CSSF Brexit Press Releases 19/33 and 19/34
The Luxembourg financial services regulator, the Commission de Surveillance du Secteur Financier ("CSSF"), published on July 15, 2019 two press releases (Press Release 19/33 and Press Release 19/34) setting out mandatory notification requirements for UK firms in the context of Brexit.
In the case of a "hard Brexit" (i.e. if the UK leaves the EU without a withdrawal agreement in place) UK firms will lose their passporting rights under the relevant financial services EU single market directives and will, as of that date, be considered "third-country firms" from an EU perspective.
The press releases above follow the publication of Press Release 19/18 on the laws of April 8, 2019 regarding measures to be taken in the financial sector in the event of Brexit (the "Brexit Laws"), and set the conditions for UK firms to continue operating in Luxembourg during a transitional period in a hard Brexit scenario.
Mandatory Notifications for UK Firms
UK firms authorized under CRD, MiFID II, PSD 2 and EMD operating in Luxembourg under a passport that intend to conclude new contracts after a hard Brexit will have to obtain authorization from the CSSF. The CSSF reminded these firms that the authorization process can take up to 12 months and encourages them to apply as soon as possible.
To continue servicing existing contracts as well as new contracts with close links to existing contracts, UK firms currently operating through a passport will be able to continue their activities for a transitional period of 12 months ("transitional regime"). To benefit from this transitional regime, these firms will have to notify the CSSF by no-later than September 15, 2019. The CSSF will review these notifications , and inform firms individually of whether they can benefit or not from the transitional regime.
Mandatory Notifications for UK UCIs and UK Managers
With regard to UK undertakings for collective investment ("UCIs") and UK managers authorized under the AIFMD or UCITS Directive and managing Luxembourg funds under a passport ("UK managers"), a similar transitional regime of 12 months is being implemented. These entities will also have to notify the CSSF by no later than September 15, 2019 of their intention to benefit from the transitional regime.
Additional Requirements for UK UCIs and UK Managers
In addition to the mandatory notification, UK UCIs and UK managers will be also required to submit to the CSSF as soon as possible, and no later than October 31, 2019, an authorization application or the corresponding notification or information on any action taken otherwise, depending on the nature of the activities they intend to pursue after a hard Brexit and/or the steps undertaken to address the loss of passporting rights. The CSSF will review this information and will inform the impacted UK UCIs and UK managers of its decision to grant the transitional regime or not within 10 business days of the submission of the required information.
The CSSF also clarified that managers holding a license under both the UCITS Directive and the AIFMD will have to submit a Brexit notification for both licenses. UK managers who have already applied for authorization with the CSSF will still have to submit a Brexit notification.
What Should You Do?
All UK firms, UCIs and managers wishing to continue operating in Luxembourg should notify the CSSF of their intentions by September 15, 2019. The CSSF will open the notification portal on its website in the coming weeks.
UK managers of Luxembourg funds will also have to apply for authorization or submit the required additional information about their alternative plans by October 31, 2019.
All UK firms wishing to enter into new contracts after a hard Brexit should apply for authorization from the CSSF as soon as possible and note that this could take up to 12 months to be processed.
New UK Prime Minister: What Does It Mean for Brexit?
On July 24, 2019 Boris Johnson became the new UK Prime Minister. During his recent Tory leadership campaign, the new Prime Minister pledged his determination to take the UK out of the EU on October 31, 2019 "do or die, come what may" even without a withdrawal agreement in place. He has also ruled out a number of compromises, such as accepting changes to the backstop solution to the Irish border, which may help the UK renegotiating the withdrawal agreement with the EU. In light of the above, commentators expect the likelihood of a hard Brexit to have significantly increased under Boris Johnson's leadership.
Firms are thus encouraged to step up their hard Brexit preparations with regard to their cross-border activities not only in Luxembourg but across the EU.
How Can We Help?
Our Compliance and Regulatory Consulting experts across our European offices can help you navigate the complexities of Brexit and assist your firm in preparing for a hard Brexit scenario.
We offer a wide range of Post-Brexit Solutions including:
- Third-party UCITS and AIFM management company and substance solutions in Ireland and Luxembourg;
- Acting as global distributor for your fund products in Europe;
- Consulting and compliance advice around regulatory authorizations and registrations in Europe, including cross-border product maintenance;
- Valuation services and advice related to local and EU tax implications of restructuring your business, management agreements and employees post-Brexit; and
- Advice on tax and structuring your business post-Brexit.
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.