CSSF Circular 11/508 For Compliance Of Mancos With UCITS IV Requirements

On 15 April 2011 the Luxembourg regulator of the financial sector (Commission de Surveillance du Secteur Financier – "CSSF"), issued a new circular reminding the Luxembourg fund industry of their obligation to adapt to the new regulatory regime, commonly referred to as "UCITS IV", within short.

The newly released CSSF circular 11/508 (the "Circular") highlights and clarifies the upcoming organizational requirements for Luxembourg located UCITS management companies and self-managed investment companies in accordance with the Directive 2010/43/EC, as transposed into Luxembourg law by the CSSF regulation 10-4 dated 17 December 2010.

As a quick reminder, the law of 17 December 2010 on undertakings for collective investments (the "UCITS Law 2010") has implemented the UCITC IV-Directive 2009/65/EC into Luxembourg law. One of the declared objectives of UCITS IV was the creation of a "level playing field" with regard to the substance and organizational requirements for all financial actors and service providers. The scope of the Financial Markets Directive (cf." MiFID Directive 2004/39/EC") introducing strict obligations vis-à-vis clients complaints, order executions, business conduct rules and more areas was limited to credit institutions and investment firms, management companies managing UCITS ("ManCos") were and are not covered by the MiFID Directive. UCITS IV now imposes similar rules and thereby harmonizes and aligns the diverse regulatory regimes for all players in the financial sector.

The grandfathering rules grant existing ManCos and investment companies ("SMICs") until 1 July 2011 to adapt to the new regulatory regime. However, in order to update its application files in time, the CSSF requires a set of written confirmations, descriptions and disclosures with regard to the UCITS IV – compliance from all ManCos and SMICs before 1 June of this year.

For ease of understanding please find hereinafter a table with the required actions and documents to be filed with the CSSF before 1 June 2011 together with the relevant regulatory context and the implementation work to be done (including any ongoing requirements).

1. Luxembourg ManCos

   N°

   Area

   Key Issues

   Action

   Underlying regulatory obligation for ManCos

   Communication CSSF

   SMIC*

   1

   General Organisation

   Procedure Handbook

   Drafting

   To establish a precise and clear handbook of procedures describing specifically

   the internal organization allocation of tasks hierarchy structure communication with outsourcing service providers Confirmation

   " "

   Management Reporting and internal communication

   Implementation

   establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the management company as well as effective information flows with any third party involved; Description

   " "

   Information & Data protection

   Implementation

   establish, implement and maintain systems and procedures that are adequate to safeguard the security, integrity and confidentiality of information, taking into account the nature of the information in question. Description

   " "

   Business continuity plan

   Drafting / Implementation

   establish, implement and maintain an adequate business continuity policy aimed at ensuring, in the case of an interruption to their systems and procedures, the...