Bill Introducing Investment Restrictions For SIFs And UCIs And Amending SICAR And AIFM laws

On 18 January 2016 the Luxembourg government filed bill n°6936 with the Parliament introducing changes to the investment rules of Luxembourg investment funds governed by the Law of 13 February 2007 on specialised investment funds (SIF Law) and of those governed by part II of the law of 17 December 201O on undertakings for collective investments (UCI Law).

The bill will also amend the law of 15 June 2004 relating to investment companies in risk capital (SICAR Law) in order to align it with the SIF regime and validate administrative practices, as well as "clean-up" the law of 12 July 2013 on alternative investment fund managers (AIFM Law).

Investment restrictions for SIFs

The main objective of the law is to ensure that SIFs investing in atypical asset classes, such as artwork, wine, diamonds or football players' economic rights, representing highly illiquid and risky investments, will enhance investor protection by reserving these investments to professional investors within the meaning of annex II of Directive 2014/65/UE on markets in financial instruments (the MiFID II Directive). Such investors may be credit institutions, investment firms, insurance firms, collective investment schemes and their management companies, pension funds or national governments.

Notable changes to the SIF law to be brought by the bill are as follows:

introduction of investment restrictions for SIFs which do not reserve their securities to professional investors, (these restrictions are to be determined by CSSF regulation); SIFs reserving their shares or interests to professional investors within the meaning of the MiFID II will have the right to invest in any type of assets, including atypical, illiquid and highly risky ones; the CSSF regulation can provide for exemptions for existing SIFs or compartments thereof having invested in restricted assets prior to the entry into force of the proposed law; an upgrade to the designation of"gerants" for the companies limited by shares (SCA), in the wake of the changes to the company law enacted in 2013; SIFs managed by registered AIFMs or SIFs not qualifying as alternative investment funds (AIF) within the meaning of the AIFM Law, will need to have a proportionate and good administrative and accounting organisation. They will also need to put in place appropriate control mechanisms allowing them to efficiently supervise their activities. What about the other, non-professional investors?

Other non-professional investors...

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