Industry welcomes ETF consultation paper

30 January 2012 | By Gary Jackson

ETF Securities, iShares owner BlackRock and the Investment Management Association (IMA) say their initial response to the regulator’s latest consultation paper is positive, as it appears to recognise the positives which can be found within the industry.

Esma’s consultation paper lays out forthcoming rules for both physical and synthetic ETFs, as well as index-tracking Ucits products and securities lending. The guidelines call for greater transparency to allow investors to make more informed decisions.

Townsend Lansing, head of regulatory affairs at ETF Securities, says: “At an industry level, this will move us beyond some of the hyperbole.

“What we’re really focusing on is real regulation around disclosure and making sure that we’re providing investors with the right information to make intelligent investment choices.”

Lansing claims the consultation paper is Esma’s recognition that the ETF industry is “in good shape” and welcomes the indication that the regulator will not label ETFs as complex products.

“ETFs are in the Ucits framework. Ucits is a gold-standard, well-respected brand and the industry is complying with the rules of Ucits,” he comments.

Lansing adds the industry is currently taking steps to bolster disclosure and ensure investors understand how the products are structured. Esma’s recommendations will support these efforts, he says.

Joe Linhares, the head of iShares Europe, Middle East and Africa, comments: “BlackRock welcomes Esma’s proposed guidelines on ETFs and securities lending and we support financial regulatory reform that increases transparency and protects investors.”

He also argues a new classification system should be implemented across Europe. This would allow investors to differentiate between ETFs and products such as exchange-traded notes and exchange-traded commodities, as well as between physical and synthetic ETFs.

“Introducing a new European classification system will answer investor calls for greater transparency and clarity, which is vital in today’s marketplace,” Linhares concludes.

The IMA also welcomes the draft guidelines, noting that similar rules are already in place in the UK and calling for European regulators to adopt such measures.

But the trade association also recommends regulators apply a joined approach when it comes to retail investment products.

Julie Patterson, the director of authorised funds and tax at the IMA, says: “The European Commission’s Packaged Retail Investment Products initiative seeks to ensure that all retail products are subject to similar rules on disclosure and selling, but we are concerned that this important principle will be eroded if different pieces of legislation apply to different products.

“In particular, the issues highlighted by Esma are relevant to all exchange-traded products, not just exchange-traded Ucits.”

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