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Association Luxembourgeoise des Fonds d'Investissement

ALFI

ALFI represents Luxembourg's investment fund industry and works to shape EU financial regulation.

Lobbying Activity

Meeting with Marc Angel (Member of the European Parliament) and FEDIL - The Voice of Luxembourg's Industry and

3 Dec 2025 · Competitiveness

Meeting with Gilles Boyer (Member of the European Parliament) and Association des Banques et Banquiers, Luxembourg and Association des compagnies d’assurances et de réassurances du Grand-Duché de Luxembourg

14 Nov 2025 · SIU, Pension package, Savings and Investment Accounts, Market integration package

Meeting with Cristina Dias (Cabinet of Commissioner Maria Luís Albuquerque), Philippe Thill (Cabinet of Commissioner Maria Luís Albuquerque) and

23 Oct 2025 · Discussion on simplification and the Savings and Investments Union

Luxembourg fund industry urges simplification of EU digital rules

14 Oct 2025
Topic — EU consultation on simplifying digital regulations and reducing administrative burdens for businesses.
Message — Exclude financial firms from the Cyber Resilience Act to prevent redundant regulatory requirements. Establish standard contractual clauses to rebalance power between fund managers and large tech providers. Simplify reporting by focusing on critical functions and exempting smaller investment firms.123
Why — This would lower compliance costs and improve terms when negotiating with tech providers.45
Impact — Major tech service providers would lose leverage during contract negotiations with financial institutions.6
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Meeting with Andrea Beltramello (Head of Unit Financial Stability, Financial Services and Capital Markets Union)

29 Sept 2025 · Pensions and Savings and Investments Union (SIU)

Meeting with Helene Bussieres (Head of Unit Financial Stability, Financial Services and Capital Markets Union)

24 Sept 2025 · State-of-play on various SIU initiatives and SFDR

Meeting with Alexandra Jour-Schroeder (Deputy Director-General Financial Stability, Financial Services and Capital Markets Union) and Association des Banques et Banquiers, Luxembourg and Association des compagnies d’assurances et de réassurances du Grand-Duché de Luxembourg

19 Sept 2025 · Financial sector’s priorities

Meeting with Maria Luís Albuquerque (Commissioner) and

18 Jun 2025 · Working lunch with financial associations on the Savings and Investments Union

Meeting with Tatyana Panova (Head of Unit Financial Stability, Financial Services and Capital Markets Union) and BlackRock and

2 Jun 2025 · Exchange with asset managers on the integration of EU capital market

ALFI urges targeted amendments to EU sustainable finance rules

30 May 2025
Topic — The European Commission is reviewing rules to simplify sustainable finance disclosures and prevent greenwashing.
Message — ALFI recommends keeping the current regime with targeted improvements to ensure market flexibility. They emphasize that any future product categorization system must be strictly voluntary.12
Why — This approach protects previous technical investments and limits the cost of new regulations.34
Impact — Regulators and transparency advocates lose the benefit of a mandatory, standardized comparison tool.56
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Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union) and Association des Banques et Banquiers, Luxembourg and Association des compagnies d’assurances et de réassurances du Grand-Duché de Luxembourg

22 May 2025 · Exchange of views on topics related to Savings and Investment Union, Internal Market and simplification.

Response to Savings and Investments Union

7 Mar 2025

Various options and possible means are currently discussed. ALFI strongly believes that many of these can contribute to the above-mentioned goal. The most effective means and that will mobilise by far the most significant investments is promoting pilar 2 occupational pensions via autoenrollment and tax advantages. These pensions are very much underdeveloped in Europe compared for example to the US and have by far the most potential. Indeed, compared to personal savings products, autoenrollment would necessitate no extra steps or efforts on the side of the employee / investor. A. Strengthening European Pension Systems. Given the demographic challenges facing Europes pension systems, we recommend: 1. Introducing first pillar pension tracking tool across the EU, with future expansion to second and third pillar savings. Such tracking tool should be based on clear and transparent calculation rules (defined at EU level) incorporating the evolution of demography and should be a realistic picture of what citizens can reasonably expect at the time of their retirement. 2. Creating a best practices framework for second and third pillar pensions, focusing on: Transparency and efficiency. Broad eligibility of schemes (insurance, banks, investment funds). Simplified employer/employee participation. Life-cycling strategies to optimize returns. 3. Promoting auto-enrollment and portability, ensuring cross-border pension mobility and consistent tax treatment across jurisdictions. This is CRUCIAL as second pillar pensions are the most potent way to channel retail bank deposits into the economy. 4. Enhancing the IORP and PEPP frameworks, eliminating regulatory hurdles. 5. Allowing occupational and personal pension schemes to be combined in a single, scalable pension product. B. Investment Savings Accounts (ISAs) Rather than introducing new financial products, we support leveraging existing EU investment frameworks through ISAs, which have proven successful in Sweden, the UK, and Japan. To maximize their impact, ISAs should: Cover a broad range of assets (equities, bonds, UCITS, ELTIFs, ETFs). Be accessible via multiple channels (banks, insurers, investment firms). Be available to minors to encourage early financial literacy (e.g. Junior ISA in the UK). Operate with simple and uniform tax treatment (e.g., tax-deductible contributions with tax-free growth after a minimum holding period). Avoid excessive restrictions, such as fee caps or mandatory EU investment allocations. We do not think that a label will be a good alternative to ISAs. Labels need to be granted by an agency or an authority requiring extra steps, time, administrative burden and costs. ISAs are quickly implementable using existing products that can be kept in these investment accounts. They also have a good track record in countries where they have been introduced. C. Supervisory convergence rather than centralised supervision We support regulatory convergence whilst recognising the benefits of specialisation/expertise of certain NCAs. Maintaining a decentralised supervision model for asset management, ensuring agility and adaptability for national authorities. All significant barriers to the distribution of investment funds through the Internal market are based on national legislation. A centralized supervisor will not solve any of these and add complexity and costs to supervision. However, such barriers should be monitored, published and addressed through targeted actions by the EU Commission. D. Conclusion The success of the SIU will depend on increasing retail investment in particular through occupational pension systems with autoenrollment and tax advantages as well as to a lesser degree ISAs combined with tax advantages. ALFI will in the coming days publish a more substantial paper elaborating on the above.
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Meeting with Pawel Wisniewski (Cabinet of Commissioner Christophe Hansen) and Association des Banques et Banquiers, Luxembourg and Association des compagnies d’assurances et de réassurances du Grand-Duché de Luxembourg

25 Feb 2025 · Role of the financial sector in financing agriculture and rural areas

Meeting with Stéphanie Yon-Courtin (Member of the European Parliament, Rapporteur)

7 Feb 2025 · Stratégie d'investissement de détail

Meeting with Maive Rute (Deputy Director-General Internal Market, Industry, Entrepreneurship and SMEs) and FEDIL - The Voice of Luxembourg's Industry and

6 Feb 2025 · Stakeholders’ roundtable in Luxembourg – Single Market Strategy Consultation

Meeting with Marc Angel (Member of the European Parliament) and FEDIL - The Voice of Luxembourg's Industry and

18 Dec 2024 · ECON and IMCO-related issues

Meeting with Stéphanie Yon-Courtin (Member of the European Parliament, Rapporteur) and Association Française de la Gestion financière

