On 28 August 2019, the CSSF ("regulator") published a Frequently Asked Questions (FAQ) concerning the Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds.
The objective of the document is to highlight some of the key aspects of the Money Market Fund regulation (MMFR) from a Luxembourg perspective. In this document, the CSSF clarifies the following key points:
- Circular 08/356 on certain techniques and instruments relating to transferable securities and money market instruments does not longer apply to MMF authorised under the MMFR
- Changes required in the funds as a result of the entry into force of the MMFR will not systematically be considered material changes. The CSSF will assess those changes on a case-by-case basis in light of the requirements of Circular 14/591.
- AIFs that are to be authorised under the MMFR must appoint an EU AIFM authorised to manage MMFs due to the non- availability of the non- EU AIFM regime under AIFMD.
- The provisions of article 17(1) (b) of the MMFR foresee the possibility to invest more than 10% of the assets in deposits with the same credit institution when the structure of the banking sector in the fund domicile is such that there are insufficient viable credit institutions to meet that diversification requirement and it is not economically feasible for the MMF to make deposits in another Member State. As there are sufficient viable credit institutions in Luxembourg and possibilities to make deposits in other member states, the 10% limit must be adhered to.
- Investment restrictions apply on the basis of the net assets.
- The limits on investment in instruments of a single body apply to the single issuer and not on a consolidated group basis.
- The prospectus of MMFs shall provide information on the internal credit quality assessment procedure.
- Daily maturing assets include deposits with a 1 week or 1 month term when they can be withdrawn with a one day notice and also reverse repos with a fixed term that can be terminated with a one day notice.
- Non-compliance with WAM and WAL requirements but also non-compliance with the daily and weekly minimum liquidity thresholds fall within the scope of application of circular 02/77.
- A given security may have a different valuation in different sub-funds of the same MMF if those sub-funds are of different MMF types (LVNAV, VNAV, public debt CNAV).
The CSSF FAQ can be found using the following link.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.