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Luxembourg third country firms regime

In the framework of the third country firms regime applicable in Luxembourg in relation to investment services, the CSSF, on 2 July 2020, published an update of its Circular 19/716 and a new regulation establishing a list of third countries deemed equivalent to Luxembourg law regarding the provision of investment services:

  • Regulation CSSF N° 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; and
  • Circular CSSF 20/743 – Amendment to Circular CSSF 19/716 regarding the provision in Luxembourg of investment services or the performance of investment activities and ancillary services in accordance with Article 32-1 of the LFS.

For the moment, the texts are only available in French. The key takeaways are the following:

  • the amended Circular 19/716 now confirms that there are situations where investment services may be deemed as being provided outside of Luxembourg, even if the client is established in Luxembourg, provided that the characteristic performance of the investment service is located outside of Luxembourg. This exception is not applicable to retail clients (investment services to retail clients would always be deemed to be provided in Luxembourg) and should be assessed under the responsibility of the third country firm willing to provide investment services to Luxembourg clients (i.e. the use of this exception should therefore be documented internally to demonstrate compliance, as the case may be). This exception would also not apply to third country firms which already have an establishment in Luxembourg (e.g. a branch); and
  • the new CSSF regulation lists some of the main financial hubs worldwide (the U.S., Canada, Japan, Switzerland, Hong Kong, Singapore) as equivalent countries in relation to the provision of investment services. However, it does currently not list the UK considering that: (i) the UK is still covered by the transitional regime under the Brexit agreement; and (ii) the equivalence decision will most likely be taken at EU level (and not only at Luxembourg level).