Content
- AIFMD II
- ELTIF 2.0
- European Single Access Point (ESAP)
- Retail Investment Package
- EMIR Refit Reporting Technical Standards
- New AML Package
- ESMA CSA on MiFID II sustainability requirements
- Listing Act
- ATAD III
- Pillar II law
- Luxembourg’s new accounting law
- SFDR Level 1
- SFDR Level 2
- Greenwashing
- Technical screening criteria of the Taxonomy
- Fund names
- CSRD
- ESMA second consultation paper under MiCAR
- UCITS marketing notifications on eDesk
- DORA
AIFMD II
On 25 November 2021, the European Commission put forward its proposal for amendments to the Directive 2011/61/EU on alternative investment fund managers (the AIFMD) as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds.
On 19 July 2023, the European Parliament and the Council of the European Union reached a provisional agreement. After two years, including several months of technical trilogues, the final text of the political agreement on the amendment of AIFMD (the AIFMD II) is finally out. It must be formally approved by both the European Parliament and the Council. The Parliament’s vote is scheduled for February 2024 and the Council’s vote is likely to follow shortly after. We can therefore reasonably expect the entry into force of AIFMD II by the end of Q1 2024.
Member States will then have 24 months to implement AIFMD II in their national rules, meaning that implementation can in principle be expected by Q1 2026.
For more information on this topic, please click here.
ELTIF 2.0
On 20 March 2023, the amendments to Regulation (EU) 2015/760 on European long-term investment funds (ELTIF 2.0) have been published in the Official Journal of the European Union. New rules shall apply as from 10 January 2024.
On 23 May 2023, the European Securities and Markets Authority (ESMA) published draft regulatory technical standards (RTS) aiming at providing further guidance on the provisions relating to the redemption of units or shares of ELTIFs, open for consultation until 24 August 2023. Since then, there have been divergences between Member States and the Commission on the level of flexibility semi-liquid ELTIFs could have in the future.
On 15 December 2023, the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) released its revised application questionnaire for ELTIF 2.0. Through this enhanced application questionnaire, the CSSF strives to streamline and accelerate the authorisation process for ELTIF and any subsequent inquiries.
On 19 December 2023, ESMA published its final report on the RTS, which have been submitted to the European Commission for endorsement and final approval. Initially expected to be approved by and applied as from 10 January 2024, a late adoption of the final RTS may well delay the application of the overall ELTIF 2.0 regime. We will actively continue to monitor recent progress on this topic and will keep you updated accordingly.
Please check out our dedicated page for more details here.
European Single Access Point (ESAP)
On 27 November 2023, the Council adopted a regulation creating the European Single Access Point (the ESAP Regulation), a platform providing investors with free, reliable, user friendly, centralised and digital access to financial and sustainability-related information made public by European companies, hence facilitating the investors’ decision-making process.
On 20 December 2023 the ESAP Regulation was published in the Official Journal of the European Union and enters into force 20 days after its publication.
The ESAP platform is anticipated to launch in the 2027 summer, with a gradual rollout to facilitate a robust implementation. This phased approach aims to incorporate European regulations and directives into the ESAP framework within a four-year timeframe, prioritising them accordingly. Throughout this period, there will be regular evaluations of ESAP’s performance and a review process to ensure the platform aligns with the needs of its users and maintains technical efficiency.
For full text, please click here.
Retail Investment Package
On 24 May 2023, the European Commission put forward its long-awaited Retail Investment Strategy (RIS). It aims at strengthening the current legislative framework to ensure retail investors are adequately protected and can take informed investment decisions suited to their needs.
The RIS is composed of (i) an omnibus directive amending the directive on markets in financial instruments (MiFID II), the directive on insurance distribution (IDD), the directive on the taking-up and pursuit of the business of insurance and reinsurance, (Solvency II Directive), the directive on undertakings for collective investment in transferable securities (UCITS Directive) and the directive on alternative investment fund managers (AIFMD), and (ii) a regulation amending the Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPS Regulation).
