On December 17, 2010, the legislation implementing the latest European Union directive on Undertakings for Collective Investment in Transferable Securities – known to the world as Ucits IV – was signed into Luxembourg law, upholding the proactive, pace-setting approach that over the past two decades has enabled the grand duchy to carve out a position of leadership in the European investment fund industry and one second worldwide only to the United States.
The early passage of the law by Luxembourg, the first EU member state to adopt the Ucits IV rules, has given the country’s fund industry the maximum time to prepare for the entry into effect of the directive on July 1, 2011. However, it also offered the opportunity to amend other aspects of Luxembourg’s fund legislation including measures affecting vehicles not subject to the Ucits regime for the cross-border distribution of retail funds across Europe.
The legislation clarifies a number of areas relating to the regulation and tax treatment of Luxembourg funds and investment management entities. For example, it abolishes the subscription tax on fund assets in the case of exchange-traded funds, which are Ucits funds, as well as non-Ucits funds whose strategy involves investment in microfinance, an area in which the grand duchy has carved out a leading role.
Ucits IV was formally approved by the EU on July 13, 2009 under the designation of Directive 2009/65/EC. Rather than introducing sweeping changes to investment rules, as did its 2002 predecessor, the directive mostly involves changes designed to improve the efficiency of the European fund market, as well as strengthening the safeguards for investors that have been a key factor in the success of Ucits funds not only in Europe but elsewhere in the world.
These include notably facilitating cross-border fund mergers, simplifying and shortening notification procedures required to sell funds in other EU member states, authorising master-feeder structures under the Ucits regime and creating a ‘passport’ for management companies established in one member state to provide services to funds in another. In addition, the directive has created the Key Investor Information Document (KIID) to help retail investors understand the investment goals, risk and performance of Ucits funds. For more information about Ucits IV, please see our guide to the directive, Removing barriers to Europe’s single fund market.
This guide is designed to help fund industry participants and investors understand the changes made to the Luxembourg fund industry as a result of the law of December 17, 2010 as well as the new opportunities available to establish both Ucits and non-Ucits funds in the grand duchy for marketing across Europe and beyond.
Please find below a link to the guide: [download id=”61″ format=”3″]