Europe: ESMA Publishes Long-Awaited Final Report on ELTIF 2.0 Regulatory Technical Standards

By: Gayle Bowen and Shane Geraghty

On 19 December, the European Securities and Markets Authority (ESMA) published its final report setting out draft Regulatory Technical Standards under the amended European Long-Term Investment Funds Regulation.

KEY POINTS

Minimum Holding Period

ESMA has proposed that each ELTIF manager selects the appropriate period based on the criteria set out in the RTS and agrees this with the ELTIF’s regulator.

Maximum Redemption Frequency

ESMA has suggested mandating a maximum of quarterly redemptions within ELTIFs.  However, it also confirmed the possibility of derogations from this norm where the ELTIF manager can justify a higher frequency to the ELTIF’s regulator based on the ELTIF’s individual features.

Matching Mechanism

ESMA has opted for a principles based approach and has further simplified its requirements.

Liquidity Management Tools (LMT)

ESMA accepts that a variety of different LMT may be required and it is better not be to overly prescriptive on the ones to be used.  However, it has suggested that the implementation of at least one LMT be mandated.

Orderly disposal of ELTIF Assets

ESMA has proposed that the RTS be amended to require ELTIFs to submit an itemized schedule for the orderly disposal of its assets only where requested to do so by its regulator.  The automatic obligation to do so at least one year prior to the end of the life of the ELTIF has been removed.

NEXT STEPS

The European Commission has three months in which to decide whether to adopt the draft RTS set out in the final report, extendable by one month.