UCITS IV & Risk Management: CSSF Circular 11/512

The CSSF has released this morning a new circular 11/512 dealing with risk management (the "Circular"). The Circular (see above the hyperlink to the text of the Circular that only exists in French for the moment) must be read together with CSSF Regulation 10-4 (articles 42-50) and ESMA publications on risk management (e.g. 10-788).

The Circular imposes two deadlines regarding the upgrade of the following:

Risk Management Process: the rules laid down in articles 42-50 of CSSF Regulation 10-4 and ESMA 10-788 must be incorporated into the risk management manual on 1 June 2011 (this deadline is not new since it was already provided for by CSSF Regulation 10-4 and Circular 11/508). In addition, the risk management manual will have to comply with the template imposed by the Circular by 31 December 2011 at the latest.

Prospectus: the global exposure calculation methodology, expected level of leverage (if VaR is used) and information about the reference portfolio (if relative VaR is used) must be disclosed in the prospectus at the occasion of an update (not necessarily the next one) and by 31 December 2011 at the latest.

Annual Report : the global exposure calculation methodology, the minimum, average and maximum VaR levels and level of leverage observed over the accounting year (if VaR is used) and information about the reference portfolio (if relative VaR is used) must be reported in the annual report of the accounting year closed on 31 December 2011 (the first observation period being 1 July until 31 December).

The PowerPoint slide should facilitate your reading of the Circular as far as the deadlines are concerned.

For more information please contact: Freddy Brausch, Emmanuel-Frédéric Henrion, Hermann Beythan or Josiane Schroeder