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The revised legislation reflects in particular the requirements of the European Union’s Directive on Alternative Investment Fund Managers, which will take effect on July 22, 2013. It also follows some aspects of Luxembourg’s funds legislation of December 17, 2010, which transposed into national law the UCITS IV Directive governing cross-border distribution of retail funds within the EU, and introduced other changes affecting non-UCITS funds.
In addition, the revisions to the SIF regime reflect the experience of Luxembourg’s regulator, the Financial Sector Supervisory Authority (CSSF). The revisions to the legislation include measures to bring the SIF law into line with AIFM Directive rules covering areas including delegation, risk management and the handling of actual or potential conflicts of interest. Following the December 2010 legislation, it will allow sub-funds of a SIF umbrella structure to invest in other compartments of the same structure in the same way that UCITS funds can do.
The most notable change abolishes an eye-catching, but not heavily used, provision of the 2007 SIF that allowed fund promoters to wait until up to a month after the launch of a fund to submit it to the CSSF for approval. Henceforth, funds must be authorised by the regulator before they can be launched.
In its advice to Parliament, Luxembourg’s Chamber of Commerce noted that “one might regret the disappearance of certain advantages relating to the approval and information procedures that up to now have made SIFs particularly flexible investment vehicles”.
However, the Council of State, which is responsible for scrutinising legislation, said in its report that this change was “more a measure of legal security and a codification of existing practice than a restriction, since almost all promoters applied for approval before launching their funds in order to avoid the risks and costs entailed by any changes to the documentation, operating model or investment policy that the CSSF might have required in the case of approval sought following the launch of the fund”.