INVESTMENT MANAGEMENT Luxembourg Regulated Investment Vehicles

INVESTMENT MANAGEMENT Luxembourg Regulated Investment Vehicles An overview of the legal and regulatory requirements Updated as at 1 March 2012 kpmg.com/lu Luxembourg Regulated Investment Vehicles | 1 Executive summary KPMG is pleased to present its updated fifth edition of the Luxembourg Regulated Investment Vehicles brochure, incorporating the recent changes in the legal and regulatory environment. The purpose of the brochure is to provide an overview of the various vehicles that may be set up in Luxembourg covering the complete spectrum of the Fund industry. The overview covers the following aspects: • Legal and regulatory requirements • Shareholding • Reporting requirements • Approval and supervision • Taxation The Luxembourg fund industry in 2011 UCITS IV Luxembourg was the first country in the EU to transpose the UCITS IV Directive into national law and the early transposition through the law of 17 December 2010 has meant that regulatory compliance is higher on the agenda of UCITS and their Management Companies in 2011. A lot of work has been done to achieve compliance with the new UCITS IV organisational requirements that became effective on 1 July 2011. One of the big challenges faced by the UCITS industry lays in the creation of a new Key Investor Information Document (KIID) to replace the Simplified Prospectus. For all UCITS launched in 2011 the KIID was an obligation but existing UCITS have been able to benefit from grand-fathering provisions that effectively postpone implementation of the KIID until 1 July 2012. Another UCITS IV compliance area that required particular attention was the significant update of the UCITS risk management policy that was due for submission to the CSSF by 31 December 2011. 2 | Luxembourg Regulated Investment Vehicles AIFMD 2011 was also marked by the final approval of the Alternative Investment Fund Managers Directive (AIFMD) by the European Council on 27 May 2011. The alternative fund industry’s attention has turned to concentrate on the Level 2 technical measures that will provide detailed rules on how the AIFMD will be implemented. The AIFMD passport regime that will allow the marketing of alternative funds across the EU to professional investors, is likely to provide significant business opportunities. Luxembourg alternative funds are well positioned to seize the opportunity and leverage the extensive cross-border distribution expertise gained from distributing UCITS. What lies ahead in 2012? UCITS V The EU authorities have an ambitious regulatory agenda in 2012 with a host of new rules in prospect that will have a broad impact on the fund industry. In relation to UCITS, new rules will be issued for UCITS ETFs and Structured UCITS that will tighten the regulatory framework for these products. In addition the European Commission is working on a new UCITS V proposal to align the depositary framework with the requirements of the AIFMD. The proposal is expected to redefine the role of the UCITS depositary and liability regime, but also issue rules covering the remuneration of UCITS managers as well as administrative sanctions for a series of key infringements. AIFMD The European Commission is expected to finalise the bulk of the AIFMD level 2 implementing measures in the second trimester of 2012. Then the onus will be on the Luxembourg lawmakers to push ahead in the remaining months of 2012 to draft the new legal texts required to transpose the EU framework into local law. The ultimate deadline to transpose the AIFMD is July 2013. SIF law In Luxembourg the industry is ready to embrace an update of the Specialized Investment Fund (SIF) law, that will introduce some significant changes to the SIF regime, such as the requirement for pre-approval of the SIF before launch, the possibility to cross-invest between sub-funds in the same umbrella structure and new rules on risk management and conflicts of interest that will bring SIFs in line with the AIFMD requirements. The regulatory agenda will remain challenging for the fund industry in the years ahead but will offer many opportunities for development to Luxembourg regulated funds. MiFID 2 The Commission has issued a draft update of the Markets in Financial Services Directive (MiFID) and is advocating enhanced investor protection measures including a ban on inducements for portfolio managers and for independent investment advisers that will have a significant impact on the way distributors of funds are remunerated. MiFID also proposes a new categorization of UCITS funds, that will draw a distinction between complex and non-complex UCITS. Luxembourg Regulated Investment Vehicles | 3 Luxembourg Fund industry Over the years, Luxembourg has developed a strong reputation as a centre of excellence for a large variety of investment funds. The legal framework of the country offers a large selection of investment vehicles that may be used to accommodate the strategies pursued by promoters. As at 31 December 2011, the size of the Luxembourg Fund industry was Euro 2.10 trillion (2010: Euro 2.20 trillion). There were 3,845 funds (2010: 3,667) or 13,294 sub-funds (2010: 12,937) approved. During the year 2011, 469 new funds were set up while 291 were closed or liquidated. In terms of sub-funds there was net increase of 357 sub-funds during the year. In addition there were 272 (2010: 244) SICARs and 28 (2010: 26) securitization vehicles on the list of regulated vehicles by the Commission de Surveillance du Secteur Financier (the Luxembourg regulator) as at 31 December 2011. 2011 has seen a significant increase in the number of SIFs from 1,192 at the end of December 2010 to 1,374 at the end of December 2011. The table below shows the number of funds under the different laws and the size of the assets managed. March 2012 Funds 2010 Sub- Assets funds EUR billion 2011 Funds Sub-funds Assets EUR billion Part I (2010 law) 1,846 8,361 1,763 1,870 Part II (2010 law) 629 2,069 222 601 SIF 1,192 2,507 214 1,374 SICAR 244 - - 272 Securitization 26 - - 28 (regulated) 8,594 1,655 1,904 202 2,796 239 - - - - Source: CSSF ... - tailieumienphi.vn