Considering the special circumstances caused by the Covid-19 crisis on financial markets, the CSSF will expect enhanced transparency on the liquidity management tools used by investment managers. The CSSF has required certain market participants to provide specific reporting of certain redemption events, the use of a swing factor, or significant events related to the impact of the Covid-19 crisis on the financial markets such as changes in valuation methods or delays in net asset value calculation.
Generally speaking, investor disclosure and notification requirements will depend on the terms in the fund documents and the relevant product legislation.
To the extent that the implementation of the swing pricing is made in accordance with the rules laid down in the prospectus, no notification to investors should be required. If however, the investment manager wishes to make use of an increased swing factor, the CSSF has clarified that this action would require the notification of investors (see our separate question on this subject). The same would apply to anti-dilution levy mechanisms.
Adapting the valuation rules may generally be done without investor notification provided that valuation is still carried out in accordance with the principles and methodologies set out in the fund documents.
Implementing a suspension of redemptions would generally require the notification of investors of the relevant fund, and the regulator should be notified without undue delay. Investors would also need to notified when applying redemption gates.
Amendments to the fund documents with the aim of providing more flexibility in terms of liquidity management would, in most cases, require that investors be notified and, for regulated funds, would need the prior approval of the CSSF.
As a rule, investors should be notified by the means provided for in the prospectus. However, given the restrictions on people and services imposed under the various lockdown measures, certain communication channels may no longer be available or be efficient, and may need to be replaced temporarily by electronic means of communication only.
Your contacts for more details : Cristina Bolea (email@example.com) and Henning Schwabe(firstname.lastname@example.org) / FF_Covid19_impact@arendt.com