CSSF Regulation Regarding Risk Management And Conflict Of Interests

• Jurisdiction: Luxemburgo
• Date: 28 August 2012

Long awaited CSSF regulation n° 12-01 regarding risk management and conflict of interests has been issued and lays down detailed rules for the application of article 42bis of the amended Luxembourg law of 13 February 2007 relating to specialized investment funds.

The regulation n°12-01 issued by the CSSF (the "Regulation") lays down detailed rules for applying paragraphs (1) and (2) of article 42bis of the amended Luxembourg law of 13 February 2007 relating to specialized investment funds (the "Law") (the "SIF(s)") regarding (i) on one hand the appropriate management of risks referred to in this article and in particular the criteria for assessing the adequacy of the risk management systems used by SIFs and (ii) on the other hand providing details on structures and organizational requirements designed as to minimize the risk of conflict of interests.

Regarding the question of risk management, clarifications have been provided by the Regulation on how SIFs shall establish and document an adequate risk management system and in particular with regards to the risk management function and its delegation to third parties.

The Regulation clearly states that the risk management system shall be adopted by the directors of the SIF and submit it to an adequate review on a regular basis, so as to be able to notify the CSSF with any material change that may occur. Except duly authorized by the CSSF, the risk management function shall be independent, functionally and hierarchically separate from the operating units of the SIF. It must also dispose of the necessary authority and have access to all relevant information for the proper accomplishment of the mission. With regards to the delegation of the risk management function, SIFs are authorized to delegate to a third party all or part of the risk management function under the following conditions: such third party shall have the necessary competence and capacity to perform the risk management function in a professional, reliable and efficient manner; and the delegation shall not, in any case and under any circumstance relieve the directors of SIFs of their responsibility...