The law of 10 July 2020 on professional payment guarantees, which aims to create greater freedom of contract while ensuring legal certainty in the provision of personal guarantees governed by Luxembourg law, recently entered into force. The new law is undoubtedly a welcome addition, especially in times of heightened uncertainty, and demonstrates once again Luxembourg's attractiveness as a forward-looking and business-friendly financial centre.
In recent months, the Luxembourg Financial Supervisory Authority (CSSF) has been active and the industry is preparing for the open banking wave. The changes in response to the EU Payment Services Directive aim for a generally positive evolution of the payment scene in Luxembourg. The CSSF has published the fallback exemption request form and adopted several circulars that are applicable to payment service providers.
By way of the Law of 20 July 2018, Luxembourg has finally implemented the EU Payment Services Directive (PSD 2). As the PSD 2 is a full harmonisation directive, most of Luxembourg's PSD 2 provisions are identical to the legal framework implemented across the European Union. Nonetheless, EU member states were given scope to decide on certain topics and the Grand Duchy seized the opportunity to define its own rules.
The new Markets in Financial Instruments (MiFID) Act, which transposes the Markets in Financial Instruments Directive and implements the EU Markets in Financial Instruments Regulation, was recently voted into law. Most issues relating to markets in financial instruments are covered by the first part of the act, while the provision of investment services will continue to be governed by the Financial Sector Act, as amended by the second part of the MiFID Act.
A recent Luxembourg District Court judgment has confirmed the well-established, flexible and creditor-friendly environment offered by the Collateral Act. The court ruled that the enforcement of a pledge cannot be set aside, except in the case of clearly established fraud. The main takeaway from the decision is the confirmation of the possibility offered by the act to enforce a pledge without any payment default and in case of a breach of a financial covenant.
Following the adoption of Bill of Law 7022, the new Act on Market Abuse recently entered into force. The act significantly increases the administrative and criminal penalties for infringements of market abuse provisions and designates the Luxembourg financial sector regulator as the competent authority for the purposes of the EU Market Abuse Regulation. It also extends the definition of 'regulated information' provided for in the Act on Transparency Requirements for Issuers.
The Luxembourg Stock Exchange (LuxSE) recently introduced a new specific platform for green financial instruments: the Luxembourg Green Exchange (LGX). Although joining the LGX is optional and green securities can be listed on the LuxSE and recognised as green regardless of whether the issuer chooses to join the LGX, having securities admitted to the LGX will increase investor confidence as to their green nature.
The Luxembourg financial sector regulator (CSSF) recently published frequently asked questions clarifying the criteria that it considers when assessing whether to accept an external expert as a regulated entity's internal auditor. The CSSF also confirmed that the criteria are assessed proportionately, and that it may request further information or interview the relevant parties when determining whether outsourcing an internal audit is possible.
The EU Market Abuse Regulation recently came into force in Luxembourg and a new market abuse regime affecting listed companies has been implemented. In addition, a wider set of rules covering the disclosure of inside information, insider list manager transactions and modifications relating to multilateral trading facility (MTF) platforms – including the Luxembourg Euro MTF market – have been introduced.
Updated Luxembourg Stock Exchange (LuxSE) rules and regulations came into force in January 2016 and the LuxSE recently published frequently asked questions (FAQs) regarding the Euro MTF Market rules. The FAQs include information on approvals and the requirements for the different types of security generally issued. They also provide support to practitioners in regards to prospectus approvals and the Euro MTF market listing process.
The Luxembourg financial sector regulator has issued Circular 15/631, which provides guidance on the definition and treatment of dormant accounts. According to the circular, professionals should maintain regular contact with their clients and monitor client relationships with vigilance. They must also set out rules to determine clearly when a relationship has become inactive and when an account has become dormant.
The EU Capital Requirements Directive has been transposed into Luxembourg law. The implementing act also amended the laws governing the financial sector, the CSSF (the Luxembourg financial sector regulator) and alternative investment fund managers. Among other things, key definitions have been introduced to pave the way for implementation of the EU supervisory framework for credit institutions and investment firms.
There is no specific legal framework regulating virtual currencies in Luxembourg. However, the authorities are fully aware that some tailoring is needed in order to adapt the financial regulatory framework to reflect the challenges of new technologies, especially with regard to virtual currencies. The financial supervisory body, the CSSF, has issued useful guidance in this regard.
Persons exercising key functions in investment firms are now subject to specific approval by the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier (CSSF). The CSSF recently published guidelines on the new prudential approval procedure, which applies to directors, authorised managers and persons in charge of internal control functions.
Persons exercising key functions in credit institutions are now subject to specific approval by the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier (CSSF). The CSSF recently published guidelines on the new prudential approval procedure, which applies to directors, authorised managers and persons in charge of internal control functions.
The Single Supervisory Mechanism (SSM) recently became fully operative. Pursuant to the SSM, the European Central Bank becomes the central prudential supervisor of financial institutions in the eurozone (including approximately 6,000 banks), with the possibility to extend the scope of its activity to cover EU member states outside the eurozone which choose to join the SSM.
