Consultation paper on changes to the ETF Rules - actively managed funds

Transcription

1 Consultation parties as shown on the enclosed list Unofficial translation Your ref: Our ref: Date: Consultation paper on changes to the ETF Rules - actively managed funds 1 Consultation process Oslo Børs wishes to consult on the enclosed proposed changes to the ETF Rules that will allow actively managed mutual funds to be admitted to listing. The proposed changes are a response to requests from market participants that wish to list actively managed mutual funds. Since the current ETF Rules are specifically restricted to index tracking funds ( index funds ), the admission of actively managed funds requires changes to the rules. The proposed changes are being circulated for consultation to mutual fund investment management companies, stock exchange firms and other interested parties. We ask recipients to send any responses to this consultation paper to lise.karlsen@oslobors.no no later than 18 June After taking into account the responses received, Oslo Børs will consider issuing a new version of the ETF Rules that provides for actively managed funds to be admitted to listing. This consultation paper is also available at Boers/Regelverk/Hoeringer. The proposed changes are presented as marked changes to the current ETF Rules. An English version of the consultation document will be made available at as soon as the translation is ready. If you have any questions about the proposed changes, please contact either of the undersigned. OSLO BØRS ASA PO Box 460 Sentrum, N-0105 Oslo. Visitor address: Tollbugata 2, Oslo Tel: Fax: Org. No.: NO

2 2 Further details on the proposed changes 2.1 Definition of an index fund and an actively managed fund In the proposed amended version of the ETF Rules at new Section 1.2 (2), second sentence, an index fund is defined as a mutual fund that shall passively track a specified index or basket of financial instruments. This restates the definition in the current ETF Rules. An actively managed fund is any other mutual fund as defined in the Securities Funds Act, Section 1-2, first paragraph, No. 1, cf. Securities Trading Act, Section 2-2 (1) No. 2. Oslo Børs does not believe that making the distinction between actively managed funds and index funds will cause any particular difficulties in practice. A fund s articles of association and its investment mandate will normally provide sufficient information to make this distinction. Oslo Børs anticipates that an index fund for which the OBX index or the OSEBX index is the underlying instrument will normally be subject to Section 4-8a of the Securities Funds Act. In addition, it is anticipated that the industry classification of a fund will provide further guidance on the question of its classification in accordance with the ETF Rules. It is proposed that Oslo Børs will reserve the right to decide whether a particular fund shall be classified as an index fund or an actively managed fund in the event of any uncertainty over classification. The extension of the rules to include actively managed funds, which are normally less transparent than index funds, makes it necessary to specify in greater detail what instruments will be permitted as underlying instruments for a fund. Oslo Børs wishes in the first instance to allow admission to listing of UCITS funds and funds that comply with rules similar to those for UCITS funds (which will typically be funds from countries outside the EEA), and the underlying instruments for such funds will to a very large extent be listed financial instruments. However, Oslo Børs also proposes an alternative approach that involves maintaining the current requirement that the underlying instruments must be (exclusively) invested in financial instruments listed on Oslo Børs, or on some other recognized exchange or regulated marketplace. The stipulation that underlying instruments must be listed instruments is intended to reflect the need for transparency. This alternative would extend to funds other than UCITS funds and funds equivalent to UCITS funds. 2.2 Scope Section 1.4 of the proposal stipulates that the ETF Rules apply to both index funds and actively managed funds except where the Rules provide separate provisions. Under the proposed rules, the classification has an effect on the requirement for daily publication of the number of fund units in issue and Net Asset Value ( NAV )/unit value, cf. Sections and of the proposed ETF Rules. 2.3 Proposal to abolish the requirement for minimum total assets at the time of listing Oslo Børs proposes that the current requirement that a fund must have total assets of at least NOK 40,000,000 at the time of admission to listing should be abolished. Oslo Børs takes the view that, regardless of the size of the fund, liquidity in fund units will be ensured by the requirement for a market maker, cf. Section of the current Rules, which is retained in the proposal. Oslo Børs also notes in this respect that there are no similar minimum size requirements for listing of ETCs or warrants /6

3 2.4 Contents of the application for admission to listing In order to ensure that Oslo Børs has all the information necessary to decide whether a fund is suitable for listing, it is proposed that the application shall, in addition to the current requirements, provide information on the number of units in the fund and the number of unit holders at the time of admission to listing, cf. proposed change to Section (2) No. 1 of the ETF Rules. In addition, Oslo Børs proposes a change to the contact details provided for the fund management company s contact person (No. 6) and proposes a new requirement for information on the fund s ISIN number and account operator (No. 7). Additional provisions are also proposed for Oslo Børs to decide on the manner in which the information in the application shall be provided, and to give Oslo Børs discretion to grant exemptions from the requirements for the content of the application. 2.5 Documentation prior to admission to listing Oslo Børs proposes a new Section 2.6 which sets out the requirements for the information that must be in place no later than on the trading day before the first day of listing. The requirements are consistent with the current requirements for the admission to listing of ETFs and other financial instruments. 2.6 Application of the Continuing obligations of stock exchange listed companies to ETFs A minor change is proposed to Section 3.1 so that the fund management company has a duty to publicly disclose the financial calendar for the fund no later than the end of the preceding year, with the dates for publication of annual and interim reports for the year in question. 2.7 Public disclosure of the number of fund units issued and NAV/unit value General The proposed wording for Section 3.2 represents a redrafting of the current Section 3.2, but the section is also expanded to include specific requirements for public disclosure of the number of fund units issued and the NAV/unit value for actively managed funds. Section 3.2 sets out requirements for the public disclosure of the number of fund units issued and NAV/unit value at specific points in time. Such information may have an effect on the market price of fund units, although the information will not always be of a price sensitive character. Section 3.2 should therefore be seen as imposing specific timing on the general duty to publicly disclose inside information. However, Oslo Børs wishes to stress that the general requirements to publicly disclose inside information will continue in addition to the specific requirements contained in Section Index fund, cf. Proposed Section The proposed wording of Section (1), first sentence, on the requirement for daily public disclosure of the number of fund units issued and NAV restates the current Section (1), first sentence. It is proposed that the provisions on the method by which this information is publicly disclosed should be moved to a new third paragraph /6

