New FAQ on Circular CSSF 24/856

On 24 December 2024 the CSSF published a FAQ on Circular CSSF 24/856 concerning the protection of investors in case of an NAV calculation error. Among the various guidance provided to the industry in this FAQ, we would like to highlight the following question with regards to NAV calculation errors, which is relevant for AIFMs managing unregulated, closed-ended AIFs. 

Closed-ended UCIs are not subject to Chapter 4 of Circular CSSF 24/856 and are consequently not required to define a tolerance threshold in accordance with the circular. What are the guidelines applicable to closed-ended UCIs? Should closed-ended UCIs nonetheless consider defining a tolerance threshold?

According to point 27 of the Circular CSSF 24/856, closed-ended UCIs, as defined in Chapter 1 (“Definitions and abbreviations”), are not in the scope of Chapter 4 of the circular. As a consequence, the requirements concerning the tolerance threshold of Section 4.2. do not apply to closed-ended UCIs. 

Closed-ended UCIs or the Investment Fund Manager (“IFM”), where applicable, have however, in accordance with point 26 and the first paragraph of point 27 of the circular, to ensure that: 

• the NAV calculation rules provided for by the law, the constitutive documents and/or the prospectus of the closed-ended UCIs are complied with on an ongoing basis;
• the policies and procedures in place (i) ensure that the assets and liabilities of the closed-ended UCIs are valued in a reliable way and that the NAV is calculated in accordance with the law, the constitutive documents and/or the prospectus and (ii) allow limiting, as much as possible, the risk of NAV calculation errors and detecting the errors that occur.

Closed-ended UCIs or its IFM, where applicable, must further ensure in accordance with the third paragraph of point 27 of the circular that corrective measures are taken to correct, where appropriate, any NAV calculation error. For that purpose, the CSSF recommends that a tolerance threshold is defined for closed-ended UCIs in order to identify any significant NAV calculation error that needs being corrected. Closed-ended UCIs having defined such a tolerance threshold for internal purposes, remain outside of the scope of Chapter 9 of Circular CSSF 24/856 and consequently are not required to submit a notification to the CSSF in case of occurrence of a NAV calculation error exceeding the internally defined tolerance threshold.