Highlights:

The CSSF has announced the launch of the 2024 data collection exercise aimed at assessing the costs associated with investments in UCITS and AIFs. This initiative follows a previous announcement from ESMA which outlined plans to produce a one-off report on these investment costs.

Luxembourg Market Update:

The aggregate net assets of Luxembourg-domiciled regulated investment funds – UCITS and Part II funds, SIFs and SICARs – amounted to €5.66trn at the end of October, up 0.11% from the previous month and by 13.13% from the same month of2023, but still below the peak of €5.86trn at the end of 2021, according to the CSSF. The financial regulator says the industry saw net inflows of €18.01bn,but the value of funds' existing financial market assets decreased by 0.21%, or€11.97bn. The grand duchy was home to 3,179 fund structures at the end of October, down from 3,194 the previous month, including 2,093 umbrella structures containing 12,621 sub-funds, while the number of active fund portfolios totalled 13,707.

Regulatory Developments in and beyond Luxembourg:

11October 2024: Performance fees: new/updated ESMA Q&As

ESMA has updated its Q&As as regards performance fees. Of note are:

·       New question 966: In case of creation of a new compartment/share class in an existing UCITS in the course of its financial year or in case of creation of a new UCITS, can performance fees be crystallised after less than 12 months from the date of creation of such a new UCITS/compartment/share class (i.e.: the date in which the share class is launched/seeded);

·       Updated answer to question 1033: In case of creation of a new compartment/share class in an existing AIF in the course of its financial year or in case of creation of a new AIF, can performance fees be crystallised after less than 12 months from the date of creation of such a new AIF/compartment/share class (i.e.: the date in which the share class is launched/seeded)?

25October 2024: Final Commission Delegated Regulation on ELTIF RTS

The EU Commission has published the final Delegated Regulation on the ELTIF Regulatory Technical Standards (“RTS”).The ELTIF RTS, which are applicable immediately, cover:

·       The circumstances in which the use of derivatives is considered as solely serving the purpose of hedging the risks inherent to the investments of the ELTIF;

·       The circumstances in which the life of an ELTIF is to be considered compatible with the lifecycles of each of its individual assets;

·       The criteria to be used by the ELTIF managers to determine the minimum holding period of an ELTIF which is not closed-ended;

·       The requirements in relation to the redemption policy and liquidity management tools of ELTIFs that not closed-ended, information to be provided to competent authorities thereon and the maximum percentage of liquid assets that can be used for redemption requests, which must be calibrated by the manager of the ELTIF on the basis of either:

o   The redemption frequency and the notice period of the ELTIF (Annex I)

o   The redemption frequency and the minimum percentage of the liquid assets of the ELTIF (Annex II)

·       The criteria to determine the percentage of liquid assets of the ELTIF which could be used to meet redemption requests;

·       The requirements in relation to the transfers of units or shares between exiting and new investors in the ELTIF on transparency, assessment of the market for potential buyers, the determination of the execution price and the pro-ratio conditions where transfers are matched, as well as the level of the fees, costs and charges, if any;

·       The criteria and relevant deadlines for the valuation of the assets to be divested;

·       Definitions, calculation methodologies and presentation formats of costs of the ELTIF.

11November 2024: CSSF Communiqué on UCITS and AIFs cross-border marketing notifications

As announced in the CSSF Communiqué of 11 September 2024, new information(predominant AIF type and contact point(s) concerning the notification letter, invoices and facilities for investors) are now collected through marketing notification and de-notification requests. Consequently, the CSSF eDesk CBDF module and S3 API channel have been adapted. All the modifications, in particular concerning the JSON schema used for transmissions through the API channel, are listed in the new version of the user guide dedicated to the cross-border marketing. For any questions, please contact edesk@cssf.lu.

12November 2024: Circular CSSF 24/865 on the Long Form Report

The CSSF has published Circular CSSF 24/865 which updates Circular CSSF 22/821 on the Long Form Report (as amended) with the aim to further align the content of the self-assessment questionnaire (SAQ) with supervisory points of focus. As a result, the following 2 thematic sections have been included in the revised SAQ:

·       Dora preparedness;

·       LCRDA Article 23(2). 

15November 2024: CSSF Communiqué on new mode of transmission for KIDs and official documents (MR/AI)

As announced in a CSSF Communiqué on 5 April 2024 regarding the direct submission of filings to the CSSF, the collection procedures for the Key Information Document (KID) and the official documents (MR/AI) have changed as of 15 November.

