Brexit: CSSF informs UK entities of actions to be taken in anticipation of a hard Brexit

By Marc Meyers, Partner | Loyens & Loeff

The CSSF issued two press releases reminding firms authorised in the United Kingdom as well as undertakings for collective investment (UCIs) and/or their managers established in the United Kingdom of the consequences of a hard Brexit and requiring them to notify the CSSF and/or apply for appropriate authorisation if they intend to continue their activities in Luxembourg after a hard Brexit.

  • UK financial services firms as well as UCIs and/or their managers established in the UK must make a CSSF filing by 15 September for existing business to benefit from a post-Brexit transitional regime.
  • Filings will be made via a dedicated portal on the CSSF’s website which has not yet been unveiled.
  • For UK financial services firms, the CSSF will be reviewing historical passporting notifications to ensure they are complete.

Context
With the October 31st deadline approaching and in light of growing uncertainty as to how Brexit might play out, Luxembourg published two laws on 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 Nothern Ireland from the European Union (the Brexit Laws). The purpose of the Brexit Laws is in particular to anticipate the loss of passporting rights for UK firms and UCIs and UCI managers established in the UK which would result from a hard Brexit, since these entities will then be considered to be “third-country firms”. The CSSF has now provided additional clarification by publishing Press Releases 19/33 and 19/34 on mandatory Brexit notifications.
Scope
Press Release 19/33 concerns firms that are currently authorised in the UK under Directive 2013/36/EU (CRD), Directive 2014/65/EU (MiFID II), Directive 2015/2366 (PSD II) or Directive 2009/110/EC (EMD), i.e. credit institutions, investment firms, market operators, data reporting services providers, payment institutions, and electronic money institutions (the UK firms). Press Release 19/34 concerns UCIs and/or their managers established in the UK and authorised under Directive 2009/65/EC (the UCITS Directive) and/or Directive 2011/61/EU (AIFMD).
Actions to be taken

For UK firms:

  • With respect to contracts entered into force prior to the hard Brexit as well as closely-related contracts, and assuming they currently provide financial services in Luxembourg under the EU passport, UK firms may be authorised by the CSSF to continue their activities for a transitional period of 12 months following a hard Brexit. Firms need to ensure historical passporting notifications were completed with an appropriate level of detail or risk not benefitting from the transitional regime. They must notify the CSSF no later than 15 September 2019 of their intention to continue to serve existing contracts.
  • UK firms which intend to enter into new contracts in Luxembourg following a hard Brexit must submit an application for authorisation to the CSSF as soon as possible. The process for granting authorisation may take up to 12 months following receipt of a complete application file. Any UK firm not appropriately authorised as at the date of a hard Brexit will be required to cease its activities.

For UCIs or UCI managers:

  • All impacted entities must notify the CSSF of their intention to continue to provide services in Luxembourg after the occurrence of a hard Brexit no later than 15 September 2019. It should be noted that: (i) entities that have already submitted an application for authorisation in anticipation of a hard Brexit are still subject to the notification obligation and (ii) entities that are currently authorised in the UK under both the UCITS Directive and the AIFMD will be required to proceed with a notification for both licenses.
  • Impacted entities will then be required to submit to the CSSF, as soon as possible but no later than by 31 October 2019, the corresponding application for authorisation, notification or information on any action otherwise taken depending on the nature of the activities they intend to pursue and/or the steps undertaken to address the loss of passporting rights. The CSSF may on a case-by-case basis allow the continuation of activities for a transitional period of 12 months following a hard Brexit. Such transitional regime may only be granted under the condition that the Brexit notification and the subsequent application(s) and/or notification(s) have been submitted within the deadlines set out by the CSSF. UCIs and/or their managers will be informed of the granting of the transitional regime within 10 business days of the submission of the required information to the CSSF.

Next steps
The CSSF will create dedicated notification portals on its website and communicate additional information. UK firms, UCIs and UCI managers should assess their current situation and future business plan and ensure their notifications and applications are made as soon as possible.

Compliments of Loyens & Loeff, a member of the EACCNY