UCITS: CSSF’s new position on investments in other UCIs

In a Press Release dated 5 January 2018, the CSSF announced a change in their position relating to the eligibility criteria of open-ended non-UCITS, ETFs and other UCIs ("Target UCI") in accordance with Article 41(1) (e) of the UCI Law¹ .

The CSSF’s new position ("New Position") provides that compliance with the eligibility criteria for a Target UCI (detailed below) needs to be assessed on the basis of the restrictions contained in the Target UCI’s constitutional documents. Mere compliance in practice by the Target UCI is no longer sufficient. As an illustration, investments in US ETFs whose documents permit borrowings, investments in money market funds and reinvestment of cash collateral in money market funds beyond UCITS restrictions, are no longer permitted.

UCITS which have invested in Target UCIs which no longer comply with the New Position have to divest as soon as possible taking into account the best interests of investors. The CSSF announced that it will contact the investment managers of the relevant UCITS by 31 March 2018 to check compliance with its New Position.

More information on this New Position is available on our website (see our Newsflash "CSSF Press Release 18/02 – Change of regulatory practice", 11 January 2018) and in the updated version of the CSSF FAQ on the UCI Law.