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CSSF circular 18/697: hidden impacts on retail funds depositaries

CSSF circular 18/697: hidden impacts on retail funds depositaries

  • United Kingdom
  • Luxembourg
  • Financial services and markets regulation

12-10-2018

The main purpose of CSSF Circular 18/697 is to set out rules applicable to depositaries of alternative investment funds, however, some of the rules also affect depositaries of retail funds such as Luxembourg UCITS and Part II funds and modify CSSF Circular 16/644.

What is the impact on depositories of UCITS and Part II funds depositaries?

1. Part II funds that permit sales of their units to retail investors in Luxembourg are now within the scope of Circular 16/644 which must now be read as applicable to both Part I and Part II funds that permit the sales of their units to retail investors.

2. Annexe 1 of Circular 16/644 is replaced by Annexe 1 of Circular 18/697.

The good news is that depositaries of retail and alternative funds will now make reports in accordance with the same annexe, easing their reporting duties.

Under new Annexe 1 the following has changed:

• if a depositary has more than one general manager, the reason for having multiple general managers must be explained and an explanation of how those general manager make decisions must be provided

• if a depositary also acts as central administration agent its internal organisation chart must show to which services and tasks this relates

• in the annual employee disclosure, the number of employees should be specified in full time equivalent employees

• depositary line managers CVs should include the following details:

o professional history

o employment history

o place and date of birth

• the delegate list must include prime brokers and collateral agents

o the requirement to provide this list can now be met by providing a link to a website where an updated list is maintained

• if a depositary uses agents it must provide CSSF with a list of those agents annually

• the previous requirement to send a copy of the template depositary agreement with a matrix to the CSSF annually has been replaced by a requirement for depositories to send the CSSF a written and duly signed confirmation attesting that the depositary agreement meets all mandatory rules of the applicable legislation

The CSSF has not yet issued a consolidated version of Circular 16/644.

To read CSSF Circular 18/697 (French language only), click here.

Impact

Retail funds depositaries should review their CSSF reporting in line with this new circular requirements and assess where changes should apply.

How Eversheds Sutherland can help

Our team in Luxembourg currently advises depositary bank on all legal aspects of their business including their service agreements. If you need any guidance or advice on this or other financial services matters, our team in Luxembourg will be pleased to assist you.

For more information contact

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