LONDON Dec 1 France's markets watchdog (AMF)
has proposed detailed rules on when asset managers can limit
repayments from funds to investors in stressed markets, becoming
the latest regulator to turn a spotlight on the growing asset
Fund managers can already impose "gates" to limit
withdrawals by investors from open end funds in extreme market
circumstances to avoid fire sales of assets that could worsen
turbulence and undermine financial stability.
On Thursday the AMF launched a one-month public consultation
to determine the "cases and conditions" under which asset
management companies may use these gates.
The draft rules propose capping redemption requests in the
same proportions for all unit holders in a fund, thus removing
any "first mover" advantage for early requests.
Funds would be required to tell the watchdog and unit
holders if gates are being activated, and the thresholds for
triggering the gates would also be defined, the AMF said.
Asset managers would also be required to spell out the
maximum duration for gates.
Slamming the brakes on redemptions came under the spotlight
when some UK commercial property funds suspended redemptions
after sharp falls in their values following Britain's vote in
June to leave the European Union.
Britain's Financial Conduct Authority is due to publish a
discussion paper on property funds in 2017 and has already
expressed concerns about how the suspensions were handled.
The AMF said it proposes to expand its conditions for
applying gates in real-estate funds sold to retail investors by
imposing, under normal conditions, a minimum redemption
Global regulators are also concerned with promises some
funds make to give investors their money back at short notice.
Funds like "UCITS" mutual funds sold in France are regulated
under EU laws whose application is coordinated by the bloc's
European Securities and Markets Authority (ESMA) to ensure
ESMA's executive director Verena Ross told a conference on
Thursday held by ICI Global, a funds industry body, she was not
aware of the AMF proposals.
"There are some issues that have a genuine, cross-Europe
application and this might be one, but I am not commenting on
that," Ross said.
It was important that national regulators can consult on
issues specific to their own market structures, she said.
"What we normally try to do when these type of issues come
up, is that we sit together... to get the national supervisors
to actually share their experiences, and see whether this is
something that needs to be dealt with at the European level or
at a national level," Ross said.
(Reporting by Huw Jones; Editing by Alexandra Hudson)