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ESMA’s Q&A on ETFs and other UCITS issues (ESMA 832-2012) - 19/03/2013


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On 15 March 2013, the ESMA published the awaited Q&A on ETFs and other UCITS issues, providing some clarifications but also leaving certain questions unanswered in relation to the practical application of ESMA 832-2012 on ETF and other UCITS issues applicable from 18 February 2013. Please see our previous newsflash for more details on the content of the guidelines.

Key take away clarifications from the Q&A are:

  •  Securities lending agent, which can be the UCITS management company, is still entitled to a normal compensation for its services;
  •  Any financial derivative instrument is subject to guidelines on investment restrictions and annual report disclosure, not only Total Return Swaps;
  •  Diversification requirements apply to all cash and non-cash collateral including excess collateral;
  •  Collateral issued by an entity belonging to the same group should be considered as correlated;
  •  Tripartite agreements for collateral management are still allowed under some conditions;
  •  Collateral diversification limit of 20% of NAV applies also to government bonds;
  •  Guidelines for financial indices apply to any UCITS and not only to index-tracking UCITS; and
  •  Definition of acceptable timetable for publication of index components weighting.

However, ESMA does not provide clarifications about issues such as definition of direct and indirect operational costs in the context of efficient portfolio management techniques, definition of financial indices independent valuation, and practical application of annual report disclosures for accounting period that started before the application date of the guidelines.

Should you need assistance in assessing the impacts of these new guidelines on your activities or any further information on this subject, please do not hesitate to contact our experts.

Kind regards,

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Contacts

Name:
Xavier Zaegel
Company:
Deloitte Luxembourg
Job Title:
Partner - Capital Markets/Financial Risk Leader
Phone:
+352 451 452 748
Email
xzaegel@deloitte.lu

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