On 5 October 2023, the European Parliament’s rapporteur Stéphanie Yon-Courtin published her two draft reports concerning the RIS package and intense debates are still taking place between the Members of the European Parliament. A possible vote in the ECON Committee could take place at the end of January 2024, but it remains doubtful that a final text can be adopted by the European Parliament before its elections in June 2024. Negotiations have also started in the Council and the Spanish Presidency has shared a paper suggesting a few changes to the text based on those negotiations.
For more information on this topic, please click here.
EMIR Refit Reporting Technical Standards
On 1 December 2023, the Commission de Surveillance du Secteur Financier (CSSF) issued Circular 23/846 to inform that it will, in its capacity as competent authority, apply the Guidelines of ESMA on reporting under the European Market Infrastructure Regulation (EMIR) published on 23 October 2023, which have hence been integrated into the CSSF’s administrative practice and regulatory approach.
These Guidelines will apply as from 29 April 2024 in the context of the EMIR Refit Reporting Technical Standards and shall provide clarifications on (i) the transition to reporting under the new rules; (ii) the number of reportable derivatives; (iii) the exemption from intragroup derivatives reporting; (iv) the delegation of reporting and allocation of responsibility for reporting; (v) the reporting logic and the population of reporting fields; (vi) the reporting of different types of derivatives; (vii) ensuring data quality by the counterparties and the TRs; (viii) the construction of the Trade State Report and reconciliation of derivatives by the TRs; and (ix) data access.
For full text, please click here.
New AML Package
On 19 April 2023, the European Parliament approved the entry into interinstitutional negotiations (so-called “trilogues”) with respect to three of the four legislative proposals that form part of the 2021 AML Package, namely (i) a regulation establishing an EU anti-money laundering and counter-terrorist financing authority (AMLAR); (ii) a regulation focusing on customer due diligence aspects (the AMLR); and (iii) a sixth directive on anti-money laundering and counter-terrorist financing (the AMLD 6).
Significant advancements have been noted in the development of the AMLR and the AMLD 6. However, disputes regarding the AMLAR are reportedly impeding the overall progress. While no text has been published yet, the EU institutions seem to have reached a provisional agreement on AMLAR. A conclusive vote on the entire package by both the Parliament and Council may potentially be delayed until early 2024.
For more information, please click here.
ESMA CSA on MiFID II sustainability requirements
On 3 October 2023, the European Securities and Markets Authority (ESMA) revealed its plan to initiate a Common Supervisory Action (CSA) in collaboration with national competent authorities (NCAs) with a focus on the incorporation of sustainability considerations into the operations of credit institutions, as well as evaluating investment firms’ MiFID II suitability assessment and product governance processes and procedures. This initiative is scheduled to take place in 2024 and follows ESMA’s recent update of two sets of guidelines on suitability and product governance, both entering into application on 3 October 2023.
For more information on this topic, please click here.
Listing Act
On 7 December 2022, the European Commission submitted a package of measures known as the “Listing Act” (the Act), aiming at making public markets more attractive for EU companies by facilitating access to capital for small and medium-sized companies (SMEs).
On the one hand, the Act put forward several amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council (the Prospectus Regulation), Regulation No 596/2014 of the European Parliament and of the Council (the Market Abuse Regulation or MAR), as well as limited amendments to Regulation No 600/2014 of the European Parliament and of the Council (the Markets in Financial Instruments Regulation or MiFIR).
On the other hand, the Act also introduces two additional proposals: (i) a directive, amending Directive 2014/65/EU of the European Parliament and of the Council (the Markets in Financial Instruments Directive or MiFID II) and repealing Directive 2001/34/EC of the European Parliament and of the Council11 (the Listing Directive), which harmonises and clarifies the listing requirements, and increases the low level of investment research on SMEs; and (ii) a directive harmonising rules on multiple-vote share structures.
