Luxembourg law implementing UCITS V now published

The law which implements UCITS V in Luxembourg (the Implementation Law) was published (at present, only in French) in the Mémorial - Journal Officiel du Grand-Duché de Luxembourg on 12 May 2016. Its provisions will apply from 01 June 2016.

The Implementation Law amends both the Law of 17 December 2010 relating to undertakings for collective investment (the UCITS Law) and the Law of 12 July 2013 on alternative investment fund managers (the AIFM Law).

Changes to the Luxembourg UCITS regime

These are mainly focused on the following areas:

• clarifying the depositary regime with respect to its duties and liabilities
• harmonising remuneration rules, and
• setting out what sanctions the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF) is able to take.

Changes to “Part II funds”

Part II funds are undertakings for collective investments other than UCITS which (i) are subject to Part II of the UCITS Law, and (ii) qualify as alternative investment funds. Part II funds are sold to all types of investors, both retail and/or institutional.

One of the objectives of the Implementation Law is to ensure a high degree of harmonised protection for retail investors whether they invest in UCITS or in Part II funds. This goal is achieved by strengthening the current regime of the Part II funds with respect to the depositary rules.

Although the change has been particularly discussed between the Luxembourg Parliament (Chambre des Députés) and the Council of State (Conseil d’Etat), the new depositary regime is also applicable to all Luxembourg UCIs subject to the Part II of the 2010 Law, regardless of whether the assets under management by the Part II UCI are above or below the threshold set out in the Alternative Investment Fund Managers Directive regime.

Changes to the AIFM Law

The Implementation Law also amends the AIFM Law to impose a new obligation upon managers of alternative investment funds (AIFMs) to have financial reports reviewed by a statutory approved auditor, and to allow AIFMs to provide certain investment services (also known as 'MiFID services'), such as portfolio investment management on a discretionary and individual basis and investment advice on a cross-border basis.