Legal framework

The harmonisation and complete revision of the European investment fund regime by means of the EU directive known as “UCITS IV” (“Undertakings for collective investment in transferable securities”; Directive 2009/65/EC) and of EU directive known as "AIFM-directive" ("Alternative Investment Fund Managers"; Directive 2011/61/EC) necessitated far-reaching modifications in Liechtenstein’s own investment fund legislation on account of the country’s EEA membership.

The previous tripartite structure of the Investment Undertakings Act (IUA), whereby funds were classified as investment undertakings for transferable securities, for other assets and for real estate (plus the special category of “special funds for qualified investors”), has been abandoned. In line with the European approach, Liechtenstein law now adopts a bipartite structure in which a basic distinction is made between UCITS, which come under the UCITS IV Directive 2009/65/EC, and alternative investment funds (AIFs), which are regulated by the AIFM Directive 2011/61/EU. The aforementioned directives are being implemented in two stages. UCITS are now regulated by the Law on Certain Undertakings for Collective Investments in Transferable Securities (the UCITS Act, or UCITSA), which entered into force on 1 August 2011. The provisions of the IUA regarding investment undertakings for other assets and investment undertakings for real estate (and for qualified investors) remain applicable until such time as the AIFM Directive is implemented by means of the Law on Alternative Investment Fund Managers (the AIFM Act, or AIFMA). The aim is to complete the legislative process to enact the AIFMA by the end of 2012 in order to safeguard international competitiveness.

Investor protection

Liechtenstein’s statutes and the associated implementing ordinances are all based on their EU counterparts and therefore provide for regulatory compatibility with the requirements of the European Economic Area (EEA) and hence the European Union (EU).

In legal terms, investor protection is the top priority in the Liechtenstein fund centre. For instance, in its very first article the IUA states that “The purpose of this statute (…) is to protect investors and to safeguard confidence in the Liechtenstein fund industry and financial system”.

In conformity with the provisions of the relevant statutes and ordinances, the Liechtenstein Financial Market Authority (FMA) has issued a number of guidelines that form a code of conduct for the country’s investment fund sector. The aim of this code of conduct is to contribute to the protection of investors and to secure and promote confidence in the Liechtenstein fund centre and the Liechtenstein financial system (market integrity), both at home and abroad. By signing up to this code, the management companies of investment undertakings that are subject to FMA supervision undertake:

• “to perform all activities lawfully and equitably and with the requisite expertise, diligence, and conscientiousness, in the best interests of the investors and of market integrity;
• to maintain and effectively employ the resources and procedures necessary for proper business conduct;
• to endeavour to prevent conflicts of interest and, to the extent this is not possible, to ensure that the interests of the investors in the investment undertakings managed by them are upheld.”

Legal sources

Main basis in Liechtenstein law

The latest German-language versions of all statutes and ordinances in the Liechtenstein jurisdiction can be found at
www.gesetze.li

• Investment Undertakings Act (IUA, Investmentunternehmensgesetz, IUG) of 19 May 2005
• Investment Undertakings Ordinance (IUO, Investmentunternehmensverordnung, IUV) of 23 August 2005
• Law on Certain Undertakings for Collective Investments in Transferable Securities (UCITSA, Gesetz über bestimmte Organismen für gemeinsame Anlagen in Wertpapieren, UCITSG)
• Ordinance on Certain Undertakings for Collective Investments in Transferable Securities (UCITSO, Verordnung über bestimmte Organismen für gemeinsame Anlagen in Wertpapieren, UCITSV)
• Securities Prospectus Act (SPA, Wertpapierprospektgesetz, WPPG) of 23 May 2007
• Financial Market Authority Act (Finanzmarktaufsichtsgesetz) of 18 June 2004
• Ordinance on FMA charges (FMA-Gebührenverordnung) of 21 December 2004
• Liechtenstein Code of Personal and Company Law (CPCL, Personen- und Gesellschaftsrecht, PGR) of 20 January 1926
• Ordinance on the Code of Personal and Company Law (Verordnung zum Personen- und Gesellschaftsrecht) of 19 October 2000
• Asset Management Act (AMA, Vermögensverwaltungsgesetz, VVG) of 25 November 2005
• Asset Management Ordinance (AMO, Vermögensverwaltungsverordnung, VVO) of 20 December 2005
• Due Diligence Act (DDA, Sorgfaltspflichtgesetz, SPG) of 11 December 2008
• Due Diligence Ordinance (DDO, Sorgfaltspflichtverordnung, SPV) of 17 February 2009

Liechtenstein Financial Market Authority (FMA) guidelines and circulars

• FMA Guideline 2005/1: Monitoring business relationships
• FMA Guideline 2005/3 (status: 2 June 2009): Code of Conduct for the Liechtenstein Fund Centre
• FMA Guideline 2/2010 (status: 15 November 2011): High-risk countries identified by the FATF
• FMA Guideline 2/2011: List of countries and territories (third-party states) with equivalent regulatory regimes for purposes of the prevention of money laundering, organised crime and the financing of terrorism
• Circular 4/2011 regarding organisational requirements, conflicts of interest, code of conduct, risk management and the terms of the agreement between the custodian and the management company
• FMA Guideline 2012/02: risk measurement and reporting procedures for the use of derivatives by undertakings for collective investment in transferable securities (UCITS)

Main basis in European law

• EU Directive 85/611/EEC (UCITS Directive) of 20 Dec. 1985 (consolidated version of 20 March 2008)
• The latest versions of all EU directives and ordinances can be found at

http://eur-lex.europa.eu