Luxembourg, 29 January 2016
Response to European Commission consultation on the call for evidence “EU
regulatory framework for financial services”
Introduction
The Association of the Luxembourg Fund Industry (ALFI) is the representative body of the
Luxembourg investment fund community. Created in 1988, the Association today represents
over 1300 Luxembourg domiciled investment funds, asset management companies and a wide
range of service providers such as custodian banks, fund administrators, transfer agents,
distributors, legal firms, consultants, tax experts, auditors and accountants, specialist IT
providers and communication companies. The Luxembourg Fund Industry is the largest fund
domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourgdomiciled investment structures are distributed on a global basis in more than 70 countries with
a particular focus on Europe, Asia, Latin America and the Middle East.
We thank the European Commission for the opportunity to participate in this consultation on the
EU regulatory framework for financial services, and we support the submission of the European
Fund and Asset Management Association (EFAMA).
The International Organization of Securities Commissions (IOSCO) plays a key role in achieving
common and consisting standards. Reference is made in this regard to ALFI’s response to
IOSCO’s consultation on cross-border regulation dated 23 February 2015 (link).
It is important to see and understand that EU regulatory changes have a marked impact on the
capacity of the EU to attract financial sector activities and hence generate new employment
opportunities.
Further EU regulations often do have an extraterritorial impact which needs to be taken into
account. A good example are the remuneration rules under the AIFMD and UCITS. Managers in
non-EU jurisdictions such as notably the USA and Asia have considerable difficulties to
internalize the EU specific remuneration concepts and see this as an obstacle to establish
investment vehicles in the EU.
Yet another issue is that the delimitations between sectors which the EU regulations purport to
cover, such as “insurance”, “investment funds”, “debt issues” etc. are sometimes artificial
leading to more granular, or at least different, regulations, for products that fulfil the same or
very similar economic purposes. PRIIPs is a good initiative to overcome such difficulties and this
should serve as an example to be followed, even though PRIIPs may have the one or the other
weakness itself.
More generally, rule making needs to revert to a more principle based level. Experience shows
that too detailed rules will not be able to cope with technical change and innovation. The
regulatory challenges of a change from more traditional ways to communicate and interact to
the new internet based economy cannot be mastered but by way of principal based rule making.
No need to emphasize that overlaps between various pieces of regulation cannot be avoided.
Hence better coordination and consistency of regulations must be a point of particular focus. We
suggest to address this by way of the impact assessment. There should be a specific section in
the impact assessment dealing only with regulatory overlap and undesirable side effects.
Implementation timelines have in the past sometimes been a moving target and it would be
preferable to have from the beginning realistic timelines that take as well the need of Level 2
regulations into account.
More generally regulatory stability as such is of great importance, notably having regard to the
global functioning of the financial markets. Too many and rapid adaptations is definitely an
inhibition for non EU players with respect to engagement in the EU.
Issue 1 – Unnecessary regulatory constraints on financing
Example 1:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers (AIFMD)
-
Please provide us with an executive / succinct summary of your example
Facilitating and encouraging access of the retail public to the financial markets should
be a priority and there is no good reason to limit this to UCITS only. The reflection on
how to provide the retail public with access to the less traditional funds should take an
important place.
This will require to make finer distinctions than that simply between “professional” and
“retail”. While of course the vast majority of the assets under management of investment
management sector relate to “professional” this is not at all true in respect to the
number of investors and potential investors. The vast majority of investors and potential
investors are from the retail space.
It cannot be that in regulatory terms all the retail investors, regardless of their specific
situation, are subject to a mandatory “one size fits all” treatment. At least one
intermediary category of “semi-professional” or “sophisticated” investors must be
created to enable such investors to access a wider array of investment opportunities
and this – obviously – on a uniform EU basis, a common market, as opposed to the
present fragmented national regimes.
The ELTIF is a step in the right direction but not enough.
The AIFMD is a good example. There is no good reason that the AIFMD marketing
passport is limited to “professional investors”. The need for at least an intermediate
category of “semi-professional” investors is obvious.
