Agefi Luxembourg - mars 2025

Mars 2025 25 AGEFI Luxembourg Fonds d’investissement ByDr.SebastiaanNiels HOOGHIEMSTRA * D irective (EU) 2024/927 (“AIFMD 2”) amends both Directive 2011/61/EU (the “AIFMD”) andDirective 2009/65/EC (the “UCITSD”). AIFMD 2 contains various amendments in relation to, amongst others, liquiditymanage- ment tools and loan-origina- ting funds that are often discussed. A topic that will be of importance in practice but that has not yet been dis- cussed is when distributors that are appointed for UCITS and/orAIFs are considered to be “acting on their own behalf”. AIFMD 2 both contains an amendment with a derogation provisionwith respect to the delegation of themarketing function for bothAIFMs andUCITSmanagement com- panies (“UCITSMancos”). This contribu- tion seeks to offer a preliminary analysis of what type of distributors are “acting on their own behalf”. Background Recital 10 and 39AIFMD2 consider that themarket- ingofAIFsandUCITSisnotalwaysconductedbythe UCITSMancoor theAIFMbut byone or several dis- tributors either onbehalf of theAIFM/UCITSManco or on their ownbehalf. AIFMD 2 recognizes that most fund distributors in Europe are subject to regulatory requirements pur- suant toDirective 2014/65/EU, as amended (“ MiFID 2 ”),orDirective2016/97/EU,asamended(the“ IDD ”). BothMiFID2andtheIDDdefinethescopeandextent of their responsibilities of firms complying with the requirementslaiddowninthesedirectives.Toaccom- modate the diversity of distribution arrangements with the aimtoavoidover-regulation, at theone, and overlapping regulations, on the other side,AIFMD 2 amends theAIFMDand theUCITSD in amanner in which a distinguishment is being made between arrangementswherebyadistributor acts onbehalf of an AIFM/UCITS Manco, which both the amended AIFMD and UCITSD consider to be a delegation arrangement, andarrangementswhereby adistribu- tor acts on its ownbehalf. For the latter case, both theAIFMD andUCITSDdo not consider the appointment of a distributor to be a delegationarrangement, provided that (i) thedistrib- utor acts on their own behalf and (ii) it markets the AIF/UCITSunderMiFIDIIortheIDD,irrespectiveof any distribution arrangement between the AIFM/UCITS Manco and the distributor. AIFMD 2, however, does not clarify these criteria and, hence, it is not always clearwhen this exemption applies. Marketing under UCITSD/ AIFMD&Delegation TheUCITSDconsidersmarketing to be a core regu- latory obligation of a UCITS Manco and one of the three functions of collective portfolio management under Annex II UCITSD. Therefore, appointing a distributortomarketthefundonbehalfoftheUCITS MancooftenconstitutesadelegationintheEUunder the UCITSD, provided that the fund or UCITS Manco (actingonbehalf of theUCITS) is the“client” of the distributor. UndertheAIFMD,“marketing”isdefinedasthe“ di- rect or indirect offering or placement of at the initiative of theAIFMor on the behalf of theAIFMof units or shares