The CSSF has informed market participants of the publication of Circular CSSF 24/863, thus implementing the ESMA Guidelines on funds’ names into the Luxembourg regulatory framework. In that context, the CSSF has established a priority processing procedure for existing UCITS and AIFs that limit the updates to their issuing document/prospectus to amendments required in the context of the Guidelines.
Context
On 21 October 2024, the CSSF published a Communiqué aimed at the investment fund industry (Communiqué) with regard to the ESMA Guidelines on funds’ names using ESG or sustainability-related terms (Guidelines) as a follow-up to its initial announcement of the Guidelines on 21 August 2024. The Communiqué is accompanied by:
- the official Circular CSSF 24/863 implementing verbatim the Guidelines into Luxembourg’s regulatory framework (Circular);
- a breakdown of the CSSF’s supervisory expectations regarding the application of the Guidelines (Supervisory Expectations); and
- a confirmation letter to accompany the submission of a fund prospectus/issuing document (Confirmation Letter) under the priority processing procedure (PPP).
The Guidelines will apply to new funds from 21 November 2024, with an additional six-month transition period for existing funds, meaning that existing funds have until 21 May 2025 to ensure compliance with the Guidelines.
Key points
Priority processing procedure
As mentioned, the CSSF has put in place a priority processing procedure for existing funds in order to facilitate updates to their pre-contractual documentation. Under the PPP, such updates are limited to amendments made in the context of the Guidelines. Market participants will be required to submit a signed confirmation letter along with the documentation required for the filing.
The CSSF further specifies that:
The amendment(s) must be limited to either a name change of at least one sub-fund or minor adjustments to the fund’s/sub-fund’s ESG engagement/SFDR precontractual disclosure.
By way of a multiple-choice matrix in Appendix 2 of the Confirmation Letter, the PPP will therefore enable market players to not only change the fund name, but also make minor changes to the content of their pre-contractual disclosures.
Additionally, the options provided in Appendix 2 of the Confirmation Letter confirm two points:
- Firstly, that there is a certain level of flexibility about the location of the relevant disclosures. Notably, the CSSF asks for where specifically the disclosures about the PAB/CTB exclusions are located and give as options: (i) the prospectus, (ii) the PCD, (iii) the website and (iv) “other means, please describe”.
- Secondly, that there should be some flexibility about the interpretation of the term “meaningful” when referring to the proportion of sustainable investments made, as the CSSF asks for both the percentage of sustainable investments and a “Description of assessment and rationale used for the determination of “meaningful” sustainable investments”.
Supervisory expectations
The CSSF makes available the PPP subject to the following Supervisory Expectations in relation to the practical application of the Guidelines:
- Fund names should not be misleading, as the disclosure of sustainability characteristics should be commensurate with the effective application of those characteristics to the fund.
- The CSSF expects adequate disclosure in the precontractual documentation of elements supporting the use of ESG or sustainability-related terms in the fund name.
- The list of ESG and sustainability-related terms mentioned in the Guidelines is not exhaustive. Accordingly, market participants are expected to review the names of all the financial products they manage and assess them on a case-by-case basis, regardless of whether the Guidelines apply to those products.
- Market participants are expected to closely monitor and take due consideration of any further developments on this topic at European level.
