CSSF releases revised AIFMD Q&A

CSSF releases revised AIFMD Q&A 

The Luxembourg regulator (the Commission de Surveillance du Secteur Financier – CSSF) has just released a revised version of its Frequently Asked Questions (the Q&A 1 ) in respect of the law of 12 July 2013 on alternative investment funds managers (the AIFM Law) which has implemented Directive 2011/61/EU on alternative investment funds managers (the AIFMD) under Luxembourg law. The most notable development is made in relation with the notification regime for non-EU alternative investment funds managers (AIFMs) wishing to market their alternative investment funds (AIFs) on the territory of the Grand Duchy of Luxembourg. In addition, the CSSF has provided some clarifications in terms of initial capital, own funds and professional liability coverage requirements to which Luxembourg AIFMs are subject. 

1. Marketing in Luxembourg of AIFs by non-EU AIFMs
The CSSF has clarified the regime applicable to marketing of AIFs (whether EU or non-EU AIFs) in Luxembourg by non-EU AIFMs. Before the marketing passport to be made available to non-EU AIFMs within the conditions of article 67 of AIFMD, article 45 of the AIFM Law provides the regime applicable to any marketing without a passport of AIFs by non-EU AIFMs on the Luxembourg territory. Those conditions are as follows: 

- the non-EU AIFM should comply with the transparency requirements under articles 20 to 22 of the AIFM Law (annual report / disclosure to investors and reporting to the CSSF) and, possibly, with the additional requirements applicable in case of acquisition of control of non-listed companies and issuers (articles 24 to 28);

- a cooperation arrangement (such as memorandum of understanding) should be in place between the CSSF and the supervisory authority where the relevant non-EU AIFM is established; and 

- the third country where the non-EU AIFM/non-EU AIF is established shall not be listed as a non-cooperative country and territory by the FATF. 

There were uncertainties as to how this regime would be applied in practice and which steps had to be undertaken by non-EU AIFMs aiming to proceed with their Luxembourg offering. In the preceding version of the Q&A (version 6), the CSSF had indeed introduced an authorisation requirement under which compliance with the three above conditions had to be reviewed and approved by the CSSF before approaching any investor in Luxembourg. Following the approach retained in many other EU jurisdictions, the CSSF has now abandoned the authorisation procedure for a notification regime. 

To this effect, a notification form to be filled-in by the non-EU AIFM has been made available by the CSSF on its website 2. Information to be reflected therein relates to the compliance with the conditions set forth above. The form would have to be filed by email with the CSSF ahead of starting any marketing on the Luxembourg territory . A single notification form can be used for up to four different AIFs. An instruction and yearly fee of EUR 2,650 per AIF will be charged by the CSSF (increased to EUR 5,000 per AIF in case of an umbrella structure with several compartments). The non-EU AIFM should also inform the CSSF when it stops its marketing on the Luxembourg territory. In terms of reporting obligations towards the CSSF (article 22 of the AIFM Law), the Q&A clarifies that such reporting shall only be made in relation with those AIFs that are marketed in Luxembourg.

2. Initial capital, own funds, and professional liability risk coverage

The CSSF has also clarified the regulatory texts to be considered when assessing the initial capital and own funds requirements applicable to Luxembourg AIFMs, organised either (i) as management companies subject to chapter 15 or 16 of the law of 17 December 2010 on undertakings for collective investments (the 2010 Law) (Chapter 15/16 ManCos) or (ii) under another legal status.

For Chapter 15 ManCos, the CSSF clarified the interaction between applicable provisions of the 2010 Law and of the AIFM Law. Own funds on top of the initial capital should represent 0.02% of the amount of their portfolio’s value exceeding EUR 250 Millions. For this purpose, AIFs, undertakings for collective investments in transferable securities (UCITS) and other undertaking for collective investments (UCIs) which do not qualify as AIFs managed by the relevant Chapter 15 ManCo should be aggregated. A similar aggregation mechanism is provided for Chapter 16 ManCos and other Luxembourg AIFMs except that those AIFMs cannot manage UCITS.

In respect of coverage for professional liability risks, Luxembourg AIFMs may opt for either to have additional own funds equal to 0.01% of the portfolio of AIFs managed or a separate professional indemnity insurance. The scope of such insurance shall be the risks of loss or damage caused by a relevant person through the negligent performance of activities for which the AIFM has legal responsibility. In this regard, the CSSF has clarified how this requirement would apply in the context of master-feeder structures, i.e. the coverage should encompass risks both at the master and feeder level, but only to the extent the AIFM has legal responsibility for the relevant activities.

1. Frequently Asked Questions (version 7 , 18 July 2014) concerning the AIFM Act. Available on http://www.cssf.lu/fileadmin/files/AIFM/FAQ_AIFMD.pdf
2. Notification form can be downloaded on http://www.cssf.lu/en/aifm/

Contacts for this article:

Investment Management 

Luxembourg office
Marc Meyers 
tel: +352 466 230 306 

Thibaut Partsch 
tel: +352 466 230 233 

London office

Jérôme Mullmaier 
tel: +44 20 7826 3075 

Dubai office

Marjorie André 
tel: +971 4 437 27 09