Update of the CSSF FAQs on UCITS and MMF

On 3 November 2021, the CSSF published updated FAQs with clarification on the holding of ancillary liquid assets by UCITS foreseen under article 41 (2) b) (the Ancillary Liquid Assets) of the law of 17 December 2010 relating to undertakings for collective investment (the 2010 Law). These updates aim at clarifying the circumstances and the extent to which UCITS are allowed to hold Ancillary Liquid Assets. In this context, some aspects of UCITS and MMF diversification rules have also been clarified.

The new questions have been included in the following FAQs:

• FAQ concerning the 2010 Law: Section 1 and Section 2. See here.
• FAQ concerning the MMF Regulation (MMFR): Section 2. See here.

UCITS are expected to comply with the conditions described in the responses to these questions as soon as possible and by 31 December 2022 at the latest, considering the best interests of investors.

In its FAQ concerning the 2010 Law, the CSSF brought the following clarifications:

• A UCITS must limit Ancillary Liquid Assets to bank deposits at sight, such as cash held in current accounts with a bank accessible at any time. Ancillary Liquid Assets held are limited to 20% of the net assets of a UCITS. Such limit shall only be temporarily breached for a period of time strictly necessary when, because of exceptionally unfavourable market conditions, circumstances so require and where such breach is justified having regard to the interests of investors.
• Ancillary Liquid Assets do not include bank deposits, money market instruments and money market funds that meet the criteria of article 41(1) of the 2010 Law.
• A UCITS is authorised to invest in bank deposits, money market instruments or other eligible assets listed under article 41(1) of the 2010 Law only if it is clearly foreseen in its investment policy. Accordingly, if a UCITS invests in a category of assets that is not foreseen in its investment policy, it will be regarded as a breach of its investment policy and the provisions of Circular CSSF 02/77 apply.
• Margin accounts do not qualify as bank deposits under article 41(1)(f) of the Law of 2010, nor do they qualify as ancillary liquid assets under article 41(2)(b) of the Law of 2010. Initial and variation margins relating to financial derivatives shall be considered as collateral received or posted.
• The 20% limit on deposits made with a same entity under article 43(1) of the Law of 2010 applies to Ancillary Liquid Assets.
• The 20% limit on deposits made with a same entity under article 43(1) of the Law of 2010 does not apply to margin accounts.

In its FAQ concerning MMFR, the CSSF clarifies that the 10% limit on deposits made by a money market fund with the same credit institution under article 17(1)(b) of the MMFR applies to the holding of ancillary liquid assets under article 9(3) of the MMF Regulation. Ancillary liquid assets held by a money market fund are limited to 20% of its net assets.