Circular CSSF 08/356 (as amended by Circular CSSF 25/901) (Updated)
Executive Summary
Circular CSSF 08/356, as amended by Circular CSSF 25/901, establishes detailed rules for Luxembourg undertakings for collective investment (UCIs), including UCITS and alternative investment funds (AIFs), on the use of techniques and instruments relating to transferable securities and money market instruments, such as securities lending, repo transactions, and over-the-counter (OTC) derivatives. It matters because it ensures investor protection, risk management, and market stability by imposing strict eligibility, collateral, and operational requirements, aligning Luxembourg funds with EU standards under UCITS and AIFMD directives. Compliance is critical for Luxembourg-domiciled funds engaging in these activities to avoid regulatory sanctions and operational disruptions. #
What Changed
The original Circular CSSF 08/356 (2008) transposed UCITS III requirements on eligible techniques like securities lending and repos. The amendment via Circular CSSF 25/901 (issued in 2025) introduces updates to reflect post-Brexit adjustments, enhanced ESG considerations in collateral eligibility, stricter counterparty risk limits for OTC derivatives, and improved transparency in reporting. Key changes include: - Expanded collateral rules: Collateral must now include sustainable assets meeting SFDR criteria, with daily marking-to-market and haircuts adjusted for liquidity and credit risk (Section 3). - Counterparty exposure limits: Net exposure to a single OTC counterparty capped at 10% of net asset value (NAV), down from previous thresholds in some cases, with mandatory collateralization
What You Need To Do
- *Policy Review & Update
- *Risk Management Systems
- *Counterparty Due Diligence
- *Operational Setup
- *Reporting & Disclosure
- *Training & Audit
Key Dates
Compliance Impact
Urgency: High - Immediate relevance for funds actively using these techniques (common in fixed-income and equity strategies for yield enhancement). Non-compliance risks CSSF fines (up to 5% of NAV), temporary prohibitions on techniques, or fund suspension. With the 01 January 2026 effective date recently passed (as of current context), firms face heightened scrutiny in 2026 reporting cycles; proac
Who is Affected
Summary
Rules applicable to undertakings for collective investment when they employ certain techniques and instruments relating to transferable securities and money market instruments