Key highlights of the 2021 CSSF Annual Report for PFS
1. Investment firms
The main regulatory event in 2021 for Investment Firms was the introduction of the IFD/IFR package. The Commission de Surveillance du Secteur Financier (CSSF) confirmed that there are no Class 1 investment firms in Luxembourg. One third are class 2 and two thirds are Class 3.
The CSSF also noted an increase in the number of investment firms in 2021 (net increase of three entities - 101 entities at the end of the year) mostly doing portfolio management (82%).
On financial aspects, the CSSF noted a strong increase of the net profit by 49% and an increase in staff number over the past three years of 215 persons (1 903 at the end of 2021).
13 on-site visits have been performed by the CSSF in 2021 on the following topics:
- four ad hoc on-site inspections
- four AML on-site inspections
- five MiFID on-site inspections.
Three fines (EUR 95,000) have been imposed by the CSSF in 2021 :
- one for non compliance with MiFID (EUR 25,000);
- one for non compliance with CSSF Circular 12/552 (EUR 10,000);
- one for non compliance with AML/CTF professional obligations (EUR 60,000).
Further on-site visits leading to significant fines have been performed in 2022.
2. Specialised PFS
The CSSF notes a decrease of the number of specialised PFS (net decrease of 2 entities - 96 at the end of the year). The main activities performed by support PSF are corporate domiciliation agent (81 out of 96 entities) and professionals providing company incorporation and management services (83 out of 96 entities).
The CSSF noted a strong increase of nearly 9% of the staff increase, achieving 5 949 employees at the end of 2021. A similar increase in % has been noted on the net revenues.
15 on-site visits have been performed by the CSSF in 2021 on the following topics:
- 10 AML/CTF on-site inspections
- two Depositary functions on-site inspections
- two governance and business model on-site inspections.
- one IT risk on-site inspection
Two fines (EUR 194,000) have been imposed by the CSSF in 2021:
- one pertaining to significant shortcomings related to the depositary functions (EUR 154,000)
- one for non respect of AML/CTF professional obligations (EUR 40,000)
One AML/CTF reprimand has also been issued by the CSSF.
Further on-site visits leading to significant fines have been performed in 2022.
3. Support PFS
The CSSF notes a decrease of the number of support PFS (net decrease of 3three entities - leaving 69 at the end of the year). The main activities performed are IT system operators (51%).
In terms of prudential review, the CSSF has noted that the internal audit plans are often identical from one year to another. The expectation of the CSSF is to have a risk-based approach in this area.
- Two on-site visits have been performed by the CSSF in 2021 which were focused on IT Risk.
- One fine (EUR 16,250) has been imposed by CSSF in 2021 due to insufficient capital base and non-compliance with an injunction of the CSSF.
