Luxembourg: CSSF Abolishes Luxembourg’s Promoter Approval Regime For UCITS

CSSF Abolishes Luxembourg's Promoter Approval Regime For UCITS

Luxembourg's Financial Sector Supervisory Authority (CSSF) has formally abolished the grand duchy's promoter approval rules applicable to the establishment of investment funds as part of new rules on the authorisation and organisation of management companies.

The new rules apply primarily to UCITS established under Luxembourg's 2010 fund legislation, but they also represent a step in the transition to the regime for non-UCITS funds set out in the European Union's Alternative Investment Fund Managers Directive.

The investor protection role formerly fulfilled by oversight of the promoter is henceforth deemed to be adequately carried out through the rules applicable to management companies that are embodied in CSSF Circular 12/546, which was published on October 24.

The circular deals with the authorisation and organisation of UCITS management companies established under Luxembourg law and subject to Chapter 15 of the investment fund legislation of December 17, 2010 (which transposed the UCITS IV Directive into Luxembourg law), as well as Article 27 of the legislation dealing with self-managed investment companies.

The CSSF takes the view that the concept of the promoter of a fund is not necessary for UCITS in the form of a self-managed fund or that have designated a management company as long a they comply with the terms of the circular, which the regulator believes fulfils the goal of providing a high level of protection to investors.

For Luxembourg-domiciled UCITS funds in the form of FCPs or SICAVs, any management company they have appointed that is covered by Chapter 15 of the 2010 law and in existence at the date of entry into force of the circular has until June 30, 2013 to comply with its provisions. It must submit to the CSSF at the latest by April 15 a dossier enabling the regulator to verify its compliance ahead of the deadline.

Management companies for one or several UCITS of which the promoter wishes formally to relinquish that status before June 30 next year must submit a dossier to the CSSF attesting to its compliance with the circular.

If the CSSF deems that the UCITS management company fulfils the circular's requirements, it will inform that management company accordingly. From this point onward, UCITS managed by the company will no longer be subject to the promoter approval regime.

Any new UCITS whose date of authorisation falls between the publication of the circular on October 24, 2012 and July 1, 2013 must designate a management company according to Chapter 15 of the 2010 law that meets the requirements of the circular, or have a promoter approved under the existing regime.

After June 30, when the circular's provisions ensuring investor protection will apply to all management companies, the explicit relinquishment of promoter status will no longer be necessary.

The same rules apply to self-managed UCITS funds. For self-managed SICAVs established under Part II of the 2010 law governing non-UCITS funds, as well as both Part II FCPs and SICAVs managed by a management company under Chapter 16 of the legislation, which applies to non-UCITS funds, the existing promoter approval requirements remain in force.

Part II FCPs and SICAVs managed by a Chapter 15 management company are subject to the same rules applicable to externally-managed or self-managed UCITS funds. The position of all Luxembourg funds governed by Part II of the 2010 legislation will be reviewed following the transposition into Luxembourg law of the AIFM Directive.