ALFI response to ESMA consultation paper on ELTIF Regulation

On 28 June 2019, ALFI responded to the ESMA consultation paper on draft regulatory technical standards under Article 25 of the ELTIF Regulation.The consultation discusses disclosure requirements of main relevance to our industry in respect of costs and disclosures.

ALFI supports the attempt to facilitate retail investors’ understanding of financial products by harmonising rules around disclosures of information regarding costs and charges. However, as the ESMA consultation paper rightly states, the PRIIPs framework has revealed to be problematic in several ways. The PRIIPs framework has not achieved its objective to provide retail investors with a practicable, understandable document that adequately reflects the features of the underlying product. This problem applies also and in particular to the PRIIPs cost disclosures. The financial industry has raised concerns in relation to the PRIIPs Regulation and its RTS, and the original timeline for the PRIIPs review had to be rescheduled, among other things, for this reason.

ALFI is of the view that it should be avoided to repeat known errors by expanding the PRIIPs cost disclosures to the prospectuses of ELTIFs. Therefore, we strongly advocate to wait for the outcome of the PRIIPs RTS revision before addressing the cost disclosure and calculation rules applicable to ELTIFs.

Furthermore, the currently proposed rules for ELTIFs will have as a consequence that retail investors would be provided with different disclosures / documents (prospectus, KID and periodic reports) indicating different costs because of different factors of calculation. We fear that instead of rendering the ELTIF more transparent, this may create considerable confusion and affect the credibility and attractiveness of the ELTIF for investors. Read ALFI's response.