The limitation of the AIFMD passport to “professional” investors contributes to the
fragmentation of the market of investment vehicles that invest in e.g. real assets or e.g.
provide financing to SME by way of permitting to maintain national barriers in the form
of providing easier access for national vehicles and the keeping out of other vehicles by
way of unfavourable national private placement rules.
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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This is a hindrance for the development of a pan-EU investment management industry
catering for the needs of the retail sector apart from UCITS. UCITS do have and need to
have an important place but they need to be complemented by other types of
investments to provide at least the semi-professional segment of the market with the
investment opportunities that are required to cover e.g. old age pension needs.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
Revisit the distinction between “professional” and “retail” and create at least one
intermediary category, namely “semi-professional” investors.
Example 2:
-
o
o
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
Regulation (EU) N° 575/2013 of the European Parliament and of the Council of 26
June 2013 on prudential requirements for credit institutions and investment firms and
amending Regulation (EU) No 648/2012
EBA guidelines on limits on exposure to shadow banking entities which carry out
banking activities outside a regulated framework under Article 395(2) of Regulation
(EU) No 575/2013 published on 14 December 2015
Please provide us with an executive / succinct summary of your example
Alternative provision of credit (“shadow banking”) is another good example.
We are deeply concerned about the SILO approach that seemed to have been adopted
by some European regulators. The recent EBA guidelines on limits on exposure to
shadow banking entities which carry out banking activities outside a regulated
framework under Article 395(2) of Regulation (EU) No 575/2013 published on 14
December 2015 illustrates this concern.
Under Article 395(2) of Regulation (EU) No 575/2013, the EBA was mandated to
develop guidelines to set appropriate aggregate limits or tighter individual limits on
exposure to shadow banking entities which carry out banking activities outside a
regulated framework.
Unfortunately, discarding the strong regulatory framework applicable to UCITS and
AIFM in Europe (UCITS Directive, AIFM Directive and ESMA supervision), EBA has
included under the definition of these entities:
-
All money market funds (including those that are subject to UCITS rules and
the ESMA guidelines on money market funds)
Leveraged AIFs
Loan funds.
We are deeply concerned about the impact of such guidelines which may significantly
restrict the possibility for these funds to operate in Europe and contract with banking
entities (prime broker, custodian, counterparties…). Moreover, these restrictions may
prevent banking groups to seed such funds in their launch process – whilst in the US
there is an exemption from the Volcker Rules requirements during the seeding period
(see question 16 of the Volcker Rules FAQ).
- Please provide us with supporting relevant and verifiable empirical evidence
for your example
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
Example 3:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
CRR III, CRD IV
-
Please provide us with an executive / succinct summary of your example
In the CRR, investment funds (namely “CIUs”) face some serious operational problems
when it comes to the recognition under the Liquidity Coverage Ratio (LCR). The CRR
stipulates that shares and units in investment funds may be treated as liquid assets
provided that they only invest in liquid assets, namely Level 1 or / and Level 2 assets
(“to invest only provision”). In practical terms this means that already small portions of
the investment fund’s portfolio which are not classified as Level 1 or 2 assets go along
with a complete disqualification of these investment funds under the CRR.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
As a consequence, we would like to encourage regulators to modify the CRR by taking
into account the nature of “one-investor-funds” in the sense that it allows for the
recognition of high quality liquid assets even in a case where this category forms part of
an investment fund’s portfolio which partially also consists of other assets. This
exemption should be limited to investment funds which make use of the “look-throughapproach” in order to be in line with the requirement of a full transparency.
Example 4:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
CRR III, CRD IV
-
Please provide us with an executive / succinct summary of your example
Assets within an investment funds (namely “CIUs”) face an extra hair-cut premium of
5% in general and in contrary to assets which are hold directly apart from cash and
exposures to central banks (see Art. 418 para. 2 of the CRR). Additionally, assets which
form part of an investment universe within an investment fund (CIU) are limited in terms
of their overall recognition (€ 500 Mio.) under the Liquidity Coverage Ratio (LCR),
whereby direct investments which might eventually be exposed to cluster risks are not
bound to this limitation (see Art 416 para.6).
