Fund Distribution Alert 2023-11

On 23 August 2023, the CSSF published the general findings and observations of its thematic review of the marketing communications of Luxembourg investment fund managers ("IFMs" for short, including UCITS management companies and AIFMs), which started in 2022.

As part of these findings and observations, the CSSF provides its interpretation of EU regulations, in particular on the ESMA Guidelines 34-45-1272 on marketing communications, as well as specific recommendations. 

Below is an overview of the key interpretations and recommendations we have identified:

• In terms of what exactly constitutes marketing communications, the CSSF states that it is up to the IFMs to assess this matter based on the guidance provided by ESMA.

• Regarding description of the features of the investment, the CSSF mentions leverage, type of eligible assets and recommended holding period as examples of key elements of said features.

• When it comes to specific terms and acronyms, the CSSF expects these to be properly defined.

• Where IFMs target a specific type of investors with a marketing communication, the CSSF recommends clearly identifying the target investor group, especially when the fund is open to e.g. the public.

• In terms of labels, ratings or certifications, the CSSF recommends indicating the concerned product, date and the granting entity. The CSSF further recommends providing a hyperlink to a website where further information is provided. 

• The CSSF furthermore expects hyperlinks to be used sparsely in marketing communications and those present to lead to the exact place where information is available instead of e.g. a homepage. To avoid issues with broken links, the authority expects IFMs to maintain these links over time.

• Regarding risks related to the investment, the CSSF expects this to be tailored to the product and to include a prominent indication where complete information is available. The CSSF points out that this is also expected when the marketing communication is addressed to professional investors only.

• For a fair, clear and not misleading disclosure of costs, the CSSF is of the view that the marketing communication should show the periodicity of the costs and include as applicable a prominent indication that not all costs are present and further information may be found in the prospectus.

• As regards performance, the CSSF is of the view that the 10-year period of performance disclosure foreseen in the ESMA guidelines for “funds establishing a KIID” also applies to funds establishing (PRIIPs) KIDs. Such funds are thus not to be considered as “other funds” by the authority which should only show performance for the preceding 5 years. 
  • Moreover, the CSSF expects IFMs to:
    - prominently disclose any changes which significantly affect the past performance of the promoted fund, and;
    - ensure consistency with the fund’s documents and include the same information present in those documents concerning benchmarks in the marketing communications.
  • The CSSF is also of the opinion that the following practices are non-compliant:
    - showing performance for the current year updated at the end of the most recent month instead of quarter, and;
    - showing simulated performance for newly launched funds based on a related group strategy (or equivalent).

The CSSF asks IFMs to take the findings, observations and recommendations into consideration in the preparation of fund marketing communications.

The general findings and observations of the CSSF can be accessed in full here (in English).

Please feel free to contact us should you require any additional information.

Partner
+352 22 51 51 7892
said.fihri@kpmg.lu

Director
+352 22 51 51 7271
stephanie.zedda@kpmg.lu

Senior Manager
+352 22 51 51 7417
henrik.olsson@kpmg.lu