Law of 5 April 1993 On The Financial Sector, As Amended

In case of discrepancies between the French and the English text, the
French text shall prevail
Law of 5 April 1993 on the financial sector, as amended
Table of Contents
Art. 1 Definitions
PART I: Access to professional activities in the financial sector

Chapter I: Authorisation of banks or credit institutions established under Luxembourg
law
Section 1: Provisions of general application
Art. 1-1. Scope
Art. 2 Authorisation requirement
Art. 3 Authorisation procedure
Art. 4 The legal form of the institution
Art. 5 Central administration and infrastructure
Art. 6 Shareholdings
Art. 7 Professional standing and experience
Art. 8 Capital base
Art. 10 External auditing
Art. 10-1 Participation in a deposit guarantee scheme
Art. 10-2 Participation in an investors’ compensation scheme
Art. 11 Withdrawal of authorisation
Section 2: Specific provisions relating to caisses rurales [rural banks]
Art. 12 Special provisions relating to caisses rurales
Section 3: Specific provisions relating to banks issuing mortgage bonds
Art. 12-1 Definition – Principal activity
Art. 12-2 Incidental and ancillary activities
Art. 12-3 Maximum amount of mortgage bonds in circulation
Art. 12-4 Protection of denomination
Art. 12-5 Collateral
Art. 12-6 Mortgage bond register
Art. 12-7 Special auditor
Art. 12-8 Preferential rights to payment of mortgage bond holders
Art. 12-9 Special supervision by the CSSF
Section 4: Special provisions relating to electronic money institutions
Art. 12-11 Applicable legal provisions
Art. 12-12 Requirements in relation to the redeemability of funds received by the issuer
Art. 12-13 Capital base
Art. 12-14 Limitations of investments
Art. 12-15 Waiver
Chapter 2: Authorisation of other professionals of the financial sector
Section 1: General provisions
Art. 13 Scope
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Art. 16 The legal form of the entity
Art. 18 Shareholders
Art. 20 Capital base
Art. 22-1. Participation in an investors’ compensation scheme
Section 2: Specific provisions relating to certain categories of PFS
Subsection 1: Investment firms
Art. 24 Investment advisers
Art. 24-1 Brokers in financial instruments
Art. 24-2 Commission agents
Art. 24-3 Private portfolio managers
Art. 24-4 Professionals acting for their own account
Art. 24-5 Market makers
Art. 24-6 Underwriters of financial instruments
Art. 24-7 Distributors of units/shares in UCIs
Art. 24-8 Financial intermediation firms
Art. 24-9 Investment firms operating an MTF in Luxembourg
Subsection 2: Miscellaneous PFS other than investment firms
Art. 25 Registrar agents
Art. 26 Professional custodians of financial instruments
Art. 27 Operators of a regulated market authorised in Luxembourg
Art. 28-1 Operators of payment or securities settlement systems
Art. 28-2 Persons carrying out foreign exchange cash operations
Art. 28-3 Debt recovery
Art. 28-4 Professionals carrying on lending operations
Art. 28-5 Professionals carrying on securities lending operations
Art. 28-6 Professionals providing fund transfer services
Art. 28-7 Mutual savings fund administrators
Art. 28-8 Managers of non-coordinated UCIs
Subsection 3: PFS carrying on activities related or supplementary to a financial sector activity
Art. 29 Corporate domiciliation agents
Art. 29-1 Client communication agents
Art. 29-2 Financial sector administrative agents
Art. 29-3 Primary IT systems operators of the financial sector
Art. 29-4 Secondary IT systems and communication networks operators of the financial sector
Art. 29-5 Professionals providing company formation and management services
Chapter 3: Authorisation for the establishment of branches and freedom to provide
services in Luxembourg by credit institutions or PFS governed by foreign law
Art. 30 Community credit institutions and investment firms
Art. 31 Community financial institutions
Art. 32 Non-Community credit institutions and investment firms; Community or non-
Community PFS other than investment firms
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Chapter 4: Authorisation for the establishment of branches and freedom to provide
services in another Member State by credit institutions, investment firms or
certain financial institutions governed by Luxembourg law
Art. 33 Establishment of branches in another Member State
Art. 34 Provision of services within the European Union
Chapter 5: Authorisation of payment and securities settlement systems
Art. 34-2 Definitions
Art. 34-3 Scope
Art. 34-4 Application for authorisation
Art. 34-5 Authorisation procedure
Art. 34-6 Conditions for authorisation
Art. 34-7 Withdrawal of authorisation
PART II: Professional obligations, prudential rules and rules of conduct in the financial
sector
Art. 35 Scope
Chapter 1: Provision applicable to Luxembourg institutions participating in payment
systems or securities settlement systems
Art. 35-1. Right to information with regard to Luxembourg institutions participating in payment
or securities settlement systems
Chapter 2: Provisions applicable to PFS other than investment firms
Art. 36 Prudential rules
Art. 36-1 Conduct of business rules
Chapter 3: Provision applicable to certain PFS
Art. 37 Prudential rules specific to certain PFS
Chapter 4: Provisions applicable to credit institutions and investment firms
Art. 37-1 Organisational requirements
Art. 37-2 Conflicts of interest
Art. 37-3 Conduct of business rules when providing investment services to clients
Art. 37-4 Provision of services through the medium of another credit institution or another
investment firm
Art. 37-5 Obligation to execute orders on terms most favourable to the client
Art. 37-6 Client order handling rules
Art. 37-7 Transactions executed with eligible counterparties
Art. 37-8 Obligations of credit institutions and investment firms when appointing tied agents
Chapter 5: Provisions applicable to credit institutions and PFS
Art. 39 Professional obligations of the financial sector as regards combating money
laundering and the financing of terrorism
Art. 40 Obligation to cooperate with the authorities
Art. 41 Obligation of professional secrecy
PART IIa: Obligations concerning cross-border credit transfers

Chapter 1: Definitions and scope
Art. 41-2 Scope
Chapter 2: Transparency of conditions for cross-border credit transfers
Art. 41-3 Prior information on conditions for cross-border credit transfers
Art. 41-4 Information subsequent to a cross-border credit transfer
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Chapter 3: Obligations of institutions in respect of cross-border credit transfers
Art. 41-5 Specific undertakings by the institution
Art. 41-6 Obligations regarding time-limits
Art. 41-7 Obligation to execute the cross-border transfer in accordance with instructions
Art. 41-8 Obligation upon institutions to refund in the event of non-execution of transfers
Art. 41-9 Force majeure
Art. 41-10 Settlement of disputes
PART III: Prudential supervision of the financial sector

Chapter 1: The competent authority responsible for supervision and its task
Art. 42 The competent authority
Art. 43 Purpose of supervision
Art. 44 Professional secrecy of the CSSF
Art. 44-1 Cooperation of the CSSF with the competent authorities of Member States
Art. 44-2 Exchange of information of the CSSF within the European Union
Art. 44-3 Exchange of information of the CSSF with third countries
Chapter 2: Supervision of credit institutions, certain financial institutions and
investment firms carrying on business in more than one Member State
Art. 45 Competence to supervise credit institutions and investment firms carrying on
business in more than one Member State
Art. 46 Precautionary measures available to the CSSF as host Member State
Art. 47 Supervision of certain Community financial institutions
Chapter 2a: Prudential supervision of payment and securities settlement systems
authorised in Luxembourg
Art. 47-1 Prudential supervision of payment and securities settlement systems authorised in
Luxembourg
Chapter 3: Supervision of credit institutions on a consolidated basis
Art. 48 Definitions
Art. 49 Scope and parameters of supervision on a consolidated basis
Art. 50 Form and extent of consolidation
Art. 50-1 Cooperation with the other authorities responsible for prudential supervision
regarding consolidated supervision
Art. 51 Content of supervision on a consolidated basis
Art. 51-1 Means used to exercise supervision on a consolidated basis
Art. 51-1a Parent undertakings having their head office in a third country
Chapter 3a: Supervision of investment firms on a consolidated basis
Section I: Luxembourg parent investment firms having no credit institution as a subsidiary
or holding no participation in a credit institution, and investment firms whose parent
undertaking is a Luxembourg or EU parent financial holding company having no credit
institution as a subsidiary or holding no participation in a credit institution
Art. 51-3 Scope and parameters of supervision on a consolidated basis
Art. 51-4 Form and extent of consolidation
Art. 51-5 Content of supervision on a consolidated basis
Art. 51-6b Cooperation with the other authorities responsible for prudential supervision
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Section II: Luxembourg parent investment firms having a credit institution authorised
outside Luxembourg as a subsidiary or holding a participation in such credit institution,
and investment firms whose parent undertaking is a Luxembourg parent financial
holding company having a credit institution authorised outside Luxembourg as a
subsidiary or holding a participation in such credit institution
Art. 51-7 Scope and content of supervision on a consolidated basis
Section III: Luxembourg parent investment firms having a credit institution authorised in
Luxembourg as a subsidiary or holding a participation in such credit institution, and
investment firms whose parent undertaking is a parent financial holding company in
Luxembourg having a credit institution authorised in Luxembourg as a subsidiary or
holding a participation in such credit institution
Chapter 3b: Supplementary supervision of credit institutions and investment firms in a
financial conglomerate
Section I: Definitions
Art. 51-10 Thresholds for identifying a financial conglomerate
Art. 51-11 Identifying a financial conglomerate
Section 2: Scope
Art. 51-12 Scope of supplementary supervision of credit institutions or investment firms
Section 3: Financial position
Art. 51-13 Capital adequacy
Art. 51-14 Risk concentration
Art. 51-15 Intra-group transactions
Art. 51-16 Internal control mechanisms and risk management processes
Section 4: Measures to facilitate supplementary supervision
Art. 51-17 Competent authority responsible for exercising supplementary supervision (the
coordinator)
Art. 51-18 Tasks of the coordinator
Art. 51-19 Cooperation and exchange of information between competent authorities
Art. 51-20 Management body of mixed financial holding companies
Art. 51-21 Access to information
Art. 51-22 Verification
Art. 51-23 Enforcement measures
Art. 51-24 Additional powers of the competent authorities
Section 5: Third countries
Art. 51-25 Parent undertakings having their head office in a third country
Art. 51-26 Cooperation with third countries’ competent authorities
Chapter 4: Means used to exercise prudential supervision
Art. 52 Official lists and the protection of titles
Art. 53 Powers of the CSSF
Art. 54 Relationship between the CSSF and external auditors
Art. 55 Accounting documents
Art. 56 Coefficients
Art. 57 Authorisation of holdings
Art. 58 Complaints by clients
Art. 59 Powers of injunction and suspension of the CSSF
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PART IV: Reorganisation and winding up of certain professionals of the financial sector
Art. 60 Definitions
Art. 60-1 Scope
Chapter 1: Suspension of payments
Section I: Provisions governing the opening of proceedings for suspension of payments by
establishments governed by Luxembourg law
Art. 60-2 Opening of proceedings for suspension of payments
Art. 60-3 Competent jurisdiction and applicable law
Art. 60-4 Information to be provided by the CSSF to foreign competent authorities
Section 2: Special provisions applicable to Luxembourg branches of Community
establishments
Section 3: Special provisions applicable to Luxembourg branches of non-Community
establishments
Art. 60-7 Reorganisation measures concerning non-Community credit institutions present in
more than one location within the European Union
Chapter 2: Winding up
Section 1: Voluntary winding up
Art. 60-8 Voluntary winding up
Section 2: Provisions governing proceedings for the judicial winding up of establishments
governed by Luxembourg law
Art. 61 Winding-up proceedings
Art. 61-1 Competent jurisdiction
Art. 61-2 Applicable law
Art. 61-3 Withdrawal of an establishment’s authorisation
Art. 61-4 Provision of information to known creditors
Art. 61-5 Lodgement of claims
Section 3: Special provisions applicable to Luxembourg branches of Community
establishments
Section 4: Special provisions applicable to Luxembourg branches of non-Community
establishments
Art. 61-8 Non-Community credit institutions present in more than one location within the
European Union
Chapter 3: Provisions common to reorganisation measures and winding-up
proceedings
Art. 61-9 Effects on certain contracts and rights
Art. 61-10 Third parties’ rights in rem
Art. 61-11 Reservation of title
Art. 61-12 Set-off
Art. 61-13 Lex rei sitae
Art. 61-14 Netting agreements
Art. 61-15 Repurchase agreements
Art. 61-16 Regulated markets
Art. 61-17 Proof of the appointment and powers of administrators and liquidators
Art. 61-18 Registration in a public register
Art. 61-19 Detrimental acts
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Art. 61-20 Protection of third parties
Art. 61-21 Lawsuits pending
Art. 61-22 Professional secrecy
Chapter 4: Special provisions applicable to payment and securities settlement systems

Art. 61-24 Provisions specific to settlement finality in payment and securities settlement
systems authorised in Luxembourg
Art. 61-25 Provisions specific to insulation of the rights of holders of collateral security provided
in the context of Community payment or securities settlement systems or in the
context of operations of central banks of the Member States or the European Central
Bank from the effects of the insolvency of the provider
Art. 61-26 Provisions specific to the opening of insolvency proceedings against a participant in a
payment or securities settlement system
PART IVa: Deposit-guarantee schemes in credit institutions

Chapter 1: Protection of persons depositing funds with credit institutions governed by
Luxembourg law and with Luxembourg branches of credit institutions having
their head office in a third country
Art. 62-1 Subject-matter of guarantees
Art. 62-2 Level and scope of the guarantee
Art. 62-3 Compensation procedures and time-limits
Art. 62-4 Obligation to supply information to clients
Art. 62-5 Intervention by the CSSF
Art. 62-6 Supplementary cover for persons depositing funds with branches set up by credit
institutions governed by Luxembourg law in other Member States
Chapter 2: Protection of persons depositing funds with Luxembourg branches of credit
institutions governed by the law of another Member State
Art. 62-8 Principles governing supplementary cover
Art. 62-9 Relationship between Luxembourg deposit-guarantee schemes and schemes
established and officially recognised in other Member States
PART IVb: Compensation schemes for investors in credit institutions and investment firms
Chapter 1: Protection of investors in credit institutions and investment firms governed
by Luxembourg law and with Luxembourg branches of credit institutions and
investment firms having their head office in a third country
Art. 62-16 Supplementary cover for investors with branches set up by credit institutions or
investment firms governed by Luxembourg law in another Member State
Chapter 2: Protection of investors with Luxembourg branches of credit institutions or
investment firms governed by the law of another Member State
Art. 62-19 Relationship between Luxembourg investor-compensation schemes and schemes
established and recognised in other Member States
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PART V: Penalties
Art. 63 Administrative fines
Art. 64 Criminal sanctions
PART VI: Amendments, repeals and transitional provisions
ANNEX I
ANNEX II
Section A
Investment services and activities
Section B
Financial instruments
Section C
Ancillary services
ANNEX III
Criteria to be fulfilled by professional clients
Section A: Categories of investors who are considered to be professionals
Section B: Clients who may be treated as professionals on request
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Law of 5 April 1993 on the financial sector (Mém. A 1993, p. 462), as amended
– by the Law of 3 May 1994

– transposing into the law on the financial sector Directive 92/30/EEC of 6 April 1992 on
the supervision of credit institutions on a consolidated basis;
– making divers other amendments to the law on the financial sector and the law on the
accounts of credit institutions; (Mém. A 1994, p. 702)
– by the Law of 9 May 1996 on the netting of debts in the financial sector, amending the Law
of 5 April 1993 on the financial sector, as amended (Mém. A 1996, p. 1145);
– by the Law of 11 June 1997

(1) transposing Directive 94/19/EC on deposit-guarantee schemes into the Law of 5 April
1993 on the financial sector, as amended, and
(2) amending the Law of 24 March 1989 on the Banque et Caisse d’Épargne de l’État,
Luxembourg, as amended (Mém. A 1997, p. 1557);
– by the Law of 21 November 1997 on banks issuing mortgage bonds (Mém. A 1997, p. 2913);
– by the Law of 12 March 1998

– amending the Law of 5 April 1993 on the financial sector for the purposes of
transposing Directive 93/22/EEC (the “investment services” directive);
– amending Article 113 of the Commercial Code (Mém. A 1998, p. 338);
– by the Law of 11 August 1998 creating and introducing into the Penal Code the offence of
membership of a criminal organisation and the offence of money laundering and amending:
(1) the Law of 19 February 1973 on the sale of medicinal substances and the fight against
drug addiction, as amended;
(2) the Law of 5 April 1993 on the financial sector, as amended;
(3) the Law of 6 December 1991 on the insurance sector, as amended;
(4) the Law of 9 December 1976 on the organisation of the profession of notary, as
amended;
(5) the Law of 20 April 1977 on gaming and betting on sporting events;
(6) the Law of 28 June 1984 on the organisation of the profession of company auditor;
(7) the Code of Criminal Procedure (Mém. A 1998, p. 1456);
– by the Law of 29 April 1999 transposing Directive 97/5/EC on cross-border credit transfers
into the Law of 5 April 1993 on the financial sector, as amended (Mém. A 1999, p. 1297);
– by the Law of 29 April 1999

– transposing Directive 95/26/EC on the reinforcement of prudential supervision into the
Law of 5 April 1993 on the financial sector, as amended, and into the Law of 30 March
1988 on undertakings for collective investment, as amended;
9
– partially transposing Article 7 of Directive 93/6/EEC on the capital adequacy of
investment firms and credit institutions into the Law of 5 April 1993 on the financial
sector, as amended;
– making divers other amendments to the Law of 5 April 1993 on the financial sector, as
amended;
– amending the Grand-Ducal Regulation of 19 July 1983 on fiduciary contracts of credit
institutions (Mém. A 1999, p. 1301);
– by the Law of 31 May 1999 governing the domiciliation of companies and

– amending and supplementing certain provisions of the Law of 10 August 1915 on
commercial companies, as amended;
– amending and supplementing certain provisions of the Law of 23 December 1909
creating a Commercial and Companies Registry, as amended;
– amending and supplementing the Law of 28 December 1988 regulating access to the
professions of artisan, trader and industrialist and certain liberal professions, as
amended;
– supplementing the Law of 12 July 1977 on holding companies;
– amending and supplementing certain provisions of the Law of 5 April 1993 on the
financial sector, as amended;
– supplementing the Law of 6 December 1991 on the insurance sector, as amended
(Mém. A 1999, p. 1681);
– by the Law of 22 June 2000 amending certain provisions, relating specifically to banks
issuing mortgage bonds, in the Law of 5 April 1993 on the financial sector (Mém. A 2000, p.
1165);
– by the Law of 27 July 2000 transposing Directive 97/9/EC on investor-compensation

schemes and amending the Law of 5 April 1993 on the financial sector, as amended (Mém.
A 2000, p. 1422);
– by the Law of 12 January 2001 transposing Directive 98/26/EC on settlement finality in

payment and securities settlement systems into the Law of 5 April 1993 on the financial
sector, as amended, and supplementing the Law of 23 December 1998 setting up a
Commission for Supervision of the Financial Sector (Mém. A 2001, p. 681);
– by the Law of 1 August 2001

– on the transfer of ownership under guarantees;
– amending and supplementing the Law of 21 December 1994 on borrowing by credit
institutions against security pledging;
– amending and supplementing the Law of 5 April 1993 on the financial sector, as
amended;
– amending and supplementing the Law of 21 June 1984 on financial futures traded on
the Luxembourg Stock Exchange and financial futures traded in by credit institutions
(Mém. A 2001, p. 2183);

– transposing Article 1 of Directive 98/33/EC amending Directives 77/780/EEC,
89/647/EEC and 93/6/EEC, and partially transposing Directive 2000/64/EC of the
European Parliament and of the Council of 7 November 2000 amending Council
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Directives 85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC as regards exchange of
information with third countries, into the Law of 5 April 1993 on the financial sector, as
amended;
– amending Article 8 of the Law of 23 December 1998 on supervision of the capital assets
markets (Mém A 2001, p. 2251);
– by the Law of 13 January 2002

– approving the International Convention for the Suppression of Counterfeiting Currency
and the Protocol thereto, signed in Geneva on 20 April 1929;
– amending divers provisions of the Penal Code and of the Code of Criminal Procedure
(Mém. A 2002, p. 58);
– by the Law of 14 May 2002 transposing into the Law of 5 April 1993 on the financial sector,
as amended:
– Directive 2000/28/EC amending Directive 2000/12/EC relating to the taking up and
pursuit of the business of credit institutions;
– Directive 2000/46/EC on the taking up, pursuit of and prudential supervision of the
business of electronic money institutions (Mém. A 2002, p. 881);
– by the Law of 19 December 2002 on the Commercial and Companies Registry and the
accounting practices and annual accounts of undertakings and amending divers other
statutory provisions (Mém. A 2002, p. 3630);

– amending the Law of 5 April 1993 on the financial sector, as amended;
– amending the Law of 23 December 1998 setting up a Commission for Supervision of
the Financial Sector, as amended;
– amending Law of 31 May 1999 governing the domiciliation of companies, as amended
(Mém. A 2003, p. 2364);
– by the Law of 19 March 2004 transposing into the Law of 5 April 1993 on the financial sector,
as amended, Directive 2001/24/EC of the European Parliament and of the Council of 4 April
2001 on the reorganisation and winding up of credit institutions (Mém. A 2004, p. 708 and
Mém. A 2004, p. 864);
– by the Law of 22 March 2004 on securitisation and amending

– the Law of 5 April 1993 on the financial sector, as amended;
– the Law of 23 December 1998 setting up a Commission for Supervision of the Financial
Sector, as amended;
– the Law of 27 July 2003 on trusts and fiduciary contracts;
– the Law of 4 December 1967 on income tax, as amended;
– the Law of 16 October 1934 on wealth tax, as amended;
– the Law of 12 February 1979 on value added tax, as amended (Mém. A 2004, p. 720);
– by the Law of 12 November 2004 on combating money laundering and the financing of
terrorism, transposing Directive 2001/97/EC of the European Parliament and of the Council
of 4 December 2001 amending Council Directive 91/308/EEC on the use of the financial
system for the purpose of money laundering, and amending:
11
1. the Penal Code;
2. the Code of Criminal Procedure;
3. the Law of 7 March 1980 of the organisation of the judicial system, as amended;
4. the Law of 23 December 1998 setting up a Commission for Supervision of the Financial
Sector, as amended;
5. the Law of 5 April 1993 on the financial sector, as amended;
6. the Law of 6 December 1991 on the insurance sector, as amended;
7. the Law of 9 December 1976 on the organisation of the profession of notary, as
amended;
8. the Law of 10 August 1991 on the organisation of the profession of lawyer, as
amended;
9. the Law of 28 June 1984 on the organisation of the profession of company auditor, as
amended;
10. the Law of 10 June 1999 on the organisation of the profession of accountant;
11. the Law of 20 April 1977 on gaming and betting on sporting events, as amended;
12. the General Fiscal Code (“Abgabenordnung”) (Mém A 2004, p. 2766).
– by the law of 5 August 2005 on financial collateral arrangements (Mém A 2005, p.2212).
– by the Law of 5 November 2006 relating to the supervision of financial conglomerates

(1) transposing into the Law of 5 April 1993 on the financial sector, as amended and into
the Law of 6 December 1991 on the insurance sector, as amended, Directive
2002/87/EC of the European Parliament and of the Council of 16 December 2002 on
the supplementary supervision of credit institutions, insurance undertakings and
investment firms in a financial conglomerate, and amending Directives 73/239/EEC,
79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC of the Council and
Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council;
(2) modifying
the Law of 6 December 1991 on the insurance sector, as amended ;
the Law of 5 April 1993 on the financial sector, as amended (Mémorial A 2006, p.3394);
– by the Law of 18 December 2006 implementing Directive 2002/65/EC concerning the

distance marketing of consumer financial services and amending:
– the Law of 27 July 1997 on insurance contracts;
– the Law of 14 August 2000 on electronic commerce;
– Article 63 of the Law of 5 April 1993 on the financial sector, as amended (Mémorial A
2006, p.3802).
– by the law of 13 July 2007 on markets in financial instruments and transposing:
– Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on
markets in financial instruments amending Council Directives 85/611/EEC and
93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and
repealing Directive 93/22/EEC
– article 52 of Commission Directive 2006/73/EC of 10 August 2006 implementing
Directive 2004/39/EC of the European Parliament and of the Council as regards
organisational requirements and operating conditions for investment firms and defined
terms for the purposes of that Directive,
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and amending:
– the law of 5 April 1993 on the financial sector, as amended;
– the law of 20 December 2002 concerning undertakings for collective investment, as
amended,
– the law of 12 November 2004 on the fight against money laundering and terrorist
financing;
– the law of 31 May 1999 governing the domiciliation of companies, as amended;
– the law of 23 December 1998 creating a commission de surveillance du secteur
financier;
– the law of 6 December 1991 on the insurance sector, as amended;
– the law of 3 September 1996 concerning the involontary dispossesion of bearer shares;
– the law of 23 December 1998 relating to the monetary status of the Banque centrale du
Luxembourg (Luxembourg Central Bank);
and repealing:
– the law of 23 December 1998 relating to the supervision of securities markets, as
amended;
– the law of 21 June 1984 on futures markets, as amended.
– by the law of 7 November 2007 transposing into the law of 5 April 1993 on the financial
sector, as amended, Directive 2006/48/EC of the European Parliament and of the Council of
14 June 2006 relating to the taking up and pursuit of the business of credit institutions
(recast) and Directive 2006/49/EC of the European Parliament and of the Council of 14 June
2006 on the capital adequacy of investment firms and credit institutions (recast) (Mémorial A
2007, p.3496).
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Updated text
Art. 1. Definitions
(Law of 13 July 2007)

“Unless otherwise prescribed, for the purposes of this law:
(1) “tied agent” means a natural or legal person who, under the full and unconditional
responsibility of only one credit institution or investment firm on whose behalf it acts,
– promotes investment and ancillary services to clients and prospective clients, or
– canvasses clients or potential clients, or
– receives and transmits instructions or orders from the client in respect of
investment services or financial instruments, or
– places financial instruments, or
– provides advice to clients or potential clients in respect of those financial
instruments or services;
(2) “competent authority” means a national authority which is empowered by law or
regulation to supervise credit institutions and/or investment firms. In Luxembourg,
the supervision of credit institutions and investment firms comes under the remit of
the CSSF;
(3) “client” means a natural or legal person to whom a credit institution or a PFS
provides the services referred to in this law;
(4) “particular client” means a client other than a professional client;
(5) “professional client” means a client who possesses the experience, knowledge and
expertise to make its own investment decisions and properly assess the risks that it
incurs. In order to be considered a professional client, the client must comply with
the criteria set out in Annexe III;
(6) “CSSF” means the Commission de surveillance du secteur financier;
(6a) “investment advice” means the provision of personal recommendations to a client,
either upon its request, or at the initiative of the credit institution or the investment
firm, in respect of one or more transactions relating to financial instruments;
(7) “control” means the relationship between a parent undertaking and a subsidiary, in
the cases referred to in point (11) or a similar relationship between any natural or
legal person and an undertaking. Any subsidiary of a subsidiary undertaking shall
also be considered as a subsidiary of the undertaking that is their original parent;
(8) “insurance undertaking” means an insurance undertaking within the meaning of
article 6 of Directive 73/239/EEC, article 6 of Directive 79/267/EC or article 1(b) of
Directive 98/78/EC. In Luxembourg, this refers to persons whose activities fall within
the meaning of article 25(1)(e) of the law of 6 December 1991 on the insurance
sector as amended;
(9) “investment firm” means a person as defined in article 4(1)(1) of Directive
2004/39/EC. In Luxembourg, these are the persons referred to in Part I, Chapter 2,
section 2, sub-section 1 of this law;
(10) “reinsurance firm” means a reinsurance undertaking within the meaning of Article
1(c) of Directive 98/78/EC. In Luxembourg, this refers to persons whose activities fall
14
within the meaning of article 25(1)(aa) of the law of 6 December 1991 on the
insurance sector as amended;
(11) "parent undertaking" means an undertaking which owns the following rights:
(a) it has a majority of shareholders’ or members’ voting rights of another
undertaking, or
(b) it has the right to appoint or remove the majority of the members of the
administrative, management or supervisory body of another undertaking and is
at the same time a shareholder or member of that undertaking, or
(c) it has the right to exercise a dominant influence over an undertaking of which it
is a shareholder or member, pursuant to a contract entered into with that
undertaking or to a provision in its memorandum or articles of association,
where the law governing that undertaking permits being subject to such
contracts or provisions, or
(d) it is shareholder or member of an undertaking and controls alone, pursuant to
an agreement concluded with other shareholders or members of this
undertaking, the majority of the voting rights of the shareholders and members
of the latter, or
(e) it may exercise or actually exercises a dominant influence over another
undertaking, or
(f) it is placed under management on a unified basis with another undertaking;
(12) "credit institution" means a credit institution as defined in article 4(1) of Directive
2006/48/EC. In Luxembourg, this refers to legal persons whose activities consist in
receiving from the public deposits or other repayable funds and in granting credits for
their own account, as well as persons considered as credit institutions under Part I,
Chapter 1 of this law. The persons whose activities consist in receiving deposits or
other repayable funds from the public and in granting credits for their own account
may be called either credit institutions or banks;
(13) "financial institution" means an undertaking other than a credit institution, the
principal activity of which is to acquire holdings or to carry on one or more of the
activities listed in points 2 to 12 of Annexe I;
(14) “Member State” means a Member State of the European Union. The States that are
contracting parties to the European Economic Area Agreement other than the
Member States of the European Union, within the limits set forth by this agreement
and related acts are considered as equivalent to Member States of the European
Union;
(15) “host Member State” means the Member State other than the home Member State in
which a credit institution or an investment firm has a branch or performs services
and/or activities set out in Annexes I and II;
(16) “home Member State” means the Member State in which a credit institution or
investment firm is authorised;
(17) “execution of orders on behalf of clients” means acting to conclude agreements to
buy or sell one or more financial instruments on behalf of clients;
(18) "subsidiary" means a subsidiary undertaking in respect of which rights are owned as
set out in point (11). Subsidiaries of subsidiary undertakings are also considered
subsidiaries of the undertaking that is their original parent;
(18a) “portfolio management” means managing portfolios in accordance with mandates
given by clients on a discretionary client-by-client basis where such portfolios include
one or more financial instruments;
15
(19) “financial instruments” means the instruments referred to in Annexe II, Section B;
(20) “money market instruments” means those classes of instruments which are normally
dealt in on the money market, such as treasury bills, certificates of deposit and
commercial papers and excluding instruments of payment;
(21) “close links” means a situation in which two or more natural or legal persons are
linked by:
(a) participation, which means the ownership, direct or by way of control, of 20% or
more of the capital or voting rights of an undertaking, or
(b) control, which means the relationship between a parent undertaking and a
subsidiary in the cases referred to in point (11), the relationship between
undertakings linked by the fact of being placed under a single management or a
similar relationship between natural and legal persons and an undertaking. All
subsidiaries of subsidiary undertakings shall also be considered subsidiaries of
the undertaking that is their original parent;
A situation in which two or more natural or legal persons are permanently linked to
one and the same person by a control relationship shall also be regarded as
constituting a close link between such persons.
(22) “regulated market” means a market within the meaning of article 1(11) of the law on
markets in financial instruments;
(23) “MTF” means a multilateral trading facility within the meaning of article 1(18) of the
law on markets in financial instruments;
(24) “holding” means the ownership of rights in the capital of a company, materialised by
securities or not, which, by creating a lasting link with the latter, are meant to
contribute to the activity of the company, or the direct or indirect ownership of 20% or
more of the voting rights or capital of an undertaking;
(25) “qualifying holding” means a direct or indirect holding in an undertaking which

represents 10% or more of the capital or of the voting rights, in accordance with
articles 9 and 10 of Directive 2004/39/EC, or which makes it possible to exercise a
significant influence over the management of that undertaking;
(26) “third country” means a state other than a Member State;
(27) “professionals of the financial sector” means credit institutions and the other PFS;
(28) “PFS” means the persons referred to in Part I, Chapter 2, excluding the persons
referred to in article 13(2);
(29) “ancillary service” means the services referred to in Annexe II, Section C;
(30) “investment service” or “investment activity” means any of the services and activities
listed in Section A of Annexe II relating to any of the financial instruments listed in
Section B of Annexe II;
(31) “UCITS management company” means a management company as defined in

Council Directive 85/611/EEC of 20 December 1985, on the coordination of laws,
regulations and administrative provisions relating to undertakings for collective
investment in transferable securities (UCITS). In Luxembourg, this refers to any
person within the meaning of Chapter 13 of the law of 20 December 2002 on
undertakings for collective investment, as amended;
16
(32) “branch” means a place of business other than the head office which is a part of a
credit institution or an investment firm, which has no legal personality and which
performs directly, entirely or in part transactions related to the activity of credit
institutions or provides investment services and/or activities and which may also
perform ancillary services for which the investment firm has been authorised; all the
places of business set up in the same Member State by a credit institution or
investment firm with headquarters in another Member State shall be regarded as a
single branch;
(33) “transferable securities” means those classes of securities which are negotiable on
the capital market, with the exception of instruments of payment, such as:
(a) shares in companies and other securities equivalent to shares in companies,
partnerships or other entities, and depositary receipts in respect of shares;
(b) bonds or other forms of securitised debt, including depositary receipts in
respect of such securities;
(c) any other securities giving the right to acquire or sell any such transferable
securities or giving rise to a cash settlement determined by reference to
transferable securities, currencies, interest rates or yields, commodities or other
indices or measures."
PART I: Access to professional activities in the financial sector
Chapter I: Authorisation of banks or credit institutions established under Luxembourg law.

