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    ALFI Newsflash january 12, 2015    
          in this edition      
    1. Headlines
2. Upcoming ALFI events
3. Events endorsed by ALFI



ALFI issues position paper on planned EU legislation regarding statutory audit of public interest entities

In April 2014, the European Parliament and the Council have adopted a new legislation on specific requirements regarding statutory audit of public interest entities. The legislation entered into force on 16 June 2014 and its provisions will be applicable to the first financial year starting on or after 17 June 2016, with the exception of mandatory firm rotation which is subject to transitional arrangements.

The legislation comprises two legislative instruments. The Directive, which needs to be transposed into national law, applies to all entities required to have a statutory audit. The Regulation, which is binding on all EU member states, introduces further requirements for Public Interest Entities (PIEs) in the EU.

ALFI has now issued a position paper focusing on the Regulation as it will significantly impact the governance of Luxembourg investment funds. Although the Regulation does not need to be transposed into national law, member states will need to legislate with regard to the implementation of their chosen options. In the position paper, ALFI provides its views and recommendations with regard to the various options.

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ALFI response to ESMA call for evidence on the AIFMD passport and third country AIFMs

On 8 January 2015, ALFI responded to the ESMA call for evidence on the AIFMD passport and third country AIFMs.

ALFI is of the view that an extension of the passport to non-EU managers in 2015 would be premature. Moreover, ALFI thinks that abolishing national private placement regimes (NPPRs) is a prerequisite for an extension of the passport to third countries. A parallel system would cause market distortion by putting EU AIFMs at a clear disadvantage. Therefore, ALFI concludes that a decision by the Commission should be deferred until at least 2018, i.e. the point in time where NPPRs are meant to disappear. A possible decision in favour of an extension at that point in time should be followed by a one year transition period.

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New ALFI podcasts


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ALFI responds to the OECD Public Discussion Draft “Follow-up Work on BEPS Action 6: Preventing Treaty Abuse”

ALFI has taken note of the OECD Public Discussion Draft “Follow-up Work on BEPS Action 6: Preventing Treaty Abuse” dated 21 November 2014. This Follow-up Discussion Draft was issued further to the release of the report “BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances” in September 2014.

ALFI’s response addresses the situation of collective investment vehicles (“CIV”) being widely-held, diversified, and subject to investor-protection regulation in the country of establishment of the CIV, as previously defined by the 2010 OECD report on treaty eligibility for investors in CIVs and section A of the Follow-up Discussion Draft relating to the LOB provision and treaty entitlement.

ALFI takes the view that CIVs are principally set up for genuine commercial reasons and given their economic characteristics it is reasonable to conclude that CIVs cannot, in principle, be effectively used for treaty shopping. This is the reason why the main focus of the BEPS action plan is – and should remain – multinationals and not CIVs. ALFI further believes that there are good grounds to consider that all CIVs set up as UCITS should always be considered as residents for treaty purposes.

Consequently, ALFI believes that the final report on Action 6 should foresee that all CIVs set up as UCITS as well as all other widely-distributed non-CIVs whose characteristics are similar to those of UCITS will automatically qualify as resident for the purpose of article 1 of the OECD Model Convention and that they will also be considered as qualified residents for the purpose of the LOB clause. Finally, ALFI also suggests to include a statement that Contracting States are encouraged to consider that UCITS and comparable non-CIVs will not be considered as creating opportunities for treaty shopping.

You may access ALFI’s response here.

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Luxembourg legislates on tax rulings

The Law of 19 December 2014, published in Memorial A No 257 on 24 December 2014, has amended the General Tax Law (“Abgabenordnung”) by introducing a new paragraph 29a on tax rulings. This new paragraph is part of a larger set of measures in the context of the Government’s “Package for the Future” and the 2015 Budget Law. Key features can be summarised as follows:

  • The law provides legal certainty to taxpayers, both corporations and individuals, who request the Luxembourg Tax Administration to issue an advance decision on one or more transactions envisaged by the taxpayer.
  • The law clarifies that an advance decision is not in itself an exemption or a reduction from tax.
  • An advance decision has a validity of a maximum of 5 years.
  • Advance decisions for corporations are subject to a fee of EUR 3,000 to 10,000.

Click here for the text of the Law (French version).

Practical details on the applicable procedure and the creation of an Advance Decision Commission have been further detailed in the Grand-ducal Decree of 23 December 2014, published in Memorial A No 264 on 29 December 2014. Click here for the text of the Grand-ducal Decree (French version).

