On 11 July 2014 the Luxembourg Commission for the Supervision of the Financial Sector ("CSSF") published a new Circular CSSF 14/587 (the "Circular") that applies to all UCITS and their depositaries.
The purpose of the Circular is to clarify the depositary regime provided for by the amended Law of 17 December 2010 regarding undertakings for collective investment through defining new organisational arrangements which must be put into place at the level of Luxembourg UCITS and their depositaries in relation to the duties, obligations and rights concerning the UCITS depositary function.
The clarifications provided by the Circular are to a certain extent based on, and aim to replicate as far as possible, the rules applicable in relation to depositaries of alternative investment funds pursuant to the provisions of the AIFM Directive and therefore to some extent anticipates the depositary rules that will be introduced by UCITS V from 2016.
The Circular sets rules relating, inter alia, to (i) the segregation of UCITS' assets throughout the delegation chain, (ii) the initial and ongoing due diligence in the case of delegation, (iii) the identification, resolution and avoidance of conflicts of interest, (iv) adequate booking and monitoring of cash flows. It also describes organisational rules and rules of conduct that a credit institution should comply with to be approved as a UCITS depositary.
The Circular provides that UCITS and their depositaries must comply with the provisions of the Circular by 31 December 2015 at the latest, subject to other transitional provisions that might become applicable once UCITS V is implemented.
We will revert separately with a more detailed Newsflash on the subject and publish an English translation of this new Circular shortly.