“Section 1: Provisions of general application1”
Art. 1-1. Scope
(Law of 13 July 2007) “This chapter shall apply to all credit institutions incorporated
under Luxembourg law.”
(1) No “…”2 person established under Luxembourg law may carry on the business of a
credit institution without holding a written authorisation from the Minister responsible
for the “Commission de surveillance du secteur financier”3 [Commission for
Supervision of the Financial Sector].
(2) No person may be authorised to carry on the business of a credit institution either
through another person or as an intermediary for the carrying-on of such business.
(3) No person other than a credit institution may carry on the business of taking deposits
or other repayable funds from the public. This prohibition shall not apply to the taking
of deposits or other funds repayable by the State, by local authorities or by public
international bodies of which one or more “Member States”4 are members, or to
cases expressly covered by national or Community legislation, provided that those
activities are subject to regulations and controls intended to protect depositors and
investors and applicable to those cases.
(1) Authorisation shall be granted upon written application, following an investigation by
the Commission de surveillance du secteur financier [Commission for Supervision of
1
Law of 21 November 1997.
2
Repealed by the law of 13 July 2007.
3
Art. 28 of the Law of 23 December 1998 setting up a Commission for Supervision of the Financial
Sector (Mém. A 1998, p. 2985).
4
Law of 13 July 2007.
17
the Financial Sector] (hereinafter referred to as “the CSSF”) to establish whether the
conditions laid down by the present Law are fulfilled.
(2) (Law of 13 July 2007) “The CSSF shall consult the relevant competent authorities of
the Member States responsible for the supervision of the credit institutions,
investment firms, insurance undertakings or management companies of UCITS, prior
to granting authorisation to a credit institution which is:
– a subsidiary of a credit institution, investment firm, insurance undertaking or
UCITS management company authorised in another Member State, or
– a subsidiary of the parent undertaking of a credit institution, investment firm,
insurance undertaking or UCITS management company authorised in the
European Union, or
– controlled by the same natural or legal persons as control a credit institution,
investment firm, insurance undertaking or UCITS management company
authorised in the European Union.”.
(Law of 5 November 2006) “The CSSF consults these competent authorities in
particular when assessing the suitability of the shareholders and the reputation and
professional qualification of the directors of the credit institution requesting the
authorisation, when the shareholder is one of the institutions referred to “in the
previous sub-paragraph”5 or when the directors involved in the management of the
credit institution requesting authorisation also take part in the management of one of
the institutions referred to “in the previous sub-paragraph”6. For these purposes, the
CSSF and the other relevant competent authorities shall inform each other of any
useful information relating to the granting of the authorisation and subsequently for
the assessment of the ongoing compliance with operating conditions.”
(3) The authorisation shall be granted for an unlimited period of time.
(4) The application for authorisation must be accompanied by all such information as
may be needed for the assessment thereof and by a programme of operations
indicating the type and volume of business envisaged and the administrative and
accounting structure of the institution in question.
(5) Authorisation shall likewise be required before any change is made to the object,
name or legal form of the institution in question and for the setting up or acquisition
of any agency, branch or subsidiary in Luxembourg or abroad, without prejudice to
the application of “Article 33”7.
(6) The decision taken on any application for authorisation must be supported by a
statement of the reasons on which it is based and must be notified to the applicant
within six months of receipt of the application or, if the application is incomplete,
within six months of receipt of the information needed for the adoption of the
decision. Such a decision shall in any event be adopted within twelve months of
receipt of the application, failing which the absence of a decision shall be deemed to
constitute notification of a decision refusing the application. An appeal against the
decision may be lodged within one month, and may be struck out if it is not so
lodged, before the “tribunal administratif”8 [administrative court], which shall
determine the matter (...) as a court adjudicating on the substance.
5
Law of 5 July 2007.
6
7
Law of 12 March 1998.
8
Art. 100 of the Law of 7 November 1996 on the organisation of administrative courts and tribunals
(Mém. A 1996, p. 2261).
18
(7) (Law of 13 July 2007) “(7) Without prejudice to sections 3 and 4 of this Chapter and
article 18(2) of the law on markets in financial instruments, credit institutions
authorised in Luxembourg are ipso jure authorised:
– to perform all the activities listed in Annexe I;
– to provide all the investment services and to perform all the investment
activities listed in Section A of Annexe II;
– to provide all ancillary services listed in Section C of Annexe II, and
– to perform any other activity falling under the scope of this law.”
Art. 4 The legal form of the institution
(Law of 13 July 2007) “Authorisation may only be granted to a legal person
incorporated under Luxembourg law which is established in the form of a public-law
institution, a société anonyme [public limited company], a société en commandite par
actions [limited partnership with a share capital] or a société coopérative
[cooperative society].
(1) Authorisation shall be subject to the production of evidence showing the existence in
Luxembourg of the central administration “and of the registered office”9 of the
institution in respect of which authorisation is sought.
“(1a) (Law of 7 November 2007) Credit institutions shall have robust internal governance
arrangements, which include a clear organisational structure with well defined,
transparent and consistent lines of responsibility, effective processes to identify,
manage, monitor and report the risks they are or might be exposed to, and adequate
internal control mechanisms, including sound administrative and accounting
procedures, as well as control and security arrangements for information processing
systems.”
(2) (Law of 13 July 2007) “(2) The credit institution shall fulfil the organisational
requirements defined in article 37-1.”
“(3) (Law of 7 November 2007) The internal governance arrangements, processes,
procedures and mechanisms referred to in this article shall be comprehensive and
proportionate to the nature, scale and complexity of the credit institution’s activities.”
Art. 6 Shareholdings
(1) Authorisation shall be subject to communication to the CSSF of the identities of
shareholders or members, whether direct or indirect and whether natural or legal
persons, whose holdings in the institution to be authorised are qualifying holdings or
are such as to enable them to exercise a significant influence on the conduct of its
business, and of the amounts of such holdings.
“Authorisation shall be refused if, taking into account the need to ensure the sound
and prudent management of the credit institution, the suitability of those
shareholders or members is not satisfactory.”10
(1a) (Law of 13 July 2007) “Where close links exist between the credit institution to be
authorised and other natural or legal persons, the authorisation shall only be granted
if those links do not prevent the CSSF from effectively exercising its supervisory
functions.
(1b) Authorisation shall be refused if the laws, regulations or administrative provisions of
a third country governing one or more natural or legal persons with whom the credit
9
10
19
institution has close links, prevent the CSSF from effectively exercising its
supervisory functions. Authorisation shall also be refused if difficulties involved in the
enforcement of these provisions prevent the CSSF from effectively exercising its
supervisory functions.”
(2) Authorisation shall be subject to the following conditions: (a) the direct and indirect
shareholding structure of the institution must be transparent and organised in such a
way that the authorities responsible for prudential supervision of the institution and,
as the case may be, of the group to which it belongs can be clearly determined; (b)
such supervision must be exercisable without impediment or obstacle; and (c)
supervision on a consolidated basis of the group to which the institution belongs
must be ensured.
(3) Any natural or legal person who proposes to acquire, directly or indirectly, a
qualifying holding in a credit institution must first inform the CSSF, telling it of the
amount of the intended holding. Such a person must likewise inform the CSSF if he
proposes to increase his qualifying holding in such a way that the proportion of the
voting rights or of the capital held by him will reach or exceed 20%, 33% or 50% or
so that the credit institution will become his subsidiary.
(4) The CSSF shall have three months from the date of the notification provided for in
the preceding paragraph in which to oppose such a plan if, in view of the need to
ensure sound and prudent management of the credit institution, it is not satisfied as
to the suitability of the person referred to in that paragraph. If it does not oppose the
plan in question, the CSSF may fix a maximum period for its implementation. If a
holding is acquired despite the opposition of the CSSF, the latter may suspend the
exercise of the corresponding voting rights or demand the nullification or cancellation
of votes cast “, without prejudice to any other sanction that might be applied.”11
(5) (Law of 13 July 2007) “If the acquirer of the holdings referred to in paragraph (3) is a
credit institution, investment firm, insurance undertaking or UCITS management
company authorised in another Member State, or the parent undertaking of such an
entity, or a natural or legal person controlling such an entity, and if, as a result of that
acquisition, the institution in which the acquirer proposes to hold a holding would
become a subsidiary or subject to the control of the acquirer, the assessment of the
acquisition must be subject to the prior consultation referred to in Article 3(2).”
(6) Any natural or legal person who proposes to dispose, directly or indirectly, of a
qualifying holding in a credit institution must first inform the CSSF, telling it of the
amount of the holding concerned. Such a person must likewise inform the CSSF if
he proposes to reduce his qualifying holding in such a way that the proportion of the
voting rights or of the capital held by him will fall below 20%, 33% or 50% or so that
the credit institution will cease to be his subsidiary.
(7) On becoming aware of them, credit institutions shall inform the CSSF of any
acquisitions or disposals of holdings in their capital that cause holdings to exceed or
fall below one of the thresholds referred to in paragraphs (3) and (6). They shall also,
at least once a year, inform the CSSF of the names of shareholders and members
possessing qualifying holdings and the amounts of such holdings as shown, for
example, by the information received at the annual general meetings of shareholders
and members or as a result of compliance with the regulations relating to
“companies whose transferable securities are admitted to trading on a regulated
market”.12
11
12
20
(8) (Law of 13 July 2007) "Where the influence exercised by the persons referred to in
the first sub-paragraph of paragraph (1) is likely to be prejudicial to the sound and
prudent management of a credit institution, the CSSF shall take appropriate
measures to put an end to that situation. In particular, the CSSF may use its power
of injunction or suspension or impose an administrative fine on the persons
responsible for the administration or management of the credit institution concerned,
who act such as to jeopardise the sound and prudent management of the credit
institution, with an administrative fine ranging from 125 to 12,500 euros.”
(1) Authorisation shall be conditional on the production by the members of the bodies
performing administrative, management and supervisory functions, and by the
shareholders or members referred to in the preceding article, of evidence of their
professional standing. Such standing shall be assessed on the basis of police
records and of any evidence tending to show that the persons concerned are of
good repute and offering every guarantee of irreproachable conduct on the part of
those persons.
(2) At least two persons must be responsible for the management of the institution.
Those persons must be empowered effectively to determine the direction taken by
the business and must possess adequate professional experience by virtue of their
having previously carried on similar activities at a high level of responsibility and
autonomy.
(3) “Any change in the persons as referred to in paragraph (1) shall be communicated in
advance to the CSSF. The CSSF may request all such information as may be
necessary regarding the persons who may be required to fulfil the legal requirements
with respect to reputation and professional experience. The CSSF shall refuse the
proposed change if these persons are of insufficient professional repute and, where
applicable, of insufficient experience or where there are objective and demonstrable
grounds for believing that the proposed change would pose a threat to the sound
and prudent management of the credit institution."13 An appeal against the decision
of the CSSF may be lodged within one month, and may be struck out if it is not so
lodged, before the “tribunal administratif”14 [administrative court], which shall
determine the matter (...) as a court adjudicating on the substance.
Art. 8 Capital base
(1) Authorisation shall be conditional on the production of evidence showing the
existence of an authorised capital of “8 700 000 euros”15, of which “6 200 000
euros”16 must be fully paid up. Those amounts may be modified by Grand-Ducal
regulation.
(2) The own funds of a credit institution may not be less than the amount of the
authorised capital prescribed pursuant to the preceding paragraph. If the own funds
fall below that amount, the CSSF may, where the circumstances so justify, allow the
institution a limited period in which to rectify its situation or cease its activities.
Art. 9 (repealed by the law of 13 July 2007)
13
14
(Mém. A 1996, p. 2261).
15
Law of 2 August 2003.
16
21
(1) Authorisation shall be conditional on the institution having its annual accounts
audited by one or more external auditors who can show that they possess adequate
professional experience. Those external auditors shall be appointed by the body
responsible for managing the credit institution.
(2) Any change in the external auditors must be authorised in advance by the CSSF in
accordance with Article 7(3).
(3) Neither the rules in respect of commissaires aux comptes [auditors], as laid down in
the Law on commercial companies, nor Article 137 of the Law of 10 August 1915, as
amended, shall apply to credit institutions.
Art. 10-1 Participation in a deposit guarantee scheme
(Law of 11 June 1997)
“Without prejudice to Article 62-5(4), authorisation shall be conditional on the
participation by the credit institution in a deposit guarantee scheme established in
Luxembourg and recognised by the CSSF.”
Art. 10-2 Participation in an investors’ compensation scheme
“Without prejudice to Article 62-15(4), authorisation shall be conditional on the
participation by the credit institution in an investors’ compensation scheme
established in Luxembourg and recognised by the CSSF.”
(1) The authorisation shall be withdrawn if the conditions for the grant thereof cease to
be fulfilled.
(2) (Law of 13 July 2007) “The agreement shall be withdrawn if the credit institution
does not make use of the authorisation within 12 months, expressly renounces the
authorisation or has ceased to engage in business for the preceding six months."
(3) (Law of 13 July 2007) “The authorisation shall be withdrawn if it has been obtained
by making false statements or by any other irregular means.”
(4) (Law of 13 July 2007) "The authorisation shall be withdrawn if the credit institution is
no longer able to fulfil its obligations towards its creditors.”
“(5)”17 An appeal against the decision of the CSSF may be lodged within one month, and
may be struck out if it is not so lodged, before the “tribunal administratif”18
[administrative court], which shall determine the matter (...) as a court adjudicating
on the substance.
“Section 2: Specific provisions relating to caisses rurales19 [rural banks]”

Art. 12 Special provisions relating to caisses rurales
(1) The composite entity comprising the central credit institution of the caisses rurales
and those caisses rurales which have been affiliated to that central institution since
before 15 December 1977 or have resulted from any merger of such caisses, and
which are still affiliated to the central institution, shall be regarded as forming a single
17
18
(Mém. A 1996, p. 2261).
19
22
credit institution. “Affiliation”, for the purposes of this article, shall mean the holding
of one or more shares in the capital of the central institution.
(2) The liabilities of the central institution and of the caisses affiliated thereto shall
constitute joint and several liabilities.
(3) The managing body of the central credit institution shall exercise administrative,
technical and financial control over the organisation and management of each
affiliated caisse. It shall be empowered to issue instructions to the managing bodies
of the affiliated caisses.
(4) The members of the administrative, management and supervisory bodies of each
affiliated caisse shall be required to produce evidence of their professional standing
and also, as regards persons responsible for the management of a caisse, evidence
that those persons possess adequate professional experience.
(5) (Law of 11 June 1997) “Without prejudice to Article 62-5(4), only the central credit
institution shall be required to participate in a deposit guarantee scheme established
in Luxembourg and recognised by the CSSF. The protection offered by that scheme
shall cover not only deposits placed with the central institution but also deposits
placed with affiliated caisses.”
(6) (Law of 27 July 2000) “Without prejudice to Article 62-15(4), only the central credit
institution shall be required to participate in an investor compensation scheme
established in Luxembourg and recognised by the CSSF. The protection offered by
that scheme shall cover not only investors who are clients of the central institution
but also persons investing with affiliated caisses.”
“Section 3: Specific provisions relating to banks issuing mortgage bonds20“

(Law of 21 November 1997)
“(1) Mortgage banks are credit institutions having as their main object the following
activities:
(a) the granting of loans secured by rights in rem in immoveable property or by
charges on real property, and the issuing on that basis of debt instruments
secured by those rights or charges, such instruments being known as mortgage
bonds;
(b) the granting of loans secured by bonds, or by other similar debt instruments
fulfilling the requirements set out in paragraph 2, which are in turn coupled with
the guarantees indicated in subparagraph (a) above, and the issuing on that
basis of debt instruments covered by those guarantees, such instruments being
known as mortgage bonds;
(c) the granting of loans to public entities and the issuing of debt instruments
secured by the debt entitlements resulting from those loans, such instruments
being known as mortgage bonds;
(d) the granting of loans secured by:
– public entities,
– bonds issued by public entities,
– bonds fulfilling the requirements set out in paragraph 2 which are issued by
credit institutions established in any State which is a Member State of the
20
23
“European Union”21, a Contracting Party to the Agreement on the European
Economic Area or a Member country of the Organisation for Economic
Cooperation and Development (OECD), such bonds being in turn secured
by debts owed to public entities,
and the issuing on that basis of debt instruments secured by the debt
entitlements resulting from those loans, such instruments being known as
mortgage bonds.
(2) Loans granted in accordance with the foregoing provisions may be granted in any
form, including in the form of the acquisition of bonds or other similar debt
instruments fulfilling the criteria laid down by “article 43(4) of the law of 20 December
2002 relating to undertakings for collective investment”22. Such bonds or other
similar debt instruments must be issued by credit institutions or public entities as
defined in paragraph 4 below and must be coupled with the guarantees mentioned in
subparagraphs (a) to (d) of paragraph 1 above.
(3) Bonds issued in accordance with the provisions of subparagraphs (a) and (b) of
paragraph 1 are known as “mortgage bonds” (lettres de gage hypothécaires). Those
issued in accordance with the provisions of subparagraphs (c) and (d) of paragraph
1 are known as “public-sector bonds” (lettres de gage publiques).
(4) (a) For the purposes of this section, “rights in rem in immoveable property” shall
mean rights in property and the separate attributes thereof, surface rights, rights in
rem acquired on the acquisition of a long lease and all other similar rights in rem in
immoveable property provided for by the laws of States which are Member States of
the “European Union”23, Contracting Parties to the Agreement on the European
Economic Area or Member countries of the OECD, conferring any right over
immoveable property located within any such State that is capable of being asserted
against third parties.
(b) For the purposes of this section, “charges on real property” shall mean ordinary
mortgages (hypothèques), mortgages in which the mortgagee takes possession and
receives the produce, rents and profits (antichrèses) and all other similar charges on
real property provided for by the laws of States which are Member States of the
“European Union”24, Contracting Parties to the Agreement on the European
Economic Area or Member countries of the OECD, conferring any charge over
immoveable property located within any such State that is capable of being asserted
against third parties.
In order to meet legal requirements, the rights in rem in immoveable property and
charges on real property referred to in subparagraphs (a) and (b) above must be
such as to authorise the holder thereof to enforce those rights and charges with a
view to obtaining payment of all debts secured thereby, without any possibility of
such enforcement being impeded by any third-party rights, whether of a public or
private nature.
(c) For the purposes of this section, “public entities” shall mean States which are
Member States of the “European Union”25, Contracting Parties to the Agreement on
the European Economic Area, Member countries of the OECD, their institutions or
bodies, central administrations, regional or local authorities, other public authorities
and other public bodies or undertakings of those States.
21
22
23
24
25
24
(5) The provisions of Articles 86 and 94-8 of the Law of 10 August 1915 on commercial
companies, as amended, shall apply to mortgage bonds.
(6) The form taken by mortgage bonds may be prescribed by Grand-Ducal regulation.”
Art. 12-2 Incidental and ancillary activities
“(1) Mortgage banks may engage in other banking and financial activities only in so far
as these are incidental and ancillary to their main activity.
For the purposes of this provision, the following shall be regarded as incidental
activities:
(a) selling and purchasing securities in their own name for the account of third
parties, but excluding forward transactions;
(b) with a view to granting mortgage loans, loans to public entities or loans of the
type referred to in Article 12-1(1)(a), (b) and (c):
– receiving capital sums as deposits from third parties, with or without interest;
– taking out loans and furnishing security for such loans;
– issuing bonds which are not subject to the mandatory cover requirements
laid down for mortgage bonds (lettres de gage hypothécaires) or public-
sector bonds (lettres de gage publiques);
(c) providing custody and management services in respect of securities for third
parties;
(d) acquiring holdings in undertakings, where such holdings are intended to further
operations carried out in accordance with Article 12-1 and the liability of the
mortgage bank resulting from those holdings is limited by the legal form of the
undertaking, provided however that each holding does not in total exceed one
third of the nominal value of all the shares in the undertaking in which the
holding is acquired. A larger holding shall be authorised in so far as the
corporate object of the undertaking is in essence – by virtue either of the law or
of its statutes – to engage in operations of the same type as those which the
mortgage bank is itself authorised to carry out; the total amount of such
holdings may not exceed twenty per cent of the mortgage bank’s own funds.
(2) Mortgage banks may use the funds available in order to:
(a) deposit them with other suitable credit institutions;
(b) redeem their mortgage bonds and public-sector bonds;
(c) purchase:
– bills of exchange and cheques,
– securities, debts, Treasury bills and Treasury bonds the debtor in respect of
which is a public entity,
– debt instruments in respect of which the payment of interest and the
repayment of capital are guaranteed by a public entity,
– other debt instruments listed on a stock exchange;
(d) make advances against pledges of securities in accordance with internal rules
to be laid down by the mortgage bank. Such rules must specify the securities
eligible to be accepted by way of pledge and fix the authorised amount of the
advance;
25
(e) invest them in the form of investment units in assets invested in accordance
with the principle of risk-spreading, where those units have been issued by a
capital investment company or a foreign investment company which is subject
to special official surveillance with a view to protecting holders of securities,
provided that, under the terms of the contractual conditions or statutes of the
capital investment company or investment company, the assets may be
invested only in debt instruments of the type referred to in (c) and in bank
deposits.
(3) Mortgage banks may acquire immoveable property only with a view to avoiding
losses on mortgages and in order to meet their own needs.”
Art. 12-3 Maximum amount of mortgage bonds in circulation
“The aggregate amount of the mortgage bonds (lettres de gage hypothécaires) and
public-sector bonds (lettres de gage publiques) of a mortgage bank which are in
circulation at any given time may not exceed 60 times the amount of its own funds.
This maximum amount may be modified by Grand-Ducal regulation.”
Art. 12-4 Protection of denomination
“No entity may issue transferable securities or other debt instruments under the
denomination of “mortgage bonds” (in French: lettres de gage; in German:
Pfandbriefe), or under any identical or similar denomination in another language, or
call itself a “mortgage bank” if it does not fulfil the conditions laid down by this
section.”
Art. 12-5 Collateral
“(1) Ordinary collateral shall be comprised of the debts due coupled with the guarantees
relating thereto, as described in Article 12-1(1)(a), (b) and (c), and held as assets as
consideration for the commitments of the mortgage bank resulting from the issue of
mortgage bonds.
(2) The collateral shall be divided into two separate categories, according to whether
they are allocated to mortgage bonds (lettres de gage hypothécaires) or to public-
sector bonds (lettres de gage publiques).
(3) In each of the categories defined above, ordinary collateral may be replaced, to the
extent of 20% of the nominal value of the mortgage bonds in circulation, by
substitute collateral comprising:
(a) cash;
(b) assets held in central banks or credit institutions having their seat or registered
office in a State which is a Member State of the “European Union”26, a
Contracting Party to the Agreement on the European Economic Area or a
Member country of the OECD;
(c) bonds fulfilling the criteria laid down by “Article 43(4) of the law of 20 December
2002 relating to undertakings for collective investment”27.
(4) The aggregate nominal amount of mortgage bonds in circulation at any given time
must be fully secured by collateral. Such collateral must produce a global interest
26
27
26
income which is at least equal to the amount of interest produced by those mortgage
bonds.
(Law of 22 June 2000) “In order to ensure global cover, in terms of both principal and
interest, for the mortgage bonds in circulation and the other debts eligible for the
preferential treatment referred to in Article 12-8, mortgage banks must take
appropriate measures and may have recourse, in particular, to financial futures. The
assets resulting from such measures must be included in the collateral required by
this Law. Any sums payable by virtue of those measures shall enjoy, following set-off
as the case may be, the preferential status referred to in Article 12-8.”
(Law of 22 June 2000) “Sums payable by virtue of the financial futures used to cover
operations of the kind referred to in Article 12-2 shall not enjoy that preferential
status.”
(5) Debts resulting from loans coupled with the guarantees provided for in Article 12-
1(1)(a) and (b) may be used as collateral only up to a maximum of 60% of the
estimated realisation value of the immoveable property serving as a guarantee. That
estimated value is to be determined on a genuine and prudent basis in accordance
with the valuation rules laid down in Article 12-7(2); it shall take into consideration
only the lasting characteristics of the property in question and the lasting income that
it may produce for any owner making normal use of it in accordance with its intended
purpose. Residential property may serve as a guarantee, as well as properties used
for industrial, commercial or business purposes.”
Art.12-6 Mortgage bond register
“(1) All mortgage banks shall be required to draw up a register, known as the “mortgage
bond register” (registre des gages), in which details of all assets serving as collateral
must be entered individually. That register shall be composed of two parts, one of
which shall be used for the registration of assets securing mortgage bonds (lettres
de gage hypothécaires) and the other for registration of assets securing public-
sector bonds (lettres de gage publiques), in application of the provisions of Article
12-5(2).
(2) The form of that register, of the entries to be made therein and of the deletions to be
made therefrom may be prescribed by Grand-Ducal Regulation, as may all other
provisions necessary in order to ensure that the register is properly kept.”
Art. 12-7 Special auditor
“(1) All mortgage banks must have a special auditor, being a qualified company auditor,
who is distinct from the company auditor who audits its accounts. That special
auditor shall be appointed by the “CSSF”28 on a proposal by the credit institution
concerned. The special auditor shall be required to report to the supervisory
authority on the findings and observations made by him in performing his duties. The
special auditor may be removed from office by the “CSSF”29 at any time.
(2) The special auditor shall be under a duty to ensure that the collateral to be provided
under this Law by mortgage banks is duly furnished and registered in the mortgage
bond register, that the value thereof is in the prescribed amount and that it continues
to exist.
The special auditor shall also be required to ascertain whether the estimated value
of the items of immoveable property serving as guarantees in rem has been
28
29
27
determined in accordance with the valuation rules to be drawn up to that end by the
credit institution with the approval of the “CSSF”30, and whether the maximum rate of
cover in respect of which the immoveable property in question may serve as
guarantee has been respected.
The special auditor shall not be required to ascertain whether the estimated value of
the immoveable property in question corresponds to its actual value.
(3) The collateral entered in the mortgage bond register may not be deleted therefrom
without the written consent of the special auditor.
The special auditor, acting jointly with the mortgage bank, shall be required to
ensure the safe-keeping of the collateral entered in the mortgage bond register and
of the deeds and documents relating to such collateral. At the request of the
mortgage bank, he shall release the said collateral, deeds and documents unto that
bank and shall consent to the removal from the mortgage bond register of the entries
relating thereto, in so far as the other items of collateral entered therein are sufficient
fully to cover the mortgage bonds in circulation.
(4) In the performance of his duties, the special auditor shall remain wholly independent
of the credit institution, the mortgage bond holders and the supervisory authority.
(5) The special auditor shall not represent the mortgage bond holders.
(6) Before mortgage bonds are issued, each of them shall be endorsed with a certificate
of the special auditor certifying the existence of the cover required by law and the
entry thereof in the mortgage bond register. The signature of the certificate by the
special auditor may be in manuscript, printed or in the form of a stamp.
(7) All disputes between the special auditor and the mortgage bank shall be determined
by the CSSF.”
Art. 12-8 Preferential rights to payment of mortgage bond holders
“(1) Without prejudice to the conditions to be fulfilled and the formalities to be completed
for the creation and maintenance of the guarantees comprised in the collateral, that
collateral shall serve, in the first instance, to guarantee to the holders of mortgage
bonds that they will be paid the full amount of the debt due to them from the issuer of
the bond or bonds in question. The collateral may not be attached or form the
subject of any execution or enforcement measure by personal creditors of the issuer
other than the mortgage bond holders.
(2) Registration of the collateral in the mortgage bond register shall confer upon the
mortgage bond holders preferential rights over that collateral in priority to all other
rights, preferences and priorities of any kind whatever, including Treasury rights,
without there being any need for the conclusion of any special contract earmarking
or pledging the same or any other contract, or for the delivery of the collateral to the
mortgage bond holders or to any agreed third party, the service of any document or
the completion of any other formality. The entry in the register shall constitute good
evidence of the date thereof.
(3) Regardless of the date of issue thereof, all mortgage bonds shall rank pari passu, in
terms of the security afforded by them, with the collateral respectively allocated to
them, whether relating to mortgage bonds (lettres de gage hypothécaires) or to
public-sector bonds (lettres de gage publiques), and the same preferential rights
shall attach to them in the event of the collective liquidation of the mortgage bank.
30
28
(4) In the event of the collective liquidation of the mortgage bank, the collateral shall not
form part of the assets to be realised in favour of the general body of creditors.
(5) (Law of 22 June 2000) “Where one of the acts referred to in Article “60-2(3)”31 or
“Article 61(3)”32 is lodged in relation to a mortgage bank, the CSSF shall by
operation of law act as manager of the aggregate comprised of the mortgage bonds
and the collateral relating thereto. The CSSF shall continue so to act until such time
as the reorganisation and liquidation measures implemented in pursuance of the
aforesaid acts produce their effects.
Articles “60-2”33 and 61 shall not apply to the aggregate comprised of the mortgage
bonds and the collateral relating thereto.
The CSSF shall manage the collateral and exercise upon the maturity thereof the
mortgage bond holders’ rights over such collateral on behalf of the mortgage bond
holders and on behalf of the mortgage bank in whose name or for whose account
the collateral in question is held by third parties or entered or registered with third
parties or in public registers.
Mortgage bonds shall be paid as and when they respectively mature.
The CSSF may conclude with a mortgage credit institution which is authorised and
supervised by the competent authorities of a Member State of the “European
Union”34, a Contracting Party to the Agreement on the European Economic Area or a
Member country of the OECD a service contract relating to the management of
mortgage bonds and the realisation of the underlying security as and when the
mortgage bonds mature.
It may also transfer the mortgage bonds and the collateral in their entirety to a
mortgage credit institution or an issuer of mortgage bonds which is authorised and
supervised by the competent authorities referred to in the preceding subparagraph.
Where any assets remain after the creditors enjoying the preferential rights have
been paid off in full, those assets shall be transferred to the general pool of assets
comprised in the liquidation of the mortgage bank.
In the event that the collateral proves to be insufficient to satisfy in full the debts due
to the creditors enjoying the preferential rights, the latter may prove their claims as
against the general assets comprised in the liquidation and the ordinary rules of
collective liquidation shall apply.”
(6) (Law of 22 June 2000) “Notwithstanding the provisions of Article 450 of the
Commercial Code, the collective liquidation of a mortgage bank shall not have the
effect of causing the mortgage bonds and other debts covered by the preferential
rights referred to in this article to become due and payable.”
(7) (Law of 22 June 2000) “The provisions of the second paragraph of Article 444 and
Article 445 of the Commercial Code shall not apply to contracts concluded by or with
the mortgage bank or to any legal acts performed by that bank or for its benefit,
provided that such contracts or acts are directly linked to the operations provided for
in Article 12-1 and to the financial futures contracts relating thereto.”
“(8)”35 The right of precedence and the preferential rights established by the provisions of
paragraphs 1 and 2 shall exist in favour of the holders of bonds issued by mortgage
credit institutions and/or mortgage bond issuers which are authorised and
31
32
33
34
35
Law of 22 June 2000.
29
supervised by the competent authorities of a Member State of the “European
Union”36, a Contracting Party to the Agreement on the European Economic Area or a
Member country of the OECD, provided that such bonds meet the criteria laid down
by “Article 43(4) of the law of 20 December 2002 relating to undertakings for
collective investment”37, provided that they are issued by credit institutions or by
public entities within the meaning of Article 12-1(4) and coupled with the guarantees
referred to in Article 12-1(1)(a) to (d), and provided further that the right of
precedence and the preferential rights established by this article are recognised
under the laws of the foreign country concerned.”
Art. 12-9 Special supervision by the CSSF
“In addition to carrying out general supervision of credit institutions, the "CSSF”38
shall carry out, in relation to the credit institutions to which this section applies,
special supervision activities to ensure compliance with the provisions of this section.
The "CSSF”39 may commission the auditor of the institution concerned or another
auditor chosen by the CSSF, whose remuneration shall be payable by that
institution, to carry out a complete or partial review of the collateral.”
“Section 4: Special provisions relating to electronic money institutions”40

(Law of 14 May 2002)
“(1) “Electronic money institution” shall mean a “legal person”41 the principal business of
which is to issue means of payment in the form of electronic money. Electronic
money institutions must be credit institutions within the limits provided for by this
Law. They may not receive from the public any deposits or other repayable funds
within the meaning of Article 2(3).
For the purposes of this Law, “electronic money” shall mean monetary value as
represented by a claim on the issuer which is:
– stored on an electronic device;
– issued on receipt of funds of an amount not less in value than the monetary
value issued;
– accepted as means of payment by undertakings other than the issuer.
The receipt of funds by electronic money institutions in accordance with the second
indent of the preceding subparagraph shall not constitute a deposit or other
repayable funds within the meaning of Article 2(3) if they are immediately exchanged
for electronic money.
(2) Electronic money institutions may in addition carry on only commercial activities
which are limited to:
– the provision of closely related financial and non-financial services such as the
administering of electronic money by the performance of operational and other
36
37
38
39
40
Law of 14 May 2002.
41
30
ancillary functions related to its issuance, and the issuing and administering of
other means of payment but excluding the granting of any form of credit; and
– the storing of data on the electronic device on behalf of other undertakings or
public institutions.
(3) Electronic money institutions may have holdings in other undertakings only where
those undertakings perform operational or other ancillary functions related to
electronic money issued or distributed by the institution concerned.
(4) No person or undertaking other than an electronic money institution or credit
institution as defined in Article 1 may carry on the business of issuing electronic
money.
(5) No person or undertaking may carry on the business of issuing electronic money
under the name or style of an electronic money institution or under any identical or
similar name or style in another language unless it fulfils the criteria laid down by this
section.”
Art. 12-11 Applicable legal provisions
“(1) Save in so far as may be otherwise expressly provided for, electronic money
institutions shall be subject to the provisions of Section 1 of Chapter 1 of Part I42,
Chapters 3 and 4 of Part I, Part II, Chapters 1, 2, 3 and 4 of Part III and Parts IV and
V. They shall draw up their annual accounts and, as the case may be, their
consolidated annual accounts in accordance with the Law of 17 June 1992 on the
annual accounts and consolidated annual accounts of credit institutions incorporated
under Luxembourg law, as amended.
(2) Articles 8, 10-1, 10-2, 31, 47, 51(1) and 57(2) to (5) shall not apply to electronic
money institutions.
(3) Articles 30, 33, 34, “…”43, 45 and 46 shall apply only to the business of issuing
electronic money.
(4) Credit institutions as defined in Article 1 which issue means of payment in the form
of electronic money are not covered by the provisions of this section apart from
Article 12-12.”
Art. 12-12 Requirements in relation to the redeemability of funds received by the issuer
“(1) During the period of validity of the electronic money device and for ten years after
the end of that period of validity, a bearer of electronic money may ask the issuer to
redeem it at par value in coins and bank notes or by a transfer to an account.
42
Law of 14 May 2002. Art. 11 – Transitional provisions:
Electronic money institutions which started to carry on their business in Luxembourg before the
date of entry into force of this Law or before 27 April 2002, if that date occurs in the interim, shall be
deemed to be authorised. Such institutions shall be required to provide the CSSF with all such
information as the CSSF may consider relevant in order for it to establish, within six months from
the date of entry into force of this Law, whether they satisfy the requirements of this Law, to
determine the measures to be taken so as to ensure compliance with those requirements, or to
decide whether the authorisation should be withdrawn. In the event that compliance with those
requirements is not ensured within six months from the date of entry into force of this Law, the
electronic money institution concerned shall cease, from that date onwards, to be covered by the
provisions of Articles 30, 33, 34, 34a, 45 and 46 of the Law of 5 April 1993 on the financial sector,
as amended.
43
31
During the period of validity, redemption shall be effected free of charges other than
those strictly necessary to carry out that operation.
(2) The contract between the issuer and the bearer shall clearly state the conditions of
redemption. Such redemption may be obtained inter alia in the event of loss, theft,
destruction or technical defect in the electronic money device, subject however to its
being possible technically to determine the value of the electronic money.
(3) The contract may stipulate a minimum threshold for redemption. The threshold may
not exceed 10 euros.”
Art. 12-13 Capital base
“(1) The authorisation of electronic money institutions shall be subject to their showing
that they have a subscribed and fully paid-up capital of not less than 1 million euros
in value. This amount may be modified by Grand-Ducal regulation.
(2) The own funds of electronic money institutions may not fall below the amount of
capital required pursuant to the preceding paragraph. In the event that an
institution’s own funds fall below that amount, the CSSF may, if the circumstances
so warrant, fix a time-limit within which the institution must either regularise its
situation or cease carrying on its business.”
Art. 12-14 Limitations of investments
“(1) Electronic money institutions shall be required to have investments of an amount of
no less than their financial liabilities related to outstanding electronic money.
The investments may be in the following assets only:
(a) cash in hand and equivalent items;
(b) claims on Zone A central governments and central banks, or claims which carry
the explicit guarantees of such governments and banks and are sufficiently
liquid;
(c) claims on the European Communities (ECSC, EC, Euratom), or claims which
carry the explicit guarantees of those Communities and are sufficiently liquid;
(d) claims on Luxembourg municipalities, or claims which carry the explicit
guarantees of such municipalities and are sufficiently liquid;
(e) sight deposits held with Zone A credit institutions;
(f) other debt instruments which are:
– sufficiently liquid;
– recognised by the CSSF as qualifying items, and
– issued by undertakings other than undertakings which have a qualifying
holding “…”44 in the electronic money institution concerned or which must be
included in those undertakings’ consolidated accounts.
For the purposes of this article, “Zone A” shall mean all “Member States”45 and all
other countries which are full members of the Organisation for Economic
Cooperation and Development (OECD) and those countries which have concluded
special lending arrangements with the International Monetary Fund (IMF) associated
with the IMF’s general arrangements to borrow (GAB). Any country which
44
45
32
reschedules its external sovereign debt is, however, precluded from Zone A for a
period of five years. “…”46
(2) Investments referred to in paragraph 1(e) and (f) may not exceed 20 times the own
funds of the electronic money institution concerned.
(3) For the purpose of hedging market risks arising from the issuance of electronic
money and from the investments referred to in paragraph 1, electronic money
institutions may use sufficiently liquid interest-rate and foreign-exchange-related
derivative instruments which are traded on a recognised regulated market or foreign-
exchange contracts with an original maturity of 14 calendar days or less. The use of
derivative instruments is permissible only if the full elimination of market risks is
intended and, to the extent possible, achieved.
(4) The CSSF shall lay down rules relating to limitation of the concentration risk and the
market risks attaching to the investments referred to in this article, as well as rules
concerning the minimum amount of own funds which electronic money institutions
are required to hold. It shall define the matters to be taken into consideration in those
rules.
(5) For the purpose of applying paragraph 1, assets shall be valued at the lower of cost
or market value.
(6) If the value of the assets referred to in paragraph 1 falls below the amount of
financial liabilities related to outstanding electronic money, the CSSF shall impose
on the electronic money institution concerned a time-limit for remedying that
situation. To this end, and for a temporary period only, the CSSF may allow the
institution’s financial liabilities related to outstanding electronic money to be backed
by assets other than those referred to in paragraph 1 up to an amount not exceeding
the lower of 5% of these liabilities or the institution’s total amount of own funds.”
Art. 12-15 Waiver
“(1) The CSSF may, on the basis of a written application, waive, in relation to electronic
money institutions, the obligation to comply with some or all of the provisions
applicable to them, apart from Articles “39”47 to 41, where:
(a) the total business activities of the institution related to the issue of means of
payment in electronic form generate financial liabilities related to outstanding
electronic money the total amount of which does not normally exceed 5 million
euros and at no time exceeds 6 million euros; or
(b) the electronic money issued by the institution is accepted as a means of
payment only by any subsidiaries of the institution which perform operational or
other ancillary functions related to electronic money issued or distributed by the
institution, any parent undertaking of the institution or any other subsidiaries of
that parent undertaking; or
(c) electronic money issued by the institution is accepted as payment only by a
limited number of undertakings, which can be clearly distinguished by:
– their location in the same premises or other limited local area; or
– their close financial or business relationship with the issuing institution, such
as a common marketing or distribution scheme.
46
47
33
The underlying contractual arrangements must provide that the electronic storage
device at the disposal of bearers for the purpose of making payments is subject to a
maximum storage amount of not more than 150 euros.
(2) Articles 30, 33, 34, “…”48 45 and 46 shall not apply to electronic money institutions to
which a waiver has been granted pursuant to the preceding paragraph.
(3) An electronic money institution to which a waiver has been granted under paragraph
1 shall each year provide to the CSSF a report on their activities including the total
amount of financial liabilities related to electronic money.”
48
34
“Chapter 2: Authorisation of other professionals of the financial sector. “…”49
Section 1: General provisions”50

Art. 13 Scope
“(1) This Chapter applies to any natural person established in Luxembourg for
professional reasons, as well as to any legal person governed by Luxembourg law
whose regular occupation or business is to exercise a financial sector activity or one
of the connected or ancillary activities referred to in sub-section 3 of section 2 of this
Chapter on a professional basis, save for the persons referred to in paragraph (2) of
this article. The abbreviation “PFS” used in and by reference to this Law, denotes
exclusively professionals of the financial sector as thus defined, to the exclusion of
the professionals of the financial sector covered by paragraph (2) of this article.
Such persons shall be known as investment firms where their regular occupation or
business is the provision of one or more investment services to third parties and/or
the performance of one or more investment activities on a professional basis.
(2) This chapter shall not apply to:
(a) credit institutions as referred to in the preceding chapter;
(b) insurance or reinsurance undertakings governed by the law of 6 December
1991 on the insurance sector, as amended;
(c) persons who provide investment services exclusively for their parent
undertaking, for their subsidiaries or for another subsidiary of their parent
undertaking;
(d) persons who provide a service under this chapter other than an investment
service, exclusively to one or more undertakings forming part of the same group
as the undertaking providing the service, unless otherwise provided;
(e) persons who provide a service under this chapter where that service is provided
in an incidental manner in the course of a professional activity and if the latter is
regulated by legal or regulatory provisions or a code of ethics governing the
profession which do not exclude the provision of that service;
(f) persons who do not provide any investment services or activities other than
dealing on own account unless they are market makers or deal on own account
outside a regulated market or an MTF on an organised, frequent and systematic
basis by providing a system accessible to third parties in order to engage in
dealings with them;
(g) persons who provide investment services consisting exclusively in the
administration of employee-participation schemes;
(h) persons who provide investment services which only involve both administration
of employee-participation schemes and the provision of investment services
exclusively for their parent undertaking, for their subsidiaries or for another
subsidiary of their parent undertaking;
(i) the members of the European System of Central Banks nor to other national
bodies performing similar functions, nor to other public bodies charged with or
intervening in the management of the public debt;
49
50
35
(j) undertakings for collective investment governed by the law of 30 March 1988
relating to undertakings for collective investment, the law of 13 February 2007
on specialised investment funds or the law of 20 December 2002 relating to
undertakings for collective investment, as amended, nor to their depositaries,
managers and advisers;
(k) pension funds governed by the law of 13 July 2005 on institutions for
occupational retirement provision in the form of sepcav or assep nor to pension
funds subject to the supervision of the Commissariat aux Assurances, nor to
their depositaries, asset managers and liabilities managers;
(l) persons dealing on own account in financial instruments, or providing
investment services in commodity derivatives or derivative contracts included in
Annexe II, Section B (10) to the clients of their main business, provided this is
an ancillary activity to their main business, when considered on a group basis,
and that main business is not the provision of investment services within the
meaning of Sections A and C of Annexe II or the exercise of one or more of the
activities listed in Annexe I;
(m) persons providing investment advice in the course of providing another
professional activity not covered by sub-sections 1 and 2 of this chapter
provided that the provision of such advice is not specifically remunerated;
(n) persons whose main business consists of dealing on own account in
commodities and/or commodity derivatives. This exemption does not apply
where persons dealing on own account in commodities and/or commodity
derivatives are part of a group the main business of which is the provision of
other investment services listed in Sections A and C of Annexe II or the
exercise of one or more activities listed in Annexe I;
(o) firms which provide investment services and/or perform investment activities
consisting exclusively in dealing on own account on markets in financial futures
or options or other derivatives and on cash markets for the sole purpose of
hedging positions on derivatives markets or which deal for the account of other
members of those markets or make prices for them and which are guaranteed
by clearing members of the same markets, where responsibility for ensuring the
performance of contracts entered into by such firms is assumed by clearing
members of the same markets;
(p) undertakings within the meaning of the law of 15 June 2004 relating to the
investment company in risk capital (SICAR), nor to their depositaries and
managers;
(q) securitisation undertakings, nor to fiduciary-representatives having dealings
with such undertakings;
(r) other persons carrying on any activity the taking up and pursuit of which are
governed by special laws.
(3) The rights conferred by Directive 2004/39/EC on credit institutions and investment
firms shall not extend to the provision of services as counterparty in transactions
carried out by public bodies dealing with public debt or by members of the European
System of Central Banks performing their tasks as provided for by the Treaty and the
Statute of the European System of Central Banks and of the European Central Bank
or performing equivalent functions under national provisions.”

