On 15 July 2019, Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier ("CSSF"), issued two press releases, in relation to Brexit. These press releases follow on from the earlier CSSF press release 19/18 and the adoption of the laws 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 (the "Brexit Laws")1.
In the press releases, the CSSF reiterated that in the event that the UK leaves the EU without a withdrawal agreement ("a hard Brexit"), affected UK entities will be considered 'third-country entities' and will lose the benefit of their current passporting rights.
CSSF Press Release 19/33 addresses the provision of services by UK based firms that are authorised under CRD, MiFID II, PSD 2 or EMD in the UK ("UK Firms") and that provide their services in Luxembourg under the relevant passporting regime.
With respect to existing activities of UK Firms, and in accordance with the powers granted to the CSSF under the Brexit Laws, UK Firms may continue providing their services in Luxembourg during a transitional period of 12 months provided that:
• The provision of such services relates only to contracts in force before a hard Brexit ("existing contracts") and / or any new contracts that are formed after a hard Brexit provided that they are closely related to existing contracts; and
• UK Firms have notified the CSSF of their intention to continue providing their services and have received confirmation from the CSSF that they may benefit from the transitional period. Such notification must be made via a dedicated portal no later than 15 September 2019. This portal is expected to go live on the CSSF's website in the coming weeks.
The CSSF also reminded UK Firms that, should they wish to enter into new contracts after a hard Brexit, they should submit an application for authorisation without delay as the approval process can take up to 12 months.
CSSF Press Release 19/34 concerns UK based funds (authorised either as UCITS under Directive 2009/65/EC ("UCITS Directive") or under Directive 2011/61/EU ( "AIFMD")) ("UK UCIs") and their UK based managers ("UK Managers") authorised either under the UCITS Directive or AIFMD or that are currently availing of the relevant passporting regime to provide their services in Luxembourg.
Similar to UK Firms, UK UCIs and UK Managers who intend to continue providing their services in Luxembourg after a hard Brexit must notify the CSSF of their intention to do so no later than 15 September 2019 through the portal. In addition, such UK UCIs and / or UK Managers will be required to file either an application for the relevant authorisation or a notification or information on any action taken (depending on the nature of activities they intend to pursue after a hard Brexit) no later than 31 October 2019.
As with UK Firms, the CSSF may, on a case by case basis, grant affected UK UCIs and / or UK Managers the possibility to continue their activities in Luxembourg for a maximum of 12 months following a hard Brexit.
UK Managers currently authorised in the UK under both the UCITS Directive and AIFMD will need to make two separate filings with the CSSF.
We expect the CSSF will require UK Firms and / or UK Managers operating in Luxembourg under the relevant passport to avail of one of three options open to them at the hard Brexit date:
(a) termination of their activity in Luxembourg; (b) application for authorisation of a Luxembourg based entity to provide the services currently provided; or (c) transfer of the relevant activity to another EU Member State based entity.
In relation to UK UCIs, we expect the CSSF to require an application for marketing the relevant UK UCIs in Luxembourg under the Luxembourg NPPR.