On 20 March 2019, a draft law was deposited with the Luxembourg Parliament. The draft law aims at ensuring the stability of the financial markets and preserving the interests of the investors by providing specific rules relative to the investment policies and investment restrictions of Luxembourg UCITS, Part II funds and SIFs in the context of Brexit.
Following the departure of the UK from the EU, those funds may be exposed to non-voluntary breaches in their investment policies and in their investment restrictions as some of the assets or issuers may no longer meet the eligibility requirements. The draft law proposes to grant those funds a maximum 12 months grace period to regularize any breach. To be noted that the grace period only applies to investments made before brexit and only for breaches that are a direct consequence of this event.
The grace period does not only apply in the event of a no deal brexit but would be applicable in all cases as a brexit deal would anyway imply that the UK becomes a third country to the EU.
In addition, the draft law foresees that UK UCITS that are currently being marketed in Luxembourg to retail investors and that would become non-EU AIFs after brexit, will be allowed to continue their marketing to retail investors for a 12 months period.
The draft law will enter into force on the date the UK will leave the EU.
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