The Luxembourg CSSF clarifies the oversight requirements of management companies on fund distributors
The Luxembourg CSSF has issued on 23rd August the CSSF Circular 18/698 that set all substance related to the provisions expected for governance and organizational structures of Luxembourg investment management companies.
The requirements applicable to the oversight of key delegated functions, including marketing and distribution
are of particular interest.
It is expected that the investment management company develop a continuous risk-based approach for the oversight of its distribution network.
This approach needs to be based on
1. the types of distributors/ intermediaries as well as information on the country of establishment of the intermediary and the AML / CFT legal and regulatory ramework applicable therein, the authority and the supervisory regime which is applicable, the ownership and the control structure of the intermediary;
2. obtaining sufficient information to fully understand the nature of the intermediary’s activities and to assess, on the basis of information available to the public, its reputation and the quality of the supervision to which it is subject;
3. obtaining the documentation required on AML / CFT obligations when entering into an intermediary relationship (“Know Your Intermediary”);
4. the distribution channels; for example, the use of unclear or complex distribution channels and cases where the intermediary is located in a country or territory
with a higher risk, are high risk factors requiring implementation of enhanced monitoring of these intermediaries;
5. country risk.