CSSF’s change of policy regarding UCITS eligible investments

1. New regulatory position

The CSSF provides in Press Release 18/02 that the eligibility criteria of such target UCI (“Target UCI”) under Article 50(1)(e) of the UCITS Directive should be assessed on the basis of the fund documentation. Consequently, mere compliance controls or written confirmation of the relevant Target UCIs (or of their managers), as previously mentioned in the Frequently Asked Questions relating to the Law of 17 December 2010 on UCIs (the “FAQ”), shall no longer be sufficient.

In particular, the CSSF wishes to draw attention to the fact that for Target UCI to be deemed eligible investments for a UCITS fund, such Target UCI should comply with the following criteria:

(i) They shall be prohibited from investing in illiquid assets (such as commodities and real estate);

(ii) They shall be bound by rules on asset segregation, borrowing, lending and uncovered short selling;

(iii) The constitutive documents shall include a restriction for investments in other funds to 10% of the net assets of the relevant Target UCI.

2. Compliance requirements

As a consequence, the CSSF has updated its FAQ to delete the previous FAQ 1.4 and published a new version 5 of the FAQ dated 5 January 2018.

As detailed in Press Release 18/02, the CSSF further requires all UCITS funds having invested in Target UCI according to the previous policy laid down in FAQ 1.4 to disinvest from these Target UCI as soon as possible, taking into account the best interest of investors.

The CSSF shall contact the managers of all relevant UCITS by 31 March 2018 in order to check compliance.

For the avoidance of doubt, the CSSF also underlines that new investments into Target UCI according to this previous policy are no longer allowed