On 1 July 2020, the CSSF published (i) CSSF Regulation No. 20-02 of 29 June 2020 on the equivalence of certain third countries with respect to supervision and authorisation rules for the purpose of providing investment services or performing investment activities and ancillary services by third-country undertakings (“CSSF Regulation”) and (ii) CSSF Circular 20/743 (amending CSSF Circular 19/716 regarding the provision in Luxembourg of investment services or performance of investment activities and ancillary services in accordance with Article 32-1 of the Law of 5 April 1993 on the financial sector, as amended) (“CSSF Circular”).
According to Article 32-1 of the Law of 5 April 1993 on the financial sector, as amended (“1993 Law”), third country firms (“TCFs”) wishing to (i) serve retail clients or professional clients on request are required to establish a branch in Luxembourg and (ii) serve per se professional clients or eligible counterparties must opt in for either the national regime or the European regime.
We refer you to our BSP Newsflash which provides an overview of CSSF Circular 19/716 on TCFs providing investment services or performing investment activities in Luxembourg.
In the absence of an equivalence decision for any country in the context of Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (“MiFID II”) (necessary to activate the European regime), TCFs can benefit from the national regime as long as the CSSF is satisfied, subsequent to a duly submitted application by the interested TCF to the CSSF, that (i) the TCF is subject to supervision and authorisation rules in its country of origin considered as equivalent to those of the national law (“Equivalence Decision”) (ii) a Memorandum of understanding is in place between the CSSF and the respective TCF’s supervisory authority and (iii) the TCF is authorised in its country of origin to provide the investment services it wishes to provide in Luxembourg.
The CSSF has published through the CSSF Regulation its first ever Equivalence Decision with respect to the following countries: Canada, Switzerland, USA, Japan, Hong Kong Special Administrative Region of the People's Republic of China and Singapore.
The CSSF Circular amends the existing CSSF Circular 19/716 and particularly clarifies the criteria under which the provision of investment services by TCFs is considered to be provided in Luxembourg under Article 32-1 of the 1993 Law:
- the third-country firm is established in Luxembourg; or
- the third-country firm provides an investment service to a retail client established or located in Luxembourg; or
- the place for the provision of the characteristic performance (prestation caractéristique) of the service is Luxembourg.
The CSSF further clarifies that a TCF may fall outside the scope of application of Article 32-1 where, even though services are provided to a client established or located in Luxembourg (other than retail clients), the service may be considered as not being provided in Luxembourg.