LUXEMBOURG Law and Practice Contributed by: Evelyn Maher, Gaston Aguirre Draghi and Djelloul Mansour, BSP
3.3 Regulatory Environment 3.3.1 Regulatory Regime UCITS Funds
• annual long-form report (only intended for the CSSF). 3.2 Fund Investment 3.2.1 Types of Investors in Retail Funds The majority of retail fund investors are located outside Luxembourg. All types of investors invest in retail funds (retail, professional and institutional investors). 3.2.2 Legal Structures Used by Fund Managers Usually, a retail fund is set up in the contrac - tual form of an FCP or a SICAV (ie, a corporate entity with variable capital). UCITS funds that are SICAVs have to take the form of an SA. However, the Modernising Law has extended the choice of legal forms for Part II UCI to include not only entities in the form of an SA but also those in the form of an SCA, SCS, SCSp, société coopérative organised as an SA or Sàrl. In the case of a Part II UCI, it is also possible to opt for an investment company with fixed capital (SICAF) in any of the same corporate forms. 3.2.3 Restrictions on Investors There are no restrictions – all investors (ie, retail, professional and institutional investors investing for their own account and/or on behalf of retail investors) can invest in retail funds. Non-Luxembourg investment funds that do not qualify as UCITS funds can be marketed to retail investors in Luxembourg provided that the pro - visions of CSSF Regulation 15-03 are complied with and the CSSF has authorised them; if such funds qualify as ELTIFs, CSSF Regulation 15-03 does not apply but rather the rules applicable under the ELTIF regulation.
Eligible assets are restricted to transferable securities admitted on a regulated market, investment funds, financial derivative instru - ments, cash and money market instruments. Risk diversification requirements for UCITS funds include the following: • cannot invest more than 10% of assets in transferable securities or money market instruments issued by the same issuer, and those holdings that exceed 5% cannot in aggregate exceed 40% of their assets; • cannot invest more than 20% of assets in deposits made with the same body; and • global exposure relating to financial derivative instruments cannot exceed the total value of the portfolio. A UCITS fund cannot borrow more than 10% of its assets on a temporary basis. Uncovered short positions are not allowed, but a UCITS fund can pursue a long-short invest - ment strategy and achieve short exposure syn - thetically through the use of financial derivative instruments. Various liquidity monitoring requirements are
provided for. Part II UCIs
The Part II UCI is subject to investment restric - tions and risk diversification rules arising from the UCI Law and various implementing CSSF circulars. For example, generally a Part II UCI cannot:
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