Why a global ETF is delisting from the LSE (and what happens next)

The Amundi Prime Global ETF (PRWU / PR1W) is delisting from the London Stock Exchange (LSE).

Though the ETF will continue life on Germany’s Xetra exchange, you can’t own that version in an ISA.

You can own it in a taxable account. But that will have serious tax implications if Amundi does not gain UK reporting fund status for the Xetra incarnation of the ETF.

Moreover, affected investors are being given just a few weeks’ notice to make consequential decisions, and with scant and confusing information.

Potential issues raised by PRWU owners include:

• Triggering a capital gains tax event if you decide to sell the ETF from a General Investment Account (GIA).

• Not having time to sell PRWU held within an ISA should you miss the relevant communications from your broker, or if you’re acting as the executor of a will.

• Confusion about whether the transfer of the ETF from a Lifetime ISA causes a withdrawal penalty on the government bonus.

• Potentially not being able to sell their ETF for months afterwards if they miss the deadline to sell prior to the delisting event, judging by reports from investors caught up in a previous delisting.

Delisting drama

So why is this happening and what are the rules if it happens to you?

Before continuing, I’d like to thank Monevator readers Peter Rabbit and J. They raised the alarm with helpful comments on Monevator’s low-cost trackers page and via email.

Also, let’s be clear that neither an ETF delisting nor closure means you’ll lose your money, in case you’re worried about that.

The main consequences are:

• Potentially making a loss if you’re sold to cash and end up being out of the market for a time.

• Not being able to access your money for a while if your broker handles the situation badly.

• Being forced into a capital gains event. (Though I think there’s reason to believe that Amundi will reacquire UK reporting tax status for the ETF. I’ll explain why below.)

• Loss of some ISA benefits if sale or redemption isn’t made in time.

Why is the Amundi Prime Global ETF delisting?

In brief, Amundi is moving the ETF’s domicile from Luxembourg to Ireland.

That’s good news for most investors because they’ll pay less withholding tax on the fund’s US securities due to Ireland’s superior tax treaty with the States.

But it’s bad news for UK investors, thanks to our old friend Brexit.

Prior to Brexit, fund firms could distribute their products across European Economic Area (EEA) borders using common passporting rules.

It was easy. No need to delist your ETF from the LSE.

Then, as Brexit approached like a small moon, the FCA invented the Temporary Marketing Permissions Regime (TMPR) to enable business to carry on.

However, TMPR does not cover new financial products registered with the FCA since 30 December 2020.

Want to promote your new EEA domiciled fund in the UK today? Then recognition is yours via the alternative Overseas Fund Regime (OFR).

But alas, the OFR only began accepting applications from 30 September 2024.

In between times, fund providers had to resort to the UK’s ‘Section 272’ recognition process. This choice piece of bureaucracy has been described variously as ‘cost intensive’, ‘time consuming’, and ‘legally expensive’.

Numerous articles quote industry insiders referring to Section 272’s bad reputation and its deterrent effect upon companies wishing to launch new funds in the UK.

Nice work Global Britain!

The OFR is supposed to be a much easier and less expensive route to market. Though still not as cheap and effective as the old passporting regime.

Amundi-ng its own business

Amundi Prime Global’s OFR application is apparently underway. But not in time to enable the Irish version of the ETF to be LSE-listed before the Luxembourg sub-fund disappears.

And apparently Amundi wasn’t minded to hang around on behalf of its UK investors.

Assuming the ETF regains UK recognition, then this ETF will be back on the LSE at some point. But Amundi pushed ahead with the nuclear option anyway, announcing the delisting on 16 October 2024 and giving investors until 15 November to decide if they wish to redeem their shares via the fund manager.

And this timeline was shortened for those investors who report first hearing about the delisting from their brokers some days later.

The impact of delisting on investors

I personally think ISA owners are best off selling the ETF while they’re still in full control of the situation.

The rules on non-qualifying investments1 in a stocks and shares ISA say:

Where the new investments are not qualifying investments, managers must, within 30 calendar days of the date on which they became non-qualifying investments, either:

– sell them (in which case the proceeds can remain in the stocks and shares ISA)

– transfer them to the investor to be held outside the ISA.

LISA qualifying investment rules are the same as for stocks and shares ISAs.

I can’t find out if a broker transferring non-qualifying investments from a LISA would incur a withdrawal charge designed to negate the government bonus.

But that seems probable, otherwise news of the “AWESOME LISA hack you MUST TRY” would probably have gone viral by now.

Meanwhile, there’s quite a bit of guidance out there advising that if delisted shares (remember: ETFs count as shares) are transferred outside of your ISA, then you can’t replace that money without reducing your annual allowance.

In other words, you should sell the ETF while it still resides within your tax shelter.

The consensus view is that your holding’s market value on the date of transfer is your base cost for future capital gains calculations. So you can’t carry over a capital loss from your ISA, but neither should you be stuck with an immediate capital gain.

However, HMRC’s ISA pages are silent on the issue. Or at least I haven’t been able to find the answer within.

And I’d rather not rely on whatever a random broker’s agent or HMRC forum denizen claims that day.

De-list of To Dos

All of which leads me to conclude that the safest course of action is to sell while you can. All other priorities are rescinded.

Once you sell you can then immediately reinvest the proceeds into another LSE-listed ETF that replaces Amundi Prime Global in your line-up. There are plenty to choose from.

I wouldn’t worry about other retail investors doing the same thing. It won’t move the price and is unlikely to nudge the needle much on the spread either. Amundi Prime Global’s spread was around 100th of a percent on 8 November. A non-issue.