of anAIF it manages to or with investors domiciled or with a registered officed in the Union ”. By contrast to the UCITSD, “marketing” is under Annex I AIFMD considered to be an “optional” function that the AIFMmayperformin the course of collectiveman- agement of anAIF. Basedupon this, someMember States, suchasLuxembourg, are less likely toqualify “marketing” asdelegationunderArticle 20AIFMD, as only appointments of distributors byAIFMs that are authorized for the “optional” marketing func- tion themselves under the AIFMD are considered to be delegation of the AIFMD “marketing func- tion”. However, there are some other Member States that interpret this differently. AIFMD 2 does not seem to resolve this discrepancy in interpretation amongst Member States. Although AIFMD 2 amends Article 20 AIFMD andArticle 13 UCITSD, still the respective provisions refer to carry- ing out the task “on their behalf” meaning on behalf of either the AIFM and/or the UCITS Manco. As AIFMsmaynotbelicensedtoperformthemarketing function, Member States may argue that under AIFMD 2 still the appointment of a distributor, irre- spective of whether the distributor is “acting on their own behalf’ or not, does not qualify as dele- gation,ifanAIFM,aspartofitsAIFMlicense, is not authorized to perform the marketing function itself. MiFID2Distributors: “Acting on their ownbehalf” versus “Acting on behalf of theAIFM/UCITSManco” TheamendedArticle20AIFMDandAr- ticle13UCITSDdonotcontainany criteriahowtodeterminewhether a distributor is “acting on their ownbehalf”.Therefore,demysti- fying the fund distribution pro- cessmaybe helpful todetermine whether a distributor “acts on their own behalf”. Fund distribu- tors, inpractice, may either be appointed exclusively on behalf of an AIFM/UCITS Manco (e.g. global/principal distributors/placement agents), acting exclusively on behalf of end-investors (independent financial advisers) or they may act on behalf of both at the same time (e.g. nominees). The above corresponds with the two phases to con- sider in the context of MiFID 2 fund distribution (1) marketing (i.e. promoting) the fund to identify prospectiveinvestors(i.e.the“promotionphase”)and (2) facilitating investors to subscribe in the fund (i.e. the “subscription phase”). The first phase is com- monly used in both the marketing to retail and pro- fessional investors,whereas the secondphase isoften onlyseeninretailAIFsandUCITSandnotinthemar- keting onbehalf of professional-onlyAIFs. TheRelationship betweenAIFMs/UCITSMancos& Distributors In retail fund distribution distributors are appointed by theAIFM/UCITS Manco to promote the fund on itsbehalfandidentifyanyprospectiveinvestorswith- outguaranteeinganylevelofsubscriptionorcommit- ment by the investors. In this case, the “client” is the fundor theAIFM/UCITSManco that is actingonbe- half of the fund. The qualification under MiFID 2 of thisrelationshipbetweenAIFMs/UCITSMancosand distributors