REGULATORY CLIENT UPDATE / JANUARY 2022
The CSSF has published three circulars (21/788, 21/789 and 21/790) with the aim of improving the Risk-Based Supervision of IFMs and UCIs.
The completion of all the above-mentioned reports (SAQs, separate reports and management letters) is to be performed using the CSSF eDesk platform.
Luxembourg Market Update:
Net assets under management of Luxembourg-domiciled investment funds set a new record of €5,749bn at the end of November, a monthly increase of 0.55% and 17.77% higher than 12 months earlier. Luxembourg bucked the trend for Europe as a whole, which saw the value of fund assets fall during the month, with eastern European countries especially affected. In November, Luxembourg funds attracted net inflows of €29.8bn while market movements added €1.62bn.
Regulatory Developments in and beyond Luxembourg:
9 December 2021: Technical Screening Criteria published for climate change mitigation and climate change adaptation
The Commission Delegated Regulation (EU) 2021/2139 has been published and establishes the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing to climate change mitigation or climate change adaptation, and whether the economic activity causes significant harm to any of the other environmental objectives. It delivers the first set of technical criteria for defining activities with regard to climate change mitigation and adaptation and applies as of 1 January 2022.
10 December 2021: Commission Delegated Regulation Art. 8 Taxonomy
The Commission Delegated Regulation (EU) 2021/2178 has been published and specifies the content, methodology and presentation of information to be disclosed by financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their business, investments or lending activities. The implementation will be phased in as of 1 January 2022.
14 December 2021: CSSF annual AML survey
CSSF issued a Communiqué on the upcoming annual online survey for the year 2021 on money laundering and terrorist financing (ML/TF) risks to which the professionals under supervision are exposed to, and on the implementation of respective risk mitigation measures. The survey will be launched on 15 February 2022 and the deadline for submission through the CSSF eDesk Portal is 15 April 2022.
17 December 2021: Updated Q&As for PRIIPs KIIDs
The European Supervisory Authorities (ESAs) have published an updated version of the Q&As on the PRIIPs Key Information Document (KID). Key updates include:
17 December 2021: ESMA updates its Q&A on AIFMD
ESMA has updated its Q&A on AIFMD by adding a question dealing with AIFs investing into crypto-assets to the Section XI (Scope section). In question 2, ESMA clarifies that undertakings for collective investment investing into crypto-assets may qualify as AIFs. In the absence of a list of eligible (and non-eligible) assets within the AIFMD framework, an AIF may invest in crypto-assets provided that this new class still allows the AIFM to fully comply with the Directive. Furthermore, ESMA reminds AIFMs of the risks associated with crypto-assets investing and highlights the possible existence of more specific local requirements (e.g. diversification and target investor provisions).
On a similar note, on 29 November 2021, the CSSF published a new FAQ titled “FAQ – Virtual assets (UCIs).” The FAQs confirmed that, AIFMs wishing to manage an AIF investing in virtual assets have to be licensed by the CSSF to do so (under the category “Other-Other Fund-Virtual assets”). Concerning target investors, only professional investors are eligible.
The FATF also issued Updated Guidance for a Risk-Based Approach to Virtual Asset Service Providers.
17 December 2021: CSSF FAQ on the UCI Law
The CSSF has updated its FAQ on the Law of 17 December 2010 by clarifying the conditions under which UCITS may invest in Special Purpose Acquisition Companies (SPACs). In particular, SPACs must qualify as transferable securities and, prior to investment, a detailed risk assessment of all material risks which the UCITS may be exposed to must be performed. In principle, investments in such companies should be limited to a maximum of 10% of the UCITS’ NAV. Appropriate disclosure must also be made in the prospectus.
17 December 2021: ESMA postpones the application of the CSDR buy-in regime
ESMA has published a statement postponing the application of the CSDR buy-in regime, initially scheduled on 1 February 2022.
In this statement, ESMA stated that it “would expect NCAs not to prioritise supervisory actions in relation to the application of the CSDR buy-in regime."
17 December 2021: Domiciliation activity exercised when operating a business centre or a co-working space
The CSSF has issued a Communiqué reminding professionals of the rules applicable to domiciliation activities exercised when operating a business centre or a co-working space. The CSSF considers that a service provider making its address available for companies to establish their head office or address through a workstation in an open space or a virtual office carries out a domiciliation activity.
20 December 2021: EU Art. 8 Taxonomy FAQs
The European Commission has published FAQs on the following topic: “How should financial and non-financial undertakings report taxonomy-eligible economic activities and assets in accordance with the Taxonomy Regulation Article 8 Disclosures Delegated Act?”
The purpose of these FAQs is to provide implementation guidance on the content of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation. They should be read in conjunction with the Considerations on voluntary information as part of Taxonomy reporting which the Platform on Sustainable Finance published that same day.
The Commission intends to update these FAQs on a regular basis. Further FAQs about the Article 8 Disclosures Delegated Act will be made available by the Commission on the same webpage.
22 December 2021: Circular CSSF 21/788 on external AML reports
The CSSF has published Circular 21/788 introducing a new AML/CFT external report. This document must be prepared annually by an approved statutory auditor in accordance with article 49 of CSSF Regulation 12-02 on the fight against money laundering, as amended.
22 December 2021: Circular CSSF 21/789 on long form reports
The CSSF published Circular 21/789 (only in French) introducing (i) a new self-assessment questionnaire (“SAQ”) to be completed by investment fund managers (“IFMs”) and (ii) a new corresponding separate report to be prepared by the IFMs’ approved statutory auditors. The corresponding SAQs have been uploaded for completion on the CSSF eDesk.
22 December 2021: Fees to be levied by the CSSF
The CSSF has increased its licence fee and has introduced a range of new fees to help balance its budget. The regulator reported a loss of around €12.5m for 2020, in part down to increased costs reflecting the doubling of its workforce to nearly 1,000 over the past decade. The new charges, introduced under a new Grand-ducal Regulation.
23 December 2021: FAQs on AML Market Entry Forms
The CSSF has published FAQs on the completion, delegation and submission of the AML/CFT Market Entry Form on the CSSF eDesk.
3 January 2022: ESMA publishes guidelines on MiFID II appropriateness and execution-only requirements
ESMA released guidelines on “certain aspects of the MiFID II appropriateness and execution-only requirements.” The guidelines cover topics such as the information to be provided to clients about the purpose of the appropriateness assessment, the arrangements necessary to understand clients and products, the matching of clients with appropriate products and the effectiveness of warnings. They further provide clarifications on other related requirements, such as the execution-only exemption, as well as the record-keeping and controls. The Guidelines will apply six months after the date of the publication on ESMA’s website in all EU official languages.
For further information, please contact:
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Disclaimer: This regulatory update has been prepared for clients of ONE group solutions and its subsidiaries for informational purposes and is not intended to be relied upon as professional advice. Please visit: https://www.one-gs.com/
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