Luxembourg Alternative Investment Funds (AIF)

Introduction

AIF refers broadly to all funds outside the Undertaking for Collective Investment in Transferable Securities (UCITS) regime. This includes investment funds exposed to traditional mainstream strategies and, in some cases, funds available to retail investors. Once approved in one EU Member State, an AIF can be distributed in all other EU Member States using the EU Product Passport (exactly like UCITS), as the AIFMD aims to replicate the UCITS success story for alternative investment fund. Luxembourg Law of 13 February 2007 under Commission de Surveillance du Secteur Financier (CSSF), regulates the funds

AIFs: target investors

“Well-informed investors”, i.e.:

• Institutional investors (e.g. banks, insurance companies, pension funds, etc.)
• Professional investors (e.g. high-net-worth individuals)

Any other investor who:

• confirms in writing that they fulfil the status of “well-informed investor”;
• invests at least €125,000; OR
• provides a bank confirmation (or similar).

Legal Requirements

Categories

Entity Requirements

The entity making the application is Luxembourg:
a) Common Fund (FCP)
b) Investment Company-variable capital (SICAV)
c) Investment Company-fixed capital (SICAF)
d) Limited Partnership

Director’s Requirements

The license will need at least 2 (two) natural person Fit and Proper Directors of any jurisdiction.

Shareholder requirements

• The investment dealer will need at least one shareholder.
• Corporate shareholding is allowed and 100% foreign ownership is permitted.

Compliance Officer

The License must establish and maintain an appropriate and effective compliance function within the firm which operates independently of all operational and business line functions and senior or supervisory management.

Fund Administrator

The Applicant must employ a Luxembourg licensed fund administrator or an approved Foreign Administrator

Fund Manager

The Applicant must employ a licensed fund manager with no local requirement

Custodian

• The applicant must have a custodian approved by the IFSC.
• A Custodian licensed and approved locally the minister.
• A Custodian licensed and approved under the laws of a recognized country or jurisdiction.
• A person with a written permission from the Minister to carry on Business as a Custodian.

Auditor

The Licensee, within one month after becoming licensed, shall appoint an external auditor who is acceptable to the Commission

Insurance

The applicant must have indemnity insurance coverage or a fidelity bond acceptable to the regulator

Minimum Capital Requirements

USD 100,000

Application Fee

USD 350

License Fee

USD 350

Ongoing Obligations

• Licenses are to be renewed annually after the date of registration. On application for renewal of a Licence, the International Finance Service Commission , if satisfied that the applicant is a licensee of good standing, may grant the renewal on payment by the applicant of the annual renewal Licence fee
• Filing of Audited Accounts: The licensee shall for the financial year beginning on the day on which it commences to carry on securities business; and for each subsequent year submit to the Commission, within ninety days after the end of the financial year, audited financial statements prepared in accordance with international accounting standards, and which contain such additional information as may be prescribed.
• The Licensee must maintain appropriate policies of insurance for the purpose of indemnifying such licensee against any liability that may be incurred as a result of any act or omission by the licensee or any of its officers or employees in the conduct of the licensee’s securities business.