New CSSF Circular On Substance Requirements Of Fund Management Companies In Luxembourg

The Commission de Surveillance du Secteur Financier ("CSSF") has issued today circular 18/698 concerning (i) the approval process and organisation of Luxembourg fund management companies and (ii) specific requirements applicable to both fund management companies and transfer agents in the fight against money laundering and terrorist financing.

The objective of the CSSF when drafting the new circular was to set out in one single document all substance related aspects concerning both UCITS management companies and alternative investment fund managers. Until now, circular 12/546 of 24 October 2012 set out the regulatory practice of the CSSF concerning the substance of management companies; initially addressing UCITS management companies only. However, the increasing number of Luxembourg alternative investment fund managers, together with the efforts on regulatory convergence in a BREXIT context, has led to the creation of a new circular applicable to all Luxembourg fund management companies, whether UCITS, AIFM or even those known as "Chapter 16 management companies". The provisions of the new circular mirror, to a large extent, the administrative practice developed by the CSSF in the recent past, but also includes some new requirements which will burden market players.

The main section of the circular sets out detailed rules concerning the shareholders of management companies, the minimum equity requirements, corporate bodies, administrative organisation, internal governance and internal controls. The provisions...