MiFID II implementing law adopted!

On 15 May 2018, the Law implementing the revised EU Markets in Financial Instruments regime (MiFID II) into Luxembourg law ("MiFID II Law") was adopted by the Luxembourg Parliament (Chambre des Députés).

As a reminder, MiFID II entered into force on 3 January 2018 and the key principles of its application in Luxembourg were anticipated by the CSSF (see the two CSSF Press Releases). A MiFID-dedicated FAQ was also published on the CSSF website. This FAQ is updated on a regular basis.

The MiFID II Law reflects the requirements of both the level 1 MiFID II Directive (Directive 2014/65/EU) and Regulation (Regulation (EU) 2014/600) and the level 2 MiFID II Directive (Directive (EU) 2017/593) and is divided into two parts. Part I includes a new Law on markets in financial instruments, repealing the Law of 13 July 2007 on the same topic¹ and Part II amends the 1993 Law on the Financial Sector.

Key points of the new MiFID II regime

• Trading platforms: A new type of regulated trading venue is introduced, the organised trading facility ("OTF"). Tighter transparency rules applicable to different trading venues are also introduced, aimed at removing obstacles to fair and efficient pricing.
• Increased investor protection: Ban on inducements, new product governance rules and cost disclosure obligations.
• Creation of three new PSF for communication of data: the approved publication arrangement, the consolidated tape provider and the approved reporting mechanism. Authorised providers of such data communication services (“prestataires de services de communication de données” or “PSCD”) may exercise the activities covered by their authorisation throughout the European Union.
• New access regime for third-country firms.
• Enhanced regime of administrative penalties.
• New transaction reporting obligations to the competent regulatory and supervisory authorities, in this case the CSSF.
• Easier access for SMEs to capital markets.
• Regulatory adaptation to technological innovations.
• Limitation of speculation on commodities.

Provided that the Council of State (Conseil d’Etat) consents to dispense with the second vote, the MiFID II Law will be published in the Mémorial, the Luxembourg official journal, and is expected to enter into force on the fourth day following its publication.

MIFID II impact on investment funds and their management companies/AIFMs²

Investment funds and their management companies/AIFMs are out of scope of MiFID II. They are therefore not directly subject to any MiFID II requirements for their service of collective investment management. However, they will be indirectly affected by MiFID II when they rely on MiFID entities for the provision of MiFID services, e.g. distribution, portfolio management, brokerage, (…) or where MiFID entities provide investment services in relation to investment funds to the clients of the funds (e.g. reception, transmission of orders).

UCITS management companies and AIFMs will also be directly affected if they have an extended licence for the provision of certain MiFID services. In this case, they will have to comply with specific MiFID II requirements.

For more information on MiFID II and its implementation in Luxembourg, please refer to your usual contact at Elvinger Hoss Prussen.