TITLE: Luxembourg Financial Authority Implements ESMA Guidelines on Liquidity Management Tools for Investment Funds
BODY:
On 15 April 2026, the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg's financial regulator, published Circular CSSF 26/910 formally implementing the European Securities and Markets Authority (ESMA) Guidelines on Liquidity Management Tools (LMTs) of Undertakings for Collective Investment in Transferable Securities (UCITS) and open-ended Alternative Investment Funds (AIFs). The Guidelines, published by ESMA on 12 March 2026, establish supervisory standards for the selection, calibration, activation and deactivation of liquidity management tools by fund managers.
The Guidelines address four main categories of LMTs: quantitative-based tools (suspension of subscriptions and redemptions, redemption gates, extension of notice periods, and redemptions in kind); anti-dilution tools (redemption fees, swing pricing, dual pricing, and anti-dilution levies); and side pockets. The Guidelines implement requirements introduced by Directive (EU) 2024/927, which amended the Alternative Investment Fund Managers Directive (2011/61/EU) and the UCITS Directive (2009/65/EC), and were transposed into Luxembourg law through amendments to the Law of 17 December 2010 and the Law of 12 July 2013. Fund managers retain primary responsibility for liquidity risk management and must demonstrate that selected LMTs are appropriate, effective and in the best interests of all investors under both normal and stressed market conditions.
The Circular applies to Luxembourg-based management companies, investment companies, UCITS investment companies without designated managers, and Alternative Investment Fund Managers (AIFMs) managing open-ended AIFs. The Guidelines apply from 16 April 2026, with a 12-month transition period for existing funds until 16 April 2027. Competent authorities must notify ESMA of compliance within two months of publication.