12 Dec 2024 · Retail Investment Strategy

Luxembourg fund industry urges EU to narrow financial data scope

27 Oct 2023
Topic — A proposal to establish a framework for sharing customer data across various financial sectors.
Message — ALFI recommends excluding legal persons from the scope to avoid high costs and management complexities. They also request that data sharing be limited to raw data, keeping internal assessments confidential. Finally, they call for a compensation model that covers infrastructure investments and potential liabilities.123
Why — This would reduce administrative burdens and protect the industry's secret internal scoring systems.4
Impact — Smaller companies might struggle if the new rules favor larger firms with more resources.5
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ALFI Urges Clearer Tax Rules for Investment Funds

18 Sept 2023
Topic — This consultation proposes a common EU system for withholding tax relief.
Message — ALFI requests a common EU approach recognizing investment funds as beneficial owners. They suggest extending reporting deadlines to reduce high volumes of reporting. The association seeks a 24-month implementation period following the directive's adoption.12
Why — Standardized rules would provide legal certainty and reduce costs for investment funds.34
Impact — Tax authorities lose oversight power if financial intermediaries' legal liabilities are significantly limited.5
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Luxembourg fund group wants ESG rating exemptions for managers

31 Aug 2023
Topic — New EU rules aimed at strengthening the reliability and transparency of sustainability-related ratings.
Message — ALFI seeks exemptions for internal assessments and proprietary investment research tools. They want the regulation to cover commercial data products and raw environmental data. They also suggest adding specific green investment percentages to public disclosure requirements.123
Why — These exemptions would allow funds to maintain proprietary analysis without extra disclosure burdens.45
Impact — Commercial data providers would face stricter rules and mandatory transparency for their scoring methods.6
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ALFI warns EU investment rules could stifle active fund competition

27 Jul 2023
Topic — The consultation addresses measures to improve retail investor outcomes and confidence in capital markets.
Message — ALFI opposes using cost benchmarks for value-for-money assessments, arguing they disadvantage actively managed funds. They also request increasing the PRIIPs page limit to four and delaying implementation timelines.123
Why — This protects the market share and profitability of higher-fee actively managed investment funds.4
Impact — Retail investors could face fewer choices as the rules discourage innovative products.5
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Meeting with Marc Angel (Member of the European Parliament) and Association des Banques et Banquiers, Luxembourg

8 Jun 2023 · ECON-related issues

Response to Strengthening existing rules and expanding exchange of information framework in the field of taxation (DAC8)

30 Mar 2023

The Association of the Luxembourg Fund Industry (ALFI) supports the need to improve the existing framework for exchange of information and administrative cooperation in the European Union in relation to crypto-assets. ALFI appreciates the opportunity to provide its views on the proposed Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC 8) and is pleased to share its comments herewith.
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ALFI warns against forced relocation of financial clearing services

16 Mar 2023
Topic — The European Commission is reviewing rules to make EU-based clearing services more attractive.
Message — ALFI opposes mandatory active accounts at EU-based clearing houses, arguing they force relocation without analysis. They recommend introducing entry thresholds to exempt smaller asset managers from these costly requirements.12
Why — Exemptions would prevent fund managers from facing doubled infrastructure expenses and higher operational costs.3
Impact — EU-based clearing houses would lose guaranteed business from the forced relocation of financial trades.4
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Luxembourg fund industry urges optional application of DEBRA rules

29 Jul 2022
Topic — The initiative addresses the tax bias between debt and equity financing for companies.
Message — ALFI calls for these rules to be optional rather than mandatory for certain taxpayers. They also advocate for interest deduction exceptions that align with current tax avoidance directives.12
Why — This allows firms to avoid new compliance costs and maintain legal certainty.3
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Meeting with Marc Angel (Member of the European Parliament) and Association des Banques et Banquiers, Luxembourg

16 Jun 2022 · AIFMD, CRR, CRD

ALFI opposes inducement ban and seeks easier professional investor status

31 May 2022
Topic — EU initiative to increase retail investor confidence and participation in capital markets.
Message — ALFI opposes banning inducements and proposes lowering wealth thresholds for retail clients to opt-up to professional status. They also reject creating a semi-professional category.123
Why — These changes would reduce regulatory compliance costs and expand their potential professional client base.45
Impact — Retail investors lose significant legal protections when they are reclassified as professional clients.6
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Response to Central securities depositories – review of EU rules

26 May 2022

Firstly, we would like to share the following observations on the application of the cash penalty regime a. From the monitoring that has been performed since the application of the cash penalty regime on 1 February, it appears - if cash penalties are to be passed on - that investment funds should receive a net credit balance, which is logical as they are net buyers of securities. Nevertheless, most of the time this credit is not material. b. Besides, it appears that the cost of the corresponding operating process are often disproportionally high compared to the credit amount to be received. So far, we observed the following: i. Only Tier 1 asset managers have sufficient market exposure to receive material penalties and benefit from sufficient means to absorb the treatment of penalties in terms of human, contractual and IT costs. ii. Meanwhile, for Tier 2 asset managers (middle and small sized), the cost of the operating process outweighs the credit amount to be received. For this reason, it is frequent that such players decide in order to achieve a cost effective implementation to agree that the CSD participant (i.e. the custodian) shall bear all penalties (credits and debits). c. Therefore, we might suggest the following remediations: i. Justify custodian price for the penalties service (filtering, pass-on, settlement reporting,…), - for the case that the parties agree to pass on penalties - with regard to the cost of doing business. It might be useful to define categories of service prices in light of CSDR purposes (ie. free of charge, cost of doing business, special price responding to a bespoke demand). ii. If the observation of the penalties regime implementation, -based on confirmed figures, in conjunction with point e. below- finally shows that this regime does not have a sufficiently positive impact on the buy side sector, an increase of the penalty rates would represent one of the possible options to contemplate, with an appropriate calibration. iii. In the same vein, we are of the view that the Refit initiative should be the opportunity to clarify which of the following payment flows should prevail in light of the CSDR purposes. Is it the payment by the failing party , or the reception by the non-failing party ? d. It would be helpful that ESMA shares with the industry a summary of the data received through the penalties reporting (type of failing counterparties, type of securities at issue, number of trades concerned). This would provide a qualitative complement to the figures circulated by the Commission in its impact assessment . e. The timing of the present consultation is not ideal, as the production process is not yet stabilised. February was a short month (not representative) and its corresponding booking is unfortunately still ongoing at the time of the present drafting. Secondly, we would like to provide feedback regarding the Commission's proposals. 1. Justification of Buy-in measures Over the course of the last couple of years, while preparing the implementation of the SDR, a significant number of industry representatives have observed the following elements: Since the entry into force of CSDR, the number of settlement fails has greatly diminished, despite the dramatic increase in trading through EU CSDs. The regulation has had a deterrence effect. Moreover, CSDR was designed based on a rationale of the years 2000s with much more market participants. After the financial crisis, the industry has consolidated. In the interim report issued by the Commission in July 2021 , and in the impact assessment annexed to the consultation, we noted an absence of official statistics to justify mandatory buy-in measures on top of cash penalties. 2. Triggering of the Buy-in In light of the above elements, we support a ‘differentiated approach’ which calls for timely implementation of cash penalties, and only introducing (voluntary) buy-ins if settlement efficiency has not improved over time.
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Luxembourg fund association seeks exemption from corporate governance rules

