Since early days, Luxembourg has always been at the forefront of financial regulations and maintained a solid reputation as a pioneer jurisdiction for investment funds. Luxembourg is now the first EU member state to implement Directive 2009/65/EC ("UCITS IV") through the new law on undertakings for collective investment voted by Parliament on December 16, 2010.

UCITS IV: A Toolbox of Opportunities

With the aim to address structural inefficiencies in the European funds market, the "UCITS IV Toolbox" as introduced by the new law will bring about the main following changes:

  • A harmonized framework for fund mergers and master-feeder structures
  • Streamlined fund notification and optimized distribution procedures
  • A full passport for management companies favouring cross-border capabilities
  • Increased transparency with the standardized "Key Investor Information"
  • Enhanced cooperation between EU financial supervisory authorities

Building a Local Efficiency Framework

Beyond UCITS IV-related changes, the new law further seeks to modernize the current regime for coordinated UCITS and other UCI in Luxembourg with a series of local "efficiency measures" including:

  • The possibility for cross-investment between sub-funds of the same umbrella fund
  • The abolition of the subscription tax for tracker funds and microfinance vehicles
  • Lightened requirements for shareholder meetings and incorporation process
  • Tax exemption in Luxembourg for:

(i) Foreign UCITS or UCI managed by a Luxembourg management company and whose place of effective management is Luxembourg;

and
(ii) Non-resident investors on gains realized on the sale of large participations (10%) held in a corporate Luxembourg UCITS or UCI.

  • Flexible transitional provisions for compliance from January 1, 2011 to July 1, 2012

With the advent of UCITS IV and the anticipation of AIFMD, a new regulatory era for the EU asset management industry has begun.

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