Exploring the future of Cross-Border Distribution at the 2023 FT Conference in Luxembourg
Our partner Olivier Sciales will be attending the 2023 Cross-Border Distribution Conference, co-organised by the Financial Times. This key event will take place at the European Convention Center in Luxembourg on May 25, 2023. This gathering of key regulators, influential asset managers, and prominent distributors is poised to tackle the most pressing issues and embrace the lucrative opportunities within the distribution industry.
The conference’s proactive agenda covers a plethora of topics, including:
• A keynote interview that offers a sneak peek into the possible trajectory of the European Funds Industry.
• A focused exploration of Luxembourg’s distinctive positioning in the evolving competitive landscape.
• A leaders’ panel shedding light on market volatility and its potential to spawn unique opportunities amidst economic transformations.
• A discussion revolving around the implications of upcoming regulatory changes on the industry’s growth trajectory.
• A fireside chat centered on harnessing lessons from our past to construct a more prosperous industry future.
• An interview dissecting the ongoing geopolitical conflict in Ukraine, its global economic repercussions, and potential routes towards restoration of peace and stability.
• A detailed panel conversation on the advent of fund tokenisation and digital custody, evaluating its merits for stakeholders and practical considerations for integration.
• A review of AIFMD2’s proposed modifications and their potential influence on the industry’s evolution.
• An intensive analysis of the anticipated ELTIF and Part II Fund reforms, assessing their capability to make private markets more accessible to retail customers.
• An exchange of views on the current status and future direction of the booming ESG industry, highlighting regulatory needs, realistic sustainability targets, and shifts in responsible stewardship.
Feel free to reach out to Olivier if you’re interested in discussing your projects related to Luxembourg-based alternative investments, including private equity, private debt, real estate, or venture capital funds.
CSSF extends submission deadline for SFDR pre-contractual disclosure data collection
The Commission de Surveillance du Secteur Financier (CSSF) has made significant strides in its efforts to enhance transparency regarding sustainability-related information in the financial sector, guided by the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation (TR). A vital part of this initiative is the data collection exercise relating to pre-contractual product disclosure information. In a recent turn of events, the CSSF announced an extension to the initial submission deadline for this exercise.
In its communiqué issued on 27th July 2022, the CSSF announced its intention to launch a data collection exercise related to SFDR and TR. This move was followed up by a communiqué published on 24th March 2023 detailing the launch of the data collection exercise.
Investment fund managers (IFMs) and institutions for occupational retirement provision (IORPs), qualifying as financial market participants (FMPs), were required to include sustainability-related information in the pre-contractual disclosures of financial products in accordance with SFDR, TR, and the SFDR Regulatory Technical Standards (RTS). The aim of this data collection exercise was to collect, in a digital format, information contained in pre-contractual disclosure documents/templates.
A broad range of FMPs were included in the scope of this data collection exercise, covering UCITS management companies, authorized AIFMs, registered AIFMs in relation to all Luxembourg-domiciled regulated AIFs they manage, and IORPs subject to specific laws.The user guide provided clarifications on the content and the format of the information to be reported.
Following discussions with financial market participants, the CSSF recognized the complexities of SFDR reporting and extended the deadline for the initial report submission on pre-contractual information for all financial products within the scope of the data collection exercise. As per CSSF communiqué dated 4 May 2023, FMPs are now requested to submit their initial report(s) by 15th June 2023 on a best-effort basis, and in any event, by 31st October 2023.
The decision to extend the initial submission deadline for the SFDR data collection exercise on pre-contractual disclosures underscores the CSSF's commitment to engaging with market participants and recognizing the complexities of SFDR requirements. While the extension provides additional flexibility, it is critical for FMPs to stay vigilant and ensure that their disclosures are compliant, accurate, and up-to-date.
If you have any questions regarding the information above, our investment management team is here to help you. Please do not hesitate to contact us for expert guidance.
Join us at the ALFI Roadshow Madrid 2023: Exploring regulatory updates, ELTIF, fund ecosystems, and ESG impacts
Our partner Olivier Sciales will be attending the ALFI Roadshow in Madrid on Thursday, May 11th, 2023.
The conference agenda boasts a treasure trove of insights for alternative investment professionals, such as:
• Cutting-edge regulatory developments in alternative investments, highlighting Luxembourg Part II Funds and ELTIF 2.0.
• Diving into Luxembourg and Spain fund ecosystems: expert insights on fund setup, available options, and a focus on alternative investments like private equity, private debt, real estate, and venture capital.
