ALFI responded to the European Securities and Markets Authority ("ESMA") discussion paper setting out policy orientations on guidelines for UCITS exchange-traded funds ("ETFs") and structured UCITS, dated 22 July 2011.
ALFI welcomes the ESMA’s policy orientations on guidelines for UCITS Exchange-Traded Funds and Structured UCITS and would like to thank the ESMA for the opportunity to participate in this consultation.
First and most importantly, we do not believe that UCITS ETFs nor structured UCITS should be singled out from other UCITS productsasthe UCITS framework foresees liquidity, negotiability, high risk management standards but also limitations on the risk of losses for investors (i.e. investors in a UCITS may never lose more than the subscription amount), and the information provided to investors which is adequately comprehensive. The UCITS regime has the merit of being a unified regime and it would not be appropriate to modify this. Furthermore, creating different categories of UCITS might undermine confidence in the global UCITS brand and damage its competitiveness, especially outside the European Union.
The proposed ESMA policy orientations also suggest additional disclosure to such UCITS investors. We believe that this increase transparency is in line with the market best practice and we welcome such proposals.
We would nevertheless suggest that ESMA should consider extending these requirements to non-UCITS ETFs and structured products currently offered to retail investors and requiring that these non-UCITS products are clearly flagged from the UCITS one. When considering investor protection and disclosure, we strongly encourage ESMA to take a horizontal approach to funds and non-fund products alike, in the spirit of MiFID and of the PRIPs initiative. Any consideration regarding the marketing of ETFs cannot be dissociated from a review of other products which are also subject to MiFID, therefore any action should be taken within the MiFID Review, maintaining a level playing field vis-à-vis other financial instruments.
To read ALFI’s response please click here.