23 May 2022
Topic — This consultation proposes new sustainability and due diligence requirements for corporate governance.
Message — ALFI demands a "clear exemption of funds" from this new legislative scope. They argue managers already follow "extensive due diligence rules" for ESG factors. Their oversight role "cannot substitute the investee companies’ primary due diligence duty".123
Why — This avoids "capturing AMs and funds again" under overlapping and burdensome regulations.4
Impact — Stakeholder groups lose influence because "directors’ duty of care remains towards SHs".5
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Meeting with Billy Kelleher (Member of the European Parliament, Shadow rapporteur) and Irish Funds Industry Association CLG

11 May 2022 · AIFMD

Meeting with Florian Denis (Cabinet of Commissioner Mairead Mcguinness), Nicolo Brignoli (Cabinet of Commissioner Mairead Mcguinness)

26 Apr 2022 · AIFMD ELTIF

Response to Fighting the use of shell entities and arrangements for tax purposes

6 Apr 2022

The Association of the Luxembourg Fund Industry (ALFI) welcomes the opportunity to provide feedback on the proposed Council Directive laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU. Please find our comments in the attached file.
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Response to Alternative Investment Fund Managers – review of EU rules

9 Feb 2022

We thank the European Commission for the opportunity to provide feedback on the legislative proposal concerning the review of the Alternative Investment Fund Managers Directive (AIFMD). ALFI welcomes the targeted nature of the review. By this, the Commission recognises the general well-functioning of the current framework which has largely met its objectives and already proved to be efficient in difficult market situations like recently the Covid-19 crisis. The proposed amendments focus on delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by AIFs. The future of the initially envisaged third-country regime (Chapter VII) remains unclear. In our view, some insight or clarification on whether and, if yes, when a third-country passport might still become available would be useful to meet certain expectations from market practitioners domiciled in the EU and non-EU countries. Content wise, we note that a number of details will be determined at level 2/3, based on regulatory technical standards to be submitted by ESMA. The industry should be able to provide comments on draft RTS. The same should apply to important positions taken by ESMA through Q&As or supervisory statements (e.g. ESMA opinions). Furthermore, it is important to ensure that the hierarchy of acts as defined by the Lamfalussy process is always complied with. Technical clarifications are often adopted only months or even more than a year after the adoption of changes at level 1. We recommend that implementation dates are sequenced so as to ensure sufficient implementation time e.g. 12 months after publication of the final level 2 text. ALFI welcomes the Commission’s view that delegation “allows for the efficient management of investment portfolios and for sourcing the necessary expertise in a particular geographic market or asset class”. We notice the increase of transparency through the introduction of a new annual notification mechanism from NCAs to ESMA focusing on certain delegations to entities located in third countries. In our view, this should not lead to a situation where ESMA would systematically review delegation arrangements with delegates domiciled in third countries, in a way similar to a provision (notably Article 31a) that was proposed and rejected in the context of the 2017 ESA review. Recent figures and ongoing trends show that loan originating funds are an important source of financing for entities that have no access to bank lending. In ALFI’s view, the proposed new requirements imposed on loan originating AIFs should be limited and coherent from a business perspective. ALFI welcomes the attempt to facilitate and harmonise the access to LMTs for AIFMs and UCITS. However, their treatment should be aligned to the nature of the respective tool. In our view, the proposed introduction of information for fees and affiliated entities on a quarterly basis is not consistent with other periodical disclosures for investors and therefore should be aligned with the latter. A series of changes also impact the UCITS Directive. While considering a transfer of certain AIFMD rules to the UCITS Directive, it is key to bear in mind that the two directives are different in nature and scope: the UCITS Directive is a retail clients product directive whereas the AIFMD is a manager directive for products to professional clients. In terms of supervisory reporting, a streamlining of rules is welcomed if it is focussed on removing duplicative requirements and unjustified inconsistencies. But generally, we are of the view that first the AIFMD review on Annex IV reporting should be finalised and settled before changes to the UCITS regime are considered. ALFI will follow the various steps of the legislative process and stands ready for further feedback if required.
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Meeting with Ramona Strugariu (Member of the European Parliament, Shadow rapporteur) and Association des Banques et Banquiers, Luxembourg

14 Jan 2022 · Anti-money laundering package

Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union) and Association des Banques et Banquiers, Luxembourg

11 Jan 2022 · Banking Package, Mifid

Meeting with Mairead McGuinness (Commissioner) and

13 Dec 2021 · Overview of recent and upcoming regulatory initiatives in financial services

Response to EU Anti-money laundering supervisor

29 Nov 2021

ALFI supports the European Commission’s efforts to fight money-laundering and financing of terrorism and is in favour of harmonising further certain professional obligations of European financial industry stakeholders. This is to the benefit of the Luxembourg fund industry, which is largely cross-border. We would however like to underline that the legislative proposals published on the 20th of July are very much banking oriented and do not necessarily take into account the specificities of the investment fund industry. In particular, the following provisions could have an adverse impact on the efficiency of the anti-money laundering measures in our industry: - Compliance functions (Compliance Manager/Compliance Officer) - Scope of the “AMLA” Regulation and assessment methodology used for selecting Obliged Entities falling under direct supervision of the new agency - Provisions in regard of beneficial ownership Other envisaged rules could also be of concern, more specifically, as regards the definition of Politically Exposed Persons and of Senior Management, as well as nominees’ obligations. Therefore, we are of the view that the formulation of a certain number of draft provisions should either be further adapted or be clarified at appropriate level. Please see file attached for further details.
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Response to Quick fix to the PRIIPs Regulation

