Article Post on 13 August 2015

Luxembourg Draft Law for the Transposition of the UCITS V Directive

The draft law 6845 (the “Bill”) transposing Directive 2014/91/EU of the European Parliament and of the Council of July 23, 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”) has been deposited on Wednesday August 5, 2015 at the Luxembourg Parliament, the Chambre des Députés.

The Bill envisages important amendments, in particular, to the existing Law of 17 December 2010 on undertakings of collective investment, as amended (“UCI”) as well as the Law of 12 July 2013 on alternative investment fund managers (“AIFM”), whereby it should be noted that the latter served as a source of legal inspiration for the UCITS V Directive. In this context, it may be pointed out that one of the purposes of the UCITS V Directive was the alignment of the UCITS regime with the depositary rules and rules on remuneration and sanctions provisions under the existing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers (the “AIFM Directive”).

As set out in the whereas section of the Bill, the competent Luxembourg Ministry of Finance submitting the said legislative proposal primarily takes into account the three thematic priorities which have already encouraged the EU lawmakers to adopt the UCITS V Directive, namely:

  1. a clear definition of tasks and responsibilities as regards UCITS depositaries including a clarification of the mission of asset safekeeping;
  2. an harmonized framework of rules governing remuneration policies of UCITS managers so as to avoid incentives for excessive risk-taking; and
  3. the harmonization of administrative sanctions for breaches of obligations imposed on UCITS as well as their managers.

In principal, for the vast majority of the provisions, the Bill incorporates faithfully and accurately the text and the wording of the UCITS V Directive. By amending the Luxembourg law of 17 December 2010, despite the wide range of legislative changes, the current structure of the said law aims to remain unaffected by the respective Bill.

The Bill also intends to make certain amendments to the Law of 17 December 2010 not arising from the implementation of the UCITS V Directive but rather, to name only the most important, for reasons to link the depositary regime for UCI under Part II of the Law of 17 December 2010 to the depositary regime for UCITS depositaries.

The present Bill finally intends to address some selective changes to the Law of 12 July 2013 on AIFM, which are not related to the amendments introduced by the UCITS V Directive either, but, inter alia, requiring the AIFM to submit their accounting data to audit by a certified auditor (“réviseur d’entreprises agréé”) as it is currently anticipated for management companies under the Law of December 17, 2010.

Finally, another amendment to the Law of 12 July 2013 aims at permitting an AIFM to provide certain investment services, such as management of investment portfolios on a discretionary and individualized basis or the provision of investment advice, to provide these services on a cross-border basis in compliance with the notification requirements prescribed by law. This amendment is necessary in order to implement the amending provisions on the subject in the AIFM Directive by the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments amending the directive 2002/92/EC and the directive 2011/61/EU (the “MiFID 2 Directive”).

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