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New CSSF Feedback Report for UCITS costs and fees supervision

Guidance based on ESMA Common Supervisory Action

25 October 2022

Regulatory News Alert

On 20 October 2022, the Commission de Surveillance du Secteur Financier (CSSF) published a Feedback Report on the European Securities and Markets Authority’s (ESMA) Common Supervisory Action (CSA) on the supervision of costs and fees of UCITS.

Context and objectives

On 6 January 2021, ESMA launched a CSA with the national competent authorities (NCAs) on the supervision of costs and fees of UCITS across the European Union.

In March 2021, the CSSF started the ESMA CSA locally by asking 36 management companies (investment funds managers or IFMs) to complete the dedicated questionnaire.

On 31 May 2022, ESMA published the results of the CSA at the EU level in a Final report on the CSA on costs and fees for investment funds. The conclusions show an overall satisfactory level of compliance with the applicable EU legislative framework. Other findings include observations on the process of setting and reviewing fees, notion of undue costs, issues stemming from related party transactions and costs related to Efficient Portfolio Management (EPM) techniques.

CSSF’s Feedback Report

The Feedback Report aims to inform the industry of the CSSF’s main observations in the context of its CSA work and recommendations for improvement in view of applicable regulatory requirements.

Guided by ESMA and CSSF observations, the CSSF asks all IFMs to conduct, as soon as possible and at the latest by the end of Q1/2023, a comprehensive compliance assessment of their policy, approach and arrangements related to costs and to take, if applicable, the necessary corrective measures. The CSSF also reminds IFMs that the supervisory briefing on the supervision of costs applies both to UCITS and AIFs and, as such, requires pricing process review is also performed by AIFMs for their AIFs under management.

Typical Observations

In its Feedback Report, the CSSF specifies typical observations related to:

  • the Pricing Process, its formalization, degree of sophistication and level of independence from the portfolio manager;
  • the notion of undue costs in accordance with the 10 elements as detailed in paragraph 19 of the ESMA supervisory briefing;
  • related party transactions and the related implementation and monitoring of an adequate conflicts of interest policy;
  • the accuracy of the calculation of Ongoing Charges as well as the implementation of a documented internal approach for the definition of what charges shall form part of the amount to be disclosed;
  • costs charged to low AuM Funds and an ongoing analysis led by the CSSF of potential outlier, i.e. funds charging fees much higher than their peers.

Specific comments on EPM techniques

The Feedback Report also gives specific comment on EPM techniques and asks all IMFs to conduct, at the latest by the end of Q1/2023, a comprehensive compliance assessment of the set-up of their EPM activities in relation to the observations made by ESMA and the CSSF and to take, if applicable, the necessary corrective measures, such as:

  • Internal policies and procedures – need to include more information (e.g., definition of the technique used, role of third party providers, controls at the level of the ManCo/AIFM);
  • Operational costs controls – best execution controls, analysis of the cost drivers which make up the total costs, controls over operational costs deducted from the gross revenue;
  • Conflicts of interest management – ensure that your policy and register cover the entire range of potential conflicts (e.g., especially when using an intra-group securities lending agent);
  • Governance & control mechanisms – periodic involvement of the compliance and internal audit functions for verifying compliance of EPM activities against the applicable regulation.

How Deloitte can help:

Deloitte’s RegWatch will help you stay tuned to regulatory updates and anticipate regulatory changes impacting your business and organization.

Deloitte’s specialists from our Audit & Assurance and our Advisory & Consulting practices can help you to:

  • assess the impact of the Feedback Report on your business;
  • understand your gaps and identify the relevant corrective actions;
  • support your implementation of changes within the deadline set by the CSSF;
  • perform benchmarking on your costs and charges including implementation of a periodic risk assessment report.

We have more than 20 years’ experience with the different fees and pricing processes of investment funds.


Subject matter specialists

Vanessa Leuters
Senior Manager – Consulting IM & PERE
Tel: +352 621510079
 Julien Nimal
 Senior Manager – Audit & Assurance
 Tel: +352 621568705





Regulatory Watch Kaleidoscope service

Marijana Vuksic
Senior Manager – Risk Advisory
Tel: +352 621412051




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