26 Aug 2021

We are thankful for the opportunity to provide feedback on the proposal for a regulation aiming at extending the transitional arrangement under PRIIPs for management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS. An extension of the exemption for UCITS management companies etc. is needed, because revised regulatory technical standards (RTS) at level 2 under PRIIPs are not yet available. However, ALFI is of the view that the end of the transitional period mentioned in Article 32 of the PRIIPs Regulation should not only be postponed by 6 months, but by 12 months (from the time when the RTS will be published in the Official Journal of the EU). The Commission justified its approach to grant only a 6-month delay with the argument that the final RTS would be adopted at the end of June 2021 and that no further changes should be expected after adoption, further to discussions with the European Parliament and Council. If this had been the case, the industry would actually have had a 12-month implementation period (until mid-2022). This means that the Commission also acknowledged that the industry needs a year from the availability of firm rules to implement upcoming changes. However, in June 2021, the Commission was only able to confirm a vague date for the adoption of RTS, namely ‘after summer’. In addition, no insight was given into the discussions with the Parliament and Council in terms of whether the industry could rely on the present proposal to be adopted by the Commission. As a result, the industry will receive confirmation on final rules only at the end of 2021, which will reduce the implementation phase under the current proposal from the initially intended 12 months to only 6 months, cutting it into half. From a practical perspective, the implementation timeline will even be much shorter. Insurers need to prepare their PRIIPs KIDs based on information from UCITS manufacturers. As a result, for a June 2022 implementation the EPT with PRIIP information under the new RTS would be expected by insurers by March/April 2022, i.e. the preparation period for a significant portion of data would be further reduced to three to four months. Considering the significant changes within the revised RTS, the technical implementation represents almost an entirely new implementation as opposed to a mere limited adaptation of existing systems. Such a short period would not leave sufficient time for the fund industry to adapt systems (data gathering, revision of or new IT programmes and templates), test and implement changes (involvement of different departments), provide translations (for which translated RTS are needed) and train staff. Moreover, discussions with insurers have to take place and the European PRIIPs Template must be revised accordingly. Distributors must be able to understand and implement the technical changes (again an important data gathering exercise) and proper communication with investors must be ensured. Given the abovementioned uncertainty concerning further changes to the draft RTS, and bearing in mind that discussions around PRIIPs have been particularly difficult in the past, the fund industry is reluctant to implement any changes before the publication of final rules in the Official Journal (after a longer period of translation). It would create unnecessary additional costs and efforts if in the end further changes were needed. Last but not least, it is worth noting that the amount of PRIIPs KIDs that will have to be produced (instead of UCITS KIID) will be considerable (estimates refer to several 100’000s of new PRIIPs KIDs). We understand from our members that only few managers have opted so far for the production of PRIIPs KIDs. They rather produced UCITS KIID-like documents in line with national law. ALFI will continue to monitor the legislative process and provide input where needed and requested.
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Response to Quick Fix to the UCITS Directive

26 Aug 2021

We are thankful for the opportunity to provide feedback on the proposal for a directive of the European Parliament and of the Council amending Directive 2009/65/EC as regards the use of key information documents by management companies of undertakings for collective investment in transferable securities (UCITS). Action needs to be taken to avoid that UCITS management companies are required to produce for the same product both a UCITS KIID and a PRIIPs KID. Such a situation would not only cause double efforts and costs, but also confusion for retail investors, because the disclosure requirements of both are not identical (as an example, investors would see different cost figures, because the cost figure under PRIIPs includes transaction costs, which is not the case for UCITS KIIDs). Moreover, an expiry of the UCITS KIID for retail investors must be consistent with the availability of revised regulatory technical standards (RTS) at level 2 under PRIIPs. From the outset, the fund and asset management industry held the view that the UCITS KIID should only be replaced by the PRIIPs KID if the latter was at least as good and reliable as the former. Discussions on revised PRIIPs level 2 rules took very long and were even suspended for a couple of months. Moreover, the review of level 2 rules was limited to only certain aspects (such as performance aspects), and the European Commission was not open to simultaneously perform a deep review of concurrent level 1 rules. Views between the European Commission and the fund and asset management industry are split over the time needed to properly implement upcoming changes. Please refer to our detailed feedback on the European Commission proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 1286/2014 as regards the extension of the transitional arrangement for management companies, investment companies and persons advising on, or selling, units of undertakings for collective investment in transferable securities (UCITS) and non-UCITS. In summary, ALFI is of the view that the end of the transitional period mentioned in Article 32 of the PRIIPs Regulation should not only be postponed by 6 months, but by 12 months (depending on the time when the RTS will be published in the Official Journal of the EU). Accordingly, the timeline for the replacement of the UCITS KIID for retail investors by the PRIIPs KID would have to be aligned, i.e. Article 2 of the proposed directive should refer to 31 December 2022. Moreover, we understand that the requirement to produce a UCITS KIID would be maintained for institutional investors. The fund industry regrets this approach, as professional investors do not require the same level of protection as retail investors; they get much more detailed information, and more frequently, tailored to their needs. Maintaining the UCITS KIID for institutional investors will cause unnecessary costs and efforts, which would be needed for other projects or initiatives. Bearing in mind the goals of an efficient Capital Markets Union in Europe, we invite the European legislators to consider abolishing the UCITS KIID for professional investors. Should professional investors even have the choice to receive a UCITS KIID or PRIIPs KID, a PRIIP KID may need to be produced for professional investors, which is contrary to the wording of the PRIIPs Regulation (recital 7 provides: “Investment funds dedicated to institutional investors are excluded from the scope since they are not for sale to retail investors.”) and which would create unnecessary costs. To date, no PRIIPs KIDs are produced for share classes reserved for professional investors and also professional investors do not receive a PRIIPs KID since the obligation is only triggered where the product is bought by a retail investor. ALFI will continue to monitor the legislative process and provide input where needed and requested.
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Response to Revision of Non-Financial Reporting Directive

13 Jul 2021

ALFI warmly welcomes the CSRD proposal that will ensure that much more ESG reliable data are available in the European market. This is key to enable FMPs to satisfy their reporting duties under SFDR. We are nevertheless concerned about the application timeline: per the current timetable, CSRD reports will be available at best in 2024 (in respect of the 2023 financial year), whereas SFDR reporting requirements will start in 2022, leaving a gap during which the necessary data will not be available, save for entities which are in the scope of NFRD and for a very limited set of data points. We are also deeply concerned about the potential application of CSRD to investment funds which would either fall under the definition of a large undertaking or which are admitted to trading on a regulated market. Our reading of the current proposal suggests that CSRD reporting requirements would apply to listed funds from 1 January 2026 (assuming that listed funds would not be in a position to avail of the exemption that applies to micro-undertakings). Depending on how the criterion of turnover is interpreted in the context of investment undertakings, investment funds might also qualify as large undertakings and as such, be subject to CSRD reporting requirements as from 2024 (in respect of 2023). We believe that these requirements are not adapted to investment funds which are not operating as enterprises. Investment funds are indeed financial products and as such are already subject to SFDR transparency requirements. SFDR framework is much more adapted to their financial product nature and the information provided under SFDR periodic template is much more relevant to investors. Requiring investment funds to report also under CSRD would be redundant, would provide irrelevant information and add unnecessary costs for investors. We therefore urge to clarify in the CSRD proposal that investment undertakings subject to SFDR periodic reporting are exempted from the CSRD requirements. This is consistent with the overarching objective of the CSRD which, as indicated in the EC’s Q&As, should “ensure alignment with other EU initiatives on sustainable finance, in particular the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation” and whose “aim is to reduce complexity and the potential for duplicative reporting requirements”.
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Response to Commission Delegated Regulation on taxonomy-alignment of undertakings reporting non-financial information

