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Luxembourg moves ahead with UCITS V adoption

October 2015 - Finance. Legal Developments by Chevalier & Sciales .

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Luxembourg is pushing ahead with legislation to adopt the UCITS V directive into national law. Bill no. 6845, transposing Directive 2014/91/EU of July 23, 2014, was approved by the cabinet on July 10 and placed before parliament on August 5. It is expected to be debated and adopted during the fourth quarter of the year.

The legislation amends directive 2009/65/EC (UCITS IV) on co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities with regard to depositary functions, remuneration policies and sanctions.

The Luxembourg bill contains significant amendments to the investment funds law on December 17, 2010 on undertakings of collective investment and the law of July 12, 2013, adopting into the national law the EU’s Alternative Investment Fund Managers Directive. The AIFMD is the source of many of the UCITS V provisions and one of the new directive’s main aims is to bring the two regimes into line regarding depositary rules, remuneration and sanctions provisions.

The preamble to the legislation states that its main purposes are to define clearly the tasks and responsibilities of UCITS depositaries, including clarification of their responsibility for safekeeping of assets, set out rules on remuneration policies designed to curb incentives for excessive risk-taking by portfolio managers and others, and harmonise administrative penalties for breaches of the rules applicable to both funds and their managers.

The bill, which faithfully follows the language of the UCITS V directive, also proposes separate changes to the December 2010 legislation, notably to apply the UCITS V depositary rules to non-UCITS funds established under Part II of the Luxembourg fund law. At present the depositary rules applicable to Part II funds are those set out in CSSF Circular 91/75 if the fund’s assets are below the AIFMD threshold.

It also introduces additional amendments to the 2013 AIFMD implementation law, requiring alternative managers to have their accounts audited by a certified auditor, as is now the case for UCITS management companies.

In addition, authorised AIFMs may henceforth provide non-core investment services, such as discretionary individual portfolio management or investment advice, on a cross-border basis subject to the notification requirements. This amendment implements changes to the AIFMD introduced by the MiFID II directive of May 15, 2014.