The proliferation of bitcoin users goes hand in hand with the emergence of operators providing bitcoin-related services – enabling, for instance, the exchange of bitcoins for conventional official currencies. In the absence of EU legislation to curb the risks of bitcoin use, the Luxembourg financial regulator has clarified the way in which it intends to deal with bitcoin-related service operators.
The regulatory authority of the financial sector recently issued a press release stating that any legal person established in Luxembourg that qualifies as an alternative investment fund manager (AIFM) must perform a self-assessment in order to determine whether it is an internal or external AIFM and whether it must be registered with or authorised by the authority.
The law implementing the EU Alternative Investment Fund Managers Directive in Luxembourg recently entered into force. Enhancing Luxembourg's attractiveness for alternative investment funds, the law offers a true alternative to the ever-popular English limited partnership by modernising the rules on common limited partnerships and introducing a new category of financial sector professional.
A new law introducing a legal regime for dematerialised securities recently entered into force. Inspired by similar regimes in Belgium, Switzerland and France, the law allows securities to be issued in or converted into entirely dematerialised form. The law constitutes a considerable step forward in the establishment of a safe and modern legal framework that facilitates the international transfer of securities.
A draft bill was published recently with the main purpose of transposing into Luxembourg law the EU Alternative Investment Fund Managers Directive. The bill also introduces a new category of financial sector professionals to the law on the financial sector. Until the bill is fully adopted, amendments may still be proposed by various bodies that advise on the proposed law.
The new Prospectus Revision Law implements EU Directive 2010/73/EC, which amends both the EU Prospectus Directive concerning the prospectus to be published when securities are offered to the public or admitted to trading and EU Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market.
Recent legislation has amended the Collateral Act. The act has always been a lender-friendly implementation of the EU Collateral Directive and, in general, it remains favourable to creditors in insolvency situations and other contexts. However, all stakeholders should be aware of the insolvency aspects of collateral arrangements.
Parliament has passed a new law which amends the Collateral Act. It seeks to enhance the legal security of the creditor's position when taking collateral, and to ensure that such collatoral is effective and bankruptcy-remote. Among many other measures, it introduces two new means of perfecting pledges over financial assets.
Excessive risk taking, incentivised by inappropriate remuneration policies, has led to the failure of many institutions. Luxembourg's financial regulator has addressed the issue with circulars that implement the EU Third Capital Requirements Directive. They explain how the proportionality principle applies to remuneration policies and when institutions may disapply certain remuneration obligations.
The Commission de Surveillance du Secteur Financier, Luxembourg's financial regulator, has published a statement on Islamic debt securities that stresses Luxembourg's desire to provide further clarity on certain rules applicable to sukuk. The move is a further boost to Luxembourg's status as a global hub for Islamic finance.
The Supervisory Authority of the Financial Sector has implemented the European Commission's recommendation on remuneration policies in the financial sector. The regulator's circular on the subject affects members of a bank's administration and management bodies, as well as certain categories of employee whose professional activities have a material impact on the bank's risks.
The passing of the Payment Services Act has implemented the EU Payment Services Directive in Luxembourg. Payment services providers include credit institutions, e-money institutions and payment institutions - a new classification that takes in supermarkets, retailers and public transport companies. The act also makes significant changes to the supervisory structure for such services.
Banks in Luxembourg and around the world have prioritized liquidity risk and risk exposure and have taken steps to improve the quality of their risk management. The Supervisory Authority of the Financial Sector has issued a circular that implements the Committee of European Banking Supervisors' principles on liquidity risk management provisions and the prudential supervision of liquidity risk.
The Law of July 17 2008 has entered into force, implementing the EU Acquisitions Directive. The Supervisory Authority of the Financial Sector has issued a circular that, among other things, offers guidance on the approach it will take in assessing acquisitions of credit institutions.
Customers of credit institutions and investment firms benefit from two guarantee systems: deposit guarantee schemes for customers of credit institutions and compensation schemes for investors in credit institutions and investment firms. However, due to the current financial crisis the guaranteed amount of the deposit guarantee scheme has recently been increased to cover deposits up to €100,000.
The Bearer Shares Immobilisation Law – which aims to improve the transparency of company ownership and to provide enhanced weapons in the fight against money laundering and financing of terrorism – has now entered into force. Companies that are subject to the law need to appoint a depositary by the deadline or risk facing a substantial fine, as well as having the shares in question cancelled.
After three shareholders representing 99.24% of the share capital of listed company Utopia SA announced their intention to exercise their right of squeeze-out, the remaining minority shareholders commenced judicial proceedings in a bid to block the squeeze-out. The case may open the way for minority shareholders in listed companies to oppose squeeze-outs more frequently.
Recent legislation has amended the Collateral Act. The act has always been a lender-friendly implementation of the EU Collateral Directive and, in general, it remains favourable to creditors in insolvency situations and other contexts. However, all stakeholders should be aware of the insolvency aspects of collateral arrangements, as well as the other mechanisms available for insolvency protection.
Including: Initiating bankruptcy; Directors' liability; Consequences; Suspect period; Effects on employment contracts; Preferred claims.
The Family Office Act, which recently came into force, establishes a new licensing procedure for financial sector professionals exercising family office activities. The act aims to create a new supervised advisory profession for wealthy families. It is expected to enhance protection for investors and thus strengthen the appeal of Luxembourg as a financial centre.