The different regimes that are applicable to third-country firms (hereinafter the “TCF(s)”) that wish to provide investment services or perform investment activities together with ancillary investment services in Luxembourg under the recently added Article 32-1 of the Luxembourg law of 5 April 1993 on the financial sector, as amended (hereinafter the “Law”) are now clarified by CSSF Circular 19/716 (hereinafter the “Circular”) issued on 10 April 2019. The newly added Article 32-1 of the Law implements the provisions of the Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (MiFID II) and Regulation (EU) No 600/2014 of 15 May 2014 on markets in financial instruments (MiFIR).
The Circular urges TCFs to firstly identify their targeted clientele, as different rules apply in respect to the provision of investment services to retail clients or professional clients on request on the one hand and per se professional clients or eligible counterparties on the other hand. In respect to the former category of clients, the Law is clear that TCFs are required to establish a branch in Luxembourg whereas in relation to the latter type of clients, the Law allows for such TCFs to opt in for either the national regime or the European regime. In contrast, a TCF is not subject to the provisions of the Law should a client established or situated in the European Union initiate at its own exclusive initiative the provision of an investment service by such TCF (so called ‘reverse solicitation’).
TCFs can provide investment services to per se professional clients or eligible counterparties situated within Luxembourg on a cross-border basis as permitted by the national regime only if the European Commission has not yet taken an equivalence decision in respect to a TCF’s country of origin or the TCF chooses to benefit from the three-year transitional period pursuant to MiFIR. 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 Law (i.e. whether the third country is a signatory party to the IOSCO Multilateral Memorandum of Understanding (MoU) or whether it is subject to adequate AML/CFT laws and supervision (ii) a MoU 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.
Conversely, a TCF can opt in for the European regime and hence provide investment services on a cross-border basis to per se professional clients and eligible counterparties in Luxembourg where the European Commission has adopted beforehand an equivalence decision relating to the TCF’s country of origin and such TCF is registered in the relevant register kept by ESMA.
TCFs must, whether utilising the national or the European regime, and before offering any investment service, inform their clients that they are not allowed to provide services to clients other than eligible counterparties and per se professional clients and are not subject to supervision in the European Union.
Interested TCFs wishing to utilise the national regime can apply to the CSSF and submit the relevant form attached to the Circular, whereas those TCFs opting for the European regime can apply to ESMA in the manner and form prescribed in Regulation (EU) 2016/2022 of 14 July 2016 with regard to regulatory technical standards concerning the information for registration of third-country firms and the format of information to be provided to the clients.
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