In adapting its administrative practice, the CSSF has provided clarification on the holding of ancillary liquid assets by UCITS under the Law of 17 December 2010 on undertakings for collective investment.
On 3 November 2021, the CSSF published an updated version of its FAQ on the Law of 17 December 2010 on undertakings for collective investment (the “FAQ on the Law of 2010”), and an updated version of its FAQ on Regulation (EU) 2017/1131 on money market funds (the “FAQ on the MMF Regulation”). These updates aim to clarify the circumstances under which, and the extent to which, UCITS are permitted to hold ancillary liquid assets.
Through its FAQ on the Law of 2010, the CSSF gave the following clarifications:
- A UCITS must limit ancillary liquid assets as referred to in article 41(2)(b) of the Law of 2010 to bank deposits at sight, such as cash held in current accounts with a bank accessible at any time. The ancillary liquid assets held are limited to 20% of the UCITS’ net assets. The 20 % limit may only be temporarily breached where exceptionally unfavourable market conditions so require and where such breach is justified by the interests of investors.
- Bank deposits, money market instruments or money market funds that meet the criteria of article 41(1) of the Law of 2010 should not be included in the ancillary liquid assets referred to in article 41(2)(b) of the Law of 2010.
- A UCITS is only authorised to hold (for investment purpose, cash management or in case of unfavourable market conditions) bank deposits, money market instruments or other eligible assets listed under article 41(1) of the Law of 2010 if this is clearly provided for in its investment policy. If a UCITS invests in a category of assets that is not foreseen in its investment policy, the provisions of CSSF Circular 02/77 on the protection of investors in case of a net asset value calculation error 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.
- The 20% limit on deposits made by a UCITS with a same body under article 43(1) of the Law of 2010 applies to ancillary liquid assets.
- The 20% limit on deposits made with a same body under article 43(1) of the Law of 2010 does not apply to margin accounts.
Furthermore, through its updated FAQ on the MMF Regulation, 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 MMF Regulation 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.
The CSSF expects UCITS to comply with the conditions described in the FAQs as soon as possible, and by no later than 31 December 2022.
For further information, please reach out to your usual contact within the Fund Formation group.
To access the CSSF FAQ on the Law of 2010, click here_
To access the CSSF FAQ on the MMF Regulation, click here_