The new measures take effect on 1 January 2015.

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Luxembourg extends regulation on transfer pricing

The Law of 19 December 2014, published in Memorial A No 257 on 24 December 2014, has amended article 56 of the Income Tax Law in relation to transactions between associated enterprises. It reinforces the already existing principle that any such transactions must be made at “arm’s length”. The new text of article 56 is modelled on Article 9 “Associated Enterprises” of the 2010 OECD Model Tax Convention. In addition, taxpayers are required to maintain appropriate transfer pricing documentation to substantiate the information contained in their tax returns (article 171 of the General Tax Law).

Click here for the text of the Law (French version).

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Luxembourg raises VAT rates as from 1 January 2015

The Law of 19 December 2014 (dealing with the 2015 Budget Law), published in Memorial A No 255 on 24 December 2014, has amended the VAT Law of 12 February 1979. The standard rate has been increased from 15% to 17% and the intermediate rate from 12% to 14%. This change takes effect as from 1 January 2015.  Click here for the text of the Law (French version).

In the context of investment funds, it is worthwhile reminding that management services rendered to a fund are exempt from VAT as per article 44 1 d). The intermediate rate of 14% applies in relation to control and supervisory services provided by a depositary as more particularly detailed in Circular 723 of the Luxembourg VAT Administration, as amended. The standard rate of 17% applies to the few services rendered to an investment fund that are not VAT exempt (such as audit, legal or tax advice).

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CSSF answers FAQ regarding the immobilisation of bearer shares

On 30 December 2014 the CSSF issued an FAQ for investment vehicles concerning the law of 28 July 2014 regarding the immobilisation of bearer shares and units. As a reminder, this law complies with the FATF and the Global Forum’s requirements as regards the identification of bearer shareholders and ultimate beneficial owners. It applies to investment companies and FCPs and provides for the immobilisation of bearer shares with a professional depositary as well as the maintenance by such depositary of a specific register of bearer shares to ensure that all information for the identification of shareholders is available. Criminal sanctions for non-compliance with the law are also foreseen.

The CSSF FAQ clarifies among others which types of investment funds are impacted, who can be appointed depositary under the law and outlines how bearer shares and units are affected by these provisions, both from the fund and the shareholder point of view. In particular, details are provided regarding the obligations stemming from the new provisions depending on whether the concerned shares or units have been issued after or before the entry into force of the law, and lists the deadlines to be complied with. The FAQ also addresses the possible means for transmitting the information to investors regarding this new legislation.

Please click here to access the text of the law and here to access the text of the FAQ.

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CSSF issues version 8 of FAQ document on the Luxembourg AIFM Law

On 29 December 2014, the Luxembourg regulator published version 8 of its FAQ document concerning the Law of 12 July 2013 on alternative investment fund managers (AIFM) and the Commission Delegated Regulation (EU) n° 231/2013. The following sections were updated or added:

  • Update of section 14 concerning reporting aspects (page 29)
  • New section 19: marketing of non-EU AIFs to professional investors in Luxembourg without passport by EU AIFMs on the basis of article 37 of the Law of 2013 (page 38 ff.)
  • New section 20: notification to the CSSF of the acquisition of major holdings and control of non-listed companies on the basis of article 25 of the Law of 2013 (page 40 ff.)

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AIFMD: Commission draft delegated regulation on the information to be provided by competent authorities to ESMA

On 18 December 2014, the European Commission published a draft delegated regulation on the information to be provided by competent authorities to the European Securities and Markets Authority (ESMA), which is based on Article 67(5) of the Alternative Investment Fund Managers Directive (AIFMD). Under Article 67(3) of the AIFMD, national competent authorities are required to report quarterly to ESMA information on the AIFMs that are marketing and/or managing AIFs under their supervision, either under the application of the passport regime or under their national regimes. The draft delegated regulation follows closely ESMA’s technical advice submitted to the Commission on 26 March 2014, as well as subsequent discussions at ESMA level. ESMA did not consult publicly on its proposals since the matter concerns exclusively reporting obligations of national competent authorities. The Commission endorses this approach.

The regulation is meant to enter into force on the 20th day following that of its publication in the Official Journal of the EU.

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New EU Directive on automatic exchange of information in the field of taxation published

Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU on automatic exchange of information in the field of taxation has been published in the Official Journal of the European Commission on 16 December 2014. The Directive extends the automatic exchange of information to (i) interest, dividends and other income (ii) gross proceeds from the sale or redemption of financial assets and (iii) account balances.

