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    NewsDigest november 17, 2010    
          in this edition      
    1. Headlines
2. New ALFI brochures
3. ALFI events
4. ALFI past events



ALFI: KID Implementation Project

On 11 November 2010, ALFI’s Key Investor Information Document (KID) Working Group published the second issue of a document including questions and proposed answers about KID implementation. Compared to the previous edition, the Q&A includes a list of key documents for KID practitioners and focuses in particular on questions in respect of investment compartments and share classes. The updates are shown in mark-up so that you can see what is new in this issue.

ALFI's members are welcome to submit a question to the KID working group. For further details, please refer to the information on page 2 of the document.

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European Parliament gives green light to AIFMD

On 11th of November the European Parliament approved with an overwhelming majority the compromise text on the Alternative Investment Fund Managers Directive (AIFMD) agreed with the Council and the Commission. The directive will impose on EU-based managers rules regarding conduct, registration and transparency, in addition to operational and organisational requirements. The directive will facilitate management and marketing of AIFs in the EU via a passport for EU managers. In 2015, after an initial two years transition period from the date of implementation and a delegated act by the Commission, third country managers will be granted such a passport as well under the strict condition that they comply with the same rules as EU managers. Three years later the national private placement regimes are to be phased out via another delegated act by the Commission in favour of the passport regime. The directive also imposes stricter liability requirements on depositaries as well as a stricter regime on private equity that is intended to avoid so-called “asset stripping”.

The directive will in the next few months undergo a strict jurist-linguist “cleaning” exercise before being officially adopted by the Council in early 2011. The Commission will adopt level 2 measures mostly prepared by ESMA. The text is to enter into force in 2013.

A provisional version of the agreed text can be found under the following hyperlink:


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The European Commission consults on further policy in the field of credit rating agencies

As part of its further work in creating a sounder financial system, the Commission services have launched on 5th November 2010 a broad consultation on credit rating agencies (CRAs). Whilst credit rating agencies are important actors in the financial markets, recent developments during the euro debt crisis have shown that there may be a need to re-examine certain aspects of the current regulatory framework. There are growing concerns that financial institutions and institutional investors may be relying too much on external ratings and do not carry out sufficient internal credit risk assessments, which may lead to volatile markets and instability of the financial system. The purpose of this consultation is to open a wider debate and get input from all stakeholders in order to calibrate the scope and ambition of any possible future legislative initiative in the field of credit rating agencies. These issues are similar to those raised at a global level in the recent Financial Stability Report.

Some of the questions asked and points for input include:

  • Overreliance. Which measures could reduce the possible overreliance on external credit ratings and increase disclosure by issuers of structured finance instruments so as to allow investors to carry out their own additional due diligence on a well-informed basis?
  • Enhancing sovereign debt rating. The Commission would like to consider further measures to improve transparency, monitoring, methodology and the process of sovereign debt ratings in EU.
  • Competition. What options exist to increase diversity in this sector?
  • Liability. Whether there is a need to consider introducing a civil liability regime for claims by investors against CRAs in the EU regulatory framework for CRAs.
  • Conflicts of interest. The “issuer-pays” model raises questions of conflict of interest. What evidence there is for “rating shopping” and whether alternative models would be possible?

The deadline for comments on this consultation is 7 January 2011. The Commission will decide whether further measures are required in 2011.

consultation document

press release


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European Commission launches second consultation on new legal framework for intermediated securities

The European Commission has issued a consultation document entitled “Legislation on legal certainty of securities holdings and dispositions” with the aim of seeking stakeholders’ views on the harmonisation of the legal framework for securities holding and transactions. The present EU Member States’ laws on the holding and disposition of securities vary significantly. This could result in legal uncertainty in cross-border situations. In 2009 the Commission conducted a consultation on this topic. Taking into consideration discussions and further reflection on legal details, the Commission has decided to issue this further consultation which contains proposed principles upon which to base the legislative proposal together with an explanation of those principles.
The Commission expects to put forward a draft Directive (the Securities Law Directive) before summer 2011 providing for a harmonisation of the legal framework for intermediated securities and a better protection of investors’ rights enshrined in their securities. The deadline on this consultation is 1 January 2011.
More information is available at: http://ec.europa.eu/internal_market/financial-markets/securities-law/index_en.htm
consultation document;

press release

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CPSS report on market structure developments in the clearing industry and the implications for financial stability

The Committee on Payment and Settlement Systems (CPSS), acting under the auspices of the Bank for International Settlements, published a report on 10 November 2010 entitled “Market structure developments in the clearing industry: implications for financial stability”. The report examines developments in the clearing industry’s market structure, their drivers and the implications for financial stability. The report:

  • provides a general overview of the clearing industry in CPSS countries, covering both traditional markets and over-the-counter (OTC) derivatives markets;
  • assesses how far structural developments of markets have given rise to new risks;
  • outlines practical issues that regulators and overseers may wish to consider, either as part of their oversight role or in the context of their broader financial stability remit;
  • examines to what extent changes in market structure or ownership might affect the expansion of central clearing services; and
  • considers the effect of ownership on central counterparties’ (CCP) incentives to manage counterparty risk.

