Directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment Fund Managers was implemented into Luxembourg domestic legislation by the law of 12 July 2013 on Alternative Investment Fund Managers (the “AIFM Law”).

Among the list of the vehicles out of the scope of the AIFM Law, Article 2(2)g provides that the AIFM Law “shall not apply to securitization special purpose entities”.

Luxembourg securitization vehicles are submitted to the law of 22 March 2004 on securitization (the “Securitization Law”) and additional guidance regarding the interpretation of the Securitization Law and the administrative practice is to be found in Frequently Asked Questions (the “FAQ”).

Since some questions related to the interpretation of the concept of securitization special purpose entities as defined were raised, the Luxembourg financial regulator (the “CSSF”) updated its FAQ document on securitization on 23 October 2013 by introducing a point 19 providing clarifications not only (i) on the applicability of the AIFM Law on securitization vehicles but also (ii) on the definition of an Alternative Investment Fund (“AIF”).

Hence, the CSSF clarified under which circumstances a securitization special purpose entity could be requalified as an AIF and the definition of the third leg of the AIF’s test (the “defined investment policy”) in Article 1(39)a of the AIFM Law.

1. By relying on ECB Regulation 24/2009 of the European Central Bank1 (the “ECB Regulation”), the CSSF confirmed as a general principle that securitization special purpose entities undertaking a true sale securitization transaction / programme should be out of the scope of the AIFM Law. The CSSF further confirmed that securitization special purpose entities undertaking synthetic securitization may be requalified as AIF should they respond positively to the AIF test of the AIFM Law, with the notable exclusion of synthetic securitization of collateralized loan obligations.

The CSSF pointed out, in addition, that securitization vehicles acting primarily as a first lender, i.e. originating new loans, as well as securitization entities offering synthetic exposure to non-credit-related assets may be subject to requalification as an AIF. On the contrary, securitization vehicles exclusively issuing debt instruments or not managed in accordance with a defined investment policy may not be considered as AIFs.

2. By defining the concept of a predefined investment policy, the CSSF aligned its views with the ESMA Guidelines on key concepts of the AIFMD 2013/611 of 13 August 2013.

Therefore several factors must be taken into consideration when assessing if there is a predefined investment policy, and the CSSF confirmed the analysis of the third leg of the AIF test (which will also be applicable to other vehicles, such as joint ventures).
In conclusion, we welcome the interpretation and the necessity for the CSSF to provide clarifications on these key concepts deriving from the AIFM Law. It is noteworthy to mention that the interpretation of the CSSF leaves an open door to the structuring of various projects by way of unregulated securitization special purpose vehicles. However, the AIFM Law should not be regarded as legislation that would apply only to regulated investment vehicles and on the basis of the latest developments of the CSSF. It is therefore crucial to undertake a complete review of the unregulated structures (Securitization, SOPARFI, SPF) to determine if they are within the scope of the AIFM Law.