New proposals to boost investor confidence in exchange traded funds have been put out to consultation by the European Commission.
The consultation builds on plans to tighten up rules to protect investors in money market funds across the European Union.
The consultation focuses on:
- The issue of money market funds and how such funds should be regulated in future;
- The fund industry’s involvement in securities lending and repurchase (repo) arrangements;
- The fund industry’s exposure to certain over-the-counter derivatives that, in future, will be subject to central clearing and the fund industry’s approach to investors’ redemptions.
The move is welcomed by the Investment Management Association, the trade body for funds in the UK, which cautions against making investment too expensive with new rules.
Julie Patterson, IMA director of authorised funds and tax, said: “This consultation is timely. It completes the package of current discussions about the evolution of Undertakings for Collective Investments in Transferable Securities (UCITS), Europe’s pre-eminent regulated investment product for retail investors.
“The existing UCITS regulatory framework has proved resilient in difficult market conditions, such as the recent credit crisis. Moreover, enhanced guidelines on such matters as risk management have already further strengthened the UCITS framework.
“The commission is right to focus on creating a European investment culture where retail investors take a longer-term and strategic view when investing in funds. But it is important that we do not place unnecessary additional restrictions or costs on UCITS to the extent that those with modest amounts to invest cannot achieve their longer-term aspirations in a cost-effective manner.
“We must avoid investment strategies being inappropriately limited within UCITS but readily accessed via less regulated products.”