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
From our point of view the legal form of a financial instrument should not take
precedence over the principle of risk diversification. Otherwise regulators will only make
one step forward but two steps back when it comes to the risk-absorbing capacity under
the CRR. Accordingly, we would like to encourage regulators for a respective revision.
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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Issue 2 – Market liquidity
General comment on this section:
While this is an obvious concern, we believe that other associations have or will make
sufficiently the point.
Issue 3 – Investor and consumer protection
Example 1:
-
o
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
None in particular.
Please provide us with an executive / succinct summary of your example
While everyone sincerely agrees on the need for consumer protection, there is a more
fundamental issue, namely the need of a more holistic view. Each person takes many
decisions that have a very profound impact on them and notably on their personal
financial well-being. A good example is the purchase of a home that will typically have a
direct financial impact in the form of a loan, which the person will have to pay back over
a period of decades. It seems incongruent that in terms of protection the same person is
able to purchase a home for e.g. 200 000 Euro without being subject to many
constraints while the same person is highly restricted in relation to a purchase of certain
financial instruments; e.g. an AIF share of 10 000 Euro.
Consequently we suggest a more balanced approach and, notably, enhanced financial
education. The digital era and in particular social media should provide good platforms
for this.
It is puzzling that there are a host of EU regulations that deal with all types of investor
protection but not one EU piece of regulation that, if not imposing, strongly recommends
that Member States ensure their citizens receive a minimum of financial education to
assist them to take financial decisions for their own and their families’ benefit..
The current attempt to achieve this is by way of, amongst others, prohibition of
inducements so as to force retail investors to have recourse to paid investment advice,
however this is unlikely to bring the desired results.
In fact such initiatives have, as a consequence, deprived retail investors, especially
those with lower incomes, from access to professional financial advice. So-called “robot
advice” may be a substitute but this still remains to be seen.
As investment advice is unlikely to be accessible to retail investors (see explanations
concerning the ban on inducements under MiFID 2 below), we regret the lack of
investor education initiatives which would, if not as a substitute for advice, at least help
retail investors to understand and navigate through the mass of available information
about investing and financial products. Although developments in technology and wider
use of social media provide individuals with access to a large quantity of information,
the challenge is understand and appreciate the quality of the diverse data that is
available.
Similarly, most of the recent regulatory developments have had a strong focus on
transparency (including AIFMD, MIFID 2, Securities Financing Transactions Regulation,
Money Market Funds Regulation). Unfortunately, the focus has been placed on the
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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quantity of information (detailed disclosure) rather than on quality (summarised and
relevant information, easy to understand). Prospectuses and reports in respect of
financial products have become longer and more detailed, and are arguably impossible
for retail investors to understand.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
We highly recommend the Commission consider ways of promoting and even ensuring
that the Member States put in place, through national strategies, financial education
programs for their citizens; in schools, in the workplace, etc. The G20 has highlighted
the importance of financial education as a complement to consumer and investor
protection and the OECD and other organisations have extolled the effectiveness and
efficiency of national strategies for financial education, a few of which have already
been introduced in the EU.
Example 2:
-
o
o
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014
on markets in financial instruments (MiFID 2)
Directive of the European Parliament and of the Council on insurance distribution
(IDD 2)
Please provide us with an executive / succinct summary of your example
We are deeply concerned about the impact that MIFID 2 and its ban / restrictions on
inducements will have on the distribution of investment funds to retail investors. Studies
have demonstrated that in the UK, the RDR reform left an advice gap, i.e. the smaller
retail investor do no longer have access to advice. This had a negative impact on retail
investment into investment funds (see Fundscape study “Navigating the post-RDR
landscape in the UK”, commissioned by ALFI).
MiFID 2 is expected to have a comparable impact across Europe, which in turn appears
contradictory to the European Commission’s objective to increase retail investor
investment into capital markets.
