Revolution on the WSE. Will Polish ETFs finally catch up with Europe? We know the draft bill

Creating the possibility of ETFs operating as open investment funds in Poland – assumes the draft law published on Monday by the Ministry of Finance. According to the project authors, the solution will allow for the full integration of Polish funds with the European market.

As indicated in the Regulatory Impact Assessment (IAS), the purpose of the draft Act amending certain acts in connection with the development of investment funds is to eliminate regulatory barriers and introduce solutions ensuring “dynamic development of the capital market and creating conditions for investment fund companies to compete equally with foreign funds.”

The purpose of the proposed regulations is to create the possibility for ETFs to operate in the UCITS formula in Poland, i.e. as open investment funds whose participation units are securities admitted to stock exchange trading. Currently, ETFs in Poland function as closed-end portfolio investment funds. According to the project developer, in practice this results in a number of limitations – including: Polish ETFs cannot use the European passport, which allows UCITS funds to freely distribute throughout the EU.

According to the project authors, the proposed solution will allow for full integration of Polish funds with the European market.

The project also provides for introduction of the possibility of issuing new categories of participation titles within existing open and specialized investment funds, which will be able to be listed on the stock exchange. The RIA indicates that this solution is modeled on practices from markets such as Luxembourg or Ireland.

The new regulations will also introduce a new one a category of alternative investment fund – Qualified Investment Fund (KFI). KFI is to enable investment activities on the non-public market, and the principles of its operation are to be similar to the solutions used in capital funds in other EU countries.

KFI is to operate in a declared capital model, and investors are to make payments at the manager's request. The rules of participation will be uniform for all investors, and early termination of the investment will only be possible in the cases indicated in the statute, which will ensure the stability of the investor structure. According to the proposed regulations, PPK and OFE will be able to invest in private market funds, including qualified funds.

“The introduced restrictions, including requirements regarding the group of investors, portfolio diversification and the impossibility of transferring assets, will ensure that KFI will not be used for economic purposes unrelated to investment activities or for aggressive tax optimization. The project assumes the need for full involvement of the manager and key personnel in the activities of KFI and restrictions on the simultaneous management of multiple funds, with delegation allowed in accordance with the AIFMD directive,” the RIA stated. The AIFMD Directive is an EU legal act regulating the activities of alternative investment fund managers.

The proposed act is to enter into force 30 days from the date of announcement. (PAP)

fos/ mick/