Repurcussions of PRIIPs on US listed ETFs/CEFs

[snagga]

The situation seems very unclear.

I hold a slug of US-domiciled ETFs in a SIPP at Interactive Investor. The II website says that customers are blocked from adding to investments in ETFs unless a KIID has been made available. However, today I was able to purchase additional shares in VNQ, a US ETF that holds US REITs, without any problem and without being shown a KIID.

Regarding IG, the list of available shares for stockbroking clients includes US-listed ETFs but with the following flag: "† Available only to clients with relevant experience/knowledge. See FAQs for details." I can't find a relevant FAQ but this seems consistent with what others have said about an exemption applying for high net worth/sophisticated investors. Interestingly, US REITs are listed as available but without any such caveat.

[hiriskpaul]

The situation seems very unclear.

I hold a slug of US-domiciled ETFs in a SIPP at Interactive Investor. The II website says that customers are blocked from adding to investments in ETFs unless a KIID has been made available. However, today I was able to purchase additional shares in VNQ, a US ETF that holds US REITs, without any problem and without being shown a KIID.

Perhaps their systems have not been adequately changed? Similar to what I think is happening at DEGIRO, where there does not seem to be a problem buying a US listed ETF once you have visibility. It would appear that DEGIRO are attempting to prevent trading by removing visibility.

Regarding IG, the list of available shares for stockbroking clients includes US-listed ETFs but with the following flag: "† Available only to clients with relevant experience/knowledge. See FAQs for details." I can't find a relevant FAQ but this seems consistent with what others have said about an exemption applying for high net worth/sophisticated investors. Interestingly, US REITs are listed as available but without any such caveat.

That might explain why I have not had a problem with IG.

[ModernMicawber]

I'll have a bit of cash towards the end of the month, will attempt a test purchase through YouInvest then. For once, their sluggishness may turn out to be a benefit!

[greygymsock]

i have successfully bought more of 1 of the US ETFs i hold in my youinvest SIPP, and other US ETFs also appear to be buyable.

i did phone them in december to ask if this would be possible from january, and the person i spoke to didn't think there would be any problem.

when buying, there is a message that their data provider does not have a KID available, and the suggestion to look for it on the fund manager's website.

this does look deliberate on youinvest's part, rather than a glitch. but of course i can't say whether they'll stick to this approach.

[Alaric]

PRIIP Regulation lays down potentially heavy sanctions for non-compliance. These can include fines up to €5 million, or twice the amount of profits gained by avoidance - as well as public censure or prohibition orders banning further marketing of the product.

Presumably it would be the FCA doing the enforcing.

Given that the FCA and its predecessors do not have a stellar past record of effective investor protection, would they feel politically comfortable trying to enforce EU diktats given the vote to leave the EU? It's an obvious example of EU illogic or rules for the sake of it that you are allowed to buy individual stocks on US markets, but not reduce your risk by buying a diversified package of the same stocks.

[BasketCase]

I wish I had seen this before January. Thanks to all posters as very informative now. Had only 1 US domiciled ETF in my HSDL Sipp. Could no longer buy any more in New Year. Was impressed that they let me sell the ETF commission-free as thought it best to extract myself from it whilst markets easier to sell and find an alternative that I can trade without restriction. They acceded to request as here had, in effect, been no prior notification by iShares of the issue to me/Halifax Share Dealing. The ETF was Emerging Markets Small Cap - does anyone know an Irish/UK domiciled ETF that offers similar exposure and is distributing (not accumulating). Thanks

[GeoffF100]

Alaric wrote:
It's an obvious example of EU illogic or rules for the sake of it that you are allowed to buy individual stocks on US markets, but not reduce your risk by buying a diversified package of the same stocks.

The logic is repatriation, the roll back out of globalisation.

The purpose of the EU and the EEA is to facilitate trade between members and put up trade barriers to outsiders. The world is also becoming more protectionist again. Nonetheless, I doubt that these EU rules (which are said to be rather vague, which I expect they had to be to get every member state to agree) are a protectionist measure. I expect that the intention is to ensure that investors are properly informed before they buy. Some UK brokers appear to be putting an interpretation on the rules that was never intended. It is also possible that the UK regulator is over-stepping the mark.

[Alaric]

Nonetheless, I doubt that these EU rules (which are said to be rather vague, which I expect they had to be to get every member state to agree) are a protectionist measure. I expect that the intention is to ensure that investors are properly informed before they buy.

Nevertheless they have had the effect of being protectionist. The effect of globalisation is that essentially the same assets can be purchased in New York or in Dublin. Restrictive measures by the US can mean that US citizens resident in the UK have to elect the New York version. The insistence on information being provided in a particular format can require UK residents to buy the Dublin version.