(1) (Law of 13 July 2007) “No person may have as a regular occupation or business an
activity of the financial sector nor a connected or complementary activity of the
36
financial sector within the meaning of sub-section 3 of section 2 of this chapter
without holding a written authorisation of the Minister responsible for the CSSF.”
(2) (Law of 12 March 1998) “No person may be authorised to carry on any financial
sector business either through another person or as an intermediary for the carrying-
on of such business.”

(Law of 12 March 1998)
“(1) Authorisation shall be granted upon written application, following an investigation by
the CSSF to establish whether the conditions laid down by this Law are fulfilled.
“Where the services offered or activities performed by PFS also concern insurance
products, the authorisation is granted upon written application and after investigation
by the CSSF and by the Commissariat aux Assurances on the conditions required
under this law and the conditions required under the law of 6 December 1991 on the
insurance sector, as amended.”51
Where authorisation is granted, the PFS may immediately start to carry on business.
(3) (Law of 13 July 2007) “The authorisation of an investment firm shall specify the
investment services or activities listed in Section A of Annexe II which it is authorised
to provide. In addition, the authorisation may cover one or more ancillary services
set out in Section C of Annexe II. The authorisation as investment firm may not be
granted where only ancillary services are provided.”
(4) “The CSSF shall consult the competent authorities of the Member States responsible
for the supervision of the investment firms, credit institutions, insurance undertakings
or UCITS management companies, prior to granting authorisation to a credit
institution which is:
– a subsidiary of an investment firm, credit institution, insurance undertaking or
UCITS management company authorised in the European Union, or
– a subsidiary of the parent undertaking of an investment firm, credit institution,
insurance undertaking or UCITS management company authorised in the
European Union, or
– controlled by the same persons, whether natural or legal, as an investment firm,
a credit institution, an insurance undertaking or a UCITS management company
authorised in the European Union.”
(Law of 5 November 2006) “The CSSF consults these competent authorities in
particular when assessing the suitability of the shareholders and the reputation and
professional qualification of the directors of the investment firm requesting the
authorisation, when the shareholder is one of the institutions referred to “in the
previous sub-paragraph”52 or when the directors involved in the management of the
investment firm requesting authorisation also take part in the management of one of
the institutions referred to “in the previous sub-paragraph"53. For this purpose, the
CSSF and the other relevant competent authorities shall inform each other of any
useful information relating to the granting of the authorisation and subsequently for
the assessment of the ongoing compliance with operating conditions.”
51
52
53
37
may be needed for the assessment thereof and by a programme of operations
indicating the type and volume of business envisaged and the administrative and
accounting structure of the institution in question.
(6) Authorisation shall “…”54 be required before any change is made to the object, name
or legal form of the institution in question and for the setting up or acquisition of any
agency, branch or subsidiary in Luxembourg or abroad. “Investment firms shall
obtain authorisation before extending their activities to other investment services or
activities or to other ancillary services not covered by their authorisation.”55
lodged, before the Tribunal administratif [administrative court], which shall determine
the matter as a court adjudicating on the substance.”
(8) (Law of 13 July 2007) “The application of the provisions of this article shall, where
applicable, be adapted to the existence of measures decided by the authorities of
the European Union and limiting or suspending the decisions regarding requests for
authorisation submitted by third countries.”
Art. 16 The legal form of the entity
“Authorisation for any activity involving the management of funds of third parties may
be granted only to legal persons having the form of a public entity or a commercial
company.”
“(1) The authorisation for an applicant which is a legal person is subject to the production
of evidence of the existence in Luxembourg of the central administration and the
registered office of the applicant. The authorisation for an applicant who is a natural
person is subject to the production of evidence that this person effectively conducts
business in Luxembourg and has his central administration in Luxembourg.”
“(1a) (Law of 7 November 2007) The applicant shall have robust internal governance
arrangements, which include a clear organisational structure with well defined,
transparent and consistent lines of responsibility, effective processes to identify,
manage, monitor and report the risks it is or might be exposed to, and adequate
internal control mechanisms, including sound administrative and accounting
procedures, as well as control and security arrangements for information processing
systems.”
(2) The investment firm shall fulfil the organisational requirements defined in article 37-
1. An investment firm operating an MTF in Luxembourg shall in addition fulfil the
requirements of article 20 of the law on markets in financial instruments.
54
55
38
A PFS other than an investment firm shall produce evidence that it has a sound
administrative and accounting organisation and adequate internal control
procedures.”
“(3) (Law of 7 November 2007) The internal governance arrangements, processes,
procedures and mechanisms referred to in this article shall be comprehensive and
proportionate to the nature, scale and complexity of the investment firm’s activities.”
Art. 18 Shareholders
“(1) Authorisation of legal persons shall be subject to communication to the CSSF of the
identities of the shareholders or members, whether direct or indirect and whether
natural or legal persons, that have qualifying holdings in the PFS to be authorised,
and of the amounts of those holdings. “…”56
“Authorisation shall be refused if, taking into account the need to ensure the sound
and prudent management of the PFS, the suitability of those shareholders or
members is not satisfactory."57
(1a) (Law of 13 July 2007) “Where close links exist between the PFS to be authorised
and other natural or legal persons, the authorisation shall only be granted if these
links do not prevent the CSSF from effectively exercising its supervisory functions.”
(1b) (Law of 13 July 2007) “Authorisation shall be refused if the laws, regulations or
administrative provisions of a third country governing one or more natural or legal
persons with which the PFS has close links, prevent the CSSF from effectively
exercising its supervisory functions. Authorisation shall also be refused if difficulties
involved in the enforcement of these provisions prevent the CSSF from effectively
exercising its supervisory mission.”
(2) Any person who proposes to acquire, directly or indirectly, a qualifying holding in an
PFS must first inform the CSSF, telling it of the amount of the intended holding. Such
a person must likewise inform the CSSF if he proposes to increase his qualifying
holding so that the proportion of the voting rights or of the capital held by him would
reach or exceed 20%, 33% or 50% or so that the PFS would become his subsidiary.
Without prejudice to paragraph 3, the CSSF shall have a maximum of three months
from the date of the notification provided for in the preceding subparagraph to
oppose such a plan if, having regard to the need to ensure sound and prudent
management of the PFS, it is not satisfied as to the suitability of the person referred
to in the preceding subparagraph. If the CSSF does not oppose the plan in question,
it may fix a maximum period for its implementation. If a holding is acquired despite
the opposition of the CSSF, the latter may suspend the exercise of the
corresponding voting rights or demand the nullification or cancellation of votes cast
“, without prejudice to any other sanction that might be applied.”58
(3) (Law of 13 July 2007) “If the acquirer of a holding referred to in paragraph (2) is an
investment firm, credit institution, insurance undertaking or UCITS management
company authorised in another Member State, or the parent undertaking of such an
entity, or a natural or legal person controlling such an entity, and if, as a result of that
acquisition, the investment firm in which the acquirer proposes to hold a holding
would become a subsidiary or subject to the control of the acquirer, the assessment
of the acquisition must be subject to the prior consultation referred to in article
15(4).”
56
57
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(4) Any person who proposes to dispose, directly or indirectly, of a qualifying holding in
an PFS must first inform the CSSF, telling it of the amount of the holding concerned.
Such a person must likewise inform the CSSF if he proposes to reduce his qualifying
holding so that the proportion of the voting rights or of the capital held by him would
fall below 20%, 33% or 50% or so that the PFS would cease to be his subsidiary.
(5) On becoming aware of them, PFS shall inform the CSSF of any acquisitions or
disposals of holdings in their capital that cause holdings to exceed or fall below one
of the thresholds referred to in paragraphs 2 and 4.
They shall also, at least once a year, inform it of the names of shareholders and
members possessing qualifying holdings and the amounts of such holdings as
shown, for example, by the information received at the annual general meetings of
shareholders and members or as a result of compliance with the regulations relating
to “companies whose transferable securities are admitted to trading on a regulated
market”.59
(6) Authorisation shall be subject to the following conditions: the direct and indirect
shareholding structure of the PFS must be transparent and organised in such a way
that the authorities responsible for prudential supervision of the PFS and, as the
case may be, of the group of which it forms part are clearly identified; it must be
possible for such supervision to be exercised without hindrance; and supervision on
a consolidated basis of the group of which the PFS forms part must be possible.”
(7) (Law of 13 July 2007) “Where the influence exercised by the persons referred to in
the first subparagraph of paragraph (1) is likely to be prejudicial to the sound and
prudent management of a PFS, the CSSF takes appropriate measures to put an end
to that situation. In particular, the CSSF may use its power of injunction or
suspension or impose an administrative fine on the persons responsible for the
administration or management of the PFS concerned, who act such as to jeopardise
the sound and prudent management of the PFS, with an administrative fine ranging
from 125 to 12,500 euros.”
(8) (Law of 13 July 2007) “The application of the provisions of this article shall, where
applicable, be adapted to the existence of measures decided by the authorities of
the European Union and limiting or suspending the decisions regarding the
acquisition of holdings by direct or indirect parent undertakings governed by the law
of a third country.”
“(1) In order to obtain authorisation, natural persons and, in the case of legal persons,
the members of the bodies performing administrative, management and supervisory
functions, and the shareholders or members referred to in the preceding article, must
produce evidence of their professional standing. Such standing shall be assessed on
the basis of police records and of any evidence tending to show that the persons
concerned are of good repute and offering every guarantee of irreproachable
conduct on the part of those persons.
(2) The persons responsible for the management must be empowered effectively to
determine the direction taken by the business and must possess adequate
professional experience by virtue of their having previously carried on similar
activities at a high level of responsibility and autonomy.
(3) Where authorisation is granted to a legal person, the persons referred to in the
preceding paragraph must be at least two in number. “In the case of an investment
firm which is a natural person directed by a single person, the authorisation is
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subject to the production of evidence by the applicant to the CSSF that it has taken
alternative arrangements to ensure the sound and prudent management of the
investment firm.”60
(4) “Any change in the persons as referred to in paragraph (1) shall be communicated in
advance to the CSSF. The CSSF may request all such information as may be
necessary regarding the persons who may be required to fulfil the legal requirements
with respect to reputation and professional experience. The CSSF shall refuse the
proposed change if these persons are of insufficient professional repute and, where
applicable, of insufficient experience or where there are objective and demonstrable
grounds for believing that the proposed change would pose a threat to the sound
and prudent management of the PFS.”61 An appeal against the decision of the CSSF
may be lodged within one month, and may be struck out if it is not so lodged, before
the Tribunal administratif [administrative court], which shall determine the matter as
a court adjudicating on the substance.”
Art. 20 Capital base
“(1) Authorisation for any professional activity in the financial sector precluding the
applicant from managing funds for third parties shall be conditional on the production
of evidence showing the existence of a capital base amounting to not less than
“50,000 euros”62.
(2) Authorisation for any professional activity in the financial sector involving the
applicant in the management of funds for third parties shall be conditional on the
production of evidence showing the existence of a fully paid-up authorised capital
amounting to not less than “125,000 euros”63.
(3) (Law of 13 July 2007) “Where several PFS statuses are held concurrently, the
applicant shall have a capital base which is at least the amount which is the highest
among those requested for the different statuses concerned.”
(4) (Law of 13 July 2007) “The funds referred to in paragraphs (1) and (2) shall be
permanently available to the PFS and be invested in its own interest."
Art. 21 (repealed by the law of 13 July 2007)

“(1) “Authorisation shall be conditional on the PFS having its annual accounts audited by
one or more external auditors who can show that they possess adequate
professional experience.”64 Those external auditors shall be appointed by the body
responsible for managing the PFS.
(2) Any change in the external auditors must be authorised in advance by the CSSF in
accordance with Article 19(4).
(3) Neither the rules in respect of commissaires aux comptes [auditors], as laid down in
the Law on commercial companies, nor Article 137 of the Law of 10 August 1915, as
amended, shall apply to the PFS covered by this article.”
60
61
62
63
64
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“Art. 22-1.”65 Participation in an investors’ compensation scheme
“Without prejudice to Article 62-15(4), authorisation shall be conditional on
participation by the investment firm in an investors’ compensation scheme set up in
Luxembourg and recognised by the CSSF.”

“(1) (Law of 13 July 2007) “The authorisation shall be withdrawn if the PFS does not
make use of the authorisation within 12 months, expressly renounces the
authorisation or has performed no financial activity, nor a connected or
complementary activity listed in sub-section 3 of section 2 of this chapter for the
preceding six months.”
(2) The authorisation shall be withdrawn if the conditions for the grant thereof cease to
be fulfilled.
(3) The authorisation shall be withdrawn if it has been obtained by means of false
declarations or by any other improper means.
(4) (Law of 13 July 2007) “The authorisation shall be withdrawn if the investment firm
has seriously and systematically infringed any of articles 37-2 to 37-8 of this law or
articles 21, 22, 23, 26, 27 or 28 of the law on markets in financial instruments.
The authorisation is withdrawn if a PFS other than an investment firm seriously and
systematically infringed any of articles 36, 36-1 or 37.”
(5) An appeal against the decision to withdraw the authorisation may be lodged within
one month, and may be struck out if it is not so lodged, before the Tribunal
administratif [administrative court], which shall determine the matter as a court
adjudicating on the substance.”
“Section 2: Specific provisions relating to certain categories of PFS

Subsection 1: Investment firms”66
Art. 24 Investment advisers

“(1) Investment advisers are professionals whose activity consists in providing personal
recommendations to a client, either at the initiative of the investment firm, or upon
request of that client, in respect of one or more transactions relating to financial
instruments.
(2) Investment advisers are not authorised to intervene directly or indirectly in the
implementation of the advice provided by them.
(3) The mere provision of information is not covered by this law.
(4) Authorisation to carry on business as investment adviser shall be conditional on the
production of evidence of:
(a) a capital base of not less than 50,000 euros, or
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(b) a professional indemnity insurance covering the whole territory of the European
Union or another comparable guarantee against liability arising from
professional negligence, representing at least 1,000,000 euros applying to each
claim and in aggregate 1,500,000 euros per year for all claims, or
(c) a combination of capital base and professional indemnity insurance in a form
resulting in a level of coverage equivalent to points (a) or (b) of this
subparagraph.
Where an investment adviser is also registered under Directive 2002/92/EC of the
European Parliament and of the Council of 9 December 2002 on insurance
mediation, it must comply with the requirement established by article 4(3) of that
Directive and in addition it must have:
professional negligence, representing at least 500,000 euros applying to each
claim and in aggregate 750,000 euros per year for all claims, or
subparagraph.
(5) For the purpose of this article, a personal recommendation is a recommendation that
is made to a person in his capacity as an investor or potential investor or in his
capacity as an agent for an investor or potential investor.
That recommendation must be presented as suitable for that person, or must be
based on a consideration of the circumstances of that person, and must constitute a
recommendation to take one of the following sets of steps:
(a) to buy, sell, subscribe for, exchange, redeem, hold or underwrite a particular
financial instrument;
(b) to exercise or not to exercise any right conferred by a particular financial
instrument to buy, sell, subscribe for, exchange, or redeem a financial
instrument.
A recommendation is not a personal recommendation if it is issued exclusively
through distribution channels within the meaning of article 1(18) of the law of 9 May
2006 on market abuse or to the public.”
Art. 24-1 Brokers in financial instruments

“(1) Brokers in financial instruments are professionals whose activity consists in receiving
or transmitting orders in relation to one or more financial instruments, without holding
funds or financial instruments of the clients. This activity includes bringing two or
more parties together with a view to the conclusion of a transaction between the
parties.
(2) Authorisation to carry on business as broker in financial instruments shall be
conditional on the production of evidence of:
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subparagraph.
When a broker in financial instruments is also registered under Directive 2002/92/EC
of the European Parliament and of the Council of 9 December 2002 on insurance
mediation, it must comply with the requirement established by article 4(3) of that
Directive and in addition it must have:
professional negligence, representing at least 500,000 euros applying to each
claim and in aggregate 750,000 euros per year for all claims, or
subparagraph.”
Art. 24-2 Commission agents

“(1) Commission agents are professionals whose activity consists in the execution on
behalf of clients of orders in relation to one or more financial instruments. Execution
of orders on behalf of clients means acting to conclude agreements to buy or sell
one or more financial instruments on behalf of clients.
(2) Authorisation to act as commission agent shall only be granted to legal persons. It is
conditional on the production of evidence of share capital amounting to not less than
125,000 euros.
(3) Commission agents shall be automatically authorised to act, in addition, as
investment adviser and broker in financial instruments.”
Art. 24-3 Private portfolio managers

“(1) Private portfolio managers are professionals whose activity consists in managing
portfolios in accordance with mandates given by clients on a discretionary client-by-
client basis where such portfolios include one or more financial instruments.
(2) Authorisation to act as private portfolio manager shall only be granted to legal
persons. It is conditional on the production of evidence of capital amounting to not
less than 125,000 euros.
(3) Private portfolio managers shall be automatically authorised to act, in addition, as
investment adviser and broker in financial instruments.”
Art. 24-4 Professionals acting for their own account

“(1) Professionals acting for their own account are professionals whose business is in
trading against proprietary capital resulting in the conclusion of transactions in one or
more financial instruments where they also provide investment services or perform in
addition other investment activities or deal on own account outside a regulated
market or an MTF on an organised, frequent and systematic basis, by providing a
44
system accessible to third parties in order to engage in dealings with those third
parties.
(2) Authorisation to act as professional acting for their own account shall only be
granted to legal persons. It is conditional on the production of evidence of capital
amounting to not less than 730,000 euros.
(3) Professionals acting for their own account shall be automatically authorised to act, in
addition, as investment adviser, broker in financial instruments, commission agent
and private portfolio manager.”
Art. 24-5 Market makers

“(1) Market makers are professionals whose business is to hold itself out on the financial
markets on a continuous basis as being willing to deal on own account by buying
and selling financial instruments against its proprietary capital at prices fixed by it.
(2) Authorisation to act as market maker shall only be granted to legal persons. It is
conditional on the production of evidence of capital amounting to not less than
730,000 euros.”
Art. 24-6 Underwriters of financial instruments

“(1) Underwriters of financial instruments are professionals whose business is to
underwrite financial instruments and/or place financial instruments with or without a
firm commitment.
(2) Authorisation to act as underwriter shall only be granted to legal persons. It is
125,000 euros and not less than 730,000 if the underwriter of financial instruments
places financial instruments on a firm commitment basis.”
Art. 24-7 Distributors of units/shares in UCIs

“(1) Distributors of units/shares in UCIs are professionals whose business is to distribute
units/shares of UCIs admitted to trading in Luxembourg.
(2) Authorisation to act as distributor of units/shares of UCIs shall only be granted to
legal persons. It is conditional on the production of evidence of capital amounting to
not less than 50,000 euros and not less than 125,000 euros if the distributor accepts
or makes payments.
(3) Distributors of units/shares in UCIs allowed to accept or make payments are ipso
jure allowed to also perform the activity of registrar agent.”
Art. 24-8 Financial intermediation firms

“(1) Financial intermediation firms are professionals whose business is to:
(a) provide personal recommendations to a client, either at their own initiative, or
upon request of the client, in respect of one or more transactions relating to
financial instruments or insurance products, and
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(b) receive and transmit orders relating to one or more financial instruments or
insurance products without holding funds or financial products of the clients.
This activity includes bringing two or more parties together with a view to the
conclusion of a transaction between the parties, and
(c) perform on behalf of investment advisers and brokers in financial instruments
and/or insurance products affiliated to them administrative and client
communication services which are inherent to the professional activity of these
affiliates, by means of an outsourcing contract.
(2) Authorisation to act as financial intermediation firm shall only be granted to legal
persons. It is conditional on the production of evidence of:
subparagraph.”
Art. 24-9 Investment firms operating an MTF in Luxembourg

“(1) Investment firms operating an MTF in Luxembourg are those professionals whose
business is to operate an MTF in Luxembourg, excluding the professionals that
operate markets within the meaning of the law on markets in financial instruments.
(2) Authorisation to act as investment firm operating an MTF in Luxembourg shall only
be granted to legal persons. It is conditional on the production of evidence of capital
amounting to not less than 730,000 euros.”
“Subsection 2: Miscellaneous PFS other than investment firms”67
Art. 25 Registrar agents

“(1) Registrar agents are professionals whose business is to maintain the register of one
or more financial instruments. The maintaining of the register includes the reception
and execution of orders relating to such financial instruments, of which they are the
necessary accessory.
(2) Authorisation to act as registrar agent shall only be granted to legal persons. It is
125,000 euros.
(3) Registrar agents are automatically authorised to perform the business of
administrative agent of the financial sector and the business of client communication
agent.”
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Art. 26 Professional custodians of financial instruments
“(1) Professional custodians of financial instruments are professionals who engage in the
receipt into custody of financial instruments exclusively from the professionals of the
financial sector, and who are entrusted with the safekeeping and administration
thereof, including custodianship and related services, and with the task of facilitating
their circulation.
(2) Authorisation to act as professional custodian of financial instruments shall only be
Art. 27 Operators of a regulated market authorised in Luxembourg

“(1) Operators of a regulated market in Luxembourg are persons who manage and/or
operate the business of a regulated market authorised in Luxembourg, excluding
investment firms operating an MTF in Luxembourg.
(2) Authorisation to carry on business as operator of a regulated market authorised in
Luxembourg is conditional on the production of evidence showing the existence of a
capital base of not less than 730,000 euros.”
Art. 28 (repealed by the Law of 2 August 2003)

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“Art. 28-1” Operators of payment or securities settlement systems
(Law of 12 January 2001)
“(1) An operator of a payment or securities settlement system approved in Luxembourg
is a person who is responsible, either alone or with others, for the proper functioning
of the system and who is the contact person designated by the authorities referred to
in Articles 34-4 and 34-5. The person in question may be a participant in the system.
(2) Authorisation to act as the operator of the system may be granted only to legal
persons having the form of a public-law institution, a commercial company, a civil-
law partnership or an economic interest grouping. This paragraph shall not apply to
the Banque centrale du Luxembourg or to any other entity forming part of the
European System of Central Banks.”
“Art. 28-2”69 Persons carrying out foreign exchange cash operations
“(1) Persons carrying out foreign exchange cash operations are professionals who carry
out operations involving the purchase or sale of foreign currencies in cash.
(2) Such persons shall be required to display the rates applied to the various currencies
dealt in and to issue to clients, in respect of each operation, a statement indicating
the name of the foreign exchange office, the amounts in the currencies dealt in, the
rates applied and the date of the operation.
(3) (Law of 13 July 2007) “Authorisation to perform cash-exchange transactions is
conditional on the production of evidence showing the existence of a capital base of
not less than 50,000 euros." ”
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“Art. 28-3”70 Debt recovery
“The recovery of debts owed to third parties, to the extent that it is not reserved by
law to certificated bailiffs, shall be authorised only with the assent of the Minister of
Justice.”
Art. 28-4 Professionals carrying on lending operations

(Law of 2 August 2003)
“(1) Professionals carrying on lending operations are professionals engaging in the
business of granting loans to the public for their own account.
(2) The following, in particular, shall be regarded as lending operations for the purposes
of this article:
(a) financial leasing operations involving the leasing of moveable or immoveable
property specifically purchased with a view to such leasing by the professional,
who remains the owner thereof, where the contract reserves unto the lessee the
right to acquire, either during the course of or at the end of the term of the
lease, ownership of all or any part of the property leased in return for payment
of a sum specified in the contract;
(b) factoring operations, either with or without recourse, whereby the professional
purchases commercial debts and proceeds to collect them for his own account.
(3) This article shall not apply to persons engaging in the granting of consumer credit,
including financial leasing operations as defined in paragraph 2(a) of this article,
where that activity is incidental to the pursuit of any activity covered by the Law of 28
December 1988 on the right of establishment.
This article shall not apply to persons engaging in securitisation operations.
(4) Authorisation to act as a professional carrying on lending operations may be granted
only to legal persons and shall be conditional on the production of evidence showing
the existence of a share capital of not less than “730,000 euros”71.”
Art. 28-5 Professionals carrying on securities lending operations
“(1) Professionals carrying on securities lending operations are professionals engaging in
the business of lending or borrowing securities for their own account.
(2) Authorisation to act as a professional carrying on securities lending operations may
be granted only to legal persons and shall be conditional on the production of
evidence showing the existence of a share capital of not less than
“730,000 euros”72.”
Art. 28-6 Professionals providing fund transfer services
“(1) Professionals performing money transfer services are professionals whose business
is:
– to receive funds from an originator and to transfer those funds on behalf of the
originator to a third-party correspondent by means of an accounting entry, with
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a view to placing those funds at the disposal of a beneficiary designated by the
originator, or
– to hold and remit the funds referred to in the preceding indent to the beneficiary
designated by the originator, or
– to operate a fund transfer system in Luxembourg.
For the purposes of this article, a money transfer system shall be any organisational
or technical infrastructure allowing to monitor and settle fund transfer operations,
independently of the effective financial flows.
(2) Authorisation to act as professional performing money transfer services shall only be
Art. 28-7 Mutual savings fund administrators

“(1) Mutual savings fund administrators are natural or legal persons engaging in the
administration of one or more mutual savings funds. No person other than a mutual
savings fund administrator may carry on, even in an incidental capacity, the business
of administering mutual savings funds.
For the purposes of this article, “mutual savings fund” means any undivided fund of
cash deposits administered for the account of joint savers numbering not less than
20 persons with a view to securing more favourable financial terms.
(2) The mutual savings fund administrator and the savers shall be required to conclude
in writing an administration agreement clearly setting out their respective obligations
and the conditions governing withdrawal from the mutual savings fund.
(3) The assets of the mutual savings fund may be invested only in term or sight deposits
and must be deposited for the account of the mutual savings fund with one or more
credit institutions having their registered office in Luxembourg or in another “Member
State”73. Each credit institution in which assets of the mutual savings fund are
deposited must, upon the entry by the fund administrator into business relations,
receive a copy of the administration agreement and must thereafter be provided with
copies of any amendments made thereto.
(4) The mutual savings fund administrator shall be answerable to the savers in
accordance with the general rules governing his mandate. He shall administer the
mutual savings fund in accordance with the administration agreement and solely in
the interests of the savers. He may make only the investments expressly provided
for in the administration agreement. In no circumstances may he use the assets of
the mutual savings fund for his own purposes.
(5) The expenses charged by the mutual savings fund administrator may not exceed
those which are strictly necessary for the administration of that fund. The
remuneration of the mutual savings fund administrator must be fixed in the
administration agreement.
(6) Save in the liquidation situations provided for by the administration agreement, the
savers may not require the mutual savings fund to be split, divided or dissolved.
(7) The mutual savings fund shall be in a state of liquidation:
– upon expiry of the period, if any, fixed by the administration agreement;
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– in the event of cessation of the performance by the administrator of his duties, if
he is not replaced within two months;
– in all other cases provided for by the administration agreement.
The administrator shall be required to advise the savers in writing of the fact or
matter giving rise to the sate of liquidation.
(8) Authorisation to act as a mutual savings fund administrator shall be conditional on
the production of evidence showing the existence of a capital base amounting to not
less than 125,000 euros.”
Art. 28-8 Managers of non-coordinated UCIs
“(1) Managers of non-coordinated UCIs are professionals engaging in the management
of undertakings for collective investment other than UCIs established in Luxembourg
and other than UCITS authorised in accordance with Directive 85/611/EEC as
amended by Directive 2001/107/EC.
The activities of managers of non-coordinated UCIs may include the provision of
central administration services for entities the management of which is provided by
the professional.
(2) Authorisation to act as a manager of a non-coordinated UCI or UCIs may be granted
only to legal persons and shall be conditional on the production of evidence showing
the existence of a share capital of not less than “125,000 euros”74.”
“Sub-section 3: PFS carrying on activities related or supplementary to a financial sector

activity”75
“Art. 29”76 Corporate domiciliation agents

“(1) Corporate domiciliation agents, who are by their nature regarded as carrying on a
business activity in the financial sector, are natural and legal persons who agree to
the establishment at their address by one or more companies of a registered office
and who provide services of any kind connected with that activity.
This article does not apply to the domiciliation of a company at the address of a
company belonging to the same group within the meaning of article 13(2) (d), nor to
the domiciliation of a company at the address of a natural person who is itself
associated directly or indirectly and exercising a significant influence on the conduct
of business of the company to be domiciliated.
(2) Authorisation to act as a corporate domiciliation agent is conditional on the
production of evidence showing the existence of a capital base of not less than
125,000 euros.”
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75
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Art. 29-1 Client communication agents
“(1) Client communication agents are professionals engaging in the provision, on behalf
of credit institutions, PFS, UCIs, pension funds, insurance undertakings or
reinsurance undertakings established under Luxembourg law or foreign law, of one
or more of the following services:
– the production, in tangible form or in the form of electronic data, of confidential
documents intended for the personal attention of clients of credit institutions,
PFS, insurance undertakings, reinsurance undertakings, investors in UCIs and
contributors, members or beneficiaries of pension funds;
– the maintenance or destruction of documents referred to in the previous indent;
– the communication to persons referred to in the first indent, of documents or
information relating to their assets and to the services offered by the
professional in question;
– the management of mail giving access to confidential data by persons referred
to in the first indent;
– the consolidation, pursuant to an express mandate, of positions held with
diverse financial professionals referred to in the first indent.
(2) Authorisation to act as client communication agent shall only be granted to legal
(3) The condition governing authorisation in relation to sufficient professional experience
of persons responsible for the daily management referred to in article (2) does not
apply to client communication agents.”
Art. 29-2 Financial sector administrative agents
“(1) (Law of 13 July 2007) Financial sector administrative agents are professionals who
engage in the provision, on behalf of credit institutions, PFS, UCIs, pension funds,
insurance undertakings or reinsurance undertakings established under Luxembourg
law or foreign law, pursuant to a sub-contract, of administration services forming an
integral part of the business activities of the originator.
This status does not govern the provision of technical services that are not likely to
have an impact on the professional activity of the originator.”
(2) Authorisation to act as a financial sector administrative agent may be granted only to
legal persons and shall be conditional on the production of evidence showing the
existence of a share capital of not less than “125,000 euros”77.
(3) Financial sector administrative agents shall be automatically authorised to act, in
addition, as client communication agents.”
“Art. 29-3. Primary IT systems operators of the financial sector

“(1) Primary IT systems operators of the financial sector are those professionals who are
responsible for the operation of IT systems allowing to draw up accounts and
financial statements that are part of the IT systems belonging to credit institutions,
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PFS, UCIs, pension funds, insurance undertakings or reinsurance undertakings
established under Luxembourg law or foreign law.
(2) Primary IT systems operators of the financial sector are entitled to install and
maintain the IT systems referred to in paragraph (1).
(3) Authorisation to act as primary IT systems operator shall only be granted to legal
(4) Primary IT systems operators of the financial sector shall be automatically
authorised to act in addition as secondary IT systems and communication networks
operator of the financial sector.
(5) The condition governing the grant of authorisation in relation to sufficient
professional experience of persons responsible for the daily management referred to
in article (2) does not apply to primary IT systems operators of the financial sector.”
(6) IT systems and communication networks operators of the financial sector, authorised
under article 29-3 as such at the time of the coming into force of this law, shall
benefit automatically of the status of primary IT systems operators of the financial
sector.”
Art. 29-4 Secondary IT systems and communication networks operators of the financial
sector
“(1) Secondary IT systems and communication networks operators of the financial sector
are those professionals who are responsible for the operation of IT systems other
than those allowing to draw up accounts and financial statements and of
communication networks that are part of the IT systems belonging to credit
institutions, PFS, UCIs, pension funds, insurance undertakings or reinsurance
undertakings established under Luxembourg law or foreign law.
The activity of secondary IT systems and communication networks operator of the
financial sector includes IT processing or transfer of data stored in the IT systems.
These IT systems and communication networks may either belong to the credit
institution, PFS, UCI, pension fund, insurance undertaking or reinsurance
undertaking established under Luxembourg law or foreign law, or provided to them
by the operator.
(2) Secondary IT systems and communication networks operators of the financial sector
are entitled to install and maintain the IT systems referred to in paragraph (1).
(3) Authorisation to act as secondary IT systems and communication networks operator
shall only be granted to legal persons. It is conditional on the production of evidence
of capital amounting to not less than 50,000 euros.
(4) The condition governing the grant of authorisation in relation to sufficient
professional experience of persons responsible for the daily management referred to
in article (2) does not apply to secondary IT systems and network operators of the
financial sector."
52
“Art. 29-5”78 Professionals providing company formation and management services
“(1) Professionals providing company formation and management services are natural
and legal persons engaging in the provision of services relating to the formation or
management of one or more companies.
(2) Authorisation to act as a professional providing company formation and
management services shall be conditional on the production of evidence showing
the existence of a capital base amounting to not less than “125,000 euros”79.
(3) Corporate domiciliation agents as referred to in Article 29 and the notaries and
registered members of other regulated professions listed in Article 1(1) of the Law of
31 May 1999 governing the domiciliation of companies shall be automatically
authorised to act, in addition, as professionals providing company formation and
management services. In consequence, such persons shall not be subject to prior
approval by the Minister responsible for the CSSF or to prudential supervision by the
CSSF.”
78
79
53
“Chapter 3: Authorisation for the establishment of branches and freedom to provide
services in Luxembourg by credit institutions or PFS governed by foreign law”80
Art. 30 Community credit institutions and investment firms

