CySEC has incorporated these Guidelines into its supervisory practices and regulatory approach, signalling a clear expectation of compliance by Cyprus Investment Fund Managers (CyIFMs).

Legislative basis

The Guidelines stem from mandates under Directive (EU) 2024/927 (the AIFMD II), which amends both the AIFMD and the UCITS Directive. Specifically, Article 18a(4) of the UCITS Directive and Article 16(2h) of the AIFMD require ESMA to develop guidelines on the selection and calibration of LMTs for the purposes of liquidity risk management and the mitigation of financial stability risks. The AIFMD II is expected to be transposed into Cypriot national law in due course.

Key obligations for fund managers

A central feature of the new regime is the mandatory minimum selection requirement. Each UCITS management company or AIFM must select at least two appropriate LMTs, following an assessment of the suitability of such tools considering the fund's investment strategy, liquidity profile and redemption policy.

The available toolkit under the framework includes:

• Quantitative-based LMTs: temporary suspensions of subscriptions, repurchases and redemptions of units of shares. As well as the selection of redemption gates, extensions on notice periods and redemptions in kind (the latter restricted to professional investors only).
• Anti-dilution tools (ADTs): to mitigate investor dilution and potential first mover advantage. Redemption fees, swing pricing, dual pricing and anti-dilution levies can be used in a fair manner and reasonable manner.
• Side pockets: which may be activated in the interest of investors on an exceptional basis.

Notably, temporary suspension of subscriptions and redemptions, as well as the activation of side pockets, may be deployed without prior inclusion in the fund's constitutional documents, provided this is justified by investor protection considerations.

CySEC expectations

The Circular outlines specific expectations for CyIFMs, as highlighted below:

• Review and, where necessary, bolster their liquidity risk management frameworks to ensure that appropriate LMTs are effectively embedded into fund structures.
• Ensure that the selection, calibration and activation of LMTs are consistent with the investment strategy, liquidity profile and redemption policy of each fund under management.
• Establish comprehensive and robust governance arrangements as well as internal procedures governing the use of LMTs, including clear decision-making processes and escalation mechanisms.
• Apply LMTs in a fair, transparent and consistent manner, with due regard to the interests of all investors.
• Adequately disclose the availability and potential use of LMTs in offering documentation and investor disclosures, in accordance with applicable transparency requirements.
• Ensure that relevant staff possess the necessary expertise and that appropriate systems and controls are in place to support effective implementation and monitoring.

Timeline

The Guidelines apply as of 16 April 2026, which aligns with the date of application of the RTS (Commission Delegated Regulations (EU) 2026/465 and 2026/466) specifying the characteristics of LMTs. For UCIs existing prior to that date, a twelve-month transitional period applies, with full compliance required by 16 April 2027.

Wider EU context

CySEC is not alone in adopting the Guidelines. The CSSF in Luxembourg issued its own Circular 26/910 on 15 April 2026 applying the same ESMA Guidelines, and the AMF in France has confirmed its intention to comply once the national transposition of Directive (EU) 2024/927 is complete. This cross-jurisdictional convergence underscores ESMA's aim of ensuring the common, uniform and consistent application of the LMT framework across the single market.

Our blog post of Luxemburg’s CSSF’s Circular 26/910 on ESMA’s LMT Guidelines can be accessed here.

Practical takeaway

CyIFMs should treat the Circular as requiring immediate action. The combination of a mandatory minimum LMT selection, enhanced governance and disclosure obligations, and defined timelines leaves limited room for delay, particularly for newly established funds, for which the Guidelines are already in force.

The CySEC Circular C776 can be found here and the ESMA Guidelines on LMTs of UCITS and open-ended AIFs can be accessed here