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20 January 2012

ALFI annual review


There was also a heavy regulatory agenda in 2011, with a number of new rules coming into being, including UCITS IV and AIFMD. Luxembourg was well prepared and the process of transposing each into national law is either already completed or well underway.

Looking ahead to 2012, the global macro-economic situation is hard to predict but markets are likely to remain volatile and investors, both retail and institutional, will probably remain cautious.

At the same time, it is certain that regulatory pressure will increase. As in the past, ALFI will continue to advocate policies that are beneficial to the funds industry and its end-users and actively take a stand against others. ALFI is particularly concerned by the Volcker Rule and the Financial Transaction Tax (FTT).

The Volcker Rule, a proposal within the Dodd-Frank Act to reform the financial sector, restricts US banks or banks active in the US from making certain kinds of speculative investments. But as it currently stands, it creates an uneven playing field and should be amended. It notably prohibits banking entities, with certain exceptions, from acquiring or retaining an ownership interest in, or sponsoring, a hedge fund or private equity fund. However, while US mutual funds are not caught by the rule, there is no similar exclusion for non-US retail mutual funds. This discriminates against non-US regulated retail funds such as UCITS. “At the minimum, we believe the definition of the funds affected (“covered funds”) in the final rules should be amended to exclude European regulated funds in the same way as their US counterparts”, argues ALFI chairman, Marc Saluzzi.

As regards the FTT, ALFI believes it has the potential to curtail the distribution of UCITS outside Europe and to reduce significantly the assets of European funds. Moreover, ALFI does not accept the argument that it would result in the financial sector making a positive contribution to the economy and to society as a whole, especially if it is not imposed globally. Financial institutions will try to reduce the impact which might result in a widescale relocation of trading activities and/or the passing on of the costs to end-consumers, including individual savers and those participating in pension plans.

The impact on the fund industry would be significant, not just because the proposed headline rates are high, but also because the proposal gives rise to multiple taxation at the level of the fund, its portfolio and its investors. Mr Saluzzi says: The benefit to the economy or to society is doubtful if it requires people to save a larger part of their earnings, retire at a later age and receive a significantly reduced pension in retirement for absolutely no tangible fiscal uplift”.

Press release



© ABBL - Luxembourg Bankers’ Association


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