What does EMIR mean for ManCos?

On 23 August, the CSSF published the new CSSF Circular 18/698 on the authorization and organization of investment fund managers incorporated under Luxembourg law. Aside from all other aspects, the circular specifies the responsibilities of management companies (ManCos) in line with the European Market Infrastructure Regulation (EMIR).

The circular, which enters into force with immediate effect, clarifies the obligations of these ManCos/AIFMs in line with EMIR, and aims to improve transparency and reduce risks related to the derivative market. The regulation applies to all financial and non-financial counterparties.

EMIR’s main requirements are as follows

• Reporting obligation of the details of any derivative contracts concluded or modified no later than the following working day to a Trade Repository (TR)
• Measuring, monitoring, and mitigating the operational and credit risk arising from non-cleared OTC contracts by introducing the Risk Mitigation Techniques (timely confirmation, exchange of collateral, daily valuation, portfolio reconciliation, portfolio compression and dispute resolution) 
• Centrally clearing the OTC derivative contracts pertaining to a class of OTC derivatives that has been declared subject to the clearing obligation

The circular clarifies the responsibilities of ManCos in the context of ensuring that the funds it manages comply with the above-mentioned EMIR obligations.

ManCos are required to have policies (including risk management) and procedures in place to meet their EMIR obligations.

Furthermore, the circular clarifies that in the case of delegation of one (or more) of the EMIR obligations, ManCos remain responsible in terms of EMIR obligations and must put specific organizational procedures in place, such as:

• Establishing and reviewing contracts and service level agreements with service providers
• Performing due diligence at initiation and monitoring that the delegated EMIR activities are performed in compliance with the regulation
• Ensuring that management regularly receives reports and KPIs on the delegated activities

Lastly, the circular informs that the above analysis and documentation shall be stored and made available to the CSSF on demand.

How can Deloitte help?

Since its entry into force, we have been helping our clients comply with EMIR provisions by providing assistance on activities ranging from strategic considerations to the full implementation of its requirements.

Deloitte Luxembourg EMIR Services for Management Companies can help your organization analyze the current gaps with regulatory health checks, propose remediation plans, and define the appropriate governance framework for the three lines of defence (contracts, risk management, and control).

Deloitte helps you stay on top of regulatory news with our Regwatch Kaleidoscope service.

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