In October 2012 the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg supervisory authority, published a press release on the promotion of Luxembourg undertakings for collective investment in transferable securities (UCITS).
Until now, the CSSF required each Luxembourg UCITS to identify a promoter – in essence, a deep pocket. The idea of a promoter was driven by investor protection considerations. The promoter had to be approved by the CSSF. To be eligible, promoters had to have a sufficient financial surface and be regulated.
The CSSF's requirement for a promoter has been debated for some time and will now be abandoned. This is the result of increased demands imposed by CSSF Circular 12/546 on Luxembourg self-managed UCITS and UCITS management companies. The CSSF now considers that a self-managed UCITS or UCITS management company ensures a sufficient level of investor protection if it complies with the circular.
Once the CSSF has confirmed to the self-managed UCITS or UCITS management company that it is in compliance with the circular, the entity acting as promoter will be released from its obligations. Since compliance with the circular must be ensured before July 1 2013, the concept of promotership will effectively cease to exist on such date.
With respect to 'Part 2' funds (ie, non-UCITS funds set up under Part 2 of the Law on Undertakings for Collective Investments of December 17 2010), the requirement for a promoter will be assessed after the implementation of the EU Alternative Investment Fund Managers Directive into Luxembourg law.
It remains to be seen whether the CSSF will nevertheless continue to ask for information on the entity at the origin of a UCITS project, similar to what is currently required with respect to specialised investment funds and investment companies in risk capital and their so-called 'initiator'.
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