New CSSF Circular on UCI Administrator

In view of its evolution in the field of UCI administration, the Commission de Surveillance du Secteur Financier (CSSF) published on 16 May 2022 a new circular, the Circular 22/811, regarding the authorisation and organisation of entities acting as UCI administrator (the Circular). It replaces Chapter D of Circular IML 91/75, issued in January 1991.

Taking into account the legislative developments, changes in technology and market evolution with respect to the activity of UCI administration, the main purpose of the Circular is to specify the principles of sound governance and the CSSF requirements on internal organisation and good practice applicable to all entities carrying out the activity of UCI administration, as explained by Mr. Marco Zwick , director in charge of UCI supervision at the CSSF. Taking into consideration legal and regulatory developments, it responds to market demand for a modernised, and harmonised national framework.

Who is it for?

All entities acting as UCI administrators for regulated and non-regulated UCIs whether or not established in Luxembourg. Typically UCI administrators in Luxembourg may be the following entities:

• Investment fund managers (“IFMs”) established in Luxembourg (management companies incorporated under Luxembourg law that are subject to either Chapter 15 or Chapter 16 of the 2010 Law, or alternative investment fund managers authorised under Chapter 2 of the 2013 Law), as well as foreign IFMs carrying out the activity of UCI administrator for UCIs established in Luxembourg;
• credit institutions authorised under Part I, Chapter 1 of the law of 5 April 1993 on the financial sector (the “1993 Law”), or Luxembourg branches of credit institutions governed by foreign law that are authorised under Part I, Chapter 3 of the law of 1993;
• regulated Luxembourg UCIs;
• external service providers set up under the 1993 Law on the financial sector, such as specialised PSF, incorporated under Luxembourg law.

When does it apply?

The Circular immediately enters into effect, ie on 16 May 2022. However it does not apply to entities already acting as UCI administrator at the date of entry in force of the Circular. A grandfathering period is granted to such entities already acting as UCI administrator until 30 June 2023.

What's its purpose?

In addition to applicable sectorial legislation where relevant, the Circular sets out a framework concerning the organisational and control requirements for entities performing the three main functions of the UCI administration:

• the NAV calculation and accounting function;
• the registrar function;
• the client communication function.

More over the Circular implements a new reporting for UCI administrators (pt 7 of the Circular & annex B). By way of example, a non-exhaustive list:

• Number of regulated UCIs established in Luxembourg administered, including the volume in terms of net assets (millions EUR);
• Number of non-regulated UCIs established in Luxembourg administered, including the volume in terms of net assets (millions EUR);
• Number of foreign UCIs administered, including the volume in terms of net assets (millions EUR);
• Number of NAV errors
• Number of material NAV errors
• Number of active investment breaches

When does it become applicable?

The reporting must be filed, for the first time, at the latest five months after the UCI financial year-end, starting from 30 June 2023.
This means by 30 November 2023 for the first instance, for 2022/2023 financial statements closing on or after 30 June 2023.

Another important change is that prior authorisation is replaced by a prior notification in case of delegation of a critical or important operational task (pt 100-101 of the circular). This is in line with the CSSF’s more recent approach with respect to outsourcing and will make the process faster and easier.

Should you require more detailed information on the above topic and its implications, please liaise with us.

Here enclosed the CSSF’s circular https://www.cssf.lu/wp-content/uploads/cssf22_811eng.pdf.