Markets

26 January 2011

Issuers of “sukuk” have recognised the attractiveness of the Luxembourg legal framework for Islamic finance.

In order to further strengthen the legal security of “sukuk” issuers, while ensuring an adequate investor protection, the CSSF would like to specify certain rules applicable to Islamic debt securities called “sukuk”, in particular as regards the Annexes to the “Prospectus” Regulation.

“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.