Although regulation is going in the right direction, there is still a long road ahead, panelists at this years’ Association of the Luxembourg Fund Industry (ALFI) Global Distribution Conference agreed.
On a panel discussing the impact of regulatory changes on distribution, moderated by Craig Blair, vice president of Franklin Templeton International Services, the three panelists offered a range of responses on where regulators should place their focus.
Micaela Forelli, managing director and distribution director for Europe at M&G Investments highlighted the importance of educating end investors on regulatory frameworks around sustainability, stating that there is “not yet full investor understanding of these extremely technical regulations” and the industry needs to bridge them to the consumers.
Forelli also emphasised the lack of clarity around ESG regulations, the specialist data for which is not yet available. She cited a “disconnect” between regulations and the companies that need to comply with them. The importance of ESG and Sustainable Financial Disclosure Regulation (SFDR) integration were highlighted as key topics for firms to consider, with upcoming regulation emphasising the importance of adaptation.
Alice Lehnert, director in the investment management practice at Deloitte Luxembourg, stated that the regulators’ fees levied to the management companies for cross-border marketing (registration and maintenance of registration) were not aligned between EU regulators.
Florence Stainier, partner at Arendt & Medernach SA, added that although current regulations provide many benefits, there is still more to be done. Particular focus areas should be digitalisation, reducing costs, and fostering harmonisation whilst leveraging on existing regulations, she said.
In a Q&A portion of the panel, questions emerged as to whether regulators would ever converge globally for a unified market. Although recognising that many regulators are generally following the same paths, the panelists maintained that globally unified regulation is still “a long way off”.
When asked about how the industry should be dealing with the difficulties of complying with Luxembourg’s legislations for non-European firms, the panel recommended reaffirming the importance of legislations and the reasons behind them.
Security and investors' protection are major concerns, something that has been made clear through companies’ troubles with scammers. Although cultural differences between markets may make compliance to Luxembourg’s legislation more troublesome, there is a need for mutual understanding and a dialogue between distributors and fund promoters, they agreed.
Blair closed the panel with the statement that although they are still evolving and have the best interests of investors in mind, there is still a need to “hone and adapt” existing regulations.
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