[hiriskpaul]

I don't think protectionism is the prime motivation either, nevertheless whenever some kind of standard is enforced that will have a protectionist slant to it as it means yet another level of bureaucracy on top of what already exists. Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

[ModernMicawber]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

Not strictly investment-related, but did you see this story: http://www.theregister.co.uk/2018/01/08 ... bans_byod/ ?

Those of you with some "front office" experience will recall that generally speaking there are already a few rules about this kind of thing, which vary from institution to institution, but the new regulation means the same thing will apply across the whole FS industry.

[hiriskpaul]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

Not strictly investment-related, but did you see this story: http://www.theregister.co.uk/2018/01/08 ... bans_byod/ ?

Those of you with some "front office" experience will recall that generally speaking there are already a few rules about this kind of thing, which vary from institution to institution, but the new regulation means the same thing will apply across the whole FS industry.

Ludicrous. I used to do a lot of work remotely and I know a lot of people still do, even for investment firms. How can this rule work in these cases?

[GeoffF100]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

The UK was undoubtedly consulted on these rules, and could have said no, as could any other EU member. Nonetheless, I expect that we were preeminent in lobbying for the rules to be as strict as possible. When a watered down version of the rules was finally agreed, the FCA may well have decided to beef them up. Alternatively, it may be a case of the FCA not issuing clear guidance, and most brokers deciding to play safe. If enough people make a fuss, e.g. writing to their MPs, the FCA may decide to clarify the requirements.

[XFool]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

The UK was undoubtedly consulted on these rules, and could have said no, as could any other EU member. Nonetheless, I expect that we were preeminent in lobbying for the rules to be as strict as possible. When a watered down version of the rules was finally agreed, the FCA may well have decided to beef them up. Alternatively, it may be a case of the FCA not issuing clear guidance, and most brokers deciding to play safe. If enough people make a fuss, e.g. writing to their MPs, the FCA may decide to clarify the requirements.

OK, but AFAICS all my LSE listed ITs, including the off-shore based ones, already have standard format KIDs in place. So should not be a problem. Admittedly I have not yet tried to purchase, but looks OK to me.

Surely this *should* only effect US based securities, and only then because presumably US based companies and funds haven't being paying attention/aren't sufficiently bothered about their European market?

[hiriskpaul]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

The UK was undoubtedly consulted on these rules, and could have said no, as could any other EU member. Nonetheless, I expect that we were preeminent in lobbying for the rules to be as strict as possible. When a watered down version of the rules was finally agreed, the FCA may well have decided to beef them up. Alternatively, it may be a case of the FCA not issuing clear guidance, and most brokers deciding to play safe. If enough people make a fuss, e.g. writing to their MPs, the FCA may decide to clarify the requirements.

OK, but AFAICS all my LSE listed ITs, including the off-shore based ones, already have standard format KIDs in place. So should not be a problem. Admittedly I have not yet tried to purchase, but looks OK to me.

Surely this *should* only effect US based securities, and only then because presumably US based companies and funds haven't being paying attention/aren't sufficiently bothered about their European market?

Not just US, anything non EU. Only for retail investors though. There are no restrictions on institutional or professional investors buying US ETFS or CEFs.

[hiriskpaul]

Unfortunately UK regulators have a habit of copper bottoming EU directives as well which sometimes does not help.

The UK was undoubtedly consulted on these rules, and could have said no, as could any other EU member. Nonetheless, I expect that we were preeminent in lobbying for the rules to be as strict as possible. When a watered down version of the rules was finally agreed, the FCA may well have decided to beef them up. Alternatively, it may be a case of the FCA not issuing clear guidance, and most brokers deciding to play safe. If enough people make a fuss, e.g. writing to their MPs, the FCA may decide to clarify the requirements.

I am sure the FCA had a very big part in this and would not be surprised if it was the FCA who initiated it.

[ModernMicawber]

Well, it is as feared, tried to add to Vanguard VT. in the SIPP and was advised that there are "restrictions in dealing in this security".

I guess the holding I have is destined for LTBH now; this is a shame as before 5 minutes ago I'd never worked out exactly how much holding VT. instead of VRWL was saving in withholding tax and the number turned out to be alarmingly large!

I've never written to my MP before; what exactly is it I would be asking him to do?

[Alaric]

what exactly is it I would be asking him to do?

Ask him why, as we are leaving the EU, this nonsense paperwork has been inflicted on us and whether he would support its removal.

(It may actually be in part at least home grown, being an initiative of the FCA)

[ModernMicawber]

I see the XBT Bitcoin ETF has a KID though, maybe that would be a safer investment!

[ModernMicawber]

Just realised the further implication of this, which is that I am now "married" to AJ Bell until death do us part!

[hiriskpaul]

US listed ETFs are no longer available to IG retail customers. The restriction came in sometime this week I think. Professional investors can still buy US listed ETFs, but not online as the system does not properly recognise the professional status yet. I have been told though that these are available over the phone at normal online prices.

I am surprised that IG have been offering these ETFs to retail for so long and suspect it was an oversight.