Luxembourg Regulator Relaxes Transparency Rules for Active ETFs
In a bid to attract more active ETFs to its shores, Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), has announced plans to relax transparency requirements for these funds. Under the new rules, active ETF managers will be allowed to publish their holdings with a one-month lag, rather than daily.
A Competitive Move
This move is seen as a strategic attempt to outmaneuver other European regulators, particularly the Central Bank of Ireland (CBI), which still requires daily publication of portfolio holdings. By offering a more relaxed transparency regime, Luxembourg hopes to become the go-to destination for active ETFs in Europe.
Balancing Transparency and Proprietary Information
The CSSF’s updated Q&As state that actively managed UCITS ETFs should publish their full portfolio holdings at least on a monthly basis, with a maximum time lag of one month. However, active managers will need to justify their chosen frequency of portfolio publication, taking into account the need to protect proprietary information.
A Shift in Regulatory Stance
This move marks a significant shift in regulatory stance, as many active mutual fund managers have been hesitant to launch ETFs due to the stringent transparency requirements. The CSSF’s decision is likely to be seen as a welcome development for these managers, who can now consider Luxembourg as a viable option for their ETF offerings.
Ireland May Follow Suit
Meanwhile, the CBI may soon review its transparency rules, with Deputy Governor Derville Rowland acknowledging the importance of protecting intellectual property in relation to further active ETF innovation. The Irish regulator is open to engaging with the industry to develop a proportionate and effective approach to portfolio transparency.
A Principles-Based Approach
Rowland hinted that the CBI may adopt a principles-based approach, rather than focusing on a particular model. This could lead to a convergence of regulatory stances between Luxembourg and Ireland, making it easier for active managers to launch ETFs in both jurisdictions.
Tax Exemption Boost
In a further boost to active ETFs, Luxembourg lawmakers have endorsed a subscription tax exemption for these funds, aligning them with the tax treatment afforded to passive funds. This move is expected to make Luxembourg an even more attractive destination for active ETFs.
Industry Reaction
Jean-Marc Goy, chairperson of the Association of the Luxembourg Fund Industry (ALFI), welcomed the new transparency and tax regime, stating that it provides asset managers with a uniquely attractive framework in Europe. With the active ETF market continuing to grow rapidly, Luxembourg is well-positioned to capitalize on this momentum.
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