Esma decision could have ‘extreme impact’, City law firm warns

A London law firm has warned that a decision of the European Securities and Markets Authority (Esma) released on Tuesday could “have an extreme impact on the retail market for investment company shares”.

Travers Smith says that Esma’s decision that all listed investment companies should be deemed complex under MiFID II would, if implemented by the UK’s Financial Conduct Authority, “prohibit brokers or platforms from selling investment company shares on an execution only basis, in other words without carrying out an appropriate assessment”.

Partner Will Normand (pictured), who specialises in investment funds, believes that Esma’s decision is “in direct contradiction” to the FCA’s current position, published in a consultation paper in September last year.

“If the FCA’s current position was maintained, shares in investment companies would not automatically be deemed complex or non-complex: instead they would be considered against specific criteria set out in MiFID II and the relevant delegated legislation,” he said.

“Applying these criteria, the vast majority of listed investment company shares would be expected to be deemed non-complex.

“Esma has stated that all non-Ucits funds should be treated as complex so the ruling impacts more than just listed investment funds.”

Normand believes that the most likely result is that the FCA will now have to revise its position to bring it into line with the European regulator’s decision.

“The real impact is impact of this is that there will be a fall in the availability of investment company shares through intermediary platforms,” he told Funds Europe.

©2017 fund europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST