Implementation of Benchmark Regulation

The Benchmark Regulation (Regulation (EU) 2016/1011) has recently been supplemented in Luxembourg by the publication of an implementing law on 19 April 2018 ("Benchmark Law").

The Benchmark Law designates the CSSF (Commission de Surveillance du Secteur Financier) as competent authority in Luxembourg to ensure compliance with the Benchmark Regulation by administrators.

The CSSF is also competent (i) when Luxembourg is the Member State of reference of an administrator located in a third country, and (ii) when an administrator or a regulated entity established in Luxembourg requests the endorsement of a benchmark or a family of benchmarks provided in a third country.

In addition, the CSSF and the CAA (Commissariat Aux Assurances) are also designated as competent authorities to ensure compliance with the Benchmark Regulation by the entities which are listed in Article 4.1 (17), letters a) to l) of the Benchmark Regulation ("Supervised Entities") and which fall under their supervision. UCITS management companies ("UCITS ManCos") and alternative investment fund managers ("AIFMs") are included in the list of Supervised Entities.

According to the Benchmark Law, specific investigation powers are granted to the CSSF and the CAA. Details on administrative sanctions and measures that can be imposed in case of violation of the Benchmark Regulation are also provided. These sanctions and measures apply not only to administrators but also to Supervised Entities (e.g. UCITS ManCos and AIFMs).

According to the Benchmark Law, UCITS ManCos and AIFMs (i) which do not have backup plans, i.e. robust written plans outlining the steps to be taken in the event that a benchmark is materially changed or ceases to be produced, and/or (ii) which do not insert the relevant information in their contractual arrangements with their clients (e.g. prospectus) as required by Article 29 of the Benchmark Regulation, may be subject to substantial fines, which can be up to an amount of EUR 1,000,000 or 10% of the turnover of the UCITS ManCo/AIFM (the highest amount being withheld as a maximum).