In its Newsletter N°130 dated November 2011 the Luxembourg
Financial Sector Regulator (Commission de Surveillance du
Secteur Financier, the "CSSF")
requires the insertion of a paragraph in the prospectuses of UCITS
and UCIs (referred to as "UCI" or
"UCIs") newly created as of the date of
publication of this Newsletter (i.e. 23rd November
2011). For all existing UCIs, this paragraph shall be introduced
with the next update of the prospectus and by 30 June 2012 at the
Such mandatory paragraph is worded as follows:
« The [investment company, FCP, UCI(TS)/management
company] draws the investors' attention to the fact that any
investor will only be able to fully exercise his investor rights
directly against the UCI(TS), [notably the right to participate in
general shareholders' meetings - for UCI(TS) incorporated in
form of an investment company] if the investor is registered
himself and in his own name in the shareholders' register [for
UCI(TS) incorporated in form of an investment company] / in the
unit holders' register [for UCI(TS) incorporated in form of an
FCP] of the UCI(TS). In cases where an investor invests in the
UCI(TS) through an intermediary investing into the UCI(TS) in his
own name but on behalf of the investor, it may not always be
possible for the investor to exercise certain shareholder rights
[for UCI(TS) incorporated in form of an investment company] or unit
holder rights [for UCI(TS) incorporated in form of an FCP] directly
against the UCI(TS). Investors are advised to take advice on their
This new requirement is based on article 151(1) of the law dated
17 December 2010 relating to undertakings for collective investment
(the "UCITS IV Law"), the provisions of
which require the inclusion in the prospectuses of necessary
information enabling the investors to make an informed judgment of
the proposed investment and, particularly, of the risks attached
Background and purpose of the new paragraph
The new paragraph relates to the services offered by
intermediaries to investors and namely nominee services. As a
reminder, the circular 91/75 has already authorised the use of
nominee services and defined the conditions thereto. A nominee, as
defined by the CSSF in its circulars 91/75 and 02/77, is an
intermediary who intervenes between the investors and the UCI of
their choice and acts on behalf of the investor of a UCI by
appearing as shareholder or unitholder of the UCI and exercising
the rights attached to such quality. The name of the underlying
investor will consequently not be revealed to the UCI, which will
handle directly with the nominee. However, the investor will remain
the ultimate beneficial owner of the shares or units of the UCI and
will act through the nominee providing appropriate information to
and soliciting instruction by the respective investor.
The investors have to be informed of the possible limitations
to their rights as shareholders or unitholders of the UCI
Similar to the circular 91/75 which requires the mention in the
prospectus of the right of the investor to deal directly
with UCI of their choice for placing the subscriptions and
redemption orders despite of using the services of a nominee, the
CSSF demands henceforth that the investors be informed of the
possible limitations to their rights as shareholders or
unitholders of the UCI in which they intend to invest, with a view
to enhance the protection of the investors as well as of the
In fact, pursuant to circular 91/75, where nominee services are
organised by the UCI, the promoter must ensure the compliance with
the requirements of this circular, namely the insertion of a
termination clause in the nominee agreement, the description of the
role of the nominee in the prospectus and the insertion of
provisions in the prospectus regarding the possibility of the
investors to directly invest in the UCI without having recourse to
In this context, the new paragraph to be inserted in the
prospectus will draw the attention of the investors to limitations
in the ongoing exercise of their shareholder/unitholder rights and
thereby helps preventing potential conflicts or misunderstandings
on the part of the investors; ultimately the UCI are also likely to
benefit from the enhanced prospectus disclosures, not least as this
heads-up may help preventing potential contestations and legal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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