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CSSF ‘Brexit licence’ deadline looms

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UK fund providers have until 15 September 2019 to submit a ‘Brexit licence’ to the Luxembourg regulator to continue trading in the jurisdiction. But as Luxembourg is the one of the primary markets for UK UCITS funds, there are potentially hundreds if not thousands of funds and managers affected, says Martin Neason (pictured), Director at FE Global Funds Registration.

 
The Commission de Surveillance du Secteur Financier (CSSF) warned that unless firms submitted a notification to them by the deadline, they would be considered as ‘third-country entities’. This would result in a loss of passporting rights and sanctions, should they continue to pursue regulated activities in Luxembourg following a no-deal Brexit.

 
The CSSF introduced the Brexit laws in April this year, which were designed to introduce a degree of certainty for both investors and fund providers and their managers in the event of a ‘no-deal’ Brexit.
 
The ever-changing political situation means that European regulators are unable to issue hard and fast guidelines, so this is why UK managers have not been aware of this for too long, explains Neason.
 
All UK firms authorised under The Capital Requirements Directive (CRD), Markets in Financial Instruments Directive (MiFID II), Payment Services Directive (PSD2), or the e-money directive (EMD), along with Undertakings for Collective Investment (UCIs) established in the UK under the UCITS Directive and/or the Alternative Investment Fund Managers Directive (AIFM) will be required to notify the CSSF.
 
Following the 15 September deadline, firms authorised under both UCITS and AIFM will then have until 31 October 2019 to submit to the CSSF either the corresponding application for authorisation, the corresponding notification or information or any action taken otherwise on the nature of the activities they intend to pursue after the occurrence of a no deal Brexit, or the steps they have undertaken to address the loss of passporting rights.
 
It makes sense for managers to apply for the licence, says Neason. “It is not committing them and not costing them to do the temporary permissions regime and if they are already registered in Luxembourg it is in their best interests to do it.”
 
Neason recommends that firms should get specialist advice; from companies specialising in overseas registration of funds but he also suggests that funds contact the lawyers of the funds. “Ultimately it is the fund or the manager that bears the responsibility. Our advice is to apply, but any decision that is taken should be backed up by legal opinion.”
 
“Managers now know what they need to do, so to ignore this opportunity to allow them to carry on business in Luxembourg, is risking their business model,” he adds.
 
“The advantage of this temporary licence is that it gives managers and regulators that time period to allow for discussions on a replacement regulatory regime to take place. Europe relies on UK investment funds as much as the UK relies on European funds. I can’t believe that in future there won’t be some sort of third country regime in place.”

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