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    NewsDigest june 13, 2010    
          in this edition      
    1. Headlines
2. ALFI past events
3. ALFI events
4. Luxembourg for Finance events



CRAs - equivalence between the US regulatory/supervisory framework and the EU regulatory regime

The Committee of European Securities Regulators (CESR) has published its technical advice in relation to the equivalence between the US legal and supervisory framework and the EU regulatory regime for Credit Rating Agencies (CRAs). CESR has concluded that, overall, the US framework is broadly equivalent to the EU regime in terms of achieving what CESR considers to be the overall objective of “assuring that users of ratings in the EU would benefit from equivalent protections in terms of the credit rating agencies' integrity, transparency, good governance and reliability of the credit rating activities”.

However, CESR has identified some differences between the US framework and the EU regime, which concern mainly the issue of disclosure of credit ratings and the quality of credit ratings and credit rating methodologies. CESR has recommended that these differences be addressed to enable further convergence between both regimes - it considers that the differences may be reduced through future regulatory amendments to the Securities and Exchange Commission’s rules. In reaching its conclusions CESR assessed the following seven areas: (i) scope of the regulatory and supervisory framework; (ii) corporate governance; (iii) conflicts of interest management; (iv) organisational requirements; (v) quality of methodologies and quality of ratings; (vi) disclosure; and (vii) effective supervision and enforcement.


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CESR consultation paper - Risk measurement and the calculation of global exposure and counterparty risk for UCITS

The Committee of European Securities Regulators (CESR) has published, for consultation, proposed guidelines on risk measurement and the calculation of global exposure and counterparty risk for Undertakings for Collective Investment in Transferable Securities (UCITS). The guidelines will accompany the level 2 implementing measures for the revised UCITS Directive (2009/65/EC) that should be adopted by the European Commission by July 2010. CESR has emphasised that the calculation of the global exposure represents only one element of the UCITS’ overall risk management process. It remains the responsibility of the UCITS to select an appropriate methodology to calculate it - in that context CESR proposes detailed methodologies to be followed by UCITS when they use the commitment or the Value at Risk (VaR) approach.

For the commitment approach, CESR sets out proposed guidelines on:

  • the conversion of financial derivatives into the equivalent position in the underlying assets of those derivatives;
  • the methodologies for netting and hedging arrangements and principles to be respected when calculating global exposure; and
  • the calculation of global exposure when using Efficient Portfolio Management Techniques.

For the VaR approach, CESR proposes guidelines on:

  • the principles to be applied for the choice between Relative and Absolute VaR;
  • the criteria to be used in the selection of the reference portfolio for use in the Relative VaR calculation;
  • the methodology for the computation of the global exposure when using Relative and Absolute VaR with a set of quantitative and qualitative requirements to be respected; and
  • additional safeguards which UCITS should put in place when calculating the global exposure with the VaR approach.

In these guidelines, CESR also defines a set of high-level principles relating to assets used as collateral to reduce counterparty risk and cover rules for transactions in financial derivative instruments. Please find, hereunder the websites the consultation as well as ALFI’s final response can be downloaded.



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CERS’s Report on Technical Details of the Pan-European Short Selling Disclosure Regime – May 2010

This report complements the Report on a Model for a Pan-European Short Selling Disclosure Regime (CESR/10-088) issued in March 2010. It provides details on the following items: determination of the economic exposure, calculation of changes in a net short position, netting and aggregation within an organizational structure, exemptions from disclosure obligations.

The Model is only proposed to apply to issuers whose shares are admitted to trading on an European Economic Area (“EEA”) regulated market and/or an EEA Multilateral Trading Facility (“MTF”).

CESR recommends that the European Institutions introduce a pan-European short selling disclosure regime as soon as possible. In the meantime, CESRinvites its members that already have the powers to introduce a permanent disclosure regime to start the implementing process and invites the others to implement such new regime on a best efforts basis, until a European regime is adopted.

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OECD Model Tax Convention

On 21 May 2010, the OECD Committee on Fiscal Affairs has released the draft contents of the next update to the OECD Model Tax Convention (the 2010 Update, http://www.oecd.org/dataoecd/19/44/45276697.pdf).

Amongst others, the 2010 Update will include the changes that were previously released for comments in the discussion draft “The Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles”.

The update will be submitted for approval to the Committee on Fiscal Affairs in June and the OECD Council in July. As all the substantive contents of the 2010 Update have previously been released for comments through various discussion drafts, this draft is released for information only and not for additional comments.

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OECD report on granting of treaty benefits with respect to the income of collective investment vehicles

The OECD Committee on Fiscal Affairs has adopted the report on “The Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles” (http://www.oecd.org/dataoecd/59/7/45359261.pdf) which contains proposed changes to the commentary on the OECD Model Tax Convention dealing with the question of the extent to which either collective investment vehicles (CIVs) or their investors are entitled to treaty benefits on income received by the CIVs.

