Ukraine crisis: FAQ on the application of Liquidity Management Tools by investment funds is a CSSF FAQ, published 31 March 2022.
\nLegal basis: Law of 17 December 2010 on undertakings for collective investment.
\nRelevant for: AIFMs, Investment fund managers, Management companies - Chapter 15, Management companies - Chapter 16, Part II UCIs, SICARs, SIFs, UCITS.
\nKeywords: International sanctions, Investor protection, Liquidity, Restrictive measures, Ukraine.
\nUkraine Crisis: FAQs on the application of LMTs by investment funds
\nUKRAINE CRISIS: FAQS ON THE APPLICATION OF LMTS BY INVESTMENT FUNDS Unrestricted Version 1 – March 2022
\nUkraine Crisis: FAQs on the application of LMTs by investment funds
\nPreliminary remark: Please note that the segregation options referred to under point 3. of the present FAQs are only applicable for illiquid assets resulting from the Ukraine crisis and should under no circumstance be interpreted such as creating a precedent by the CSSF for any other or future situations. Introduction In the context of the impact of the Ukraine crisis on financial markets, investment fund managers (IFMs) are currently facing the challenge of how to deal with Russian and Belarussian assets in their managed investment funds that have become illiquid/ nontradeable as a consequence of this crisis as well as due to the restrictive measures taken by the EU and other countries in this context. The CSSF received questions from market participants regarding temporary as well as more structural measures for the situation, including the usage of Liquidity Management Tools (LMTs) by investment funds as well as the valuation of the affected assets. The CSSF hereby would like to provide additional information and clarification, taking into account also the previously published FAQs on swing pricing (FAQ_Swing_Pricing) and COVID-19 (FAQ_Covid_19). The CSSF would like to emphasize that the approach, including the choice of the respective LMTs as well as the valuation to be applied to affected assets, is the responsibility of the governing body 1 of the respective investment fund (hereafter referred to as “governing body of the fund”). The CSSF expects that the governing body of the fund, while always safeguarding the interests of all investors (existing and future) in such funds, considers the following elements (non-exhaustive list) when deciding about the application of temporary or more structural measures for the respective investment fund(s):
\nas defined in Article 1(26a) of the 2010 Law, namely: a) as regards sociétés anonymes (public limited companies), the board of directors or the management board, as the case may be; b) as regards other types of companies, the body that represents the management company or the UCITS pursuant to the law and the instruments of incorporation
\nUKRAINE CRISIS: FAQS ON THE APPLICATION OF LMTS BY INVESTMENT FUNDS Version 1 – March 2022
\nSpecific fund documentation (prospectus, articles of incorporation, management regulation)
\nInvestment policy and strategy (country-focused or wider investment focus)
\nOverall size of exposure to illiquid/ non-tradeable assets in absolute size and in relation to total net assets.
\nRestrictions due to the current sanction’s regime.
\nAs most of the affected investment funds are UCITS and governed by the local Law of 17 December 2010, the FAQs below mainly relate to these fund structures, while they might also be applicable to alternative investment funds. The following FAQs aims at providing further guidance to the governing body of the fund in their own assessment of each investment fund’s individual situation, to provide further insights on the different options available to the governing body of the fund and to decide on the best way forward.
\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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