We also regret the lack of a level playing field across products: the IDD 2 text voted by
the European Parliament does not include a comparable ban / limitation on
inducements regarding the distribution of insurance products. A lack of consistency is
likely to lead to market distortion and could end up in favouring insurance wrapper,
increasing complexity and costs of products available to retail investors.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
In addition to increased education of notably the retail public in financial matters, a
central sort of “financial driving license” could be an option. This could be a sort of
electronic web based certificate on which distributors could rely to appreciate the
financial education of their customers.
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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Issue 4 – Proportionality / preserving diversity in the EU financial sector
Example 1:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009
on the coordination of laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities (UCITS Directive),
as amended by Directive 2014/91/EU as regards depositary functions, remuneration
policies and sanctions
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers (AIFMD)
o
-
Please provide us with an executive / succinct summary of your example
It is a main concern that “one size fit all” approaches are misguided and have
undesirable side-effects.
AIFM and UCITS remuneration rules impact non-EU managers to an extent not initially
expected and, we believe, not initially intended.
ALFI has provided a detailed response to the recent ESMA consultation paper on
guidelines on sound remuneration policies under the UCITS Directive and AIFMD (link).
Certain of the points raised illustrate the extraterritorial effect on non-EU managers
which could fundamentally damage the European fund industry.
We also mentioned a point of non-viability beyond which non-EU delegate managers
will simply not wish to contract with UCITS management companies in the first instance.
From conversation with members who have gone through the process of making the
“appropriate contractual arrangements” under AIFMD Guidelines, ALFI actually believes
this point of non-viability will be reached sooner rather than later.
Points of non-viability for non-EU delegation
From the perspective of non-EU delegate portfolio managers ALFI believes that the
costs that will accrue to firms in achieving compliance with anything more onerous than
higher-level remuneration principles will far outweigh the benefits they receive back
from UCITS management companies by way of management fees. This will be
especially the case for non-EU delegates for whom UCITS management represents
only a smaller proportion of their general asset management. For these entities the
costs of compliance with UCITS will be completely disproportionate to the return on
investment that UCITS management gives the entity relative to its other activities. Such
entities would in a worst case resign from their UCITS management mandate.
Consequence of non-viability
This would have an impact on three levels:



The loss of non-EU portfolio management expertise to UCITS investors and
subsequent performance drag;
The loss of the attractiveness of UCITS as a proxy to non-EU fund originators;
and
The attendant loss to the UCITS industry and the EU from both eventualities
above.
In terms of performance drag take, for example, a Luxembourg domiciled Japanese
equity UCITS having to operate in the absence of a Japanese delegate. Such a UCITS
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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would either suffer poorer performance at the hands of a non-localised portfolio
management; higher costs as the non-localised portfolio manager travels to / from the
region and seeks relevant investment research; or indeed both as a result. The effect of
non-localised management would naturally be felt more by actively managed UCITS
than by passive trackers.
In terms of the loss of attractiveness of UCITS as a ‘brand’ take, for example, Asian
fund originators currently using UCITS to manage Asian assets for Asian investors – the
halo effect that UCITS currently has outside the EU itself. And this at a time when
UCITS’ halo effect is already under threat from local products that are emerging as
strong competitors for fund originators’ time, resource and assets. ALFI figures (as of 31
August 2015) indicate that 17,8% of UCITS AuM are held by non-EU fund originators –
the US is accounting for 19,6% of that total.
The knock-on effect to the UCITS industry is not difficult to imagine, should UCITS lose
their investment edge in all but the management of EU assets or should their halo effect
for non-EU originators begin to diminish.
ALFI would also like to recall one of the European Commission’s top priorities, the
Capital Markets Union. The Commission’s priority is to strengthen Europe’s economy
and stimulate investment to create jobs. However, when building a Capital Markets
Union, one must also look at existing legislation and the legal framework applicable
throughout the financial sector that must remain coherent. The UCITS brand has
become a worldwide well- known brand. UCITS are managed by highly qualified asset
managers in different regions of the world. We fear that the proposed remuneration
rules will lead to a loss of attractiveness of the UCITS brand and be counterproductive
to the creation of a Capital Markets Union.
