Luxembourg, 7 December 2020
CSSF published a press release on 7th December 2020 on the forthcoming end of the BREXIT time-limited transitional period ending on 31 December 2020 at midnight; following this date, the withdrawal of the UK from the EU shall become effective.
Luxembourg UCI managed by UK entities
Any Luxembourgish UCI, managed by a UK manager (UCITS management company and AIFM), will have to appoint a EU-27 management company/AIFM to maintain its EU/EEA passporting rights, in which case, a notification for cross-border management under Article 33 of the AIFMD or Articles 16 to 21 of the UCITS Directive need to be filed before the 31st of December 2020.
Luxembourg IFMs
Luxembourgish Investment Funds Managers (IFM) managing UK branches must apply for FCA’s TPR to keep their rights during the transitional period and apply for the new UK regime post-BREXIT.
In addition, in the perspective of a hard BREXIT, Luxembourg managers of UK UCITS must be authorised as AIFM in Luxembourg to be able to continue to manage these forthcoming UK UCIs after 31 December 2020. Luxembourg AIFM law’s Article 34 shall apply from the 1st January 2021 to the extent that such UK UCIs will not be marketed in EU/EEA Member States.
Cross-border distribution of UCIs
Inbound distribution: UK managers (UCITS management company and AIFM) are requested to file a de-notification with CSSF (withdraw from cross-border distribution into Luxembourg) whereas new EU-27 managers should file a new notification if they intend to continue marketing units in Luxembourg.
In the event of Luxembourg investors remaining invested in a de-notified UCI with no active marketing in Luxembourg, such UCIs are required to apply for registration with CSSF and keep reporting obligations as long as Luxembourg investors remain invested.
Outbound distribution: Luxembourg managers and Luxembourg funds having activities in the UK on an EU/EEA passport basis must be registered in the FCA’s TPR to keep their rights during the transitional period and apply for the new UK regime post-BREXIT.
Other issues
Delegations: Investment management/portfolio management delegations and/or risk management delegations to UK entities will be still authorised under certain circumstances.
UCITS master-feeder: Investment/portfolio holdings relating to UCITS master-feeder structures (i.e. a UCITS feeder fund established in Luxembourg investing into a UCITS master fund established in the UK) where the UK UCITS will qualify as “other UCIs” in the sense of articles 41.1(e) and 46.1 of the Law of 2010, may not in aggregate exceed 30% of the assets of the Luxembourg UCITS.
Money Market Funds (MMF): Deposits with a credit institution having their registered office in the UK (considered as third country in the event of a hard-BREXIT) will not be an eligible investment by an MMF as of 1 January 2021.
Secondments: In relation to potential secondments made and controlled by a Luxembourg IFM with a UK natural persons to be involved in the provision of collective portfolio management services, CSSF’s position is that such secondments of staff are acceptable provided that they comply with all applicable requirements, including inter alia, an appropriate supervision, a physical presence in Luxembourg premises and an appropriate prior notification to the CSSF. This CSSF’s position on secondments also fully apply to the management of marketing staff, together wit hthe requirement to be in place before the 31st of December, 2020.
Please note that, as of the end of the transitional period (31 December 2020 or any additional delay agreed by both EU and UK governments), any issue of non-compliance with applicable investment rules or policies triggered by the withdrawal of the UK from the EU will be considered as a breach.
We also warmly recommend reading our publications relating to the consequences of the BREXIT, in particular the last publications relating to the UK FCA’s TPR to guarantee business continuity and a more to further UK regime under the management of the FCA, forthcoming French AMF rules for PEA UCIs with UK holdings and/of UK UCIs, etc.
FundGlobam will be happy to assist you should you require any further information.