Article published on 6 July 2020 www.igniteseurope.com
Non-EU fund managers will be able to service professional investors in Luxembourg without requiring a licence under new regulations that could be a boon for UK firms after Brexit.
The Commission de Surveillance du Secteur Financier recently passed two measures to ease access for third-country funds to investors in Luxembourg.
The CSSF says authorised portfolio managers and investment advisers from countries including the US, Switzerland, Japan, Canada, Hong Kong and Singapore can passport their services to Luxembourg without requiring a presence in the Grand Duchy, provided their clients are defined as professional investors under Mifid II.
This could include investment services such as managed accounts, funds of funds, private banks and family offices.
The CSSF says firms from these jurisdictions will only be required to obtain a licence if the firm already has a Luxembourg branch, is servicing retail investors or the Grand Duchy is the principal location where the firm’s principal business activities related to Luxembourg clients is taking place.
Benoit Kelecom, Luxembourg-based counsel at law firm Van Campen Liem, says it is likely that this principal business location “will generally be deemed to be located where the portfolio management or advisory teams are”.
Mr Kelecom says that with portfolio management teams at non-EU firms unlikely to be located in the Grand Duchy, third-country funds will not be deemed to be rendering services in Luxembourg and so will not require a licence.
“This is rather good news for UK asset managers in the context of the continuation of their services post Brexit,” he says.
Augustin de Longeaux, partner at Simmons & Simmons, adds that the new circular puts forward “a very relaxed and flexible regime” for third-country firms.
“Firms are still able to access the Luxembourg market without needing to register. It is only a sub-set of the market but it is a large and important one,” he says.
Mr de Longeaux says that while it is very likely that the UK will be added to the CSSF’s list of equivalent financial regimes after Brexit, an acrimonious end to the UK’s negotiations with the EU would threaten that status.
“If the EU deemed the UK as not equivalent, it would be very difficult for Luxembourg not to follow suit,” he says.
Mr de Longeaux adds that the circular is “a useful clarification” as to which jurisdictions the CSSF recognises as equivalent to its own regime.
“Before applications were decided case by case, now we have clarification that you can still access professional clients on a ‘reach-in’ basis,” he says.
Delegation arrangements for Ucits and alternative investment funds distributed to investors in Luxembourg will continue to be subject to the measures in Ucits and the Alternative Investment Fund Managers Directive.
