On 28 August 2018, the CSSF issued its first version of Frequently Asked Questions (FAQs) concerning the Regulation (EU) 2017/1131 on Money Market Funds (MMFs). The FAQs aim at highlighting some of the key aspects of the MMF Regulation ("MMFR" or "Regulation") on MMFs and are addressed to managers of MMFs and MMFs that are established in Luxembourg.
This first FAQs cover general provisions, obligations concerning the investment policies of MMFs, obligations concerning the risk management of MMFs, valuation rules and transparency requirements.
Under general provisions, a few questions have been addressed with regard to the impact of distribution policy on the type of MMFs, the applicability of circular CSSF 08/356 to those MMFs authorised under the MMFR, assessment of the CSSF on the materiality of the changes at the level of existing funds pursuant to the entry into force of the MMFR, eligible entity to manage the MMFs and the applicability of the MMFR to a Luxembourg AIF MMF marketed exclusively outside of Luxembourg.
In terms of obligations concerning the investment policies of MMFs, a few topics have been covered, namely the types of Master/Feeder structures allowed, clarification on the application of the 10% investment limit in deposits and on the basis of computation of the investment limits when referring to single body or total assets (i.e. as well as the obligation for the MMFs to detail the internal credit quality assessment procedure in the sales prospectus.
With regard to obligations concerning the risk management of MMFs, the CSSF has highlighted several points including the classification of deposits with a 1 week or 1 month term or reverse repos with a fixed term as daily maturing assets, and clarification of the treatment of non-compliance issues with WAL/WAM limits and liquidity thresholds vis-à-vis the CSSF circular 02/77.
As regards valuation rules, the FAQ covers the possibility that different sub-funds (i.e. public debt CNAV MMF, LVNAV MMF or VNAV MMF) of the same MMF umbrella use different valuation methods to price the same security.
Finally, in terms of transparency requirements, the CSSF has also addressed a few points regarding the disclosure of information under article 36(2) of the MMFR (i.e. weekly reporting to investors), such as its applicable timeline, the means to disclose such information and the required content.
The full text of FAQs is available at 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.