The Bill of law 7401 regarding the measures to be taken in relation to the Luxembourg financial sector in case of a hard Brexit was deposited on 31 January to the Luxembourg Parliament.
The departure of the United Kingdom from the European Union will have consequences for the British companies that are currently active in Luxembourg in the financial sectors using the European passport. In case of a messy withdrawal, these British companies may not be able to benefit from the system of the European passport and risk losing access to the Luxembourg market from one day to the other. Such a situation will make especially uncertain the fate of a number of contractual relationships that exist at the time of the withdrawal of the United Kingdom from the EU on basis of the European passport between companies of the British financial sector and Luxembourg counterparties and which produce effects far beyond this date. In order to avoid the risks which may arise from such a situation for financial stability, good functioning of financial markets, the Luxembourg financial sector actors as well as their customers, depositors, investors, policyholders and holders, it is important that the Luxembourg competent authorities have the necessary powers to ensure, as appropriate, the continuity of the above contracts after the withdrawal of the UK from the European Union for a specific period.
The Bill 7401 aims to confer to the Luxembourg competent supervisors (i.e. the CSSF and the CAA), the power to take temporary measures to remove the aforementioned risks and to ensure an orderly transition. The Bill 7401 modifies the text of the main legislation on the financial services in order to register for provisions transitional specific to Brexit.
The transitional period (21 months from brexit date) foreseen by the Bill 7401 shall be applicable, inter alia, (if adopted as deposited) to UK companies performing the following services:
- Management of AIFs (Luxembourg law of 12 July 2013 on alternative investment fund managers, as amended from time time);
- Management of UCITS (Luxembourg law of 17 December 2010 on undertakings of collective investment, as amended from time time);
- Financial and banking services (Luxembourg law of 5 April 1993 on the financial sector, as amended from time time).
The marketing passport for AIFs and UCITS is not covered by the Bill 7401.
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