Chevalier & Sciales | View firm profile
In the latest update of its Frequently Asked Questions document on the legislation governing alternative investment fund managers, published on July 6, 2017, Luxembourg financial regulator CSSF has addressed issues raised by the introduction in January 2018 of the European Union’s regulation on Packaged Retail and Insurance-based Investment Products and its requirement for such products to provide investors with a Key Information Document.
Exemption for UCITS KIID
The CSSF says manufacturers of Luxembourg AIFs whose units are being advised on, offered to or sold to retail investors must have a PRIIPs KID in place from January 1, 2018, unless they benefit from a two-year exemption under article 32(2) of the PRIIPs Regulation by having issued a UCITS Key Investor Information Document before that date.
The exemption is subject to the UCITS KIID being issued for each retail share class of the sub-funds of the Luxembourg AIF, and that its offering document has been amended to reference the distribution of a KIID to all retail investors considering an investment in the fund. The offering document must also mention that the KIID will be published on the website of the AIF’s registered or authorised AIFM and is available upon request in paper form.
Additional sub-funds or share classes of such an AIF launched after January 1, 2018 may also benefit from the exemption. All AIFs must have a PRIIPs KID in place by January 1, 2020 (unless this deadline is pushed back by the European Commission).
Indication of professional investor exclusivity
The CSSF makes clear that the PRIIPs Regulation does not apply to manufacturers of and persons advising on or selling Luxembourg AIFs whose units are advised on, offered or sold solely to professional investors. However, the regulator strongly urges AIFs in this situation to amend their offering documents before January 1, 2018 to include a reference to the fact that they are restricted to professional investors and therefore no PRIIPs KID will be issued. As an alternative, the CSSF will accept a signed self-assessment form stipulating that AIF’s shares or units may be subscribed or acquired exclusively by professional investors.
Non-EU and existing retail investors
A PRIIPs KID does not have to be provided to retail investors outside the EU and European Economic Area unless the regulations of the country in which marketing takes place provide otherwise, nor is one required for existing retail investors of a Luxembourg AIF if its units are not being advised on, offered or sold to any new retail investors.
A KID does need to be provided to existing retail investors of a Luxembourg AIF that wish to make additional investments after January 1, but not where periodic subscriptions are being made under a regular savings plan, unless a change is made to the subscription arrangements and a new subscription form is required.
Timing of KID delivery
PRIIPs KIDs should be provided to retail investors by persons advising on or selling units of Luxembourg AIFs “in good time” before the investors are bound by any contract or offer relating to the subscription of units, free of charge and in paper form, using another durable medium or by means of a website (a PRIIP manufacturer must always publish the KID on its website). The KID should be made available in at least one official language of each EU member state where the AIF is being offered or sold.
Filing of KID final version
The CSSF says it requires exclusively the notification of the final version of a KID; there is no obligation of notifying any draft versions. Despite the above, the final version of KID will not be certified by the regulator. It must be filed according to the instructions in circulars CSSF 08/371 and CSSF11/509 using the nomenclature described at: http://www.cssf.lu/fileadmin/files/Metier_OPC/Transmission_electronique_des_documents__PRIIPs_KID_.pdf
Other PRIIPs guidance
The CSSF’s update on AIFs and PRIIPs follows just after the publication on July 4 of a Questions and Answers document (https://esas-joint-committee.europa.eu/Publications/Consultations/Questions%20and%20answers%20on%20the%20PRIIPs%20KID.pdf) from the European Supervisory Authorities’ joint committee covering the presentation, content and review of the KID, including the methodologies underpinning the risk, reward and costs information.
At the same time the European Commission adopted and released guidelines (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52017XC0707(02)&from=EN) on application of the PRIIPs Regulation that are designed to ease implementation of the new rules by minimising as far as possible the scope for differences in interpretation between EU member states. It includes clarification in areas including territorial application, running offers and ‘real time’ KIDs.
The latest version of the CSSF FAQ on the Luxembourg law of July 12, 2013 on alternative investment fund managers and the European Commission’s AIFMD level 2 regulation is available at http://www.cssf.lu/fileadmin/files/AIFM/FAQ_AIFMD.pdf.