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New harmonised outsourcing regime for CSSF regulated entities
02/05/2022

On 22 April 2022, the Commission de Surveillance du Secteur Financier (the "CSSF") published CSSF Circular 22/806 on outsourcing arrangements (the “Outsourcing Circular”).

The Outsourcing Circular is complemented by:

  • CSSF Circular 22/805 on revised EBA Guidelines on outsourcing arrangements; and
  • CSSF frequently asked questions (the “FAQ”) whose aim is to clarify the application of the Outsourcing Circular to investment fund managers (“IFMs”) and the prior CSSF notification process for outsourcing arrangements.

The main purpose of the Outsourcing Circular is to implement the requirements of the European Banking Authority Guidelines EBA/GL/2019/02 on outsourcing arrangements (the “EBA Guidelines”).

The Outsourcing Circular essentially creates a harmonised Luxembourg regulatory outsourcing regime1, aligned with the EBA Guidelines.

Scope of application

While the Outsourcing Circular contains a myriad of (new and old) requirements, which we will not elaborate on in this alert, the scope of the Outsourcing Circular is of particular importance.

The EBA Guidelines only apply to:

  • credit institutions;
  • nvestment firms; and
  • payment and electronic money institutions.

The Outsourcing Circular has a wider scope as it covers, in addition to those mentioned above:

  • other professionals of the financial sector, branches included (PFS); and
  • POST Luxembourg.

In the context of information and communication technology (“ICT”) outsourcing, the Outsourcing Circular also applies to2:

  • IFMs (in particular, Luxembourg UCITS management companies and AIFMs),
  • undertakings for collective investment in transferable securities (UCITS),
  • central counterparties (CCPs),
  • market operators operating a trading venue, and
  • central securities depositories (CSDs).

Focus on the impact on IFMs

The new rules are of particular relevance to IFMs, which were previously subject to a lighter regime under CSSF Circular 18/698. Any ICT outsourcing (whether cloud- based or not) by IFMs will now be subject to the stricter requirements of the Outsourcing Circular.

We would expect the impact to be felt in notably the following areas:

  • more detailed organisational/governance requirements;
  • obligation to keep a register of all ICT outsourcings. Such register may be inspected by the CSSF upon request;
  • application of the full CSSF notification regime, where intending to outsource a critical or important function. This also implies that the prior CSSF notification requirement no longer applies to ICT outsourcing which is not critical or important, as under the previous regime; and
  • more stringent catalogue of regulatory clauses to be inserted in ICT outsourcing agreements.

 

Entry into force

The Outsourcing Circular enters into force on 30 June 2022 and will be applicable to all outsourcing arrangements entered into, reviewed, or amended on or after this date.

All existing outsourcing arrangements will have to be put in line with the requirements of the Outsourcing Circular before 31 December 2022.

We would be happy to discuss the new requirements and to assist you with any regulatory notifications, or changes to existing outsourcing agreements.

1  as a result, several other CSSF Circulars (which governed the previous regime) will be (i) amended: CSSF 12/552, CSSF 20/758, IML 95/120, IML 96/126, IML 98/143, CSSF 04/155, CSSF 16/644, CSSF 18/697, and CSSF 18/698, or (ii) repealed: CSSF 13/554, CSSF 15/611, CSSF 17/654, CSSF 17/656, CSSF 19/714, CSSF 21/777 and CSSF 21/785.

2  the scope also includes approved publication arrangements (APAs) and administrators of critical benchmarks. 

Zie ook : Linklaters LLP (Luxembourg) ( Mr. Raoul Heinen )

[+ http://www.linklaters.com]

Mr. Raoul Heinen Mr. Raoul Heinen
Managing Associate
[email protected]

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