“(1) Without prejudice to the provisions of the law on markets in financial instruments,
credit institutions and investment firms authorised in another Member State may
exercise their activities in Luxembourg, through the establishment of a branch, as
well as the provision of services, provided that their activities are covered by their
authorisation and by Annexe I or Section A or C of Annexe II. Credit institutions and
investment firms may provide in Luxembourg ancillary services only together with an
investment service or investment activity. The exercise of their activities is not
subject to an authorisation by the Luxembourg authorities provided that these
activities fulfil the requirements laid down in this article.
(2) In cases where credit institutions or investment firms referred to in paragraph (1)
appoint a tied agent established in Luxembourg, that tied agent shall be assimilated
to the Luxembourg branch and shall be subject to the provisions of this law
applicable to Luxembourg branches of EU credit institutions and investment firms.”
Art. 31 Community financial institutions

“(1) The provisions of article 30 shall also apply to financial institutions of another
Member State if they meet each of the following requirements:
– the financial institution is the subsidiary of a credit institution or the jointly owned
subsidiary of several credit institutions;
– the legal status of the financial institution must be such as to be allowed to
engage in the acquisition of participations or the exercise of activities referred to
in points 2 to 12 of the list included in Annexe I;
– the parent undertaking or undertakings shall be authorised as credit institutions
in the Member State by the law of which the subsidiary is governed;
– the activities in question shall actually be carried on within the territory of the
same Member State;
– the parent undertaking or undertakings shall hold 90% or more of the voting
rights attaching to shares in the capital of the subsidiary;
– the parent undertaking or undertakings shall satisfy the competent authorities
regarding the prudent management of the subsidiary and shall have declared,
with the consent of the relevant competent authorities of the home Member
State, that they jointly and severally guarantee the commitments entered into by
the subsidiary;
– the subsidiary shall be effectively included, for the activities in question in
particular, in the consolidated supervision of the parent undertaking, or of each
of the parent undertakings, in particular for the purposes of the calculation of
the solvency ratio, the control of large exposures and limitation of holdings.”
80
54
Art. 32 Non-Community credit institutions and investment firms; Community or non-
Community PFS other than investment firms
“(1) Non-Community credit institutions and investment firms and Community or non-
Community PFS other than investment firms wishing to establish a branch in
Luxembourg shall be subject to the same authorisation rules as those applying to
credit institutions and other professionals governed by Luxembourg law, as
respectively covered by Chapters 1 and 2 of this Part.
(2) For the purposes of applying the preceding paragraph, compliance with the
conditions for authorisation shall be assessed in relation to the foreign institution.
(3) Authorisation for an activity involving the applicant in the management of funds of
third parties shall be granted to subsidiaries of companies governed by foreign law
only if those companies are endowed with own funds which are separate and distinct
from the assets of their shareholders. In addition, the branch must have at its
permanent disposal an endowment capital or capital base equivalent to that required
of a person governed by Luxembourg law who carries on the same activity.
(4) The requirement concerning professional standing and experience shall extend to
those responsible for the management of the branch. In addition, the branch in
question, instead of fulfilling the condition regarding central administration, shall be
required to produce evidence of the existence of a satisfactory administrative
infrastructure in Luxembourg.”
“Chapter 4: Authorisation for the establishment of branches and freedom to provide

services in another “…”81 Member State by credit institutions, investment firms or certain
financial institutions governed by Luxembourg law “82
Art. 33. “Establishment of branches in another Member State”83

“(1) Any credit institution or investment firm authorised in Luxembourg, or any financial
institution governed by Luxembourg law corresponding to “…”84 the conditions laid
down in Article 31, which wishes to establish a branch within the territory of another
“…”85 Member State shall notify the CSSF in advance of its intention so to do,
providing, together with such notification, the following information:
(a) the Member State within the territory of which it plans to establish a branch;
“(b) a programme of operations setting out, inter alia, the types of business
envisaged and the structural organisation of the branch and whether it
envisages to appoint tied agents. The programme of operations specifies the
banking activities, investment services, investment activities and ancillary
services that the branch envisages to provide or exercise;”86
(c) the address in the host Member State from which documents may be obtained;
(d) the names of those responsible for the management of the branch.
81
82
83
84
85
86
55
(2) Unless the CSSF has reason to doubt the adequacy of the administrative structure
or the financial situation of the applicant professional, taking into account the
activities envisaged, it shall, within three months of receiving all the information
referred to in preceding paragraph, communicate that information to the competent
authority of the host Member State and shall inform the applicant accordingly. “…”87
(3) (Law of 13 July 2007) “In addition to the information referred to in paragraph (1), the
CSSF shall also communicate to the competent authority of the host Member State
the amount of own funds and solvency ratio of the applicant credit institution, as well
as details on any deposit guarantee scheme and investor compensation scheme that
aim to ensure the protection of depositors and investors of the branch of the
applicant credit institution. It shall also communicate to the competent authority of
the host Member State details of the investor compensation scheme of which the
applicant investment firm is a member. In the event of a change on any of the
information relating to the deposit guarantee scheme or investor compensation
scheme, the CSSF shall notify the competent authority of the host Member State.”
(4) (Law of 13 July 2007) “Where the CSSF refuses to communicate the information to
the competent authority of the host Member State, it shall give reasons for its refusal
to the applicant within three months of receiving that information. An appeal against
the refusal may be lodged within one month, and may be struck out if it is not so
lodged, before the “Tribunal administratif” [administrative court], which shall
determine the matter as a court adjudicating on the substance.”
(5) (Law of 13 July 2007) “On receipt of a communication from the competent authority
of the host Member State, or failing such communication from the latter at the latest
after two months from the date of transmission of the communication by the CSSF,
the branch may be established and commence business.”
(6) (Law of 13 July 2007) “In the event of a change in any of the information
communicated in accordance with paragraph (1), the credit institution shall give
written notice of that change to the CSSF and the competent authority of the host
Member State at least one month before implementing the change.
In the event of a change in any of the information communicated in accordance with
paragraph (1), an investment firm shall give written notice of that change to the
CSSF at least one month before implementing the change. The CSSF shall inform
the competent authority of the host Member State of that change.”
(7) (Law of 13 July 2007) "Where a credit institution incorporated under Luxembourg law
or an investment firm incorporated under Luxembourg law referred to in article 24-9
intends to operate an MTF in another Member State by means of a branch, the
CSSF shall ensure that the applicant fulfils the provisions of article 20 of the law on
markets in financial instruments before communicating the information to the
competent authority of the host Member State.
The provisions of article 20 of the law on markets in financial instruments apply
mutatis mutandis.
Credit institutions or investment firms that wish to operate an MTF in another
Member State shall inform the CSSF beforehand. It shall communicate all
information to the CSSF, including a programme of operations setting out inter alia
all the types of business envisaged, the rules governing the functioning and the
organisational structure, necessary to assess compliance with the provisions of
article 20 of the law on markets in financial instruments.
The CSSF shall communicate to the competent authority of the host Member State
in accordance with paragraph (2) the information only if it is not opposed to the plan.
87
56
It shall inform the applicant thereof. The CSSF opposes the plan to operate the MTF
if the requirements of article 20 of the law on markets in financial instruments are not
fulfilled.”
Art. 34 “Provision of services within the European Union”88

“(1) Any credit institution authorised in Luxembourg or financial institution incorporated
under Luxembourg law fulfilling article 31, wishing to carry on business within the
territory of another Member State for the first time in the form of provision of
services, shall notify the CSSF of the activities listed in Annexe I which it wishes to
perform.
The CSSF shall communicate to the competent authority of the host Member State
the notification referred to in the previous subparagraph, within one month of its
reception.
(2) An investment firm authorised in Luxembourg wishing to provide services or
activities within the territory of another Member State for the first time or which
wishes to change the range of services or activities so provided, shall communicate
to the CSSF the following information:
(a) the Member State in which it intends to operate;
(b) a programme of operations stating in particular the investment services,
investment activities as well as ancillary services which it intends to perform or
exercise and whether it intends to use tied agents in the territory of the host
Member States.
Where the investment firm intends to use tied agents, the CSSF shall, at the request
of the competent authority of the host Member State, communicate the identity of the
tied agents that the investment firms intends to use in that host Member State.
(3) The CSSF shall, within one month of receiving the information, forward it to the
competent authority of the host Member State. The investment firm may start to
provide investment services, exercise investment activities and provide ancillary
services in the host Member State as from the date on which the CSSF transmitted
this information to the competent authority of the host Member State.
(4) In the event of a change in any of the information communicated in accordance with
paragraph (2), an investment firm shall give written notice of that change to the
CSSF at least one month before implementing the change. The CSSF shall inform
the competent authority of the host Member State of that change.”
Art. 34-1 (Repealed by the law of 13 July 2007)
88
57
“Chapter 5: Authorisation of payment and securities settlement systems”89

“For the purposes of this Chapter and of Articles “35-1”90, 41, 42, 47-1, 52 and “61-
24 to 61-26”91,
(a) “system” means a formal arrangement:
– governed by Luxembourg law, authorised as a payment or securities
settlement system and notified as a system to the European Commission, or
– governed by the law of another Member State, designated as a system and
notified to the European Commission by a Member State;
(b) “institution” means:
– a credit institution authorised in a Member State, including the institutions
listed in Article 2(2) of Directive 77/780/EEC, or
– an investment firm authorised in a Member State, excluding the institutions
listed in Article 2(2)(a) to (k) of Directive 93/22/EEC, or
– a public authority or publicly guaranteed undertaking, or
– any undertaking whose head office is outside the European Community and
whose functions correspond to those of the Community credit institutions or
investment firms referred to in the preceding indents,
which participates in a system and which is responsible for discharging the
financial obligations arising from transfer orders within that system.
Undertakings which:
– participate in a system which is supervised in accordance with the legislation
of a Member State and which only execute transfer orders as defined in the
second indent of (j), as well as payments resulting from such orders,
– and which have responsibility for discharging the financial obligations arising
from transfer orders within that system,
shall be regarded as institutions, provided that at least three participants in that
system fall within the categories referred to in the first subparagraph and that
such assimilation is warranted on grounds of systemic risk;
“(c) “central counterparty” means an entity which is interposed between participants
in a system and which acts as the exclusive counterparty of those participants
with regard to their transfer orders;”92
“(d) “settlement agent” means an entity providing to participants in systems,
settlement accounts through which transfer orders within such systems are
settled and, as the case may be, extending credit to those institutions or central
counterparties for settlement purposes;”93
89
Law of 12 January 2001.
90
91
92
93
58
“(e) “clearing house” means an entity responsible for the calculation of the net
positions of participants;”94
“(f) “participant” means any person admitted as participant in the system, including
an institution, central counterparty, settlement agent, clearing house.
According to the rules of the system, the same participant may act as a central
counterparty, a settlement agent or a clearing house or carry out part or all of
those tasks.
An indirect participant shall be regarded as a participant if it is known to the
system and such assimilation is warranted on the grounds of a systemic risk;”95
(g) “indirect participant” means a credit institution as defined in (b) having a
contractual relationship with an institution participating in a system executing
transfer orders as defined in the first indent of (j) which enables the
abovementioned credit institution to pass transfer orders through the system;
(h) “system operator” means the entity having responsibility, either alone or with
others, for the proper functioning of the system and which is the contact entity
designated by the authorities. It may be a participant in the system.
(i) “securities” means all instruments referred to in section B of Annex II hereto;
(j) “transfer order” means:
– any instruction by a participant to place at the disposal of a recipient an
amount of money by means of a book entry on the accounts of a credit
institution, a central bank or a settlement agent, or any instruction which
results in the assumption or discharge of a payment obligation as defined by
the rules of the system, or
– an instruction by a participant to transfer the title to, or interest in, a security
or securities by means of a book entry on a register, or otherwise;
(k) “insolvency proceedings” means any collective measure provided for by the law
of a Member State or third country, either to wind up the participant or to
reorganise it, where such measure involves the suspension of, or the imposition
of limitations on, transfers or payments;
(l) “moment of opening of insolvency proceedings” means the moment when the
competent judicial or administrative authority of a Member State or third country
handed down its decision;
(m) “netting” means the conversion into one net claim or one net obligation of
claims and obligations resulting from transfer orders which a participant or
participants either issue to, or receive from, one or more other participants with
the result that only a net claim can be demanded or a net obligation be owed;
(n) “settlement account” means an account at a central bank, a settlement agent or
a central counterparty used to hold funds and securities and to settle
transactions between participants in a system;
“…”96
94
95
96
59
Art. 34-3 Scope
“This Chapter shall apply to any payment or securities settlement system authorised
in Luxembourg. However, it shall not apply to payment and securities settlement
systems governed by Luxembourg law in which the Banque centrale du Luxembourg
or any other entity forming part of the European System of Central Banks is a
participant within the meaning of Article 34-2(f); such systems shall be regarded as
automatically authorised under Luxembourg law from the date on which they are
notified to the European Commission by the Banque centrale du Luxembourg.”
Art. 34-4 Application for authorisation
“(1) A formal arrangement
– agreed between three or more participants, without counting a settlement
agent, central counterparty, clearing house or indirect participant, with common
rules and standardised arrangements for the execution of transfer orders
between the participants,
– which the participants have chosen to be governed by Luxembourg law,
– at least one of the participants in which is a legal person having its registered
office in Luxembourg, and
– which designates an operator of the system,
may be authorised as a payment or securities settlement system.
Subject to compliance with the conditions laid down in the first subparagraph, a
formal arrangement which involves the execution of transfer orders as defined in the
second indent of Article 34-2(j), and, to a limited extent, the execution of orders
relating to other financial instruments, may be authorised provided that such
authorisation is warranted on grounds of systemic risk.
Authorisation may also be granted for a formal arrangement between two
participants, without counting a settlement agent, central counterparty, clearing
house or indirect participant, which the participants have chosen to be governed by
Luxembourg law, at least one of the participants in which is a legal person having its
registered office in Luxembourg, and which designates an operator of the system,
provided that such authorisation is warranted on grounds of systemic risk.
(2) The Minister responsible for the CSSF shall be the authority competent to grant
authorisation for such systems. The CSSF shall notify the European Commission of
the systems authorised by the Minister.”
Art. 34-5 Authorisation procedure
“(1) Authorisation shall be granted upon written application by the system operator,
following an investigation by the CSSF to establish whether the conditions laid down
by this Law are fulfilled and after the opinion of the Banque centrale du Luxembourg
has been sought concerning the systemic risk aspects.
may be needed for the assessment thereof.
60
(4) Authorisation shall be required before any change is made to the formal
arrangement on which the system authorised is based.
lodged, before the Tribunal administratif [administrative court], which shall determine
the matter as a court adjudicating on the substance.”
Art. 34-6 Conditions for authorisation
“(1) Systems must be organised in such a way as to ensure the orderly settlement of
transfer orders.
(2) Authorisation of a system shall be conditional on the system operator having its
registered office in Luxembourg or in another Member State.
(3) Authorisation of a system shall be conditional on the system operator being
authorised as a credit institution in Luxembourg or in another Member State, as an
PFS in Luxembourg or as an investment firm in another Member State, or as a
system operator in another Member State which is subject to supervision equivalent
to that exercised by the CSSF with regard to operators authorised in Luxembourg.
(4) The rules of the system must be detailed and satisfactory having regard to the
nature and volume of business transacted and the number of participants envisaged.
Those rules must inter alia:
– lay down the conditions for the admission of participants to the system and their
exclusion therefrom,
– specify the rights and obligations of the participants resulting from their
participation in the system,
– specify the point in time at which a transfer order is introduced into the system,
– fix the point in time after which a transfer order may no longer be revoked by a
participant in the system or by a third party,
– specify the mode of settlement of transfer orders,
– lay down the settlement procedures applicable in ordinary situations and in
crisis situations,
– establish risk management procedures,
– indicate which courts are to have jurisdiction in the event of disputes,
– designate the person or persons responsible for notifying the CSSF of the
participants in the system and of any change in those participants,
– “ ensure compliance with the professional obligations laid down in Article 39.”97
97
61
Art. 34-7 Withdrawal of authorisation
“(1) The Minister responsible for the CSSF shall withdraw the authorisation if the
conditions for the grant thereof cease to be fulfilled. The CSSF shall forthwith inform
the European Commission of the withdrawal of the authorisation.
(2) An appeal against the decision to withdraw the authorisation may be lodged within
one month, and may be struck out if it is not so lodged, before the Tribunal
administratif [administrative court], which shall determine the matter as a court
adjudicating on the substance.”
“PART II: Professional obligations, prudential rules and rules of conduct in the financial
sector”98
Art. 35 Scope
“(1) Chapter 1 of this Part applies to all institutions covered by article 34-2(b) established
in Luxembourg.
(2) Chapters 2 and 5 of this Part apply to PFS incorporated under Luxembourg law
other than investment firms, as well as to Luxembourg branches of PFS incorporated
under foreign law other than investment firms.
(3) Chapter 3 of this Part applies to PFS incorporated under Luxembourg law, including
investment firms incorporated under Luxembourg law, which manage third-party
funds. Article 37(1) and (2) apply to Luxembourg branches of PFS incorporated
under foreign law, including investment firms under foreign law.
(4) Chapters 4 and 5 of this Part apply to credit institutions and investment firms
incorporated under Luxembourg law, as well as to Luxembourg branches of credit
institutions and investment firms that have their registered office in a third country.
Save for articles 37-1, 37-2 and 37-8, Chapters 4 and 5 of this Part apply to
Luxembourg branches of credit institutions and investment firms that have their
registered office in another Member State.”
“Chapter 1: Provision applicable to Luxembourg institutions participating in payment

systems or securities settlement systems”99
Art. 35-1. Right to information with regard to Luxembourg institutions participating in

payment or securities settlement systems
“Anyone with a legitimate interest may require an institution within the meaning of
article 34-2(b) established in Luxembourg to inform him of the payment and
securities settlement systems in which it participates and to provide information
about the main rules governing the functioning of those systems.”
98
99
62
“Chapter 2: Provisions applicable to PFS other than investment firms”100
Art. 36. “Prudential rules”101

“(1) “Each PFS other than an investment firm shall be bound by conduct of business
rules:”102
– to have sound administrative and accounting procedures, control and safeguard
arrangements for electronic data processing, and adequate internal control
mechanisms including, in particular, rules for personal transactions by its
employees;
– to make adequate arrangements for instruments belonging to “clients”103 with a
view to safeguarding the latter’s ownership rights, especially in the event of the
insolvency of the “…”104 PFS, and to preventing the use by the “…”105 PFS of
“clients’”106 instruments for its own account except with the “clients’”107 express
consent;
– to make adequate arrangements for funds belonging to “clients”108 with a view
to safeguarding the latter’s rights and “…”109 preventing the use of “clients’”110
funds for its own account;
– to arrange for records to be kept, and retained for periods laid down in the
Commercial Code, of transactions executed which shall at least be sufficient to
enable the CSSF to monitor compliance with the prudential rules which it is
responsible for applying;
– to be structured and organised in such a way as to minimise the risk of clients’
interests being prejudiced by conflicts of interest between the “…”111 PFS and
its clients or between one of its clients and another.
Nevertheless, where a branch is set up the organisational arrangements may not
conflict with the rules of conduct laid down by the host Member State to cover
conflicts of interest.”
(2) (Law of 13 July 2007) “By way of derogation from paragraph (1), market operators
covered by article 27 which operate in addition an MTF in Luxembourg or in another
Member State are subject to the organisational requirements of article 37-1.”
100
101
102
103
104
105
106
107
108
109
110
111
63
“Art. 36-1 Conduct of business rules”112
“(1) “Each PFS other than an investment firm shall be bound by conduct of business
rules:”.113
– to act honestly and fairly in conducting its business activities in the best
interests of its clients and the integrity of the market,
– to act with due skill, care and diligence, in the best interests of its clients and
the integrity of the market,
– to have and employ effectively the resources and procedures that are
necessary for the proper performance of its business activities,
– to seek from its clients information regarding their financial situations,
investment experience and objectives as regards the services requested,
– to make adequate disclosure of relevant material information in its dealings with
its clients,
– to try to avoid conflicts of interests and, when they cannot be avoided, to ensure
that its clients are fairly treated, and
– to comply with all regulatory requirements applicable to the conduct of its
business activities so as to promote the best interests of its clients and the
integrity of the market.
(2) (Law of 13 July 2007) “Where a PFS other than an investment firm receives, through
a credit institution or another PFS, the instruction to execute a transaction on behalf
of a client of that credit institution or that other PFS, article 37-4 applies mutatis
mutandis.”
“Chapter 3: Provision applicable to certain PFS”114
“Art. 37”115 Prudential rules specific to certain PFS

“(1) Contracts concluded between an PFS managing third party funds and its own clients
must specify all the accounts and other assets of the clients to which they relate.
Under no circumstances may the PFS dispose in its own favour of clients’ assets.
(2) Assets of third parties must be deposited with an authorised depositary and must be
subject to official supervision.
(3) The assets in question shall not form part of the collective assets of the PFS in the
event of its liquidation. They may not be seized by the latter’s personal creditors. The
PFS must enter them in accounts separate from those relating to its own assets.”
Art. 37a (repealed by the Law of 27 July 2000)
112
113
114
115
64
“Chapter 4: Provisions applicable to credit institutions and investment firms”116
Art. 37-1 Organisational requirements

“(1) Credit institutions and investment firms shall establish policies and procedures
sufficient to ensure compliance of the credit institutions or investment firms, including
their managers, employees and tied agents with their obligations laid down in the
relevant legal and regulatory provisions.
Moreover, credit institutions and investment firms shall define appropriate rules
governing transactions by their managers, employees and tied agents.
(2) Credit institutions and investment firms shall maintain and operate effective
organisational and administrative arrangements with a view to taking all reasonable
steps designed to prevent conflicts of interest as defined in article 37-2 from
adversely affecting the interests of their clients.
(3) Credit institutions and investment firms shall take reasonable steps to ensure
continuity and regularity in the performance of investment services and activities. To
this end they shall establish appropriate and proportionate systems, resources and
procedures.
(4) Credit institutions and investment firms shall have a sound administrative and
accounting organisation, an appropriate internal control system, effective procedures
for risk assessment, and effective control and security arrangements for information
processing systems.
(5) Where they rely on third parties for the performance of operational functions which
are critical for the provision of continuous and satisfactory services to clients or the
performance of activities on a continuous and satisfactory basis, the credit
institutions and investment firms shall take reasonable steps to avoid undue
additional operational risk. Outsourcing of important operational functions may not
be undertaken in such a way as to impair materially the quality of internal control of
the credit institutions and investment firms, and the ability of the CSSF to monitor
compliance of the credit institutions and investment firms with all obligations arising
from this law.
(6) Credit institutions and investment firms shall arrange for records to be kept of all
services and transactions undertaken by them, in accordance with the period laid
down in the Commercial Code, which shall be sufficient to allow the CSSF to monitor
compliance with the requirements under this law and, in particular, their obligations
towards clients or potential clients.
(7) Where they hold financial instruments belonging to clients, credit institutions and
investment firms shall make appropriate arrangements so as to safeguard clients’
ownership rights, especially in the event of insolvency of the credit institution or
investment firm, and to prevent the use of clients’ financial instruments on own
account except with the clients’ express consent.
(8) Where they hold funds belonging to clients, credit institutions and investment firms
shall make appropriate arrangements to safeguard clients’ ownership rights, and,
except in the case of credit institutions, prevent the use of client funds for their own
account.
(9) The arrangements made to implement this article are laid down by way of a Grand-
ducal regulation.
116
65
Art. 37-2 Conflicts of interest
(1) Credit institutions and investment firms shall take all reasonable steps to identify
conflicts of interest between themselves, including their managers, employees and
tied agents, or any person directly or indirectly linked to them by control and their
clients or between one client and another that arise in the course of providing any
investment and ancillary services, or combinations thereof.
(2) Where organisational or administrative arrangements made by the credit institution
or investment firm in accordance with article 37-1(2) to manage conflicts of interest
are not sufficient to ensure, with reasonable confidence, that risks of damage to
client interests will be prevented, the credit institution or investment firm shall clearly
disclose the general nature and/or sources of conflicts of interest to the client before
undertaking business on their behalf.
ducal regulation.
Art. 37-3 Conduct of business rules when providing investment services to clients
(1) When providing investment services and/or, where appropriate, ancillary services to
clients, credit institutions and investment firms shall act honestly, fairly and
professionally in accordance with the best interests of their clients and comply, in
particular, with the principles set out in paragraphs (2) to (8).
(2) All information, including marketing communications, addressed by the credit
institution or investment firm to clients or potential clients shall be fair, clear and not
misleading. Marketing communications shall be clearly identifiable as such.
(3) Credit institutions and investment firms shall provide appropriate information in a
comprehensible form to clients or potential clients about:
– the credit institution or investment firm and its services;
– financial instruments and proposed investment strategies; this should include
appropriate guidance on and warnings of the risks associated with investments
in those instruments or in respect of particular investment strategies;
– execution venues, and
– costs and associated charges
so that clients or potential clients are reasonably able to understand the nature and
risks of the investment service and of the specific type of financial instrument that is
being offered and, consequently, to take investment decisions on an informed basis.
This information may be provided in a standardised format.
(4) When providing investment advice or portfolio management, credit institutions and
investment firms shall obtain the necessary information regarding the client’s or
potential client’s knowledge and experience in the investment field relevant to the
specific type of product or service, his financial situation and his investment
objectives so as to be able to recommend to the client or potential client the
investment services and financial instruments that are suitable for him.
(5) Credit institutions and investment firms, when providing investment services other
than those referred to in paragraph (4), shall ask the client or potential client to
provide information regarding his knowledge and experience in the investment field
relevant to the specific type of product or service offered or demanded so as to be
66
able to assess whether the investment service or product envisaged is appropriate
for the client.
In case the credit institution or investment firm considers, on the basis of the
information received under the previous paragraph, that the product or service is not
appropriate to the client or potential client, it shall warn the client or potential client.
This warning may be provided in a standardised format.
In cases where the client or potential client elects not to provide the information
referred to under the first subparagraph, or where he provides insufficient
information regarding his knowledge and experience, the credit institution or
investment firm shall warn the client or potential client that such a decision will not
allow the credit institution or investment firm to determine whether the service or
product envisaged is appropriate for him. This warning may be provided in a
standardised format.
(6) When providing investment services that only consist of execution and/or the
reception and transmission of client orders with or without ancillary services, credit
institutions and investment firms are allowed to provide those investment services to
their clients without the need to obtain the information or make the determination
provided for in paragraph (5) where all the following conditions are met:
– the above services relate to shares admitted to trading on a regulated market or
in an equivalent third country market, money market instruments, bonds or
other forms of securitised debt (excluding those bonds or securitised debt that
embed a derivative), units of UCITS and other non-complex financial
instruments. A third country market is considered as being equivalent to a
regulated market if it is included in the list published by the European
Commission in accordance with article 19(6) of Directive 2004/39/EC;
– the service is provided at the initiative of the client or potential client;
– the client or potential client has been clearly informed that in the provision of
this service the credit institution or investment firm is not required to assess the
suitability of the instrument or service provided or offered and that therefore he
does not benefit from the corresponding protection of the relevant conduct of
business rules. This warning may be provided in a standardised format;
– the credit institution or investment firm complies with the obligations under
article 37-2.
(7) The credit institution or investment firm shall establish a record that includes the
documents agreed between the credit institution or investment firm and the client,
that set out the rights and obligations of the parties, and the other terms on which the
firm will provide services to the client. The rights and duties of the parties to the
contract may be incorporated by reference to other documents or legal texts.
(8) The client must receive from the credit institution or the investment firm adequate
reports on the service provided to the client by the credit institution or investment
firm. These reports shall include, where applicable, the costs associated with the
transactions and services undertaken on behalf of the client.
ducal regulation.
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Art. 37-4 Provision of services through the medium of another credit institution or
another investment firm
The credit institution or investment firm receiving an instruction to perform
investment or ancillary services on behalf of a client through another credit institution
or another investment firm are allowed to rely on client information transmitted by
that institution or firm. The credit institution or investment firm which mediates the
instructions will remain responsible for the completeness and accuracy of the
information transmitted.
The credit institution or investment firm which receives an instruction to undertake
services on behalf of a client in this way shall also be able to rely on any
recommendations in respect of the service or transaction that have been provided to
the client by another credit institution or another investment firm. The credit
institution or investment firm which mediates the instructions will remain responsible
for the appropriateness for the client of the recommendations or advice provided.
The credit institution or investment firm which receives client instructions or orders
through the medium of another credit institution or investment firm shall remain
responsible for providing the service or executing the transaction, based on any such
information or recommendations, in accordance with the relevant provisions of this
chapter.
Art. 37-5 Obligation to execute orders on terms most favourable to the client
(1) Credit institutions and investment firms shall take all reasonable steps to obtain,
when executing orders, the best possible result for their clients taking into account
price, costs, speed, likelihood of execution and settlement, size, nature or any other
consideration relevant to the execution of the order. Nevertheless, whenever there is
a specific instruction from the client, the credit institution or investment firm shall
execute the order following that specific instruction.
(2) Credit institutions and investment firms shall establish and implement effective
arrangements for complying with paragraph (1). Credit institutions and investment
firms shall establish and implement an order execution policy to allow them to obtain,
for their client orders, the best possible result in accordance with paragraph (1).
(3) The order execution policy shall include, in respect of each class of financial
instruments, information on the different execution venues where the credit
institution or investment firm executes its client orders and the factors affecting the
choice of execution venue. It shall at least include those execution venues that
enable the credit institution or investment firm to obtain on a consistent basis the
best possible result for the execution of client orders.
Credit institutions and investment firms provide appropriate information to their
clients on their order execution policy. Credit institutions and investment firms shall
obtain the prior consent of their clients to the execution policy.
Where the order execution policy provides for the possibility that client orders may
be executed outside a regulated market or an MTF, the credit institution or
investment firm shall, in particular, inform its clients about this possibility. Credit
institutions and investment firms shall obtain the prior express consent of their clients
before proceeding to execute their orders outside a regulated market or an MTF.
Credit institutions and investment firms may obtain this consent either in the form of
a general agreement or in respect of individual transactions.
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(4) Credit institutions and investment firms are required to monitor the effectiveness of
their order execution arrangements and execution policy in order to identify and,
where appropriate, correct any deficiencies. In particular, credit institution and
investment firms shall assess, on a regular basis, whether the execution venues
included in the order execution policy provide for the best possible result for the
client or whether they need to make changes to their execution arrangements. Credit
institutions and investment firms shall notify to clients of any material changes to
their order execution arrangements or execution policy.
(5) Credit institutions and investment firms shall be able to demonstrate to their clients,
at their request, that they have executed their orders in accordance with their order
execution policy.
ducal regulation.
Art. 37-6 Client order handling rules

(1) Credit institutions and investment firms authorised to execute orders on behalf of
clients shall implement procedures and arrangements which provide for the prompt,
fair and expeditious execution of client orders, relative to other client orders or their
own trading interests.
These procedures or arrangements shall allow for the execution of otherwise
comparable client orders in accordance with the time of their reception by the credit
institution or investment firm.
(2) In the case of a client limit order in respect of shares admitted to trading on a
regulated market which is not immediately executed under prevailing market
conditions, credit institutions and investment firms shall, unless the client expressly
instructs otherwise, take measures to facilitate the earliest possible execution of that
order by making public immediately that client limit order in a manner which is easily
accessible to other market participants. The CSSF may waive this obligation in
respect of transactions that are large in scale compared with normal market size as
laid down for the purposes of article 13(2) of the law on markets in financial
instruments. For the purposes of this article, “limit order” means the order to buy or
sell a financial instrument at a specified price limit or better and for a specified size.
ducal regulation.
Art. 37-7 Transactions executed with eligible counterparties

(1) Credit institutions and investment firms authorised to execute orders on behalf of
clients or to deal on own account or to receive and transmit orders may bring about
or enter into transactions with eligible counterparties without being obliged to comply
with the obligations under articles 37-3, 37-5 and 37-6(1), in respect of those
transactions or in respect of any ancillary service directly related to those
transactions.
(2) Eligible counterparties for the purposes of this article shall be investment firms, credit
institutions, insurance companies, UCITS and their management companies,
pension funds and their management companies, other financial institutions
authorised or regulated under Community legislation or the national law of a Member
State, undertakings exempted from the application of Directive 2004/39/EC under
article 2(1)(k) and (l) of that Directive, national governments and their corresponding
offices including public bodies that deal with public debt, central banks and
supranational organisations.
69
Classification as an eligible counterparty under the first sub-paragraph shall be
without prejudice to the right of such entities to request, either on a general form or
on a trade-by-trade basis, treatment as clients whose business with the credit
institution or investment firm is subject to articles 37-3, 37-5 and 37-6.
(3) The CSSF may also recognise as eligible counterparties other undertakings meeting
pre-determined proportionate requirements, including quantitative thresholds. In the
event of a transaction where the prospective counterparties are located in different
jurisdictions, the credit institution or investment firm shall defer to the status of the
counterparty, as determined by the law or measures of the Member State in which
that counterparty is established.
The credit institution or investment firm, when it enters into transactions in
accordance with paragraph (1) with such undertakings, shall obtain the express
confirmation from the prospective counterparty that it agrees to be treated as an
eligible counterparty. The credit institution or investment firm may obtain this
confirmation either in the form of a general agreement or in respect of each
individual transaction.
(4) Third country entities equivalent to those categories of entities mentioned in
paragraph (2) may also be recognised as eligible counterparties.
The CSSF may also recognise as eligible counterparties third country undertakings
such as those mentioned in paragraph (3) on the same conditions and subject to the
same requirements as those laid down at paragraph (3).
ducal regulation.
Art. 37-8 Obligations of credit institutions and investment firms when appointing tied
agents
(1) A credit institution or investment firm may decide to appoint tied agents for the
purposes of promoting its services, soliciting business or receiving orders from
clients or potential clients and transmitting them, placing financial instruments and
providing advice in respect of such financial instruments and services offered.
(2) Where an investment firm decides to appoint a tied agent it remains fully and
unconditionally responsible for any action or omission on the part of the tied agent
when acting on its behalf.
The credit institution or investment firm shall ensure that the tied agent discloses the
capacity in which he is acting and the firm he is representing when contacting or
before dealing with a client or potential client.
(3) Tied agents registered in Luxembourg acting on behalf of an investment firm, may
hold, on behalf and under the full responsibility of that investment firm and in
accordance with the provisions of article 37-1(6), (7) and (8), money and financial
instruments of clients in Luxembourg and in Member States that allow tied agents to
hold clients’ money.
(4) Credit institutions and investment firms shall monitor the activities of their tied agents
so as to ensure that they continue to comply with this law when acting through tied
agents.
(5) The CSSF keeps a register of the tied agents established in Luxembourg, as well as
of the tied agents established in a Member State the laws of which do not allow
credit institutions or investment firms authorised on its territory to appoint tied
agents. Tied agents established in another Member State may be registered in the
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CSSF’s register only if they are acting on behalf of a credit institution or an
investment firm authorised in Luxembourg.
Registration in the CSSF’s register is conditional on the tied agents being of
sufficiently good repute and possessing appropriate general, commercial and
professional knowledge so as to be able to communicate accurately all relevant
information regarding the proposed service to the client or potential client. Such
repute shall be assessed on the basis of police records and of any evidence tending
to show that the tied agents are of good repute and offering guarantee of
irreproachable conduct.
Credit institutions and investment firms that appoint tied agents established in
another Member State are required to verify that the tied agents they consider
appointing are of sufficiently good repute and possess the knowledge as referred to
in the previous indent and to confirm in writing to the CSSF that the registration
requirements are fulfilled. The CSSF may request any information necessary to
assess whether the registration requirements are being fulfilled by the tied agents
concerned.
The CSSF shall update the register on a regular basis. This register shall be
published on the CSSF's website so that it is accessible to the public.
(6) Credit institutions and investment firms that appoint tied agents shall take adequate
measures in order to avoid any negative impact that those activities of the tied
agents that are not activities of the financial sector within the meaning of this law
could have on the activities carried out by tied agents on behalf of the credit
institution or investment firm.
(7) Credit institutions and investment firms shall appoint only tied agents entered in the
public register held by an administrative authority of a Member State.”
Art. 38 (repealed by the Law of 12 November 2004)
“Chapter 5: Provisions applicable to credit institutions and PFS”117
Art. 39 Professional obligations of the financial sector as regards combating money

laundering and the financing of terrorism
“Credit institutions and PFS shall be bound by the professional obligations laid down
by the Law of 12 November 2004 on combating money laundering and the financing
of terrorism, as follows:
– the obligation to know their customers, in accordance with Article 3 of that Law,
– the obligation to have an adequate internal organisation, in accordance with

