Circular CSSF 19/733 is a CSSF circular, published 20 December 2019. Subject: IOSCO recommendations – Liquidity risk management for open-ended undertakings for collective investment.
\nLegal basis: Law of 17 December 2010 on undertakings for collective investment, Law of 12 July 2013 on alternative investment fund managers.
\nRelevant for: AIFMs, Investment fund managers, Management companies - Chapter 15, Management companies - Chapter 16, Other specific authorisations, registrations and information, Part II UCIs, SICARs, SIFs, UCITS.
\nKeywords: Money Market Fund (MMF), Risk management.
\nLuxembourg, 20 December 2019
\nTo all Luxembourg investment fund managers, to all Luxembourg undertakings for collective investment and to those involved in the operation and supervision of such undertakings
\nRe : IOSCO recommendations - Liquidity risk management for open-ended undertakings for collective investment
\nLadies and Gentlemen, We refer to the International Organization of Securities Commissions (IOSCO) recommendations and good practices on liquidity risk management for undertakings for collective investment (“UCIs”), brought to your attention by means of the CSSF Press Release 18/08. The objective of this Circular is to implement the IOSCO recommendations into Luxembourg regulation applicable to the entities, as defined in Section I below (the “Scope”). The IOSCO recommendations address the structural vulnerabilities associated with asset management activities in the area of liquidity risk that were identified by the Financial Stability Board (FSB) in the sense that they could potentially pose financial stability risks. They point to the importance of an effective liquidity risk management to safeguard the interests and protection of investors, to maintain the orderliness and robustness of UCIs and markets, and to help reduce systemic risk, all of which support financial stability. The CSSF expects entities, as referred to in the Scope, to implement the IOSCO recommendations and to draw on the related IOSCO good practices for the implementation of a robust and effective liquidity risk management process for each of their managed open-ended UCIs. The IOSCO recommendations are appended to this Circular. The IOSCO good practices are available on the IOSCO website https://www.iosco.org/.
\nI. Scope The provisions of this Circular apply to the following investment fund managers (“IFMs”) managing open-ended UCIs: • management companies incorporated under Luxembourg law and subject to Chapter 15 of the Law of 17 December 2010 relating to undertakings for collective investment (hereinafter “2010 Law”); • management companies incorporated under Luxembourg law and subject to Article 125-2 of Chapter 16 of the 2010 Law; • Luxembourg branches of IFMs subject to Chapter 17 of the 2010 Law; • investment companies which did not designate a management company within the meaning of Article 27 of the 2010 Law; • alternative investment fund managers authorised under Chapter 2 of the Law of 12 July 2013 on alternative investment fund managers (hereinafter “2013 Law”); as well as • internally managed alternative investment funds within the meaning of point (b) of Article 4(1) of the 2013 Law. In addition, this Circular applies to open-ended Specialised Investment Funds (“SIFs”) which are not referred to in the specific provisions of Part II of the Law of 13 February 2007 (hereafter “2007 Law”) and which are subject to the provisions of the CSSF Regulation N° 15-07 laying down detailed rules for the application of Article 42a of the 2007 Law as regards the requirements in relation to risk management and conflicts of interest. The CSSF also recommends open-ended UCIs subject to Part II of the 2010 Law which are not managed by an authorized alternative investment fund manager as defined in the 2013 Law to consider the provisions of this Circular. Entities as referred to in the scope managing closed-ended UCIs are recommended to give consideration to the provisions of this Circular, where deemed necessary and relevant. II. Summary of the main elements of the IOSCO recommendations The IOSCO recommendations address in particular the following elements of the liquidity risk management process: the design process of UCIs; the day-to-day liquidity management of UCIs ; and contingency planning. II.1. The design process of UCIs At the design phase of UCIs,
\n an effective liquidity risk management process should be established.
\nThe text above is the opening of the document; the PDF carries the whole.
\nDocument page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.
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