On 24 October 2023, MEPs on the European Parliament Committee on Economic and Monetary Affairs (ECON) adopted their position for the forthcoming interinstitutional negotiations (“trilogues”). We will stay vigilant in tracking the latest developments on this matter and will provide you with timely updates as needed.
For more information on this topic, please click here.
ATAD III
On 17 January 2023, the European Parliament approved almost by unanimity the proposal for a Council directive laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU (ATAD III) with certain amendments proposed by its Committee on Economic and Monetary Affairs (ECON Committee) on 9 December 2022.
Nevertheless, during the Swedish Presidency of the Council, Member States have encountered challenges in reaching a consensus on certain critical elements of the proposals. These include (i) determining the suitable indicators of substance, (ii) defining the tax implications of being labeled a shell entity, and (iii) specifying the information that taxpayers must report and exchange among Member States.
At this stage, the date of adoption of the proposal remains uncertain and its final configuration is yet to be determined. Therefore, the dates for implementation of the proposal in domestic law from 30 June 2023 and application of the national provisions from 1 January 2024 are postponed. We are closely monitoring the progress of these developments.
For more information on this topic, please click here.
Pillar II law
On 22 December 2021, the European Commission published the proposal for a Council directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU (Pillar II Directive), this is in line with a larger OECD/G20 initiative. The purpose of the Directive is to put an end to practices of certain large multinational groups which tend to shift their profits to jurisdictions where they are subject to low or no taxation. In that respect, the Pillar II Directive establishes a minimum effective tax rate of at least 15%. The proposal of Directive was adopted on 14 December 2022.
The draft law implementing the provisions of the Pillar II Directive under Luxembourg law was published on 4 August 2023. The draft law closely follows the text of the directive and introduces the following three new taxes to ensure that constituent entities of multinational groups and large-scale domestic groups are subject to a minimum effective tax rate of 15%: (i) the income inclusion rule which applies when the effective tax rate for the constituent entities of a group in a particular jurisdiction is below the minimum rate of 15%; (ii) the undertaxed profits rule which applies as a backstop rule meaning whenever the top-up tax is not levied through the application of the income inclusion rule; (iii) the qualified domestic minimum top-up tax which allows Luxembourg to levy the top-up tax whenever the effective tax rate of the Luxembourg constituent entities of a group is below 15%. This latter rule applies in priority to the income inclusion rule and the undertaxed profit rule.
The draft law contains several exclusions including an exclusion for investment funds to the extent they qualify as ultimate parent entities of the group and for entities held by such fund subject to conditions (ownership and activity tests).
According to the draft law, the income inclusion rule and the qualified domestic minimum top up tax should become effective on or after fiscal year starting from 31 December 2023 while the undertaxed profit rule should become effective on or after fiscal year starting from 31 December 2024. However, according to a recent communication from the Luxembourg reporter of the financial commission, considering the technical complexity of the draft law, the latter should be adopted only next year which means that the application of the various rules should be postponed accordingly unless the draft law provides for a retroactive application of the taxes.
Luxembourg’s new accounting law
On 28 July 2023, bill of law 8286 (the Bill) was introduced with the twofold purpose of (i) modernising Luxembourg’s current accounting provisions and consolidating them in one single law; and (ii) extending the scope of application to include more undertakings. The Bill notably introduces the following noteworthy changes: (i) the extension of the scope to non-commercial companies such as common funds, civil companies, mutual insurance associations, pension-savings associations, agricultural associations, temporary commercial companies and commercial companies by participation; (ii) the adoption of bottom-up approach to improve the readability of the Luxembourg accounting framework; (iii) new filing requirements for special limited partnerships (SCSps); (iv) the introduction of an audit requirement for “large holding companies”; (v) the introduction of an optional scheme applicable to “micro-enterprises” providing simplification measures that Member States are free to transpose in whole or in part; (vi) new non-financial reporting obligations, notably on the undertaking’s impact on sustainability matters and diversity policy; and (vii) the abolition of the function of supervisory auditor (commission aux comptes).
