EU market integration proposal: what asset managers need to know

According to Zeidler Group, the European Commission’s Market Integration Legislative proposal, published on 4 December 2025, sets out a broad restructuring of the rules governing how UCITS and alternative investment funds (AIFs) are marketed and supervised across the EU.

Rather than tinkering at the edges, the proposal takes aim at the structural fragmentation that has long hampered the EU’s single market for investment funds, where inconsistent national rules and supervisory practices have acted as barriers to scale and investor access.

As Zeidler Group outlines, the legislative package is made up of three instruments: a “Master Regulation” amending several existing EU regulations including Regulation (EU) 2019/1156, a “Master Directive” amending UCITS, AIFMD and MiFID II, and a Settlement Finality Regulation proposal. The design is intended to eliminate duplication and create a coherent distribution framework, though it depends on parallel amendments to the underlying directives to work effectively.

At the heart of the changes, Zeidler Group notes, is an expansion of Regulation (EU) 2019/1156 — the Cross-Border Distribution Regulation — which becomes the primary legal framework for cross-border marketing. The patchwork of provisions previously spread across UCITS and AIFMD rules is replaced by this single regulation, and the UCITS Directive’s cross-border marketing chapter is removed accordingly.

One of the more significant structural shifts identified by Zeidler Group is the move away from nationally implemented, notification-based marketing passports. In their place comes a harmonised, authorisation-anchored framework in which notification and de-notification processes are standardised at EU level. Separate but harmonised passporting regimes are introduced for both UCITS and AIFMs, supported by standardised documentation, common rules on material changes and consistent withdrawal processes.

ESMA is handed a substantially expanded role under the new framework. As Zeidler Group highlights, the regulator will develop and operate a data platform through which all passporting notifications must be submitted, and will also maintain a public register of cross-border marketed funds. ESMA gains new powers to address supervisory obstacles, facilitate dispute resolution between national authorities and, in defined circumstances, intervene directly. To fund this expanded mandate, ESMA will be permitted to charge fees to UCITS and AIFMs for passporting and platform-related activity.

The proposal also draws clearer lines between home and host state supervisory responsibilities, a distinction Zeidler Group considers central to the reform. Home authorities retain responsibility for prudential, organisational and product-level supervision. Host authorities are expressly limited to overseeing marketing communications and investor-facing conduct. Prior approval of marketing communications by host authorities is explicitly prohibited, and member states are prevented from adding their own national content or format requirements on top.

One area of uncertainty flagged by Zeidler Group concerns the transitional arrangements. The proposal sets a 24-month window for establishing the ESMA platform and a 36-month review of host member state fees, but the mechanics for transitioning existing UCITS and AIFMD marketing notifications to the new system remain unclear. There is a risk of interim discontinuity if member states transpose directive deletions before the new platform is operational, or vice versa. Detailed transitional provisions are expected in the final legislative act, but the precise timing remains to be confirmed.

For more insights into the new proposal, read Zeidler’s full analysis here.