FAQ regarding Circular CSSF 02/77 is a CSSF FAQ, published 3 April 2025. It was repealed by Circular CSSF 24/856.
\nRelevant for: AIFMs, Investment fund managers, Management companies - Chapter 15, Management companies - Chapter 16, Part II UCIs, SIFs, UCITS.
\nKeywords: NAV calculation, Risk management.
\nIn case of discrepancies between the French and the English text, the French text shall prevail
\nLuxembourg, 27th November, 2002
\nTo: All Luxembourg undertakings for collective investment and all parties involved in the operation and supervision of such undertakings
\nConcerns:
\nProtection of investors in case of NAV calculation error and correction of the consequences resulting from non-compliance with the investment rules applicable to undertakings for collective investment.
\nLadies and Gentlemen, The purpose of this circular is to set out the minimum rules of conduct to be followed by collective investment professionals in Luxembourg in case of errors in the administration or management of the undertakings for collective investment (\"UCIs\") for which they are responsible. Errors which occur in practice are essentially those resulting from the incorrect calculation of the net asset value (\"NAV\") or from non-compliance with the investment rules applicable to UCIs. In most cases, non-compliance is caused either by investments which are not in compliance with the investment policy which the UCIs define in their prospectus or because of a breach of the investment or borrowing restrictions provided for by law or their prospectus. It is the responsibility of the UCIs' promoters to ensure that any errors are correctly dealt with in strictest compliance with the rules of conduct specified in this circular. This is of a primordial importance not only because the interests of the UCIs and/or of the investors having suffered a loss need to be protected, but it must be ensured that investors maintain their trust in the integrity of collective management professionals which exercise their activities in Luxembourg and the effectiveness of the supervision exercised over UCIs.
\nThe corrective and compensatory actions to be taken in case of NAV calculation errors or in case of non-compliance with the investment rules applicable to UCIs are separately dealt with under sections I. and II. hereafter. That presentation is necessary to take account of the fact that this circular takes a different approach to deal with losses in each of the two situations. This circular replaces and supersedes CSSF circular 2000/8 of 15th March, 2000. I. The treatment of NAV calculation errors 1. Definition of a calculation error It is reminded that the NAV per unit/share of UCIs is obtained by dividing the value of their net assets, meaning assets less liabilities, by the number of units/shares outstanding. Unless provided differently in their constitutional documents, the valuation of the assets of UCIs, whose investment policy provides for the investment in transferable securities, must be based, in case of securities admitted to official stock exchange listing, on the last known price on such stock exchange, unless such price is not representative. Securities which are not so listed or securities which are so listed but of which the last price is not representative, are valued on the basis of the reasonably foreseeable sale's price which must be determined prudently and in good faith. It is presumed that the NAV is correctly calculated where the rules provided for its determination in the constitutional documents and prospectus of the UCI are strictly applied, consistently and in good faith, on the basis of the most current and most reliable information available at the time of the calculation. An error in the NAV calculation occurs as a result of one or more factors or circumstances which cause the calculation to yield an incorrect result. Generally, these factors and circumstances are related to inadequate internal control procedures, management shortfalls, imperfections or deficiencies in the operation of the IT, accounting or communication systems as well as to non-compliance with the valuation rules provided in the constitutional documents and the prospectus of UCIs. 2.
\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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