• Demystifying ESG factors, EU SFDR regulations, and market trends in alternative investments: examining the influence of ESG on the asset management industry, the current regulatory landscape, and the challenges in product design, distribution, and operational delivery.
Feel free to reach out if you're interested in discussing your projects related to Luxembourg-based alternative investments, including private equity, private debt, real estate, or venture capital funds.
CSSF updates its FAQ for investments in virtual assets: Impact on AIFs
On April 6, 2023, the Commission de Surveillance du Secteur Financier (CSSF) released an update to its Frequently Asked Questions (FAQs) regarding virtual assets and undertakings for collective investment (UCIs). The update includes modifications to Question 2 and the publication of Question 3A.
Investment conditions for AIFs aimed at Professional Investors
Question 2 of the CSSF FAQ was updated to clarify the conditions under which investments in virtual assets can be made by AIFs aimed at professional investors, but not those aimed at retail investors. These investments can be made as long as they comply with existing regulatory requirements and do not affect the fund's risk profile. An AIF can invest directly and indirectly in virtual assets, provided its units/shares are marketed only to professional investors, and the AIFM must obtain an authorization extension from the CSSF for this new investment strategy.
Risk assessment and internal control functions
The CSSF underlines that investments in financial instruments, such as derivatives or transferable securities with underlying virtual assets, are to be considered as indirect investments in virtual assets. The CSSF highlights the importance of proper risk assessment and internal control functions when integrating virtual assets into investment policies. Investment managers must make a case-by-case assessment of the impact of virtual assets on the risk profile of investment funds and ensure transparency and timely disclosure to investors.
Clarification on licensing requirements
The CSSF has also included in its updated FAQ, Question 3A, which clarifies that an "Other-Other Fund-Virtual assets" license is not required for a Luxembourg IFM managing an AIF investing in virtual assets through one or several target funds (TF). However, when the AIF invests more than 20% of its NAV in one or several TFs, an IFM authorization for the "fund of funds" strategy is required.
Assessing risks related to virtual assets
The CSSF emphasizes the importance of assessing the risks related to investing in virtual assets, and IFMs must evaluate the ability of the TF's manager to identify and manage such risks. The IFM should provide the CSSF with the results of its assessment upon request. The IFM is responsible for determining whether a TF has virtual assets as its main exposure.
Conclusion: The evolving virtual asset industry
The update to the CSSF FAQ reflects the rapidly evolving nature of the virtual asset industry and the need for regulatory clarity in this area. As virtual assets continue to gain in popularity, it is likely that regulators around the world will continue to develop new rules and guidelines to govern their use. In Luxembourg, the CSSF will continue to play an important role in ensuring that investors are protected and that the virtual asset industry operates in a safe and secure manner.
Feel free to get in touch with our investment management team should you wish to receive more information or if you are interested in establishing a crypto fund.
Latest EU Regulations update: Navigating Sustainability-Related Disclosures and Investments in 2023
In its communication dated 20 April 2023, the CSSF recently drew attention to several publications related to sustainability-related disclosures in the financial services sector. These publications include Regulation (EU) 2019/2088 – SFDR, Commission Delegated Regulation (EU) 2022/1288 (the SFDR RTS), and Regulation (EU) 2020/852 – the EU Taxonomy Regulation.
- The European Commission adopted a third set of Q&As on the interpretation of SFDR, published by the ESAs on 14 April 2023. The first and second sets of Q&As were adopted and published by the ESAs in July 2021 and May 2022, respectively. The third set of Q&As includes amendments to the first and second Q&As.
- The European Commission also published two draft delegated acts relating to the EU Taxonomy Regulation on 5 April 2023. The first draft delegated act provides a new set of technical screening criteria for four environmental objectives, including sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. It also includes amendments to the Taxonomy Disclosures Delegated Act. The second draft delegated act adds or complements the technical screening criteria for climate change mitigation for certain economic activities in the transport and manufacturing sectors. The draft delegated acts are open for feedback until 3 May 2023.
- Furthermore, the ESAs published a consultation paper on a proposed review of the SFDR RTS regarding PAI and financial product disclosures on 12 April 2023. The consultation period will be open until 4 July 2023.
In light of these recent publications and developments, financial services firms operating within the European Union must ensure that they are compliant with all relevant regulations and delegated acts. Firms should also stay abreast of any updates or changes to these regulations and delegated acts and adapt their compliance programs accordingly.
If you have any questions regarding the information above, our investment management team is here to help. Please don’t hesitate to contact us for expert guidance.