The report identifies a number of different types of market structure which have developed in the past decade and concludes that, while there is no evidence that the industry is settling on one particular structure, nor that one market structure is superior to another either in terms of CCP risk management or in terms of wider systemic risk, risks occur in many of these structures. However, the CPSS takes the view that certain risks are more likely to occur in some structures rather than others and provides a checklist of questions intended to be used by central banks, regulators and overseers as part of their oversight activities.


press release

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Report to the G20 from the IOSCO’s Task Force on Commodity Futures Markets

The International Organization of Securities Commissions’(IOSCO) Task Force on Commodity Future Markets has published a report addressed to the G20 detailing the progress made since its June 2010 report and setting out its future plans.
The report sets out the Task Force’s findings with respect to transparency in the following markets:

  • over-the-counter (OTC) commodity derivatives;
  • exchange-traded futures; and
  • cash commodities.

The report notes, among other things, that price discovery in the financial commodity markets, as well as analysis of the interactions between the financial and cash commodity markets, should be improved by promoting greater transparency across futures, OTC derivative and cash commodity markets.

The Task Force, in outlining its future plans, has (i) committed to collaborating with the Commodities Major Dealers and the ISDA Commodities Steering Committee to work towards the formation of a trade repository for commodities; and (ii) recommended that a detailed study of the issues facing physical markets from the impact of price reporting agencies be undertaken to address the transparency and functioning of cash markets for commodities.


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Luxembourg & Hong Kong: signature of an addendum to the DTA

Read the press release here.  (French only)

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ALFI announces permanent presence in Asia - Meeting the Rising Demand for UCITS Funds Domiciled in Luxembourg

Read more

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LFF Media Watch Novembre 1-15, 2010

Please click here

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European Commission Communication on a new EU framework for crisis management in the financial sector

The European Commission has issued a Communication that sets out its plans for an EU framework for crisis management in the financial sector. This paves the way for legislation due by spring 2011 which will create a comprehensive crisis management framework for banks and investment firms.

The new framework described in the Communication aims to equip authorities with common and effective powers to tackle bank crises, and avoid the associated costs for taxpayers. Key measures will include:

  • preparatory and preventative measures, such as a requirement for institutions and authorities to prepare for recovery and resolution plans (“living wills”);
  • powers to take early action to remedy problems before they become severe, including powers for supervisors to require replacement of management or to require an institution to divest itself of activities or business lines that pose an excessive risk; and
  • resolution tools, such as powers to effect the takeover of a failing bank or firm by a sound institution or transfer all or part of its business to a temporary bridge bank.

The overriding objective will be to ensure that banks can fail without jeopardising wider financial stability by minimising the risks of contagion and ensuring continuity of essential financial services.

The Communication also details other proposals, including:

  • building on existing supervisory colleges to set up resolution colleges, for the purposes of crisis preparation and management;
  • giving the new European Supervisory Authorities coordination and support roles in crisis situations;
  • establishing national funds on the basis of contributions paid by banks, to fund the cost of future resolution measures; and
  • setting out a roadmap of measures which will be considered in the longer term with a view to delivering a more integrated crisis management framework, in particular better suited to integrated European banking groups.

The new framework described in the Communication will be broad-ranging and aims to equip authorities with common and effective tools and powers to tackle bank crises at the earliest possible moment, and avoid costs for taxpayers.

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European Commission presents its 2011 Work Programme

The European Commission has presented its 2011 Work Programme to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. One of the five main priorities on which the programme is based focuses on dealing with the economic crisis and building the momentum of the recovery.

Early in 2011, the Commission will table the remaining proposals to complete the financial sector reforms that began in June 2010, including:

  • a further series of improvements to bank capital rules (CRD IV) to implement the outcome of international work of the Basel Committee on Banking Standards in the EU;
  • changes to the Market in Financial Instruments Directive and the Market Abuse Directive to complete the move to more transparent and safer derivates markets;
  • a proposal on credit rating agencies; and
  • legislation establishing a framework for bank crisis management and resolution to equip the relevant authorities with a consistent set of tools including resolution funds.

