Legal requirements and authorisation procedure for specialised professionals of the financial sector (“specialised PFS”)
The legal requirements that must be met and the procedure that must be followed in order to obtain an authorisation as specialised PFS are laid down in Articles 13 to 23 of the Law of 5 April 1993 on the financial sector (“LFS”).
Articles 28-11 to 28-13 of the LFS contain special provisions that are applicable to central account keepers whose activity is to keep issuance accounts for dematerialised securities.
An authorisation as specialised PFS may, in general, be granted to natural or legal persons in the form of a public entity or a commercial company. However, most categories of specialised PFS require that the applicant be a legal person. Please refer to the legal provisions of the LFS applicable to the categories which are sought in order to determine the required legal form.
Specialised PFS shall prove that they have a subscribed and fully paid-up share capital of not less than EUR 50,000. Depending on the category of specialised PFS for which the authorisation is sought, the required minimum share capital may amount to up to EUR 730,000. Please consult the relevant legal provisions of the LFS in order to determine the minimum share capital required for the categories of specialised PFS you seek.
Central administration and infrastructure
An applicant, which is a legal person, shall prove that its central administration and its registered office are located in Luxembourg. An applicant, who is a natural person, shall prove that s/he effectively conducts business in Luxembourg and that his/her central administration is in Luxembourg.
The specialised PFS shall produce evidence that it has a sound administrative and accounting organisation and adequate internal control procedures. The administrative and accounting organisation and internal control procedures shall be comprehensive and proportionate to the nature, scale and complexity of the activities of the specialised PFS. The specialised PFS shall have an appropriate infrastructure at its registered office, i.e. its own executing personnel, its own execution systems, the documentation relating to the transactions as well as the support functions in accounting, IT and internal control, and shall have an internal audit function.
Moreover, specialised PFS performing lending operations shall comply with Chapter 3 of Part III of Circular CSSF 12/552 on central administration, internal governance and risk management.
Natural and legal persons are allowed as shareholders or members in specialised PFS, provided that they are previously authorised by the CSSF. In order to be authorised, the applying specialised PFS shall communicate to the CSSF the identity of any direct or indirect shareholder or member with a direct or indirect qualifying holding and the percentage held in the specialised PFS. “Qualifying holding” means any direct or indirect holding in the specialised PFS which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the specialised PFS.
The shareholders or members with a qualifying holding shall fulfil the required conditions to ensure a sound and prudent management. The concept of sound and prudent management shall be assessed in light of the criteria listed in Article 18(9) of the LFS. The main criteria are:
- the professional standing of the shareholders or members;
- the professional standing and experience of any person who will direct the business of the specialised PFS upon obtaining the authorisation;
- the financial soundness of the shareholders or members;
- the risk of money laundering and terrorist financing.
Professional standing and experience
In order to obtain authorisation, natural persons and, in the case of legal persons, the members of the administrative, management and supervisory bodies and the shareholders or members with a qualifying holding shall prove their professional standing. Professional standing is assessed on the basis of the extracts from the police record and of any other evidence showing that the persons concerned are of good repute and offer every guarantee of irreproachable conduct.
The persons responsible for the day-to-day management shall be empowered to effectively direct the business and shall have adequate professional experience, i.e. they shall have previously carried out similar activities at a high level of responsibility and autonomy.
In the case of a legal person, the day-to-day management shall be entrusted to at least two natural persons, who must both have professional standing and experience and closely equal powers. This two-man management principle shall allow mutual control and common decision-taking, but does not necessarily imply that these persons must act together to commit the specialised PFS. These persons must be reachable by the CSSF at any time in case of need, i.e. they shall reside in Luxembourg or in the Grande Région. An exemption from the requirement of residence may be requested for one of these persons but only for the first six months following the issue of the authorisation.
In the case of a natural person, s/he shall prove to the CSSF that s/he has taken appropriate arrangements to ensure the sound and prudent management of the specialised PFS.
The specialised PFS shall entrust the audit of its accounting documents to one or several réviseurs d’entreprises agréés (approved statutory auditors) who have adequate professional experience. The réviseur d’entreprises agréé shall be appointed by the body responsible for managing the specialised PFS, i.e. the board of directors for sociétés anonymes and the managers (gérants) or the management board for sociétés à responsabilité limitée.
The authorisation as a specialised PFS is granted by the Minister responsible for the CSSF, i.e. the Minister of Finance, upon written application and following an investigation of the application file by the CSSF. The CSSF verifies whether the conditions laid down in the LFS are fulfilled.
In order to simplify administrative burdens, the CSSF encourages applicants to first transmit their application files to the CSSF before filing the formal application request with the Minister of Finance.
The authorisation is granted for an unlimited period of time provided the specialised PFS complies at all times with the applicable legal requirements. Upon receipt of the authorisation, the specialised PFS may immediately start to carry on business.
Before transmitting the application to the CSSF, the applicant may contact the CSSF to request information on the qualification of an activity, on the need for an authorisation, on the status requested, on the application documentation for the authorisation file or any other important question relating to the applicant’s project. The applicant may also request a meeting to present the project and to discuss certain aspects of it.
The examination of the file by the CSSF
In order to speed up the verification process, the applicant may submit a detailed and complete file to the CSSF by using the main application forms available on the CSSF website.
If the specialised PFS intends to carry out central administration tasks for UCIs, SIFs or SICARs, the form “Application for approval as central administration of a UCI” shall also be submitted together with the main application form.
If the specialised PFS intends to carry out the activities of professional depositary of assets other than financial instruments, the form “Application form for an authorisation as a professional depositary of assets other than financial instruments” shall also be submitted together with the main application form.
The complete application file shall be submitted to the CSSF in paper form and shall, in addition, be transmitted in electronic form to email@example.com.
Upon receipt of the file by the CSSF, the applicant receives an acknowledgement of receipt which indicates the department in charge of the examination of the file and the name of a contact person at the CSSF. The CSSF will examine the file and may raise comments or request additional information.
Once the CSSF deems that the conditions laid down in the LFS are fulfilled, the applicant will be notified in writing and the applicant may file an official request with the Minister of Finance.
The formal analysis by the Minister of Finance
The application file submitted to the Minister of Finance shall be signed by the initiators of the project and all the relevant annexes shall be enclosed. The annexes and, in particular, the declarations of honour and the extracts from the police records must be original documents. Please ensure that all information contained in the annexes are up-to-date and that the extracts from the police records are not older than three months.
The decision of the Minister of Finance will be notified to the applicant within six months following receipt by the Minister of Finance of the application file. Should the application file be incomplete, the applicant will be notified of the decision of the Minister of Finance within six months following receipt of the missing information. All decisions on an application request shall be motivated in fact and in law.
A decision shall be taken within 12 months, at the latest, of the receipt of the application. If no decision is notified within 12 months, it means that the application has been refused.
The decision of the Minister of Finance may be appealed against and referred to the Tribunal administratif (Administrative Court), which deals with the substance of the case. The appeal shall be filed within one month, or else shall be time-barred.