The Luxembourg District Court on Tuesday ordered the dissolution and liquidation of 23-year old investment firm Fuchs & Associés Finance SA and appointed a liquidator and an official receiver. Luxembourg’s financial supervisor CSSF, noting “serious breaches of essential legal and regulatory requirements,” said it has revoked the firm’s authorisation to operate as an investment services provider and has activated the Grand Duchy’s investor compensation scheme.
The date of 19 January 2024 has been set as the deadline for submitting claims during the liquidation process. Part of the firm’s assets is a major holding in Fuchs Asset Management SA, officially regarded as a separate entity and which operates as a management company and AIFM under a seperate licence. The asset management firm was launched in 2014 by Fuchs & Associés and manages 48 Reserved Alternative Investment Funds, or Raifs, as a Luxembourg-supervised AIFM.
Jean-Jacques Lava, deputy CEO at Fuchs Asset Management, told Investment Officer that the withdrawal of Fuchs & Associés Finance’s licence has no impact on its licence. “Our financial situation is sound, our licence is intact and we continue our daily operations without any disruption nor encumbrances.” he said, pointing out that Fuchs & Associés Finance acted as a licensed Professional in the Financial Sector, or PFS. Fuchs Asset Management acts as investment fund manager, or IFM. Under that licence it bears responsibility for managing the 48 Raifs, among others.
Seeking ‘interested parties’
Lava said the appointment of a liquidator means that Fuchs Asset Management “will now be in a position to consider the offers issued by interested parties to buy back our capital”. “This process which started a while ago will pursue its course until a deal is concluded,” he said, referring also to a press release that said his firm’s “ongoing buyout process, in conjunction with external partners, continues to move forward steadily.”
Plagued by the demise of its majority-owner, Fuchs Asset Management also sought to reassure clients, mostly professional investors. Its press release said that it “will maintain its efforts to ensure a successful conclusion as soon as possible” while reaffirming its commitment “to maintaining stability, continuity, and uninterrupted service for our clients.”
CSSF said it had already decided to withdraw Fuchs & Associates’ authorisation earlier this month, with effect from 15 July 2023. Fuchs, founded in 2000, had been permitted to operate as an investment firm under the Mifid rules since 2007.
CSSF activates investor compensation scheme
CSSF also said on Tuesday that it has decided to activate the Luxembourg investor compensation scheme SIIL. This scheme can reimburse investor claims up to 20,000 euro when FAF is incapable to repay money owed to them that was held in connection with their investment business.
Fuchs & Associates, also referred to as FAF, had already been under the supervisor’s scrutiny for a number of years. The firm and CSSF had an aggravated relationship, and people familiar with the situation said the regulator was not pleased with the firm’s reaction to regulatory fines amounting to 1.55 million euro issued last year.
In its statement issued on Tuesday, CSSF reiterated that it had “noted serious breaches of essential legal and regulatory requirements relating to capital base and prudential ratios of FAF, as well as of legal and regulatory requirements concerning the management body.”
“The breaches by FAF seriously compromised the legal requirement regarding sound and prudent management. The withdrawal of FAF’s authorisation is a prudential measure taken exclusively in the public interest to protect the integrity of the financial markets and investors. The decision to withdraw the authorisation may still be subject to an administrative appeal.
Fuchs’ founder, Jean Fuchs, is former member of the board of directors at CSSF. He created the firm in 2000 and still is listed as managing partner. A 69-year old French native and avid hunter who barely speaks to the press, Fuchs is known as a staunch opponent of regulation in the financial sector. “The sector is over-regulated. It is not only excessive, but also unnecessary,” he said in a 2016 interview with Luxembourg business website Paperjam. “You don’t take away the risk factor, but you instil in people’s heads that the banking world is full of cheats.”
According to a filing to the Luxembourg Business Registers, Jean Fuchs was removed as director at Fuchs Asset Management in September 2022. His son Timothy Fuchs was appointed as director general in January 2023.