Luxembourg investment funds and their auditors will have to familiarise themselves with a completely new version of a process known as ‘the long-form report’ with which to document their regulatory compliance to the CSSF financial regulator. One of the changes is that investment firms will have to provide annual self-certifications on key aspects of central administration, internal governance and risk management.
The revised approach, said the CSSF in a 6 February press release, “is the result of a thorough reconsideration of its objective, scope and content in order to align it with” the CSSF’s supervisory and prudential focus points. Among accounting specialists, a long-form report is generally known as an expanded form of audit reporting that is issued by an external auditor.
The reporting now focuses on central administration, internal governance and risk management requirements, as well as MiFID and AML/CFT regulations.
Banking precedent
This follows last year’s rollout of a parallel update for banking supervision. At that time, Investment Officer spoke with Nele Mayer, head of the CSSF’s banking regulation and implementation department, who said the new form is intended to modernise and streamline the content.
“The long form was originally introduced already in 2001, and there Mifid and PSD2 were not really on the radar,” said Mayer. “We found that, especially for Mifid2 and PSD2, we wanted to have some more comfort, because it was not so extensively covered in the existing long form report.”
Active development
The CSSF is actively developing the functionalities of its digital filing system. In its 2022 annual report, the regulator pointed to its work in implementing various elements of digital filing, for example, “the implementation of the management letter, self-assessment questionnaire and separate report for IFMs and UCIs, as well as the AML report on the CSSF’s eDesk platform.”
It also discusses the “further development of functionalities allowing an efficient use and management of the documents,” adding this included “the implementation of functionalities allowing a smoother transmission of the information and data set out, notably, in the self-assessment questionnaire for investment funds.”
Gradual roll-out
The new investment fund framework, set out in CSSF circular 24/853, will be rolled out in a staggered approach.
The CSSF uses the ‘IF’ acronym to describe ‘investment funds’.
For the financial year ending at year-end 2023, “all Class 2 IF investment funds incorporated under Luxembourg law, including their branches and certain Class 3 IF will be required to submit the revised LFR.” All other firms will remain subject to the earlier framework under CSSF circular 03/113.
For all financial years ending after year-end 2023, all firms must submit the revised long form report.
Two reports
Under the new approach, investment firms will have to submit reports through different channels. One is a questionnaire on key aspects of CSSF circular 20/758 and MiFID regulations that they can fill out themselves. In doing this, the CSSF says firms must take “into consideration the nature, size and complexity of their business model.”
Additionally, the firm’s certified financial auditor must provide reports allowing the CSSF to assess the firm’s compliance with relevant MiFI aspects, including provisions on the protection of financial instruments and funds belonging to clients. This relates to a specific Grand-ducal regulation and the applicable AML/CFT laws and regulations.
Technical channels
Firms are required to transmit the long-form report to the CSSF using one of two channels. One is an online solution via the CSSF’s eDesk procedure for manual input by the firms.
The other is an API solution based on submitting a structured file (using the JSON format) through the S3 (simple storage service) protocol. This makes it possible to pre-fill the questionnaire to ease the process. This file will then pre-fill the questionnaire on the CSSF eDesk platform.
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