As from 1 January 2021, UK AIFMs of Luxembourg AIFs will be considered as “third-country managers” and will lose the benefit of the AIFMD management passport. They should therefore appoint an EU AIFM to be able to continue managing Luxembourg AIFs.

Hence, for Luxembourg AIFs having been set up prior to 31 December 2020, UK AIFMs may continue to manage Luxembourg AIFs to the extent that (i) all direct or indirect investors are professional investors and/or well-informed investors and (ii) such investors consented, before 31 December 2020, to continue to be managed by a third-country/UK AIFM (unless Brexit transition provisions had been provided in the fund’s documentation).

Notification to the CSSF in connection with the above had to be made by the UK AIFM before year end with the relevant supporting documentation. UK AIFMs wanting to continue to manage non-regulated Luxembourg AIFs do not need to notify the CSSF.

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Simone Baier (simone.baier@arendt.com)
(02/03/20 - You are a UK AIFM)

As from 1 January 2021, UK AIFMs will be considered as “third-country managers” and will lose the benefit of the AIFMD marketing passport. As such, the CSSF requires that a “de-notification” of cross-border distribution into Luxembourg be made.

If the Luxembourg AIF retains Luxembourg investors – even if they no longer actively market in Luxembourg – a further registration will be required. If there is active marketing in Luxembourg, then a notification under the Luxembourg national private placement regime would be needed instead.

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Simone Baier (simone.baier@arendt.com)
(10/12/20  - You are a UK AIFM)

Luxembourg managers currently managing UK funds and wishing to continue to manage UK funds need to apply for the Temporary Permissions Regime (TPR) with the FCA in the UK and inform the CSSF of such application.

When it comes to managing UK UCITS, Luxembourg managers will need to be authorised as AIFM in Luxembourg.

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Simone Baier (simone.baier@arendt.com)
(10/12/20 -You are a Luxembourg investment fund manager)

According to the CSSF, Luxembourg management companies can delegate their due diligence obligations only to portfolio managers which are themselves subject to such obligations. As a result of Brexit, due diligence obligations under the regulation could in principle no longer be delegated to UK based portfolio managers. Alternate set-up involving the assistance of the portfolio manager is however accepted by the CSSF. Feel free to contact us for further details in that respect.

UK trading venues may remain eligible markets for UCITS after 1 January 2021. Even though UK trading venues will lose their status as EU regulated markets, they may be considered as eligible non-EU markets. UCITS and their management companies will have to assess whether the particular UK markets relevant to them remain eligible under the applicable rules. In this context, the CSSF has noted that UK markets which currently (pre-Brexit) qualify as regulated markets under MiFID II may be considered as non-EU regulated markets post-Brexit.

Your contacts: Florence Stainier and Géraldine Léonard
(23/12/20 - You are a Luxembourg investment fund manager)

When implementing their due diligence on non EU based entities, Luxembourg investment fund managers should assess whether these entities have done their assessment as to their need to apply for a CSSF authorisation to perform investment services in Luxembourg in line with CSSF Circular 20/743.

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Florence Stainier (florence.stainier@arendt.com)
(26/01/21 - You are a Luxembourg investment fund manager)

As from 1 January 2021, non-compliance of Luxembourg UCITS with applicable investment rules or policies triggered by the withdrawal of the UK from the European Union will be considered as “active breaches”.

Your contacts for more details : 
Michèle Eisenhuth (michele.eisenhuth@arendt.com) and Fiona de Watazzi (fiona.dewatazzi@arendt.com)
(10/12/20)

UK trading venues may remain eligible markets for UCITS after 1 January 2021. Even though UK trading venues will lose their status as EU regulated markets, they may be considered as eligible non-EU markets. UCITS and their management companies will have to assess whether the particular UK markets relevant to them remain eligible under the applicable rules. In this context, the CSSF has noted that UK markets which qualified in a pre-Brexit environment as regulated markets under MiFID II may be considered as non-EU regulated markets post-Brexit.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

