On March 1st 2018, a law was published to modify, inter alia, the law of 17 December 2010 on undertakings for collective investment (the “2010 Law”). Luxembourg Parliament voted to clarify the depositary regime for funds subject to Part II of the 2010 Law (“Part II-UCIs”).
It is worth recalling that the UCITS depositary regime differs from the AIFMD depositary regime in two material ways: (i) the AIFMD depositary regime allows for the contractual transfer of liability from the depositary to the sub-depositary, and (ii) the AIFMD depositary regime allows for the re-pledging of assets.
Although Part II-UCIs always qualify as alternative investment funds as per the law of 12 July 2013 on managers of alternative investment funds (the “2013 Law”), the revised 2010 Law now distinguishes the following cases:
- Part II-UCIs that permit marketing to retail investors in Luxembourg in their offering documents.
For these funds, the depositary regime provided for in Part I of the 2010 Law will apply.
- Part II-UCIs that exclude the marketing to retail investors in Luxembourg in their offering documents and are managed by an authorised AIFM.
For these funds, the AIFMD depositary regime (rather than the UCITS depositary regime) will apply.
- Part II-UCIs that exclude the marketing to retail investors in Luxembourg in their offering documents and are managed by a registered AIFM or a non-EU AIFM.
The depositary regime provided for in the law of 13 February 2007 on specialised investment funds will apply.
This clarification of the depositary regime will be particularly helpful in situations where a Part II-UCI uses a sub-depositary (e.g. prime broker), and where the depositary does not want to be liable for the loss incurred by such sub-depositary.