REGULATORY CLIENT UPDATE / JANUARY 2023
Highlights:
With the aim of “aligning and adjusting the fees collected by the CSSF to suit the evolution of the legal framework,” the new Grand Ducal Regulation increases existing CSSF fees and introduces new fees applicable to investment fund managers (IFMs) under CSSF supervision.
Luxembourg Market Update: New platform for fund data management
The aggregate assets of Luxembourg-domiciled investment funds – UCITS and Part II funds, SIFs and SICARs – amounted to €5,166bn at the end of November, up from €5,064bn at the end of the previous month although still 10.15% lower over the previous 12 months, according to the CSSF. The increase comes from €8.07bn in net inflows and €93.52bn from rising securities markets, down to decreasing inflation in the US, the expectation of smaller interest rate rises, the easing of Covid-19 restrictions in China and the easing of supply chain bottlenecks. The number of legally distinct fund structures fell from 3,392 to 3,375, with a total of 2,204 entities having an umbrella structure containing between them 13,133 sub-funds, representing a total of 14,304 fund portfolios.
Regulatory Developments in and beyond Luxembourg:
6 December 2022: FinDatEx publishes supplementary data fields for EET
FinDatEx published a set of supplementary data fields for the EET V1.1. These fields have been developed in response to the adoption by the European Commission of Delegated Regulation (EU) 2022/1288 that requires the disclosure of Taxonomy-aligned investments in nuclear and fossil gas activities under SFDR Level 2. The fields contain 26 preliminary data points concerning pre-contractual and periodic disclosures and will facilitate the exchange of information between product manufacturer and distributor/insurer in this context. These data fields will be appended in an EET V1.1.1 to be released in early 2023.
16 December 2022: ESMA Q&A on AIFMD
ESMA has published an updated version of its Q&A document on the Alternative Investment Fund Managers Directive (AIFMD). This new edition includes a new question asking whether managers of special purpose acquisition companies (SPACs) are subject to the directive. ESMA concludes that a case-by-case assessment needs to be done to determine whether the vehicle meets the definition of an "AIF" or whether it qualifies as "holding company". For further details, please refer to page 47 of the Q&A.
16 December 2022: CSRD published in Official Journal of the European Union
The Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the European Union (OJEU). The CSRD expands the existing Non-Financial Reporting Directive (NFRD) by introducing new requirements to report on sustainability matters, including environmental, social and human rights and governance matters.
The CSRD introduces new requirements for large companies and all companies listed on a regulated market in the European Union, as well as non-EU companies which have a significant activity on the territory of the European Union. Financial products such as UCITS or AIFs are out of scope.
Entities in scope of the new Directive will have to report based on the mandatory European Sustainable Reporting Standards (ESRS) that have been developed by the European Financial Reporting Advisory Group (EFRAG). A first set of drafts was submitted by EFRAG to the European Commission on 22 November 2022.
The application of the CSRD will be staggered (for financial years starting on or after):
16 December 2022: Updated CSSF FAQs on UCITS KIID and PRIIPs KID
In light of the transition from the UCITS KIID to the PRIIPs KID on 1 January 2023, the CSSF has published updated versions of several FAQ documents that deal with the two disclosure documents:
Note that the CSSF clarified that it will allow filings of PRIIPs KIDs replacing UCITS KIIDs to be made until 31 January 2023 at the latest.
19 December 2022: European Commission publishes draft notices on the Disclosures Delegated Act under Article 8 Taxonomy Regulation and on the Taxonomy Climate Delegated Act
The European Commission has issued:
The drafts were approved on 19 December 2022. Their formal adoption in all the official languages of the European Union will take place later on as soon as the language versions are available.
20 December 2022: ESMA publishes Guidelines and technical documentation on reporting under EMIR REFIT
ESMA has published a Final Report on Guidelines for reporting under EMIR, clarifying the legal provisions on reporting and data management under the amended EMIR rules and providing practical guidance on their implementation.
This report should be considered in light of the EMIR RTS on data to be reported to trade repositories (“TRs”), published in the Official Journal on 7 October 2022, and increasing the number of fields to report from 129 currently to 203.
These Guidelines aim to enhance the standardisation of reporting under EMIR along the reporting chain. Therefore, they apply to the counterparties that report the data, the trade repositories which put in place the procedures to verify the completeness and correctness of data, and the authorities defined in Article 81(3) of EMIR which use data for supervisory and regulatory purposes. The Guidelines will enter into application on 29 April 2024, and provide clarifications on the following aspects:
The final report on Guidelines is accompanied by the validation rules and the reporting instructions.
21 December 2022: ESMA publishes technical standards on cross-border activities under UCITS and AIFMD
ESMA has published a final report specifying the information and templates needed by management companies, UCITS and AIFMs when informing national competent authorities about their intentions to undertake cross-border marketing or management activities.
With the draft of optional Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS), ESMA aims to standardize the content and format of the information that needs to be provided to the competent authorities of the cross-border marketing and management of investment funds and the cross-border provision of services by fund managers.
The RTS also specify the information to be provided by management companies and AIFMs aiming to carry out their activities in host Member States, on the other, the ITS contain the templates to be used by management companies, UCITS and AIFMs to notify their intention to carry out their activities in host Member States and specify furthermore the procedure for the communication between competent authorities in this regard.
The RTS and ITS were submitted to the European Commission for adoption and will then be subject to the non-objection of the European Parliament and the Council.