In theory, you have until 21 November to sell (that’s the ETF’s last day of LSE trading). But InvestEngine for one told its ISA owners to sell by 31 October or else it’d take action unilaterally around 7 November.

‘Unilateral’ here means your broker sells for you if haven’t opened a (taxable) GIA with them.

If you do have such a taxable account and you don’t sell beforehand, then your broker will instead transfer the new-style Prime Global ETF into your GIA upon completion of the merger. The merger is slated for 22 November but that’s subject to change.

However, it’s a bad idea to let an ETF without UK reporting fund status hang around outside your tax shelters. (See the ‘Taxable account’ section below).

I don’t think you can depend on the extra 30 days the stocks and shares ISA rules imply you get either.

That’s because the communications received by affected investors suggest that brokers will either sell or transfer on their own timeline if you don’t act yourself.

Does delisting affect SIPPs?

Amundi’s notice to shareholders says:

The Receiving Sub-Fund is eligible for self-invested personal pension (SIPP) purposes under UK tax law. Nevertheless, each SIPP provider may impose its own restrictions.

(The ‘receiving sub-fund’ referred to is the Xetra-listed version of Prime Global.)

I haven’t found any reports of SIPP owners being affected. Still, you may need to take action if your broker doesn’t allow you to trade European-listed ETFs.

One broker advises (with reference to shares generally) that you’ll have to call its telephone trading desk to offload delisted stock if you miss the deadlines. A bit tedious and likely more expensive.

Still, if you fancy holding the new ETF and your current platform doesn’t do Europe then you could transfer it to a different broker who does. There are enough decent options, though it does mean incurring charges on another platform.

My own brokers don’t support European-listed ETFs. So personally I’d sell and replace Amundi Prime Global before the last day of trading.

Taxable accounts and capital gains events

Without UK reporting fund status, capital gains are taxed at your marginal income tax rate. Even worse, the CGT exemption allowance does not apply.

Bad, bad, bad.

However, being an unrecognised overseas fund needn’t stop Amundi Prime Global from achieving UK reporting fund status.

Other LSE delisted Amundi ETFs found this happy place in good time.

For example:

• EPRE was delisted on 5 July 2023. The LSE sub-fund merged with versions trading on multiple European exchanges. HMRC states reporting fund status came into effect for those back on 31 January 2018.

• WGES was delisted on 1 February 2024. It merged with its Xetra counterpart which had gained reporting fund status from 17 January 2024.

• RUSG was delisted on 8 July 2024. It merged with its Xetra equivalent, MWOT. Reporting fund status was granted from 8 July 2024.

So anyone who doesn’t want to trigger a capital gains event by selling PWRU / PR1W may not have to worry about UK reporting fund status if they can wait for the Irish incarnation to appear.

In fact, I haven’t yet found an example of an Amundi ETF delisting from the LSE and only leaving behind a non-reporting fund version.

That said, I can’t claim to have searched every instance. And this time might be different.

Obviously this is a tricky decision that could backfire either way. Ideally, Amundi can give you a straight answer about its plans if you need it. You can call customer service on 0207 074 9598 or email Retail-UK-ETF@amundi.com

You can also check which overseas funds have UK reporting fund status by downloading an Excel document from the dedicated gov.uk page. Search the spreadsheet using the fund’s ISIN code.

The Irish version of Amundi Prime Global is not present in the latest update dated 9 October 2024.

Why do Amundi ETFs keep delisting?

Amundi isn’t the only ETF provider to have delisted ETFs from the LSE over the past several years. But it has been hyperactively pruning its range in the wake of its 2022 takeover of the Lyxor ETF brand.

Normally, delistings eliminate niche products that are struggling to make a profit.

However Prime Global has $1.5 billion under management, according to Amundi.

So Amundi is not delisting the ETF because it failed to gain traction in the market. In fact, it’s protecting the fund’s competitiveness by moving it to Ireland.

Amundi has obviously decided that move can’t wait for the outcome of its OFR application. So it’s seemingly not too bothered about losing any UK investors caught in the regulatory cross-fire.

Indeed the company has done little more than provide the 30-calendar-day notice period required. Meanwhile affected owners are struggling with ineffectual communication from their brokers.

All of which makes me think customer service still has a long way to go in the investment industry.

Are other large ETFs at risk?

I’d be surprised if this proves to be a problem that gets notably worse in the future.

The UK is the second biggest European market for UCITS funds (ETFs fall into that category).

Moreover ETF Stream recently quoted BNP Paribas Asset Management’s global head of business development ETF and index solutions, Lorraine Sereyjol-Garros, as saying:

Some clients, such as in the Nordics, Middle East, Latin America, and Asia prefer LSE listings over mainland Europe, so it enables us to target the domestic market and international clients

Thankfully then, we’ve still got market power as a country. It seems likely to me that fund managers who haven’t launched new products in the UK over the past few years were waiting for OFR to go live.

Unsurprisingly implementation kept being delayed, though it seems we’re finally off to the races now.

Be that as it may, delistings are a natural part of the ETF ecosystem. And yet retail investors aren’t always being given enough time – nor adequate information – to confidently respond.

Brokers are on point for this as they hold the direct relationship with the customer.

It wouldn’t be that hard to write a comprehensive guide to delisting. They’re welcome to start with the points raised above.

Take it steady,

The Accumulator

1. Scroll to the Changes to investments held in a stocks and shares ISA section. [↩]