The CSSF publishes the reform of Circular CSSF 02/77 on NAV calculation errors and investment breaches

Considering the CSSF’s important mandate of investor protection and in view of the regulatory developments since 2002, the developments of the supervisory practices of the CSSF and the market evolution with regard to the activities of undertakings for collective investment (UCI), the Commission de Surveillance du Secteur Financier (CSSF) publishes today Circular CSSF 24/856 on investor protection in the event of a NAV calculation error, non-compliance with investment rules and other errors. The new circular replaces Circular CSSF 02/77 and will take effect as from 1 January 2025. 

Since the publication of Circular CSSF 02/77 in 2002, the UCI industry has been undergoing numerous regulatory developments at the European level, such as the updates of the UCITS Directive, the implementation of the AIFM Directive as well as the introduction of specific product regulations (ELTIF, EuVECA, EuSEF, MMF). In addition, the UCI landscape saw changes in 2004 with the law relating to the investment company in risk capital (SICAR) and in 2007 with the law relating to specialised investment funds (SIFs).

As a result, the new circular applies to UCITS, UCI Part II, SIFs and SICARs as well as to ELTIF, MMF, EuVECA and EuSEF (which are not UCITS, UCI Part II, SIF and SICAR) for which the CSSF is the competent authority in accordance with the applicable regulations.

The new circular sets guidelines to be followed by investment management professionals in case of errors in the administration or management of a UCI.

It covers, in addition to NAV calculation errors and non-compliance with the investment rules applicable to UCI, other errors (e.g. errors at the level of the payment of costs / fees, swing pricing) that may occur at the level of a UCI.

The new circular also defines a dedicated approach for the different types of funds concerning the tolerance thresholds governing NAV calculation errors.

Besides clarifying the scope of application, the new circular aims, first and foremost, at clarifying the guidelines to be followed by the industry in case of errors at the level of a UCI.

In this respect, the circular consolidates notably in one single document the guidance given by the CSSF over the past years via CSSF FAQs and activity reports, provides additional guidance on selected topics (e.g. active vs passive breach) and integrates the administrative practice applied by the CSSF.

With a view to protecting the interests of the investors in the UCI, the implementation of the guidelines by the UCI, the investment fund managers and those intervening in the functioning and the control of the UCI will contribute to maintaining the confidence of investors in collective portfolio management globally and investment management professionals operating in Luxembourg more specifically.

Finally, the updated regime will enable the CSSF to further develop and implement its risk-based supervision of UCIs.

Circular CSSF 24/856 on investor protection in the event of a NAV calculation error, non-compliance with investment rules and other errors at the level of a UCI will come into force with effect from 1 January 2025, the date on which Circular CSSF 02/77 will be repealed.

The text of Circular CSSF 24/856 is available under this link.

Circular CSSF 24/856 is currently only available in French. An English version of the circular will be published in the short term.