Ethics and governance in the European Financial centers

Luxalpha Sicav, Société d’Investissement à Capital Variable was created on 5 February 2004 by UBS.

Roger Hartmann, Managing Director, UBS (Luxembourg) S.A. was elected as director.
Ernst & Young was appointed the auditor.

Roger Hartmann remained director until the last election in the Memorial dated 26 June 2006 when he was elected for a one-year period. The publication of the information was done more than one year later (on 22 September 2007)

We don’t know what happened in 2007-2008, and especially who was elected director mid 2007.


On 15 November 2007, Roger Hartmann joined Ernst & Young as partner to focus on the development of Ernst & Young’s Advisory Services for financial services clients.
The press release underlines that Roger Hartmann “has played an active role in the development of Luxembourg’s financial centre. At the Luxembourg Bankers’ Association (ABBL), he became the founding chairman of the Private Banking Group; he is also a member of the Board of Directors. He is a member of two committees of the Luxembourg’s financial sector supervisory authority (CSSF): banking and anti-money laundering. At the Luxembourg School of Finance, as well as lecturing at the yearly Financial Services Strategy seminars, he has been instrumental in the development of the research and executive programmes.

In the context of the Madoff case were UBS/Luxalpha is involved and where there are questions about the weaknesses of the auditor of the fund, I do not think it is a good thing to allow the auditee to join the auditor even for advisory services all the more than Mr Roger Hartmann was representative of the fund.

There should be a tree-year-period to be able to do so.

Investor activist group Deminor said last Thursday it is to file a legal complaint against UBS, HSBC, and others for allegedly neglecting clients who invested in Madoff-related products.

The complaint will be filed before the end of the month in courts in Luxembourg and Ireland, where the funds through which some of the banks' clients invested are located: UBS in Luxembourg and HSBC for Ireland.

The banks involved acted as depository banks for the funds and did not verify the true nature of the investments.

As far as Luxembourg is concerned, because of the clear and pragmatic legal and regulatory framework that is promoted I do not think clients will be successful:
- when processing a client complaint, the regulator CSSF’s positions are not binding on the professionals (See CSSF annual report 2007 page 162)
- the penal liability of legal persons does not exist
- the civil jurisprudence in not in favour of the investor “from day to day”
- the guarantee of deposits is very low (limited to 20 000 EUR according to the Bankers’ association)

The consequence is that procedures initiated will be long and probably not successful.

The only way for investors that are victims of a lax legal and regulatory framework to be respected would be a payment by the Luxembourg State that would go later before the court for the refund in the legal and regulatory framework it enforced.

A couple of months ago, Véronique Poujol from the Lëtzebuerger Land published a lucid analysis of the situation in Luxembourg.

She underlined the contradiction of the Luxembourg model. Nothing is more volatile than the capital. The success of the Luxembourg business model, it is to be business friendly, flexible and pragmatic with the economic operators, including in the banking legislation. Luxembourg was flexible with the investors, more slackness with the savers that have a poor level of the guarantees. There will not be doubt in the arbitration which these people will make between the safety of their funds and discretion with which they are managed. The State have reserves which are not inexhaustible.

The guarantee of the deposits will remain limited to 20 000 EUROS as the director of the ABBL confirmed quoted by L'Essentiel. today



Who is lying ?

Minister Frieden today confirmed the amount of 100 000 EUR as reported l'Essentiel in contradiction with what the director of the ABBL said.




Doubts about the protection of the investor with the Madoff case, Doubts about the protection of the client's deposits with the Kaupthing case...

This is the reality of this pragmatic Luxembourg that anyway despises the client as demonstrated the reference book written by Alex Schmitt : in a book called La Responsabilité du Banquier en droit prive luxembourgeois (Banker’s liability in Luxembourg private law) he concludes that one could be pleased with what Luxembourg jurisprudence generally shows very clear-sighted vis-a-vis the investors from day to day (“L'on pourra se féliciter de ce que la jurisprudence luxembourgeoise se montre généralement très clairvoyante face aux investisseurs à la petite semaine”). In other words in case of litigation because of a bank failure, there is a country risk as the foreign investor will not win.

In a nutshell the investor is consirered as a sucker.