Further legal and regulatory developments

On 18 November 2024, the CSSF updated its FAQ on alternative investment fund managers.

Question 23.N has been modified to clarify the procedure for filing the final version of a PRIIPs KID with the CSSF, if requested. Filing will therefore need to comply with Circular CSSF 23/833.

Question 14.H states that from 1 July 2024, only the API (S3) channel or the eDesk procedure is authorised for the submission of AIFM reporting. Reports submitted via external channels under the old transmission method are no longer being processed by the CSSF.

On 25 October 2024, the European Commission published Regulation (EU) 2024/2759 of 19 July 2024 supplementing Regulation (EU) 2015/760, which marks the final push of the full implementation of ELTIF 2.0.

The Regulatory Technical Standards (the “RTS”), which are applicable as of 26 October 2024, specify certain topics such as hedging, redemption, liquidity management tools and minimum holding period with the aim of aligning ELTIF operations with their long-investment strategies while protecting investor interests.

The RTS restrict the use of financial derivatives instruments (“FDI”) solely for hedging purposes aiming to ensure that FDI effectively reduce the risks tied to the ELTIF’s investments.

ELTIF managers must also assess the compatibility of the life of the ELTIF with the life cycle of its assets, considering inter alia its investment objective, the liquidity profiles of the ELTIF’s portfolio and its assets, the redemption policy etc.

The RTS mandate detailed redemption policies and liquidity management tools, supported by regular stress testing to handle severe market conditions.

Matching transfer requests between investors must follow strict criteria to prevent arbitrage, and valuation methodologies are required to reflect current market conditions. Cost disclosure rules ensure all fees are transparently reported as percentages of the net asset value, enhancing investor confidence and comparability across various long-term investment funds.

With standardised frameworks for redemptions, liquidity management tools, and cost disclosures, the RTS harmonise ELTIF management across the EU. This enhances market integrity and reinforce the brand of ELTIFs in long-term investments, particularly for retail and institutional investors.

On 12 December 2024, ESMA released a consultation paper proposing Regulatory Technical Standards (“RTS”) to guide the operations of open-ended loan-originating AIFs (“LO AIFs”) under the AIFMD aiming to enhance regulatory consistency and supervisory convergence across EU member states, reduce regulatory arbitrage and enhance investor protection.

LO AIFs are defined under the AIFMD as AIFs whose investment strategy is mainly to originate loans or whose originated loans have a notional value that represents at least 50% of their net asset value.

LO AIFs, traditionally closed-ended by default, may be open-ended provided that their fund manager can demonstrate to national competent authorities that the AIF’s liquidity management system is compatible with the fund’s investment strategy and redemption policy.

The proposed RTS outline four core elements for LO AIFs with an open-ended structure: sound liquidity management, adequate liquid assets and robust liquidity stress testing and appropriate redemption policies.

Redemption policies must consider certain factors such as investor behaviour and redemption notice periods having regard to the LO AIF’s liquidity profile.

Fund managers must maintain sufficient liquid assets defined as cash flows from loans and other investments that can be converted to cash within the fund’s notice period without significant value loss.

Quarterly liquidity stress tests are required, with scenarios simulating adverse market conditions, including high redemption requests or loan defaults. These tests ensure resilience by assessing both assets and liability side risks. Fund managers must also implement ongoing monitoring mechanisms to track liquid asset levels, investor behaviour, repayment schedules, and potential loan impairments. The framework prioritises the fair treatment of investors while aligning investment strategies with liquidity profiles.

A cost-benefit analysis indicates limited compliance costs for fund managers due to alignment with existing AIFMD rules, while providing significant benefits in terms of financial stability and investor confidence. Feedback on the consultation is sought by 12 March 2025, with final RTS expected by late 2025. This initiative seeks to balance operational flexibility for fund managers with robust safeguards for investors interests.

On 11 November 2024, the CSSF published a communiqué restating that with effect from 11 September 2024, new information requirements, including predominant AIF type and contact points for notification letters, invoices, and investor facilities, are collected through marketing notification and de-notification requests. The eDesk CBDF module and S3 API channel have been updated accordingly. Detailed changes are outlined in the user guide for cross-border marketing.

On 19 November 2024, the CSSF published a communiqué concerning a data collection exercise for a one-off report on costs linked to AIF investments, initiated by ESMA on 14 November 2024.

As part of the review of the AIFMD and UCITS Directive, ESMA is required to submit a report assessing the costs charged by AIFMs and UCITS management companies to investors, explaining the potential costs differences and evaluating their causes and nature. Those costs include all fees, charges, and expenses directly or indirectly borne by investors, or by the AIF managers in connection with the AIFs’ operations and those directly or indirectly allocated to the AIFs.

To this end, the CSSF is required to collect and provide data collected to ESMA.

The CSSF launched its data collection exercise by the end of November 2024, targeting a representative sample of Luxembourg-based UCITS and AIF managers and distributors.

Selected entities are required to complete a questionnaire via the CSSF eDesk Portal. Details and deadlines are communicated directly to participants, with any further guidance from ESMA shared as it becomes available.

The final report should be submitted by ESMA to the European Parliament, the Council, and the European Commission by 16 October 2025.

On 24 December 2024, the CSSF published a new FAQ on Circular CSSF 24/856 on the protection of investors in case of NAV calculation errors, non-compliance with the investment rules and other errors, applicable as from 1 January 2025. This new FAQ will replace the FAQ on Circular CSSF 02/77 and aims to provide updated guidance therein. It will retain certain questions from the previous FAQ where they remain relevant. However, most questions from the Circular 02/77 FAQ have been deleted, as their clarifications have been directly integrated into the new circular. Click here to read our Quarterly Update 1 of 2024 on Circular CSSF 24/856.

The new FAQ introduces questions which address the scope of application of the circular, the use of tolerance thresholds for closed-ended UCIs, and the handling of non-compliant cost or fee payment at the UCI level. It is worth noting that the previous FAQ will remain applicable for errors and non-compliance cases identified before 1 January 2025. For any errors or instances of non-compliance detected from 1 January 2025 onwards, the provisions of the new Circular 24/856 and the provided FAQ will apply.

The CSSF also released the UCI notification in accordance with Circular CSSF 24/856. The practical and technical guide outlines the notification process for UCITS and AIFs, detailing the submission requirements, technical specifications and regulatory expectations. It emphasises the use of the CSSF eDesk Portal and the S3 API communication channel, which are now the only authorised channels for filing and managing notifications. The guide also includes specific instructions regarding the required templates, format and nomenclature standards to ensure submissions are consistent and meet regulatory requirements. Additionally, it clearly defines who is authorised to submit notifications, meaning either the UCIs themselves, the IFM, a mandated delegate, or the UCI administrator.