4 Section (1), second sentence, empowers Oslo Børs to consent to the public disclosure of the value of units in the fund based on calculations other than NAV. Such consent will only be granted if the fund management company calculates the unit value using a method that is similar to, but not identical to, NAV, and discloses this unit value more frequently than a daily disclosure of NAV in order that the information requirements of unit holders and investors are met in a satisfactory manner. Oslo Børs also proposes a new provision in the proposed Section 3.21 (2) that requires the fund management company to make an immediate public disclosure if it is not able to calculate NAV/unit value. This requirement is included so that market participants, including investors and the market maker, are made aware that pricing of the fund has become uncertain Actively managed funds, cf. Proposed Section In the case of actively managed funds, Oslo Børs proposes that information on the number of fund units issued and the NAV/unit value must be published at least three times a day. The requirement for greater frequency of disclosure is based on the fact that an actively managed fund is typically less transparent than an index fund in terms of the investments held by the fund. Oslo Børs notes in this respect that actively managed funds only provide public disclosure of the composition of their portfolios relatively infrequently. The Securities Funds Act, Section 7-1, second paragraph, No. 1, cf. Regulation of 28 May 1999 No. 654 on the annual accounts of mutual funds, Section 5-5, only requires the disclosure of reports providing information on the securities held by the fund on a sixmonthly basis. Certain fund management companies have elected to provide more frequent public disclosure, such as monthly reports published on the company s website. The reason for the statutory requirements and the practice for public disclosure of funds portfolios appears to be the danger that other investors might be able to take advantage of information on a fund s investments and changes in these investments ( frontrunning ). In order to meet the market s need for information on the correct pricing of a fund, Oslo Børs therefore proposes that information on the number of fund units issued and the NAV/unit value should be published at least three times a day. This is in line with the requirements imposed by OMX Copenhagen, which has a developed market for listing of mutual funds. It is proposed that in special circumstances of Oslo Børs should be empowered to grant exemptions from the requirement for public disclosure, including varying the number of disclosures per day and the timing of disclosure. It is also proposed that a fund management company can decide not to satisfy the requirements of Sections (1) and (2) without the prior consent of Oslo Børs if the company would incur significant disadvantage or loss by waiting for such consent. In such a situation, the fund management company must provide a report on the circumstances to Oslo Børs no later than the next trading day. The provision for fund management companies to avoid the requirements at (1) and (2) is intended to be a restricted exemption used only in circumstances where technical problems, extreme market events or other special circumstances make it impossible to calculate or publicly disclose information on NAV/unit value Information on the fund and the fund management company Oslo Børs proposes new Sections 3.4 and 3.5 that introduce requirements for public disclosure of information in respect of the fund and the fund management company. The /6

5 provisions relate to information that may be assumed to be of significance for the market price of the fund units, or that may be assumed to be significant for existing or potential unit holders in some other way. Oslo Børs wishes to stress that the general requirement for the publication of price sensitive inside information will continue in addition to the requirements of Sections 3.4 and 3.5. Yours truly OSLO BØRS ASA Lars Jacob Braarud Vice President Listing Christoffer Bergene Attorney-at-law /6

6 Consultation parties: Via Stock exchange member firms. Ministry of Finance Financial Supervisory Authority of Norway Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime Norwegian Securities Dealers Association VPS ASA Norwegian Mutual Fund Association ABG Sundal Collier Asset Management AS Alfred Berg Kapitalforvaltning AS Carnegie Kapitalforvaltning AS Danske Capital AS Dnb NOR Kapitalforvaltning AS Fondsfinans Kapitalforvaltning ASA Fondsforvaltning AS Friggfond.no AS Handelsbanken Fondforvaltning AS Holberg Fondsforvaltning AS KLP Fondsforvaltning AS Landkreditt Forvaltning AS Nordea Fondene Norge AS Odin Forvaltning AS Orkla Finans Fondsforvaltning AS Pareto Forvaltning AS Seb Asset Management Norge AS Sigma Fondsforvaltning AS Skagen AS Storebrand Fondene AS Terra Forvaltning AS (Finansdepartementet) (Kredittilsynet) (Økokrim) (Norges Fondsmeglerforbund) (Verdipapirfondenes Forening) /6