On 24th October 2012 the Commission de Surveillance du Secteur Financier ("CSSF"), released a new Circular – 12/546 – which covers the authorisation and organisation of Luxembourg Management Companies ("ManCos"), subject to Chapter 15 of the Law of 17 December 2010 on undertakings for collective investment schemes and investment management companies that have yet to designate a Management Company (i.e. self-managed investment companies or Sociétés d'Investissements Autogérées, also known as "SIAGs").

The Circular repeals CSSF Circular 03/108, CSSF Circular 05/185, CSSF Circular 11/508. It enters into force with immediate effect.

Fund managers and their advisors need to be aware of the key points relating to the governing body of Luxembourg ManCos/SIAGs:

  • The members of the Board of Directors and Conducting Officers must be of sufficiently good repute and have adequate professional experience.
  • Members of the Board should limit the number of other professional commitments to such an extent as to ensure the proper performance of his duties.
  • The number of Conducting Officers (also known as "Conducting Persons" or "Dirigeants") must be at least two, and must, in principle, be Luxembourg resident or live in a location where they can come into Luxembourg every day.
  • The Conducting Officers should form a "management committee" and work together in close partnership to take all actions falling within the scope of their responsibilities. The tasks should be split to avoid conflicts of interest (e.g. the roles of supervising the investment management function and supervising the risk management function cannot be undertaken by the same Conducting Officer). The Conducting Officers must be supported in their daily work by enough qualified staff working in Luxembourg. They should also communicate on a daily basis and hold regular meetings that are formally minuted.
  • The Board of Directors must ensure that the ManCo is not predominantly composed of representatives of the "depositary bank" (when a bank is a shareholder of a ManCo and assumes the function of a depositary bank). In addition, in the case of a SICAV having appointed a ManCo, it is recommended that the Board of Directors of the two entities is not predominantly composed of the same people.
  • Certain activities can be delegated (e.g. portfolio management, administration, compliance, internal audit, IT) but other functions cannot (e.g. choice of service provider, the definition of risk profile, implementation of certain policies, etc.)
  • A written due diligence process must be performed before activities are delegated to a third party.

In addition, the CSSF published a press release on 31st October 2012 (Press Release 12/45) in which it stated that it would repeal the requirement for a promoter from 30th June 2013 for UCITS which have a Chapter 15 ManCo or are self-managed and which comply with Circular 12/546. This press release also stipulates that by 15th April 2013, ManCos and SIAGs must submit a file to the CSSF containing the necessary information to allow the CSSF to check the ManCos / SIAG's compliance with Circular 12/546 by 30th June 2013.

Carne offers experienced and Luxembourg-resident Conducting Officers who can assist the Boards of Luxembourg ManCos and SIAGs in order to meet the above requirements. In addition, we offer our own ManCo solution which will fit with your existing third party service provider relationships and comes with the required reporting and risk control frameworks, along with administration support. Carne help with the establishment Luxembourg ManCos and SIAGss, including the required governance and risk management/compliance framework.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.