Background
The CSSF has published the Circular 24/853, introducing the key aspects of the revised long form report for Investment Firms (IF).
The Circular CSSF 03/113, as amended by Circulars CSSF 10/486 and CSSF 21/768, defined the regulatory framework for IF PFS in Luxembourg as regards the regulatory requirements and guidelines concerning the role and responsibilities of approved statutory auditors (réviseurs d’entreprises agréés - REA).
The revision of the long-form report (LFR) was undertaken to realign its objective, scope, and content with the supervisory and prudential priorities of the CSSF. The updated LFR aims to provide the CSSF with pertinent information regarding Investment Firms' adherence to key regulatory requirements. It enables the CSSF to gather necessary data while promoting a risk-based supervision approach. Importantly, the review process considers the principle of proportionality.
What's new?
The Circular CSSF 24/853 defines practical rules concerning the self-assessment questionnaire to be submitted by Investment Firms as well as the mission and related reports of the approved statutory auditors (réviseurs d’entreprises agrées)
The revised LFR will apply to Investment Firms on an individual basis only and comprises four parts produced on a yearly basis:
- Self-Assessment Questionnaire (SAQ) to be filled in by the IF with respect to governance and MiFID topics. This will be composed of a “general information” section and 6 thematic sections that will be active or not depending on the answers provided to the general section.
- Agreed-Upon Procedures report (AUP report) to be produced by the REA. The annual AUP report focuses on specific MiFID aspects each year, while a three-year cycle ensures comprehensive coverage of all relevant MiFID areas over time.
- Report on protection of financial instruments and funds belonging to clients (MiFID report) to be prepared by the REA. The MiFID report will cover the adequacy of the arrangements under Article 37-1(7) and (8) of the Law of the Financial Sector if 5 April 1993 as amended Article 13(4) of the Law of 5 August 2005 on financial collateral arrangements, as amended, and Section 2 of Chapter 1 of the MiFID Grand Ducal Regulation of 30 May 2028. The purpose of this report is to assess the reliability of the answers provided by the Investment Firm in the SAQ.
- Report on procedures concerning anti-money laundering and countering the financing of terrorism (AML/CFT report) to be prepared by the REA. The objective of this report is to ensure compliance with LFS, AML/CFT Law, Grand-Ducal Regulation 2010, Regulation (EU) 2015/847, CSSF regulations and circulars.
What's next?
Gradual implementation
To facilitate adaptation, Circular CSSF 24/853 will be applicable in staggered stages:
- For the financial year ending 31 December 2023, all Class 2 Investment Firms (IF) incorporated under Luxembourg law, including their branches, and certain Class 3 IF will submit the revised LFR.
- Other investment firms will remain subject to Circular CSSF 03/113.
- As from the financial year ending after 31 December 2023, all investment firms shall adhere to the revised LFR.
The Self-Assessment Questionnaire must be approved and electronically signed by the authorised management before submitting it to the CSSF. It must be transmitted on an annual basis in an electronic form within three months after the end of the financial year. For the financial year ending 31 December 2023, the self-assessment questionnaire must be transmitted within four months after the end of the financial year.
The AUP reports will be provided by the REA to the IF, which will have the option to provide comments on the findings. Following this, it is the responsibility of the Investment Firm to submit the AUP reports to the Commission de Surveillance du Secteur Financier.
Additionally, the REA submits the MiFID and AML/CFT reports to the Investment Firm, which then transmits them to the CSSF.
All three reports must be conveyed electronically, with submission deadlines set at within six months after the financial year's end, except for the financial year concluding on 31 December 2023, which necessitates completion within seven months.
Ongoing Compliance
Investment firms should prepare for the new reporting requirements. The CSSF emphasises the importance of self-certifications, robust governance, and risk management practices. Compliance with MiFID and AML/CFT regulations remains paramount. Entities must stay informed about any updates and adapt their processes accordingly.
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