varies throughout Member States. Some MemberStatescategorizethisserviceasthereception and transmission of orders (“RTO”), whereas other Member States qualify it as “placing without a firm commitment basis”. Thedistributor acts for and in thebest interests of the fund and, under the amendments introduced by AIFMD 2, the appointment of global/principal dis- tributorsandplacementagentsforthispurposelikely fallswithin the ambit of the amendedUCITSDdele- gation rules. Hence, the funds for which such a dis- tributor is appointed are, therefore, subject to the product governance requirements, including identi- fyingtheappropriate targetmarket, ensuringa con- sistent distribution strategy etc. These are the considerations that theUCITSMancowouldpayat- tention towhenmonitoring itsdelegate’smarketing activities and is also consistentwith thenatureof the distributor’s appointment. WhenmarketingAIFstoprofessionalinvestors,often onlyplacementarrangementsareinplace.Essentially, distributors arematchmakers and thedistributorsdo notfacilitatesubscriptionbecausethatisnotthenature of the appointment or commercial arrangementwith theAIFM. It is also regularlycoupledwitha so-called “introductionservice”,whichislimitedtoestablishing the contact between potential investors and the fund/AIFMor distributor. Usually, nomarketing-re- lated services, e.g. sharing of fund documentation or constitutional documents) is performed by business introducers and, therefore, this servicedoes not qual- ifyaspre-marketingormarketingunder theAIFMD. Whether “placement arrangements” forAIFMs fall within the scopeof theAIFMDdelegation ruleswill, irrespective of whether a distributor is “acting on their own behalf”, as referenced to above, likely de- pendupon the implementationof theAIFMDof the Member State in which the AIFM is being estab- lished. The likely interpretation inLuxembourgwill be that, if the AIFM is licensed for the marketing function, such arrangements will fall under the AIFMDdelegation rules. The Relationship between Distributors and End- investors In the UCITS and retail AIF domain, distributors are actingeitherbothonbehalfofAIFMs/UCITSMancos and the end-investors or exclusively on behalf of the investor. Funddistributors in this domain that act on behalf of both facilitate the subscription in the fundof the (prospective) investors they identifiedduring the “placement” phase. The “subscriptionphase” entails the relationshipbetween the investor and thedistrib- utor.Theinvestorwouldbethe“client”ofthedistrib- utorandthisrelationshipwouldbeseparatefromthe distributor’s arrangement with the AIFM/UCITS Mancoand,withrespecttothispart,theAIFM/UCITS Mancowouldnot be seenas responsible for oversee- ing the distributor’s activities as a delegate. From the perspective of MiFID 2, this relationship may constitute a range of different investment ser- vices,includinginvestmentadvice,discretionaryport- foliomanagement,RTOortheexecutionoforderson