New Risk Management and Conflicts of Interest Procedures for SIFs
CSSF Amendments to the SIF Law
Posted on 24 Apr 2012
Important amendments were made to the Luxembourg law of 13 February 2007 on specialised investment funds (“SIFs”) that had been passed by the Luxembourg Parliament. These amendments have now been in force since 1 April 2012 and on 20 April 2012 the CSSF issued a statement on the initial information they require from existing SIFs by 30 June 2012 (or from SIFs established after 1 April 2012, this information is to be provided immediately).
Going forward, SIFs must produce a short description of their risk management processes (“RMPs”), including how they identify, measure, manage and control existing risks and potential risks arising from the fund’s positions and the contribution to the portfolio’s overall risk profile. This description should include details of the risk management function – for example, allocation of responsibility – as well as procedures that are in place to appropriately manage risks associated with the fund’s investment strategies and that ensure independence.
A description should also be given of the practical measures that have been taken to comply with Article 42a of the SIF law, which deals with potential conflicts of interest. According to this article, funds should be structured and organised in a way that mitigates the risk of any conflict of interest between the SIF and any person involved in the activities of the SIF adversely affecting the interests of the investors. This information should be validated by the directors of the SIF, before being sent to the CSSF by email.
Laven, whose focus is to offer its clients a practical view of compliance and regulatory requirements, has assisted a number of clients on how to implement RMPs and conflicts of interest policies under the UCITS IV requirements. We are well experienced in helping you implement the above mandatory procedures, subject to proportionality where possible, so as not to unduly burden you where it can be avoided.