The European Securities and Markets Authority made the statement as it released a new discussion paper setting out guidelines for Ucits ETFs and structured Ucits. It said it has reviewed the current regulatory regime applicable to such funds and considers that the existing requirements are not sufficient to take account of the specific features and risks associated with these types of fund.
In the discussion paper, the ESMA examines the possible measures that could be introduced to mitigate the risk that particularly complex products, which may be difficult to understand and evaluate, are made available to retail investors. The ESMA also raises the potential systemic risk caused by these types of fund and their impact on financial stability. It said it will use the feedback from this paper to develop draft guidelines for such funds.
Steven Maijoor, chair of ESMA, said: “Investor protection is one of the core missions of ESMA. With the publication of this discussion paper, we seek views on policy orientations to improve the transparency and quality of information provided to investors buying Ucits ETFs and structured Ucits.
“Also, specific safeguards need to be developed for activities like securities lending used by Ucits ETFs or for complex strategies pursued by some structured Ucits. However, in order to preserve the integrity of the Ucits brand and to protect investors, it cannot be excluded that it may be necessary for ESMA to issue warnings to retail investors about the risks of these products or even to limit the distribution of certain of such funds to retail investors. In this context, ESMA may need to ask for appropriate powers for inclusion in the relevant sector legislation.”