2 Jun 2021

We are concerned with the implementation timeline of the Taxonomy disclosure information. We understand from the draft DA that information in relation to the level of alignment with the taxonomy under art 8 would not be available before 23 (in relation to 22 reporting period). At the same time, under taxonomy art 5/6 (and draft RTS in JC 2021 22), financial products falling under art 5/6 would be required to disclose their taxonomy alignment commitment from Jan 22 as well as actual portfolio alignment in their 22 periodic reports. Pending adequate taxonomy alignment data reported by investee companies, FMPs will not be able to make relevant taxonomy alignment assumptions and estimation, supporting realistic and informed alignment commitment as of Jan 22 and disclose actual portfolio alignment in reports issued in 22. We therefore strongly advocate that timeline of disclosure be aligned to ensure that disclosure requirement under art 5/6 of the taxonomy be only implemented after investee companies are required to disclose their taxonomy alignment so that managers will dispose of relevant data before committing to a certain portion of their portfolios to be aligned with the taxonomy. Similarly, we are concerned about the provision of art 8.3 and 11.5. We understand that these would prevent financial undertakings from taking into consideration voluntarily reported taxonomy alignment by companies which are not (yet) required to report under NFRD. We believe that this is counterproductive and could defeat the entire purpose of the taxonomy, reorienting capital flows towards sustainable investments. It would also introduce a market bias, favouring larger listed companies to the detriment of smaller ones. Take 2 companies in the same sector: - Company A has 90% of its turnover taxonomy-aligned. It does not meet the current NFRD threshold (450 staff) but has voluntarily decided to produce a CSR report and to include taxonomy alignment KPI as sustainability is a key to its strategy. - Company B is less focussed on GHG emissions with 5% of its activities taxonomy-aligned but exceeds the NFRD reporting threshold of 500 staff. Under the current proposal, an investment in A is considered as 0% aligned with the taxonomy whereas an investment in B is considered as 5% aligned. An asset manager having set taxonomy alignment ambitions would have no choice but to invest in B in order to increase its alignment ratio. Just because of its size, B will have easier and cheaper access to financing than A although the activities of A are more sustainable. Moreover, A would be disincentivized to issue taxonomy alignment reporting as, due to its size, such report would not bring easier access to financing. As a result, sustainability information as well as taxonomy alignment reporting could be really limited. This will further deter managers from setting up taxonomy aligned products, given the resulting scarcity of taxonomy alignment data and could hamper the success of the taxonomy as a universally recognized classification framework for sustainable activities. We therefore strongly recommend to remove this exclusion for companies below NFRD threshold and authorize the consideration of any aligned activities in the numerator, whatever the size of the investee company. As per JC 2021 22 investments of a financial product investments in real estate assets which qualify as environmentally sustainable activities may be taken into account when calculating the taxonomy alignment. However none of the categories of investee companies set out in Annex III 1.1. (a) - (e) mention real estate products as being eligible when calculating the KPI. We further fail to understand how investments in real assets qualifying as sustainable economic activities, might be captured. ALFI would welcome clarification on the methodology to be used as per Annex IV in the calculation of the value of derivatives (commitment approach, gross vs. net exposure) to ensure consistency.
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Meeting with Mairead McGuinness (Commissioner) and

22 Apr 2021 · Basel III, capital markets regulation, AML. AIFMD

Meeting with Nicolas Schmit (Commissioner) and

12 Mar 2021 · Meeting on the funds and banking sector in Luxembourg, teleworking and the Right to Disconnect (R2D).

Response to Financial market regulation - EU recognition of US Prudential Regulators’ rules on OTC derivatives

16 Feb 2021

We thank the European Commission for the opportunity to provide feed-back regarding this draft implementing decision (draft hereafter). ALFI has been active in the field of collateral exchange for OTC Derivatives contracts over the course of the last three years. In particular, ALFI has issued industry best practices guidelines on the implementation of EMIR Refit and UMR. ALFI has also advocated for a proportionate calibration of EU rules and their alignment on US rules, for efficiency and level playing field reasons. Our understanding of the scope of the equivalence is the following. According to §7, 8 of the draft and as set in Article 1, the project of equivalence concerns the obligations covered by Article 11(3) of EMIR, ie. the existence of risk-management procedures for counterparties eligible to the exchange of collateral with respect to OTC derivative contracts. Moreover, according to §9, 10, 11 of the draft, the project of equivalence is aimed at including the implementation of the Uncleared Margin Rules (UMR) Global framework, covering the exchange of initial and variation margin. General comment An initiative of mutual recognition in the field of collateral exchange - where one of the counterparties is established in the USA- represents obvious advantages to facilitate the treatments of transactions and the associated risk mitigation. Reservations Nevertheless, we would like to share the following reservations regarding provisions of EU regulation representing an unlevelled playing field with the US regulation at issue. o Re. Article 11(15) of Regulation 648/2012 (EMIR) amended by Regulation 2019/834 (EMIR Refit) According to Article 11(15)(a) EMIR, ESAs are obliged to develop RTS specifying the arrangements referred to in Article 11(3). According to Article 11(15)(aa) EMIR Refit, the ESAs should have submitted draft RTS on the supervisory procedures to ensure initial and ongoing validation of those risk-management procedures, by 18 June 2020. Unfortunately we have not observed such RTS from the ESAs, nor a related communication, in particular in their latest reports (2020 09 and 2020 20). o Re. Articles 14 and 18 CDR 2016/2251 respectively relating to internal back-testing requirements, and internal governance for IM models In the US, these three prudential-style model-related requirements generally apply only to registered swap dealers, while in the EU they apply to any counterparty. These reservations have already been conveyed in May 2019 to the ESAs, through a joint ALFI/ISDA letter (attached). Conclusion 1. The three above mentioned points create an unlevelled playing field between the EU and the US. They also imply the implementation of burdensome and unjustified procedures for the investment fund industry (eligible only to the last and less risky phases of UMR), and in particular for the small sized funds. The corresponding provisions increase the cost of collateral in the EU and thus preclude an effective equivalence with the US regime. 2. Because the RTS corresponding to the Article 11(15)(aa) of EMIR Refit have finally not been issued, the financial industry does not benefit from a fair and complete information to assess the actual extent of the equivalence project. The equivalence is dependent on the actual endorsement of the different RTS. Consequently, in our view, the equivalence project should be postponed to at least 1 month after the official publication of the last RTS. 3. The extent of the provisions of Article 11(3) appears too narrow to reach, on a standalone basis, the presented objective of an equivalence of collateral exchange. We are of the view that article 1 of the draft should explicitly enlarge the scope of the equivalence to the provisions in relation to the definition of the assessment and practical conditions of collateral exchange, thus to the entire Article 11(15) EMIR, and with references to the corresponding provisions of CDRs 2016/2251 and ESAs RTS.
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Response to Alternative Investment Fund Managers – review of EU rules