Member States must transpose this Directive into their national legislation by 31 December 2015. The Directive takes effect as from 1 January 2016 with information on the above categories of revenues being reported within 9 months from the end of each calendar year. Member States should require financial institutions to implement reporting and due diligence rules which are consistent with the Common Reporting Standard developed by the OECD.

Click here for the text of the Directive.

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ESMA updates AIFMD Q&A document

On 9 January 2015, the European Securities and Markets Authority (ESMA) updated its Q&A document on the application of the Alternative Investment Fund Managers Directive (AIFMD). Four Q&As on AIFMD reporting have been added.

Click here for the document.

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ESMA issues Final Report on Technical Advice on MiFID II

On 19 December, 2014 ESMA has published a Final Report on its Technical Advice to the Commission on MiFID II and launched a Consultation on its draft Technical Standards (RTS/ITS) under MiFID II / MiFIR.

The Final Report on the ESMA Technical Advice to the Commission adopts the same structure as the earlier consultation paper that ESMA had published in May 2014 and addresses investor protection issues  (in particular research costs, inducements and best execution), and capital markets (including the liquidity and systematic internaliser regimes). It also contains summaries of responses that ESMA received further to the abovementioned consultation.

The Consultation Paper covers topics such as accesses to investors, service offering and information related to orders, as well as transparency, definition of high frequency trading firms and trading venues and data publication and access. It also contains summaries of responses received further to the ESMA discussion paper issued on 22 May 2014 on these topics. Deadline for responding to this consultation is 2 March, 2015 and an open hearing will be organised in Paris on 19 February 2015.

Click here to access the text of the Technical Advice and here to access the Consultation Paper.

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ESMA publishes Opinion and Advice on Crowdfunding

On 18 December 2014 ESMA has published an Opinion together with an Advice on investment-based crowdfunding.

The Opinion clarifies the rules applicable to crowdfunding and is addressed to national competent authorities. It outlines how EU rules are likely to apply to crowdfunding platforms, depending on the business model chosen, and gives guidance as to how to regulate platforms operating outside the scope of such rules.

The Advice outlines issues to be considered by European institutions with a view to achieving greater regulatory and supervisory convergences within the EU. In particular, it expresses the concern that incentives exist for platforms to set up outside the scope of regulations and underlines the investor protection risks this entails. It therefore asks for a reduction of these incentives by appropriate policies.

Click here to access the Opinion paper and here to access the Advice.

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Council of the EU conclusions on European private placement framework

At the occasion of its ECOFIN meeting on 9 December 2014, the Council of the EU adopted, among other things, the following conclusions on a European private placement framework:

With regard to a European private placement framework, the Council:

(14) RECOGNISES that the development of a specific private placement framework with guidelines for issuers and professional investors represents one possibility for the long term financing of the economy which can complement other financing sources;

(15) NOTES that such a private placement framework would be mostly beneficial for medium-sized enterprises with currently limited access to or presence in capital markets;

(16) CONSIDERS that the lack of harmonisation of processes, credit information and documentation as well as the need for sound credit analysis addressing information asymmetries are among the challenges facing cross-border private placements;

(17) WELCOMES the potential benefits presented by market-led initiatives, with a view to establishing reference standards underpinning a common framework for private placements;

(18) TAKES NOTE of the Commission's planned mapping of national private placement regimes and of the FSC's work in sharing information on Member States' best practices;

(19) INVITES accordingly the Commission, with the involvement of the FSC and the EFC to take stock of the outcome of market-led initiatives, in the course of 2015, and consider at the same time whether and how possible policy actions, incl. the development of a comprehensive but flexible regulatory framework, could play a supportive role in the development of a sustainable private placement market in the EU.

Click here for the official press release.

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Volcker Rule: US Federal Reserve Board grants extension of conformance period

The US Board of Governors of the Federal Reserve System has granted a one-year extension of the conformance period for banking entities to conform investments in and relationships with covered funds and foreign funds that may be subject to the provisions of section 13 of the Bank Holding Company Act of 1956 (which was added by section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Volcker Rule) and that were in place prior to 31 December 2013 (“legacy covered funds”). Moreover, the Board intends next year to exercise the authority to grant the final one-year extension in order to permit banking entities until 21 July 2017, to conform ownership interests in and relationships with legacy covered funds.