Article 4 of that Law, and
– the obligation to cooperate with the authorities, in accordance with Article 5 of

that Law.
117
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In addition, credit institutions and PFS shall be required to include in remittances and
transfers of funds, and in any messages relating thereto, the name or account
number of the originator.”
Art. 40 Obligation to cooperate with the authorities
Credit institutions and other professionals of the financial sector shall be required to
provide the fullest possible response to, and cooperation with, any lawful demand
which may be made to them by the authorities responsible for applying the law in the
exercise by those authorities of their powers.
(...)118
Art. 41 Obligation of professional secrecy

(1) (Law of 12 January 2001) “All administrators, members of managing and supervisory
bodies, directors, employees and other persons in the service of credit institutions,
other professionals of the financial sector, settlement entities, central counterparties,
clearing houses and foreign operators of systems authorised in Luxembourg, as
referred to in Part I of this Law, shall be required to keep secret any information
confided to them in the context of their professional activities. Disclosure of such
information shall be punishable by the penalties laid down in Article 458 of the Penal
Code.”
(2) The obligation to maintain secrecy shall cease to exist where disclosure of
information is authorised or required by or pursuant to any legislative provision, even
where the provision in question predates this Law.
(3) The obligation to maintain secrecy shall not exist in relation to the national and
foreign authorities responsible for prudential supervision of the financial sector where
those authorities are acting in the exercise of their legal powers for the purposes of
such supervision and the information communicated is covered by the rules of
professional secrecy governing the supervisory authority by which it is received. The
transmission of the requisite information to a foreign authority with a view to
prudential supervision shall be effected through the intermediary of the parent
undertaking, shareholder or partner involved in the supervision in question.
(4) The obligation to maintain secrecy shall not exist in relation to shareholders or
partners whose status or capacity is a precondition for authorisation of the institution
in question, in so far as the information communicated to such shareholders or
partners is necessary for the proper and prudent management of the institution and
does not fall directly within the ambit of the obligations owed by that institution to any
customer other than a professional of the financial sector.
“By way of derogation from the preceding subparagraph, credit institutions and PFS
forming part of a financial group shall guarantee to the group’s internal control
bodies, where necessary, access to information concerning specific business
relations, to the extent that this is needed for the global management of legal risks
and risks to their reputation in connection with money laundering or the financing of
terrorism within the meaning of the laws of Luxembourg.”119
(5) (Law of 13 July 2007) “The obligation to secrecy does not cover credit institutions
and professionals referred to in articles 29-1, 29-2, 29-3 and 29-4 insofar as the
information communicated to those professionals is provided under an agreement
for the provision of services."
118
Repealed by the Law of 12 November 2004.
119
72
(5a) (Law of 5 November 2006) “The obligation to maintain secrecy shall not exist
between entities within a financial conglomerate for information that these entities
may exchange between them insofar as the information is necessary for the exercise
of supplementary supervision as referred to in Chapter 3b of Part III of this Law.”
“(6)”120 Subject to the rules applicable in penal matters, once any information of the kind
referred to in paragraph 1 has been disclosed, it may not be used for any purposes
other than those for which its disclosure is permitted by law.
“(7)”121 No person bound by the obligation of secrecy referred to in paragraph 1 who lawfully
discloses any information covered by that obligation shall, by reason of that
disclosure alone, incur any criminal responsibility or civil liability.
“PART IIa: Obligations concerning cross-border credit transfers”122
“Chapter 1: Definitions and scope”123

(Law of 29 April 1999)
“For the purposes of this Part, and without prejudice to the scope thereof as more
precisely defined in Article 41-2,
“…”124
– “institution” means a credit institution or any other natural or legal person that by
way of business executes cross-border credit transfers; for the purposes of
Articles 41-6 to 41-8, branches of one credit institution situated in different
Member States which participate in the execution of a cross-border credit
transfer shall be regarded as separate institutions;
– “intermediary institution” means an institution which is neither that of the
originator nor that of the beneficiary and which participates in the execution of a
cross-border credit transfer;
– “financial institution” means a credit institution, investment firm, life assurance
undertaking, non-life insurance undertaking, undertaking for collective
investment in transferable securities and any other undertaking or institution the
activities of which are similar to those of the undertakings referred to above or
the principal activity of which is to acquire holdings of financial assets or to
transform financial claims;
– “cross-border credit transfer” means a transaction carried out on the initiative of
an originator via an institution or its branch in one Member State, with a view to
making available an amount of money to a beneficiary at an institution or its
branch in another Member State; the originator and the beneficiary may be one
and the same person;
– “cross-border credit transfer order” means an unconditional instruction in any
form, given directly by an originator to an institution to execute a cross-border
credit transfer;
120
121
122
Law of 29 April 1999.
123
124
73
– “originator” means a natural or legal person that orders the making of a cross-
border credit transfer to a beneficiary;
– “beneficiary” means the final recipient of a cross-border credit transfer for whom
the corresponding funds are made available in an account;
– “customer” means the originator or the beneficiary, as the context may require;
– “reference interest rate” means an interest rate representing compensation and
established in accordance with the rules laid down by the Member State in
which the establishment which must pay the compensation to the customer is
situated. Where the compensation is payable by an institution situated in
Luxembourg, the applicable rate of interest is the legal rate specified in the Law
of 22 February 1984;
– “date of acceptance” means the date of fulfilment of all the conditions required
by the institution as to the execution of the cross-border credit transfer order
and relating to the availability of adequate financial cover and the information
required to execute that order;
“…”125
Art. 41-2 Scope
“This Part shall apply to institutions that by way of business intervene in cross-border
credit transfers:
– in the currencies of the Member States and in euros,
– up to the equivalent of 50,00 euros
– ordered by persons other than institutions or financial institutions, and

– executed by institutions.”
“Chapter 2: Transparency of conditions for cross-border credit transfers”126
Art. 41-3 Prior information on conditions for cross-border credit transfers

“The institutions shall make available to their actual and prospective customers in
writing, including where appropriate by electronic means, and in a readily
comprehensible form, information on conditions for cross-border credit transfers.
This information shall include at least:
– an indication of the time needed, when a cross-border credit transfer order
given to the institution is executed, for the funds to be credited to the account of
the beneficiary’s institution; the start of that period must be clearly indicated,
– an indication of the time needed, upon receipt of a cross-border credit transfer,
for the funds credited to the account of the institution to be credited to the
beneficiary’s account,
125
126
74
– the manner of calculation of any commission fees and charges payable by the
customer to the institution, including where appropriate the rates,
– the value date, if any, applied by the institution,
– details of the complaint and redress procedures available to the customer and
arrangements for access to them,
– an indication of the reference exchange rates used.”
Art. 41-4 Information subsequent to a cross-border credit transfer

“The institutions shall supply their customers, unless the latter expressly forgo this,
subsequent to the execution or receipt of a cross-border credit transfer, with clear
information in writing, including where appropriate by electronic means, and in a
readily comprehensible form. This information must include at least:
– a reference enabling the customer to identify the cross-border credit transfer,
– the original amount of the cross-border credit transfer,
– the amount of all charges and commission fees payable by the customer,
– the value date, if any, applied by the institution.
Where the originator has specified that the charges for the cross-border credit
transfer are to be wholly or partly borne by the beneficiary, the latter shall be
informed thereof by his own institution.
Where any amount has been converted, the institution which converted it shall
inform its customer of the exchange rate used.”
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“Chapter 3: Obligations of institutions in respect of cross-border credit transfers”127
Art. 41-5 Specific undertakings by the institution

“An institution which agrees to execute a cross-border credit transfer with stated
specifications for a customer must at the request of that customer give an
undertaking concerning the time needed for execution of the transfer and the
commission fees and charges payable, apart from those relating to the exchange
rate used.”
Art. 41-6 Obligations regarding time-limits
“(1) The originator’s institution shall execute the cross-border credit transfer in question
within the time limit agreed with the originator.
Where the agreed time limit is not complied with or, in the absence of any such time
limit, where, at the end of the fifth banking business day following the date of
acceptance of the cross-border credit transfer order, the funds have not been
credited to the account of the beneficiary’s institution, the originator’s institution shall
compensate the originator.
Compensation shall comprise the payment of interest calculated by applying the
reference interest rate to the amount of the cross-border credit transfer for the period
from:
– the end of the agreed time limit or, in the absence of any such time limit, the
end of the fifth banking business day following the date of acceptance of the
cross-border credit transfer order, to
– the date on which the funds are credited to the account of the beneficiary’s
institution.
Similarly, where non-execution of the cross-border credit transfer within the time limit
agreed or, in the absence of any such time limit, before the end of the fifth banking
business day following the date of acceptance of the cross-border credit transfer is
attributable to an intermediary institution, that institution shall be required to
compensate the originator’s institution.
(2) The beneficiary’s institution shall make the funds resulting from the cross-border
credit transfer available to the beneficiary within the time limit agreed with the
beneficiary.
Where the agreed time limit is not complied with or, in the absence of any such time
limit, where, at the end of the banking business day following the day on which the
funds were credited to the account of the beneficiary’s institution, the funds have not
been credited to the beneficiary’s account, the beneficiary’s institution shall
compensate the beneficiary.
Compensation shall comprise the payment of interest calculated by applying the
reference interest rate to the amount of the cross-border credit transfer for the period
from:
– the end of the agreed time limit or, in the absence of any such time limit, the
end of the banking business day following the day on which the funds were
credited to the account of the beneficiary’s institution, to
127
76
– the date on which the funds are credited to the beneficiary’s account.
(3) No compensation shall be payable pursuant to paragraphs 1 and 2 where the
originator’s institution or, as the case may be, the beneficiary’s institution can
establish that the delay is attributable to the originator or, as the case may be, the
beneficiary.
(4) Paragraphs 1, 2 and 3 shall be entirely without prejudice to the other rights of
customers and institutions that have participated in the execution of a cross-border
credit transfer order.”
Art. 41-7 Obligation to execute the cross-border transfer in accordance with
instructions
“(1) Unless the originator has specified that the costs of the cross-border credit transfer
are to be borne wholly or partly by the beneficiary, the originator’s institution, any
intermediary institution and the beneficiary’s institution, after the date of acceptance
of the cross-border credit transfer order, shall each be obliged to execute that credit
transfer for the full amount thereof.
The first subparagraph shall be without prejudice to the possibility of the
beneficiary’s institution levying a charge on the beneficiary relating to the
administration of his account, in accordance with the relevant rules and customs.
However, such a charge may not be used by the institution to avoid the obligations
imposed by the said subparagraph.
(2) Without prejudice to any other claim which may be made, where the originator’s
institution or an intermediary institution has made a deduction from the amount of the
cross-border credit transfer in breach of paragraph 1, the originator’s institution shall,
at the originator’s request, credit, free of all deductions and at its own cost, the
amount deducted to the beneficiary unless the originator requests that the amount
be credited to him.
Any intermediary institution which has made a deduction in breach of paragraph 1
shall credit the amount deducted, free of all deductions and at its own cost, to the
originator’s institution or, if the originator’s institution so requests, to the beneficiary
of the cross-border credit transfer.
(3) Where a breach of the duty to execute the cross-border credit transfer order in
accordance with the originator’s instructions has been caused by the beneficiary’s
institution, and without prejudice to any other claim which may be made, the
beneficiary’s institution shall be liable to credit to the beneficiary, at its own cost, any
sum wrongly deducted.”
Art. 41-8 Obligation upon institutions to refund in the event of non-execution of
transfers
“(1) If, after a cross-border credit transfer order has been accepted by the originator’s
institution, the relevant amounts are not credited to the account of the beneficiary’s
institution, and without prejudice to any other claim which may be made, the
originator’s institution shall credit the originator, up to the equivalent of 12,500 euros,
with the amount of the cross-border credit transfer plus:
– interest calculated by applying the reference interest rate to the amount of the
cross-border credit transfer for the period between the date of the cross-border
credit transfer order and the date of the credit, and
– the charges relating to the cross-border credit transfer paid by the originator.
77
These amounts shall be made available to the originator within fourteen banking
business days following the date of his request, unless the funds corresponding to
the cross-border credit transfer have in the meantime been credited to the account of
the beneficiary’s institution.
Such a request may not be made before expiry of the time limit agreed between the
originator’s institution and the originator for the execution of the cross-border credit
transfer order or, in the absence of any such time limit, before expiry of the time limit
laid down in the second subparagraph of Article 41-6(1).
Similarly, each intermediary institution which has accepted the cross-border credit
transfer order owes an obligation to refund at its own cost the amount of the credit
transfer, including the related costs and interest, to the institution which instructed it
to carry out the order. If the cross-border credit transfer was not completed because
of errors or omissions in the instructions given by that institution, the intermediary
institution shall endeavour as far as possible to refund the amount of the transfer.
(2) By way of derogation from paragraph 1, if the cross-border credit transfer was not
completed because of its non-execution by an intermediary institution chosen by the
beneficiary’s institution, the latter institution shall be obliged to make the funds
available to the beneficiary up to an amount equivalent to 12,500 euros.
(3) By way of derogation from paragraph 1, if the cross-border credit transfer was not
completed because of an error or omission in the instructions given by the originator
to his institution or because of non-execution of the cross-border credit transfer by
an intermediary institution expressly chosen by the originator, the originator’s
institution and the other institutions involved shall endeavour as far as possible to
refund the amount of the transfer.
Where the amount has been recovered by the originator’s institution, it shall be
obliged to credit it to the originator. The institutions, including the originator’s
institution, are not obliged in this case to refund the charges and interest accruing,
and can deduct the costs arising from the recovery if specified.”
Art. 41-9 Force majeure
“ “Without prejudice to Articles 39 and 40”128, institutions participating in the
execution of a cross-border credit transfer order shall be released from the
obligations laid down in this Part where they can adduce reasons of force majeure,
namely abnormal and unforeseeable circumstances beyond the control of the person
pleading force majeure, the consequences of which would have been unavoidable
despite all efforts to the contrary, which are relevant to this Part. The insolvency of
the institution shall not constitute a situation of force majeure.”
Art. 41-10 Settlement of disputes
“Article 58 of this Law shall apply to the settlement of disputes between an originator
and his institution or between a beneficiary and his institution.”
128
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PART III: Prudential supervision of the financial sector
Chapter 1: The competent authority responsible for supervision and its task
Art. 42 The competent authority

“The CSSF shall be the competent authority responsible for the supervision of credit
institutions and other professionals of the financial sector.”129 “It shall also be the
competent authority responsible for the prudential supervision of payment and
securities settlement systems authorised by the Minister.”130
“...”131
“The CSSF is responsible for the cooperation and exchange of information with other
authorities, bodies and persons within the limits, under the conditions and according
to the terms laid down in this law. It shall be the Luxembourg contact point for the
purposes of Directive 2004/39/EC.
The CSSF shall inform the competent authorities of the other Member States
responsible for the supervision of credit institutions and investment firms that it is
designated to receive requests for exchange of information or cooperation pursuant
to this law.”132
Art. 43 Purpose of supervision

(1) The CSSF shall exercise its powers of prudential supervision exclusively in the
public interest. Where the public interest so warrants, it may publish its decisions.
(2) The CSSF shall monitor the application of the laws and regulations relating to the
financial sector by the persons subject to its supervision.
(3) The CSSF shall ensure the implementation of international agreements and “of
Community law”133 applicable to the area falling within the scope of its powers. To
that end, it shall also be required to carry out all consultations and to effect all
communications prescribed by international agreements or by Community law within
its field of competence.
Art. 44 Professional secrecy of the CSSF
(1) All persons who work or have worked for the CSSF, as well as auditors or experts
instructed by the CSSF, are bound by the obligation of professional secrecy referred
to in article 16 of the law of 23 December 1998 creating a commission de
surveillance du secteur financier. This secrecy implies that no confidential
information which they may receive in the course of their duties may be divulged to
any person or authority whatsoever, except in summary or collective form, such that
individual professionals of the financial sector cannot be identified, without prejudice
to cases covered by criminal law.
129
130
131
Repealed by the Law of 2 August 2003.
132
133
79
(2) Where a credit institution or investment firm undergoing a financial reconstruction or
liquidation procedure, the CSSF, as well as the auditors or experts instructed by the
CSSF, may divulge confidential information which does not concern third parties in
civil or commercial proceedings if necessary for carrying out those proceedings.
(3) The reception, exchange and transmission of confidential information by the CSSF
pursuant to this law are subject to the conditions laid down in this article.
This article does not prevent the CSSF from exchanging confidential information with
the competent authorities, other authorities, bodies and persons or from transmitting
them confidential information within the limits, under the conditions and according to
the terms laid down in this law and in other legal provisions governing the
professional secrecy of the CSSF.
(4) Communication of information by the CSSF authorised under this law is subject to
the following conditions:
– the information transmitted to competent authorities of a Member State
supervising credit institutions, investment firms, insurance undertakings or
reinsurance undertakings or to other administrative authorities of a Member
State supervising markets in financial instruments are for the purpose of
performing the supervisory task of the receiving authorities;
– the information communicated to competent authorities of a third country, other
authorities, bodies or persons of a third country, must be relevant for the
exercise of their functions;
– the information communicated by the CSSF must be covered by the
professional secrecy of the competent authorities, other authorities, bodies and
persons receiving it and the professional secrecy imposed on those competent
authorities, other authorities, bodies and persons must provide safeguards at
least equivalent to those inherent in the professional secrecy incumbent on the
CSSF;
– the competent authorities, other authorities, bodies and persons receiving
information from the CSSF, must use this information only for the purposes for
which it has been communicated to them and must be in a position to ensure
that no other use is made thereof;
– the competent authorities, other authorities, bodies and persons of a third
country receiving information from the CSSF afford the same right to
information to the CSSF;
– information received from competent authorities, other authorities, bodies or
persons may be disclosed by it only with the express consent of those
competent authorities, other authorities, bodies and persons and, as the case
may be, solely for the purposes for which those competent authorities, other
authorities, bodies and persons have given their consent, except in duly justified
circumstances. In this latter case, the CSSF shall immediately inform the
competent authority that communicated the transmitted information.
The condition of the previous indent does not apply to the transmission to the
Commissariat aux Assurances of information received by the CSSF under paragraph
(1) of article 44-2, of 44-3 or paragraph (3) of article 54.
(5) Without prejudice to cases covered by criminal law, the CSSF may use confidential
information received pursuant to this law only in the performance of its duties and for
the exercise of functions within the scope of this law, or in the context of
administrative or judicial proceedings specifically related to the exercise of those
functions.
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However, the CSSF may use the information received for other purposes where the
competent authority, other authority, body or person having transmitted the
information consents thereto.
(6) The CSSF, which receives confidential information under paragraph (1) of article 44-
2, of 44-3 or paragraph (3) of article 54, may only use this information in the
performance of its functions:
– to check that the conditions governing the taking-up of the business of
professionals of the financial sector are met and to facilitate the monitoring, on
a non-consolidated or consolidated basis, of the conduct of that business,
especially with regard to supervision of liquidity, solvency, large exposures,
capital adequacy in relation to market risks, administrative and accounting
procedures and internal control mechanisms, or
– to impose penalties, or
– in administrative appeals against decisions taken by the CSSF, or
– in court proceedings brought against decisions refusing to grant authorisation or
withdrawing such authorisation.
Art. 44-1 Cooperation of the CSSF with the competent authorities of Member States
(1) The CSSF shall cooperate with the competent authorities of the other Member
States responsible for the supervision of credit institutions and investment firms
whenever necessary for the purpose of carrying out their relevant prudential
supervisory duties making use of their powers set out in this law.
The CSSF shall render assistance to these authorities, in particular by exchanging
information and cooperating in any supervisory activities.
(2) The CSSF shall closely cooperate with the Commissariat aux Assurances whenever
necessary for the purpose of carrying out their relevant prudential supervisory duties,
including performing additional supervision pursuant to Chapter 3 of Part III of this
law, making use of their powers set out in this law.
The CSSF shall render assistance to the Commissariat aux Assurances, in particular
by exchanging all information which is essential or relevant to the exercise of their
relevant prudential supervisory missions, including the supplementary supervision as
referred to in Chapter 3 of Part III of this law, and, where applicable within the scope
of supervisory activities.
(3) Where the CSSF has good reasons to suspect that acts, if carried out in
Luxembourg, would have been such as to be contrary to the provisions of this law,
are being or have been carried out in another Member State by entities not subject
to its supervision, it shall notify the competent authority of that other Member State in
as specific manner as possible.
Where the CSSF receives comparable information from an authority of another
Member State, it shall take appropriate measures. The CSSF shall inform the
notifying competent authority of the outcome of the action and, to the extent
possible, of significant interim developments.
(4) The CSSF may request the cooperation of the competent authority of another
Member State responsible for the prudential supervision of credit institutions and
investment firms in a supervisory activity or for an on-the-spot verification or in an
investigation.
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Where the CSSF receives such a request with respect to an on-the-spot verification
or investigation from such an authority, the CSSF shall, within the framework of its
competences, act upon that request either by carrying out the request itself or by
having an auditor or expert carrying it out, or by allowing the authority which made
the request to carry it out itself.
(5) The CSSF may refuse to act on a request for cooperation in carrying out an
investigation, on-the-spot verification or supervisory activity where:
– the investigation, on-the-spot verification or supervisory activity might adversely
affect the sovereignty, security or public policy of the State of Luxembourg, or
– judicial proceedings have already been initiated in respect of the same actions
and against the same persons before the Luxembourg courts, or
– a final judgment has already been delivered in relation to such persons for the
same actions in Luxembourg.
In the case of such a refusal, the CSSF shall inform the requesting authority
accordingly, providing as detailed information as possible.
Art. 44-2. Exchange of information of the CSSF within the European Union
(1) The CSSF shall exchange without delay with:
– the competent authorities of the other Member States responsible for the
prudential supervision of credit institutions;
– the competent authorities of the other Member States responsible for the
prudential supervision of investment firms;
– the administrative authorities of the other Member States responsible for the
supervision of markets in financial instruments;
the information necessary for the supervision of the financial sector and the
supervision of markets in financial instruments respectively.
Where the CSSF communicates information to the aforementioned authorities, it
may indicate at the time of communication that such information must not be
disclosed without its express consent, in which case such information may be
exchanged solely for the purposes for which the CSSF gave its consent.
Without prejudice to the provision of the last indent of article 44(4), the CSSF may
not disclose information received from the authorities referred to above or use them
for purposes other than for which those authorities gave their consent, where the
latter have indicated this at the time of communication.
The CSSF may refuse to act on a request for information from the aforementioned
authorities only if:
– communication might adversely affect the sovereignty, security or public policy
of the State of Luxembourg, or
– judicial proceedings have already been initiated in respect of the same actions
and against the same persons before the Luxembourg courts, or
– a final judgment has already been delivered in relation to such persons for the
same actions in Luxembourg.
In the case of such a refusal, the CSSF shall inform the requesting authority
accordingly, providing as detailed information as possible.
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(2) The CSSF may exchange, within the European Union with:
– the competent authorities of a Member State responsible for the prudential
supervision of insurance undertakings or reinsurance undertakings;
– the authorities of a Member State entrusted with the public task of supervising
financial institutions other than investment firms;
– the persons responsible for the statutory audit of the accounts of credit
institutions, PFS, insurance undertakings, reinsurance undertakings or other
financial institutions;
– the bodies involved in the liquidation, bankruptcy or similar procedures
concerning credit institutions and PFS;
– the authorities responsible for the supervision of the persons responsible for the
statutory audit of the accounts of credit institutions, PFS, insurance
undertakings, reinsurance undertakings or other financial institutions;
– the authorities responsible for the supervision of the bodies involved in the
liquidation, bankruptcy or similar procedures concerning credit institutions, PFS,
insurance undertakings, reinsurance undertakings, undertakings for collective
investment in transferable securities, management companies and custodians
of undertakings for collective investment in transferable securities;
– central banks, the European System of Central Banks and the European
Central Bank in their capacity as monetary authorities;
– the authorities entrusted with the public task of supervising payment systems or
securities settlement systems, information intended for the performance of their
tasks.
(3) The CSSF may transmit information, within the European Union, to bodies which
administer deposit-guarantee schemes, investor compensation schemes or central
credit registers, which is necessary to the exercise of their functions.
(4) The CSSF may communicate information referred to in paragraph (1) of article 44-2
and in article 44-3 to a clearing house or other similar body recognised under the law
for the provision of clearing or settlement services for one of the Luxembourg
markets, if the CSSF considers that it is necessary to communicate the information
in order to ensure the proper functioning of those bodies in relation to defaults, even
potential defaults, of market participants.
Art. 44-3. Exchange of information of the CSSF with third countries

(1) For the purpose of its task of supervising credit institution or investment firms, the
CSSF may exchange information with:
– the competent authorities of third countries responsible for the prudential
supervision of credit institutions;
supervision of investment firms;
supervision of insurance undertakings or reinsurance undertakings;
– the authorities of third countries entrusted with the public task of supervising
83
– the persons responsible for the statutory audit of the accounts of credit
institutions, PFS, insurance undertakings, reinsurance undertakings or other
– the authorities of third countries entrusted with the public task of supervising
markets in financial instruments;
– the bodies involved in the liquidation, bankruptcy or similar procedures
concerning credit institutions and PFS;
– the authorities responsible for the supervision of the persons responsible for the
statutory audit of the accounts of credit institutions, PFS, insurance
undertakings, reinsurance undertakings or other financial institutions;
– the authorities responsible for the supervision of the bodies involved in the
liquidation, bankruptcy or similar procedures concerning credit institutions, PFS,
insurance undertakings, reinsurance undertakings, undertakings for collective
investment in transferable securities, management companies and custodians
of undertakings for collective investment in transferable securities.
(2) The CSSF may request the cooperation of the competent authority of a third country
responsible for the prudential supervision of credit institutions or investment firms for
an on-the-spot verification or in an investigation.
Where the CSSF receives such a request with respect to an on-the-spot verification
or investigation from such an authority, the CSSF may, within the framework of its
competences and provided that the requesting authority grants the same right to the
CSSF, act upon that request either by carrying out the request itself or by having an
auditor or expert carry it out. Upon request, the CSSF may be accompanied by
certain agents of the requesting authority to an on-the-spot verification or
investigation. Nevertheless, the on-the-spot verification or investigation shall be
subject to the overall control of the CSSF.”
“Chapter 2: Supervision of credit institutions, certain financial institutions and investment

firms carrying on business in more than one “Member State”134”135
Art. 45 Competence to supervise credit institutions and investment firms carrying on

business in more than one “Member State”136
“(1) The prudential supervision by the CSSF, acting as the competent authority of the
“home Member State”137, of credit institutions and investment firms established
under Luxembourg law shall also extend to the business carried on by any such
institution or firm in another “Member State”138, whether by means of the setting up
of a branch or by way of the provision of services.
(2) (Law of 13 July 2007) “The prudential supervision of a credit institution or investment
firm authorised in another Member State, including that of activities carried on in
Luxembourg in accordance with the provisions of articles 30 and 31, shall be the
responsibility of the competent authorities of the home Member State, without
prejudice to the provisions of this law which give responsibility to the CSSF as
competent authority of the host Member State.
134
135
136
137
138
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(3) The CSSF as the competent authority of the host Member State shall retain
responsibility in cooperation with the competent authorities of the home Member
State for the supervision of the liquidity of the Luxembourg branches of credit
institutions authorised in another Member State.
(4) The CSSF as the competent authority of the host Member State is responsible for
ensuring that the investment services and ancillary services provided in Luxembourg
by the Luxembourg branches of credit institutions or investment firms authorised in
another Member State fulfil the obligations laid down in articles 37-3, 37-5 and 37-6
of this law and articles 26, 27 and 28 of the law on markets in financial instruments.
The CSSF has the right to examine the arrangements of the Luxembourg branches
and to request such changes as are strictly needed to enable the CSSF to enforce
the obligations under articles 37-3, 37-5 and 37-6 of this law and articles 26, 27 and
28 of the law on markets in financial instruments, with respect to investment services
and ancillary services provided by branches in Luxembourg.
(5) The CSSF is competent to ensure that the Luxembourg branches of credit
institutions and investment firms authorised in another Member State comply with
the record-keeping obligation under article 37-1(6) with respect to the transactions
performed by the Luxembourg branches, without prejudice to the possibility for the
competent authority of the Member State in which the credit institution or investment
firm is authorised, to have direct access to those records.
(6) Luxembourg branches of credit institutions and investment firms authorised in
another Member State are required to report periodically on their activities to the
CSSF.
In discharging the responsibilities imposed on the CSSF in paragraph (3),
Luxembourg branches of credit institutions authorised in another Member State are
required to provide to the CSSF the same information as is required from credit
institution incorporated under Luxembourg law.
In discharging the responsibilities imposed on the CSSF in paragraph (4), the
Luxembourg branches of credit institutions and investment firms authorised in
another Member State are required to provide to the CSSF, upon request, the
information necessary for the monitoring of their compliance with the standards that
apply to them in Luxembourg, for the cases provided for in articles 37-3, 37-5 and
37-6 of this law and in articles 26, 27 and 28 of the law on markets in financial
instruments. The information to be provided by these branches is the same
information as the CSSF requires for these purposes from credit institutions and
investment firms authorised in Luxembourg.
(7) For the purposes of supervising the activities of the Luxembourg branch of a credit
institution authorised in another Member State, the competent authority of the home
Member State of this credit institution may, after having first informed the CSSF,
carry on itself or through the intermediary of persons it appoints for that purpose on-
the-spot verification of information concerning the management and ownership of
that credit institution that is likely to facilitate its supervision and the examination of
the conditions for its authorisation, and all information likely to facilitate the
monitoring of that credit institution, in particular with regard to capital adequacy,
liquidity, solvency, deposit guarantees, the limiting of large exposures, administrative
and accounting procedures and internal control.
For the purposes of verifying this information, the competent authority of the home
Member State may also request the CSSF to have this verification made. The CSSF
shall, within the framework of its powers, carry out the verification itself, or appoint to
this end and chargeable to the credit institution an auditor or expert.
85
(8) For the purposes of supervising the activities of the branches established by a credit
institution incorporated under Luxembourg law in another Member State, the CSSF
may, after having first informed the competent authority of the host Member State,
carry on itself or through the intermediary of persons it appoints for that purpose on-
the-spot verification of information concerning the management and ownership of
that credit institution that is likely to facilitate its supervision and the examination of
the conditions for its authorisation, and all information likely to facilitate the
monitoring of that institution, in particular with regard to capital adequacy, liquidity,
solvency, deposit guarantees, the limiting of large exposures, administrative and
accounting procedures and internal control.
For the purposes of verifying this information, the CSSF may also request the
competent authority of the host Member State to have this verification made.
(9) The competent authority of the home Member State may, in the exercise of its
responsibilities and after informing the CSSF, carry on itself or through the
intermediary of persons it appoints for that purpose on-the-spot verification or
investigations within Luxembourg branches of investment firms authorised in the
home Member State.
The competent authority of the home Member State may also request the CSSF to
have this verification made. The CSSF shall, within the framework of its powers,
carry out the verification itself, or appoint to this end and chargeable to the
investment firm an auditor or expert.
(10) The CSSF may, in the exercise of its responsibilities and after informing the
competent authority of the host Member State, carry on itself on-the-spot
verifications or investigations within branches established by investment firms
incorporated under Luxembourg law in that host Member State.”
“Art. 46. Precautionary measures available to the CSSF as host Member State
(1) Where the CSSF has clear and demonstrable grounds for believing that a credit
institution or investment firm of another Member State having a branch or acting
within the Luxembourg territory under the freedom to provide services is in breach of
the obligations arising from the provisions of this law which do not confer powers on
the CSSF, it shall refer those findings to the competent authority of the home
Member State of the credit institution or investment firm.
If, despite the measures taken by the competent authority of the home Member
State of the credit institution or investment firm or because such measures prove
inadequate, the said credit institution or investment firm persists in acting in a
manner that is clearly prejudicial to the interests of host Member State investors or
the orderly functioning of markets, the CSSF, after informing the competent authority
of the home Member State of the credit institution or investment firm, shall take all
the appropriate measures needed in order to protect investors and the proper
functioning of the markets in Luxembourg. This shall include the possibility of
preventing the offending credit institution or investment firm from initiating any further
transactions in Luxembourg. The CSSF shall inform the European Commission of
such measures without delay.
(2) Where the CSSF ascertains that a credit institution or an investment firm of another
Member State having a branch in Luxembourg is not complying with the provisions
of this law which confer powers to the CSSF, the CSSF enjoins the offending credit
institution or investment firm to put an end to its irregular situation.
If the credit institution or investment firm concerned fails to take the necessary steps,
the CSSF shall take all appropriate measures to ensure that the credit institution or
investment firm puts an end to its irregular situation. The CSSF shall inform the
86
competent authority of the home Member State of the credit institution or investment
firm of the nature of those measures.
If, despite the measures taken by the CSSF, the credit institution or investment firm
persists in breaching the legal or regulatory provisions of this law which confer
powers on the CSSF, the latter may, after informing the competent authority of the
home Member State of the credit institution or investment firm, take appropriate
measures to prevent or to penalise further irregularities and, in so far as necessary,
to prevent that credit institution or investment firm from initiating any further
transactions in Luxembourg. The CSSF shall inform the European Commission of
such measures without delay.
(3) Any measure adopted pursuant to paragraphs (1) and (2), involving sanctions or
restrictions on the activities of a credit institution or investment firm, shall be properly
justified and communicated to the credit institution or investment firm concerned. An
appeal against these measures may be lodged within one month, and may be struck
out if it is not so lodged, before the “Tribunal administratif” [administrative court],
which shall determine the matter as a court adjudicating on the substance.
(4) Before following the procedure provided for in paragraph (2), the CSSF may, in
emergencies, take any precautionary measures necessary to protect the interests of
depositors, investors and others to whom services are provided. The CSSF shall
inform the European Commission and the competent authorities of the other
Member States concerned of the adoption of such measures without delay.
(5) Where the CSSF is informed by the competent authority of the home Member State
of the withdrawal of authorisation from a credit institution having a branch or acting
under the freedom to provide services in Luxembourg, it shall take appropriate
measures to prevent the credit institution concerned from initiating further
transactions in Luxembourg and to safeguard the interests of the depositors.”
Art. 47 Supervision of certain Community financial institutions
“Articles 45 and 46 shall apply mutatis mutandis to the supervision of Community
financial institutions, including those governed by Luxembourg law, which carry on
business in a Member State other than their “home Member State”139, whether by
means of the setting up of a branch or by way of the provision of services, in
accordance with the conditions laid down in Article 31.”
“Chapter 2a: Prudential supervision of payment and securities settlement systems

authorised in Luxembourg”140
Art. 47-1 Prudential supervision of payment and securities settlement systems

authorised in Luxembourg
“Without prejudice to the tasks imposed and the competences conferred on the
European System of Central Banks by the Treaty establishing the European
Community and by the statutes of the European System of Central Banks and of the
European Central Bank, as well as those allocated to the Luxembourg Central Bank,
the CSSF shall be the competent authority responsible for the prudential supervision
of payment and securities settlement systems authorised by the Minister. The
139
140
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objective of that supervision, which shall relate to the operational and financial
stability of each system and participants in systems, shall be to ensure the stability of
the financial system as a whole. To that end, the CSSF shall monitor the application
of the rules governing the functioning and implementation of the settlement
procedures and risk management procedures attaching to the systems which it
supervises.”
Chapter 3: Supervision of credit institutions on a consolidated basis
Art. 48 Definitions
(Law of 3 May 1994)
“For the purposes of this Chapter:
“…”141
– (Law of 5 November 2006) ““financial holding company” means a financial
institution, the subsidiary undertakings of which are either exclusively or mainly
credit institutions or financial institutions, at least one of such subsidiaries being
a credit institution, and which is not a mixed financial holding company within
the meaning of Article 51-9(3);”
– (Law of 5 November 2006) ““mixed-activity holding company” means a parent
undertaking, other than a financial holding company or a credit institution or a
mixed financial holding company within the meaning of Article 51-9(3);”
– (Law of 7 November 2007) ““ancillary services undertaking” means an
undertaking the principal activity of which consists in owning or managing
property, managing data-processing services, or any other similar activity which
is ancillary to the principal activity of one or more credit institutions or of one or
more investment firms;”
“…”142
– (Law of 7 November 2007) ““Luxembourg parent financial holding company”
means a financial holding company set up in Luxembourg which is not itself a
subsidiary of a credit institution authorised in Luxembourg or of another
financial holding company set up in Luxembourg;”
– (Law of 7 November 2007) ““EU parent financial holding company” means a
parent financial holding company set up in a Member State which is not a
subsidiary of a credit institution authorised in any Member State or of another
financial holding company set up in any Member State;”
– (Law of 7 November 2007) ““Luxembourg parent credit institution” means a
credit institution authorised in Luxembourg which has a credit institution or a
financial institution as a subsidiary or which holds a participation in such an
institution, and which is not itself a subsidiary of another credit institution
authorised in Luxembourg, or of a financial holding company set up in
Luxembourg;”
– (Law of 7 November 2007) ““EU parent credit institution” means a parent credit
institution authorised in a Member State which is not a subsidiary of another
credit institution authorised in any Member State, or of a financial holding
company set up in any Member State.”
141
142
88
Art. 49 Scope and parameters of supervision on a consolidated basis
(Law of 3 May 1994)
“(1) (Law of 7 November 2007) “The CSSF exercises a prudential supervision based on
the consolidated financial situation of the credit institution, to the extent and as
specified in this chapter, on any Luxembourg parent credit institution. Moreover, the
CSSF exercises a prudential supervision based on the consolidated financial
situation of the credit institution, to the extent and as specified in this chapter, on any
Luxembourg parent credit institution whose subsidiary is an investment firm.”
(2) (a) “Where a Luxembourg parent financial holding company has a subsidiary
authorised as credit institution under this law, the CSSF exercises a prudential
supervision based on the consolidated financial situation of the financial holding
company, to the extent and as specified in this chapter.”143 “Without prejudice to
Article 51-1(1)(b), the consolidation of the financial situation of the financial
holding company shall not in any way imply that the CSSF is required to play a
supervisory role in relation to the financial holding company on a stand-alone
basis.”144
(b) (Law of 7 November 2007) “Where a Luxembourg parent financial holding
company has subsidiaries authorised as credit institutions in two or more
Member States among which a credit institution authorised under this law, the
supervision on a consolidated basis is exercised by the CSSF. Where the
parents of credit institutions authorised in two or more Member States comprise
more than one financial holding company set up in different Member States and
at least one of these credit institutions is authorised in each of these Member
States, supervision on a consolidated basis shall be exercised by the CSSF if
the credit institution authorised in Luxembourg shows the largest balance sheet
total.”
(c) (Law of 7 November 2007) “Where more than one credit institution authorised in
the EU has as its parent the same financial holding company and none of these
credit institutions has been authorised in the Member State in which the
financial holding company was set up, supervision on a consolidated basis shall
be exercised by the CSSF if among these credit institutions, the one authorised
in Luxembourg shows the largest balance sheet total.”
(d) (Law of 7 November 2007) “In particular cases, the CSSF and the competent
authorities of other Member States may by common agreement waive the
criteria referred to in points (b) and (c) if their application would be
inappropriate, taking into account the credit institutions and the relative
importance of their activities in the various Member States, and appoint different
competent authorities to exercise supervision on a consolidated basis. Before
taking their decision, the competent authorities shall give the EU parent credit
institution, or EU parent financial holding company, or credit institution with the
largest balance sheet total, as appropriate, an opportunity to state its opinion on
that decision.”
(e) (Law of 7 November 2007) “The CSSF shall notify the European Commission of
any agreement falling within point (d).”
(3) (Law of 7 November 2007) “Where consolidated supervision by the CSSF is required
pursuant to this article, ancillary services undertakings and asset management
companies as defined in Directive 2002/87/EC shall be included in consolidations in
the cases, and in accordance with the methods, laid down in article 50.”
143
144
89
(4) (Law of 7 November 2007) “The CSSF may decide in individual cases that a credit
institution, financial institution or ancillary services undertaking which is a subsidiary
or in which a participation is held need not be included in the consolidation:
– where the undertaking concerned is situated in a third country where there are
legal impediments to the transfer of the necessary information;
– where, in the opinion of the CSSF, the undertaking concerned is of negligible
interest only with respect to the objectives of the consolidated supervision of
credit institutions and in any event where the balance-sheet total of the
undertaking concerned is less than the smaller of the following two amounts:
(i) 10 million euros; or
(ii) 1% of the balance-sheet total of the parent undertaking or the undertaking
that holds the participation;
– where, in the opinion of the CSSF, the consolidation of the financial situation of
the undertaking concerned would be inappropriate or misleading as far as the
objectives of the consolidated supervision of credit institutions are concerned.
If, in the cases referred to in the first subparagraph, second indent, several
undertakings meet the criteria set out therein, they shall nevertheless be included in
the consolidation where collectively they are of non-negligible interest with respect to
consolidated supervision.”
Art. 50 Form and extent of consolidation