7 Jan 2021

We thank the European Commission for the opportunity to provide feedback on the inception impact assessment concerning the review of the Alternative Investment Fund Managers Directive (AIFMD). According to this impact assessment, the major focus of the review should be on the directive’s effectiveness and the aim of completing a single market for AIFs in the context of the Capital Markets Union (CMU). While it is certainly necessary to take into account more recent political, economic and social developments, ALFI thinks that one should not deviate from the idea of a targeted review on the application and scope of the AIFMD as provided in Article 69(1) AIFMD. The latter refers to an analysis of the experience acquired in applying this directive, its impact on investors, AIFs and AIFMs in the EU and third countries, and the degree to which the objectives of the AIFMD have been achieved. In our view, this makes it clear that the general concept of a manager directive should not be put into question, e.g. by introducing product specific rules on loan originating funds. Overall, we concur with the Commission’s conclusion that the impact of the AIFMD on AIFs and AIFMs has been largely positive, with the AIFMD playing an important role in creating an internal market for AIFs and reinforcing the regulatory and supervisory framework for AIFMs in the EU. The industry got used to the new manager related requirements, which also provided room for new product developments at national level. The AIFMD is already known in many parts of the world, even though we would say that it is not yet at the same level as the UCITS brand. To ensure the development of a brand and the EU’s competitiveness, there is primarily a need for stability. Improvements should at this stage focus on areas where clear issues have been identified. Given the conclusions drawn from the consultancy survey in 2019 and the Commission’s report in 2020, ALFI is of the view that changes should mainly be of a technical nature, and they could be achieved at level 2 and/or level 3 of the Lamfalussy process. From this perspective, ALFI thinks that the UCITS framework and AIFMD should not be merged, and harmonised rules could only be appropriate in very few selected areas. There are a number of reasons why both directives were calibrated differently (product regulation versus manager regulation, different investor types, different asset classes, different risk profiles and different processes and requirements for risk management, valuation and portfolio management). A single rulebook could have been envisaged when fund rules were introduced for the first time. Now we have two different successful brands, which should not be destabilised by creating meaningless general terms and sub-categories. The EU must be aware that the choice of investors worldwide for (European) products and the recognition of UCITS and EU AIFs as attractive investment vehicles are subject to the existence of a competitive regulatory framework combining flexibility and investor protection. This has been achieved by both UCITS and AIFMD and should not unduly be put at risk. ALFI will respond to almost all questions raised by the European Commission in its consultation on the AIFMD review and stands ready for further feedback if required.
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Response to Strengthening the consideration of sustainability risks and factors for financial products (Regulation (EU) 2017/565)

6 Jul 2020

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community. Created in 1988, the Association today represents over 1,500 Luxembourg domiciled investment funds, asset management companies and a wide range of business that serve the sector. These include depositary banks, fund administrators, transfer agents, distributors, legal firms, consultants, tax advisory firms, auditors and accountants, specialised IT and communication companies. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg domiciled investment funds are distributed in more than 70 countries around the world. ALFI has been at the forefront of actively promoting sustainable finance opportunities for asset managers. ‘Responsible Investing’ is a major pillar of the Luxembourg investment fund industry and ALFI firmly believes that asset managers can play a key role in this area. ALFI believes that providing transparency and clarity to investors is key for the further development of this area. ALFI strongly supports the initiative of the Commission to promote sustainable finance and is pleased to provide you with specific comments on the draft delegated acts.
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Response to Integration of sustainability risks and factors related to alternative investment fund managers

6 Jul 2020

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community. Created in 1988, the Association today represents over 1,500 Luxembourg domiciled investment funds, asset management companies and a wide range of business that serve the sector. These include depositary banks, fund administrators, transfer agents, distributors, legal firms, consultants, tax advisory firms, auditors and accountants, specialised IT and communication companies. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg domiciled investment funds are distributed in more than 70 countries around the world. ALFI has been at the forefront of actively promoting sustainable finance opportunities for asset managers. ‘Responsible Investing’ is a major pillar of the Luxembourg investment fund industry and ALFI firmly believes that asset managers can play a key role in this area. ALFI believes that providing transparency and clarity to investors is key for the further development of this area. ALFI strongly supports the initiative of the Commission to promote sustainable finance and is pleased to provide you with specific comments on the draft delegated acts.
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Response to Integration of sustainability risks and factors for undertakings for collective investment in transferable securities

6 Jul 2020

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community. Created in 1988, the Association today represents over 1,500 Luxembourg domiciled investment funds, asset management companies and a wide range of business that serve the sector. These include depositary banks, fund administrators, transfer agents, distributors, legal firms, consultants, tax advisory firms, auditors and accountants, specialised IT and communication companies. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg domiciled investment funds are distributed in more than 70 countries around the world. ALFI has been at the forefront of actively promoting sustainable finance opportunities for asset managers. ‘Responsible Investing’ is a major pillar of the Luxembourg investment fund industry and ALFI firmly believes that asset managers can play a key role in this area. ALFI believes that providing transparency and clarity to investors is key for the further development of this area. ALFI strongly supports the initiative of the Commission to promote sustainable finance and is pleased to provide you with specific comments on the draft delegated acts.
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Meeting with Nicolas Schmit (Commissioner), Thierry Breton (Commissioner) and

6 Jul 2020 · Entrevue sur les investissements dans les compétences et la transition numérique pour accélérer la reprise, les stratégies numériques et industrielles, les PME.

Meeting with Valdis Dombrovskis (Vice-President) and

15 Nov 2018 · ESAs review package, Brexit, Sustainable Finance

Meeting with Paulina Dejmek Hack (Cabinet of President Jean-Claude Juncker)

25 Sept 2018 · Speech on Capital Markets Union at the ALFI Global Distribution Conference

Response to Institutional investors' and asset managers' duties regarding sustainability

21 Aug 2018

ALFI has been at the forefront of actively promoting sustainable finance opportunities for asset managers. ‘Responsible Investing’ is a major pillar of the Luxembourg investment fund industry and ALFI firmly believes that asset managers can play a key role in this area. Market growth has strengthened this conviction: the European Responsible Investing fund market has almost doubled since 2010, reaching 476 billion EUR of Assets under Management at the end of 2016 . Luxembourg is the leading domicile for European Responsible Investment Funds, accounting for 31% of funds and 35% of total Assets under Management. ALFI believes that providing transparency and clarity to investors is key for the further development of this area. This is why the association was a founding member of Luxflag, the Luxembourg Fund Labeling Agency in 2006. ALFI therefore actively supports the initiative of the Commission to promote sustainable finance but believes the Proposal requires certain adjustments and clarifications in order not become a missed opportunity. ALFI’s main concerns are regarding the scope and definitions. For instance, is the aim of the proposed regulation to establish a framework for a niche of investment activities, i.e. only those that are marketed as sustainable investments or for those that are marketed as impact investments, or whether the aim is to establish a general framework with the purpose of encouraging sustainable investments overall, whether marketed as such or not. In particular, we are concerned by the fact that the definition seems to focus on a narrowed segment of sustainability finance (thematic/impact investing) – we indeed struggle to reconcile the proposed framework with approaches using screening, exclusion or ESG integration. These approaches are really successful and popular among investors (in particular retail investors). If these were not to be considered as “sustainable investment” anymore, we fear that this move would defeat the Commission objective to promote ESG and sustainability consideration within the investment process. Please also refer to our comments on the article 2 of the Proposal for a regulation relating to sustainable investments and sustainable risks. Furthermore we believe the regulation should allow for various “shades of green” and include a process and target approach: - Regulation of the process: e.g. how are investments analysed and selected (exclusion, negative screening, best-in-class approach etc.) - Regulation of the target: e.g. thematic investments In addition, the market is moving quickly, technologies are evolving. What will be sustainable today may not be sustainable tomorrow. Therefore, the taxonomy should allow for periodic adaptation and modification. You will find comments related to specific sections of the Proposal in the attached PDF document. For ALFI’s detailed comments on the scope and definition please refer to the comments provided in relation to the EU Regulation on disclosures related to sustainable investment and sustainability risks. We re-iterate that we strongly support the EU initiative on sustainable finance, wishing it to succeed. We therefore remain at your disposal to further contribute to and support this important project.
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Response to Institutional investors' and asset managers' duties regarding sustainability

