Marketing of US ETFs in EU


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Locked-out US ETFs seek to regain access to EU
Providers of US-domiciled exchange traded funds are seeking ways to regain access to the EU retail market after being locked out of it.

New EU fund regulation requires providers of non-Ucits funds to supply retail investors with a key investor document.

The KID requires the disclosure of future performance scenarios – an obligation that directly conflicts with US domestic regulations.

US-domiciled funds have not been able to comply with the new rules, leading EU execution-only platforms to delist thousands of products – mainly ETFs.

A lawyer says US asset managers are now looking into whether the regulation governing packaged retail and insurance-based investment products could be clarified to solve the problem.

According to the lawyer, firms want clarification that only products marketed actively in the EU should have to provide a KID.

The funds that were delisted in January had been sold to European retail investors on a reverse solicitation basis rather than via active marketing on the part of the providers.

The current Priips wording, which states that funds that are “made available” to EU retail investors should provide a KID, is “somewhat unclear”, says the lawyer, who adds that US and UK trade bodies have started to look into what could be done to clarify this.

Ignites Europe understands that fund trade body ICI Global is analysing the situations in which distributors require a KID and what the terms set out in the Priips legislation “mean in the context of reverse solicitation”.

According to a person with knowledge of the situation, the trade body is “considering” talking to regulators and policymakers about the ambiguity.

Kristopher Heck, managing partner at Tanager Wealth Management, says it is in US ETF providers’ interests to solve the problem.

Mr Heck says these firms are locked out of a “large market” of potential investors in the EU – mainly hundreds of thousands of US expats in the EU who may favour these products as they are more tax efficient than Ucits equivalents.

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He is hopeful that firms can “get their head around how to square the circle” but warns that taking the route of lobbying EU and US regulators could take time.

“That could be a medium solution in three to five years – [but it is not] going to happen in 2018,” says Mr Heck.

Another solution US funds could look into is providing a KID with performance scenarios but explicitly stating that this would not be for use by US resident investors, he suggests.

Providers that have seen a halt to trading in their US ETFs by EU retail investors due to the Priips legislation include iShares, State Street Global Advisors, Van Eck, Global X, Vanguard, Direxion ETFs, Ark Funds and Horizons ETFs.

IShares, SSGA, Van Eck, Vanguard and Horizons ETFs tell Ignites Europe that they do not actively market their US funds to retail investors in Europe, meaning they are not in scope of the Priips regulations.

Malcolm Smith, global chief operating officer of SSgA’s ETF business, says that since his firm “[does] not currently have regulatory permissions to market to retail investors, [it has] no plans to produce Priips-compliant KID documents in-house”.

A spokesperson for Horizons ETFs says it provides factsheets and regulatory ETF documents on its website, which “should provide sufficient information to any EU distributor in order for them to comply with regulation”.

Andy O’Rourke, chief marketing officer of Direxion ETF, says his firm is currently “reviewing [its] registration requirements” for the sale of its US funds in Europe.

“We have retained outside counsel and are working with local distributors and brokerage firms to sort out country-specific requirements and hope to resolve the matter as quickly as possible,” says Mr O’Rourke.

A spokesperson for Ark Funds says it is currently “working with outside counsel to analyse” the legislation.

Global X declined to comment.


Frequent Poster
Got the following from Saxo today (I love the not-so-subtle bit about how I can't deal with complex products :oops: ):

Dear dub_nerd,

In January this year new regulation came into effect (MiFID II) which brought with it a number of initiatives to further strengthen investor protection.

Under MiFID II some Exchanged–Traded Products (ETPs) were reclassified from ‘non-complex’ to ‘complex’, meaning that due to the higher nature of risks involved they are no longer suitable for all types of trader.

You can read more about complex and non–complex products, and how we evaluate appropriateness here.


What does this mean for your trading?

Based on the information you provided when you opened an account with us, we deemed that products of a complex nature were not appropriate for you.

We have reclassified some Exchanged–Traded Products (ETPs) as complex, so you will no longer have access to trade these markets.
You don’t need to take any action, these instruments will just no longer be visible in the trading platform.


If you are in any doubt as to what these changes mean for you, or if you have any questions, please do not hesitate to contact your account manager, or use the general contact information on our Contact us page.

Kind regards,
Saxo Capital Markets


Registered User
When you are opening an account with a broker does this mean you can say that you have experience investing in different types of products and you can get full access to all ETFs? OR are they still off limits?