The Bill imposes new responsibilities on diverse Luxembourg enterprises. Given that certain obligations may come into effect starting from the fiscal year 2024, businesses are advised to commence assessments of how these alterations will impact their operations.
SFDR Level 1
On 14 September 2023, the European Commission published two consultations on the future of SFDR (together, the Consultation): (i) a public consultation aimed at a broader range of stakeholders with a more general knowledge of SFDR (e.g. individual investors); and (ii) a targeted consultation aimed at those who are more familiar with the details of SFDR and the EU’s approach to sustainable finance more generally (e.g, fund houses).
The primary aim of the Consultation is to assess the practical application of SFDR and pinpoint any possible deficiencies, with a specific focus on legal clarity, the usability of the regulation, and its effectiveness in addressing greenwashing. The Consultation will also analyse how SFDR interacts with other elements of the European sustainable finance framework, assess its compatibility with comparable frameworks in different jurisdictions, and explore potential avenues for enhancement.
The deadline for feedback is 15 December 2023 and the Commission is expected to publish a report or concrete proposal for the SFDR revision within 2024, which would potentially cover the transformation of SFDR into a categorisation system, through a potential reform of article 8 and article 9 classification.
For more information on this topic, please click here.
SFDR Level 2
The European Supervisory Authorities (ESAs) published a joint consultation paper on 12 April 2023 (with consultation open until 4 July 2023), in which significant changes were proposed to SFDR and its regulatory technical standards (RTS).
On 4 December 2023, the ESAs published their final report amending the draft RTS by notably (i) improving the disclosures on how sustainable investments “do no significant harm” to the environment and society; (ii) suggesting new product disclosures on “greenhouse gas emissions reduction” targets; (iii) simplifying pre-contractual and periodic disclosure templates for financial products; and (iv) other technical adjustments, notably on the treatment of derivatives, the calculation of sustainable investments, and provisions for financial products with underlying investment options.
The European Commission will review the RTS and make a decision on their endorsement within a three-month timeframe. These proposed RTS would be implemented separately from the comprehensive assessment of SFDR declared by the European Commission in September 2023 (see section above), and any modifications resulting from that assessment would be introduced at a later stage; the application of the revised SFDR RTS is therefore unlikely to take effect before mid-2024. However, the entities in scope are recommended to already consider the potential changes to the SFDR disclosures of their existing funds that would be required and watch this topic closely.
For more details, please click here.
Greenwashing
On 1 June 2023, the European Supervisory Authorities (ESAs) presented their common understanding of greenwashing as a response to the European Commission’s request for input on greenwashing risks and supervision of sustainable finance policies. Each of the ESAs has also taken the opportunity to publish a progress report including input on (1) the definition of greenwashing and the forms it can take in the financial sector; (2) the risks greenwashing poses to investors and financial markets; (3) the implementation, supervision and enforcement of sustainable finance policies aimed at preventing greenwashing; and (4) potential improvements to the regulatory framework.
In accordance with the European Commission’s request, the ESAs will publish their final recommendations by May 2024, including any changes to the current EU regulatory framework that they deem necessary.
For more information on this topic, please click here.
Technical screening criteria of the Taxonomy
On 27 June 2023, the Commission adopted a new set of EU taxonomy criteria for economic activities making a substantial contribution to one or more of the four remaining objectives (the Environmental Delegated Act), not already covered by the Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, as amended (the Climate Delegated Act), as amended.
The Environmental Delegated Act introduces activities contributing substantially to the objectives of sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems.
The Commission also adopted amendments to the Climate Delegated Act which entered into force, together with the provisions of the Environmental Delegated Act, on 1 January 2024.