21 Aug 2018

ALFI has been at the forefront of actively promoting sustainable finance opportunities for asset managers. ‘Responsible Investing’ is a major pillar of the Luxembourg investment fund industry and ALFI firmly believes that asset managers can play a key role in this area. Market growth has strengthened this conviction: the European Responsible Investing fund market has almost doubled since 2010, reaching 476 billion EUR of Assets under Management at the end of 2016. Luxembourg is the leading domicile for European Responsible Investment Funds, accounting for 31% of funds and 35% of total Assets under Management. ALFI believes that providing transparency and clarity to investors is key for the further development of this area. This is why the association was a founding member of Luxflag, the Luxembourg Fund Labeling Agency in 2006. ALFI strongly supports the initiative of the Commission to promote sustainable finance but we nevertheless believe that the Proposal requires certain adjustments and clarifications not to be a missed opportunity. The scope and definitions in the proposal are ALFI’s main concerns. Indeed, while “sustainability risk” is at the core of the Proposal (used 18 times in 26 pages), it is not defined. It needs to be defined because all market participants cannot be expected to understand it – at least not in the same manner. We believe the terms “sustainability risks” should apply to risk management (where relevant), whereas the terms “sustainability factors” or “sustainability considerations” (which cover risks and/or opportunities) would be more typical in a portfolio management context. For consistency reasons, we recommend to use the same terminology throughout the document. The terminology used in art. 10 (e.g. “factors” and risk management) is clearer to us than the terminology used in articles 3 and 4. We therefore encourage to stick to such terminology throughout the document. You will find detailed comments related to specific sections of the Proposal in the attached PDF document. We re-iterate that we strongly support the EU initiative on sustainable finance, wishing it to succeed. We therefore remain at your disposal to further contribute to and support this important project.
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Response to Safekeeping duties of depositaries for UCITS funds

26 Jun 2018

The Luxembourg depositary banking sector, represented for the purposes of this feedback by ALFI and ABBL, welcomes the European Commission’s initiative to follow up on the ESMA opinion and is happy to provide feedback as per the attached document in regard of the different proposals made. We understand that, as stated in Part 1 of the Explanatory Memorandum, the European Commission aims, with this initiative, at harmonising insolvency laws at EU level in order to ensure protection of assets safe-kept by depositaries or custodians for their clients. Firstly, we consider that a depositary should be able to rely on the record-keeping of its delegate when delegating safe-keeping functions. There is no practical reason for the depositary to maintain a custody record that is already recorded and reconciled in the books of its delegate. This model, known in the industry as ‘’reliance model’’ has a proven track record in a number of jurisdictions. Moreover, we are not aware of any case of depositary failure in the European Union. As such, the reliance model coupled with the strong liability regime applicable to depositaries provide, in our view, enough protection for the assets safe-kept by depositaries or custodians for their clients. Secondly, the draft CDRs propose implementing one single standard of challenging operational procedures. This proposal leaves without consideration the practical organisation of the custody chain which not only differs from one jurisdiction to another, but also and most importantly depending on type of underlying asset. While some of these provisions presented in the draft CDRs were suggested and hinted at in the ESMA opinion, ESMA certainly being aware of these national and asset-based discrepancies, did not provide at the time a clear description of the full contemplated set-up. As such, we strongly suggest to retain the current risk-based approach proper to and conscious of each custody model. Thirdly, we deem that the scope of a depositary’s safe-keeping versus its record-keeping obligations should be reviewed. As such, it is crucial to maintain the main focus on the depositary’s responsibilities for the financial instruments that can be technically safe kept rather than extending the safe-keeping responsibilities to any type of asset, thereby including assets that cannot technically be safe-kept. For these assets, the solution of choice needs to be record-keeping taking into account that this is the only solution technically possible. We further believe that harmonised safe-keeping provisions that apply to assets that cannot technically be safe kept do not take into account the operational reality of the custody functions. To such extent this does not provide additional safeguards for the end-investor. In addition, if the draft CDRs were approved as such, these new requirements would become applicable in the first quarter of 2019. This very short timeline cannot be met in terms of implementation of the corresponding operational processes without regression and impacts on the current conduct of business. Moreover, the draft proposal for independent legal advice on insolvency in CDR 2013/231 does not take into account the nuances typically found in such advice, and shifts the obligation to the depositary. We strongly suggest sticking in this respect to the current UCITS approach. Conclusively, we consider that a restriction on the right of the depositary to delegate the maintenance of books and records is not beneficial to investors or the funds industry in general. It neither improves investor protection nor the asset safe-keeping controls. As such, it fails to match the Commission’s asset segregation objectives. On the contrary, the current proposals would introduce market inefficiencies, as well as increase investor costs, thereby resulting in significant market disruption, including, for example, depositaries refusing any investment with a counterparty that cannot be mirrored.
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Response to Safekeeping duties of depositaries for Alternative Investment Funds

26 Jun 2018

The Luxembourg depositary banking sector, represented for the purposes of this feedback by ALFI and ABBL, welcomes the European Commission’s initiative to follow up on the ESMA opinion and is happy to provide feedback as per the attached document in regard of the different proposals made. We understand that, as stated in Part 1 of the Explanatory Memorandum, the European Commission aims, with this initiative, at harmonising insolvency laws at EU level in order to ensure protection of assets safe-kept by depositaries or custodians for their clients. Firstly, we consider that a depositary should be able to rely on the record-keeping of its delegate when delegating safe-keeping functions. There is no practical reason for the depositary to maintain a custody record that is already recorded and reconciled in the books of its delegate. This model, known in the industry as ‘’reliance model’’ has a proven track record in a number of jurisdictions. Moreover, we are not aware of any case of depositary failure in the European Union. As such, the reliance model coupled with the strong liability regime applicable to depositaries provide, in our view, enough protection for the assets safe-kept by depositaries or custodians for their clients. Secondly, the draft CDRs propose implementing one single standard of challenging operational procedures. This proposal leaves without consideration the practical organisation of the custody chain which not only differs from one jurisdiction to another, but also and most importantly depending on type of underlying asset. While some of these provisions presented in the draft CDRs were suggested and hinted at in the ESMA opinion, ESMA certainly being aware of these national and asset-based discrepancies, did not provide at the time a clear description of the full contemplated set-up. As such, we strongly suggest to retain the current risk-based approach proper to and conscious of each custody model. Thirdly, we deem that the scope of a depositary’s safe-keeping versus its record-keeping obligations should be reviewed. As such, it is crucial to maintain the main focus on the depositary’s responsibilities for the financial instruments that can be technically safe kept rather than extending the safe-keeping responsibilities to any type of asset, thereby including assets that cannot technically be safe-kept. For these assets, the solution of choice needs to be record-keeping taking into account that this is the only solution technically possible. We further believe that harmonised safe-keeping provisions that apply to assets that cannot technically be safe kept do not take into account the operational reality of the custody functions. To such extent this does not provide additional safeguards for the end-investor. In addition, if the draft CDRs were approved as such, these new requirements would become applicable in the first quarter of 2019. This very short timeline cannot be met in terms of implementation of the corresponding operational processes without regression and impacts on the current conduct of business. Moreover, the draft proposal for independent legal advice on insolvency in CDR 2013/231 does not take into account the nuances typically found in such advice, and shifts the obligation to the depositary. We strongly suggest sticking in this respect to the current UCITS approach. Conclusively, we consider that a restriction on the right of the depositary to delegate the maintenance of books and records is not beneficial to investors or the funds industry in general. It neither improves investor protection nor the asset safe-keeping controls. As such, it fails to match the Commission’s asset segregation objectives. On the contrary, the current proposals would introduce market inefficiencies, as well as increase investor costs, thereby resulting in significant market disruption, including, for example, depositaries refusing any investment with a counterparty that cannot be mirrored.
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Response to Institutional investors' and asset managers' duties regarding sustainability

