Luxembourg’s financial supervisor Commission de Surveillance du Secteur Financier, CSSF, and Alfi, the Association of the Luxembourg Fund Industry, will host a joint webinar on 6 June to discuss the new new rules for investment funds concerning errors in Net Asset Value (NAV) calculations, breaches of investment rules, and other related errors in investment funds. The CSSF announced the new rules in March as per CSSF Circular 24/856.
Financial regulators across Europe are closely monitoring CSSF’s approach to managing NAV calculation errors, which is seen as a best practice by many in the industry. Currently, NAV errors are not addressed at the EU level, and the European Securities and Markets Authority, ESMA, is keen to move towards a standardised EU approach, particularly for funds with less liquid assets.
Industry specialists have voiced strong support for the new Luxembourg NAV rules. They said that a clear regulatory framework aids asset managers in becoming more efficient and responsive to investors’ needs, while defining materiality thresholds to ensure a level playing field for all market participants. Legal experts have highlighted the increasing complexity and mixed nature of investment funds, which heightens risks for investors, and stressed the necessity for clear guidelines to address valuation errors in illiquid funds.
’Materiality threshold’ seen as pivotal
The “materiality threshold” for NAV errors is regarded as a pivotal aspect of the new circular. Different firms currently use varying definitions of materiality, which affects how errors are addressed. CSSF aims to standardise these thresholds, ensuring a level playing field for all market participants. This standardization is crucial, as minor errors can lead to costly and lengthy correction processes.
The circular also expands its scope to include new types of investment funds introduced after 2002, such as alternative investment funds (AIFs) and specialized investment funds (SIFs). Given the growing interest in less liquid alternative investments, the circular’s updated guidelines are expected to provide better investor protection and clearer operational processes for fund managers.
The Luxembourg webinar aims to present the new circular and to highlight the main changes it introduces, CSSF said. The webinar is specifically targeted at professionals managing or administering Luxembourg UCIs under CSSF supervision, including board members, conducting officers, compliance officers, and risk managers. Invitations have been sent out by Alfi, and participation is by invitation only.