ESMA's response to the revised ELTIF Regulation: Proposed amendments and balancing investor interests
The revised European Long-Term Investment Fund (ELTIF) Regulation mandates the European Securities and Markets Authority (ESMA) to develop draft Regulatory Technical Standards (RTS) addressing various aspects such as compatibility of ELTIF's life with asset life cycles, redemption policy features, costs disclosure, and other criteria related to financial derivative instruments and asset disposal.
ESMA published its final report on the draft RTS on 19 December 2023, and forwarded it to the European Commission for adoption. However, the European Commission issued a letter to ESMA stating that the draft RTS did not adequately address the individual characteristics of ELTIFs and suggested a more proportionate approach, especially regarding redemption requirements and liquidity management tools.
In response, ESMA has prepared an opinion, communicated to the European Commission suggesting limited changes to the European Commission's proposed amendments.
ESMA acknowledges the need to balance investor protection and financial stability with ELTIFs' role in contributing to capital market union objectives. The opinion details ESMA's proposed amendments, particularly concerning redemption notice periods, maximum redemption amounts, and liquidity management tools. These proposed revisions are outlined in the opinion's appendix for further consideration.
The European Commission may adopt the draft RTS with the amendments it considers relevant or reject it. The European Parliament and the Council of the EU may object to RTS adopted by the Commission within a period of three months.
ESMA’s opinion can be found here.
The European Commission’s letter to ESMA can be accessed here.
ESMA’s final Report on draft regulatory technical standards under the revised ELTIF Regulation issued on 19 December 2023 can be found here.