These changes are expected to be included in the 2010 Update to the Model Tax Convention and the report would then be included in volume II of the loose-leaf and electronic versions of the Model.

The report is a modified version of the report “Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles” of the Informal Consultative Group on the Taxation of Collective Investment Vehicles and Procedures for Tax Relief for Cross-Border Investors which was released on 12 January 2009.

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DTT Luxembourg –Spain

The protocol signed in Brussels on 10 November 2009 between Luxembourg and Spain, and amending the double tax treaty between the two countries will enter into force on 16 July 2010 in accordance with article II of said protocol. In accordance with the OECD standard, the protocol provides for an exchange of information in specific cases between the respective tax authorities.


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AIFM Directive

An important milestone was reached this week in the AIFM Directive adoption process with the votes in the European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) and in the Economic and Financial Affairs Council (“ECOFIN”). Tripartite meetings (“trilogues”) between the three EU institutions will now start with the view to reaching an agreement on the proposed Directive; Parliament's first reading is expected in July 2010.

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CESR: Closer monitoring of securities and derivative markets

To respond to the recent market turmoil, the Committee of European Securities Regulators (CESR) has decided to intensify their close monitoring of the securities and derivatives markets. In particular, they will pay attention to potential breaches of conduct of business rules and cases of market abuse with a view to coordinating the actions of national supervisors. CESR will also liaise with non-EU securities regulators in this respect.

Please click here for CESR’s press release:


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CESR consultations on credit rating agencies

The EU Regulation of the European Parliament and Council on Credit Rating Agencies (CRAs) was published in the Official Journal on 17 November 2009 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:302:0001:0031:EN:PDF) and came into force on 7 December 2009. As a result, CRAs operating in the EU will need to apply for registration between 7 June 2010 and 7 September 2010 for their ratings to be used for regulatory purposes in the European Community.

According to article 21.3 (a) of the Regulation, CESR shall issue guidelines by 7 September 2010 on the enforcement practices and activities to be conducted by competent authorities under the Regulation. The purpose of the consultation document issued by CESR on 17 May 2010 is to seek comments on the conclusions CESR has drawn for setting guidelines on enforcement practices applicable as part of ongoing supervision as well as on the interaction expected between CRAs and competent authorities.


According to article 21.3 (b) of the Regulation, CESR shall issue guidelines by 7 September 2010 on common standards for assessing compliance of credit rating methodologies with the requirements set out in article 8.3. Thus, CESR issued another consultation paper to seek comments on the conclusions CESR has drawn for setting guidelines on common standards for assessing compliance of credit rating methodologies with the requirements set out in Article 8.3.


CESR invites responses to the two consultation papers by 18 June 2010.

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IOSCO and CPSS consultation on policy guidance for central counterparties and trade repositories in the OTC derivatives market

On 12 May 2010, the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) issued two consultative reports containing proposals aimed at strengthening the over-the-counter (OTC) derivatives market.

The first report(Guidance on the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties to OTC derivatives central counterparties) presents guidance for central counterparties that clear OTC derivatives products.


The second report (Considerations for trade repositories in OTC derivatives markets) presents a set of considerations for trade repositories in OTC derivatives markets and for relevant authorities over trade repositories.


Comments are invited from any interested parties by 25 June 2010.

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IOSCO consultation on credit rating agencies

The International Organization of Securities Commissions’ Technical Committee has published for public comment a consultation report on Regulatory Implementation of the Statement of Principles Regarding the Activities of Credit Rating Agencies.


The consultation paper addresses several of the recent regulatory initiatives that impact or will shortly impact credit rating agencies (CRAs) that are active in multiple jurisdictions. In particular, the paper reviews CRA supervisory initiatives in Australia, the European Union, Japan, Mexico, and the United States in order to evaluate whether, and if so how, these regulatory programs implement the four principles set forth in the 2003 IOSCO paper Statement of Principles Regarding the Activities of Credit Rating Agencies. The four principles address:

1) quality and integrity in the rating process;

2) independence and conflicts of interest;

3) transparency and timeliness of ratings disclosure; and

4) confidential information.

Comments may be submitted on or before 6 August 2010.

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CESR sets out harmonised definition of European money market funds

CESR publishes today its guidelines on a common definition of European money market funds (Ref. CESR/10-049). The guidelines aim to improve investor protection by setting out criteria to be applied by any fund that wishes to market itself as a money market fund. The criteria reflect the fact that investors in money market funds expect the capital value of their investment to be maintained while retaining the ability to withdraw their capital on a daily basis. A common definition will also help provide a more detailed understanding of the distinction between funds which operate in a very restricted fashion and those which follow a more ‘enhanced’ approach.

CESR’s guidelines create two categories of money market fund

CESR’s guidelines set out two categories of money market fund: Short-Term Money Market Funds and Money Market Funds. This approach recognises the distinction between short-term money market funds, which operate a very short weighted average maturity and weighted average life; and money market funds which operate with a longer weighted average maturity and weighted average life.

