Key points of 17 hot regulatory topics
By Michele Eisenhuth & Emmanuel Gutton

Key points of 17 hot regulatory topics

Luxembourg’s fund industry is currently digesting six major regulatory challenges, with about a dozen more coming soon. Michèle Eisenhuth, a partner at Arendt and Emmanuel Gutton, director legal & tax at ALFI gave tips on what questions fund boards should be asking in the Hot Topics in a Slide presentation.

Although the deadline for SFDR filing with the CSSF has passed, Michèle advised the audience to remain vigilant. Some loose ends remain, such as the need for websites to reflect, among others, the information sent to the regulators. Further clarifications from the authorities should continue coming through this quarter, and these comments might impact how disclosures will be made. In addition, a revision of SFDR level 2 is already in the making, forcing market players to use a new version of the template at a date to be defined.

On the long form report, Emmanuel said an ALFI survey of 22 IFMs found that 80% rated their experience of completing it as either “neutral” or “good”. However, two thirds said this procedure resulted in at least a €15,000 cost increase. He noted that work is on-going at the CSSF to upgrade the IT, so the industry can be hopeful this process will be eased.

Regarding the Priips KID, Michèle set out a series of questions that Fund or ManCo boards should ask if they are the Priips KID manufacturer and hence, bear the ultimate responsibility of its content. Does the KID contain the narratives required by the regulation? Is it aligned with the prospectus? Have the calculations been made in compliance with the rules? Was the KID filed with the CSSF in time, etc.? She pointed out that ultimate responsibility for these matters does not lie with these boards if they are not the manufacturer, but she advised it is still prudent, from a governance perspective, to ensure these checks are done. 

With the UCI administrator circular, Emmanuel advised boards to pay particular attention to the scope. This regulation applies to entities which perform the administration activity in Luxembourg for locally based or foreign UCIs. Worth noting is that depending on the activity performed, the UCI itself can sometimes qualify as the UCI administrator. He recommended checking the updated CSSF FAQ from the end of last year. 

Costs and fees have been the subject of an ESMA CSA, and Michèle noted that the CSSF required IFMs to make a proper assessment of their pricing processes before the end of Q1 2023, for UCITS and AIFs under management. Data disclosed to investors must be in line with reality and this should be assessed periodically. 

New EU-wide guidance gives regulators the power to review marketing communications before and after they are issued. This applies to all IFMs of Luxembourg and foreign domiciled regulated and unregulated funds distributed in the EU to any current and potential types of investors (retail, professional, etc.). The CSSF expects IFMs to be able to justify upon request that contents are in line with regulation, and that communications are consistent. It is recommended that procedures be well documented regarding the classification of marketing communication, and that oversight of delegates in charge of the preparation thereof, if any, be properly organised. 

Michèle and Emmanuel then previewed regulations that should be taking greater shape this year. Aifmd II should receive political approval, Eltif II should be published early April with entry into force around year end but with an early opt-in as from publication, crypto assets regulation MiCA is making progress, and ICT risk management regulation DORA will apply from 2025. 

Otherwise, Michèle noted that the CSSF is planning additional onsite visits this year with key topics of interest, like ESG related matters, costs & fees, etc., so she recommended ensuring documentation is in shape and processes duly complied with. There will also be upgrades of CSSF circulars 02/77 and 11/512. Emmanuel noted that it is to be expected that liquidity management will come again under the microscope in the coming months and years.

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