The European Securities and Markets Authority (ESMA) has responded to the European Commission (the Commission) request for amendments to the draft Regulatory Technical Standards (RTS) for the new ELTIF 2.0 regime. Here are some of the key amendments:
- Redemption notice period: the minimum 12-month notice period for redemptions has been removed. Justification for the consistency of the notice period to the competent authority if the notice period is less than 6 months (instead of 3 months as suggested by the Commission). In addition, ESMA still links the length of the notice periods with minimum percentages of liquid assets and maximum percentages that can be redeemed.
- Liquidity requirements: changes have been made to take into account the specificities of different types of ELTIFs without implementing all the Commission suggestions (the redemption frequency criterion has been rejected).
- Liquidity management tools: removal of the requirement to implement at least one anti-dilution LMT (among anti-dilution levies, swing pricing and redemption fees) in line with the Commission’s concerns regarding the diversity of liquidity management tools. ESMA however does not implement the additional wording on the extension of the notice period proposed by the Commission as it believes that this extension, which is a liquidity management tool, might be confused with the minimum notice period of the ELTIF which is one of its key features.
- Redemption gates: upholding of redemption gates (rather than deletion of all references to gates as suggested by the Commission) but ESMA clarifies that they be implemented, while this is not an obligation, in particular if the amount of liquid assets is not sufficient to cover expected redemptions.
- Cost disclosures: Implementation of the Commission proposal to calculate the overall cost indicator as a percentage of the “net asset value of the ELTIF per annum” rather than as a “percentage of the capital of the ELTIF.
- Minimum holding period: upholding of this requirement that ESMA considers as a main component of the redemption policy of ELTIFs while the Commission suggested to make it optional.
- Valuation: strengthening of some requirements amended by the Commission to ensure clarity regarding the information on asset valuation submitted to the competent authority of the ELTIF.
Next Steps: The Commission may adopt the revised RTS with the amendments it considers relevant or reject it. The European Parliament and the Council may object to an RTS adopted by the Commission within a period of three months. Our experts will closely monitor this process and keep you informed of any further developments.
To access the full version of the revised RTS, please click here.
