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    NewsDigest july 29, 2010    
          in this edition      
    1. Headlines
2. ALFI events
3. Luxembourg for Finance events



ALFI press release

Alfi welcomes the Luxembourg Government’s draft bill on UCITS4
On 23 July 2010, the Luxembourg Government approved the draft bill implementing UCITS 4
into national law. The final adoption of the Government draft bill by Parliament is expected to
take place before the end of this year.
Commenting on this approval, Claude Kremer, chairman of Alfi said: “The Luxembourg
authorities have taken a very proactive approach to the introduction of UCITS4, including
introducing new tax measures to remove uncertainties on the fiscal treatment of new UCITS4
freedoms such as master-feeder structures and the management company passport. The
speed of the process and the introduction of these new measures clearly demonstrate once
again Luxembourg’s vigorous support of the European Fund Industry.
The Association of the Luxembourg Fund industry (Alfi) welcomes this move, and believes
that UCITS4 provides is a unique opportunity for funds to work in a more resource and cost effective
environment, making Europe an attractive domicile for funds globally.”

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EFAMA/PwC Survey on the Key Information Document

On 14 June 2010, the European Fund and Asset Management Association (EFAMA) and PricewaterhouseCoopers (PwC) published a survey on the asset management industry’s views on the key information document (UCITS IV: Time for change http://www.efama.org/images/stories/efama_and_pwc_ucits_kid_survey_2010_final_v12_2.pdf).


Two more surveys will be carried out focussing on the management company passport and fund mergers/master-feeder structures respectively.

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ALFI: KID Implementation Project

From the outset, the KID Sub Committee chaired by Noel Fessey analysed the proposal of the European Commission to introduce for UCITS a key investor information document (KID), which will replace the simplified prospectus.

The group prepared responses not only to the more general CESR consultations and on the recent IOSCO consultation on principles on point of sale disclosure, but in particular to the following consultation papers:

  1. Content and form of Key Investor Information disclosures for UCITS (October 2007)
  2. Technical issues relating to Key Information Document (KID) disclosures for UCITS (March 2009)
  3. Technical Advice at level 2 on the format and content of KID disclosures for UCITS (July 2009) + Addendum (August 2009)

The responses are all published at ALFI’s website (www.alfi.lu), section ALFI statements within publications & statements. Another consultation paper expected for summer or autumn 2010 will focus on glossary of terms to be used in the KID.

With regard to the adoption of implementing measures by 1 July 2010, the group has recently restarted to hold weekly meetings, in order to be prepared and to accompany the upcoming implementation of the KID in Luxembourg. This initiative includes amongst others a question-and-answer service for the members of ALFI.

The latest legislative texts are published at the Commission’s website


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CESR consultations on key investor information

On 20 July 2010, CESR published four consultation papers with regard to key investor information, namely

  • A guide to clear language and layout for the key investor information document;


  • CESR’s template for the key investor information document;


  • CESR’s guidelines for the transition from the simplified prospectus to the key investor information document; http://www.cesr.eu/popup2.php?id=6989
  • CESR’s level 3 guidelines on the selection and presentation of performance scenarios in the key investor information document (KII) for structured UCITS.


Responses to these consultation papers can be submitted to CESR by 10 September 2010.

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Publication of UCITS IV measures

Following the adoption of the UCITS IV level 2 measures by the European Commission, the final texts have been published in the Official Journal of the European Union: http://eur-lex.europa.eu/JOHtml.do?uri=OJ:L:2010:176:SOM:EN:HTML

This includes

  • a regulation on key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website;
  • a regulation on the form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations and the exchange of information between competent authorities;
  • a directive on certain provisions concerning fund mergers, master-feeder structures and notification procedure;
  • a directive on organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company.

The Directives have to be transposed into national law, whereas the Regulations are directly applicable.

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19 July : CESR has published its consultation on Transaction Reporting on OTC Derivatives and Extension of the Scope of Transact

This consultation paper sets out CESR’s proposal for the possible organisation of transaction reporting on OTC derivatives as well as for the extension of the scope of transaction reporting obligations.

CESR’s proposal on transaction reporting on OTC derivatives is based on the assumption that all persons not exempted from European Market Infrastructure Legislation (including MiFID-authorised firms) would have to report their OTC derivatives transactions to trade repositories (TRs) after these will have been established and registered under EMIL.

However, CESR proposes that investment firms would retain the possibility of complying with their transaction reporting obligations with respect to OTC derivatives under MiFID provisions. Investment firms reporting their transactions to a TR, supporting MiFID standards, would be exempted from direct reporting when they communicate to the competent authority their decision to report their transactions through a TR. The MiFID regime would therefore apply to reporting obligations but these could be dealt with by TRs for the account of investment firms in order to avoid duplication. In other words, TRs would be recognised as a valid third-party reporting mechanism under Article 25(5) of MiFID.

As long as EMIL has not been finalised and implemented, OTC derivatives transactions would be reported under MiFID rules, where applicable.

Furthermore, CESR is considering to propose to the European Commission to extend, through a change in Article 25 of MiFID, the scope of transaction reporting obligations to financial instruments that are admitted to trading only on MTFs and to OTC derivatives.