These documents will now be collected exclusively through the following two methods, free of charge :

·       Document upload via the dedicated eDesk procedure;        

·       Automated submission of the documents via API (S3 protocol);

Please note that from 15 November 2024,

·       Only the API (S3) channel or thee Desk approach will be authorised for submitting KIDs and official documents;

·       Any KID or official document submitted using the old transmission method (external channels) will not be processed by the CSSF.

A user guide detailing the submission procedures is available for the Key Information Documents and the official documents. For any questions, please contact edesk@cssf.lu.

19November 2024: CSSF Communiqué on launch of the 2024 ESMA data collection oncosts linked to investments in AIFs and UCITS

The CSSF has published a Communiqué informing that ESMA has announced the launch of its data collection exercise for a one-off report on costs linked to investments in UCITS and AIFs.

For this purpose, the competent authorities are required to provide ESMA with data on costs. This includes all fees, charges, and expenses directly or indirectly borne by investors, or by the UCITS or the AIF investment fund manager in connection with the operation of the UCITS/AIF, and those directly or indirectly allocated to the UCITS/AIF.

To this end, the competent national authorities are asked by ESMA to collect data at the level of UCITS and AIF investment fund managers (manufacturers) as well as distributors (i.e. investment firms, credit institutions, in dependent financial advisors, neo-brokers) in order to provide it to ESMA.

ESMA is expected to submit the report to the European Parliament, the Council, and the European Commission by 16 October 2025. This one-off report will form part of the enhanced 2025 market report on the Costs and Performance of EU Retail Investment Products.

In this context, the CSSF will launch, by the end of November 2024, a data collection exercise requesting a sample of UCITS and AIF investment fund managers as well as distributors to complete a specific questionnaire. A representative selection of Luxembourg-based UCITS and AIF investment fund managers, as well as of distributors, will soon be contacted by the CSSF for this purpose.

To ensure a secure exchange and to allow pre-submission data quality checks, the responses to the questionnaire must be submitted via the CSSF’s eDesk Portal. A dedicated section for completing this questionnaire will soon be available on the portal.

Technical details and deadlines will be communicated directly to the selected entities in the course of the exercise.

In addition, any further guidance from ESMA that becomes available will be provided to the selected entities.

22November 2024: Final decision taken on VAT on Directors' fees

The Luxembourg district court has taken a final decision on VAT on Directors' fees for the TP case. The court ruled that TP's VAT slip was invalid, which confirms the European Court of Justice ruling of 21 December 2023 stating that that a natural person acting as a Director of a commercial company registered as a Société Anonyme (S.A.) is not a taxable person for VAT. This is an important step towards recognising the non-application of VAT for Directors.

The most important question nevertheless remains the interpretation of the decision: is it a ruling in a particular case, limited to Directors of public S.A.s or a ruling of principle which would apply to all Directors?

The Luxembourg Institute of Governance (“ILA”) announced that it is engaging with the Administration de l’Enregistrement et des Domaines (AED) and asked for an appointment with them in December to discuss and understand the concrete consequences of VAT for Directors.

For the time being, ILA maintains the view that a Director is (in most cases) not subject to VAT and the answers to our Q&A published in March are still applicable.

This means that:

·       Directors are no longer obliged to charge VAT to the companies that they serve if their situation is identical to the TP case. If registered as a Director for VAT, they are permitted to stop submitting VAT returns without penalties. However, Directors cannot claim input VAT on their expenses.

·       ILA advises Directors to remain VAT registered for now. The benefits of staying registered is that it will simplify the adjustment process, ensure continued communication with authorities, and minimise any administrative hassle. Authorities have also announced a non-bureaucratic process for adjusting past VAT charges, that requires Director involvement; de-registering could complicate this process.

·       The My Guichet procedure for Directors to adjust past VAT on fees is not yet available and will be discussed with the AED in our next meeting. The purpose of the online platform is to centralise Director requests for VAT adjustments on fees collected since 2018.

For further information, please contact:

Tobias Ettlin

m: +352 691 111 931

tobias.ettlin@one-gs.com

Disclaimer: This regulatory update has been prepared for clients of ONE group solutions and its subsidiaries for informational purposes and is not intended to be relied upon as professional advice. Please visit: https://www.one-gs.com/‍