Bracing For Brexit: Luxembourg Sets Notification Procedures For UK Firms, UCIs And Their Managers In The Event Of A Hard Brexit

On 15 July 2019, the CSSF published two press releases (19/33 and 19/34) directed at (i) UK firms and (ii) UCITS management companies and AIFMs, clarifying actions to be taken by UK entities in anticipation of a hard Brexit.

Once again, the Luxembourg financial regulator demonstrates a clear intention to view the UK as a key partner. This statement follows the CSSF press release 19/18 regarding the publication of laws on 8 April 2019 relating to measures to be taken in relation to the financial sector in case of a withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (the Brexit Law) which had set a first framework ensuring the performance of activities in a post-Brexit context.

The CSSF confirms its initial position towards currently authorised UK entities by granting the benefit of a transitional regime, ensuring both the stability of financial markets and the protection of investors. However, UK firms (under CRD, MiFID II, PSD2 or EMD) (the UK Firms) which have not taken the necessary steps in anticipating a hard Brexit scenario might take the strain. Indeed, UK Firms who intend to conclude new contracts in the context of Brexit shall be excluded from the transitional period, opening the road to a 12-month uncertainty period.

CSSF Press Release 19/34

Post Brexit status: third-country entities

In the event of a hard Brexit, the CSSF underlines that UK authorised entities shall be considered as "third-country" entities, leading to the loss of passporting rights under relevant EU directives.

Continuity of activity: a 12-month transitional period to be observed on a case-by-case basis

To guarantee the continuity of existing contracts, the CSSF may, on a case-by-case basis, grant UK UCIs and/or their managers the possibility to continue their activities in Luxembourg for a limited period following the date of a hard Brexit (the Transitional Period).

The benefit of this Transitional Period shall be introduced by means of a 2-step notification procedure, consisting of the submission of a "Brexit notification" and the subsequent application(s) and/or notification(s).

2-step Brexit notification procedure: UK authorised entities and UK entities pending authorisation both concerned

Currently authorised UK entities (under UCITS and AIFM directive) and UK entities which have applied for authorisation with the CSSF shall both be required to submit a Brexit notification to the CSSF.

1st step to be undertaken...