The CSSF is continuing to update its Frequently Asked Questions document on the grand duchy’s law of July 12, 2013 implementing the AIFMD and the European Commission’s Level 2 regulation on implementation of the directive, most recently on December 29, 2014.

The FAQ document has now run to eight versions over the past year and a half. The CSSF’s aim is to highlight aspects of the AIFMD rules from a Luxembourg perspective, for the benefit primarily of alternative funds and managers established in the grand duchy. It complements Q&A documents on the AIFMD published by ESMA, most recently updated earlier in January 2015, and by the European Commission.

The FAQs cover issues including the scope of the law, the authorisation and registration regimes applicable to alternative managers, delegation requirements, entry into force of the law and duration of transitional provisions, the scope of authorised managers’ activities, depositary requirements, the application of the AIFMD passport to Luxembourg managers and funds and for foreign managers marketing in Luxembourg, reporting, valuation, transaction costs, managers’ capital requirements, and co-operation agreements signed by the CSSF with non-EU regulators.
The new version primarily updates information regarding reporting requirements for managers authorised in the final quarter of 2014, requirements governing the marketing without a passport in the grand duchy of non-EU funds by Luxembourg or other EU managers, and notification to the CSSF of the acquisition of major holdings and control of non-listed companies by both Luxembourg-authorised managers and non-EU firms carrying out marketing in the grand duchy.

The CSSF says that managers established before July 22, 2014 and authorised between October 1 and December 31 of last year are required to submit their first report to the regulator, covering the final quarter of 2014, for January 31, 2015, of February 15 in the case of a fund of funds), even if they are normally subject to half-yearly or annual reporting. The standard deadline for transmission of information is one month following the end of the reporting period for ordinary funds, and the 15th of the following month for funds of funds.

The update Q&A also sets out the rules for the marketing of funds domiciled outside the EU to professional investors in Luxembourg without a passport by Luxembourg or other EU-based managers, as set out in Article 37 of the legislation. The rules apply to all authorised EU managers seeking to market in Luxembourg the shares or units of one or more non-EU funds, or of EU feeder funds where the master fund is not EU-domiciled or not managed by an authorised EU manager.

Managers in question must inform the CSSF when they start (or stop) carrying out marketing activity for such funds in the grand duchy, providing the information required on a form downloadable from the regulator’s web site. They must ensure the appointment of one or more entities to carry out the so-called Depositary Lite services of cash monitoring, safekeeping of assets and oversight of certain operational functions described in Article 21 of the AIFMD, and indicate the identity of the providers to the CSSF.

The regulator says the safekeeping of assets for non-EU fund may be carried out by a single depositary or several entities, such as multiple different prime brokers, but a single provider must be appointed for cash monitoring and for oversight of operational functions. There are no requirements regarding geographical location for Depositary Lite service providers.

The only general rule applicable to EU managers marketing non-EU funds to professional investors is that they should not contravene to the Luxembourg Consumer Code. Managers that were marketing non-EU funds to professional investors under Luxembourg’s existing private placement regime before July 22, 2013, must submit the required information to the CSSF in order to continue to market the funds under Article 37 of the Luxembourg legislation.

The Q&A also covers details of how authorised Luxembourg alternative managers authorised under Chapter 2 of the 2013 legislation as well as non-EU managers conducting marketing activities in the grand duchy without a passport under Article 45 are required to notify the CSSF whenever the proportion of voting rights held by their funds in unlisted companies reaches, exceeds or falls below the thresholds of 10%, 20%, 30%, 50% and 75%.

Managers must also notify the CSSF when one or more of the funds they manage, either individually or jointly, or under an agreement with other managers, acquires control of an unlisted company, defined as holding more than 50% of the voting rights. This applies to companies whose registered office is in the EU and whose shares are not traded on a recognised market.

Notification to the CSSF is not required for unlisted companies that are defined as small and medium-sized enterprises: employing fewer than 250 people, with an annual turnover no larger than €50m, and/or an annual balance sheet total not exceeding €43m. Nor does it apply to SPVs created to purchase, hold or manage real estate.

