On 7 August 2020, the CSSF issued an updated version of its Frequently Asked Questions concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment schemes (the “UCITS Law” and the “FAQ”).
With this update (the ninth) CSSF introduces a new FAQ (1.13 FAQ), stating that loans cannot be considered eligible assets for UCITS under Article 41 (1) and (2) of the UCITS Law.
The CSSF clarifies that the loans cannot be qualified as:
- money market instruments as defined in Article 1 (23) of the UCITS Law (instruments normally dealt in on the money market which are liquid and have a value that which can be accurately determined at any time) and in Articles 3 and 4 of the Grand-Ducal Regulation of 8 February 2008 (the “Regulation”), clarified by the CESR guidelines concerning eligible assets for investment by UCITS (the “CESR Guidelines”); neither as
- transferable securities as defined in Article 1 (34) of the UCITS Law (shares in companies or other equivalent securities, bonds and other form of securitised debt, other negotiable securities which carry the right to acquire such transferable securities by subscription or exchange) and in
Article 2 of the Regulation, as further clarified by the CESR Guidelines.
The statement impacts all the Luxembourg domiciled UCITS, and the FAQ provide that:
- UCITS that are invested in loans are required to sell them by 31 December 2020, taking into account the best interest of investors;
- the prospectuses of the UCITS that provide for investments in loans have to be updated by 31 March 2021.
No reference has been made to KIIDs, but it’s to be expected that KIIDs will also have to be updated.