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Money Market Funds | CSSF FAQ
22/10/2018

The CSSF published its first Frequently Asked Questions (“FAQ”) concerning the Money Market Fund Regulation (“MMFR”) on August 28th 2018. This FAQ explains some of the key aspects of the regulation which are relevant to money market funds (“MMFs”) and their managers.

The document answers many of the questions surrounding the new regulation with regards to general provisions, obligations concerning investment policies of MMFs, obligations concerning the risk management of MMFs, variation rules and transparency requirements.

As regards general provisions, the CSSF has said that all types of MMFs can have accumulating and/or distributing share classes and that Circular 08/365 which deals with certain techniques and instruments relating to transferable securities and money market instruments no longer applies to MMFs. The CSSF will analyse on a case by case basis whether the changes to be operated at the level of existing funds requires one month prior notice with redemptions free of charge. The CSSF also confirmed that all AIFs authorised under the MMFR have to appoint an authorised AIFM.

The FAQ also covers obligations concerning the investment policies of MMFs, in particular article 17(1)(b) of the MMFR, whereby it clarifies that the CSSF does not authorise a Luxembourg MMF to invest more than 10% of its assets in deposits with the same credit institution as it is economically feasible for the MMF to make deposits in another Member State and there are sufficient viable credit institutions in Luxembourg. The CSSF also confirms that it requires MMFs to provide information on the internal credit quality assessment procedure in the prospectus.

With respect to obligations concerning the risk management of MMFs, the FAQ confirms that one week or one month deposits, as well as reverse repos with a fixed term, can be considered daily maturing assets when they can be withdrawn with one working day prior notice. Non-compliance issues regarding WAL and WAM limits and minimum liquidity thresholds shall fall under the scope of CSSF Circular 02/77 concerning the protection of investors in case of NAV calculation error and correction of the consequences resulting from non-compliance with the investment rules applicable to UCIs. 

Regarding valuation rules, different sub funds under the same umbrella can use different methods to price the same security.

In terms of transparency requirements, the FAQ clarifies that information regarding maturity breakdown and credit profile of the MMF (article 36(2)) can be provided by a website link in the prospectus, the manager can decide on which day of the week they report the weekly disclosure of article 36(2),  information regarding internal credit quality assessment must be provided and that article 36(2) only applies to MMF authorised in accordance with MMFR as at  July 21st 2018, not MMFs who benefit from the transitional provision of article 44(1).

Zie ook : Bonn Steichen & Partners

[+ http://www.bsp.lu]


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