Ethics and governance in the European Financial centers

Bloomberg has reported that Investments with Bernard Madoff have forced Luxembourg funds and sub funds to suspend redemptions.

List of Luxembourg-registered sub-funds and funds that have suspended their net asset valuations, the subscription and
redemptions of their shares since the Madoff fraud:

The funds are Source: Commission de Surveillance du Secteur Financier in an e-mail to Bloomberg News) :
*U.S. Absolute Return of Herald (Lux)
*U.S. Equity Plus of Luxembourg Investment Fund
*American Selection of Luxalpha Sicav
*Arbitrage of Norvest
*Balanced sub-fund, Growth sub-fund et Xtra Alternative
Investments Sub-fund of GLOBAL FUND SELECTION Sicav
*Global One of Carat (Lux) Sicav
*LRI Invest Alpha Stable EUR
*BG Global Classic, BG Global Dynamic, BG Global Challenge, BG
Global Balance, BG Global Discovery, BG Stable Value of BG
Umbrella Fund
*One (c) of the fund MARS
*Best Selection of Pareturn



I know that there may other funds that are not on the list like a typical Luxembourg-made situation :

X Bermuda as custodian and X Luxembourg as sub- custodian, X being the name of the Bank in the prospectus.
"X Bermuda" is quoted 11 times "X Luxembourg" is quoted 5 times despite they are only sub-custodians.
"Luxembourg" is quoted ...25 times and "Bermuda" 58 times.

The prospectus was changed early 2000 to add X Luxembourg and the word Luxembourg to seduce European investors and have a foot in Europe. X Luxembourg would have given the money to Madoff. A big four is the auditor.

The prospectus specifies that the FUND is a British Virgin Islands business company pursuant to the BVI Business Companies Act, 2004.

The Agefi in France has reported what Charles Muller, who is deputy managing director of the ALFI, said to reassure the investor. “There does not exist any difference between the French and Luxembourg legislations as regards responsibility for the agent”, he said .
In a document the ALFI states that article 1932 of the Luxembourg Civil code makes on request weigh on the depositary “an obligation of restitution of the assets of the client.”

What does article 1932 exactly states ?

Art. 1932. Le dépositaire doit rendre identiquement la chose même qu'il a reçue.
Ainsi, le dépôt des sommes monnayées doit être rendu dans les mêmes espèces qu'il a été fait, soit dans le cas d'augmentation, soit dans le cas de diminution de leur valeur

Free translation

Article 1932. The depositary must return identically the thing as it received.
Thus, the deposit of the monnayées cashed in on sums must be returned in the same species that it was made, either in the case of increase, or in the case of reduction in their value

Should the article be applicable to investments, this would mean that in Luxembourg the investor never loose the money even though the value of shares at the Stock Exchange is decreasing or the NAV of UCITS is decreasing.

In other words, according to the ALFI, if the investor invest EUR 1 billions in Luxembourg and because of the markets the value decrease to EUR 500 million he or she can ask the professionel to receive his EUR 1 billion backj.


In a market that is decreasing I can only encourage every investor in Luxembourg that lost money in the past months to ask the for the refund of the money invested.