The form for notification of major holdings in or control of unlisted companies can be downloaded from the CSSF website. This must be completed and submitted as soon as possible, and not later than 10 working days after the date on which the fund reached or passed a stipulated ownership threshold or took control of the unlisted company. Compliance with these rules is required from the date of authorisation for Luxembourg managers, and from the date of starting marketing activities for non-EU managers.

The January 9 update to the ESMA AIFMD Q&A also deals with reporting requirements. The authority says alternative managers should report the value of subscription and redemption orders rather than their number, reporting should be for the month when cash flows in or out rather than when the orders are placed, unless they are the same.
Reports on changes in NAV from month to month should reflect the net impact of subscriptions, redemptions and investment performance. If no official NAV is available, managers should provide estimates for the NAV.

In some cases, such as where funds are investing in illiquid assets, the best estimate may be the previous NAV, ESMA says. The same applies to information on gross and net investment returns per month.
The authority has also clarified that managers of both single-manager funds and funds of funds should provide information on the single-manager funds within a month of the end of the reporting period, and on the funds of funds as well as manager-level reporting within 45 days.

The FAQs deal with by the CSSF can be consulted at http://www.cssf.lu/fileadmin/files/AIFM/FAQ_AIFMD.pdf, those posted by ESMA at http://www.esma.europa.eu/system/files/2015-11_qa_aifmd_january_update.pdf, and those published by the European Commission at http://ec.europa.eu/yqol/index.cfm?fuseaction=legislation.show&lid=9.

The European Securities and Markets Authority has published on July 21 the latest update to Question and Answers document on the Alternative Investment Fund Managers Directive, which seeks to ensure the application of common supervisory approaches and practices in the application of the AIFMD and its implementing measures.
The Q&A document, which was last updated in June, offers responses to questions from the general public and national regulators regarding the practical application of the directive. Although primarily designed to ensure that regulators’ supervisory actions are in line with ESMA’s guidance, the answers also aim to provide alternative fund managers with clarity about the AIFMD rules, and do not constitute fresh requirements.
The Q&A now deals with seven topics: remuneration, notification of alternative investment funds, reporting to national regulators, notification of alternative fund managers, MiFID services under the AIFMD, depositaries, and calculation of leverage.
As regards reporting to national regulators, ESMA’s new answers deal with issues including reporting of derivative trade volumes, repo trades, FX spot trades, cross-currency interest rate swaps, the assessment of “substantial” leverage, rehypothecation of collateral, and the currency denomination for reporting on principal markets and financial instruments in which they trade.
In the area of depositary requirements, the clarifications cover cash monitoring and reconciliation obligations, verification of compliance by the fund and manager with AML, employment law and non-management related contractual obligations, verification of ownership of derivatives, custody requirements regard interests in other funds, and the definition of the close of the business day.
Regarding calculation of leverage, ESMA has clarified that debt raised by financial structures controlled by private equity funds for the acquisition of assets should be included in the calculation of leverage where the structure is specifically set up for that purpose, but not where the fund does not have to bear losses beyond its investment in the structure, nor does it have to include debt raised by unlisted companies or issuers subject to the same proviso, even where the debt is raised to pay a dividend enabling the financial structure to repay its acquisition debt.
The ESMA Q&A can be consulted at http://www.esma.europa.eu/system/files/2014-esma-868__qa_on_aifmd_july_update.pdf.

