ESMA Consults On Future Regulation Of Exchange-Traded Funds And Structured UCITS

On 22 July 2011, the European Securities and Markets Authority ("ESMA") issued a discussion paper setting out policy orientations on guidelines for UCITS exchange-traded funds ("ETFs") and structured UCITS. Following the entry into force of the broader investment freedoms for UCITS under UCITS III and their further extension in the Eligible Assets Directive (2007/16/EC), UCITS have been used as vehicles to implement a variety of strategies previously unavailable to them. ESMA is examining the impact that such innovation may have on investor protection and market integrity, particularly as UCITS products are not intended to be complex. ESMA is of the view that the current regulatory regime does not take sufficient account of the specific features and risks associated with UCITS which are ETFs or structured funds and is concerned that particularly complex products, which may be difficult for retail investors to understand and evaluate, may be made available to them. ESMA