On 23 August 2018, the Commission de Surveillance du Secteur Financier (CSSF) published Circular 18/698 (see our blog article) on the authorization and organization of investment fund managers incorporated under Luxembourg law. As part of the document, the CSSF as supervisory authority outlines requirements for Management Companies (ManCos) under the European Market Infrastructure Regulation (EMIR). The Circular entered into force directly with its publication.
Detailed requirements
EMIR requires ManCos to fulfill regulatory requirements in case the funds under their management are counterparties to derivative transactions. For this reason, the CSSF requires ManCos to have documented corresponding processes and procedures. If a ManCo has delegated these (risk management) processes, it should instead have procedures that guarantee the overview of the delegate. This is especially important since the responsibility for (EMIR) compliance remains with the ManCo.
A comprehensive delegation overview encompasses the review of contractual documents, such as Service Line Agreements (SLAs), an initial due diligence of the delegate as well as the recurring monitoring of delegated activities. For example, ManCos that have delegated EMIR reporting should request access to the chosen trade repository to monitor regularly the successful submission of reports.
Increased attention
The EMIR section ends with the communication that all documentation must be available to the CSSF upon demand. This request lines up with the individualized dunning letters to non-financial counterparties ("NFCs") for EMIR reporting in spring 2017, the EMIR questionnaire to Banks in winter 2017 as well as its Communication of 13 July 2018 with respect to EMIR reporting. Our corresponding article can be found here.
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.