Luxembourg's financial regulator, the CSSF, has issued a reminder that firms that are currently authorised under CRD, MiFID II, PSD 2 or EMD in the UK will be considered as "third-country firms" in the event of a "hard Brexit".
Following its publication on the laws of 8 April 2019 on Brexit (the “Brexit Laws”), the CSSF has re-iterated that such companies will lose the benefit from their existing passporting rights under the relevant EU Directives from the date the UK leaves the EU without concluding a withdrawal agreement based on Article 50(2) of the Treaty on European Union (“hard Brexit”).
The CSSF has recalled that the provision of regulated services in Luxembourg without a proper authorisation is illegal and thus subject to sanctions. As such, UK firms should by now have taken the necessary steps to prepare and anticipate the consequences of a possible hard Brexit. UK firms that intend to continue their business and conclude new contracts in Luxembourg following a hard Brexit are required to submit an application for an authorisation to the CSSF as soon as possible. They should also be mindful that the granting of an authorisation can take up to twelve months following the reception of a complete application file and that UK firms that have not received the necessary authorisation are required to cease all business as of the date of a hard Brexit.
With respect to existing activities, to ensure the orderly functioning and the stability of the financial markets or the protection of depositors, investors and consumers, the Brexit laws empower the CSSF to allow UK firms that are currently providing financial services in Luxembourg under the EU passport to continue their activities for a limited period after the occurrence of a hard Brexit. This transitional regime is limited in scope as it applies only to the scenario of a hard Brexit and only to contracts that have entered into force before Brexit as well as to contracts concluded after Brexit with close links to existing contracts.
The CSSF has decided to set the transitional period at twelve-months following the date of a hard Brexit. UK firms that are planning to continue to serve existing contracts in Luxembourg under the transitional regime will be required to notify the CSSF accordingly. A dedicated notification portal will be opened on the CSSF website in the coming weeks. The CSSF will inform the public in due course. Notifications will have to be made no later than 15 September 2019.
The CSSF will then assess each notification received and inform UK firms individually as to whether they can benefit or not from the transitional regime. For the purpose of the assessment, the CSSF will verify that the conditions of the Brexit laws are met, in particular, that a UK firm has duly passported its services to Luxembourg in the past and that the information on their activities is coherent and sufficiently detailed.