Luxembourg Fund Distribution Post Brexit. All You Need to Know Now.

Luxembourg Fund Distribution Post Brexit. All You Need to Know Now

The CSSF recently issued a press release to reinstate and clarify the steps required for Luxembourg Fund Distribution post Brexit in light of the looming deadline of 31 December 2020 and the end of the transition period in the UK. The press release from the CSSF contains actionable information for UK fund promoters, with funds currently authorised for marketing in Luxembourg, in light of the imminent loss of EU passporting rights.

The topics covered in the CSSF press release are not new and are in line with previous iterations of similar announcements already issued on the topic. Whilst the content of the latest CSSF press release covers also the issue of management of funds on a cross border basis as well as delegation of investment and portfolio management, we will concentrate on the aspects of the loss of passporting rights specifically related to cross border distribution of investment funds and what Luxembourg Fund Distribution post Brexit will look like for those UK fund managers and promoters intending to actively market their UK funds to both professional and retail investors domiciled in Luxembourg.

Get in touch here with your contacts at Veneziano & Partners to see how we can help UK Fund Managers and Promoters with Luxembourg Fund Distribution Post Brexit.

Step one – Denotification from Marketing in Luxembourg

For UK investment funds distributed cross border in Luxembourg, the first step to take is to proceed with a denotification from marketing of the specific fund/s from Luxembourg. The request for denotification shall be in electronic format and submitted via email. Here, depending on the type of product, the denotification shall either be made directly to the Luxembourg authority or via the national competent authority of the home state of the management company of the fund. A request for denotification is the opposite of a request for marketing authorisation, in that the relevant marketing authorisation is withdrawn.

Most typically, the denotification of UK UCITS will have to be made directly with the CSSF, whilst the denotification of UK AIFs will have to be made via the Home State Authority of the EU AIFM managing the UK AIF marketed in Luxembourg. Whilst there are no specific forms or templates for the request for denotification, we have long standing experience in preparing successful denotification letters to the CSSF in Luxembourg. One of the items to cover in the denotification request, as highlighted in the press release issued by the CSSF, relates to the existence of Luxembourg domiciled investors at the time of the request and also going forward. Managers should also include information as to whether they intend to proceed with a re-registration for marketing in Luxembourg of the specific funds.

Step Two – New Registration for Marketing in Luxembourg

Once a UK fund has been denotified for marketing in Luxembourg, there are different scenarios and steps to take depending on whether the fund retains Luxembourg domiciled investors after the denotification and whether active marketing in Luxembourg will be carried out going forward. It is of paramount importance for fund managers and promoters of UK funds to make sure that they know whether there are Luxembourg investors in the fund at the time of requesting a denotification for marketing as well as any future plans for marketing of those UK investment funds in Luxembourg are clear.

If a UK investment fund does not have or will not retain Luxembourg domiciled investors post denotification, nor there is any intention to actively carry out marketing of that fund locally, the fund will be taken out from the official list held by the CSSF as a consequence of the request for denotification. Nothing further will be required on the manager of the UK fund for as long as there is no intention to actively market the fund in Luxembourg.

If a UK investment fund does have and will retain Luxembourg domiciled investors post denotification, there is a requirement to register the UK investment fund for marketing directly with the CSSF post denotification. This will also be the case where there is an intention to continue with carrying on active marketing of that UK investment fund in Luxembourg. In both cases, the intention to proceed with a new registration of the UK investment fund with the CSSF shall be signaled already by the manager in the request for denotification.

The rationale for requesting a registration also in instances where there will no longer be active marketing of the UK investment fund in Luxembourg is based on the fact that Luxembourg domiciled investors are retained. For that very reason, the CSSF will have to continue to receive update on the offering documentation of UK investment funds as well as other forms of reporting where applicable.

The only exception to the rule of registering a UK investment fund for marketing post denotification is the case of UK AIFs managed by EU AIFMs and marketed in Luxembourg. For as long as there is no intention to carry out active marketing of those UK AIFs locally, there will be no need to proceed with a new registration for marketing.

Registering a UK Investment Fund for Marketing in Luxembourg

With the end of the transition period, UK investment funds will be considered in Luxembourg, same as in the rest of Europe, as third country or non-EU funds. UK UCITS will be treated as non-EU AIFs in Luxembourg and presumably in the rest of Europe.

The procedure and requirements for registration of a UK investment fund for marketing in Luxembourg will depend mainly on the type of investors targeted locally, whether professional or retail.  On this point, the local Luxembourg AIFMD national private placement regime rules will apply to the marketing towards professional investors of UK AIFs, including UK UCITS.

The marketing to local retail investors, instead will be accommodated both by article 46 of the Luxembourg transposition of AIFMD, for UK investment funds managed by an EU 27 AIFMs, or by article 100(1) of Luxembourg Law of 2010 for those UK investment funds managed by a UK manager.

Get in touch here with your contacts at Veneziano & Partners to see how we can help UK Fund Managers and Promoters with Luxembourg Fund Distribution Post Brexit.