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Consultation on Standardisation and exchange trading of OTC derivatives

On 19 July, Committee of European Securities Regulators (CESR) published its Consultation on Standardisation and exchange trading of OTC derivatives.

Following the financial market turmoil which began in 2007, a number of regulatory initiatives have been launched to address the problems identified in Europe and the United States in relation to the derivatives traded over-the-counter (OTC).

In this regard, the Commission’s communication “Ensuring efficient, safe and sound derivatives markets: Future policy actions” [COM (2009) 332 final] states – among others - that consideration should be given to ensuring that trades eligible for exchange trading take place on organised trading venues as defined by MiFID. In the U.S., legislative initiatives have been launched in the House of Representatives and the Senate following the Administration’s initiative to strengthen OTC derivative markets through improving risk management and increasing transparency.

In this paper CESR explores the need for taking regulatory actions in relation to further standardisation for credit, equity, interest rate, commodity and foreign exchange derivatives both as a means in itself and also in relation to the promotion of trading of these derivatives on organised markets. This paper does not analyse issues related to post-trading and in particular eligibility for clearing. In relation to standardisation, CESR is of the opinion that firms should be able to retain the flexibility to customise aspects such as standard valuation, payment structures and payment dates given the role that OTC derivatives, and in particular bespoke products, play in meeting hedging needs. Nevertheless, CESR is of the view that greater standardisation of OTC derivatives contracts can deliver efficiency benefits to the market. In particular, CESR has identified the use of electronic confirmation systems as one measure which could potentially deliver benefits to the market. To date, much of this work has been industry-driven but the question now faced by regulators is whether current progress is sufficient, how best to build on current industry initiatives, and whether regulatory intervention is needed. As a consequence, CESR is eager to explore with the industry what measures could be taken to foster a higher degree of standardisation. As the degree of standardisation differs by asset class, CESR is keen to solicit views on whether regulators should prioritise their focus on a) a certain element of standardisation and/or b) a particular asset class.

CESR particularly invites market participants to provide information on the potential costs of introducing a mandatory electronic trade confirmation requirement for European trading of OTC derivatives so that CESR can take an informed decision when making its final recommendations to the European Commission. In relation to ‘exchange trading’ of derivatives currently traded OTC, CESR believes that trading on organised markets could deliver a number of benefits like providing a higher level of transparency, enhancing liquidity, ensuring efficiency and risk reduction and providing an easy access for market participants. There are however also a number of limitations or pre-requisites to exchange trading of derivatives that may explain why the OTC segment of the market remains very large: the need for the contracts to be standardised, the inability to customise contracts according to individual customers’ needs and the limited possibility for products innovation. As a preliminary opinion, CESR is in favour of incentivising the use of organised trading venues but continues to consider whether mandatory usage is desirable, taking into account the discussions currently taking place on this issue in other jurisdictions and international fora. Therefore, CESR would like to further explore with market participants which kind of incentives could effectively promote exchange trading.

CESR invites responses to this consultation paper by 16 August 2010. All contributions should be submitted online via CESR’s website under the heading ‘Consultations’. All contributions received will be published following the close of the consultation, unless the respondent requests its submission to be confidential.


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LFF Media Watch July 1 - 14, 2010


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ALFI events

28 & 29 September: ALFI & NICSA 19th Global Investment Funds Forum

Special early bird rates available before 30 July ! Save € 100.

Click here for the webpage that includes the programme and registration details.

Please clink on the link above to see the confirmed exhibitors to date. Some exhibition spaces remaining !

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08 - 11 November: ALFI Roadshow to Asia (Tokyo, Taipei, Hong Kong)

Fund industry seminars will take place on Monday 8 in Tokyo, Wednesday 10 in Taipei and Thursday 11 in Hong Kong. Attendance is free of cost and registration will be possible from mid september on www.alfi.lu

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24 & 25 November: ALFI European Alternative Investment Funds Conference

Sponsorship and exhibition opportunities available by deadline dates of 25 August and 4 October respectively click here for webpage.

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December ALFI Roadshow to Frankfurt

Date to be confirmed

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Luxembourg for Finance events

24 October: Official mission to South America led by Minister Frieden

For more information please contact Mr Sohrab Ziai / Ms Violaine Mathurin, fax: 27 20 21 399 or sohrab.ziai@lff.lu / violaine.mathurin@lff.lu

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22 November : Official mission to Milan

The Agency Luxembourg for Finance will organise an official mission to Milan in November 2010 led by Mr. Luc Frieden, Minister of Finance and Chairman of Luxembourg for Finance.

A seminar on the Luxembourg financial sector is planned on the 22 November, in the morning. The seminar will be followed by a walking lunch offering participants possibilities for networking.

Presently, we have the pleasure to forward to your attention the Luxembourg for Finance registration form. A more detailed agenda will follow.

In case your organisation would be interested in joining Luxembourg for Finance for this official mission, we would be very grateful if you could return the enclosed registration form directly to Luxembourg for Finance before September 17th, 2010 (Ms Sophie Henry, fax: +352 27 20 21 399 or sophie.henry@lff.lu).

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