behalf of clients, which depends on the nature of the relationshipbetweenthedistributorandtheunderly- ing investor. In any case, the distributor has to act in the best interests of the underlying investor, if it is a clientofthedistributor.Ifdistributorsareonlyhaving the end-investor as a client under MiFID II, it can be consideredthatthedistributoris“actingontheirown behalf”.Aclear example of the latter case is an (inde- pendent) investment advisor that recommends the purchaseofunitsorsharesinanAIF/UCITSbasedon investment advice renderedonan independent basis andwherenoremunerationispaidbytheAIF/UCITS or theAIFM/UCITSManco. Increasingly, there are alsodigital fundmarketplaces inthemarketthatofferalistofthumbnailcardsofvar- ious funds. Their services involve the accepting/com- pletingsubscriptionorredemptionorders,adigitized subscription solution and various support services, suchas services related toAML/CFTand tax compli- ance. Theyoftenhave the fundmanagers andnot the end-investorastheirclientandtheyareoftenalsopaid by fundmanagers and not the underlying investors. Although they are, typically, not actively involved in the “placement” of funds and focus, in practice, merely on “passively” sharing fund documentation (incl. subscription documents) and the subscription process still theviewcanbeheld that theydonot “act on their ownbehalf”, as they are actively engagedby AIFMs/UCITS Mancos and not by the end-investor. Although tobe assessedona case-by-casebasis, such distribution services are regularly qualifying as dele- gation arrangements under theAIFMD/UCITSD. Thisis,inmyview,tobeseendifferentlywithrespect todistributors,suchasbanksordistributionplatforms, withnomineestructuresthatinvestintheirownname but on behalf of its investor clients. These are “acting on their ownbehalf”, as they areprofessional distrib- utorswith their ownnetworkof sub-distributors and their own clients/customers (i.e. investor base) who aretheunderlyingbeneficialinvestorsoffunds.Albeit distributors with nominee structures have often sep- arate commercial relationships and agreementswith both AIFMs/UCITS Mancos and end-investors, the focusoftheircommercialactivitiesisthedevelopment of their ownclients/customers.Hence, thedistributor is performing both the promotional activity towards its own clients/customers and also facilitates the sub- scription process. AIFMs nor UCITS Mancos, typi- cally, have any contact with the end-investor and nominees only share informationwith themwith re- spect to their end-investors in limited circumstances (e.g. UBOs or high-riskAML/CFT cases). InsuranceDistributors under the IDD InsomeMember States, suchas France, it is common forinsuranceundertakingstoofferUCITS/AIFwithin life insurance products commonly known as insur- ance-based investment products (“ IBIPs ”). Not the investors of the IBIP, but the insurer is the investor in the fund and, therefore, the shares/units of the fund are