Luxembourg: CSSF Mandatory Notifications October 2019

Last Updated: 25 October 2019
Article by Johan Terblanche, Jevgeniy Nesch, Michelle Barry and Philippe Burgener

Introduction

Further to our earlier legal update on mandatory notifications to Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier ("CSSF") in the context of Brexit1, the CSSF has issued another press release2 on this subject, in light of the impending Brexit deadline.

In its latest press release, the CSSF included two separate communications addressed to different categories of UK Managers of Luxembourg alternative investment funds ("AIFs").  The press release expressly states that it applies to all AIFs managed by UK managers, irrespective of whether or not the AIF is regulated under a Luxembourg sectorial (or 'product') law ("UK Managers"). 

The first communication is addressed to UK Managers who have not submitted a notification to the CSSF through its dedicated Brexit portal (the "Notification") in advance of the 15 September 2019 deadline (the "First Communication").  The second communication is addressed to UK Managers who have submitted a Notification in advance of the 15 September 2019 deadline (the "Second Communication"). A cheat sheet can be found on page three of this update.

UK Managers – Notification Not Submitted

In the First Communication, the CSSF reminds UK Managers who have not submitted a Notification that they will not be entitled to continue providing their services in Luxembourg under the relevant passport regime during the transitional period (the "Transitional Period") foreseen by the Brexit Laws3.  As such, from 1 November 2019, each of these UK Managers will be considered as a third-country manager ("TCM") and will lose the benefit of their current passporting rights if a hard Brexit occurs on 31 October 2019 (the "Brexit Date").

UK Managers who wish to continue providing services (as a TCM) to AIFs they currently manage and whose direct and indirect investors are Professional Investors4 are required to seek the approval of these Professional Investors before the Brexit Date.

Approval of Professional Investors

Professional Investors must approve the UK Manager's redesignation as a TCM in accordance with the conditions to amend the articles of association or limited partnership agreement as set out in the AIF's constitutive documents.  In the absence of such a provision, the relevant provisions of the law of 10 August 1915 on commercial companies will apply.  When communicating with Professional Investors on this, UK Managers should clearly indicate the possible outcomes of the vote and their potential consequences. 

Documents to be provided to the CSSF

In the event the Professional Investors of an AIF have approved the UK Manager's redesignation as a TCM in respect of the AIF, the UK Manager must provide the CSSF, by email to brexitopc@cssf.lu, with the following documents (the "Documents") before 31 October 2019, save in the case of exceptional circumstances:

  • a duly signed confirmation from the UK Manager that all direct and indirect investors in the AIF qualify as Professional Investors; and
  • a copy of the appropriate, duly signed resolution(s) evidencing the approval of the Professional Investors.

Breach of Applicable Luxembourg Requirements

UK Managers who have not submitted a Notification through the dedicated Brexit portal or have not provided a copy of the Documents to the CSSF will be regarded by the CSSF as operating in breach of applicable requirements as of the date of a hard Brexit.  Furthermore, the CSSF has reserved the right to publish a list of these UK Managers.

UK Managers - Notification Submitted

The CSSF has set out the same procedure in the Second Communication which is aimed at UK Managers seeking the approval of Professional Investors for the UK Manager to act as a TCM following a hard Brexit, despite the fact that the UK Manager has already submitted a Notification to the CSSF in respect of the UK Managers' intention to continue providing services in Luxembourg for the duration of the Transitional Period. 

Documents to be provided to the CSSF

However, in addition to providing the Documents, such UK Managers must also provide a duly signed confirmation from the UK Manager confirming that the Notification should be rescinded and specifying the Notification number, the list of AIFs in respect of which the Notification should be disregarded and the list of AIFs in respect of which the Notification is still valid, if any (the "Confirmation"). 

Notification Discarded

In cases where a Confirmation is filed, the earlier Notification will be discarded.  The UK manager will not benefit from the Transitional Period if it opts to continue providing services as a TCM.

Assumption of Hard Brexit

The CSSF also noted that the foregoing is based on the assumption that a hard Brexit will occur on 31 October 2019 and that future legislative or regulatory modifications of the third country regime in its current form are not precluded by this press release or the communications. 

Cheat sheet

Options

Timing

UK Manager who has made Notification

UK Manager who has not made Notification

Appoint Luxembourg domiciled AIFM

 

During TP

 

 

x

Prior to Brexit Date

 

 

Appoint an EU based AIFM

During TP

 

 

x

Prior to Brexit Date

 

 

Liquidate the AIF

 

During TP

 

 

x

Prior to Brexit Date

 

 

Withdraw Notification and be appointed TCM

During TP

 

x

 

N/A

Prior to Brexit Date

 

 

N/A

Be appointed TCM

 

During TP

 

N/A

 

x

Prior to Brexit Date

 

N/A

 

Transitional Period ("TP")

Footnotes

1. https://maples.com/en/Knowledge-Centre/Industry-Updates/2019/07/Lux-CSSF-Mandatory-Notifications-for-UK-Firms-Funds-and-Managers

2. http://www.cssf.lu/fileadmin/files/Publications/Communiques/Communiques_2019/CP1948_mandatory_notification_Brexit_111019.pdf

3. Law of 8 April 2019 regarding measures to be taken in relation to the financial sector in the event of a withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union.

4. Professional Investors in this context are to be understood as professional investors as defined under article 3 of the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers or well-informed investors under the law of 23 July 2016 on reserved alternative investment funds, the law of 13 February 2007 relating to specialised investment funds or the law of 15 June 2004 relating to the Investment company in risk capital

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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