On 22 December 2021, the Commission de Surveillance du Secteur Financier (“CSSF”) published three new circulars dated 17 December 2021 effectively reforming the Long Form Report:
A circular for Luxembourg undertakings for collective investment (“Circular 21/790”).
A circular addressed to Luxembourg-authorised investment fund managers ("Circular 21/789”).
The main innovations of these circulars are, on the one hand, their scope; and on the other hand, the creation of two new documents: the self-assessment questionnaire (“SAQ”) to be prepared by in-scope investment fund managers (“IFMs”), respectively by regulated undertakings for collective investment (“UCIs”) and the separate report (“SR”) to be prepared by the independent auditor, the réviseur d'entreprises agréé (“REA”), both of which the CSSF provides via its eDesk portal.
A circular providing guidelines for the collective investment sector on the CSSF AML/CFT external report (“Circular 21/788”).
These circulars will serve as new, effective prudential supervision tools for the CSSF following the legislative and regulatory developments of the last few years.
1. Scope of the circulars
Circular 21/789 and Circular 21/790 both set out the practical rules for the annual preparation and submission of the SAQ by IFMs and UCIs. They also define the scope of the mandate of the REA, and of the SR and the framework of the management letter that the REA must issue.
Contrary to the regime that applied before these circulars came into force, the new regime impacts both SIFs and SICARs, in addition to UCITS and UCIs falling under Part II of the law of 17 December 2010 on UCIs (“Part II Funds”). Furthermore, IFMs must now also complete an SAQ unless they fall under the exemption of Circular 21/789 such as e.g. registered alternative investment fund managers.
As regards Circular 21/788, are in scope:
- all Luxembourg IFMs as defined in CSSF Circular 18/698 – including registered AIFMs,
- all Luxembourg investment funds supervised by the CSSF for AML/CFT purposes.
Are excluded from the scope of this Circular, Luxembourg investment funds that have appointed an IFM, whether that IFM is established in Luxembourg or abroad. However, REAs must nonetheless perform AML/CFT “work” for these funds in compliance with article 49(1) of CSSF Regulation No 12-02, as amended (“Regulation No 12-02”).
2. The self-assessment questionnaire (SAQ)
For each audited accounting year or period, an SAQ must be completed by all IFMs in scope and all UCIs, subject to a statutory audit. The key objective of the SAQ is to have IFMs and UCIs self-assess their compliance with legal and regulatory requirements – except for AML matters, which are covered by a separate questionnaire referred to under 5. below. The SAQ must be submitted to the CSSF by a certain deadline following the end of the financial year.
3. The separate report (SR)
The REA must complete the SR via the CSSF eDesk portal for each audited accounting year or period, after the IFM or UCI has submitted the SAQ. The purpose is to ensure the reliability of the responses given by the IFM or UCI on the SAQ, and to answer specific questions raised by the CSSF. Like the SAQ, the SR must be filed by the IFM or UCI with the CSSF within a certain timeframe following the end of the financial year.
4. The management letter
In Circular 21/789 and Circular 21/790, the CSSF further sets out the regulatory framework applicable to the management letter to be prepared by the REA for each audited accounting year or period of in-scope IFMs and UCIs.
This letter, provided in a standardised format through the CSSF eDesk portal, is to be prepared by the REA for each in-scope IFM or UCI and sent by the IFM or UCI to the CSSF via eDesk.
In addition to the weaknesses and areas for improvement detected by the REA, this letter must include a follow-up on any pre-existing weaknesses and areas for improvement that remain unresolved; here, the IFM or UCI is bound to provide detailed comments and explanations in good time and by a reasonable deadline. Submission to the CSSF must occur within a specific timeframe after the end of the financial year.
5. The CSSF AML/CFT external report
In Circular 21/788, the CSSF provides guidance on the specific AML/CFT report that must be drawn up by an external AML/CFT expert.
All professionals legally required to appoint an REA must appoint the same REA as an “external AML/CFT expert” to prepare this report on an annual basis, which may only be submitted via eDesk by the supervised entities in scope.
This report contains (i) a section concerning the corroboration of answers given by the supervised entity in scope in the context of the CSSF annual AML/CFT online survey, as well as (ii) a section dedicated to sample testing or specific work to be performed by the REA. Comments from the REA and the supervised entity on the results of the work performed may also be added. The RR (responsable du respect des obligations) or RC (responsable du contrôle du respect des obligations) or a member of the board of directors/managers (or equivalent) will be in charge of filing this report.
Circular 21/790 repeals CSSF Circular 02/81 providing guidelines concerning the task of auditors of undertakings for collective investment, as well as chapter P of CSSF Circular 91/75 concerning the obligation of UCIs to inform the CSSF on the audits carried out by the REA.
Entry into force
As regards Circular 21/790, the following distinction will have to be made:
For UCITS and Part II Funds, the provisions of this Circular have to be complied with for the financial years ending on or after 30 June 2022.
For SIF and SICAR, the provisions of this Circular have to be complied with for the financial years ending on or after 30 June 2022, except for the provisions relating to the SR. The latter provisions will have to be complied with by the SIF and the SICAR for the financial year ending on or after 30 June 2023.
For IFMs, Circular 21/789 applies for financial years ending on or after 31 December 2021.
Circular 21/788 must be complied with for the financial years ending on or after 31 December 2021.
Should you require more detailed information and assistance on the above topic and its implications, please liaise with your usual contact on the Fund Formation Team.
– To access the CSSF Circular 21/788, click here
MICHELE EISENHUT - Partner - Investment Management
CLAUDE NIEDNER - Partner - Investment Management - Private Equity & Real Estate