The CSSF clarifies the concept of independence under UCITS V

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1 July 2017 The CSSF clarifies the concept of independence under V On 6 of July 2017, the CSSF updated its FAQ concerning the law of 17 December 2010 relating to undertakings for collective investment and added a new section 5 entitled Independence requirements. The objective of the FAQ is to clarify how the independence requirement, which was introduced under the V Directive as further specified in the Commission Delegated Regulation (EU) 2016/438 of 17 December 2015 (the V Delegated Regulation ), applies in practice to entities. You will find below a summary of the questions and answers. To which entities and to which corporate bodies of these entities is the independence requirement applicable? The CSSF position is summarised in the table below: Entities involved Level of the independence assessment Chapter 15 depositary supervisory board) of the Chapter 15 and the body (and, as Chapter 15 branch of an EU depositary supervisory board) of the Chapter 15 and the body (and, as board) of the head office of the depositary and the employees of the depositary (both at the level of its head office and of the branch). 1

2 Entities involved Level of the independence assessment branch of an EU depositary supervisory board) of the head office of the and the employees of the (both at the level of its head office and of the branch) and the body (and, as selfmanaged selfmanaged depositary branch of an EU depositary supervisory board) of the selfmanaged SICAV and the body (and, as the case may be, the supervisory supervisory board) of the selfmanaged SICAV and the body (and, as the case may be, the supervisory board) of the head office of the depositary and the employees of the depositary (both at the level of its head office and of the branch). 2

3 What is the meaning of body and body in charge of the supervisory functions under law? The CSSF clarifies how the expressions body and body in charge of the supervisory functions must be understood under law. Management body Public limited Société anonyme (S.A.) monistic board of directors dualistic board Limited liability Société à responsabilité limitée (S.à r.l.) the board of manager managers ship limited by shares Société en commandite par actions (S.C.A.) the manager(s) Body in charge of the supervisory functions - supervisory board Is there any specific requirement in terms of independence when there is a group link between the Chapter 15 (or the self-managed and the depositary? The CSSF highlights that where a group link 1 exists between the (or the self-managed, and the depositary, there are additional requirements as set forth in articles 21 and 24 of the V Delegated Regulation. Pursuant to article 21, employees and members of the body of a Chapter 15 are not allowed to hold a position as an employee or as a member of the body of the depositary and vice versa, meaning employees and members of the body of a depositary are not allowed to hold a position either as an employee or a member of the body of a Chapter 15 (or of a self-managed. Furthermore in case companies and/or depositaries are dualistic entities, no more than one third of the members of the supervisory board of a Chapter 15 (or of a self-managed ) are allowed to hold a position either as a member of the body, as a member of the supervisory board or as an employee of the depositary and vice versa, meaning no more than one third of the members of the supervisory board of a depositary are allowed to hold a position either as a member of the 1 Under the V Delegated Regulation «group link» means a situation in which two or more undertakings or entities belong to the same group within the meaning of Article 2(11) of Directive 2013/34/EU of the European Parliament and of the Council or international accounting standards adopted in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council 3

4 body, as a member of the supervisory board or as an employee of the related Chapter 15 or self-managed SICAV. Pursuant to article 24, there is an extra obligation to have a certain number of independent members included in the relevant body (or when applicable, in the supervisory board). The minimum number of these independent members varies from 1 (if the relevant body comprises three or four members) to 2 (if the relevant body comprises five or more members). To be considered as independent, individuals who have previously been involved with, or linked to, either the Chapter 15, the self-managed SICAV, or the depositary must respect a period of cooling-off of 12 months. The CSSF has summarised these various rules in four tables (see pages 16 and 17 of the FAQ). Following the entry into force of the V Delegated Regulation, are the provisions of CSSF Circular 12/546 still applicable? The CSSF considers that both the V Delegated Regulation and the provisions of CSSF Circular 12/546 must apply (more particularly those relating to solid governance arrangements and the independence of the Chapter 15 from the depositary). For more information, please read the CCSF FAQ or alternatively contact a member of your Linklaters team who will be delighted to provide you with any further clarification. 4

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