Recent Developments In The Luxembourg Financial Sector

Luxembourg Undertakings for Collective Investment: Additional Prospectus Information for Investors

The Luxembourg law of 17 December 2010 on undertakings for collective investment (the "2010 Law") entered into force on 1 January 2011. The 2010 Law implemented the European Directive 2009/65/EC (the "UCITS IV Directive") into Luxembourg legislation, as well as introducing several non-UCITS IV related changes.

Article 151(1) of the 2010 Law (which applies to both undertakings for collective investment in transferable securities, governed by part I of the 2010 Law ("UCITS") and other undertakings for collective investment, governed by part II of the 2010 Law ("UCIs")) provides that "the prospectus must include the information necessary for investors to be able to make an informed judgment of the investment proposed to them, and, in particular, of the risks attached thereto." The prospectus is required to include, in addition to the disclosure on the fund's investments, a clear and easily understandable description of the fund's risk profile.

Article 151(1) was included in the former Luxembourg law regarding UCIs,1 although with a slightly different wording that still referred to the simplified prospectus. According to the UCITS IV Directive and the 2010 Law, UCITS should replace their simplified prospectus with a key investor information document ("KIID") by 1 July 2012. However, Article 151(1) does not refer to the KIID, but only refers to the (full) prospectus.

On the basis of Article 151(1), and since 23 November 2011,2 the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (the "CSSF"), requires a paragraph to be included in the prospectus of each UCITS and UCI, referring to the exercise of an investor's rights against the UCITS or UCI. The CSSF indicates that the required paragraph (text set forth below) should be included in the prospectus of each newly created UCITS or UCI. For all existing UCITS and UCIs, the required paragraph should be included in the next update of the prospectus, but in any event no later than 30 June 2012.

The required disclosure is as follows (and should be adapted according to the legal form of the fund in question):

The investment company,3 draws the investors' attention to the fact that any investor will only be able to fully exercise his investor rights directly against the UCI(TS), if the investor is registered himself and in his own name in the shareholders' register4 of...