11 Dec 2017

Introduction The Association of the Luxembourg Fund Industry (ALFI) is the representative body of the Luxembourg investment fund community. Created in 1988, the Association today represents over 1,400 Luxembourg domiciled investment funds, asset management companies and a wide range of service providers such as depositary banks, fund administrators, transfer agents, distributors, legal firms, consultants, tax experts, auditors and accountants, specialist IT providers and communication companies. The Luxembourg Fund Industry is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg-domiciled investment structures are distributed in more than 70 countries around the world. Response to the inception impact assessment For the purpose of the present position paper, sustainability factors relate to environmental, social and governance issues as defined in the glossary of the public consultation. As per the European Fund and Asset Management Association’s (EFAMA) paper entitled ‘EU Strategy on Sustainable Finance – Views from a European asset management perspective’, ALFI believes that the ‘asset managers’ fiduciary business model dictates them to invest in capital markets and projects based on their clients’, individual and institutional asset owners, investment guidelines and profile, best long-term interest’. As such, asset managers have a fiduciary duty to integrate ESG considerations into the investment process, when these considerations are financially relevant, or in other words, material. In this sense, the concept of fiduciary duty in Europe is already aligned with sustainable and responsible investment and we therefore do not believe that any specific legislation in this regard is necessary. We believe asset managers shall have a duty to assess not only financial, but also extra financial criteria. This does however not mean that extra financial criteria necessarily need to flow into the investment decision process in a specific way. In some cases asset managers are not able to receive sufficient extra financial information from the investee allowing for a proper assessment. Taking into account sustainability factors may be made by way of exclusion (i.e. the asset manager checks if the investee complies with minimal extra financial criteria) rather than positive decision factors. Each asset manager shall be free to choose (i) to integrate extra financial criteria in the decision process, (ii) decide on the weighting of financial vs. extra financial criteria (ii) decide on the investment universe from which selecting investments and ultimately (iv) choose the methodology he wishes to use. Obliging managers to integrate extra financial criteria in their strategies would mean, at the minimum, that assets considered as ‘unsustainable’ are excluded from the investment universe. This would impose additional requirements on EU managers, resulting in a loss of attractiveness and competitiveness of EU funds (notably UCITS, which are distributed globally as state-of-the-art retail investment products). In any case, we believe that the consideration of sustainability factors should be captured in a ‘sustainability taxonomy’ to be worked out at EU level. Regarding transparency, we believe the best policy option would be a non-legislative action, such as guidelines, focusing on how to best enhance systemic good quality disclosure (as well as avoid misleading disclosure) by asset managers to their clients regarding their policy of integration of sustainability criteria in their investment processes. Especially with regards to reporting, experience (e.g. in microfinance) has shown that excessive investors’ requirements in terms of extra-financial reporting may dramatically increase costs for managers, investees and investors, resulting in excluding a number of potential investments and massively impacting the returns offered by the relevant funds.
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Response to Review of the European Supervisory Authorities

5 Dec 2017

ALFI is of the view that any change to the current regulatory framework of the European asset management industry should focus on the needs and best interests of investors in order to provide safe, high quality investment products and access to best-in-class professional investment management expertise and related services coupled with strict oversight. ALFI regrets that, in its Consultation on the Operations of the ESAs in spring 2017, the Commission did not include any questions dealing with “delegation, outsourcing and risk transfer” although this is now considered in the Proposal. ALFI questions the inclusion of what are effectively new rules on delegation in what is otherwise a result of a consultation on the general powers of the ESAs. ALFI is further of the view that the Proposal is in breach of the principle of subsidiarity which is enshrined in the European legal framework. NCAs are best placed to know and understand their respective market offerings. Their close oversight of market participants and products guarantees the best and most efficient level of investor and market protection. The Proposal includes the direct supervision of EuVECAs, EuSEFs and ELTIFs. ALFI does not embrace direct supervision by ESMA, in line with a majority of stakeholders responding to the Commission consultation. The Impact Assessment does not provide any conclusive evidence of the need for ESMA to become the lead regulator for these three investment products, responsible for both approval and supervision. The UCITS and AIFM Directives explicitly provide for the possibility for investment funds and management companies to delegate certain functions. They require cooperation agreements between EU Member States and third countries in case of delegation. The designation of delegates in and outside the EU today is subject to strict requirements in terms of initial and ongoing due diligence and monitoring of the activities of delegates. Financial institutions making use of delegation arrangements retain decision powers and must continuously monitor these delegation arrangements. The existing framework with the required protections and safeguards is already in place. There is therefore no need, nor is there any justification, to go beyond this. Delegation of portfolio management is a tried and tested practice which has existed since the first days of the UCITS legislation in the mid 1980’s, and which continues to offer investors access to a broad range of investment strategies. There is no evidence of a market failure due to improper delegation that has been identified in the Impact Assessment. In a globalised economy, delegation is a common practice in many industry sectors outside of finance that serve customers’ interests in obtaining best of breed services and products. The delegation model is a cornerstone of the global success of the European asset management industry today. ALFI is of the view that the proposed process around the review by ESMA of delegation arrangements to third countries introduces risks, new delays and uncertainty for investors. It creates a de facto split supervision between NCAs and ESMA and will add an additional layer of cost without any evidence of the benefit to investors at all. Given that the work performed by NCAs will not be reduced and might even increase, it is likely that fees charged by NCAs and indirect fees due to ESMA will increase. This means an additional cost for financial institutions and ultimately for investors in UCITS and AIFs. Finally, ALFI questions the proposal to transfer significant powers to an Executive Board as it would undermine the role of the NCAs. ALFI therefore calls for a significant recalibration of the Proposal. ESMA should make efficient use of the existing and extensive set of supervisory and coordination tools at its disposal to achieve regulatory and supervisory convergence rather than embarking on a far reaching review of the current regulatory and supervisor
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Meeting with Paulina Dejmek Hack (Cabinet of President Jean-Claude Juncker)

18 Jul 2017 · ESA Review

Meeting with Michel Barnier (Head of Task Force Task Force for Relations with the United Kingdom) and Association des Banques et Banquiers, Luxembourg and Union des Entreprises Luxembourgeoises

4 Apr 2017 · Meeting with the Task Force for the Preparation and Conduct of the Negotiations with the United Kingdom under Article 50 TEU

Meeting with Valdis Dombrovskis (Vice-President) and

1 Mar 2017 · Banking; Investment fund distribution; EDIS

Meeting with Lee Foulger (Cabinet of Vice-President Valdis Dombrovskis)

22 Jul 2015 · Capital Markets Union/Undertakings for the collective investment in transferable securities