To print this article, simply register or connect to Mondaq.com.
On December 22, 2021, the Commission de Surveillance du Secteur Financier (“CSSF“) published three new circulars dated December 17, 2021 effectively reforming the Long Report:
- A circular for Luxembourg collective investment undertakings (“Circular 21/790“).
- A circular addressed to investment fund managers authorized in Luxembourg (“Circular 21/789“).
The main innovations of these circulars are, on the one hand, their scope; and on the other hand, the creation of two new documents: the self-assessment questionnaire (“SAQ“) to be prepared by the relevant investment fund managers (“IFM“), respectively by regulated collective investment undertakings (“OPC“) and the separate report (“RS“) to be prepared by the independent auditor, approved auditor(“REA“), which the CSSF makes available via its eDesk portal.
- A circular giving guidance to the collective investment sector on the CSSF’s external AML / CFT report (“Circular 21/788“).
These circulars will constitute new effective prudential supervision tools for the CSSF following the legislative and regulatory changes of recent years.
1. Scope of circulars
Circulars 21/789 and 21/790 both set the practical rules for the preparation and annual filing of the SAQ by IFMs and UCIs. They also define the scope of the mandate of the REA, and of the SR and the framework of the management letter that the REA is to issue.
Unlike the regime that applied before the entry into force of these circulars, the new regime concerns both SIFs and SICARs, in addition to UCITS and UCIs falling under Part II of the Law of 17 December 2010 on OPC (“Part II fundsIn addition, IFMs must now also complete an SAQ unless they fall under the exemption of Circular 21/789 such as for example registered alternative investment fund managers.
With regard to circular 21/788, the following fall within the scope of:
- all Luxembourg IFMs as defined in CSSF Circular 18/698 – including registered IFMs,
- all Luxembourg investment funds supervised by the CSSF for AML / CFT purposes.
Luxembourg investment funds which have appointed an IFM, whether this IFM is established in Luxembourg or abroad, are excluded from the scope of this Circular. However, the REAs must nevertheless carry out AML / CFT âworkâ for these funds in accordance with article 49 (1) of CSSF regulation n Â° 12-02, as amended (âBy-law n Â° 12-02“).
2. The self-assessment questionnaire (SAQ)
For each financial year or accounting period audited, an SAQ must be completed by all IFMs in the scope and all UCIs, subject to a legal audit of the accounts. The main objective of the SAQ is to have IFMs and UCIs self-assess their compliance with legal and regulatory requirements – with the exception of AML questions, which are the subject of a separate questionnaire referred to in point 5. below. The SAQ must be filed with the CSSF within a certain period of time following the end of the financial year.
3. The separate report (SR)
The REA must complete the SR via the CSSF eDesk portal for each audited financial year or accounting period, after the IFM or UCI has submitted the SAQ. The aim is to ensure the reliability of the answers given by the IFM or the UCI on the SAQ, and to answer specific questions raised by the CSSF. Like the SAQ, the SR must be filed by the IFM or the UCI with the CSSF within a certain period of time following the end of the financial year.
4. The management letter
In Circulars 21/789 and 21/790, the CSSF also specifies the regulatory framework applicable to the recommendation letter to be prepared by the REA for each audited financial year or accounting period of IFMs and UCIs falling within the scope.
This letter, provided in a standardized format via the CSSF eDesk portal, is to be prepared by the REA for each MFI or UCI concerned and sent by the IFM or UCI to the CSSF via eDesk.
In addition to the weaknesses and areas for improvement detected by the REA, this letter must include a follow-up of pre-existing weaknesses and unresolved areas for improvement; here, the IFM or the UCI is required to provide detailed comments and explanations in good time and within a reasonable time. Submission to the CSSF must take place within a specified time after the end of the financial year.
5. The CSSF’s external AML / CFT report
In Circular 21/788, the CSSF provides information on the specific AML / CFT report which must be drawn up by an external AML / CFT expert.
All professionals legally required to appoint a REA must designate the same REA as an âexternal AML / CFT expertâ to prepare this report on an annual basis, which can only be submitted via eDesk by the supervised entities concerned.
This report contains (i) a section relating to the corroboration of the responses given by the supervised entity in the scope of the CSSF’s annual online AML / CFT survey, as well as (ii) a section dedicated to surveys or specific work to be carried out by the REA. Comments from the REA and the supervised entity on the results of the work carried out can also be added. The RR (responsible for compliance) or RC (responsible for monitoring compliance with obligations) or a member of the board of directors / management (or equivalent) will be responsible for submitting this report.
Circular 21/790 repeals Circular CSSF 02/81 setting the guidelines concerning the mission of auditors of collective investment undertakings, as well as chapter P of Circular CSSF 91/75 concerning the obligation of UCIs to inform the CSSF of the checks carried out by the REAs.
Coming into force
Regarding circular 21/790, the following distinction should be made:
- For UCITS and Part II Funds, the provisions of this Circular must be complied with for the financial years ending on or after June 30, 2022.
- For RISs and SICARs, the provisions of this circular must be complied with for the financial years ending on or after June 30, 2022, with the exception of the provisions relating to RS. These last provisions must be respected by the SIF and the SICAR for the financial year ending on or after June 30, 2023.
For IFMs, Circular 21/789 applies to fiscal years ending on or after December 31, 2021.
Circular 21/788 must be respected for financial years ending on or after December 31, 2021.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
POPULAR ARTICLES ON: Finance and Banque du Luxembourg