On 17 August 2021, the Commission de Surveillance du Secteur Financier (the “CSSF”) published an updated version of its Frequently Asked Questions concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment schemes (the “UCITS FAQ”) in order to add a new Section 11 which comprises four new questions in relation to the treatment of breaches of the UCITS global exposure limit.
The new section clarifies in which circumstances a breach can be considered as passive (eg: as the result of the increase of volatility in financial markets even in the absence of any new positions increasing the risk of the portfolio) and the actions the CSSF expects the funds’ managers to take in case of passive breaches. The updated UCITS FAQ also confirms that passive breaches do not need to be reported to the CSSF.
It also provides the list of information that UCITS must communicate to the CSSF in case of occurrence of an active breach of the VaR limits.
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