REGULATORY CLIENT UPDATE / MAY 2022
Highlights:
The CSSF has issued Circular 22/806 on outsourcing arrangements. The Circular creates a single consolidated set of outsourcing provisions. It applies as of 30 June 2022 to all outsourcing arrangements entered into, reviewed or amended on or after this date. For all existing outsourcing arrangements, entities are expected to review and amend their existing arrangements by 31 December 2022.
Luxembourg Market Update:
According to ALFI chairwoman Corinne Lamesch, last year's 17.8% increase in assets under management in Luxembourg to €5.9trn was mainly due to net inflows, which averaged €33bn per month, far exceeding the level of €10bn- €20bn seen in previous years. She noted that equity funds saw the biggest growth at 11.4%, driven by the strength of stock markets worldwide. Lamesch argues that Luxembourg is well positioned to benefit from growth of the alternative fund sector, with real estate fund assets up 13.3% and private equity assets by 11.4%, and she points out that 37 of the 68 European Long-term Investment Funds established so far are domiciled in the grand duchy.
Regulatory Developments in and beyond Luxembourg:
22 April 2022: CSSF Circular 22/806 on outsourcing arrangements
The CSSF has issued Circular 22/806 on outsourcing arrangements which implements the revised European Banking Authority Guidelines on Outsourcing arrangements EBA/GL/2019/02 (EBA Guidelines). The Circular creates a single consolidated set of outsourcing provisions addressing all regulated entities supervised by the CSSF on an individual basis, including IFMs who did not originally fall in the scope of the EBA Guidelines. It covers all types of outsourcing arrangements, such as business process, ICT, and cloud outsourcing.
Besides integrating the EBA Guidelines into the Luxembourg regulatory framework, the CSSF expects all entities to review their existing outsourcing arrangements to comply with the new provisions in terms of central administration, internal governance, and risk management, proportionally to the nature, scale and complexity of their activities or services.
In addition, the Circular 22/806 amends the prior authorization by the CSSF for the outsourcing of critical or important functions, replacing it by a three-month prior notification before the planned outsourcing. The notice period is reduced to one month when resorting to a support professional of the financial sector (PFS). The notification mechanism had been already introduced by Circular 21/785 for material ICT outsourcing.
The Circular 22/806 will be applicable as of 30 June 2022 to all outsourcing arrangements entered into, reviewed or amended on or after this date. For all existing outsourcing arrangements concerned entities are expected to review and amend their existing arrangements by 31 December 2022.
18 May 2022: CSSF Circular 22/813 on the application of the MAR Guidelines
The purpose of this circular is to inform the market that the CSSF applies the MAR Guidelines of ESMA on delay in the disclosure of inside information and interactions with prudential supervision (Ref. ESMA70-159-4966) published on 13 April 2022. Consequently, the CSSF has integrated the Guidelines into its administrative practice and regulatory approach with a view to promote supervisory convergence in this field at European level. All issuers bound to comply with Article 17 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (“MAR”) shall duly comply with them.
Reminder: 31 May 2022 submission deadline of real estate levy filing
On 20 January 2022, the Luxembourg tax authorities (LTA) released a new Circular regarding the real estate levy introduced by the Luxembourg law of 19 December 2020. Luxembourg investment vehicles which directly or indirectly own or invest in Luxembourg real estate will have to submit their real estate levy return before 31 May 2022, and those vehicles which do not own or invest in Luxembourg real estate will have to report this fact. Failure to comply may result in a fine imposed by the LTA.
For further information, please contact:
Tobias Ettlin
m: +352 691 111 931
tobias.ettlin@one-gs.com
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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