CSSF feedback report on ESMA Common Supervisory Action on valuation

In January 2022, the European Securities and Markets Authority (“ESMA”) launched a Common Supervisory Action (“CSA”) with national competent authorities (“NCAs”) on valuation of Undertakings for Collective Investment in Transferable Securities (“UCITS”) and open-ended alternative investment funds (“AIFs”).

In addition, in the context of the Russia-Ukraine crisis, the CSSF conducted a separate but related supervisory exercise targeting specifically the valuation practices adopted by a panel of Investment Fund Managers (“IFMs”) during that episode which caused affected assets to become illiquid/non-tradeable because of the crisis as well as due to the restrictive measures taken by the EU and other countries.

On 24 May 2023, ESMA published the results of the CSA on Valuation at European level in a final report on the 2022 CSA on valuation (hereafter “ESMA report on the CSA on Valuation”), including the feedback and findings of all EU/EEA NCAs (including the CSSF) participating in this exercise.

ESMA reported that most NCAs considered that there was an overall satisfactory level of compliance of the sample of IFMs with the applicable regulatory requirements. However, the CSA on Valuation also showed shortcomings and vulnerabilities.

In this context, based on the ESMA report on the CSA on Valuation and the assessment of the CSSF of this CSA on valuation, the CSSF would like to inform market participants about the publication of the report “CSSF Feedback Report – ESMA Common Supervisory Action on Valuation” which presents the main observations and related recommendations for improvements in view of the applicable regulatory requirements.

The CSSF is currently engaging on a bilateral basis with most of the IFMs of the sample in relation to observations made in the context of the CSA on Valuation, thereby asking these IFMs to implement the necessary corrective measures for the observed weaknesses/shortcomings/vulnerabilities.

In addition, the CSSF hereby asks all IFMs managing UCITS and/or AIFs to conduct a comprehensive assessment of their valuation framework in relation to, respectively, the views and observations of ESMA and the CSSF presented in the ESMA report on the CSA on Valuation and in the report “CSSF Feedback Report – ESMA Common Supervisory Action on Valuation” and to take, if applicable, the necessary corrective measures by 31 December 2023.