For both categories of fund, CESR expects that there should be specific disclosure to explain clearly the implications of investing in the type of money market fund involved. For Money Market Funds, for example, this means taking account of the longer weighted average maturity and weighted average life of such funds. For both types of money market fund, this should reflect any investment in new asset classes, financial instruments or investment strategies with unusual risk and reward profiles.

The guidelines will enter into force in line with the transposition deadline for the revised UCITS Directive (1 July 2011). However, money market funds that existed before that date will be granted an additional six months to comply with the guidelines as a whole.

Guidelines - Common definition of European money market funds (Ref: CESR/10-049)


Feedback statement - CESR’s Guidelines on a common definition of European money market funds (Ref: CESR/10-545)


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Joint EFAMA / IMFFA Press release about CESR's guidelines and MM funds

Please find hereafter a press release and also the link to CESR guidelines.


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LuxFLAG and MicroRate launch, LUMINIS, Investor Information Service for Microfinance

On 12 May 2010, the Luxembourg Government, LuxFLAG, and MicroRate announced the launch of LUMINIS Microfinance (“LUMINIS”). LUMINIS will provide critical information on Microfinance Investment Vehicles (MIVs) in order to facilitate future growth and investment in microfinance. Building on its many years of experience in the industry, MicroRate will manage and direct this new investor information service with the support of the Luxembourg Government and the Luxembourg Fund Labeling Agency “LuxFLAG”. The goal of LUMINIS is to create widespread transparency in the universe of MIVs. For the first time, MIVs’ critical performance data will be collected, analyzed and disseminated throughout the industry via a web-based platform. The data and accompanying analyses will allow investors to compare MIVs, analyze performance and trends, and ultimately make informed investment decisions.

Please click here to view the press release.

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EC: consultation on double tax conventions

The European Commission has launched an online public consultation to ask individuals, companies and tax advisers for information on double taxation problems that they have encountered when operating across borders within the EU:


The aim of the public consultation is to clearly identify the nature of the problems that EU taxpayers are facing and the extent to which many individuals and companies are encountering the problem of being taxed on the same income or profits in two or more different Member States.

The consultation concerns all direct taxes – income taxes, corporate taxes, capital gains taxes, withholding taxes, inheritance taxes and gift taxes.

The Commission is also inviting suggestions on how to effectively and rapidly remedy the double taxation identified.

Following the end of the consultation period (deadline: 30 June 2010), the Commission will publish a summary of all contributions received. It will also analyse the replies in detail and use them in preparing possible initiatives for EU action in the field of direct taxation.

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EC report on removing tax obstacles to cross-border venture capital investments

On 30 April 2010, the European Commission published a report on removing tax obstacles to cross-border venture capital investments:

please click here

Based on the recommendations of a Venture Capital Tax Expert Group which was established by the Commission in May 2007, the report outlines the double taxation problems that arise when venture capital is invested cross-border, as well as possible solutions. The Commission will now consider how best to follow up on the findings in the report, in line with its broader agenda to eliminate double taxation in the EU.

Please click on the following link for a memo on questions and answers in the context of venture capital:


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ALFI past events

11 May 2010 - ALFI Roadshow to London

ALFI organised its annual trip to London for the sixth year running. Despite the threat of flight disruptions, a delegation of about 130 people travelled from Luxembourg which included H.E. Luc Frieden, Minister of Finance, who gave the opening keynote address. Over five hundred local participants registered to attend the different sessions throughout the day which included plenary topics on UCITS and the future opportunities and challenges for alternative investment funds, followed by four afternoon workshops on UCITS and non-UCITS alternative investment strategies,  implementation of UCITS IV, and Luxembourg’s role as the centre for real estate funds and private equity funds. A post-seminar discussion was held on fund governance developments in Luxembourg in association with the Institute of Luxembourg Directors, ILA, and the seminar concluded with a networking cocktail.

During the seminar ALFI also organised a press conference with H.E Luc Frieden and Claude Kremer, Chairman of ALFI, for the London specialised financial press, to which 15 journalists attended.

Please click on the following link to access the seminar slides: http://www.alfi.lu/conferences-training/conferences/london-seminar

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ALFI events

Changes to the ALFI Calendar

The Asia roadshow has moved from October to November.

The Frankfurt roadshow will therefore take place in early October rather than early December, date tbc.

Please click here.

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28 & 29 September: ALFI & NICSA

The programme is on the website.

Online registration will be open next week – early bird deadline 30 July.

General sponsorship is no longer available but there are some exhibition spaces remaining.

Click here for the webpage.

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Luxembourg for Finance events

LFF events "Discover Luxembourg" in Beirut, June 24 2010

24 June Beirut: Luxembourgfor Finance and Luxembourg for Business financial seminar

Please find the programme and reply form here.

For further information and registration please contact the Consulate of the Grand Duchy of Luxembourg in Beirut directly:

Mrs. Elianne Tayar

by fax: (+961) 1485799

or e-mail: consulux@sista-group.com

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