Fund regulatory trends

The "Investment Funds - latest trends and evolutions in the regulatory landscape" break out session was an in depth, technical view of boards’ responsibilities around regulations, most notably SFDR, new reporting requirements from the CSSF and AML 

New SFDR requirements kick in on 1st January 2023, and Daniela Klasen-Martin of Credit Suisse Fund Management listed the key areas that management companies need to get right: pre contractual disclosure related to article eight and article nine funds; website disclosures; the principal adverse impact statement template; and periodic financial reporting. “One of the key challenges is related to independent sources of data,” she noted. 

On the fund side, Joachim Kuske, a non-Executive Director, said boards need to “ensure service providers (mostly the IFM) have processes in place for facing the challenges.” He suggested making ESG concerns a standing agenda item and boards should receive adequate reporting from the IFMs on ongoing compliance with the relevant requirements.

Some fund managers have downgraded funds from Article 8 to 6 or from 9 to 8. “I would pay particular attention as a fund board or as the management company board to question the portfolio manager about the reasons for this downgrade,” said Daniela. “Also ask a quick question about if there was any suggestion of greenwashing before that downgrade,” she said. The panel advised that these discussions must be reflected in minutes.

Revel Wood of ONE group solutions touched on the requirement to ensure policies are reflected in documentation and practice: sustainability risk policies, enhancement to policies like the governance policies, or even remuneration policies. “Boards should rely on product and governance committees internally to ensure that the processes are being adopted and adhered to,” he said.

In the new reporting requirements section, Mike Delano of PwC reminded directors that the new templates for the self-assessment questionnaire (SAQ) and separate report (SR) are now live on the CSSF’s e-desk platform. He and the panel noted that the CSSF had been explicit that the reason for these questionnaires is not necessarily to drive inspections but to enhance the regulator’s ability to identify areas where guidance may need to be clarified, and also where certain market players have not understood the requirements. “In areas such as TA and distribution, depending on the products, the questions might not be applicable,” said Revel. Again, good quality board discussions need representing in the minutes, said the panel. 

A presentation on key AML technicalities ended the session. This featured a summary by Sophie Dupin of Elvinger Hoss Prussen of ILA-CSSF discussions to clarify the finer points of how the CSSF is interpreting the EBA’s AML guidelines. This included clarification on the nature of the "responsable du respect des obligations" ("RR"), and the "responsable du contrôle du respect des obligations" ("RC").