The aim is to have the full reform agreed by the end of 2011. The EU will also continue its efforts to promote a strong and coordinated global approach through its active participation in the G20.


Annexes: http://ec.europa.eu/atwork/programmes/docs/cwp2011_annex_en.pdf

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CESR completes MiFID review and issues advice on OTC derivative trading, post-trade transparency standards and client categorisa

The Committee of European Securities Regulators (CESR) has published the second and final set of technical advice to the European Commission with regard to the review of the Markets in Financial Instruments Directive (MiFID). The first set of technical advice was published in July.

The second set of technical advice includes proposals on:

  • Standardisation and organised platform of over-the-counter (OTC) derivatives.The policy measures proposed in this regard aim (i) at increasing the level of standardisation of OTC derivatives, and (ii) encouraging trading of eligible standardised derivatives on organised trading venues. With regard to (i), CESR is of the opinion that market participants should develop a higher level of legal, operational and product standardisation since this is considered beneficial for operational efficiency and for the reduction of systemic risk in the OTC derivatives markets. In connection with (ii), CESR considers that regulators should encourage increased trading of standardised derivatives on organised trading venues through target setting.
  • Post-trade transparency standards on equity markets.The main recommendations put forward concern (i) harmonised formats for reference data, (ii) defined transaction type standards and other trade flags, and (iii) clarifications of who is responsible for post-trade transparency obligations in order to avoid duplicative publication.
  • Client categorisation.CESR is of the view that the present MiFID rules on client categorisation, as well as the associated obligations, are in general appropriate and do not require substantial change.

CESR has also published additional factual information requested by the Commission relating to CESR’s July technical advice on equity markets and on non-equity markets transparency. Additional information is provided on the following topics: (i) using trade repositories for transaction and position reporting of OTC derivatives; (ii) extending the scope of transaction reporting obligations; (iii) assessing the need for position limits; and (iv) extending the reporting obligations to commodity markets firms.

second set of technical advice;

press release

related feedback statements on:

equity markets and

non-equity markets transparency.

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IOSCO consults on regulatory oversight principles for dark liquidity

The International Organization of Securities Commissions (IOSCO) has published a consultation report entitled “Issues raised by dark liquidity”.

The report notes the expanded use of dark liquidity as traders seek ways to preserve anonymity and execute orders with minimal market impact. In order to assist market authorities when dealing with dark liquidity, the report sets out principles covering:

  • transparency to market participants and issuers;
  • priority of transparent orders;
  • reporting to regulators;
  • information available to market participants about dark pools and dark orders; and
  • regulation of the development of dark pools and dark orders.

The deadline for comments on the consultation report is 28 January 2011.

consultation report: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD336.pdf

related press release: http://www.iosco.org/news/pdf/IOSCONEWS194.pdf

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Taxation: European Commission outlines vision for taxing the financial sector

On 7 October 2007, the European Commission set out its ideas for the future taxation of the financial sector. Working on the basis that the financial sector needs to make a fair contribution to public finances, and that governments urgently need new sources of revenue in the current economic climate, the Commission put forward a two pronged approach.

At global level, the Commission supports further exploration and development of a Financial Transactions Tax (FTT) and will promote an agreement with the most relevant partners. At EU level, the Commission sees potential in a Financial Activities Tax (FAT) and envisages policy action by summer 2011.

Please click on the following links for

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Supervision of the financial sector

Last year, the European Commission adopted an important package of draft legislation to significantly strengthen the supervision of the financial sector in Europe by creating:

  • a European Systemic Risk Board (ESRB)  to monitor and assess risks to the stability of the financial system as a whole ("macro-prudential supervision"). The ESRB will provide early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks. 
  • a European System of Financial Supervisors (ESFS) for the supervision of individual financial institutions ("micro-prudential supervision"), consisting of a network of national financial supervisors working in tandem with new European Supervisory Authorities, created by the transformation of existing Committees for the banking securities and insurance and occupational pensions sectors. There will be a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA), and a European Securities and Markets Authority (ESMA).

On 22 September 2010, the European Parliament voted in a plenary session on the reform of the EU framework for supervision of the financial system. On 17 November 2010, the ECOFIN Council officially adopted the three regulations establishing the EBA, ESMA and EIOPA as well as the one on the ESRB. The regulations will enter into force on the day following that of its publication in the Official Journal of the EU and apply from 1st of January 2011.

