Cross-border services by third-country firms

CSSF recognises first equivalent third countries and clarifies when an investment service is rendered in Luxembourg.

On 2 July 2020, the CSSF published two important documents in relation to the provision of cross-border services by third-country firms:

• CSSF Regulation 20-02  which lists the first third countries with equivalent supervision regimes for MiFID II services performed to per se professional clients or eligible counterparties in Luxembourg; and
• CSSF Circular 20/743 which amends an existing circular (Circular 19/716) on the regime applicable to third-country firms wishing to provide investment services to clients in Luxembourg in accordance with Article 32-1 of the Financial Sector Law, which transposed the third-country regime of MiFID II Directive and MiFIR.

The clarifications in the CSSF Circular 20/743 are particularly relevant for investment funds and their managers.

They imply that:

• the provision of investment management services to Luxembourg UCITS and AIFs by an investment manager established outside the EU/EEA (in the typical scenario where a UCITS management company or an AIFM delegates investment management to an investment manager established outside the EU/EEA) should not be deemed to be a provision of services "in Luxembourg" for the purpose of the Financial Sector Law (as long as the third-country manager is not established in Luxembourg or does not otherwise provide its services in Luxembourg);
• MiFID II rules do not apply to such provision of services. Application of Article 32-1 of the Financial Sector Law (and related CSSF authorisation process) is therefore not triggered. Only the investment management delegation rules set forth in the UCITS Law¹  and the AIFM Law²  apply in that case.

For more information on CSSF Regulation 20-02 and CSSF Circular 20/743, see the Newsflash on our website.