While ALFI agrees with ESMA’s determination (at paragraph 33 of the aforementioned
consultation) that “management companies should not circumvent the remuneration
rules through the delegation of activities to external service providers”, we would
however note that this use of delegation is already prohibited by Article 13 as to arrange
a delegation in order to circumvent remuneration control would neither be for good
reason, nor for the more efficient conduct of the management company nor in the best
interests of the UCITS’ investors.
UCITS management companies appoint non-EU portfolio managers in order to more
efficiently manage non-EU asset classes and not to circumvent remuneration rules.
It may also be argued that UCITS delegation arrangements that pre-date UCITS V – or
at least Commission consultation around UCITS V – cannot have been established for
purposes of circumvention. This is simply because the rules they might claim to have
been established to circumvent were not yet in existence.
Similar considerations apply for the AIFMD.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
Example 2:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
o
AIFMD
Proposal for a regulation of the European Parliament and of the Council on
structural measures improving the resilience of EU credit institutions
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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-
Please provide us with an executive / succinct summary of your example
The definition of “Alternative Investment Funds” which determines the application of the
AIFMD (Article 4; Directive 2011/61/EC) is a melting pot for all collective investment
undertakings as it covers all those that do not require an authorisation as UCITS. But
Alternative Investment Funds cannot be perceived as just one uniform fund category.
There is rather a wide range of different funds types.
The EU Commission published a proposal for a regulation on structural measures
improving the resilience of EU credit institutions. The structural reform proposal aims to
strengthen the resilience of the EU banking sector while ensuring that banks continue to
finance economic activity and growth. With regard to Alternative Investment Funds the
Commission intends to ban also hedge funds from certain trading activities (see detailed
explanation of the proposal, 3.3.3. proposal for a Regulation 2014/0020 (COD)). The
exclusions of a ban foreseen by the Commission within the Alternative Investment
Funds category are without practical relevance: EuSEF (six registered funds with capital
target 6 Mio. EUR) and EuVECA (34 registered funds with capital target 1.3 Bn. EUR)
do currently not have an essential volume (data: see Commission Consultation
document Review of EuVECA and EuSEF, page 5) and the recently introduced ELTIFs
are not yet present in the wider market. Furthermore, we believe the exclusions are
incomplete because they do not contain Alternative Investment Funds that incorporate a
moderate level of leverage and hence, do not form part of the hedge funds category.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
We recommend to differentiate within the scope of Alternative Investment Funds. Such
an approach has been undertaken e.g. by the Council within the general approach
regarding BSR whereas the ban comprises only Alternative Investment Funds which
employ leverage on a substantial basis within the meaning of Article 111 of Regulation
(EU) 231/2013.
Issue 5 – Excessive compliance costs and complexity
General comment on this section:
As other associations rightfully mention in their responses to this consultation,
compliance costs (in terms of required systems, procedures, HR, time spent even by
non-compliance focused employees, delays in time to market etc.) have taken a too
important part. This is not only an issue for established players but as well a barrier to
enter the market that only few new players are able to overcome. The obvious effect will
be the absence of competition and innovation which at the end of the day will be
detrimental to the competitiveness of the EU in a globalized economy but which will also
limit severely the possibility of notably retail investors to participate in the financial
markets in a manner that is efficient and fruitful to the investors.
Issue 6 – Reporting and disclosure obligations
Example 1:
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
o
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers (AIFMD)
Commission Delegated Regulation (EU) N° 231/2013 of 19 December 2012
o
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supplementing Directive 2011/61/EU of the European Parliament and of the Council
with regard to exemptions, general operating conditions, depositaries, leverage,
transparency and supervision
-
Please provide us with an executive / succinct summary of your example
Again we have here the problem of too detailed (instead of principle based)
regulations, lack of proportionality requirements and regulatory overlap with the
consequence of unintended consequences.