(Law of 3 May 1994)
“(1) The CSSF shall require full consolidation of all the credit institutions and financial
institutions which are subsidiaries of a parent undertaking.
However, proportional consolidation may be prescribed where, in the opinion of the
CSSF, the liability of a parent undertaking holding a share of the capital is limited to
that share of the capital because of the liability of the other shareholders or members
whose solvency is satisfactory. The liability of the other shareholders and members
must be clearly established, if necessary by means of formal, signed commitments.
“In the case where undertakings are linked by the fact of being managed on a unified
basis pursuant to a contract or provisions in the memorandum or articles of
association or by the fact of having administrative, management or supervisory
bodies consisting for the major part of the same persons, the CSSF shall determine
how consolidation is to be carried out.”145
(2) The CSSF shall require the proportional consolidation of participations in credit
institutions and financial institutions managed by an undertaking included in the
consolidation together with one or more undertakings not included in the
consolidation, where those undertakings’ liability is limited to the share of the capital
they hold.
(3) In the case of participations or capital ties other than those referred to in paragraphs
1 and 2, the CSSF shall determine whether and how consolidation is to be carried
out. In particular, it may permit or require use of the equity method. That method
shall not, however, constitute inclusion of the undertakings concerned in supervision
on a consolidated basis.
(4) Without prejudice to paragraphs 1, 2 and 3, the CSSF shall determine whether and
how consolidation is to be carried out in the following cases:
145
90
– where, in the opinion of the CSSF, a credit institution exercises a significant
influence over one or more credit institutions or financial institutions, but without
holding a participation or other capital ties in those institutions,
– where two or more credit institutions or financial institutions are placed under
single management other than pursuant to a contract or clauses of their
memoranda or articles of association,
(…)146
In particular, the CSSF may permit, or require use of, the method whereby the items
in respect of the capital, reserves and profit or loss of each of the undertakings
concerned are aggregated. That method shall not, however, constitute inclusion of
the undertakings concerned in consolidated supervision.”
“Art. 50-1 Cooperation with the other authorities responsible for prudential supervision
(1) Where the CSSF is responsible for the exercise of supervision on a consolidated
basis of credit institutions authorised in Luxembourg which are EU parent credit
institutions or credit institutions controlled by EU parent financial holding companies,
it shall in addition carry out the following tasks:
(a) coordination of the gathering and dissemination of relevant or essential
information in going concern and emergency situations;
(b) planning and coordination of supervisory activities in going concern as well as in
emergency situations, including in relation to the activities concerned by the
prudential supervision, in cooperation with the competent authorities involved;
(c) receipt of the application by an EU parent credit institution and by its
subsidiaries or jointly by the subsidiaries of an EU parent financial holding
company in order to use the internal ratings-based approach for the calculation
of capital requirement for credit risk, the internal model method for counterparty
credit risk, the advanced measurement approach for operational risk coverage
and the internal market risk-management model for market risk.
(2) In the case of applications to the CSSF as referred to in paragraph (1)(c), submitted
by an EU parent credit institution and its subsidiaries, or jointly by the subsidiaries of
an EU parent financial holding company, the CSSF shall work together with the other
competent authorities, in full consultation, to decide whether or not to grant the
permission sought and to determine the terms and conditions, if any, to which such
permission should be subject.
The CSSF and the other competent auhorities shall do everything within their power
to reach a joint decision on the application within six months. This fully reasoned
joint decision is provided by the CSSF to the applicant.
The period referred to in the previous subparagraph shall begin on the date of
receipt of the complete application by the CSSF. The CSSF shall forward the
complete applicatin to the other competent authorities without delay.
In the absence of a joint decision between the competent authorities within six
months, the CSSF shall make its own decision on the application. Its decision shall
be set out in a document containing the fully reasoned decision and shall take into
account the views and reservations of the other competent authorities expressed
146
91
during the six months period. The decision shall be provided to the applicant and the
other competent authorities by the CSSF.
If the CSSF receives a notification of such decision by another EU competent
authority, the notification shall be applied.
(3) In the context of consolidated prudential supervision, the CSSF shall closely
cooperate with the other competent authorities. They shall provide one another with
any information which is essential or relevant for the exercise of their prudential
supervision. In this regard, the CSSF and the other competent authorities shall
communicate on request all relevant information and shall communicate on their own
initiative all essential information.
Information referred to in the first subparagraph shall be regarded as essential if it
could materially influence the assessment of the financial soundness of a credit
institution or financial institution in another Member State.
In particular, in its role of authority responsible for consolidated supervision of EU
parent credit institutions or credit institutions controlled by an EU parent financial
holding company, the CSSF shall provide the competent authorities in other Member
States who supervise subsidiaries of these parents with all relevant information. In
determining the extent of relevant information, the importance of these subsidiaries
within the financial system in those Member States shall be taken into account.
The essential information referred to in the first subparagraph shall include, in
particular, the following items:
(a) identification of the group structure of all major credit institutions in a group, as
well as of the competent authorities of the credit institutions in the group;
(b) procedures for the collection of information from the credit institutions in a
group, and the verification of that information;
(c) adverse developments in credit institutions or in other entities of a group, which
could seriously affect the credit institutions;
(d) major sanctions or exceptional measures taken by the CSSF, including the
imposition of an additional capital charge and the imposition of any limitation on
the use of the Advanced Measurement Approach for the calculation of the own
funds requirements for coverage of operational risk.
(4) Where the CSSF is responsible for the supervision of credit institutions controlled by
an EU parent credit institution, it shall whenever possible contact the competent
authorities responsible for consolidated supervision of the EU parent credit institution
or of the credit institution controlled by an EU parent financial holding company when
it needs information regarding the implementation of approaches and methodologies
set out in Directives 2006/48/EC and 2006/49/EC that may already be available to
those competent authorities.
(5) The CSSF shall, prior to its decision, consult the other competent authorities with
regard to the following items, where this decision is of importance for other
competent authorities’ supervisory tasks:
(a) changes in the shareholder, organisational or management structure of credit
institutions in a group, which require the approval or authorisation of competent
authorities; and
(b) major sanctions or exceptional measures, including the imposition of an
additional capital charge and the imposition of any limitation on the use of the
Advanced Measurement Approach for the calculation of the own funds
requirements for coverage of operational risk.
92
For the purposes of point (b), the CSSF shall always consult the competent
authority responsible for supervision on a consolidated basis of the group to
which the Luxembourg credit institution belongs. However, the CSSF may
decide not to consult in cases of urgency or where such consultation may
jeopardise the effectiveness of its decision. The CSSF shall forthwith inform the
other relevant competent authorities.
(6) Where an emergency situation arises within a group, as defined under point 15 of
article 51-9, which potentially jeopardises the stability of the financial system in any
of the Member States where entities of a group have been authorised, and the CSSF
is the competent authority responsible for supervision on a consolidated basis in
accordance with article 49, it shall alert as soon as is practicable, the other
competent authorities. Where possible, the CSSF shall use existing defined
channels of communication.
(7) The CSSF in its role as competent authority responsible for supervision on a
consolidated basis shall, when it needs information which has already been given to
another competent authority, contact this authority whenever possible in order to
prevent duplication of reporting to the various authorities involved in supervision.
(8) In order to facilitate and establish effective supervision, the CSSF in its role as
competent authority responsible for supervision on a consolidated basis and the
other competent authorities shall have written coordination and cooperation
arrangements in place.
Under these arrangements additional tasks may be entrusted to the CSSF in its role
as competent authority responsible for supervision on a consolidated basis and
procedures for the decision-making process and for cooperation with other
competent authorities, may be specified.”
Art. 51 Content of supervision on a consolidated basis

(Law of 3 May 1994)
“(1) (Law of 7 November 2007) “Supervision on a consolidated basis shall include at
least:
(a) supervision of capital adequacy for credit risk, market risk, operational risk and
for the control of large exposures;
(b) internal process for internal capital adequacy assessment;
(c) compliance with article 5(1a).
The CSSF shall adopt any measures necessary, where appropriate, to include
parent financial holding companies in consolidated supervision, in accordance with
paragraph (2) of article 49.
Compliance with the limits laid down for holdings is subject to supervision and
control on the basis of the credit institution’s consolidated or sub-consolidated
financial situation.”
(1a) (Law of 5 November 2006) “Without prejudice to the rules relating to the control of
large exposures, the CSSF shall exercise general supervision over transactions
between credit institutions incorporated under Luxembourg law and their parent
undertaking, if it is a mixed-activity holding company, and the latter’s subsidiaries.
Credit institutions are required to have in place adequate risk management
processes and internal control mechanisms, including sound accounting and
reporting procedures, in order to identify, measure, monitor and control transactions
with the mixed-activity holding company and its subsidiaries appropriately. Credit
93
institutions shall report to the CSSF any significant transaction with these entities,
other than under the regulation relating to large exposures. These procedures and
significant transactions are controlled by the CSSF.
Where these transactions jeopardize the financial situation of a credit institution
incorporated under Luxembourg law, the CSSF shall enjoin, by registered letter, the
credit institution concerned to remedy within such period as it may prescribe the
situation found to exist.”
(2) Prudential supervision on a consolidated basis shall not affect supervision on a non-
consolidated basis.
(3) (Law of 7 November 2007) “Where a credit institution, subsidiary of an EU parent
credit institution, has been authorised in Luxembourg, the CSSF shall apply to this
institution the rules set out in paragraph (1) on an individual or, where applicable,
sub-consolidated basis.
The CSSF may choose not to apply, on a sub-consolidated or individual basis, the
rules set out in paragraph (1) to a subsidiary of a Luxembourg parent credit
institution authorised and supervised in Luxembourg, if the subsidiary is included in
the supervision on a consolidated basis of the Luxembourg parent credit institution in
accordance with article 49. Moreover, all of the following conditions shall be
satisfied, in order to ensure that own funds are distributed adequately among the
parent undertaking and its subsidiary:
(a) there is no current or foreseen material practical or legal impediment to the
prompt transfer of own funds or repayment of liabilities by the parent
undertaking;
(b) either the parent undertaking satisfies the CSSF regarding the prudent
management of the subsidiary and has declared, with the consent of the CSSF,
that it guarantees the commitments entered into by the subsidiary, or the risks
in the subsidiary are of negligible interest;
(c) the risk evaluation, measurement and control procedures of the parent
undertaking cover the subsidiary;
(d) the parent undertaking holds more than 50% of the voting rights attaching to
shares in the capital of the subsidiary and/or has the right to appoint or remove
a majority of the members of the management body in charge of the
subsidiary.”
(4) (Law of 5 November 2006) “Persons who effectively direct the business of a financial
holding company shall prove to be of good professional repute. Such repute shall be
assessed on the basis of police records and of any evidence tending to show that
the persons concerned are of good repute and offering guarantee of irreproachable
conduct on part of those persons. In addition, those persons shall possess an
adequate professional experience by having previously exercised similar activities at
a high level of responsibility and autonomy.
Any change in the persons as referred to above shall be authorised in advance by
the CSSF. To this effect, the CSSF may request all such information as may be
necessary regarding the concerned persons. An appeal against the decision of the
CSSF may be lodged within one month, and may be struck out if it is not so lodged,
before the Tribunal administratif [administrative court], which shall determine the
matter as a court adjudicating on the substance.”
(5) (Law of 7 November 2007) “The CSSF may exercise the option provided for in
paragraph (3) where the parent undertaking is a Luxembourg financial holding
company, provided that it is subject to the same supervision as that exercised over
credit institutions, in accordance with paragraph (1).”
94
(6) (Law of 7 November 2007) “The CSSF may choose not to apply, on an individual
basis, the rules set out in paragraph (1) to a Luxembourg parent credit institution
where this credit institution is supervised by the CSSF and included in the
supervision on a consolidated basis in accordance with article 49. Moreover, all of
the following conditions shall be satisfied, in order to ensure that own funds are
distributed adequately among the parent undertaking and its subsidiaries:
prompt transfer of own funds or repayment of liabilities by the parent credit
institution;
(b) the risk evaluation, measurement and control procedures relevant for
consolidated supervision cover the parent credit institution.
Where the CSSF makes use of the provisions of this paragraph, it shall inform the
competent authorities of all other Member States.”
(7) (Law of 7 November 2007) “Where the CSSF makes use of the discretion provided
for in paragraph (6), it shall disclose:
(a) the criteria it applies to determine that there is no current or foreseen material
practical or legal impediment to the prompt transfer of own funds or repayment
of liabilities;
(b) the number of parent credit institutions which benefit from the exercise of the
provisions of paragraph (6) and the number of these which incorporate
subsidiaries in a third country;
(c) on an aggregate basis for Luxembourg:
(i) the total amount of own funds on the consolidated basis of the
Luxembourg parent credit institution which benefits from the provisions of
paragraph (6), which are held in subsidiaries in a third country;
(ii) the percentage of total own funds on the consolidated basis of the
Luxembourg parent credit institutions which benefit from the provisions of
paragraph (6), represented by own funds which are held in subsidiaries in
a third country;
(iii) the percentage of total minimum own funds required to cover credit risk,
market risk and operational risk on a consolidated basis of Luxembourg
parent credit institutions which benefit from the provisions of paragraph (6),
represented by own funds which are held in subsidiaries in a third country.”
(8) (Law of 7 November 2007) “Where a Luxembourg parent credit institution has a
credit institution, financial institution or asset management company within the
meaning of article 2, point (5) of Directive 2002/87/EC as a subsidiary in a third
country or holds a participation in such institution, and which is a subsidiary of a
parent credit institution authorised in the EU, the CSSF shall apply to this institution
the rules set out in paragraph (1) on a sub-consolidated basis. The same applies
where the parent company of a Luxembourg credit institution is an EU parent
financial holding company and that the latter has a credit institution, financial
institution or asset management company within the meaning of article 2, point (5) of
Directive 2002/87/EC as a subsidiary in a third country or holds a participation in
such an institution.”
(9) (Law of 7 November 2007) “Subject to provisions set out in points (a) to (c), the
CSSF may allow on a case by case basis Luxembourg parent credit institutions to
incorporate their subsidiaries in the calculation of their capital requirements on an
individual basis, where these subsidiaries meet the conditions laid down in
paragraph (3), points (c) and (d), and whose material exposures or material liabilities
are to that parent credit institution.
95
(a) The treatment in this paragraph shall be allowed only where the parent credit
institution demonstrates fully to the CSSF the circumstances and arrangements,
including legal arrangements, by virtue of which there is no material practical or
legal impediment, and none are foreseen, to the prompt transfer of own funds,
or repayment of liabilities when due by the subsidiary to its parent undertaking.
(b) Where the CSSF exercises the discretion laid down in this paragraph, it shall on
a regular basis and not less than once a year inform the competent authorities
of all the other Member States of the use made of paragraph (1) and of the
circumstances and arrangements referred to in point (a). Where the undertaking
concerned is situated in a third country, the CSSF shall provide the same
information to the competent authorities of that third country as well.
(c) Where the CSSF makes use of the discretion provided for in this paragraph, it
shall disclose:
(i) the criteria it applies to determine that there is no current or foreseen
material practical or legal impediment to the prompt transfer of own funds
or repayment of liabilities;
(ii) the number of parent credit institutions which benefit from the exercise of
the provisions of this paragraph and the number of these which incorporate
(iii) on an aggregate basis for Luxembourg:
– the total amount of own funds of parent credit institutions benefiting
from the provisions of this paragraph which are held in subsidiaries in
a third country;
– the total percentage of own funds of parent credit institutions
benefiting from the provisions of this paragraph, represented by own
funds which are held in subsidiaries in a third country;
– the percentage of total minimum own funds required for capital
adequacy in order to cover credit risk, market risk and operational risk
of parent credit institutions which benefit from the provisions of this
paragraph, represented by own funds which are held in subsidiaries in
a third country.”

(Law of 3 May 1994)
“(1) Where the CSSF is called upon, pursuant to this Chapter, to exercise prudential
supervision of a credit institution on a consolidated basis, the following conditions
must be fulfilled:
(a) the structure of the direct and indirect participations covered by the
consolidation must be transparent and organised in such a way that the
prudential supervision can be exercised, without impediment, in the most
effective and direct way;
(b) the central administrative and accounting bodies and the management of all of
the undertakings included in the consolidation must be established in
Luxembourg;
(c) in all the undertakings included in the consolidation, there must be adequate
internal control mechanisms for the production of any data and information
which would be relevant for the purposes of supervision on a consolidated
basis.
96
(2) (a) In the exercise of prudential supervision of a credit institution on a consolidated
basis, the CSSF may require, for the purposes of such supervision, any
undertaking included in the consolidation, and the subsidiaries of a credit
institution or “financial holding company”147 which do not fall within the scope of
supervision on a consolidated basis, to supply any information which would be
relevant.
(b) Where the parent undertaking of one or more credit institutions subject to
supervision by the CSSF is a “mixed-activity holding company”148, the CSSF
shall, by approaching the “mixed-activity holding company”149 and its
subsidiaries either directly or via credit institution subsidiaries, require them to
supply any information which would be relevant for the purposes of supervising
the credit institution subsidiaries.
The CSSF may carry out, or have carried out by external inspectors, on-the-
spot inspections to verify information received from “mixed-activity holding
companies”150 and their subsidiaries. If the “mixed-activity holding company”151
or one of its subsidiaries is an insurance undertaking, it may also have recourse
to collaboration by the supervisory authority of that insurance undertaking. If the
“mixed-activity holding company”152 or one of its subsidiaries is situated in
another “Member State”153, on-the-spot verification of information shall be
carried out in accordance with the procedure laid down in paragraph 3 of this
Article.
(c) Where a credit institution authorised in Luxembourg which is the subsidiary of a
parent undertaking situated in another “Member State”154 is not included in the
consolidated supervision of that parent undertaking for one of the reasons set
out in Article 49(4), the CSSF may ask the parent undertaking for information
which may facilitate its supervision of that credit institution.
(3) (a) Where the CSSF is the competent authority responsible for supervising on a
consolidated basis a credit institution the parent undertaking of which is situated
in another “Member State”155, it may request the competent authority of that
other “Member State”156 to ask the parent undertaking for any information which
would be relevant for the purposes of supervision on a consolidated basis and
to transmit the same to the CSSF.
Where it receives such a request from the competent authority of another
“Member State”157 and the parent undertaking is situated in Luxembourg, the
CSSF must act on that request by asking the parent undertaking for the
relevant information and by transmitting it to that authority.
(b) Where, in the context of the supervision of credit institutions on a consolidated
basis, the CSSF wishes in specific cases to verify information concerning a
credit institution, a “financial holding company”158, a financial institution, an
ancillary banking services undertaking, a “mixed-activity holding company”159 or
147
148
149
150
151
152
153
154
155
156
157
158
159
97
one of its subsidiaries or a subsidiary of a credit institution or “financial holding
company”160 which does not fall within the scope of consolidated supervision
and is situated in another “Member State”161, it may ask the competent
authorities of that other “Member State”162 to have that verification carried out.
“Where the CSSF is not authorised by the competent authority of the other
“Member State”163 to carry out the verification itself, it shall, if it so wishes,
request to participate in it.”164
“Where it receives such a request for verification from the competent authority
of another “Member State”165, the CSSF shall, within the framework of its
competences, act upon that request either by carrying out the request itself or
by having an auditor or expert carrying it out, or by allowing the authority which
made the request to carry it out itself.
The competent authority which made the request may, if it so wishes,
participate in the verification when it does not carry out the verification itself.” 166
(4) (a) Each undertaking falling within the scope of the supervision of a credit
institution on a consolidated basis, together with “mixed-activity holding
companies”167 and their subsidiaries and the subsidiaries of a credit institution
or “financial holding company”168 that do not fall within the scope of supervision
on a consolidated basis, shall be required, upon demand by the competent
supervisory authorities, to provide any information which would be relevant for
the purposes of supervision on a consolidated basis.
They shall be authorised to exchange such information with each other.
(b) Where a credit institution authorised in another “Member State”169 which is the
subsidiary of a parent undertaking situated in Luxembourg is not included by
the CSSF in its consolidated supervision for one of the reasons set out in Article
49(4), the parent undertaking shall be required upon demand to provide to the
supervisory authority of the Member State in which that credit institution
subsidiary is situated any information which may facilitate the supervision of
that credit institution subsidiary.
(5) The collection or possession by the CSSF of information from or concerning an
undertaking for the purposes of supervising a credit institution on a consolidated
basis shall not in any way imply that the CSSF is required to play a supervisory role
in relation to that undertaking standing alone.
However, in the event of non-compliance with the provisions of this article by an
undertaking which is not subject to prudential supervision by the CSSF, the CSSF
may call upon it, by registered letter, to remedy the situation found to exist within a
period fixed by the CSSF. Article 63 of this Law shall apply to persons in charge of
the administration or management of such an undertaking.”
160
161
162
163
164
165
166
167
168
169
98
“(1) Where a credit institution incorporated under Luxembourg law, whose parent
undertaking is a credit institution or financial holding company having its head office
in a third country, is not subject to consolidated supervision pursuant to Article 49,
the CSSF shall verify that this credit institution is subject to consolidated supervision,
exercised by the competent authority of a third country, equivalent to that exercised
by the CSSF based on the principles set out under Article 49 et seq. The CSSF
carries out this verification, on its own initiative or at the request of the parent
undertaking or of any of the regulated entities authorised by a Member State,
whenever it exercises the consolidated supervision if paragraph (2) were to apply.
“Regulated entity” means a regulated entity within the meaning of Article 51-9(7).
Before taking its decision, the CSSF shall consult the other relevant competent
authorities concerned regarding the equivalence or not of this consolidated
supervision exercised by the competent authority of the third country. It shall take
into consideration the applicable guidelines issued by the European Banking
Committee. For this purpose, the CSSF may consult this Committee before taking a
decision.
(2) Where the CSSF, based on the verification described in paragraph (1) establishes
the absence of equivalent consolidated supervision, the provisions concerning
consolidated supervision as referred to in Article 49 et seq. shall apply by analogy.
(3) By way of derogation from paragraph (2), the CSSF may decide, when it exercises
consolidated supervision, after consultation with the other relevant competent
authorities, to apply a different method to achieve the objectives of consolidated
supervision of credit institutions. The CSSF may in particular require the
establishment of a financial holding company with head office in a Member State and
apply the provisions relating to consolidated supervision to the consolidated situation
of that financial holding company.
The CSSF shall inform the other relevant competent authorities and the European
Commission of any decision taken in accordance with this paragraph.”
99
“Chapter 3a: Supervision of investment firms on a consolidated basis”170
“…”171
– “financial institution” means an undertaking other than a credit institution or
investment firm engaging as its principal activity in the acquisition of
participations or the pursuit of one or more of the activities listed in points 2 to
12 of Annex I hereto;
– (Law of 5 November 2006) ““financial holding company” means a financial
institution the subsidiary undertakings of which are either exclusively or mainly
investment firms, or other financial institutions, one at least of such subsidiaries
being an investment firm, and which is not a mixed financial holding company
within the meaning of Article 51-9(3);”
– (Law of 5 November 2006) ““mixed-activity holding company” means a parent
undertaking other than a financial holding company or an investment firm or a
mixed financial holding company within the meaning of Article 51-9(3);”
“…”172
– (Law of 7 November 2007) ““ancillary services undertaking” means an
undertaking within the meaning of article 48;”
“…”173
– (Law of 7 November 2007) ““Luxembourg parent financial holding company”
means a financial holding company which is not itself a subsidiary of a credit
institution or investment firm authorised in Luxembourg or of another financial
holding company set up in Luxembourg;”
– (Law of 7 November 2007)““EU parent financial holding company” means a
parent financial holding company in a Member State which is not a subsidiary of
a credit institution or investment firm authorised in any Member State or of
another financial holding company set up in any Member State;”
– (Law of 7 November 2007) ““Luxembourg parent investment firm” means an
investment firm authorised in Luxembourg which has a credit institution or an
investment firm, or a financial institution as a subsidiary or which holds a
participation in such an institution, and which is not itself a subsidiary of another
credit institution authorised in Luxembourg, or of a financial holding company
set up in Luxembourg;”
– (Law of 7 November 2007) ““EU parent investment firm” means a parent
investment firm in a Member State which is not a subsidiary of another
institution authorised in any Member State or of another financial holding
company set up in any Member State.”
“Furthermore, for the purposes of this chapter, the terms “investment firm” shall
include third-country investment firms.”174
170
171
172
173
174
100
“Section I: Luxembourg parent investment firms having no credit institution as a
subsidiary or holding no participation in a credit institution, and investment firms whose
parent undertaking is a Luxembourg or EU parent financial holding company having no
credit institution as a subsidiary or holding no participation in a credit institution.”175
Art. 51-3 Scope and parameters of supervision on a consolidated basis

“(1) (Law of 7 November 2007) “The CSSF exercises a prudential supervision based on
the consolidated financial situation of the investment firm, to the extent and as
specified in this section, on any Luxembourg parent investment firm not having a
credit institution as a subsidiary nor holding a participation in a credit institution.”
(2) (a) “Where a Luxembourg parent financial holding company having no credit
institution as a subsidiary nor holding a participation in a credit institution has an
investment firm authorised in accordance with this law as a subsidiary, the
CSSF exercises a prudential supervision based on the consolidated financial
situation of the financial holding company, to the extent and as specified in this
section.”176. “Without prejudice to Article 51-6(1), second indent, the
consolidation of the financial situation of the financial holding company shall not
in any way imply that the CSSF is required to play a supervisory role in relation
to the financial holding company on a stand-alone basis.” 177
(b) (Law of 7 November 2007) “Where a Luxembourg financial holding company
has subsidiaries authorised as investment firms in more than one Member State
among which an investment firm authorised under this law, the supervision on a
consolidated basis is exercised by the CSSF.
Where the parents of investment firms authorised in two or more Member
States comprise more than one financial holding company set up in different
Member States and at least one of these investment firms is authorised in each
of these Member States, supervision on a consolidated basis shall be exercised
by the CSSF if the investment firm authorised in Luxembourg shows the largest
balance sheet total.”
(c) (Law of 7 November 2007) “Where more than one investment firm authorised in
the EU has as its parent the same financial holding company and none of these
investment firms has been authorised in the Member State in which the
financial holding company was set up, supervision on a consolidated basis shall
be exercised by the CSSF if among these investment firms, the one authorised
in Luxembourg shows the largest balance sheet total.”
(d) (Law of 7 November 2007) “In particular cases, the CSSF and the competent
authorities of other Member States may by common agreement waive the
criteria referred to in points (b) and (c) if their application would be
inappropriate, taking into account the investment firms and the relative
importance of their activities in the various Member States, and appoint different
competent authorities to exercise supervision on a consolidated basis. Before
taking their decision, the competent authorities shall give the EU parent
investment firm, or EU parent financial holding company, or investment firm with
the largest balance sheet total, as appropriate, an opportunity to state its
opinion on that decision.”
175
176
177
101
(e) (Law of 7 November 2007) “The CSSF shall notify the European Commission of
any agreement falling within point (d).”
(3) (Law of 7 November 2007) “Where consolidated supervision by the CSSF is required
pursuant to this article, ancillary services undertakings and asset management
companies as defined in Directive 2002/87/EC shall be included in consolidations in
the cases, and in accordance with the methods, laid down in article 51-4.”
(4) (Law of 7 November 2007) “The CSSF may decide in individual cases that an
investment firm, financial institution or ancillary services undertaking which is a
subsidiary or in which a participation is held need not be included in the
consolidation:
– where the undertaking concerned is situated in a third country where there are
legal impediments to the transfer of the necessary information;
– where, in the opinion of the CSSF, the undertaking concerned is of negligible
interest only with respect to the objectives of the consolidated supervision of
investment firms and in any event where the balance-sheet total of the
undertaking concerned is less than the smaller of the following two amounts:
(i) 10 million euros; or
(ii) 1% of the balance-sheet total of the parent undertaking or the undertaking
that holds the participation;
– where, in the opinion of the CSSF, the consolidation of the financial situation of
the undertaking concerned would be inappropriate or misleading as far as the
objectives of the consolidated supervision of investment firms are concerned.
If, in the cases referred to in the first subparagraph, second indent, several
undertakings meet the criteria set out therein, they shall nevertheless be included in
the consolidation where collectively they are of non-negligible interest with respect to
consolidated supervision.”
(5) (Law of 7 November 2007) “The CSSF may waive the supervision of investment
firms on a consolidated basis provided that:
(a) any investment firm likely to be included in the supervision on a consolidated
basis:
– is not authorised to provide the investment services listed in Annexe I,
section A, points 3 and 6 to Directive 2004/39/EC; or
– is an investment firm that has a capital base of 730.000 euros and which is
authorised to deal on own account only for the purpose of executing a
client order or for the purpose of gaining entrance to a clearing and
settlement system or a recognised exchange when acting in an agency
capacity or executing a client order; or
– is an investment firm:
(i) that does not hold client money or securities;
(ii) that undertakes only dealing on own account;
(iii) that has no external customers;
(iv) the execution and settlement of whose transactions takes place under
the responsibility of a clearing institution and are guaranteed by that
clearing institution;
(b) that each investment firm in the European Union, referred to under point a),
complies with the following requirements:
102
– its illiquid assets are deducted from its own funds;
– it is subject to a supervision on an individual basis concerning at least
capital adequacy for credit risk, operational risk, market risk and for the
control of large exposures;
– it deducts from its own funds any contingent liability in favour of investment
firms, financial institutions, asset management companies or ancillary
services undertakings, whose accounts would otherwise be consolidated;
– it shall have in place systems to monitor and control the sources of capital
and funding of all financial holding companies, investment firms, financial
institutions, asset management companies and ancillary services
undertakings which might be included within the consolidated supervision.
(c) the parent financial holding company of an investment firm in Luxembourg
belonging to such group holds at least as much capital, defined as the sum of
original own funds, equivalent to the sum of the full book value of any holdings,
cumulative preference shares with no fixed maturity, subordinated claims and
instruments in investment firms, financial institutions, asset management
companies and ancillary services undertakings which would otherwise be
consolidated, and the total amount of any contingent liability in favour of
investment firms, financial institutions, asset management companies and
ancillary services undertakings which would otherwise be consolidated.
By way of derogation from point (c), the CSSF may permit the Luxembourg parent
financial holding company of an investment firm in such a group to use a value lower
than the value calculated under point (c), but no lower than the sum of the capital
requirements imposed on an individual basis to investment firms, financial
institutions, asset management companies and ancillary services undertakings to
cover credit risk, market risk, and operational risk, which would otherwise be
consolidated and the total amount of any contingent liability in favour of investment
firms, financial institutions, asset management companies and ancillary services
undertakings which would otherwise be consolidated. For the purposes of this
paragraph, the capital requirement for investment undertakings of third countries,
financial institutions, asset management companies and ancillary services
undertakings is a notional capital requirement.
The investment firms authorised in Luxembourg which have been granted the waiver
of a consolidated supervision by the CSSF shall be required to notify the CSSF of
the risks which could undermine the financial positions of these investment firms,
including those associated with the composition and sources of their capital and
funding.
If the CSSF considers that the financial positions of the investment firms authorised
in Luxembourg which have been granted the waiver of a consolidated supervision by
the CSSF are not adequately protected, it shall require them to take measures
including, if necessary, limitations on the transfer of capital from such investment
firms to other group entities.
The CSSF may apply the provisions of article 51-5, paragraph (3).”
Art. 51-4 Form and extent of consolidation

