Luxembourg prepared for Brexit – two draft bills are voted for the protection of the financial sector and investment funds
Both the draft bill n°4701 and the draft bill n°7426 on the protection of the Luxembourg financial sector and investment funds, in case of a so called “Hard Brexit”, have been voted on the 26th and 28th of March 2019.
The draft bill n°4701 provides for the prolongation of a maximum of 21 months after the Hard Brexit, of the European financial passport for UK entities already active in the financial sector of the Grand Duchy of Luxembourg (“Luxembourg”) before the UK’s exit. The Commission de Surveillance du Secteur Financier (the “CSSF”) will have full power to take any temporary measures to ensure the financial stability and the continuity of the ongoing contracts and commercial relationship. During this period, UK-based authorized alternative investment funds managers (“AIMFs”) and UK-based undertakings for collective investment in transferable securities (“UCITS”) management companies, already active on the Luxembourg market, will be allowed to continue managing and marketing funds in Luxembourg on the basis of such prolonged authorisation.
The draft bill n°7426 provides, among others, for transitional measures for a limited duration of 12 months after Brexit, during which Luxembourg UCITS, Part II UCIs and specialised investment funds can reorganise their portfolio in order to comply with the applicable investment rules which they may be in breach of, due to the withdrawal of the UK from the European Union. For continuity of the financial activity purposes, the same transitional period of time applies to UK-based UCITS management companies and non UK-based UCITs management companies, managing British assets which remain authorised to market products to retail investors in Luxembourg. For the latter, this will possible under the condition that they have been duly authorized as AIFM before Brexit.