Posted on September 29, 2011 by Winston Penhall

Luxembourg SIFs and the AIFMD

Draft legislation was put to the Luxembourg Chamber of Deputies (Parliament) in August which proposes to amend the Law of 13th February 2007 on Specialised Investment Funds to implement UCITS IV and the AIFMD. Some of the material changes to the SIF regime:

  • The requirement to translate fund articles from English into French will fall away.
  • The ability to launch a SIF and apply for retrospective CSSF authorisation will be repealed.
  • The individuals managing the fund's assets will have to be approved by the CSSF which must be notified of any changes to the portfolio managers.
  • Generally, sub-managers exercising discretionary investment management powers will need to be prudentially managed.
  • Funds will require the CSSF's approval for major changes to their offering documents including a change of name, creation of a new sub-fund or the replacement of the administrator, custodian or auditors.
  • There are also additional rules on conflicts of interest and risk management.

Some of the proposals under the proposed law are positive steps for Luxembourg funds while others are indicative of how onshore unregulated funds will lose flexibility once AIFMD comes into force.

Posted on September 08, 2011 by Winston Penhall

Jersey Security Interests

Institutional investors that have investment vehicles domiciled in Jersey may have come across the conundrum of taking security over shares owned by Jersey vehicles. In order to gain a valid security interest in Jersey over shares, the security holder needs to either (i) hold the physical share certificates (which would require uncertificated shares held by a Jersey vehicle to be reissued in certificated form); or (ii) be registered as the legal title holder of the shares (which not all security interest holders would find desirable). These requirements may not be practical to implement, making it difficult for vehicles to grant security for borrowing, trading or other purposes.

The States of Jersey on 19 July 2011 approved the Security Interests (Jersey) Law 201- (the "New Law") which is likely to come into force, at least partially, in 2012 (it is currently with the Privy Council for approval). Under the New Law, the requirement to specify a method of creation (i.e. physical possession or assignment) will no longer be required and security may be taken over book debts and receivables.

When the relevant provisions of the New Law come into force, a borrower will be permitted to use collateral posted to a lender which under existing law would raise doubts as to the validity of the lender's security. There will also be a new electronic public register of security interests which will simplify determining priority although priority may still be maintained by other means, for instance by taking physical possession.

Some security interest holders will no doubt require new or amended agreements to be entered into when the New Law comes into force.

Posted on September 08, 2011 by Alan Meehan

Top Tips for Directors - Weavering Macro Fixed Income Fund

Picture by Anderson ManciniIn an interesting case from the Cayman Islands, the former directors of the Weavering Macro Fixed Income Fund have been ordered to pay $110 million in damages to the Fund (after its liquidation), on the basis that this represented loss suffered by the Fund as a result of the directors' wilful neglect or default. The judgment may well scare any less than active non-executive fund directors and provides us with a useful reminder of some basic do's and don'ts, which are outlined below.

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