21 December 2022: ESAs: updated Q&As on the PRIIPs KID
The European Supervisory Authorities (ESAs) published updated versions of their Q&As on the Key Information Document (KID) for packaged retail and insurance-based investment products (PRIIPs). Of note is that the ESAs have transferred ESMA’s interpretation on benchmark disclosures in the UCITS KIID to the PRIIPs KID.
23 December 2022: Increase of CSSF fees
The new Grand-ducal Regulation on fees to be levied by the CSSF was published in the Mémorial A. The Regulation aims at “aligning supervisory fees to the evolution of the supervision costs and the legal framework.” This text is applicable as from 1 January, 2023.
As regards the investment fund sector, the main changes can be summarised as follows:
30 December 2022: CSSF issues a Communiqué on BaFin’s product intervention regarding futures
The CSSF issued a communiqué to draw the attention of supervised entities to a product interventionmeasure regarding futures instruments taken by Germany’s Federal Financial Supervisory Authority (BaFin) under a General Administrative Act (published on its website on 30 September 2022). The measure is based on Article 42 “Product intervention by competent authorities” of MiFIR.
Therefore, entities supervised by the CSSF are prohibited from marketing, distributing and selling futures to retail clients domiciled in Germany except if “additional payment obligations” have been contractually excluded. Transactions for hedging purposes or to close out open futures positions are not subject to this prohibition.
The restriction is effective as of 1 January 2023.
1 January 2023: Repeal of Circular CSSF 20/748 adopting the Guidelines of the EBA on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis
Following the European Banking Authority (EBA) communication of 16 December 2022 concerning the repeal of its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis (EBA/GL/2020/07), the CSSF would like to inform the concerned entities that Circular CSSF 20/748 adopting these EBA Guidelines is repealed from 1 January 2023. The temporary COVID-19 reporting and disclosure framework introduced by these EBA Guidelines in June 2020 had been set up to monitor the measures taken by credit institutions in response to the COVID-19 crisis.
2 January 2023: Enforcement of the 2022 annual reports published by issuers subject to the Transparency Law
Pursuant to the Law of 11 January 2008 on Transparency requirements for issuers (the “Transparency Law”), the CSSF is monitoring that financial and non-financial information published by issuers is drawn up in compliance with the applicable reporting frameworks. As issuers are now preparing their reporting for the 2022 financial year, the CSSF wishes to draw the attention of those issuers preparing their financial statements in accordance with IFRS and/or their non-financial report in accordance with the Law of 23 July 20161, as well as of their auditors, to several topics and issues that will be the subject of a specific monitoring during the CSSF’s enforcement campaign planned for 2023.
9 January 2023: CSSF eDesk – new design
The CSSF has announced the launch of a new version of the eDesk digital portal for all professionals. The portal was redesigned to offer a better user experience and a smoother navigation.
The new look aims to improve the readability of the content and to facilitate access to information for users.
11 January 2023: AML/CFT controls applied to TCSP activities by certain IFMs - thematic inspections from November 2021 to January 2022
In July 2020 the CSSF had published a money laundering/ terrorist financing (“ML/TF”) sub-sector risk assessment regarding the specialised professionals of the financial sector providing corporate services – Trust and Company Service Provider (“TCSP”) activities. In this context, the CSSF’s UCI On-site Inspection department carried out a thematic review from November 2021 to January 2022 of the AML/CFT controls applied by IFMs in regard to their TCSP activities, ancillary to their principle investment fund management activity. The thematic review targeted specific Luxembourg IFMs.
Key findings:
12 January 2023: ELTIF Revision - Update
The European long-term investment funds (ELTIF) regime was introduced in 2015. On 7 December 2022, a proposal was agreed between the Council of the European Union and the EU Parliament to amend the ELTIF Regulation (“ELTIF 2.0”). This text has been subsequently approved by the EU Parliament’s ECON committee on 12 January 2023. The text remains subject to formal individual approval by the EU co-legislators. The EU Parliament has indicatively foreseen mid-February 2023 to approve the ELTIF 2.0.
Of note are the following changes:
For further details, please refer to a recently White Paper recently published by ONE.
19 January 2023: CSSF communication on the publication of two notification templates to be completed when applying for the authorisation or modification of an IFM to the CSSF
The CSSF has published two notification templates entitled “Authorised investment fund managers (“IFMs”) – type(s) of requested authorisation(s)” and “Authorised investment fund managers (“IFMs”) – type(s) of requested change(s)” to be used with immediate effect when:
The template “Authorised investment fund managers (“IFMs”) – type(s) of requested change(s)” should also be used in the context of an acquisition of a qualifying holding in an IFM, a change of a reference shareholder and/or the creation of one or more branches.
The applicable notification template should always be filled out and submitted to the CSSF along with the related application file. The templates can be found in the documentation/forms section of the relevant pages:
19 January 2023: Circular CSSF 23/829 on the application of the Guidelines on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033 (EBA/GL/2022/10)
The purpose of this circular is to inform that the CSSF applies the Guidelines on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033 (Ref. EBA/GL/2022/10) published on 29/07/2022. 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.
26 January 2023: Reporting Handbook for Investment Firms
The CSSF has published an update of the Reporting Handbook for investment firms, thus integrating the updates of the EBA reporting framework version (DPM) version 3.2 (applicable as of June 2023) and the introduction of a Threshold Monitoring module. In addition, and in line with the CSSF’s current practice for national reporting templates, the Handbook introduces a new requirement to also submit final versions of some EU reporting templates.
For further information, please contact:
Tobias Ettlin
m: +352 691 111 931
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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