No, not necessarily. UCITS investing in European markets will need to review the wording of their investment objectives in the light of their portfolio composition. In practice, there may be a need to either adapt their investment policy or to disinvest from UK positions prior to 1 January 2021.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

UK UCITS will lose their UCITS status and will cease to qualify on that basis as of 1 January 2021. Nevertheless, they may still remain an eligible investment for UCITS if they comply with the requirements applicable to investment in UCIs. UCITS and their management companies are expected to verify the compliance of their investments, and to proceed with any necessary disinvestments, prior to 1 January 2021.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

Yes. As the UK forms part of the OECD, UCITS may continue to invest up to 100% of their assets in transferable securities and money market instruments issued or guaranteed by the UK, provided that the constitutional documents of these UCITS expressly mention OECD member states as eligible third-country issuers.

Appropriate measures may need to be taken concerning investments of up to 100% in transferable securities and money market instruments issued by authorities of local governments within the UK.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

Pending formal guidance from the CSSF in this respect, in light of the probable interpretation of existing Luxembourg laws and regulations, we believe that UK investment grade credit institutions may be deemed to be eligible third-country credit institutions.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

Pending formal guidance from the CSSF in this respect, in light of the probable interpretation of existing Luxembourg laws and regulation, we believe that UK counterparties to OTC financial derivative instruments may be deemed to be eligible third-country counterparties.

Your contacts: Michèle Eisenhuth and Géraldine Léonard
(18/12/20 - Impact on your fund’s investment policies and restrictions)

As from 1 January 2021, UK UCITS will qualify as other UCIs and will no longer qualify as UCITS master funds. The investment in master-feeder structures where the master is located in the UK will therefore be limited to 30% of the assets of the feeder fund.

Such master-feeder structures will need to be liquidated or reorganised, for example, by way of a relocation of the master in an EU Member State or by way of absorption of the master fund by the feeder fund.

Your contacts for more details : 
Michèle Eisenhuth (michele.eisenhuth@arendt.com) and Fiona de Watazzi (fiona.dewatazzi@arendt.com)
(10/12/20 - Impact on your fund’s investment policies and restrictions)

Deposits with a credit institution having its registered office in a third country is an eligible investment by a MMF only where the third country credit institution is subject to prudential rules considered to be equivalent to those laid down in EU law.

This will not be the situation as of 1 January 2021 in relation to credit institutions having their registered office in the UK. Therefore, based on the current situation, deposits with UK credit institutions will not be eligible investments for MMFs as of 1 January 2021.

MMFs will therefore need to replace their UK bank deposits by bank deposits with credit institutions located in EU Member States or in third countries which are recognized as equivalent.

Your contacts for more details : 
Michèle Eisenhuth (michele.eisenhuth@arendt.com) and Fiona de Watazzi (fiona.dewatazzi@arendt.com)
(10/12/20 - Impact on your fund’s investment policies and restrictions)

Retail clients can only be serviced within the limits of the reverse solicitation exemption.

Opt-up professional clients can only be serviced within the limits of the reverse solicitation exemption or if the investment firm can establish that the characteristic performance of the investment service is not deemed located in Luxembourg.

Per se professional clients and eligible counterparties clients may be serviced upon CSSF registration of the UK investment firm (since the UK has been captured in the list of jurisdictions that are considered by the CSSF to be equivalent to Luxembourg by virtue of CSSF Regulation 20-09), or within the limits of the “reverse solicitation” exemption or if they can establish that the characteristic performance of the investment service is not deemed located in Luxembourg.

Your contacts for more details :
Marc Mouton (marc.mouton@arendt.com) and Nathalie Berck (nathalie.berck@arendt.com)
(28/12/20 - You are a UK investment firm)

As from 1 January 2021, UK firms will have to analyse each investment service provided in Luxembourg on a case-by-case and continuous basis in order to assess whether it could fall within the reverse solicitation exemption (based on the guidance provided by ESMA in this area).

