CSSF feedback report on Circular CSSF 24/856: key observations on NAV errors, investment rule breaches and UCI notifications

Background

Circular CSSF 24/856 entered into application on 1 January 2025 and repealed Circular CSSF 02/77. The Circular significantly expanded the scope of the previous framework by extending its application beyond UCITS and Part II UCIs to include, among others, SIFs, SICARs, ELTIFs, MMFs, EuVECAs and EuSEFs. It also introduced a dedicated framework for “other errors”, including errors relating to the payment of costs and fees, swing pricing and investment allocations. In addition, the Circular introduced dedicated approaches for the determination of NAV error tolerance thresholds and consolidated guidance previously provided by the CSSF through FAQs, activity reports and supervisory practice. 

The CSSF also updated the notification forms and introduced dedicated submission channels through the eDesk platform and API-based reporting.

Statistics from the first year of application

The CSSF reports that it received a total of 2,028 notifications under Circular CSSF 24/856 during 2025. 

Instances of non-compliance with investment rules represented the largest category, accounting for 1,393 notifications, followed by 586 notifications relating to other errors and 239 notifications concerning NAV calculation errors.

Among investment restriction breaches, the most common category concerned non-compliance with investment policy limits or rules set out in UCIs’ prospectuses or offering documents. The CSSF reports that 210 notifications related to ESG-related limitations.

For the newly introduced category of “other errors”, the vast majority of notifications concerned non-compliant payments of costs and fees at UCI level, representing 416 of the 586 notifications received.

Key CSSF observations

NAV calculation errors

The CSSF observed that the category “Other error” was used too frequently when reporting NAV calculation errors and notes that a more detailed assessment of the incident and its root cause would often have allowed a more appropriate classification. 

The CSSF also observed that certain incidents were incorrectly reported as NAV calculation errors even though they should have been classified as breaches of investment rules or under one of the categories of “other errors”. The report therefore highlights the importance of properly assessing errors and instances of non-compliance and notifying them under the appropriate category.

The report further draws attention to the CSSF’s expectation that entities applying a qualitative approach for determining NAV error tolerance thresholds ensure that the supporting analysis is sufficiently detailed and adequately documented. The CSSF notes that a number of requests submitted in this context lacked sufficient depth and consistency.

The CSSF also states that UCIs offering limited redemption possibilities, such as semi-liquid Part II UCIs, fall within the category of open-ended UCIs and are therefore subject to the guidelines of Chapter 4 of the Circular, including the guidelines on tolerance thresholds.

Investment rule breaches

The CSSF observed that UCIs generally have robust policies, processes and procedures in place to ensure compliance with applicable investment restrictions.

With regard to correction methods, the report recalls that the economic method may only be used where it is formally provided for in the UCI’s internal policies and procedures and where the use of a representative comparative benchmark is clearly defined. The CSSF notes that it identified a limited number of cases where the economic method was used without an adequate policy basis and intervened to ensure consistency. 

Non-compliant payment of costs and fees

The report identifies weaknesses in control frameworks as a recurring cause of cost and fee payment errors. The CSSF refers in particular to insufficient pre- and post-payment controls, overly manual processes, inadequate oversight of delegates, deficiencies in escalation and reconciliation processes, as well as insufficient corrective and remediation measures.

The report also notes that a material number of notifications concerned relatively small compensation amounts. While the CSSF indicates that it is currently assessing the framework of the Circular in light of this observation, it states that, in the meantime, all instances of non-compliant payments of costs and fees, irrespective of their amount, must still be notified to the CSSF. 

The CSSF further reminds entities that compensation must be paid in full and without delay. Compensation paid in instalments is not permitted, nor may compensation amounts be offset against future remuneration owed to the party responsible for the error or instance of non-compliance.

Investment allocation errors

The CSSF highlights a number of observations concerning investment allocation errors.

In particular, it notes that where an investment is incorrectly allocated between two UCIs that are both in scope of the Circular, the error will generally have an impact at the level of each UCI and, accordingly, the CSSF expects two notifications, one for each affected UCI.

The CSSF also emphasises that the impact of an erroneously allocated investment should be assessed by reference to the applicable market price at the time of correction and does not accept that an incorrect allocation is simply reversed at the initial acquisition price without analysing and calculating the impact at sub-fund level.

Notification requirements for “other errors”

Before addressing the individual sub-categories of “other errors”, the CSSF clarifies the notification requirements applicable to Chapter 6 of the Circular. In particular, the report states that such errors must be notified in accordance with Chapter 9 of the Circular irrespective of whether their financial impact exceeds the tolerance threshold applicable to the UCI under Chapter 4 concerning NAV calculation errors, subject to the specific regime applicable to swing pricing errors.

Practical considerations

The CSSF notes that the integration of the notification forms and transmission process into the eDesk platform was generally welcomed by the industry. Nevertheless, the report identifies several recurring issues, including:

• use of incorrect notification forms;
• duplicate filings;
• insufficiently detailed descriptions of incidents;
• inconsistencies in notification data; and
• inappropriate use of pre-notification forms.

The CSSF therefore stresses the importance of appropriate pre-submission controls and review procedures and expects notifications to be complete, accurate and sufficiently detailed to clearly explain the origin, causes and impact of the reported incident.

Conclusion

The feedback report provides useful insight into the CSSF’s experience with the application of Circular CSSF 24/856 during its first year of operation.

While the report does not introduce new regulatory requirements, it highlights a number of observations that the CSSF expects industry participants to duly consider when notifying errors and instances of non-compliance. In particular, the report provides further guidance regarding the classification of incidents, the use of correction methodologies, the operation of control frameworks and the preparation of notifications under the Circular.

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