CSSF Regulation 15-08 - Conflict of interest policies for SICARs

Regulation 15-08 (the “Regulation”) of December 31st 2015 implements how article 7bis of the law of June 15th 2004 (“SICAR Law”) relating to investment companies in risk capital (“SICARs”), as amended, is to be applied.

The Regulation only applies to SICARs (“Impacted SICARs”) which are not subject to part II of the SICAR Law i.e. it does not apply to SICARs which are being managed by a fully authorised alternative investment fund manager (“AIFM”) subject to Chapter 2 of the law of July 12th 2013 on alternative investment fund managers (the “AIFM Law”) or internally managed SICAR’s subject to the full scope of the AIFM Law.

"The practical impact of the Regulation is that SICARs which have not appointed a fully authorised AIFM are henceforth required to have a conflicts of interest policy."

SICARs which have a fully authorised AIFM do not need to have their own conflicts of interest policy in addition to the AIFM’s.

Article 7bis of the SICAR Law requires Impacted SICARs to be structured and organised in such way as to minimise the risk of investors' interests being prejudiced by conflicts of interest.

The Regulation clarifies the requirements of article 7bis, as follows:

  • it sets out certain criteria which would enable the SICAR to spot potential conflicts of interest while keeping in mind the interests of the SICAR, the SICAR’s group and services providers and the investors;
  • it requires the SICAR to establish and keep operational a  written policy on managing conflicts of interests, on  (the “CIP”);
  • the SICAR shall ensure that the procedures put in place for the prevention or management of conflicts of interest shall be designed to ensure that the relevant persons engaged in different business activities involving a risk of conflict of interest carry out these activities with an appropriate degree of independence;
  • keep updated a register describing the type of investment management activities where conflicts of interest entailing a material risk of damage to the SICAR have arisen or may arise ; and
  • inform investors of conflicts of interest where organisational or administrative measures taken by the SICAR where not sufficient to handle those conflicts.

Existing SICARs are expected to comply with the Regulation by March 31st 2016