REGULATORY CLIENT UPDATE / MAY 2021
The European Commission has adopted an ambitious and comprehensive package of measures to help improve the flow of money towards sustainable activities across the European Union. Among other measures, the package is comprised of the EU Taxonomy Climate Delegated Act, a proposal for a Corporate Sustainability Reporting Directive, and 6 Delegated Acts on fiduciary duties amending existing regulations.
Luxembourg Market Update:
The Association of the Luxembourg Fund Industry (ALFI) announced that the total assets under management in Luxembourg domiciled investment funds hit another all-time record of EUR 5,050.132 billion as at 31 January 2021. This represents an increase of 1.54% over one month compared to EUR 4,973.780 billion at the end of 2020. The growth was fuelled by the positive impact of financial markets amounting to EUR 35 billion and strong net inflows of EUR 41 billion.
Regulatory Developments in and beyond Luxembourg:
29 March 2021:
ESMA updates Q&A on inducements
The European Securities and Markets Authority (ESMA) informed the market of an update of the Q&A on MiFID II and MiFIR investor protection and intermediaries topics. The update concerns one of the conditions under which an inducement can be considered as designed to enhance the quality of the relevant service to the client. The condition contains that the inducement is justified by the provision of an additional or higher-level service to the relevant client, proportional to the level of inducements received (article 11 (2) (a) of the MiFID II Delegated Directive (EU) 2017/593). ESMA highlights that the assessment whether a particular quality enhancement complies with the said elements is ultimately to be performed on a case-by-case basis. Nonetheless, ESMA provides some guidance in the updated Q&A to ensure a consistent approach in the application of the requirements.
1 April 2021:
CSSF announces Annual AML Audit of AIFMs and Management Companies
The CSSF announced that it plans to issue a Circular in 2021 detailing the requirements for an annual external AML audit of AIFMs and Management Companies. Registered AIFMs who do not yet have an external auditor appointed will have to appoint an external auditor. The first annual AML audit is currently planned to be implemented for December 2021. The CSSF will issue a prescriptive AML audit work program. All audit firms are to use this and all AIFMs and Management Companies will be subject to it. The principle is that the AIFM/ManCo will perform a self assessment by topic. The auditor is required to perform a validation of this self assessment and sample testing work. The results of the audit will be presented in a table format and to be uploaded on CSSF eDesk by the auditor.
1 April 2021:
CSSF announces new LFR for Funds
The CSSF announced that it will issue a Circular in 2021 detailing the requirement for an annual Long Form Report (LFR) for Funds. The scope includes all regulated funds. The first annual audit is currently planned to be implemented for years ending as from 30 June 2022 (though this is still to be confirmed). The IFM of the Fund will be required to complete a Self Assessment Questionnaire (SAQ) which will follow the requirements of CSSF Circular 18/698. Selected answers from the SAQ will be subject to testing by the external auditor.
9 April 2021:
CSSF publishes Circular CSSF 21/769 on Teleworking
The Circular covers specific governance and security requirements for supervised entities to perform tasks or activities through telework. The Circular enters into force on 30 September 2021 and is addressed to all Supervised Entities of the financial sector.
Note that the implementation of Telework by Supervised Entities will not necessitate any prior approval by the CSSF. The CSSF will however monitor compliance of these entities with this circular and amend these requirements if necessary.
Topics of note include:
21 April 2021:
Sustainable Finance and EU Taxonomy
The European Commission adopted an ambitious and comprehensive package of measures to help improve the flow of money towards sustainable activities across the European Union. Among other measures, the package is comprised of:
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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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