Fund names
On 18 November 2022, the European Securities and Markets Authority (ESMA) published its consultation paper on guidelines in relation to funds’ names, including quantitative thresholds that would need to be met before ESG- and sustainability-related terminology can be used in funds’ names.
Such consultation closed on 20 February 2023 and ESMA’s final version of the rules was initially expected by Q3 2023.
Meanwhile, on 2 November 2023, ESMA released an article delving into the utilisation of language associated with environmental, social, and governance (ESG) factors in the names and documentation of EU investment funds, as part of its ongoing monitoring efforts around greenwashing risks.
On 14 December 2023, ESMA provided an update on the status of the guidelines together with expected changes compared to its initial proposal.
The guidelines on funds’ names are expected to be approved and published in Q2 2024.
CSRD
On 17 October 2023, the European Commission suggested a two-year extension to implement specific aspects of the Corporate Sustainability Reporting Directive (CSRD), which came into effect in January 2023. This proposal coincided with the release of the 2024 Commission Work Programme, outlining planned actions for the upcoming year.
The primary modification detailed in the 2024 Programme involves a two-year extension of the deadline for the adoption of sector-specific European Sustainability Reporting Standards (ESRS), which are standards that comprise the regulations and criteria that mandate companies to disclose sustainability-related impacts, opportunities, and risks as per the CSRD (see dedicated section to ESRS). While EU companies will now have a considerably longer period before being obligated to furnish sector-specific sustainability disclosures, certain non-EU entities will also be encompassed by the CSRD two years later than initially suggested. The rationale of the delay is to allow in-scope financial market participants to focus on the implementation of the first set of ESRS.
For more information on this topic, please click here.
ESMA second consultation paper under MiCAR
The European Securities and Markets Authority (ESMA) has released a second consultation package for the Markets in Crypto-Assets Regulation (MiCAR). Stakeholders are urged to share their feedback on these proposals by 14 December 2023. ESMA is soliciting input on five sets of suggested regulations, including sustainability indicators for distributed ledgers, disclosures of inside information, technical requirements for white papers, trade transparency measures, and record-keeping and business continuity requirements for providers of crypto-asset services.
Looking ahead, ESMA plans to compile a final report based on the feedback received and aims to submit the draft technical standards to the European Commission for endorsement no later than 30 June 2024.
ESMA will also publish a third consultation package with the remaining 18-month mandates in Q1 of 2024.
For more information on this topic, please click here.
UCITS marketing notifications on eDesk
After Circular CSSF 22/810 was issued on 12 May 2022, the Commission de Surveillance du Secteur Financier (CSSF) informed, through its communication dated 15 November 2023, Luxembourg UCITS that intend to notify or de-notify arrangements for marketing shares in another Member State under Article 6 of the 2010 Law that they are required to adhere to the marketing notification and de-notification procedures accessible through the eDesk Portal starting from 2 January 2024. Consequently, Circular CSSF 11/509 will be revoked on this date.
DORA
On 27 December 2022, Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on the digital operational resilience of the financial sector and amending Regulations (EC) 1060/2009, (EU) 648/2012, (EU) 600/2014, (EU) 909/2014 and (EU) 2016/1011 (DORA) was published in the Official Journal of the European Union. It entered into force on 16 January 2023 and will apply as from 17 January 2025. It aims at achieving a high level of common digital operational resilience by establishing standard requirements for network security and information systems that are the support structure for the business processes of financial entities and applies, among others, to investment firms, ICT third-party service providers and most AIFMS and management companies.
On 4 August 2023, bill of law 8291 was submitted to the Luxembourg Parliament with a view to operationally implement DORA in Luxembourg, by notably (i) amending existing laws relating to the financial sector to take DORA into account; (ii) giving the Commission de Surveillance du Secteur Financier (CSSF) and the Commissariat aux Assurances supervisory and investigative powers to ensure the application of DORA; and (iii) introducing administrative sanctions in cases of non-compliance with DORA.
Our team will keep monitoring the legislative process.
