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New Luxembourg regulations welcomed by funds industry

RegulationNew rules for the funds industry issued by Luxembourg’s financial regulator have been broadly welcomed by sector actors in the Grand Duchy contacted by Funds Europe.

Last month the Commission de Surveillance du Secteur Financier (CSSF) published two new circulars: 18/697, which applies to alternative investment fund depositaries, and 18/698, which sets out new requirements on the authorisation and organisation of fund managers and replaces regulation 12/546 issued in 2012.

Ricky Marshall, head of product at Luxembourg-based third party management firm FundRock, said that, while his firm is currently carrying out a full assessment of the 18/698 circular, first impressions were that it was “a massively positive development”.

“We see a clear goal here to bring consistency and transparency with regard to internal governance and control between both Ucits management companies and alternative investment fund managers,” he said.

“Further, it also codifies areas which we have already adopted in our business model such as our look-through approach with respect to our delegation oversight model, particularly distribution oversight irrespective of the type of fund vehicle.”

In addition to introducing measures to combat money-laundering, 18/698 limits alternative investment fund managers to no more than 20 mandates in regulated entities and operating firms. It also sets a limit of 1,920 working hours per year, which corresponds to 240 eight-hour shifts.

Allen Foley, managing partner of the Luxembourg-based Trinova consultancy, said he did not expect the working time and mandate limits to create any problems for the industry.

The new limits would “absolutely not prevent us from doing business”, he said, and “are within our expectations for capacity”.

The requirements would simply bring Luxembourg into line with similar guidelines from the European Securities and Markets Authority and the Central Bank of Ireland, Foley added.

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