Luxembourg’s Financial Sector Supervisory Authority has published on March 17 an update to its Frequently Asked Questions document on the grand duchy’s law of July 12, 2013 implementing the European Union’s Alternative Investment Fund Managers Directive, as well as the European Commission’s Level 2 regulation on implementation of the AIFMD.
The CSSF says the FAQ document, which is now in its sixth version in nine months, is designed to highlight certain key aspects of the AIFMD rules from a Luxembourg perspective and is primarily aimed at alternative funds and managers established in the grand duchy.
It should be read in conjunction with the Q&A document published by the European Securities and Markets Authority at http://www.esma.europa.eu/page/Investment-management-0, which was most recently revised on February 17. The European Commission has also published answers to questions regarding the transposition of the AIFMD, which is published at http://ec.europa.eu/yqol/index.cfm?fuseaction=legislation.show&lid=9.
The FAQs include the scope of the law, the authorisation and registration regimes applicable to alternative managers, delegation requirements, entry into force of the law and transitional provisions, the scope of authorised managers’ activities, depositary aspects, the application of the AIFMD passport to Luxembourg managers and funds as well as for foreign managers marketing in Luxembourg, reporting, valuation, transaction costs and co-operation agreements signed by the CSSF with non-EU regulators.
The new elements added in the latest versions of the FAQs concern reporting requirements. The CSSF says managers authorised between July 22, 2013 and June 30 this year must submit their first reporting statement, for the period starting July 1, by the end of October for those subject to quarterly reporting, or by the end of January 2015 for those reporting half-yearly and annually, or 15 days later in the case of fund of funds managers. They also have the option to report for periods before July 1.
Alternative managers authorised between July 1 and 22 must submit their first reporting, for the period from October 1 to December 31, by January 31, 2015 or February 15 for funds of funds, whatever their reporting frequency.
Registered managers of alternative funds with assets below the AIFMD authorisation threshold that have received confirmation of their registration in 2013 must report for 2014 by January 31, 2015, or February 15 for funds of funds. They too can report for earlier periods if applicable, if they choose.
Managers registered in 2014 must begin reporting as of the quarter following registration for a period up to the end of the calendar year (2015 in the case of managers registered in the fourth quarter), and file their report by the end of the following January, or February 15 for funds of funds.
Other points covered by the CSSF:
• Managers taking advantage of the transitional provisions may report in advance of their authorisation, but must obtain identifiers for reporting purposes from the CSSF in advance.
• The only acceptable language for all AIFMD reporting is English. Reporting must use channels accepted by the CSSF, for now e-file and SOFIE.
• Authorised managers must ensure an annual report based in conformity with article 20(2) of the 2013 law is made available for all funds whose managers were authorised before the end of the fund’s financial year, including managers authorised during 2013 for the 2013 financial year. Annual reports must comply with the naming conventions and format set out in CSSF circulars 11/509 and 08/371.
• Annual reports must include a balance sheet or a statement of assets and liabilities, and an income and expenditure account for the financial year. Managers must comply with the requirements under scheme B of Luxembourg’s 2010 funds law for part II funds, in the appendix to the 2007 SIF law where applicable, and article 104 of the AIFMD Level II regulation.
• The CSSF will require managers to provide all information indicated in Article 24(5) of ESMA’s Opinion on Reporting.
• The reporting requirements also apply to non-EU managers that are managing Luxembourg-domiciled alternative funds (irrespective of where the funds are marketed, even if this is exclusively outside the EU) or marketing either EU or non-EU funds in Luxembourg, during the “transitional period” before they obtain access to the marketing passport, expected in 2015
• Non-EU managers should in principle take the date of CSSF approval for marketing in Luxembourg as the start date for their AIFMD reporting requirements, with the same reporting frequency and reporting periods as those applicable to Luxembourg managers. This does not apply to non-Luxembourg funds that were marketed in the grand duchy by non-EU managers under the existing Luxembourg placement rules before July 22, 2013.
The CSSF FAQs can be consulted at http://www.cssf.lu/fileadmin/files/AIFM/FAQ_AIFMD.pdf.