soldaspart of another financial product, e.g. a life insurance, with a distinct product manufacturer underMiFID2.Theinsurerismerelyadistributorthat sells the retail investor a contract offering exposure to thereturnoftheunderlyingfundandisnottobeseen as acting onbehalf of theAIFM/UCITSManco. Outlook: The need for a common understanding at the EU level Although the amendments made to Article 20 AIFMDandArticle 13UCITSDare helpful, there is a need for a common understanding at the EU level when to apply the “derogation” with respect to the AIFMD /UCITSD delegation rules toAIFMs/UCITS Mancos that appoint distributors. In thefirst place, thederogatoryprovisionsunder the amendedrulesrefertomarketingAIFs/UCITS“under MiFID2”.Itisnotclearhowtointerpretthiscriterion. Forexample,itcouldimplythatthe“derogation”only appliestodistributorsthatarelicensedasbanksorin- vestmentfirmsandthatmarketAIFs/UCITSinaccor- dancewithMiFID2.Thesamewordingcouldalsobe broaderinterpretedasmeaningfirmsthatarepermit- ted to provide “MiFID 2 services”, including tied- agents,AIFMs/UCITSMancoswithaMiFID2top-up, as well as third-country firms that are providing MiFID2 services toEUfunds.With respect to the lat- ter, it would be helpful if it could be clarified how third-country distributors can fulfil the “MiFID2 cri- terion”. The most plausible interpretation in this re- spect would be that third-country firms may benefit fromthederogatoryprovision,providedthattheyare providing “MiFID2 services” in the EU. Even if they are qualifying under an exemption under theMiFID 2 licensing/registration requirements. Lastly,itwouldbehelpfultoclarifyhowthecarve-out applies to nominees. Although most market players in the Luxembourg fund industry see nominees as “acting on their own behalf”, it would be helpful to clarify this understanding on the EU level. (*)Dr.SebastiaanHooghiemstra isaseniorassociate inthe investment managementpracticeofLoyens&LoeffLuxembourgandSeniorFellow of the International Center for Financial Law & Governance at the Erasmus University Rotterdam. AIFMD 2/UCITSD 6 Distributors “acting on their own behalf” –What does it mean? DASHBOARD ȱ AGEFI ȱ Luxembourg ȱ 28 Ȭ Feb Ȭ 2025 ȱ 31 Ȭ Dec Ȭ 2024 ȱ DIFF ȱ % ȱ ȱ ȱȱ Dow ȱ 30 ȱ (DJI) ȱ 43.840,91 ȱ 42.544,22 ȱ 3,05% ȱ ȱ ȱ S&P ȱ 500 ȱ (GSPC) ȱ 5.954,50 ȱ 5.881,63 ȱ 1,24% ȱ ȱ ȱ Euro ȱ Stoxx ȱ 50 ȱ 5.463,54 ȱ 4.869,28 ȱ 12,20% ȱ ȱ ȱ DAX ȱ (GDAXI) ȱ 22.551,43 ȱ 19.909,14 ȱ 13,27% ȱ ȱ ȱ CAC ȱ 40 ȱ (FCHI) ȱ 8.111,63 ȱ 7.380,74 ȱ 9,90% ȱ ȱ ȱ FTSE ȱ 100 ȱ (FTSE) ȱ 8.800,72 ȱ 8.173,00 ȱ 7,68% ȱ ȱ ȱ LuxX ȱ index ȱ 1.496,28 ȱ 1.303,91 ȱ 14,75% ȱ ȱ ȱ Nikkei ȱ 225 ȱ (N225) ȱ 37.155,50 ȱ 39.894,54 ȱ Ȭ 6,87% ȱ ȱ ȱ Shanghai ȱ (SHCOMP) ȱ 3.320,90 ȱ 3.351,76 ȱ Ȭ 0,92% ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ US ȱ Fed ȱ Funds ȱ Rate ȱ 4,33% ȱ 4,48% ȱ Ȭ 0,15% ȱ ȱ ȱ 3 ȱ Month ȱ US ȱ Treasury ȱ Rate ȱ 4,32% ȱ 4,37% ȱ Ȭ 0,05% ȱ ȱ ȱ 5 ȱ Year ȱ US ȱ Treasury ȱ Rate ȱ 4,03% ȱ 4,38% ȱ Ȭ 0,35% ȱ ȱ ȱ European ȱ Central ȱ Bank ȱ (ECB) ȱ Refinancing ȱ Rate ȱ 2,90% ȱ 3,15% ȱ Ȭ 0,25% ȱ ȱ ȱ 5 Ȭ Year ȱ Eurozone ȱ Central ȱ Government ȱ Bond ȱ 2,48% ȱ 2,49% ȱ Ȭ 0,01% ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ Barrel ȱ (West ȱ Texas ȱ Intermediate) ȱ 0,4229 ȱ 0,4088 ȱ 3,46% ȱ € ȱ West ȱ Texas ȱ Intermediate ȱ (prix ȱ en ȱ euro ȱ par ȱ litre) ȱ Natural ȱ gas: ȱ 1 ȱ m3= ȱ 0,1340 ȱ 0,1164 ȱ 15,16% ȱ € ȱ Natural ȱ Gas, ȱ Henry ȱ Hub Ȭ I ȱ (prix ȱ en ȱ euro ȱ par ȱ m3) ȱ Natural ȱ gas: ȱ 1MWh= ȱ 12,9270 ȱ 11,2255 ȱ 15,16% ȱ € ȱ Natural ȱ Gas, ȱ Henry ȱ Hub Ȭ I ȱ (prix ȱ en ȱ euro ȱ par ȱ MWh) ȱ Natural ȱ gas: ȱ 1 ȱ MMbtu= ȱ 3,9300 ȱ 3,6300 ȱ 8,26% ȱ $ ȱ Natural ȱ Gas, ȱ Henry ȱ Hub Ȭ I ȱ (prix ȱ en ȱ $ ȱ par ȱ MMbtu) ȱ ȱ ȱ ȱ ȱ ȱ ȱ Gold: ȱ 1 ȱ Kg= ȱ 89.402,07 ȱ 76.453,87 ȱ 16,94% ȱ € ȱ ȱ Gold: ȱ 1 ȱ oz= ȱ 2.885,27 ȱ 2.624,49 ȱ 9,94% ȱ $ ȱ ȱ Silver: ȱ 1 ȱ Kg= ȱ 975,74 ȱ 840,14 ȱ 16,14% ȱ € ȱ ȱ Silver: ȱ 1 ȱ oz= ȱ 31,49 ȱ 28,84 ȱ 9,19% ȱ $ ȱ ȱ OECD ȱ General ȱ Governement/GDP ȱ 2022 ȱ 2022 ȱ last ȱ 2022 ȱ previous 2022 ȱ trend ȱ ȱ ȱ Japan ȱ 243% ȱ 243% ȱ 0% ȱ ȱ ȱ Greece ȱ 192% ȱ 193% ȱ Ȭ 1% ȱ ȱ ȱ Italy ȱ 145% ȱ 148% ȱ Ȭ 3% ȱ ȱ ȱ USA ȱ 119% ȱ 120% ȱ Ȭ 1% ȱ ȱ ȱ France ȱ 115% ȱ 116% ȱ Ȭ 1% ȱ ȱ ȱ Portugal ȱ 114% ȱ 115% ȱ Ȭ 1% ȱ ȱ ȱ Spain ȱ 114% ȱ 116% ȱ Ȭ 2% ȱ ȱ ȱ OECD ȱ (Total ȱ 2022) ȱ 110% ȱ 109% ȱ 1% ȱ ȱ ȱ Belgium ȱ 101% ȱ 104% ȱ Ȭ 3% ȱ ȱ ȱ Canada ȱ 99% ȱ 102% ȱ Ȭ 3% ȱ ȱ ȱ UK ȱ 99% ȱ 105% ȱ Ȭ 6% ȱ ȱ ȱ Austria ȱ 80% ȱ 80% ȱ 0% ȱ ȱ ȱ Hungary ȱȱ 77% ȱ 77% ȱ 0% ȱ ȱ ȱ OECD ȱ (Average ȱ 2022) ȱ 77% ȱ 78% ȱ Ȭ 1% ȱ ȱ ȱ Finland ȱ 75% ȱ 75% ȱ 0% ȱ ȱ ȱ Iceland ȱ 74% ȱ 75% ȱ Ȭ 1% ȱ ȱ ȱ Slovenia ȱ 72% ȱ 72% ȱ 0% ȱ ȱ ȱ Israel ȱ 68% ȱ 68% ȱ 0% ȱ ȱ ȱ Germany ȱ 64% ȱ 65% ȱ Ȭ 1% ȱ ȱ ȱ Slovakia ȱ 64% ȱ 64% ȱ 0% ȱ ȱ ȱ Poland ȱ 59% ȱ 59% ȱ 0% ȱ ȱ ȱ New ȱ Zealand ȱ 57% ȱ 57% ȱ 0% ȱ ȱ ȱ Mexico ȱ 55% ȱ 54% ȱ 1% ȱ ȱ ȱ Latvia ȱ 54% ȱ 52% ȱ 2% ȱ ȱ ȱ Australia ȱ 53% ȱ 53% ȱ 0% ȱ ȱ ȱ Netherlands ȱ 53% ȱ 54% ȱ Ȭ 1% ȱ ȱ ȱ Czechia ȱ 46% ȱ 48% ȱ Ȭ 2% ȱ ȱ ȱ Korea ȱ 46% ȱ 58% ȱ Ȭ 12% ȱ ȱ ȱ Ireland ȱ 45% ȱ 46% ȱ Ȭ 1% ȱ ȱ ȱ Sweden ȱ 44% ȱ 44% ȱ 0% ȱ ȱ ȱ Chile ȱ 41% ȱ 41% ȱ 0% ȱ ȱ ȱ Norway ȱ 41% ȱ 41% ȱ 0% ȱ ȱ ȱ Denmark ȱ 39% ȱ 35% ȱ 4% ȱ ȱ ȱ Lithuania ȱ 38% ȱ 38% ȱ 0% ȱ ȱ ȱ Switzerland ȱ 37% ȱ 38% ȱ Ȭ 1% ȱ ȱ ȱ Turkiye ȱ 36% ȱ 36% ȱ 0% ȱ ȱ ȱ Luxembourg ȱȱ 29% ȱ 30% ȱ Ȭ 1% ȱ ȱ ȱ Estonia ȱ 27% ȱ 26% ȱ 1% ȱ ȱ ȱ ȱ This ȱ dashboard, ȱ exclusive ȱ to ȱ AGEFI ȱ Luxembourg, ȱ allows ȱ the ȱ reader: ȱ 1° ȱ to ȱ see ȱ the ȱ returns ȱ of ȱ the ȱ main ȱ assets ȱ and ȱ financial ȱ indices ȱ for ȱ the ȱ current ȱ year ȱ / ȱ 2° ȱ to ȱ see ȱ on ȱ one ȱ page ȱ the ȱ main ȱ stock ȱ market ȱ indices ȱ and ȱ interest ȱ rates ȱ / ȱ 3° ȱ to ȱ know ȱ the ȱ production ȱ cost ȱ of ȱ several ȱ energy ȱ products ȱ in ȱ euros, ȱ to ȱ compare ȱ with ȱ the ȱ retail ȱ price ȱ / ȱ 4° ȱ to ȱ know ȱ the ȱ price ȱ of ȱ gold ȱ and ȱ silver ȱ in ȱ kilos ȱ and ȱ in ȱ euros. ȱ / ȱ 5° ȱ to ȱ immediately ȱ see ȱ the ȱ public ȱ date/GDP ȱ for ȱ several ȱ significant ȱ countries ȱ ȱ