_The Luxembourg financial supervisory authority (Commission de Surveillance du Secteur Financier, CSSF) issued a communication on 27 January 2020 regarding the European Securities and Market Authority’s (ESMA) Questions and Answers on the Application of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), which was amended from time to time, and in particular by Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to UCITS as regards depositary functions, remuneration policies and sanctions (ESMA Q&A), which clarified (in its version dated 29 March 2019) the benchmark disclosure obligations for UCITS.
With this communication, the CSSF reminds UCITS management companies and self-managed UCITS that they must incorporate the changes that are required by the ESMA Q&A in the Key Investor Information Documents (KIIDs) by 19 February 2020 at the latest and any changes in this context in the respective UCITS prospectuses until the earlier of either the next revision of the prospectus or the end of 2020.
As noted by the CSSF, per the ESMA Q&A, the benchmark-related disclosures in the KIID should in particular include the following elements by 19 February 2020 at the latest:
- whether the strategy of the UCITS is active or passive (i.e. actively or passively managed);
- the benchmark index (or indices) that the UCITS is tracking or to which it is making reference;
- the use of the benchmark (e.g. outperformance objective, performance comparison, risk limitation, definition of investment universe), the degree of freedom from the benchmark and the past performance against the benchmark when the investment approach of the UCITS either includes or implies a reference to a benchmark.
The updated KIIDs shall be transmitted to the CSSF via the usual transmission channels (i.e. via e-file). There is no pre-approval of the KIIDs needed, but the CSSF may decide to review the KIIDs on a case-by-case basis.
As further noted by the CSSF, per the ESMA Q&A, the information disclosed in the KIID should be consistent with the UCITS’ objectives and investment policy in the prospectus. As a result, UCITS management companies and self-managed UCITS must assess whether a change in the prospectus is necessary, verify that KIID and prospectus disclosures are aligned and, where applicable, proceed with filing an update of the prospectus to the CSSF until the earlier of either the next revision of the prospectus or the end of 2020.
For any enquiries about the communication of the CSSF or the ESMA Q&A and the relevant update of the KIID/prospectus or in general on the fund industry in Luxembourg, please contact our Investment Funds Practice Group.