“(1) The CSSF shall require full consolidation of all the investment firms and financial
institutions which are subsidiaries of a parent undertaking.
103
However, proportional consolidation may be prescribed where, in the opinion of the
CSSF, the liability of a parent undertaking holding a share of the capital is limited to
that share of the capital because of the liability of the other shareholders or members
whose solvency is satisfactory. The liability of the other shareholders and members
must be clearly established, if necessary by means of formal, signed commitments.
“In the case where undertakings are linked by the fact of being managed on a unified
basis pursuant to a contract or provisions in the memorandum or articles of
bodies consisting for the major part of the same persons, the CSSF shall determine
how consolidation is to be carried out.”178
(2) The CSSF shall require the proportional consolidation of participations in investment
firms and financial institutions managed by an undertaking included in the
consolidation together with one or more undertakings not included in the
consolidation, where those undertakings’ liability is limited to the share of the capital
they hold.
(3) In the case of participations or capital ties other than those referred to in paragraphs
1 and 2, the CSSF shall determine whether and how consolidation is to be carried
out. In particular, it may permit or require use of the equity method. That method
shall not, however, constitute inclusion of the undertakings concerned in supervision
on a consolidated basis.
(4) Without prejudice to paragraphs 1, 2 and 3, the CSSF shall determine whether and
how consolidation is to be carried out in the following cases:
– where, in the opinion of the CSSF, an investment firm exercises a significant
influence over one or more investment firms or other financial institutions, but
without holding a participation or other capital ties in those institutions,
– where two or more investment firms or financial institutions are placed under
single management other than pursuant to a contract or clauses of their
memoranda or articles of association,
(…)179
In particular, the CSSF may permit, or require use of, the method whereby the items
in respect of the capital, reserves and profit or loss of each of the undertakings
concerned are aggregated. That method shall not, however, constitute inclusion of
the undertakings concerned in consolidated supervision.”
Art. 51-5 Content of supervision on a consolidated basis
“(1) (Law of 7 November 2007) “Supervision on a consolidated basis shall include at
least:
(a) supervision of capital adequacy for credit risk, market risk, operational risk and
for the control of large exposures;
(b) internal process for internal capital adequacy assessment;
(c) compliance with article 17(1a).
The CSSF shall adopt any measures necessary, where appropriate, to include
parent financial holding companies in consolidated supervision, in accordance with
paragraph (2) of article 51-3.”
178
179
104
“(1a) (Law of 5 November 2006) “Without prejudice to the rules relating to the control of
large exposures, the CSSF shall exercise general supervision over transactions
between investment firms incorporated under Luxembourg law and their parent
undertaking, if it is a mixed-activity holding company, and the latter’s subsidiaries.
Investment firms are required to have in place adequate risk management processes
and internal control mechanisms, including sound accounting and reporting
procedures, in order to identify, measure, monitor and control transactions with the
mixed-activity holding company and its subsidiaries appropriately. Investment firms
shall report to the CSSF any significant transaction with these entities, other than
under the regulation relating to large exposures. These procedures and significant
transactions are controlled by the CSSF.
Where these transactions jeopardize the financial situation of an investment firm
incorporated under Luxembourg law, the CSSF shall enjoin, by registered letter, the
investment firm concerned to remedy within such period as it may prescribe the
situation found to exist.”
(2) Prudential supervision on a consolidated basis shall not affect supervision on a non-
consolidated basis.
(3) (Law of 7 November 2007) “Where an investment firm, subsidiary of an EU parent
investment firm, has been authorised in Luxembourg, the CSSF shall apply to this
institution the rules set out in paragraph (1) on an individual, or where applicable,
sub-consolidated basis.
The CSSF may choose not to apply, on a sub-consolidated or individual basis, the
rules set out in paragraph (1) to a subsidiary of a Luxembourg parent investment firm
authorised and supervised in Luxembourg, if the subsidiary is included in the
supervision on a consolidated basis of the Luxembourg parent investment firm in
accordance with article 51-3. Moreover, all of the following conditions shall be
satisfied, in order to ensure that own funds are distributed adequately among the
parent undertaking and its subsidiary:
prompt transfer of own funds or repayment of liabilities by the parent
undertaking;
(b) either the parent undertaking satisfies the CSSF regarding the prudent
management of the subsidiary and has declared, with the consent of the CSSF,
that it guarantees the commitments entered into by the subsidiary, or the risks
in the subsidiary are of negligible interest;
(c) the risk evaluation, measurement and control procedures of the parent
undertaking cover the subsidiary;
(d) the parent undertaking holds more than 50% of the voting rights attaching to
shares in the capital of the subsidiary and/or has the right to appoint or remove
a majority of the members of the management body in charge of the
subsidiary.”
(4) (Law of 5 November 2006) “Persons who effectively direct the business of a financial
holding company shall prove to be of good professional repute. Such repute shall be
assessed on the basis of police records and of any evidence tending to show that
the persons concerned are of good repute and offering guarantee of irreproachable
conduct on part of those persons. In addition, those persons shall possess an
adequate professional experience by having previously exercised similar activities at
a high level of responsibility and autonomy.
105
(5) (Law of 7 November 2007) “The CSSF may exercise the option provided for in
paragraph (3) where the parent undertaking is a Luxembourg parent financial
holding company, provided that it is subject to the same supervision as that
exercised over investment firms, in accordance with paragraph (1).”
(6) (Law of 7 November 2007) “The CSSF may choose not to apply, on an individual
basis, the rules set out in paragraph (1) to a Luxembourg parent investment firm,
where this investment firm is supervised by the CSSF and included in the
supervision on a consolidated basis in accordance with article 51-3. Moreover, all of
the following conditions shall be satisfied, in order to ensure that own funds are
distributed adequately among the parent undertaking and its subsidiaries:
prompt transfer of own funds or repayment of liabilities to the parent investment
firm in a Member State;
(b) the risk evaluation, measurement and control procedures relevant for
consolidated supervision cover the parent investment firm.”
Where the CSSF makes use of the provisions of this paragraph, it shall inform the
competent authorities of all other Member States.”
(7) (Law of 7 November 2007) “Where the CSSF makes use of the option provided for in
paragraph (6), it shall disclose:
(a) the criteria it applies to determine that there is no current or foreseen material
practical or legal impediment to the prompt transfer of own funds or repayment
of liabilities;
(b) the number of parent investment firms which benefit from the exercise of the
provisions of paragraph (6) and the number of these which incorporate
(c) on an aggregate basis for Luxembourg:
(i) the total amount of own funds on the consolidated basis of the
Luxembourg parent investment firm which benefit from the provisions of
paragraph (6), which are held in subsidiaries in a third country;
(ii) the percentage of total own funds on the consolidated basis of the
Luxembourg parent investment firms which benefit from the provisions of
paragraph (6), represented by own funds which are held in subsidiaries in
a third country;
(iii) the percentage of total minimum own funds required to cover credit risk,
market risk and operational risk on a consolidated basis of Luxembourg
parent investment firms which benefit from the provisions of paragraph (6),
represented by own funds which are held in subsidiaries in a third country.”
(8) (Law of 7 November 2007) “Where a Luxembourg parent investment firm has an
investment firm, financial institution or asset management company within the
country or holds a participation in such an institution, and which is a subsidiary of an
EU parent investment firm, the CSSF shall apply to this firm the rules set out in
paragraph (1) on a sub-consolidated basis.
The same applies where the parent company of an investment firm authorised in
Luxembourg is an EU parent financial holding company and that the latter has an
106
investment firm, financial institution or asset management company within the
country or holds a participation in such an institution.”
(9) (Law of 7 November 2007) “Subject to the provisions set out in points (a) to (c), the
CSSF may allow on a case by case basis Luxembourg parent investment firms to
incorporate their subsidiaries in the calculation of their capital requirements on an
individual basis, where these subsidiaries meet the conditions laid down in
paragraph (3), points (c) and (d), and whose material exposures or material liabilities
are to that parent investment firms.
(a) The treatment in this paragraph shall be allowed only where the parent
investment firm demonstrates fully to the CSSF the circumstances and
arrangements, including legal arrangements, by virtue of which there is no
material practical or legal impediment, and none are foreseen, to the prompt
transfer of own funds, or repayment of liabilities when due by the subsidiary to
its parent undertaking.
(b) Where the CSSF exercises the discretion laid down in this paragraph, it shall on
a regular basis and not less than once a year inform the competent authorities
of all the other Member States of the use made of paragraph (1) and of the
circumstances and arrangements referred to in point (a). Where the subsidiary
concerned is situated in a third country, the CSSF shall provide the same
information to the competent authorities of that third country as well.
(c) Where the CSSF makes use of the discretion provided for in this paragraph, it
shall disclose:
(i) the criteria it applies to determine that there is no current or foreseen
material practical or legal impediment to the prompt transfer of own funds
or repayment of liabilities;
(ii) the number of parent investment firms which benefit from the exercise of
the provisions of this paragraph and the number of these which incorporate
(iii) on an aggregate basis for Luxembourg:
– the total amount of own funds of parent investment firms benefiting
from the provisions of this paragraph which are held in subsidiaries in
a third country;
– the total percentage of own funds of parent investment firms
benefiting from the provisions of this paragraph, represented by own
funds which are held in subsidiaries in a third country;
– the percentage of total minimum own funds required in order to cover
credit risk, market risk and operational risk of Luxembourg parent
investment firms which benefit from the provisions of this paragraph,
represented by own funds which are held in subsidiaries in a third
country.”
107
“(1) Where the CSSF is called upon, pursuant to this Chapter, to exercise prudential
supervision of an investment firm on a consolidated basis, the following conditions
must be fulfilled:
– the structure of the direct and indirect participations covered by the
consolidation must be transparent and organised in such a way that the
prudential supervision can be exercised, without impediment, in the most
effective and direct way;
– the central administrative and accounting bodies and the management of all of
the undertakings included in the consolidation must be established in
Luxembourg;
– in all the undertakings included in the consolidation, there must be adequate
internal control mechanisms for the production of any data and information
which would be relevant for the purposes of supervision on a consolidated
basis.
(2) (a) In the exercise of prudential supervision of an investment firm on a consolidated
basis, the CSSF may require, for the purposes of such supervision, any
undertaking included in the consolidation, and the subsidiaries of an investment
firm or “financial holding company”180 which do not fall within the scope of
supervision on a consolidated basis, to supply any information which would be
relevant.
(b) Where the parent undertaking of one or more investment firms subject to
supervision by the CSSF is a “mixed-activity holding company”181, the CSSF
shall, by approaching the “mixed-activity holding company”182 and its
subsidiaries either directly or via investment firm subsidiaries, require them to
supply any information which would be relevant for the purposes of supervising
the investment firm subsidiaries.
The CSSF may carry out, or have carried out by external inspectors, on-the-
spot inspections to verify information received from “mixed-activity holding
companies”183 and their subsidiaries. If the “mixed-activity holding company”184
or one of its subsidiaries is an insurance undertaking, it may also have recourse
to collaboration by the supervisory authority of that insurance undertaking. If the
“mixed-activity holding company”185 or one of its subsidiaries is situated in
another “Member State”186, on-the-spot verification of information shall be
carried out in accordance with the procedure laid down in paragraph 3 of this
article.
(c) Where an investment firm authorised in Luxembourg which is the subsidiary of
a parent undertaking situated in another “Member State”187 is not included in the
consolidated supervision of that parent undertaking for one of the reasons set
out in Article 51-3(4), the CSSF may ask the parent undertaking for information
which may facilitate their supervision of that investment firm.
180
181
182
183
184
185
186
187
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(3) (a) Where the CSSF is the competent authority responsible for supervising on a
consolidated basis an investment firm the parent undertaking of which is
situated in another “Member State”188, it may invite the competent authority of
that other “Member State”189 to ask the parent undertaking for any information
which would be relevant for the purposes of supervision on a consolidated basis
and to transmit the same to the CSSF.
Where it receives such an invitation from the competent authority of another EC
Member State and the parent undertaking is situated in Luxembourg, the CSSF
must act on that invitation by asking the parent undertaking for the relevant
information and by transmitting it to that authority.
(b) Where, in the context of the supervision of investment firms on a consolidated
basis, the CSSF wishes in specific cases to verify information concerning an
investment firm, a “financial holding company”190, another financial institution,
an ancillary banking services undertaking, a “mixed-activity holding company”191
or one of its subsidiaries or a subsidiary of an investment firm or “financial
holding company”192 which does not fall within the scope of consolidated
supervision and is situated in another “Member State”193, it may ask the
competent authorities of that other “Member State”194 to have that verification
carried out.
“Where it receives such a request for verification from the competent authority
of another “Member State”195, the CSSF shall, within the framework of its
competences, act upon that request either by carrying out the request itself or
by having an auditor or expert carrying it out, or by allowing the authority which
made the request to carry it out itself.
The competent authority which made the request may, if it so wishes,
participate in the verification when it does not carry out the verification itself.”196
(4) (a) Each undertaking falling within the scope of the supervision of an investment
firm on a consolidated basis, together with “mixed-activity holding companies”197
and their subsidiaries and the subsidiaries of an investment firm or “financial
holding company”198 that do not fall within the scope of supervision on a
consolidated basis, shall be required, upon demand by the competent
supervisory authorities, to provide any information which would be relevant for
the purposes of supervision on a consolidated basis.
They shall be authorised to exchange such information with each other.
(b) Where an investment firm authorised in another “Member State”199 which is the
subsidiary of a parent undertaking situated in Luxembourg is not included by
the CSSF in its consolidated supervision for one of the reasons set out in Article
51-3(4), the parent undertaking shall be required upon demand to provide to the
supervisory authority of the Member State in which that investment firm
188
189
190
191
192
193
194
195
196
197
198
199
109
subsidiary is situated any information which may facilitate the supervision of
that investment firm subsidiary.
(5) The collection or possession by the CSSF of information from or concerning an
undertaking for the purposes of supervising an investment firm on a consolidated
basis shall not in any way imply that the CSSF is required to play a supervisory role
in relation to that undertaking standing alone.
However, in the event of non-compliance with the provisions of this article by an
undertaking which is not subject to prudential supervision by the CSSF, the CSSF
may call upon it, by registered letter, to remedy the situation found to exist within a
period fixed by the CSSF. Article 63 of this Law shall apply to persons in charge of
the administration or management of such an undertaking.”
“(1) Where an investment firm incorporated under Luxembourg law, whose parent
undertaking is an investment firm or financial holding company having its head office
in a third country, is not subject to consolidated supervision pursuant to Article 51-3,
the CSSF shall verify that this investment firm is subject to consolidated supervision,
exercised by the competent authority of a third country, equivalent to that exercised
by the CSSF based on the principles set out under Article 51-3 et seq. The CSSF
carries out this verification, on its own initiative or at the request of the parent
undertaking or of any of the regulated entities authorised by a Member State,
whenever it exercises the consolidated supervision if paragraph (2) were to apply.
Regulated entity shall mean a regulated entity within the meaning of Article 51-9(7).
Before taking its decision, the CSSF shall consult the other relevant competent
authorities concerned regarding the equivalence or not of this consolidated
supervision exercised by the competent authority of the third country. It shall take
into consideration the applicable guidelines issued by the European Banking
Committee. For this purpose, the CSSF shall consult this Committee before taking a
decision.
(2) Where the CSSF, based on the verification described in paragraph (1) establishes
the absence of equivalent consolidated supervision, the provisions concerning
consolidated supervision as referred to in Article 51-3 et seq. shall apply by analogy.
consolidated supervision, after consultation with the other relevant competent
authorities, to apply a different method to achieve the objectives of consolidated
supervision of investment firms. The CSSF may, in particular, require the
establishment of a financial holding company with head office in a Member State and
apply the provisions relating to consolidated supervision to the consolidated situation
of that financial holding company.
The CSSF shall inform the other relevant competent authorities and the European
Art. 51-6b. Cooperation with the other authorities responsible for prudential supervision
“(1) Where the CSSF is responsible for the exercise of supervision on a consolidated
basis of investment firms authorised in Luxembourg which are EU parent investment
firms or investment firms controlled by EU parent financial holding companies, it
shall in addition carry out the following tasks:
110
information in going concern and emergency situations;
(b) planning and coordination of supervisory activities in going concern as well as
in emergency situations, including in relation to the activities concerned by the
prudential supervision, in cooperation with the competent authorities involved;
(c) receipt of the application by an EU parent investment firm and by its
subsidiaries or jointly by the subsidiaries of an EU parent financial holding
company in order to use the internal ratings-based approach for the calculation
of capital requirement for credit risk, the internal model method for counterparty
credit risk, the Advanced Measurement Approach for operational risk coverage
and the internal market risk-management model for market risk.
(2) In the case of applications to the CSSF as referred to in paragraph (1)(c), submitted
by an EU parent investment firm and its subsidiaries, or jointly by the subsidiaries of
an EU parent financial holding company, the CSSF shall work together with the other
competent authorities, in full consultation, to decide whether or not to grant the
permission sought and to determine the terms and conditions, if any, to which such
permission should be subject.
The CSSF and the other competent authorities shall do everything within their power
to reach a joint decision on the application within six months. This fully reasoned
joint decision is provided by the CSSF to the applicant.
The period referred to in the previous subparagraph shall begin on the date of
receipt of the complete application by the CSSF. The CSSF shall forward the
complete application to the other competent authorities without delay.
In the absence of a joint decision between the competent authorities within six
months, the CSSF shall make its own decision on the application. Its decision shall
be set out in a document containing the fully reasoned decision and shall take into
account the views and reservations of the other competent authorities expressed
during the six months period. The decision shall be provided to the applicant and the
other competent authorities by the CSSF.
If the CSSF receives a notification of such decision by another EU competent
authority, this decision shall be recognised as determinative and the notification shall
be applied.
(3) In the context of consolidated prudential supervision, the CSSF shall closely
cooperate with the other competent authorities. They shall provide one another with
any information which is essential or relevant for the exercise of their prudential
supervision. In this regard, the CSSF and the other competent authorities shall
communicate on request all relevant information and shall communicate on their own
initiative all essential information.
Information referred to in the first subparagraph shall be regarded as essential if it
could materially influence the assessment of the financial soundness of an
investment firm or financial institution in another Member State.
In particular, in its role of authority responsible for consolidated supervision of EU
parent investment firms or investment firms controlled by an EU parent financial
holding company, the CSSF shall provide the competent authorities in other Member
States who supervise subsidiaries of these parents with all relevant information. In
determining the extent of relevant information, the importance of these subsidiaries
within the financial system in those Member States shall be taken into account.
The essential information referred to in the first subparagraph shall include, in
particular, the following items:
111
(a) identification of the group structure of all major investment firms in a group, as
well as of the competent authorities of the investment firms in the group;
(b) procedures for the collection of information from the investment firms in a
group, and the verification of that information;
(c) adverse developments in investment firms or in other entities of a group, which
could seriously affect the investment firms;
(d) major sanctions or exceptional measures taken by the CSSF, including the
imposition of an additional capital charge and the imposition of any limitation on
the use of the Advanced Measurement Approach for the calculation of the own
funds requirements for coverage of operational risk.
(4) Where the CSSF is responsible for the supervision of investment firms controlled by
an EU parent investment firm, it shall whenever possible contact the competent
authorities responsible for consolidated supervision of the EU parent investment firm
or of the investment firm controlled by an EU parent financial holding company when
it needs information regarding the implementation of approaches and methodologies
set out in Directives 2006/48/EC and 2006/49/EC that may already be available to
those competent authorities.
(5) The CSSF shall, prior to its decision, consult the other competent authorities with
regard to the following items, where this decision is of importance for other
competent authorities’ supervisory tasks:
(a) changes in the shareholder, organisational or management structure of credit
institutions in a group, which require the approval or authorisation of competent
authorities;
(b) major sanctions or exceptional measures, including the imposition of an
additional capital charge and the imposition of any limitation on the use of the
Advanced Measurement Approach for the calculation of the own funds
requirements for coverage of operational risk.
For the purposes of point (b), the CSSF shall always consult the competent
authority responsible for supervision on a consolidated basis of the group to
which the Luxembourg investment firm belongs.
However, the CSSF may decide not to consult in cases of urgency or where
such consultation may jeopardise the effectiveness of its decision. The CSSF
shall forthwith inform the other relevant competent authorities.
(6) Where an emergency situation arises within a group, as defined under point 15 of
article 51-9, which potentially jeopardises the stability of the financial system in any
of the Member States where entities of a group have been authorised, and the CSSF
is the competent authority responsible for the exercise of consolidated supervision in
accordance with article 51-3, it shall alert as soon as is practicable, the other
competent authorities. Where possible, the CSSF shall use existing defined
channels of communication.
(7) The CSSF as competent authority responsible for supervision on a consolidated
basis shall, when it needs information which has already been given to another
competent authority, contact this authority whenever possible in order to prevent
duplication of reporting to the various authorities involved in supervision.
(8) In order to facilitate and establish effective supervision, the CSSF as competent
authority responsible for supervision on a consolidated basis and the other
competent authorities shall have written coordination and cooperation arrangements
in place. Under these arrangements additional tasks may be entrusted to the CSSF
in its role as competent authority responsible for supervision on a consolidated basis
112
and procedures for the decision-making process and for cooperation with other
competent authorities, may be specified.”
“Section II: Luxembourg parent investment firms having a credit institution authorised
outside Luxembourg as a subsidiary or holding a participation in such credit institution,
and investment firms whose parent undertaking is a Luxembourg parent financial holding
company having a credit institution authorised outside Luxembourg as a subsidiary or
holding a participation in such credit institution.”200

“(1) (Law of 7 November 2007) “Luxembourg parent investment firms having a credit
institution authorised outside Luxembourg as a subsidiary or holding a participation
in such credit institution are subject to supervision on a consolidated, or, where
applicable, sub-consolidated basis, by the CSSF, to the extent and as specified in
this chapter. Supervision on a consolidated basis by the CSSF shall concern only
supervision of capital adequacy for credit risk, market risk, operational risk, control of
large exposures, compliance with an internal capital adequacy assessment process
and compliance with article 17(1). It does not impact supervision on a non-
consolidated basis. The CSSF may apply the provisions of article 51-5, paragraph
(3).”
(2) (Law of 7 November 2007) “Where a Luxembourg parent financial holding company
has one or more subsidiaries authorised as investment firms in Luxembourg, and a
credit institution authorised outside Luxembourg as a subsidiary or holds a
participation in such credit institution, the CSSF exercises a prudential supervision
based on the consolidated financial situation of the financial holding company, to the
extent and as specified in this chapter. Supervision on a consolidated basis by the
CSSF shall concern only supervision of capital adequacy for credit risk, market risk,
operational risk, control of large exposures, compliance with an internal capital
adequacy assessment process and compliance with article 17(1). It does not impact
supervision on a non-consolidated basis.””
“Section III: Luxembourg parent investment firms having a credit institution authorised in
Luxembourg as a subsidiary or holding a participation in such credit institution, and
investment firms whose parent undertaking is a parent financial holding company in
Luxembourg having a credit institution authorised in Luxembourg as a subsidiary or
holding a participation in such credit institution.”201

“(1) (Law of 7 November 2007) “Luxembourg parent investment firms having a credit
institution authorised in Luxembourg as a subsidiary or holding a participation in
such credit institution are subject to supervision on a consolidated, or, where
applicable, sub-consolidated basis, by the CSSF, to the extent and as specified in
chapter 3 of this part of the law.”
200
201
113
(2) (Law of 7 November 2007) “Where a Luxembourg parent financial holding company
has an investment firm authorised in Luxembourg as a subsidiary, and a credit
institution authorised in Luxembourg or holding a participation in such credit
institution, the CSSF exercises a prudential supervision based on the consolidated
financial situation of the financial holding company, to the extent and as specified in
chapter 3 of this part of the law.” ”
114
“Chapter 3b: Supplementary supervision of credit institutions and investment firms in a
financial conglomerate”202
“Section I: Definitions”203

(1) “competent authority” shall mean the national authority of a Member State which is
empowered by law or regulation to supervise one or several categories of regulated
entities, whether on an individual or a group-wide basis. In Luxembourg, supervision
of insurance undertakings is performed by the “Commissariat aux assurances” and
the supervision of credit institutions and investment firms is performed by the CSSF.
(2) “relevant competent authority” shall mean
(a) a competent authority responsible for the sectoral group-wide supervision of
any of the regulated entities in a financial conglomerate;
(b) the coordinator appointed in accordance with Article 51-17, if different from the
authorities referred to in (a);
(c) other competent authorities concerned, where relevant, in the opinion of the
authorities referred to in (a) and (b); this opinion shall especially take into
account the market share of the regulated entities of the conglomerate in other
Member States, in particular if it exceeds 5%, and the importance in the
conglomerate of any regulated entity established in another Member State.
Other competent authorities concerned shall mean the competent authorities
responsible for the supervision of the regulated entities in a given financial
conglomerate.
(3) “mixed financial holding company” shall mean a parent undertaking, other than a
regulated entity, which is at the head of a financial conglomerate;
(4) “risk concentration” shall mean all exposures with a loss potential borne by entities
within a financial conglomerate, which are large enough to threaten the solvency or
the financial position in general of the regulated entities in this financial
conglomerate. These exposures may be caused by counterparty risk/credit risk,
investment risk, insurance risk, market risk, other risks, or a combination or
interaction of these risks;
(5) “financial conglomerate” shall mean a group which meets, subject to Article 51-10,
the following conditions:
(a) the group comprises at least one regulated entity which has its head office in a
Member State, which is either at the head of the group or a subsidiary;
(b) where the entity at the head of the group is a regulated entity which has its
head office in a Member State, it is either a parent undertaking of an entity in
the financial sector, a regulated entity which holds a participation in an entity in
the financial sector or a regulated entity linked with an entity in the financial
sector by the fact of being managed on a unified basis pursuant to a contract or
provisions in the memorandum or articles of association or by the fact of having
202
203
115
administrative, management or supervisory bodies consisting for the major part
of the same persons;
(c) where the entity at the head of the group is not a regulated entity which has its
head office in a Member State, the group’s activities mainly occur in the
financial sector within the meaning of Article 51-10(1);
(d) at least one of the entities in the group is within the insurance sector and at
least one is within the banking or investment services sector;
(e) the consolidated and/or aggregated activities of the entities in the group within
the insurance sector and the consolidated and/or aggregated activities of the
entities within the banking and investment services sector are both significant
within the meaning of Article 51-10(2) or (3).
Any subgroup of a group within the meaning of point (15) which meets the criteria in
this point shall be considered as a financial conglomerate;
(6) “coordinator” shall mean the competent authority responsible for coordination and
exercise of supplementary supervision of a financial conglomerate, appointed from
among the competent authorities that have approved the regulated entities
belonging to this financial conglomerate, including those of the Member State in
which the mixed financial holding company has its head office;
(7) “regulated entity” shall mean a credit institution, an insurance undertaking or an
investment firm;
“…”204
(9) “investment firm” shall mean an investment firm within the meaning of Article 4(1)1)
of Directive 2004/39/EC, whether its head office is in a Member State or in a third
country. In Luxembourg, this shall mean any person whose activity falls under the
definition of Article 13;
(10) “parent undertaking” shall mean an undertaking:
(a) that has a majority of the shareholders’ or members’ voting rights in an
undertaking; or
(b) that has the right to appoint or remove a majority of the members of the
administrative, management or supervisory body of another undertaking and is
at the same time a shareholder or member of that undertaking; or
(c) that has the right to exercise a dominant influence over an undertaking of which
it is a shareholder or member, pursuant to a contract entered into with that
undertaking or to a provision in its memorandum or articles of association,
where the law governing that undertaking permits its being subject to such
contracts or provisions; or
(d) that is shareholder or member of an undertaking and controls alone, pursuant to
an agreement with other shareholders in or members of that undertaking, a
majority of shareholders’ or members’ voting rights in that undertaking; or
(e) that, in the opinion of the competent authorities, actually exercises a dominant
influence over another undertaking;
“…”205
(12) “credit institution” shall mean a credit institution within the meaning of the second
subparagraph of Article 1(1) of Directive 2000/12/EC. In Luxembourg, this shall
mean any person whose activity falls under the definition of Articles 1 or 12-10;
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205
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“…”206
(14) “subsidiary undertaking” shall mean an undertaking in respect of which the rights
listed down in point (10) are held. Any subsidiary undertaking of a subsidiary
undertaking shall also be considered a subsidiary of the parent undertaking;
(15) “group” shall mean a group of undertakings, which consists of a parent undertaking,
its subsidiaries and the entities in which the parent undertaking or its subsidiaries
hold a participation, as well as undertakings linked by the fact of being managed on
a unified basis pursuant to a contract or provisions in the memorandum or articles of
bodies consisting for the major part of the same persons;
(16) “close links” shall mean a situation in which two or more natural or legal persons are
linked by:
(1) “participation”, which shall mean the ownership, direct or by way of control, of
20% or more of the voting rights or capital of an undertaking; or
(2) “control”, which shall mean the relationship between a parent undertaking and a
subsidiary in all the cases referred to in point (10), the relationship between
undertakings linked by the fact of being managed on a unified basis or a similar
relationship between any natural or legal person and an undertaking. Any
subsidiary undertaking of a subsidiary undertaking shall also be considered a
subsidiary of the parent undertaking which is the head of those undertakings.
A situation in which two or more natural or legal persons are permanently linked to
one and the same person by a control relationship shall also be regarded as
constituting a close link between such persons;
“…”207
(19) “sectoral rules” shall mean the national legislations transposing the Community
legislation relating to the prudential supervision of regulated entities on an individual
or consolidated basis;
(20) “financial sector” shall mean a sector composed of one or more of the following
entities:
(a) the banking sector, comprising credit institutions, financial institutions within the
meaning of Article 1(5) of Directive 2000/12/EC, ancillary banking services
undertakings within the meaning of Article 1(23) of Directive 2000/12/EC;
(b) the insurance sector, comprising insurance undertakings, reinsurance
undertakings, insurance holding companies within the meaning of Article 1(i) of
Directive 98/78/EC;
(c) the investment services sector, comprising investment firms within the meaning
of Article 4(1)1) of Directive 2004/39/EC, financial institutions within the
meaning of Article 1(5) of Directive 2000/12/EC;
The financial sector, where applicable, also comprises one or several mixed financial
holding companies;
(21) “intra-group transactions” shall mean all transactions by which regulated entities
within a financial conglomerate rely either directly or indirectly upon other
undertakings within the same group or upon any natural or legal person linked to the
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207
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undertakings within that group by close links, for the fulfilment of an obligation,
whether or not contractual, and whether or not for payment.”
Art. 51-10 Thresholds for identifying a financial conglomerate
“(1) For the application of Article 51-9(5)(c), a group’s activities are deemed to mainly
occur in the financial sector when the ratio of the balance sheet total of the regulated
and non-regulated financial sector entities in the group to the balance sheet total of
the group as a whole exceeds 40%.
(2) For the application of Article 51-9(5)(e), a group is deemed to have a significant
activity in a given financial sector when the average of the ratio of the balance sheet
total of the entities of that financial sector to the balance sheet total of all financial
sector entities in the group and the ratio of the solvency requirements of the entities
of the same financial sector to the total solvency requirements of all the financial
sector entities in the group exceeds 10%.
For the purposes of this Chapter, the smallest financial sector in a financial
conglomerate is the sector with the smallest average and the most important
financial sector in a financial conglomerate is the sector with the highest average.
For the purposes of calculating the average and for the measurement of the smallest
and the most important financial sectors, the banking sector and the investment
services sector shall be considered together.
(3) For the application of Article 51-9(5)(e), cross-sectoral activities shall also be
presumed to be significant if the balance sheet total of the smallest financial sector
entities in the group exceeds 6 billion euros. If the group does not reach the
threshold referred to in paragraph (2), the CSSF may decide, by common agreement
with the other relevant competent authorities, not to regard the group as a financial
conglomerate or not to apply the provisions of Articles 51-14, 51-15 or 51-16 if it is of
the opinion that the inclusion of the group in the scope of the supplementary
supervision as defined in this Chapter or the application of such articles are not
necessary or would be inappropriate or misleading with respect to the objectives of
supplementary supervision, taking into account, for instance, the fact that:
(a) the relative size of the smallest financial sector in the group does not exceed
5%, measured either in terms of the average referred to in paragraph (2) or in
terms of the balance sheet total or the solvency requirements of such financial
sector; or
(b) the market share does not exceed 5% in any Member State, measured in terms
of the balance sheet total in the banking or investment services sectors and in
terms of gross premiums written in the insurance sector.
Where the CSSF exercises the role of coordinator, it shall notify to the other
concerned authorities the decisions taken in accordance with this paragraph.
(4) For the application of paragraphs (1), (2) and (3), the CSSF may, by common
agreement with the other relevant competent authorities:
(a) exclude an entity when calculating the ratios, in the cases referred to in Article
51-13(5);
(b) take into account compliance with the thresholds envisaged in paragraphs (1)
and (2) for three consecutive years so as to avoid sudden supervision regime
shifts, or disregard such compliance if there are significant changes in the
group’s structure.
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Where a financial conglomerate has been identified according to paragraphs (1), (2)
and (3), the decisions referred to in the first subparagraph shall be taken on the
basis of a proposal made by the coordinator of that financial conglomerate.
(5) For the application of paragraphs (1) and (2), the CSSF may, in exceptional cases
and by common agreement with the other relevant competent authorities, replace
the criterion based on balance sheet total with one or both of the following
parameters or add one or both of these parameters, if it is of the opinion that these
parameters are of particular relevance for the purposes of supplementary
supervision under this Chapter: income structure, off-balance-sheet activities.
(6) For the application of paragraphs (1), (2) and (3), if a financial conglomerate already
subject to supplementary supervision no longer meets one or more of the thresholds
referred to in those paragraphs, these thresholds are replaced for the following three
years in order to avoid a sudden supervision regime shift, by the following
thresholds: 40% shall be replaced by 35%, 10% shall be replaced by 8%, 6 billion
euros shall be replaced by 5 billion euros.
Notwithstanding the previous subparagraph, the coordinator may, with the
agreement of the other relevant competent authorities, decide that these lower
thresholds shall not apply or shall cease to apply during the period of three years,
taking into account the objectives of the group’s supplementary supervision.
(7) The calculations referred to in this Article regarding the balance sheet shall be made
on the basis of the aggregated balance sheet total of the entities of the group,
according to their annual accounts. For the purposes of this calculation,
undertakings in which a participation is held shall be taken into account as regards
the amount of their balance sheet total corresponding to the aggregated proportional
share held by the group. Where consolidated accounts are available for a given
group or part of a group, the calculations shall be based on these accounts.
The solvency requirements referred to in paragraphs (2) and (3) shall be calculated
in accordance with the provisions of the relevant sectoral rules.”
Art. 51-11 Identifying a financial conglomerate

“(1) The CSSF shall, on the basis of Articles 51-9, 51-10 and 51-12, identify any group
that falls under the scope of this Chapter. For this purpose, the CSSF shall, where
necessary, cooperate closely with the other competent authorities which have
authorised regulated entities in the group.
If the CSSF is of the opinion that a credit institution or an investment firm
incorporated under Luxembourg law is a member of a group which may be
considered as a financial conglomerate, but has not yet been identified, it shall
communicate its view to the other competent authorities concerned.
(2) Where a group has been identified as a financial conglomerate and where the CSSF
is the coordinator, in accordance with Article 51-17, it shall inform the parent
undertaking at the head of the group or, in the absence of a parent undertaking, the
regulated entity with the largest balance sheet total in the most important financial
sector in the group. It shall also inform the competent authorities which have
authorised regulated entities in the group and the competent authorities of the
Member State in which the mixed financial holding company has its head office, as
well as the European Commission.”
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“Section 2: Scope”208
Art. 51-12 Scope of supplementary supervision of credit institutions or investment firms
“(1) Without prejudice to the provisions on supervision contained in the sectoral rules,
credit institutions and investment firms incorporated under Luxembourg law
belonging to a financial conglomerate are subject to a supplementary supervision, to
the extent and in the manner prescribed in this Chapter. The supplementary
supervision of the CSSF does not undermine the supervision on consolidated basis,
nor the supervision on individual basis.
(2) In relation to credit institutions and investment firms incorporated under Luxembourg
law belonging to a financial conglomerate for which it assumes the role of
coordinator pursuant to Article 51-17, the CSSF performs a supplementary
supervision at the level of the financial conglomerate, in accordance with Articles 51-
13 to 51-24.
All the financial sector entities within a financial conglomerate, whether regulated or
not, whether established in a Member State or in a third country, fall under the scope
of the supplementary supervision of the CSSF.
The supplementary supervision carried out by the CSSF encompasses the financial
position of the financial conglomerate in general and the capital adequacy in
particular, risk concentration and intra-group transactions, as well as internal control
mechanisms and risk management processes set up at the level of the financial
conglomerate.
Where the CSSF exercises the role of coordinator for a financial conglomerate which
is itself a subgroup of another financial conglomerate subject to supplementary
supervision, the CSSF may exempt the subgroup, as a whole or in part, from the
application of Articles 51-13 to 51-24.
(3) Credit institutions and investment firms incorporated under Luxembourg law
belonging to a financial conglomerate for which a competent authority other than the
CSSF acts as coordinator, are subject to a supplementary supervision to the extent
and in the manner prescribed in Articles 51-13 to 51-24.
(4) Credit institutions and investment firms incorporated under Luxembourg law not
subject to supplementary supervision in accordance with paragraphs (2) and (3), the
parent undertaking of which is a regulated entity or a mixed financial holding
company having its head office in a third country shall be subject to supplementary
supervision at the level of the financial conglomerate, to the extent and in the
manner prescribed in Article 51-25.
(5) Where, in cases other than those referred to in paragraphs (2), (3) and (4), an
undertaking holds participations or capital ties in one or more regulated entities or
exercises significant influence over such entities without holding a participation or
capital ties, and where one of these regulated entities is a credit institution or
investment firm incorporated under Luxembourg law, the CSSF, where it is the
relevant competent authority, shall by common agreement with the other relevant
competent authorities determine whether and to what extent supplementary
supervision of the regulated entities is to be carried out, as if it constituted a financial
conglomerate. The competent authority in charge of the supplementary supervision
at the level of the group is appointed through analogous application of the provisions
of Article 51-17.
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In order to apply such supplementary supervision, the requirements laid down in
Article 51-9(5)(d) and (e) shall be met.
(6) Without prejudice to Article 51-20, the exercise of supplementary supervision at the
level of the financial conglomerate shall in no way imply that the CSSF is required to
play a supervisory role in relation to mixed financial holding companies, third-country
regulated entities in a financial conglomerate or unregulated entities in a financial
conglomerate, on a stand-alone basis.”
“Section 3: Financial position”209