Luxembourg Fund Law Reforms: Key proposed changes to RAIF, SIF, SICAR, AIFM, and UCI Laws
On March 24, 2023, a bill of law was submitted to the Luxembourg Parliament, proposing amendments to the Luxembourg fund laws, namely the Law of 2010 on UCIs (UCI Law), the Law of 2007 on SIFs (SIF Law), the Law of 2004 on SICARs (SICAR Law), the Law of 2013 on AIFMs (AIFM Law), and the Law of 2016 on RAIFs (RAIF Law).
Below is a summary of the main changes:
Definition of “Well-informed Investor”
The proposed amendments aim to harmonize the “well-informed investor” definition in the SIF, SICAR, and RAIF Laws by reducing the investment threshold to EUR 100,000 and aligning the list of entities that can certify the experience of other well-informed investors.
Time Limit for Reaching Minimum Capital
The proposed amendments suggest increasing the subscribed capital time limit for SICARs, SIFs, and RAIFs to 24 months, while for Part II funds, the time limit is proposed to be extended to 12 months.
Harmonization of Legal Form for Part II UCI
The proposed amendments aim to align the available legal forms for Part II SICAVs with the legal forms permitted under the SIF, SICAR, and RAIF Laws.
Simplification for RAIFs
The proposed amendments also seek to simplify the formation formalities for RAIFs where a RAIF is set up by virtue of articles of association, by eliminating the requirement for a Luxembourg notary to acknowledge the establishment and appointment of an external AIFM within five business days if established through notarial deed, although this requirement still applies to RAIFs established through private deed. Moreover, it clarifies that marketing RAIFs to well-informed investors in Luxembourg is permitted.
Amendments to the AIFM Law
The proposed amendments would allow authorized alternative investment fund managers to have recourse to tied agents as defined by the 1993 financial sector law.
In conclusion, the proposed amendments represent a significant step towards modernizing and improving Luxembourg’s fund toolbox by providing a more consistent and practical approach. It remains to be seen how the proposed amendments will be received by the Luxembourg Parliament and whether they will ultimately be adopted. The bill of law is subject to the lawmaking procedure and may undergo further changes. We will keep you updated on the evolution of the Luxembourg funds rules.
If you have any questions regarding the information above, our investment management team is here to help. Please do not hesitate to contact us for expert guidance.
SFDR CSSF FAQ Updates: Fund Names, Sustainable Investments & EPM Techniques
The CSSF (Commission de Surveillance du Secteur Financier) has released on 13 March 2023 an updated FAQ on the Sustainable Finance Disclosure Regulation (SFDR) which offers guidance on adhering to the SFDR requirements. In this article, we will delve into the latest revisions made to questions 7, 8, and 9 in the FAQ.
Q7: Use of ESG and/or Sustainability related terminology in fund names
Question 7 focuses on the use of ESG and sustainability-related terminology in fund names. The CSSF emphasizes that fund names should not be misleading and must align with the fund’s investment objective and policy as well as the applicable guidance on fund names. The CSSF expects Financial Market Participants (FMPs) to utilize terminology like “ESG,” “sustainable,” or “ethical” only when substantiated by evidence of sustainability characteristics that are reflected in the fund’s investment objectives, policies, and strategy as described in the relevant documentation. FMPs must also take note of any updates on this topic at the European level.
Q8: Methodology used to define sustainable investments
Question 8 pertains to the methodology used to define sustainable investments. FMPs must provide investors with the necessary information to make informed judgments about the proposed investment, and they must publish and maintain information on the methodologies used to assess, measure, and monitor the impact of sustainable investments chosen for the financial product. Although further clarification is awaited at the European level, FMPs must provide investors with the methodology used to define sustainable investment and the applied thresholds through mandatory disclosure templates, prospectus, or website disclosures.
Q9: Efficient portfolio management (“EPM”) techniques
Question 9 discusses Efficient Portfolio Management (EPM) techniques. A fund disclosing under Article 9 SFDR may include investments or techniques used for hedging purposes or relating to cash as ancillary liquidity, provided that they align with the sustainable investment objective of the fund. The CSSF expects FMPs to assess the precise purpose of any use of EPM techniques and determine whether they could fall within the “remaining portion” of the investment portfolio when used in the context of funds disclosing under Article 9 SFDR.
