A revised Q&A has been published by ESMA, on 27 November 2013, in relation to itsGuidelines on ETFs and Other UCITS Issues.
The only changes are the addition of two new questions and answers: the first, Q&A 6m, under the Collateral Management section and the second, Q&A 7i, under the section on Financial Indices.
For ease of reference, both new Q&A are set out below:
Question 6m: When UCITS reinvest cash collateral, should the reinvested cash collateral be taken into account for the calculation of the issuer concentration limits laid down in the UCITS Directive?
Answer 6m: Yes, in accordance with paragraph 2 of Box 27 of the Guidelines on Risk Measurement and Calculation of Global Exposure and Counterparty Risk for UCITS (Ref. CESR/10-788) the reinvested cash collateral should be taken into account for the calculation of the investment restrictions applicable to UCITS. For example, this means that if a UCITS has already placed 10% of its assets on deposit with a given issuer, it should not reinvest cash collateral for more than 10% of its assets in deposits with the same issuer in order to comply with the 20% limit of Article 52(1) (b) of the UCITS Directive. In addition, the reinvested cash collateral has to comply with the diversification requirement laid down in paragraph 44 of the ESMA Guidelines on ETFs and other UCITS issues.
Question 7i: According to paragraph 59 of the guidelines, UCITS should not invest in financial indices whose methodologies permit retrospective changes to previously published index values (‘backfilling’). Does this provisions cover calculation mistakes.
Answer 7i: No. Calculation mistakes are not covered by paragraph 59 of the guidelines.
The revised Q&A can be found here.