Under the law of 10 May 2016 transposing UCITS Directive 2014/91/EU (UCITS V), it was originally expected that all undertakings for collective investment (UCIs) falling under the law of 17 December 2010 (the 2010 Law) would fall under the same depositary regime. In effect, extending the stricter rules applicable to UCITS under UCITS V to all other publicly available UCIs in Luxembourg (Part IIs).
This position proved controversial because Part IIs are alternative investment funds (AIFs), and the stricter rules gave rise to gold plating. The 2010 Law and the law of the 12 July 2013 transposing AIFM Directive 2011/61/EU have consequently been amended by the law of 27 February 2018 (the so-called "omnibus law") to allow Parts IIs that:
- are managed by an authorised AIFM; and
- are reserved for professional investors in Luxembourg (and not open to retail investors) – as expressly indicated in their fund documentation -
to apply the depositary rules applicable to AIFs under the 2013 Law. Similarly, Part IIs managed by registered or non-EU AIFMs may also apply lighter depositary rules (i.e. depositary rules which apply to non-AIFs) where the fund rules similarly prohibit retail distribution in Luxembourg.
This amendment is very much to be welcomed, but it results in an unusual three-tier depositary regime for Part IIs in Luxembourg:
- a UCITS depositary regime for Part IIs that are publicly distributed in Luxembourg;
- an AIFM depositary regime for other Part IIs; or
- a lighter depositary regime where Part IIs are managed by registered or non-EU AIFMs and are not publicly distributed in Luxembourg,
and it will become important to identify the relevant Part II variant at the outset.