Advisers to collective investment funds are henceforth included in the scope of application of the 1993 financial services legislation and must hold an investment adviser authorisation issued by the Finance Ministry, the CSSF has announced, following the entry into force of the law of December 21, 2012.
The legislation transposed into Luxembourg law the so-called ‘Omnibus I’ Directive 2010/78/EU of November 24, 2010, establishing the powers of the three EU financial regulatory agencies, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority and setting out the framework for reporting, notification and co-operation responsibilities of national regulators in these sectors. The legislation came into force on December 31.
The legislation notably amends Luxembourg’s 1993 legislation by ending the exclusion from authorisation requirements of investment advisers to UCITS and Part II funds established under the law of December 17, 2010 and advisers to Specialised Investment Funds regulated by the SIF law of February 2007. Investment adviser authorisation is carried out under Article 24 of the financial services legislation.
New entrants (i.e. investment advisers) must be authorised before taking up activity, while firms already active as investment advisers to these funds have until June 30 this year to comply with the provisions of the 1993 legislation (the deadline has been shifted from the end of 2012). The CSSF has invited such firms to file their authorisation request as soon as possible to ensure it can be processed by the deadline.
Beyond the submission of the authorisation application, firms will be subject to additional legal requirements comprising compliance with the CSSF’s requirements regarding their structure, administration and internal controls, periodic reporting to the regulator, including the annual long form report, and a mandatory annual audit if the firm is not already required to undergo one.
Otherwise the legislation brings Luxembourg’s law regarding regulation and oversight of investment funds as a whole into line with the requirements of the new EU supervisory structure for financial services introduced at the beginning of 2011.
In a statement issued on March 6, the CSSF states that most of firms submitting applications that the regulator has received to date in response to its announcement do not meet the definition of investment adviser in the meaning of Article 24 of the financial services legislation.
These entities do not provide personalised recommendations to investor clients and are not targeted by the stipulations relating to the provision of investment services stemming from the markets in financial instruments legislation. Such firms, which only advise collective investment funds under the 2010 legislation and Specialised Investment Funds, do not need to be authorised under Article 24.
Before taking matters further, the CSSF says it plans to send a questionnaire to 2010 legislation funds and SIFs regarding the advisers they use, in order to determine whether some of these need to be authorised under the financial services legislation, in particular if they provide advice outside the investment fund or SIF group of which they are part.
The CSSF press release can be found here [download id=”81″]