Luxembourg has adopted a law on specialised investment funds.

Luxembourg has adopted a law on specialised investment funds, which includes a number of new features, amongst them a broader definition of “eligible investors” to encompass both professional and private “well-informed” investors. The new law regime gives greater flexibility in terms of investment policy. There are no quantitative investment restrictions, given that such vehicles would be reserved for sophisticated investors although the principle of risk spreading has been maintained. The new law requires that the directors of a SIF, as well as the directors of the custodian bank and the auditor, be approved by the CSSF. The promoter is not subject to CSSF approval though. And since the investors in funds governed by this law are deemed to be sufficiently experienced to make their own decision with regard to the fund manager, there is no need for the CSSF to verify the status and financial standing of a company to which asset allocation has been subcontracted. The new law replaces the law of 19 July, 1991 which concerned collective investment schemes reserved for institutional investors. Existing institutional investment funds will be grandfathered into the new legal base. Earlier this month the Luxembourg government launched a replacement of its 1929 holding company regime known as the Family Private Assets Management Company, or SPF. The new regime, which is subject to European Commission approval, is intended to be exempt from corporate income tax, municipal business tax and net-worth tax, and from withholding tax on distributions. The holding company regime was terminated on 1 January 2007 following an EC decision that it violated state aid rules by granting "unjustified tax advantages" to providers of certain financial services who set up holding structures in Luxembourg. The new vehicles will be prohibited from commercial activity, and will be limited to private wealth management, for example the holding of financial instruments such as shares, bonds and other debt instruments, in addition to cash and other types of bankable asset.