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Magazine Issues » September 2021

Luxembourg talking heads: Regulatory responsibilities



One regulator’s responsibility
It may be unusual, but I have to say that on this occasion I find myself in full agreement with the solution proposed by the AMF!

Not necessarily because things might fall through the cracks or that the regulators show ‘vulnerabilities’ as the AMF say, which is a veiled way of saying that different regulators apply different standards. To me it is simply a question of making life easier for AIFs to comply with the regulations. If they only have to deal with a single ‘lead’ regulator, it is cheaper, more efficient, and faster for them, and hence for the underlying investors.

Another significant consideration is the specific mention the AMF made to delegation and the level of scrutiny they would like to see imposed on external providers (sub-advisers, administrators and so on). And they don’t want to let the managers of both Ucits and AIFs off the hook. This could be harmful to the causes of certain smaller states seeking to make it easier to consolidate activity in a financial centre like Luxembourg, or to offshore administrative tasks.

To show reaction in this regard, regulators as the CSSF in Luxembourg started recently to fine AIFMs due to lack of due diligence, oversight and monitoring of delegates.

AIFMD: Harmonisation priorities
The key elements in the AIFMD review are:

  • Focus on reporting requirements to enhance regulatory supervision of both micro and macro risks;
  • Common liquidity management tools with ‘gating’ becoming a mandatory tool;
  • Further harmonisation between AIFMD/Ucits rules, and MiFID – the Markets in Financial Instruments Directive

For me, the key element to harmonise between AIFMD and Ucits is distribution.

Whether a fund is deemed to be an AIF or a Ucits, its treatment for suitability of distribution should be consistent, with the risk and level of sophistication needing to be appropriate for the respective investors.

Again, oversight of delegates responsible for distribution will be instrumental as roles between management companies, AIFMs, distributors, placement agents and transfer agents should be consistent and clearly allocated between all parties at stake.

For this reason, the new CBDR (Cross Border Distribution Regulation), which came into force on August 2, 2021, is to be welcomed as a mechanism to harmonise the rules member states place on the premarketing activities of funds. This piece of regulation will align, frame and clarify premarketing activities that were previously not necessarily followed by managers sometimes going beyond the limits of national private placement rules, passporting and reverse solicitation allowances.


Looking forward to Alfi’s Global Distribution Conference
Alfi’s Global Distribution Conference on September 21/22 is the traditional gathering of the Luxembourg fund community after the summer break. As its name says, the main focus is on cross-border distribution, which is one of the distinctive strengths of Luxembourg. 2021’s edition will be centred on four main themes.

  • Innovation and technology: the recent crisis caused by the pandemic has brought with it a tectonic shift in investors’ behaviour; it has also significantly impacted on the way the industry is operating. New technologies are being deployed at an unprecedented pace. Digitalisation of operational processes is a game-changer. What does this mean for the distribution of funds in Europe and beyond? Will fintech firms compete with more traditional distributors?
  • Private assets attract more and more interest from institutional investors taking a long-term view in their asset allocation. Eltifs and private debt funds enjoy double-digit growth rates. Centre-stage in the debate is whether retail investors should remain barred from investing in this asset class, or are there legitimate ways of granting some form of access to retail/sophisticated investors.
  • The conference will also draw first conclusions following on the first implementation of SFDR and the Taxonomy. How do actors in the value chain position themselves? How are ESG solutions being built and offered to investors? What do investors really want?
  • Finally, day two of the conference will feature three workshops dedicated to distribution trends in Latin America, Asia-Pacific and Europe, with local players sharing their insights.

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