ESG Alert – CSSF announces Fast Track Approval Process for SFDR Level 2 disclosures

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The Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg financial services regulator, on 27 July 2022 issued a communication to the investment fund industry reminding it of the deadline of 1 January 2023 for specific updates of UCITS and regulated AIFs’ (i.e., SIF, SICAR, part II and ELTIF)1 pre-contractual documents to comply with the requirements of the Regulatory Technical Standards issued under the Sustainable Finance Disclosure Regulation (SFDR)2 and the Taxonomy Regulation (RTS).3 The CSSF communication also provided details on how to proceed with the filing of updated pre-contractual documents in view of the upcoming entry into force of the RTS.

CSSF “fast track approval process” for RTS disclosures

On 6 September 2022, the CSSF issued a communication4 stating that Financial Market Participants (FMPs)5 intending to update pre-contractual documents may benefit from an accelerated examination and visa stamping – a “fast track approval process” – for the prospectus or issuing/offering documents provided that certain conditions are fulfilled.

The communication also included an RTS confirmation letter that the CSSF said should accompany the filing of a prospectus or issuing/offering document to support the update on sustainability-related disclosures in connection with the RTS. The RTS confirmation letter can be downloaded here for UCITS and here for regulated AIFs and should be signed by authorized representatives of the relevant FMP.

This is the first time that the CSSF has indicated that it would make a “fast track approval” process available for the RTS-related updates. The “fast track approval process” is only available until 31 October 2022, and the CSSF is clear that any submissions made after that date will only be considered on a best effort basis in order receive a visa-stamped document in time for the deadline of 1 January 2023.

Importantly, where the prospectuses or issuing/offering documents are updated with regard to the RTS along with other material changes (including SFDR related reclassifications of financial products from article 6 financial products to article 8 financial products for example), those documents must be filed using the normal amendments procedure.

CSSF conditions to make use of the “fast track approval process”

To benefit from the “fast track approval process,” the CSSF requires that the following conditions are fulfilled:

  • changes made to the pre-contractual documents are limited to the insertion of the templates according to the annexes of the RTS and that changes are made for all of the sub-funds subject to Article 8 or 9 SFDR where it is an umbrella fund;
  • the updated prospectus filed is accompanied by the RTS confirmation letter and related table requested, duly filled in and signed by authorised representatives of the relevant FMP;
  • any other changes made apart from changes made in reference to the insertion of the standardized annexes pursuant to the RTS must be minor, of editorial nature only and not entail a material change for investors;
  • for the purpose of the accelerated examination and visa stamp procedure, the following sequential process must be followed:
  1. The submission for examination of a draft prospectus/issuing/offering document, including the templates (in track changes compared to last visa-stamped prospectus/issuing/offering document), the RTS confirmation letter and the related table;
  2. Where relevant, the CSSF will return comments to the applicant with a request for prompt clarification or confirmation, if needed. This process will be repeated until the CSSF has no further comments and agrees with the content of the proposed disclosure;
  3. After completion of the review process and consent, confirmation will be sent to the applicant that the examination phase has ended and the applicant will be invited to upload the approved document in clean version for visa stamping, in PDF – text format and in accordance with Circular CSSF 19/708 relating to the electronic transmission of documents to the CSSF.

Conclusion

The CSSF making a “fast track approval” available is a welcome development. However, FMPs will need to act quickly if they are to meet the deadline on 31 October 2022 before the “fast track process” closes. While the accelerated examination or fast track allows the SFDR reclassification procedure to be largely driven by FMPs, FMPs are reminded that the CSSF considers “compliance of the IFMs’ and investment funds’ activity with the different levels of EU legislation on sustainable finance is a supervisory priority” in its annual report published on 8 September 2022.

It is also important to note that the “fast track approval process” applies only to regulated funds. Reserved Alternative Investment Funds (RAIFs) and other unregulated entities need only ensure that their disclosures are updated by 1 January 2023.

Footnotes

1) These vehicles being a Specialised Investment Fund (SIF), a société d'investissement en capital à risqué (SICAR), a fund set up under Part II of the Luxembourg Law of 17 December 2010 on undertakings for collective investment (part II) and a European Long Term Investment Fund (ELTIF).

2) Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), as amended by Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation).

3) The RTS being Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports, is available here.

4) The CSSF communication is available here.

5) FPMs are defined in SFDR to include alternative investment fund managers (AIFMs), UCITS management companies (UCITS ManCos), MiFID investment managers/advisers and other in scope financial institution.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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