UCITS V – INTERMEDIATE STAGE IN THE TRANSFORMATION OF THE LUXEMBOURG FINANCIAL CENTRE

On 23 July 2014, the Council of the European Union officially adopted the recommendation for a Directive of the European Parliament and of the Council to amend Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to certain undertakings for collective investment in transferable securities (UCITS) as regards the tasks, remuneration policies, sanctions and liability of depositaries that manage fund assets (the “UCITS V Directive”). The aim of the UCITS V Directive is the harmonisation of provisions for UCITS with the rules on depositaries and the remuneration and sanctions provisions that apply to alternative investment fund managers (the “AIFM Directive”, Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011).

Draft law no. 6845 (the “Draft Law”) implementing Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EG on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions (the “UCITS V Directive”), was put to the Luxembourg parliament on 5 August 2015.

The CSSF had already published Circular CSSF 14/587 on 11 July 2014. The aim was to clarify the rules on depositaries and to determine new organisational requirements for Luxembourg UCITS and UCITS depositaries regarding their tasks, rights and duties. It also includes requirements for the segregation of assets along the full custody chain, and due diligence rules regarding the selection and ongoing monitoring of sub-depositaries, alongside rules for the identification, handling and avoidance of conflict of interests and provisions on accounting and monitoring cash flows.

The aims of the UCITS V Directive and the subject of Draft Law no. 6845 are:

  • the harmonisation of the UCITS regulations with the rules for depositaries, as well as the remuneration and sanctions provisions of the existing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers
  • the determination and definition of the tasks and responsibilities of UCITS depositaries
  • the harmonisation of the remuneration principles for UCITS managers to minimise the incentive for excessive risk taking with the rules for alternative investment fund managers (AIFM)
  • the harmonisation of the administrative sanctions for contravention of the duties imposed upon UCITS and their managers

As a management company of UCITS funds and Alternative Investmenfunds (AIFM), we have, in close cooperation with our affiliated depositaries, ensured implementation of the rules and requirements of Circular CSSF 14/587 in compliance with the relevant directives. The depositary agreement has been comprehensively reworked and takes account of both the directive provisions and CSSF Circular 14/587. We also included comprehensive information on the new provisions and requirements regarding the depositary tasks and responsibilities and the remuneration principles of our company in the relevant sales documents. The up-to-date versions will be available on the homepage of our company immediately following receipt of approval from the CSSF.

We will of course keep you informed on the entry into force of the Luxembourg law implementing Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions (the “UCITS V Directive”).

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