More information, such as an FAQ document on the financial supervision package, is available at the following link:


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FSC Circular 2010-09-17

Taiwan regulatory authority FSC has formally issued a circular on 17 September 2010 to amend the investment limitation by Taiwan investors in a sub fund’s NAV from 90% to 70%. Please click here for the English translation and note that this circular is effective immediately.

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LuxFLAG: 5 new MIVs obtain the Microfinance Label

LuxFLAG is pleased to announce that 5 new MIVs have been granted the LuxFLAG Microfinance Label:

  • the KCD‐Microfinance Fund I "Global" and II "Latin America";
  • Finethic Microfinance SCA;
  • Triodos SICAV II – Triodos Microfinance Fund;
  • Wallberg Global Microfinance Fund.

For further information, please click here

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New ALFI brochures

Luxembourg: the domicile of choice for financial services

Discover the new ALFI guide here.

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Setting up an investment fund in Luxembourg

This brochure provides you with the main definitions about the legal framework for setting up an investment fund in Luxembourg, the available structures, the main players, the regulatory supervision, the taxation as well as the once-off and ongoing costs at a glance.  Have a look at it by clicking here

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ALFI events

24 & 25 November: ALFI European Alternative Investment Funds Conference

Late registrations are welcome, but will not be listed on the printed delegates list. Click here for online registration.

Specialised Workshops lead by industry experts on:

v      Hedge Funds

v      Real Estate

v      Private Equity

 … and No Plain Vanilla!

Click here for the webpage for the programme and all information.


The Association of the Luxembourg Fund Industry announces that proceedings at its European Alternative Investment Fund conference will be reported through a live blog, http://alfiforum2010.com/. The blog will go live on day one of the conference, 24th November 2010.

The blog will be written by Phil Davis, a freelance journalist and former fund management reporter at the Financial Times.  Supporting content, including an exclusive study on Newcits by Strategic Insight, will also be uploaded from the conference.

The conference will focus on the implications of the AIFM Directive from the European perspective. The European Commission, AIMA and several European regulators will be giving their views of AIFMD. A series of panel events will cover the hedge fund vs alternative UCITS debate, the impact of AIFMD on property funds, and the operational impact of AIFMD for private equity houses and their service providers.

The full programme for the conference is available here. You can follow the conference discussion on Twitter using this hashtag: #alficonference

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9 December 2010: ALFI Roadshow to Frankfurt

The programme begins at 09h00 (registration at 08h30) with an introduction by the Chairman of ALFI, Claude Kremer, followed by sessions on UCITS IV and the AIFM Directive. After the coffee break, the seminar will then divide into two streams, the first of which features a discussion on UCITS III and IV and the second stream focuses on Alternatives. The seminar concludes with a networking lunch buffet.

Presentations will be in German and entry is free of charge.

Programme: click here.

Registration: click here.

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17 February 2011: ALFI SRI Conference

Highlights of the programme include:

•    SR investing in the emerging markets: are developing economies ahead of the game or lagging behind?
•    A look at sustainable stock indices and what they contribute to responsible asset management.
•    Carbon finance and forestry funds: can these funds really make a difference?
•    LuxFLAG launches an Environment Label
Further information will be published on our website shortly.

Save the date in your agenda!The full programme and registration details will be published on our website www.alfi.lu (conference section) in December.

Sponsorship opportunity

ALFI is offering sponsorship at the cost of 3,000€ for this conference.If you are interested, please click here for benefits and costs and confirm your sponsorship by returning the agreement form to us by Friday, 26 November 2010.

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2011 Confirmed Event Dates

17 February:                            ALFI SRI Conference
15 March:                                 ALFI Gala Dinner
15 & 16 March:                        ALFI Spring Conference
17 March:                                 ALFI Microfinance Conference
27 & 28 September:              ALFI Global Fund Distribution Conference in association with NICSA   
22 & 23 November:               ALFI European Alternative Investment Funds Conference

To download the draft 2011 events calendar, click here.

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ALFI past events

ALFI Roadshow to Asia (Tokyo – Taipei – Hong Kong)

Last week ALFI held its roadshow to Asia with seminars in Tokyo, Taipei and Hong Kong. The number of participants was 230, 115 and 220 that included a delegation from Luxembourg of about 25, 25 and 60 respectively.

ALFI also had meetings with the financial regulators and sister fund associations in each city.

The roadshow presentation slides and detailed programmes can be seen on this link.

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11 November : Official Opening of ALFI’s Rep Office in Asia by Minister Frieden

On this occasion ALFI signed a cooperative alliance with the Hong Kong Investment Funds Association (HKIFA) and  Luxembourg officials met with their counterparts to discuss regulatory issues concerning the two countries.

Please find the press release here

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