AIFMD reporting to regulators was mainly designed to take into consideration the
need to get data about hedge funds. But the requirements now apply to the entire
spectrum of non-UCITS funds. Preparing these reports lead to very significant costs
for the industry. So far, we have not (yet?) seen any evidence of these reports being
used by regulators in their supervisory role.
- Please provide us with supporting relevant and verifiable empirical evidence
for your example
Out of 35 strategies foreseen by the reporting under the AIFMD, 18 concern hedge
funds. Out of 301 fields required by the reporting, a very significant portion focuses
on features that are specific to hedge funds attributes: short positions, estimate
NAV, monthly returns, monthly liquidity, side pockets, gates, etc.
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
We take the view that reporting and transparency considerations should find a more
important place in the impact studies so as to find out prior to imposing any such
requirements whether they do actually contribute to achieve the desired effects and
are free from unintended consequences. Also a more principle based way to
regulate would be helpful because this leaves more room to proceed to adaptations,
as may be required.
Example 2:
-
o
o
o
-
To which Directive(s) and / or Regulation(s) do you refer in your example?
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014
on markets in financial instruments (MiFID 2)
Directive of the European Parliament and of the Council on insurance distribution
(IDD 2)
Regulation (EU) N° 1286/2014 of the European Parliament and of the Council of 26
November 2014 on key information documents for packaged retail and insurancebased investment products (PRIIPs)
Please provide us with an executive / succinct summary of your example
The various texts mentioned above require different cost disclosures to investors
leading to implementation challenges, undue costs and confusion for investors.
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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Transaction costs: high level comparison between existing requirements and on-going
consultations
UCITS KIID
UCITS/Part
2
Annual
report
UCI law,
Schema B,
point V
MIFID 2
PRIIPS KID
ESMA Final
report
2014/1569,
Annex
2.14.1, pages
125 and 126
Joint
consultation
paper JC
2015 073,
pages 57 to
73
2017
Funds
(PRIIPs) sold
to retail
investors
(not UCITS
until 2019)
When sold to
retail
investors
Reference
text
CESR
guidelines
10-674,
article 5 d)
Applicable?
N/A
Yes
Document
where to
publish?
-
Annual
report
2017 or
2018?
Report to
investors
Funds
under
scope?
UCITS
UCITS
All products
To whom?
-
Public
All investors
when sold
through a
MIFID entity
KID
ELTIF
ELTIF
regulation
(article 25),
ESMA
consultation
paper
2015/1239:
article 5 of
draft RTS
2016
Prospectus
(PRIIPS KID
applicable
when sold to
retail)
ELTIF
All investors
ALFI response to EC call for evidence “EU regulatory framework for financial services”
IOSCO
Consultation
CR06/2015
No direct
application
Funds
(“CIS”) sold
to retail
investors
When sold
to retail
investors
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UCITS KIID
UCITS/Part
2
Annual
report
Transaction
charges
(not
defined)
What to
publish?
Transaction
costs are
not part of
on-going
charges
How
expressed?
N/A
Annual
monetary
amount
Frequency?
N/A
Annual
(date
depends on
fund yearend)
Ex-ante or
ex-post?
N/A
MIFID 2
PRIIPS KID
ELTIF
IOSCO
Aggregate
costs to
include
Transaction
charges
(costs linked
to the
transaction)
Includes
broker
commissions,
entry-exit
costs, markup
embedded in
the
transaction,
stamp duty,
transaction
charges, fx,
etc.
Cash amount
and
percentage
Transaction
costs Include
direct and
indirect
costs.
Average over
a three year
period.
Precise
methodology
to calculate
depending
on the
nature of
instrument –
see below.
Acquisition
costs include
all
administrative,
regulatory,
depositary,
custodial,
professional
service and
audit costs
related to the
acquisition of
the assets of
the ELTIF.
Transaction
costs (to be
defined by
regulator)
Annual
percentage
(up to 2
decimals) +
recurring
costs to be
disclosed in
amount, for
1000 EU
invested,
based on
holding
scenario
Annual (date
depends on
date of first
KID)
Percentage of
capital
(capital=capital
contributed +
uncalled
committed
capital)
Update at least
once a year
Updating
frequency to
be defined
in legislation
Once a year,
on an expost basis
(maybe
based on
annual or
semi -annual
report, if
recent).
