ESMA flags persistent gaps in cross-border fund marketing compliance
ESMA's cross-border fund marketing review confirms that, almost four years after the cross-border distribution of funds regime entered into force, many managers still fall short of regulatory expectations. ESMA has published its latest review of the cross-border distribution rules applicable to UCITS and AIFMs under Regulation (EU) 2019/1156 on the cross-border distribution of collective investment undertakings (the "CBDF Regulation"). The review identifies persistent compliance gaps in marketing communications, supervisory divergence among national competent authorities (“NCAs”), and heightened scrutiny of environmental, social and governance (“ESG”) claims.
Background: the cross-border distribution framework
The CBDF Regulation has applied since 2 August 2021. It aims to facilitate the cross-border marketing of UCITS and AIFs while enhancing investor protection through harmonised marketing standards.
This framework introduced:
- harmonised notification and de-notification procedures for UCITS and AIFs;
- common rules governing marketing communications;
- enhanced transparency regarding national marketing requirements;
- an ESMA central database of cross-border marketed funds;
- a mandate for ESMA to develop Guidelines on marketing communications.
Under Article 8 of the CBDF Regulation, ESMA must periodically assess the application of national marketing requirements and the effectiveness of the framework. Its 2025 report provides a detailed assessment of supervisory practices across Member States and highlights areas where compliance remains weak.
Key findings: what ESMA identified
ESMA's review highlights that the main recurring breaches fall into three areas: notification and passporting, marketing material standards, and ESG and sustainability claims.
The most common breaches include:
- marketing communications not being clearly identifiable as marketing material;
- information that is not fair, clear and not misleading;
- unbalanced presentation of risks and rewards;
- inconsistent information between marketing materials and legal documentation;
- deficiencies in ESG-related disclosures;
- failure to provide mandatory information regarding investor rights and access to fund documentation.
Supervisory divergence remains across Member States
Most NCAs now apply a risk-based supervisory approach and conduct marketing reviews on a case-by-case basis. However, only a limited number of jurisdictions continue to perform systematic ex-ante reviews of marketing communications. Belgium remains the most notable example, requiring prior verification of certain marketing communications before use.
ESMA also identified continuing differences in local requirements, including:
- translation requirements for KIDs and KIIDs;
- national filing fees in certain jurisdictions;
- additional requirements relating to de-notification procedures;
- specific retail investor marketing conditions in some Member States.
Fund managers therefore cannot rely solely on compliance with the EU-level framework and should continue to assess host-state requirements before launching marketing activities.
ESG and sustainability claims remain a supervisory priority
ESMA identified ESG-related marketing as one of the highest-risk areas for investor protection. The review contains multiple examples of supervisory findings where:
- SFDR Article 6 funds were presented as sustainable or ESG-focused;
- marketing materials overstated ESG integration compared to the disclosures contained in prospectuses or other legal documents;
- sustainability reports or ESG ratings were used in a manner inconsistent with the fund's regulatory classification;
- references to responsible investment initiatives, including the UN Principles for Responsible Investment (UN PRI), were made despite sustainability considerations not being integrated into investment decisions.
- The report reinforces ESMA's expectation that all sustainability-related statements must be fully substantiated and strictly aligned with the fund's legal and regulatory documentation.
Increased focus on forward-looking statements and performance claims
The report also highlights supervisory concerns regarding performance projections and return expectations. NCAs identified examples where:
- marketing materials referred to expected annual returns without adequate risk disclosures;
- future performance forecasts were presented without the mandatory warnings required by the ESMA Guidelines on marketing communications;
- performance objectives and return targets appeared in marketing communications despite not being included in the fund's legal documentation.
Fund managers should therefore ensure that any forward-looking statements are clearly identified as estimates, supported by reasonable assumptions, and accompanied by appropriate risk disclosures.
Next steps and timeline
Based on the ESMA findings, fund managers and management companies should pay attention to the following points before launching new cross-border marketing activity or reviewing existing arrangements:
- Notification and local requirements
- Marketing communications
- Mandatory investor disclosures
- ESG and sustainability claims
- Forward-looking statements
ESMA's next report on cross-border distribution will be submitted to the European Parliament, the Council and the Commission by mid-2028. In the meantime, fund managers should conduct an internal review of their cross-border marketing arrangements against the ESMA Guidelines on marketing communications and the findings in this report without delay in order to avoid regulatory sanctions.
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