While somewhat helpful with respect to most outstanding foreign public funds, the extension does not extend to those foreign public funds that were launched in 2014 and also does not address the core question of whether foreign public funds (or foreign non-covered funds) should be deemed banking entities subject to the Volcker Rule restrictions on proprietary trading. 

Click here for the order.

Background information: ALFI newsflash of 5 November 2014

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Brazil makes international investing more accessible to local investors

Brazil’s Comissão de Valores Mobiliários (CVM) has published two new regulations that will make international investing by local investors more accessible:

- Instruction 554/14: the CVM now allows for natural and legal persons to be considered “professional investors” when they possess financial investments greater than BRL 10 million, while “qualified investors” must possess financial investments in excess of BRL 1 million. The instruction also removes rules requiring qualified investors to make a high minimum investment in a single fund.

- Instruction 555/14 (replaces Instruction 409/04 as the regulatory framework governing the creation, administration, operation and information-disclosure of mutual funds. The CVM has extended the limits for overseas investment:

  • Equity and fixed-income funds for retail investors: the limit has doubled to 20%;
  • Multimarket funds (hedge funds): the limit is kept the same at 20%;
  • Funds exclusively designed for qualified investors: the upper limit is set at 40% but can reach 100% if certain rules are observed.
  • Funds exclusively designed for professional investors: there is no limit.

The two instructions will enter into force on July 1, 2015 and the investment funds which are in operation on July 1, 2015 will have until January 4, 2016 to adjust to the new rules.

More information and both instructions can be found on CVM’s website.

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Upcoming ALFI events

13-16 January 2015: ALFI Roadshow to Asia

Registration is still possible. Please forward the invitations to your contacts in Asia!

Programme & Invitation: click here

To Register: click here

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4 February 2015: Navigate your way through responsible investing

A member meeting from 4.30 - 5.30 pm at the Chamber of Commerce

Programme details and registration links will be sent to ALFI members soon.

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12 February 2015: ALFI Roadshow to Amsterdam

Registrations open! 

Please forward the invitation to your contacts in The Netherlands.

Half-day morning seminar followed by lunch.

Programme & Invitation

Fund Industry Seminar including sessions on

  • alternative investment fund structuring
  • current distribution trends of traditional (UCITS) & alternative (AIFs) products
  • trends in responsible investing
  • real estate funds round table

Participation is free of charge.

Event webpage

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25 February 2015: ALFI Leading Edge Conference

"New Depositary Rules & other Service Provider related issues"

Register now!

The programme gives you practical and technical details on :

  • Selection, initial due diligence and ongoing review on service providers by the Depositary;
  • Segregation and record keeping of assets;
  • Governance and prevention of conflicts of interests
  • Depositary/Custody Delegation and Sub-Delegation Operating Models
  • Liquidity oversight requirements and other controls
  • The role of the Management Company in light of the new Depositary Circular - Business as usual?

Sponsorship Opportunity! Deadline 16 January 2015

General sponsorship: click here

Badge sponsorship: click here

Event webpage

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24 & 25 March 2015: ALFI Spring Conference

Registration open! Click here.

Click here for all Sponsorship & Exhibition opportunities!

Inform your foreign contacts!

ALFI is offering 50 free tickets for asset managers and institutional investors who are not based in Luxembourg. click here for the application form.
Booking deadline: 6 February 2015!

Event webpage

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24 March 2015 from 6 pm: ALFI Gala Cocktail at Cercle Cité

This year again, ALFI will host a gala event on the first evening of the Spring Conference at Cercle cité in Luxembourg Ville.

Open to all fund industry professionals attending the Spring Conference, we expect hundreds of key industry players. Don’t miss the opportunity to meet them and to make new contacts to intensify existing ones in an informal setting.

Registration: included in the Spring conference registration

Access map: click here

Sponsorship: contact events@alfi.lu

Event webpage

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Calendar of public ALFI events in 2015

For an overview of all events scheduled or endorsed so far by ALFI in 2015, have a look at the ALFI events calendar.

Check out all upcoming events. Click on  "Search Events" to filter by event type.

Note: the event calendar allows to have events listed either chronologically or by event category. Click on the name of the event for detailed information.

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Events endorsed by ALFI

Special discounted rates for ALFI members

ALFI has agreed to support a certain number of selected international third-party events that are listed on the exclusive ALFI member events calendar! Click on the name of the event to get your ALFI member discount code.

Are you missing an event on the list? Do you need more information? Contact: events@alfi.lu

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