Ex-ante (but
update at least
once a year)
Both
Annual
Ex-ante and
ex-post
ALFI response to EC call for evidence “EU regulatory framework for financial services”
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UCITS KIID
How
calculated?
N/A
UCITS/Part
2
Annual
report
No
precision
MIFID 2
PRIIPS KID
Estimate for
new PRIIPs.
Ex-ante:
Transaction
based in
costs shall be
incurred
calculated as
costs or
the
estimations.
difference
Assumption
between net
to be
realised
reviewed
execution
based on ex- price and
post
mid-market
experience
price (or
and adjusted. independent
Ex-post:
valuation or
based on
fait value).
costs
Specific rules
incurred and by category
provided on
of assets.
a
Includes all
personalised direct and
basis to
indirect costs
investor.
(all charges,
commission,
taxes and
other
payments).
Includes a
table of costs
(Bps) to be
used for new
PRIIPs
investing in
liquid assets
transaction
costs.
ELTIF
No precision
IOSCO
No precision
- If you have suggestions to remedy the issue(s) raised in your example, please
make them here
Please see above.
Issue 7 – Contractual documentation
General comment on this section:
Again as other associations outline in their responses to this consultation, there must
not be overregulation but place must be left to adapt the rules as required by a specific
situation by notably having principle based regulations and by taking into account the
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principles of proportionality and subsidiarity.
Issue 8 – Rules outdated due to technological change
General comment on this section:
We refer to comments made by other associations, where we agree on the need to be
able to communicate by way of electronic data transmission (as opposed to hard copy
transmission) with all the regulators. Further it is obvious that we live in a time of change
for a traditional to a digital economy and that this accelerates change. Consequently,
too detailed regulations risk to be outdated too soon. Hence shorter and more principle
based regulations and taking into account the principle of subsidiarity is a better way
forward.
Issue 9 – Barriers to entry
General comment on this section:
There is a marked need to extent the AIFMD product marketing passport to at least
semi-professional investors.
Another important consideration is that the powers of the Host State regulator to put into
doubt e.g. compliance with transparency rules, rules on mandatory contents of
documents and similar must – according to the “cassis of Dijon” principle – be limited.
The same goes with respect to any form of “gold plating” be it by way of additional fees,
additional requirements of any sort or manner. A safe harbour approach is to be
favoured instead.
Issue 10 – Links between individual rules and overall cumulative impact
General comment on this section:
We refer to our previous comments.
Issue 11 – Definitions
General comment on this section:
It cannot be emphasized enough how important consistency of definitions over various
pieces of regulations are – on the one hand – but equally that a given definition does fit
to the relevant piece of regulation if it is borrowed from another piece of regulation.
“Control” is a good example. This term appears in many Directives with variable
definitions that may or may not fit the relevant purpose.
Issue 12 – Overlaps, duplications and inconsistencies
General comment on this section:
In general, the treatment of investment funds (both UCITS and AIF) should be
consistent in banking and insurance legislation. This means that coherence and
consistency is needed. The rule to be applied should be: no different treatment between
an investment fund and any direct investment (i.e. in terms of liquidity ratio calculations
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etc.).
Duplication of reporting / disclosure requirements for asset managers under SRD II
needs to be avoided. And the fact that transparency standards for benchmark providers
do not match with information needs of benchmark users must be remedied.
MiFID II, CRD IV, Short Selling Regulation, SFTR, and EMIR are typical examples for
an existing overlap as they foresee reporting provisions which cover the same or similar
type of transactions.
Issue 13 – Gaps
General comment on this section:
We rather see overregulation and overlap as gaps. This being said, a more principle
based manner to elaborate and draft regulations will avoid gaps whereas too detailed
regulations are on the contrary prone to create gaps.
Issue 14 – Risk
General comment on this section:
We refer to the comments of other associations.
Issue 15 – Procyclicality
General comment on this section:
We refer to the comments of other associations.
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