Luxembourg tweaks funds regime to meet AIFM

Luxembourg funds have until the end of June to put in place procedures to measure, monitor and minimise any conflicts of interest.  They must also have a system to make sure any investor in the fund is a qualified investor on an ongoing basis, Jean-Florent Richard of Luxembourg-based law firm NautaDutilh, told PE Manager.

Luxembourg has tweaked rules concerning its 2007 specialised investment funds law in anticipation of the Alternative Investment Fund Mangers (AIFM) directive. The changes came into force on 1 April. 

Another change to the law relates to delegation of management functions, which does not come into effect until 30 June 2013, and could be the biggest change for existing firms added Richard.

“You cannot delegate freely any asset management functions as you could before because of the AIFM,” he added.

“Any function of asset management that will be delegated can only be delegated to a supervised entity meaning that this entity must be subject to the financial supervision of an authority like the CCSS in Luxembourg or the FSA in London.”

The Luxembourg supervisory authority is expected to provide written guidance relating to the details of these requirements.  

Under the Directive a manager must continue to remain in charge of its basic functions as to not become a “letter-box entity”. This is when a manger delegates so many of their responsibilities they in effect do not actually manage the fund. 

Any delegations bestowed to a third party must not be a means to bypass the directive and the third party responsible must meet the Directive’s requirements.