EFAMA welcomes the opportunity to provide its comments on the Good Practices to be adopted by IOSCO for the Termination of Investment Funds. We agree that the decision to terminate a fund can have significant impact on investors in terms of the costs associated with such an action, or the ability for investors to redeem their holdings during the termination process. In this regard, even in the context of a fund’s voluntary termination, asset managers must abide by their fiduciary obligation to act in the best interest of their investors.
In this respect, we welcome the efforts of IOSCO towards the development of Good Practices, as presented in the consultation. At the same time, we wish to underline that a large majority of these Good Practices are already reflecting existing regulatory requirements, market standards and best practices in the EU asset management industry. In this sense, we do not anticipate the proposed Good Practices to bring extensive changes to the current EU regulatory framework and to the ongoing practices of European investment funds.
The efforts to further standardise established practices, as welcome as they are, should, however, not result in additional, overly-prescriptive regulatory requirements, likely to turn the existing best practices into an overly bureaucratic process, at odds with timely decision-making. The termination process should always be in the best interest of investors and stream-lined enough for the entity in charge of the liquidation to deliver it over a reasonable time-frame. For instance, an exhaustive list of information to be disclosed in the initial termination plan, or the detailed description of the treatment of different types of assets during the termination process, would not only be overly prescriptive, but might create unfavourable conditions for the liquidation process and reduce the flexibility for the responsible entity to choose the right option at the time of the liquidation. Therefore, EFAMA considers it important that the IOSCO Good Practices focus on the key high-level information to be disclosed to investors, while at the same time allowing sufficient flexibility and discretion for the responsible entity to act in the investors’ interest.