In conclusion, the updated FAQ provides more detailed guidance on how FMPs can comply with SFDR requirements, particularly regarding questions 7, 8, and 9. It is critical for FMPs to comply with SFDR requirements and ensure that their fund names are not misleading. Furthermore, FMPs must provide investors with information on the methodology used to define sustainable investments and assess, measure, and monitor their impact.
If you have any questions regarding the information above, our investment management team is here to help. Please don’t hesitate to contact us for expert guidance.
CSSF Notification regarding the amended SFDR RTS
The CSSF would like to bring to the attention of Financial Market Participants (FMPs) that the amended SFDR RTS has entered into force on 20 February 2023. These amendments require precontractual and periodic transparency obligations in relation to Taxonomy-aligned fossil gas and nuclear energy-related activities for financial products disclosing under Articles 8 and 9 of SFDR.
Regarding precontractual documents, FMPs must provide the disclosure information in the format of the templates outlined in the annexes of the amended SFDR RTS for:
- Investment funds launched after the entry into force of the amended SFDR RTS; and
- Existing investment funds that introduce changes in the prospectus/issuing document after the entry into force of the amended SFDR RTS.
With the purpose of simplifying the CSSF review process, in cases where changes to the prospectus/issuing document are limited to the usage of new templates outlined in the appendices of the updated SFDR RTS, FMPs must confirm in the application file submitted to the CSSF that (i) they have utilized the new templates and (ii) no further modifications have been made.
Regarding periodic reports, FMPs must present the periodic disclosure information in the format of the templates set out in the annexes of the amended SFDR RTS for annual reports of investment funds issued after the amended SFDR RTS comes into effect, regardless of the financial year-end of the investment funds.
Please feel free to contact our investment management team should you have any questions concerning the above.
CSSF introduces new notification template for critical ICT outsourcing
The Commission de Surveillance du Secteur Financier (CSSF) has recently announced on 17 February 2023 the publication of a new notification template for critical or important ICT outsourcing. The new template is effective from 20th February 2023 and replaces the previous notification template for outsourcing of material IT activities.
This update is in line with the guidelines set out in Circular CSSF 22/806 on outsourcing arrangements. The new template has been designed to align the terminology and structure of the notification with the circular.
The notification period and communication channels remain unchanged, and In-Scope Entities must use the new template to notify the CSSF of critical or important ICT outsourcing arrangements from 20th February 2023 onwards.
However, to avoid penalizing entities that are well advanced in the preparation of notifications based on the previous template, In-Scope Entities may use the previous template during a transitional period until 20th March 2023. After this date, the new template will be the only acceptable notification format.
It is important for In-Scope Entities to comply with the instructions and forms set out in the circular. Failure to do so may result in penalties or other consequences. In case of any questions or concerns, In-Scope Entities are advised to liaise with their usual contact person within the CSSF.
In conclusion, this new notification template for critical or important ICT outsourcing arrangements is an important development in the financial sector. The CSSF’s efforts to standardize and improve communication regarding ICT outsourcing arrangements will contribute to greater transparency and security in the financial sector.
- The notification template for outsourcing of material IT activities is available here.
- The CSSF communication is available here.
Get in touch with our Investment Management team for expert advice and assistance on the latest developments.
CSSF communication on notification templates
On 8 February 2023, the CSSF updated the communication dated 19 January 2023 relating to the publication of the notification templates which investment fund managers shall use and submit to the CSSF when:
- An application of an investment fund manager is submitted to the CSSF for:
- its registration as an alternative investment fund manager subject to the Law of 12 July 2013 on alternative investment fund managers where the alternative investment fund manager exclusively manages alternative investment funds which are not subject to authorisation and prudential supervision by an official supervisory authority in Luxembourg; or
- its registration as an alternative investment fund manager subject to Regulation (Eu) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European Venture Capital Funds (Euveca) and/or Regulation (Eu) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European Social Entrepreneurship Funds (EUSEF); or
- its authorisation according to the Law of 17 December 2010 relating to undertakings for collective investment and/or Chapter 2 of the Law of 12 July 2013 on alternative investment fund managers.
The notification template for the registration and/or authorisation of an investment fund manager is available here.
- Or, an application of an investment fund manager is submitted to the CSSF requesting:
- the extension of the activities performed by the investment fund manager seeking the approval of additional investment services and/or services regulated by MiFID; or
- the modification of the shareholding structure of the investment fund manager.
The notification template for the extension of the services performed by the investment fund manager and/or the modification of its shareholding structure is available here.
For more insights, the updated CSSF communication is available here.
Should you require any further clarifications, please do not hesitate to get in contact with our investment management team.