Further to CSSF Regulation 20-09 recognising the UK as an equivalent jurisdiction on a national level, UK investment firms may however choose to benefit from the national third country regime as from 1 January 2021. A registration with the CSSF is necessary to benefit from this regime (see Q15).

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Florence Stainier (florence.stainier@arendt.com)
(28/12/20 - You are a UK investment firm)

Investment services are presumed to be provided in Luxembourg, according to the CSSF, where one of the following conditions is fulfilled:

  • the third country firm has a permanent establishment in Luxembourg (e.g. a branch);
  • the third country firm provides a service to a retail client established or located in Luxembourg; or
  • the “characteristic performance” of the investment service, i.e. the essential service for which a payment is due, is deemed provided in Luxembourg.

Your contacts for more details : 
Marc Mouton (marc.mouton@arendt.com) and Nathalie Berck (nathalie.berck@arendt.com)
(10/12/20 - You are a UK investment firm)

Since 1 January 2021, UK firms have to analyse each investment service provided in Luxembourg on a case-by-case and continuous basis in order to assess whether a specific application should be made with the CSSF in line with CSSF Circular 20/743.

Such UK firms should therefore first assess whether the investment service is rendered in Luxembourg, i.e. on the territory of Luxembourg.
As mentioned in Question 17 above, investment services are presumed to be provided in Luxembourg, according to the CSSF, where one of the following conditions is fulfilled:

  • the third-country firm has a permanent establishment in Luxembourg (e.g. a branch);
  • the third-country firm provides a service to a retail client established or located in Luxembourg; or
  • the “characteristic performance” of the investment service, i.e. the essential service for which a payment is due, is deemed provided in Luxembourg.

This is equally applicable in case the service is rendered in the context of collective portfolio management i.e. portfolio management, distribution, advice,…
UK firms providing investment services to the benefit of Luxembourg based funds or funds services providers should consequently assess whether a CSSF authorisation is required based on the above. According to CSSF Circular 20/743, non-EU firms are responsible for making the analysis above before providing any service, for documenting and for retaining the analysis.
Furthermore, the abovementioned CSSF authorisation is subject to the compliance of non-EU firms with specific conditions described in CSSF Circular 20/743.

Your contacts for more details : 
Camille Bourke (camille.bourke@arendt.com) and Florence Stainier (florence.stainier@arendt.com)
(26/01/21 - You are a UK investment firm)

The Law of 25 February 2021 amends, among others, the UCI Law in extending the 12-month period granted under the Brexit Law of 8 April 2019 to market shares to retail investors in Luxembourg until 31 January 2021. The adopted text provides that a continued marketing until 31 July 2021 in accordance with article 100(1) of the UCI Law to Luxembourg retail investors is subject to the following conditions:

  • The marketing to retail investors has been done prior to 31 January 2021 under the terms and conditions of the aforementioned Brexit Law;
  • The former UK UCITS was managed on 31 December 2020 by a former UK UCITS management company.

The amendments entered into force with retroactive effect as per 1 February 2021.

Your contacts: Florence Stainier (florence.stainier@arendt.com)
(02/03/21 - You are a former UK UCITS with a former UK UCITS management company)

The Law of 25 February 2021 amends, among others, the UCI Law in extending the 12-months period granted under the Brexit Law to market shares to retail investors in Luxembourg until 31 January 2021. The adopted text provides that a continued marketing until 31 July 2021 in accordance with article 46 of the AIFM Law to Luxembourg retail investors is subject to the following conditions:

  • The marketing has been done prior to 31 January 2021 under the terms and conditions of the aforementioned Brexit Law;
  • The former UK UCITS was managed on 31 December 2020 by an EU-UCITS management company which is also acting as an authorised EU-AIFM as at 31 December 2020.

The amendments entered into force with retroactive effect as of 1 February 2021.

Your contacts: Florence Stainier (florence.stainier@arendt.com)
(02/03/21 - You are a UK UCITS with a EU-UCITS management company)