The European Securities and Markets Authority has published on February 17 a Question and Answers document on the Alternative Investment Fund Managers Directive, with the aim of promoting common supervisory approaches and practices in the application of the AIFMD and its implementing measures.
ESMA says the Q&A document has been compiled to offer responses to questions from the general public and national regulators regarding the practical application of the directive. Although primarily intended to ensure that regulators’ supervisory activities are in line with the authority’s guidance, the answers are also intended to help alternative fund managers by providing clarity about the AIFMD rules, rather than creating an extra layer of requirements.
Because the Q&A mechanism is a convergence tool for promoting common supervisory approaches and practices under Article 29(2) of the ESMA Regulation, formal consultation on the draft answers is considered unnecessary, although ESMA may discuss them with representatives of its Securities and Markets Stakeholder Group, other consultative groups or external parties.
The authority says it will continually edit and update the Q&A as and when new questions are received, and review the document regularly to determine whether there is a need to convert any of the material into formal guidelines.
The Q&A currently deals with five topics. ESMA says that while the AIFMD remuneration rules apply to an existing alternative fund manager from its date of regulatory authorisation, the directive’s regime on variable remuneration applies only from the first full performance period after authorisation: the 2014 accounting period for firms approved between July 22 and December 31, 2013, and 2015 in the case of authorisation between January 1 and July 22, 2014. The determining factor is the manager’s date of authorisation, not the date of application. The same principle applies to firms performing AIFMD activities for the first time after July 22, 2013.
Where an alternative fund manager delegates portfolio management or risk management activities, ESMA says contractual arrangements to prevent circumvention of the remuneration rules need apply only to identified staff of the delegate entity that have a material impact on the risk profiles of the fund portfolios managed under the delegation, and only in respect of remuneration applicable to the delegated management.
Where the delegate entity is subject to the Capital Requirements Directive rules on remuneration, as long as the particular staff in question are subject to the CRD rules, these are deemed as effective as those applicable under the AIFMD.
ESMA also clarifies that managers seeking to market new investment compartments of an existing alternative fund in a member state where the fund has been already notified must undertake a new notification procedure via their home regulator. In addition, where a non-EU manager reports information to an EU regulator under Article 42 (marketing of alternative funds under national private placement regimes), only funds marketed in that member state need be taken into account.
The ESMA Q&A can be consulted here below.

Luxembourg’s Financial Sector Supervisory Authority (CSSF) has issued a circular that aims to clarify technical details of how alternative fund managers should comply with the reporting obligations set out in the European Union’s Alternative Investment Fund Managers Directive, as transposed into Luxembourg’s legislation by the law of July 12, 2013 (“Circular 14/581“).
The frequency and nature of the reporting requirements depend on managers’ levels of assets under management, investment strategies and use (if any) of leverage. The obligations are set out in article 3 (3)(d) of the directive for registered alternative fund managers (those whose assets are below the thresholds triggering the obligation for full compliance) and article 24 (1), (2) and (4) for authorised managers subject to the full requirements of the legislation. In the Luxembourg law these articles correspond to article 3 (3)(d) for registered managers and article 22 (1), (2) and (4) for authorised managers.
The European Commission’s so-called Level 2 implementing Regulation 231/2013 of December 19, 2012 provides details on the reporting obligations to national regulators under Articles 3 and 24 of the AIFMD, and the regulation’s Annex IV contains a reporting template for managers to use.
Following a consultation exercise, the European Securities and Markets Authority published in November its revised final report on AIFMD reporting guidelines, along with further details and technical supporting material comprising a consolidated reporting template, detailed IT guidance for filing of the XML and the XSD schema.
Information on operational issues applicable to AIFMD reporting, including its frequency, reporting periods and first reporting period for existing, registered and authorised managers is available in the final ESMA report and in the Frequently-Asked Questions document for managers published by the CSSF on its website  (see also our newsflash on the FAQ by clicking here).
CSSF Circular 14/581 stipulates that the reporting files should be submitted electronically exclusively via channels accepted by the regulator in accordance with its existing Circular 08/334. Further details regarding legal reporting is available on the CSSF website by clicking here.
The new circular details the technical specifications of the reporting files, as defined by ESMA, including the requirement for all text fields to be completed in English, the contents of the files to be submitted for managers and funds, certification of the sender if not the manager itself, naming conventions and CSSF response messages.