Ethics and governance in the European Financial centers

In a video, J.-M. Goy, CSSF, is developing the Responsibility of a Luxembourg Depositary bank in the framework of a conference that took place on 4 March 2009 with the participation Peter de Proft, EFAMA, under the leadership of KPMG Luxembourg. 

What the CSSF says is very interesting even  more so that the ALFI admitted that The relationship between the Luxembourg Commission de Surveillance du Secteur Financier Luxembourg ( CSSF ) and the Financial centre it supervises has always been described, and rightly so, as being heavily influenced by a true common interest approach. (...) The Luxembourg Investment Fund Industry has regularly had a very close and direct say on the evolution of the Luxembourg prudential regulatory environment governing the collective Investment Industry.

 

J.-M. Goy stated:

 

The principles are perfectly clear. In Luxembourg we consider that our legal and regulatory framework is absolutely on line with the principles set up by the directive and provides for an appropriate level for investor protection.

 The rules are practically the same in all the European jurisdictions.

 

 Practically means in Merriam Webster: 

1 : in a practical manner <look practically at the problem>

2 : almost, nearly <practically everyone>

 

 

Practically has as its basic and primary sense "in a practical manner”. Language critics sometimes object when the notion of practicality means "almost, nearly" but this usage is widely used by reputable writers and must be considered acceptable.

 

Mr Goy is using the first meaning.

 

The problem is that in the transposition Luxembourg dropped some critical keywords under the influence of the financial sector so that their legal and regulatory framework cannot be on line with the principles set up by the directive to provide for an appropriate level for investor protection.

 

Which was confirmed late May by Mr McCreevy.

 

And they are unable to admit that there is a direct link between the changes and the Madoff affair in Luxembourg. Especially:

1. UBS was both management company and depositary, which is proscribed by the directive to prevent the conflicts of interest but is authorized by the Luxembourg law that keeps silence on the provision;
2. There is no safekeeping duty in the Luxembourg law whereas it is explicitly prescribed by the directive. Only the duty of supervision exists.
3. The way to discharge the duty of supervision to a third party does not comply with basic meaning of the word supervision: It is considered that the depositary has discharged its duty, when it is satisfied from the outset and during the entire duration of the contract that the third parties, with which the assets of the collective undertaking are on deposit, are reputable and competent and have sufficient financial resources, which is not consistent with a critical watching and directing as defined in Merriam Webster.

Additionally in a survey dated 20 February 2009 provided by the EFAMA itself to compare the jurisdiction, it appears that Luxembourg is the only jurisdiction with such strange wording for the depositary to discharge its duties.

 

These are facts.

 

Therefore who actually sows the doubt and depreciates the Luxembourg credibility (Jean Meyer’s wording)?

 

Those who are telling the truth on facts and want to correct dysfunctions in the jurisdiction, or those who are not telling the truth?

 

Investors will judge.

 

Subsidiary observation. I bet that according to the CSSF, their legal and regulatory framework is absolutely on line with the principles set up by the FATF and the European Directive and provides for an appropriate level for AML-CFT.

 

Should I be the FATF or the European Commission, I would definitely have a look on the transposition into the Luxembourg legal and regulatory framework…