The legislation entered into force on 16 June 2014 and its provisions will be applicable to the first financial year starting on or after 17 June 2016, except mandatory firm rotation.
The legislation comprises two legislative instruments. The Directive, which needs to be transposed into national law, applies to all entities required to have a statutory audit. The Regulation, which is binding on all EU member states, introduces further requirements for Public Interest Entities (PIEs) in the EU. This document focuses on the Regulation as it will significantly impact the governance of Luxembourg investment funds. Although the Regulation does not need to be transposed into national law, member states will need to legislate with regard to the implementation of their chosen options.
Alfi is concerned about the inclusion of AIF and UCITS in the definition of PIEs as it will imply disproportionate costs for the Luxembourg fund industry while the expected added benefits the audit quality and reliability of the financial reporting over and above current arrangements is neither clear, nor proven.AIF, UCITS and their related Management Companies operate in a strictly defined regulatory environment and are subject to specific governance mechanisms, including controls exercised by their depositary.
Furthermore, because Luxembourg funds listed on Stock Exchanges (with the exception of Exchange Traded Funds) are not traded on the market, Alfi recommends to exclude from the list of PIEs, AIF and UCITS not listed on any Stock Exchange as well as AIF and UCITS not actively traded on a Stock Exchange. Alfi recommends to choose the aptitude test and to foresee specific questions in relation to the Luxembourg regulatory and reporting framework applicable to investment funds. Indeed his will provide greater comfort that third-country auditors will have sufficient knowledge on Luxembourg investment funds’ specificities in order to ensure the quality of their audits.
Full position paper
© ALFI - Association of the Luxembourg Fund Industry
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