The CSSF (the Luxembourg Supervisory Authority of the Financial Sector) has issued on 26 January 2011 a communiqué in which it clarifies the concept of a Sukuk in particular as regards the Annexes to the “Prospectus” regulation. This communiqué is issued in order to further strengthen the legal security of sukuk issuers while ensuring an adequate investor protection and as such to recognise the attractiveness of the Luxembourg legal framework for Islamic Finance.
The CSSF clarifies that Sukuk may be treated as asset backed securities pursuant to the provisions of Article 2.5 of the Prospectus Regulation or, subject to certain conditions, as guaranteed debt securities pursuant to Article 23.2 and Annex VI of the Prospectus Regulation. Indeed, provided that the payments of principal and the periodic revenues under the securities are guaranteed on a contractual basis by one or more underlying entities, in other words, if the payment of principal and the periodic distributions are independent from the performance of the underlying asset, the CSSF considers that the underlying entities may be described in accordance with the provisions of Annex VI of the Prospectus Regulation.