Bill of Law 7401
Following on from our recent legal update1 on the draft no deal legislation, the Luxembourg Parliament passed bill of law 7401 on 26 March 2019.
This will allow FCA regulated UK entities currently providing financial or insurance services or carrying out activities in Luxembourg under the freedom to provide services, or by way of a branch, to continue to do so for a period of 21 months from the date the UK leaves the EU, in the event no deal is agreed between the UK and the EU.
The grandfathering provisions will not, however, extend to the provision of such services for new relationships entered into after the date that the UK leaves the EU, unless they are closely linked with relationships in place prior to the date that the UK leaves the EU.
Bill of Law 7426
On 28 March 2019, a second Brexit related draft law2 (the "Bill of Law 7426") concerning measures to be taken in respect of the financial sector in the event of the UK's withdrawal from the EU was passed by the Luxembourg Parliament.
The Bill of Law 7426 will amend (i) the law of 17 December 2010 relating to undertakings for collective investment and (ii) the law of 13 February 2007 relating to specialised investment funds and applies to UCITS, Part II UCIs and SIFs.
The Bill of Law 7426 provides a 12 month grace period during which breaches of the investment policy or investment restrictions caused by the UK's withdrawal from the EU must be remedied. The 12 month grace period only applies to breaches of the investment policy/investment restrictions resulting from positions held prior to the UK leaving the EU.
Use of the marketing passport by (i) UK UCITS managed by UK management companies and (ii) UK UCITS managed by management companies established in another EU Member State is also addressed in the Bill of Law 7426.
UK management companies managing UK UCITS that are currently authorised for marketing to retail investors in Luxembourg may continue to market to retail investors in Luxembourg for a period of 12 months from the date of the UK's withdrawal from the EU (the "Transitional Period"). This, however, only applies to existing UK UCITS (or sub-funds thereof). New UK UCITS or new sub-funds within an existing UK UCITS cannot avail of the Transitional Period.
However, during the Transitional Period, UK UCITS managed by management companies established in another EU Member State may only be marketed to retail investors in Luxembourg if the management company in question is also authorised as AIFM.
In contrast to bill of law 7401, the Bill of Law 7426 will take effect irrespective of whether there is a 'hard', 'soft' or "no-deal" Brexit.
For assistance on these matters, please liaise with your usual Maples Group contact or any of the contacts listed below.