Art. 51-13 Capital adequacy
“(1) Without prejudice to the sectoral rules, the CSSF exercises a supplementary
supervision of credit institutions and investment firms incorporated under
Luxembourg law belonging to a financial conglomerate for which it assumes the role
of coordinator, with respect to the capital adequacy in accordance with this Article,
Article 51-16 and Section 4 of this Chapter.
The requirement laid down in paragraph (2) shall be subject to supervisory overview
by the CSSF in accordance with Section 4 of this Chapter.
(2) Credit institutions and investment firms concerned shall ensure that own funds are
available at the level of the financial conglomerate, which are always at least equal
to the capital adequacy requirements.
(3) The entity at the head of a financial conglomerate for which the CSSF exercises the
role of coordinator shall calculate at least annually own funds and the capital
adequacy requirements according to the terms, including periodicity, laid down by
the CSSF in accordance with Article 56. The CSSF shall, after consultation with the
other relevant competent authorities and with the financial conglomerate, decide
which method shall be applied by the financial conglomerate.
role of coordinator shall submit to the CSSF the results of the calculation and the
relevant data on which the calculation is based according to the terms, including
periodicity, laid down by the CSSF in accordance with Article 56. The CSSF may,
after consultation with the other relevant competent authorities and with the financial
conglomerate, authorise another regulated entity in the financial conglomerate to
submit the information required.
(5) The CSSF, in its capacity as coordinator, may decide not to include a particular
entity in the scope when calculating the supplementary capital adequacy
requirements in the following cases:
(a) if the entity is situated in a third country where there are legal impediments to
the transfer of the necessary information, without prejudice to the sectoral rules
regarding the obligation of competent authorities to refuse authorisation where
the effective exercise of their supervisory functions is prevented;
(b) if, in the opinion of the CSSF, the entity is of negligible interest with respect to
the objectives of supplementary supervision;
(c) if, in the opinion of the CSSF, the inclusion of the entity would be inappropriate
or misleading with respect to the objectives of supplementary supervision.
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However, if several entities are to be excluded pursuant to (b) of the first
subparagraph, they must nevertheless be included when collectively they are of non-
negligible interest.
In the case mentioned in (c) of the first subparagraph, the CSSF shall, except in
cases of urgency, consult the other relevant competent authorities before taking a
decision.
When the CSSF does not include a regulated entity in the scope under one of the
cases provided for in (b) and (c) of the first subparagraph, the competent authorities
of the Member State in which that regulated entity is situated may ask the entity
which is at the head of the financial conglomerate for information which may facilitate
their supervision of the regulated entity.
CSSF exercises the role of coordinator shall provide the results of their calculations
of own funds and capital adequacy requirements to the entity at the head of the
financial conglomerate or, where applicable, to another regulated entity of the
financial conglomerate assigned by the coordinator to provide it with the results of
the calculations, in order to allow the coordinator to assess whether, at the level of
the financial conglomerate, own funds are always at least equal to the capital
adequacy requirements.”
Art. 51-14 Risk concentration
“(1) Without prejudice to the sectoral rules, the CSSF exercises supplementary
of coordinator, with respect to the risk concentration in accordance with this Article,
Article 51-16 and Section 4 of this Chapter.
Significant risk concentration shall be subject to supervisory overview by the CSSF.
The CSSF shall in particular monitor the possible risk of contagion in the financial
conglomerate, the existence of conflicts of interests, the circumvention of sectoral
rules and the level or volume of risks.
role of coordinator shall notify the CSSF on a regular basis, and at least annually, of
any significant risk concentration at the level of the financial conglomerate in
accordance with the provisions of paragraph (3).The CSSF may, after consultation
with the other relevant competent authorities and with the financial conglomerate,
authorise another regulated entity in the financial conglomerate to submit the
information required.
(3) The CSSF, in its capacity as coordinator, in cooperation with the other competent
authorities concerned and after consulting the financial conglomerate, determines, in
accordance with Article 56, the risk categories that shall be notified, the notification
thresholds and notification procedures, including periodicity, of significant risk
concentrations for a given financial conglomerate. To this end, it shall take into
account the specific group and risk management structure of the financial
conglomerate. The definition of the notification thresholds is based on the regulatory
own funds and/or the technical provisions.
(4) The CSSF may set quantitative limits with regard to any risk concentration at the
level of the financial conglomerate or take other supervisory measures which would
achieve the objectives of controlling the risk concentration at the level of the financial
conglomerate. In order to avoid a circumvention of sectoral rules, the CSSF may
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require the application of sectoral rules regarding risk concentration at the level of
the financial conglomerate.
(5) Where the financial conglomerate is headed by a mixed financial holding company,
the sectoral rules regarding risk concentration applicable to the most important
financial sector in the financial conglomerate, if any, shall apply to that sector as a
whole, including the mixed financial holding company.
CSSF exercises the role of coordinator shall provide information relating to any
significant risk concentration to the entity at the head of the financial conglomerate
or, where applicable, to another regulated entity of the financial conglomerate
assigned by the coordinator to provide the necessary information in order to allow
the coordinator to fulfil its supervisory control mission regarding risk concentration at
the level of the financial conglomerate.”
Art. 51-15 Intra-group transactions
“(1) Without prejudice to the sectoral rules, the CSSF exercises a supplementary
of coordinator, with respect to intra-group transactions of regulated entities in a
financial conglomerate, in accordance with this Article, Article 51-16 and Section 4 of
this Chapter.
The CSSF shall exercise a supervisory overview of intra-group transactions in
accordance with Section 4 of this Chapter. It shall in particular monitor the possible
risk of contagion in the financial conglomerate, the existence of conflicts of interests,
the circumvention of sectoral rules, and the level and volume of intra-group
transactions.
(2) The entity at the head of the financial conglomerate for which the CSSF assumes
the role of coordinator shall report to the CSSF on a regular basis, and at least
annually, all significant intra-group transactions of regulated entities within a financial
conglomerate in accordance with the provisions of paragraph (3). The CSSF may,
after consultation with the other relevant competent authorities and with the financial
conglomerate, authorise another regulated entity in the financial conglomerate to
report the information concerned to the CSSF.
(3) The CSSF, in its capacity as coordinator, in cooperation with the other competent
authorities concerned and after consulting the financial conglomerate, determines, in
accordance with Article 56, the risk categories that shall be notified, the notification
thresholds and notification procedures, including periodicity, of significant intra-group
transactions for a given financial conglomerate. To this end, it shall take into account
the specific group and risk management structure of the financial conglomerate. The
definition of the notification thresholds is based on the regulatory own funds and/or
the technical provisions. Where no definition of the notification thresholds has been
drawn up, an intra-group transaction shall be presumed to be significant if its amount
exceeds at least 5% of the total amount of capital adequacy requirements at the
level of the financial conglomerate.
(4) The CSSF may set quantitative limits and qualitative requirements with regard to
intra-group transactions of regulated entities within a financial conglomerate or take
other supervisory measures which would achieve the objective of controlling the
intra-group transactions of regulated entities within a financial conglomerate. In order
to avoid a circumvention of sectoral rules, the CSSF may require the application of
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sectoral rules regarding intra-group transactions of regulated entities within a
financial conglomerate.
(5) Where the financial conglomerate is headed by a mixed financial holding company,
the sectoral rules regarding intra-group transactions applicable to the most important
financial sector in the financial conglomerate, if any, shall apply to that sector as a
whole, including the mixed financial holding company.
CSSF exercises the role of coordinator shall provide information relating to
significant intra-group transactions to the entity heading the financial conglomerate
or, where applicable, to another regulated entity of the financial conglomerate
assigned by the coordinator to provide the necessary information, in order to allow
the coordinator to fulfill its supervisory control mission regarding intra-group
transactions of regulated entities within a financial conglomerate. “
Art. 51-16 Internal control mechanisms and risk management processes
“(1) Credit institutions and investment firms incorporated under Luxembourg law
belonging to a financial conglomerate for which the CSSF exercises the role of
coordinator shall have in place, at the level of the financial conglomerate, adequate
risk management processes and internal control mechanisms, including sound
administrative and accounting procedures.
(2) The risk management processes shall include:
(a) sound governance and management with the approval and periodical review of
the strategies and policies by the appropriate governing bodies at the level of
the financial conglomerate with respect to all the risks they assume;
(b) adequate capital adequacy policies in order to anticipate the impact of their
business strategy on risk profile and capital requirements as determined in
accordance with Article 51-13;
(c) adequate procedures to ensure that their risk monitoring systems are well
integrated into their organisation and that all measures are taken to ensure that
the systems implemented in all the undertakings included in the scope of
supplementary supervision are consistent so that the risks can be measured,
monitored and controlled at the level of the financial conglomerate.
(3) The internal control mechanisms shall include:
(a) adequate identification, measurement and management systems of material
risks incurred and processes aiming to ensure capital adequacy with respect to
the risks incurred;
(b) sound accounting and reporting procedures to identify, measure, monitor and
control the intra-group transactions and the risk concentration.
(4) The entities included in the scope of supplementary supervision exercised by the
CSSF pursuant to Article 51-12 shall have in place internal control mechanisms
ensuring the production of information necessary for the purposes of the
supplementary supervision.
This requirement shall also apply to the mixed financial holding company having its
head office in Luxembourg and to entities incorporated under Luxembourg law of the
banking and investment services sector belonging to a financial conglomerate for
which a competent authority other than the CSSF exercises the role of coordinator.
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CSSF exercises the role of coordinator shall have in place adequate risk
management processes and internal control mechanisms, including sound
administrative and accounting procedures, for the financial conglomerate.
(6) The CSSF, in its capacity as coordinator, exercises a prudential supervision on the
requirements of paragraph (1), (2), (3) and of the first subparagraph of paragraph
(4).”
“Section 4: Measures to facilitate supplementary supervision”210
Art. 51-17 Competent authority responsible for exercising supplementary supervision
(the coordinator)
“(1) In order to ensure proper supplementary supervision of the regulated entities in a
financial conglomerate, a single coordinator shall be appointed for each financial
conglomerate. The CSSF exercises the role of coordinator in the cases referred to in
this Article.
(2) The CSSF shall exercise the role of coordinator when the financial conglomerate is
headed by a credit institution or investment firm authorised under this Law.
(3) The CSSF shall exercise the role of coordinator, within the limits set out in this
Article, where the financial conglomerate is headed by a mixed financial holding
company which is the parent undertaking of a credit institution or investment firm
authorised under this Law.
Nevertheless, the CSSF shall not exercise the role of coordinator when the mixed
financial holding company has its head office in a Member State other than
Luxembourg and is also parent undertaking of a regulated entity authorised in this
same Member State. In this case, the competent authority of the relevant Member
State shall exercise the role of coordinator.
(4) Where the financial conglomerate is headed by a mixed financial holding company
having its head office in Luxembourg and which is parent undertaking of one or more
regulated entities having their head office in different Member States, the CSSF shall
exercise the role of coordinator if at least one of these regulated entities is a credit
institution or an investment firm authorised under this Law.
Where the mixed financial holding company is parent undertaking of both a credit
institution or an investment firm authorised under this Law and of an insurance
undertaking authorised pursuant to the Law of 6 December 1991 on the insurance
sector as amended, the CSSF shall exercise the role of coordinator if the banking
and investment services sector represent the most important sector within the
financial conglomerate.
(5) Where the financial conglomerate is headed by more than one mixed financial
holding company with their head office in different Member States including
Luxembourg and there is at least one regulated entity in each of these Member
States, including in Luxembourg, the CSSF shall exercise the role of coordinator if
the regulated entity located in Luxembourg is a credit institution or an investment
firm authorised under this Law and if, where regulated entities located in the Member
States exercise their activities in the same financial sector, the credit institution or
investment firm authorised under this Law shows the largest balance sheet total, or,
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where regulated entities situated in the Member States exercise their activities in
more than one financial sector, the credit institution or investment firm authorised
under this Law shows the largest balance sheet total in the most important financial
sector.
(6) Where the financial conglomerate is headed by a mixed financial holding company
having its head office in a Member State other than Luxembourg and which is parent
undertaking of one or more regulated entities having their head office in different
Member States, except in the Member State where the mixed financial holding
company has its head office, the CSSF exercises the role of coordinator if at least
one of these regulated entities is a credit institution or an investment firm authorised
under this Law and if this credit institution or investment firm shows the largest
balance sheet total in the most important financial sector.
(7) Where the financial conglomerate is a group which is not headed by a parent
undertaking, or in any other case, the CSSF shall exercise the role of coordinator if
at least one of the regulated entities within the group is a credit institution or an
investment firm authorised under this Law and if this credit institution or investment
firm shows the largest balance sheet total in the most important financial sector.
(8) The CSSF may by common agreement with other relevant competent authorities
waive the criteria referred to in paragraphs (2) to (7), if their application would be
inappropriate, taking into account the structure of the financial conglomerate and the
relative importance of its activities in different countries, and appoint a different
competent authority as coordinator. In these cases, before taking the decision, the
CSSF shall request the opinion of the financial conglomerate.”
Art. 51-18 Tasks of the coordinator
“(1) Where the CSSF exercises the role of coordinator with regard to supplementary
supervision, the following tasks shall be carried out:
information in going concern and emergency situations, including the
dissemination of information which is of importance for a competent authority’s
supervisory task under sectoral rules;
(b) supervisory overview and assessment of the financial situation of a financial
conglomerate;
(c) assessment of compliance with the rules on capital adequacy, risk
concentration and intra-group transactions;
(d) assessment of the financial conglomerate’s structure, organisation and internal
control system;
(e) planning and coordination of supervisory activities in going concern as well as
in emergency situations, in cooperation with the relevant competent authorities
involved;
(f) other tasks, measures and decisions assigned to the coordinator by this
Chapter or deriving from the regulatory provisions of its implementation.
(2) In order to facilitate and establish supplementary supervision on a broad legal basis,
the CSSF and the other relevant competent authorities, and where necessary other
competent authorities concerned, shall have coordination arrangements in place.
The coordination arrangements may entrust additional tasks to the coordinator and
specify the procedures for the decision-making process as set out in Articles 51-10
and 51-11, Article 51-12(4), Article 51-13, Article 51-19(2) and Articles 51-23 and 51-
25, and for cooperation with other competent authorities.
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(3) Where the CSSF exercises the role of coordinator and needs information which has
already been given to another competent authority in accordance with the sectoral
rules, it should contact this authority, whenever possible, in order to prevent
duplication of reporting to the various authorities involved in prudential supervision.
Where the competent authority of another Member State exercises the role of
coordinator and where this authority needs information which has already been
given to the CSSF in accordance with the sectoral rules, the CSSF provides the
coordinator, whenever possible, with the information requested if this request aims at
preventing duplication of reporting to the various authorities involved in prudential
supervision.
(4) Without prejudice to the possibility of delegating specific supervisory competences
and responsibilities, the presence of a coordinator entrusted with specific tasks
concerning the supplementary supervision of regulated entities in a financial
conglomerate shall not affect the tasks and responsibilities of the CSSF as provided
for by the sectoral rules.”
Art. 51-19 Cooperation and exchange of information between competent authorities
“(1) The CSSF shall closely cooperate with the other competent authorities responsible
for the supervision of regulated entities within a financial conglomerate, and where it
does not exercise this role, with the coordinator. Without prejudice to the
responsibilities as defined under this Law, the CSSF and these authorities provide
one another with any information which is essential or relevant for the exercise of the
other authorities’ supervisory tasks under the sectoral rules and supplementary
supervision. In this regard, the CSSF shall communicate to the other competent
authorities and, where it does not exercise this role, to the coordinator, on request,
all relevant information and shall communicate on its own initiative all essential
information.
This cooperation shall at least provide for the gathering and the exchange of
information with regard to the following items:
(a) identification of the group structure of all major entities belonging to the financial
conglomerate, as well as of the competent authorities in charge of prudential
supervision of the regulated entities in the group;
(b) the financial conglomerate’s strategic policies;
(c) the financial situation of the financial conglomerate, in particular on capital
adequacy, intra-group transactions, risk concentration and profitability;
(d) the financial conglomerate’s major shareholders and management;
(e) the organisation, risk management and internal control systems at financial
conglomerate level;
(f) procedures for the collection of information from the entities in a financial
conglomerate, and the verification of that information;
(g) adverse developments in regulated entities or in other entities of the financial
conglomerate which could seriously affect the regulated entities;
(h) major sanctions and exceptional measures taken by competent authorities in
accordance with sectoral rules or this Chapter.
The CSSF may also exchange, in line with the provisions laid down in this Law, such
information on regulated entities within a financial conglomerate as may be needed
for the performance of their respective tasks, with the central banks of the Member
States, the European System of Central Banks and the European Central Bank.
127
(2) Without prejudice to its responsibilities under sectoral rules as defined under this
Law, the CSSF shall, prior to its decision, consult with the other relevant competent
authorities with regard to the following items, where the decisions are of importance
for other competent authorities’ supervisory tasks:
(a) changes in the shareholder, organisational or management structure of
regulated entities in a financial conglomerate, which require the approval or
authorisation of these competent authorities;
(b) major sanctions or exceptional measures taken by the CSSF.
The CSSF may decide not to consult with the other relevant competent authorities in
cases of urgency or where such consultation may jeopardise the effectiveness of the
decisions. In this case, the CSSF shall, without delay, inform the other competent
authorities.
(3) Where the CSSF exercises the role of coordinator, it may invite the competent
authorities of the Member State in which a parent undertaking has its head office to
ask the parent undertaking for any information which would be relevant for the
exercise of its coordination tasks as laid down in Article 51-18, and to transmit that
information to the CSSF.
Where the information referred to in article 51-21(2) has already been provided to a
competent authority in accordance with sectoral rules, the CSSF, when exercising
the role of coordinator, may apply to this authority to obtain the information.
(4) For the purposes of supplementary supervision, the CSSF may exchange
information as referred to under paragraphs (1), (2) and (3) with the “Commissariat
aux assurances” as well as other relevant competent authorities and the authorities
as defined in the last subparagraph of paragraph (1). The collection or possession of
information with regard to an entity within a financial conglomerate which is not a
regulated entity shall not in any way imply that the CSSF is required to play a
supervisory role in relation to this entity on a stand-alone basis.
Information received in the framework of supplementary supervision, and in
particular any exchange of information between the CSSF and other relevant
competent authorities or the authorities as referred to under the last subparagraph of
paragraph (1) in accordance with this Chapter are subject to the provisions of Article
44.”
Art. 51-20 Management body of mixed financial holding companies
(Law of 5 November 2006) “Persons who effectively direct the business of a mixed
financial holding company at the head of a financial conglomerate for which the
CSSF exercises the role of coordinator shall prove to be of good professional repute.
Such repute shall be assessed on the basis of police records and of any evidence
tending to show that the persons concerned are of good repute and offering
guarantee of irreproachable conduct on part of those persons. In addition, those
persons shall possess an adequate professional experience by having previously
exercised similar activities at a high level of responsibility and autonomy.
Art. 51-21 Access to information
128
(Law of 5 November 2006) “The entities in a financial conglomerate, whether or not
regulated, shall provide any information which would be relevant for the purposes of
supplementary supervision, on request, to the CSSF.”
Art. 51-22 Verification
(Law of 5 November 2006) “Where, in the context of supplementary supervision, the
CSSF, in its capacity of coordinator, wishes, in specific cases, to verify information
concerning an entity in a financial conglomerate, whether or not regulated, which is
situated in another Member State, the CSSF shall ask the competent authorities of
that other Member State to have the verification carried out.
Where the CSSF receives such a request from another competent authority in the
capacity of coordinator, it shall, within the framework of its competences, act upon it
either by carrying out the verification itself, by allowing an auditor or expert to carry it
out, or by allowing the authority which made the request to carry it out itself.
The competent authority which made the request may, if it so wishes, participate in
the verification when it does not carry out the verification itself.”
Art. 51-23 Enforcement measures
(Law of 5 November 2006) “Where the CSSF, in exercising its role of coordinator,
observes that the financial conglomerate does no longer comply with the
requirements referred to in Articles 51-13 to 51-16 or that these requirements are
met but solvency of the financial conglomerate may nevertheless be jeopardized, or
that the intra-group transactions or the risk concentrations are a threat to the
financial position of the regulated entities within a financial conglomerate, it shall
enjoin the mixed financial holding company at the head of the financial conglomerate
and the credit institutions and investment firms incorporated under Luxembourg law
belonging to the financial conglomerate, by registered letter, to remedy within such
period as it may prescribe the situation found to exist. Article 63 is applicable to the
persons in charge of the administration or management of the mixed financial
holding company. Where a credit institution or investment firm incorporated under
Luxembourg law is at the head of a financial conglomerate, the CSSF shall enjoin it,
by registered letter, to remedy within such period as it may prescribe the situation
found to exist. The CSSF shall also inform the other relevant competent authorities
of its findings.
Where the CSSF is informed of such findings by another competent authority
exercising the role of coordinator, it shall enjoin, if need be, the credit institutions and
investment firms incorporated under Luxembourg law belonging to the financial
conglomerate, by registered letter, to remedy within such period as it may prescribe
the situation found to exist.
The CSSF and other relevant competent authorities shall coordinate, where
necessary, the supervisory measures to be taken.”
Art. 51-24 Additional powers of the competent authorities
(Law of 5 November 2006) “Where the CSSF observes that a credit institution or
investment firm, which has been authorised by it, is using the membership to a
financial conglomerate in order to avoid, totally or partially, application of the sectoral
rules, the CSSF shall enjoin that credit institution or investment firm, by registered
letter, to remedy within such period as it may prescribe the situation found to exist.
Likewise, where non-compliance with the provisions set out in this Chapter and with
the measures for its implementation by a mixed financial holding company occurs,
the CSSF shall enjoin it, by registered letter, to remedy within such period as it may
prescribe the situation found to exist. Article 63 is applicable to the persons in charge
of the administration or management of the mixed financial holding company.
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The CSSF shall closely cooperate with other relevant competent authorities to
ensure that the measures aiming at ending the observed breaches or the causes of
such breaches produce the desired results.”
“Section 5: Third countries”211

Art. 51-25 Parent undertakings having their head office in a third country
“(1) Without prejudice to the sectoral rules, in the case referred to in Article 51-12(4), the
CSSF shall verify whether the credit institutions and investment firms incorporated
under Luxembourg law are subject to supervision by a third-country competent
authority, which is equivalent to that provided for by the provisions of this Chapter on
the supplementary supervision referred to in Article 51-12(2). The CSSF carries out
this verification, on its own initiative or at the request of the parent undertaking or of
any of the regulated entities authorised by a Member State and belonging to the
group, whenever it exercises the role of coordinator if Article 51-17 were to apply.
The CSSF shall consult the other competent authorities involved regarding the
equivalence or not of this supplementary supervision. It shall take into consideration
the applicable guidelines issued by the European Financial Conglomerates
Committee as provided for by Directive 2002/87/EC. For this purpose the CSSF shall
consult the Committee before taking a decision.
(2) Where the CSSF, based on the verification described in paragraph (1), establishes
the absence of equivalent supplementary supervision, the provisions concerning
supplementary supervision as referred to in Article 51-12(2) shall apply by analogy.
the role of coordinator, after consultation with the other relevant competent
authorities, to apply a different method to achieve the objectives of supplementary
supervision. The CSSF may in particular require the establishment of a mixed
financial holding company with head office in a Member State and apply the
provisions of this Chapter to the regulated entities in the financial conglomerate
headed by that mixed financial holding company.
The CSSF informs the other relevant competent authorities and the European
Art. 51-26 Cooperation with third countries’ competent authorities

(Law of 5 November 2006) “The CSSF may conclude cooperation agreements with
competent authorities of third countries specifying the means of exercising
supplementary supervision.”
211
130
Chapter 4: Means used to exercise prudential supervision
Art. 52 Official lists and the protection of titles

(1) The CSSF shall keep official lists of the credit institutions and other categories of
professionals of the financial sector authorised to carry on business through an
institution in Luxembourg, which are subject to its supervision. To that end, the
competent Minister shall supply it with copies of decisions granting and withdrawing
authorisation. “In addition, the CSSF shall keep the official list of the payment and
securities settlement systems authorised by the Minister. The official list shall also
include all payment and securities settlement systems notified by the Luxembourg
Central Bank to the European Commission pursuant to Article 34-3”212.
“The various official lists shall be drawn up and published in the Mémorial
[Luxembourg Official Journal] at least at the end of each year”213.
(2) Only persons entered in an official list may use any title or name purporting to
indicate that they are authorised to carry on any of the activities reserved to persons
entered in such a list. This prohibition shall not apply where there is no possibility of
anyone being misled or in cases involving a branch or service provider from abroad
which is duly authorised to carry on business in Luxembourg and uses a title or
name which it is authorised to use in its home State. However, where there is any
possibility of anyone being misled, such persons must arrange for the title or name
used by them to be followed by sufficiently precise particulars.
(3) No person may make use for commercial purposes of his entry in an official list or of
the fact of his being subject to supervision by the CSSF.
Art. 53 Powers of the CSSF
214
“(1)” (Law of 13 July 2007) “For the purposes of this law, the CSSF shall be given all
supervisory and investigatory powers for the exercise of its functions.
The powers of the CSSF include the right to:
– have access to any document in any form whatsoever, and to receive a copy of
it;
– request information from any person and, where necessary, to summon any
such person in order to obtain information;
– carry on on-site inspections or investigations with respect to persons subject to
its prudential supervision;
– require existing telephone and existing data traffic records;
– require the cessation of any practice that is contrary to the provisions adopted
in the implementation of this law;
– request the freezing and/or sequestration of assets with the President of the
district court of Luxembourg deciding on request;
– request temporary prohibition of professional activity with respect to persons
subject to its prudential supervision, as well as members of the management or
supervisory bodies, employees and tied agents linked to these persons;
– require auditors of the persons subject to its prudential supervision to provide
information;
212
213
214
131
– adopt any type of measure necessary to ensure that the persons subject to its
prudential supervision continue to comply with the requirements of this law and
its implementing measures;
– refer information to the State Prosecutor for criminal prosecution;
– require auditors or experts to carry out on-the-spot verifications or investigations
of persons subject to its prudential supervision.
In particular, the CSSF has the right to require from any person subject to its
supervision any information relevant for the performance of its tasks. It may inspect
books, accounts, registers or other deeds and documents of those persons”.
(2) (Law of 7 November 2007) “The CSSF shall require any credit institution or
investment firm that does not meet the requirements of Directives 2006/48/EC and
2006/49/EC to take the necessary actions or steps at an early stage to address the
situation. In case of non-compliance with these requirements, the CSSF shall take
the following measures:
– oblige credit institutions or, where appropriate, investment firms, to hold own
funds in excess of the minimum level laid down by the CSSF in accordance with
article 56;
– require the reinforcement of the arrangements, processes, mechanisms and
strategies implemented to comply with article 5 or, where appropriate, article
17, and to the internal process for internal capital adequacy assessment;
– require credit institutions or, where appropriate, investment firms to apply to
their exposures a specific provisioning policy or treatment of assets in terms of
own funds requirements;
– restrict or limit the business, operations or network of credit institutions or,
where appropriate, of investment firms;
– require the reduction of the risk inherent in the activities, products and systems
of credit institutions or, where appropriate, of investment firms.
If the CSSF takes such measures, it shall inform the other competent authorities
concerned.
Non-compliance with the requirements laid down in article 5 or, where appropriate,
article 17, as well as non-compliance with the provisions relating to the internal
capital adequacy assessment process are subject to a specific own funds
requirement in addition to the minimum laid down in article 56, whenever the
application of other measures is unlikely to sufficiently improve the arrangements,
processes, mechanisms and strategies within an appropriate timeframe. The same
measure applies to credit institutions or investment firms in respect of which a
negative determination has been made by the CSSF in the context of prudential
supervision where own funds held do not ensure an adequate management and
coverage of the risks incurred by the credit institution or investment firm. Finally, the
same measure applies to credit institutions or investment firms which do not have
sound administrative and accounting procedures and adequate internal control
mechanisms for identification and accounting of large exposures.”
Art. 54 Relationship between the CSSF and external auditors
(1) Every professional of the financial sector who is subject to supervision by the CSSF
and whose accounts are subject to audit by an external auditor shall be required of
his own volition to communicate to the CSSF all written reports, analyses and
commentaries produced by that auditor in the context of the latter’s audit of the
annual accounting documents. The CSSF may prescribe rules concerning the remit
132
of the audit mandate and the contents of the report on the audit of the annual
accounting documents.
(2) The CSSF may request any external auditor to carry out an audit in relation to one or
more specific aspects of the activities and operations of such a professional of the
financial sector. Such audits shall be carried out at the expense of the professional
concerned.
(3) (Law of 29 April 1999) “The external auditor shall be required promptly to report to
the CSSF any fact or decision of which he becomes aware while performing the task
of auditing the annual accounting documents of a professional of the financial sector
or any other statutory task, where that fact or decision:
– concerns that professional of the financial sector and
– is liable to:
“– constitute a material breach of the provisions of this law”.215
or
– affect the continuous functioning of the professional of the financial sector
or
– lead to refusal to certify the accounts or to the expression of reservations
relating thereto.
The external auditor, in completing for a professional of the financial sector the tasks
referred to in the preceding subparagraph, shall likewise be required promptly to
inform the CSSF of any fact or decision concerning that professional, and fulfilling
the criteria enumerated in the preceding subparagraph, of which he becomes aware
while auditing the annual accounting documents or performing any other statutory
task within an undertaking which is linked to that professional of the financial sector
by a “close link”216.
“…”217
(4) (Law of 29 April 1999) “The disclosure in good faith to the CSSF by an external
auditor of any fact or decision as referred to in paragraph 3 shall not constitute a
violation of the obligation of professional secrecy or a breach of any restriction on
disclosure of information imposed by contract, and shall not expose that auditor to
liability of any kind.”
Art. 55 Accounting documents
(1) In the absence of any specific legislative provisions governing the publication of
annual accounts, consolidated accounts and the accounting documents of branches,
the CSSF shall lay down rules governing the content, lodging and publication of the
accounting documents of persons subject to its supervision. Communications or
lodgements provided for by law or regulation, and, generally, any publication of the
financial situation of a person subject to supervision by the CSSF, may be effected
only in the forms thus prescribed.
(2) Save in so far as may be otherwise provided for by a specific law, the properly
approved annual accounts and consolidated accounts, the business report and
consolidated business report, the reports drawn up by the person appointed to audit
the annual accounts and consolidated accounts, and the accounting documents of
215
216
217
133
branches must be lodged in the “Commercial and Companies Registry”218 within one
month following their approval.
Art. 56 Coefficients
The CSSF shall fix structure coefficients to be observed by the various categories of
credit institutions and other professionals of the financial sector subject to its
supervision. It shall define the factors involved in the calculation of those coefficients.
It shall monitor compliance with the coefficients fixed by international agreements or
Community law.
Art. 57 Authorisation of holdings
(1) Any credit institution or other professional of the financial sector subject to
supervision by the CSSF which wishes to have a qualifying holding must first obtain
authorisation from the CSSF.
(2) “No credit institution may have a qualifying holding the amount of which exceeds
15% of its own funds in an undertaking which is neither a credit institution, nor a
financial institution, nor an undertaking carrying on activities which are a direct
extension of banking or concern services ancillary to banking, such as leasing,
factoring, the management of unit trusts, the management of data processing
services or any other similar activity.”219 “The restriction laid down in this paragraph
shall not apply to holdings in insurance undertakings, nor to holdings in reinsurance
undertakings.”220
(3) The total amount of a credit institution’s qualifying holdings in any of the
undertakings referred to in the preceding paragraph may not exceed 60% of the own
funds of that credit institution.
(4) Shares held temporarily during a financial reconstruction or rescue operation or
during the normal course of underwriting or in an institution’s own name on behalf of
others shall not be counted as qualifying holdings for the purpose of calculating the
limits laid down in paragraphs 2 and 3. Shares which are not financial fixed assets
shall not be included.
(5) The limits laid down in paragraphs 2 and 3 may be exceeded only in exceptional
circumstances. In such cases, however, the CSSF shall require a credit institution
either to increase its own funds or to take other equivalent measures.
Art. 58 Complaints by clients
The CSSF shall be competent to entertain complaints by clients of persons subject
to its supervision and to approach those persons with a view to achieving an
amicable settlement of such complaints.
Art. 59 Powers of injunction and suspension of the CSSF
(1) Where a person subject to supervision by the CSSF is not complying with the
provisions of any laws, regulations or memorandum and articles of association
relating to him, or where his management activities or financial situation are not such
as to constitute an adequate guarantee of proper discharge of his commitments, the
CSSF shall enjoin that person, by registered letter, to remedy, within such period as
it may prescribe, the situation found to exist “or to cease any practice that is contrary
to the relevant legal, regulatory or statutory provisions”.221
218
Law of 19 December 2002.
219
220
221
134
(2) If, by the end of the period prescribed by the CSSF pursuant to the preceding
paragraph, the situation in question has not been remedied, the CSSF may:
(a) suspend the members of the administrative, executive or management bodies
or any other persons who, by their actions, negligence or lack of prudence,
have brought about the situation found to exist or the continued exercise of
whose functions may prejudice the implementation of recovery or
reorganisation measures;
(b) suspend the exercise of voting rights attaching to shares held by shareholders
or members whose influence is likely to operate to the detriment of the prudent
and sound management of the person in question;
(c) suspend the pursuit of that person’s business or, if the situation found to exist
concerns a particular area of business, the pursuit of the latter.
(3) Decisions adopted by the CSSF pursuant to the preceding paragraph shall take
effect vis-à-vis the person in question from the date on which they are notified by
registered letter or served by a process-server.
(4) Where, on account of a suspension ordered pursuant to paragraph 2, an
administrative, executive or management body no longer has the minimum number
of members prescribed by law or by the memorandum and articles of association,
the CSSF shall fix, by registered letter, the period within which the institution
concerned is to fill the positions left vacant by the departure of the persons
suspended.
(5) If, by the end of that period, the positions left vacant by the departure of the persons
suspended have not been filled, they shall be provisionally filled by persons
appointed by the President of the Tribunal d’Arrondissement de Luxembourg
[Luxembourg District Court], after the institution in question has been duly heard or
called upon to put forward its submissions. The persons thus appointed shall have
the same powers as the persons whom they replace. Their term of office may not
exceed the duration of the suspension of the latter persons. Their fees shall be taxed
by the judge appointing them and shall, together with all other expenses occasioned
in pursuance of this article, be borne by the institution in question.
(6) (Law of 13 July 2007) “The CSSF may disclose to the public any measure taken
pursuant to paragraphs (1) and (2), unless such disclosure would seriously
jeopardise the financial markets or cause disproportionate damage to the parties
involved.”
“PART IV: Reorganisation and winding up of certain professionals of the financial

sector”222
Art. 60 Definitions
“For the purposes of this part:
– “administrator” shall mean any person or body appointed by the administrative
or judicial authorities whose task is to administer reorganisation measures;
– “administrative or judicial authorities” shall mean such administrative or judicial
authorities of the Member States as are competent for the purposes of
reorganisation measures or winding-up proceedings;
222
135
– “competent authorities” shall mean the national authorities which are
empowered by law or regulation to supervise credit institutions or investment
firms;
– “establishment” shall mean an establishment which manages funds for third
parties. This term covers credit institutions, commission agents, asset
managers, professionals acting for their own account, distributors of units in
UCIs who accept or make payments, underwriters, transfer agents and
registrars and professional depositaries of securities or other financial
instruments;
“…”223
– “host State” shall mean the State in which the establishment managing funds
for third parties has a branch or in which it provides services in the exercise of
its freedom to provide services;
– “home State” shall mean the State in which the establishment managing funds
for third parties has been authorised;
– “instruments” shall mean all the instruments referred to in section B of Annex II
hereto;
– “liquidator” shall mean any person or body appointed by the administrative or
judicial authorities whose task is to administer winding-up proceedings;
“…”224
– “regulated market in a third country” shall mean “a regulated market established
in a third party offering another comparable guarantee to the regulated markets
included in the list published by the European Commission in accordance with
article 47 of Directive 2004/39/EC”225 in terms of liquidity, security and market
transparency. Markets shall be deemed to offer comparable guarantees where
they fulfil, in particular, the following criteria:
● a legal or regulatory framework exists defining the organisation and
functioning of the market, the conditions of access thereto and the conditions
to be fulfilled by securities and financial instruments in order to be capable of
being dealt in on the market concerned;
● a public authority exists to ensure the supervision and proper functioning of
the market;
● a clearing house exists to organise liquidity and ensure that operations are
properly carried out. The clearing house in question must keep the accounts
opened in the names of the persons admitted to trade on the market, ensure
supervision of the positions of those persons and, where necessary, proceed
of its own motion to close out such positions;
● requirements exist for the payment, in the case of financial futures markets,
of an initial security deposit and of daily margins;
● there exists an obligation to publish at regular intervals relevant information
concerning the operations handled on the market concerned;
– “reorganisation measures” shall mean measures which are intended to
preserve or restore the financial situation of an establishment managing funds
for third parties and which could affect third parties’ pre-existing rights, including
223
224
225
136
measures involving the possibility of a suspension of payments, suspension of
enforcement measures or reduction of claims;
– “winding-up proceedings” shall mean collective proceedings opened and
monitored by the administrative or judicial authorities of a State with the aim of
realising assets under the supervision of those authorities, including where the
proceedings are terminated by a composition or other, similar measure;
– “branch” shall mean a place of business which forms a legally dependent part of
an establishment managing funds for third parties and which carries out directly
all or some of the transactions inherent in the business of that establishment;
any number of places of business set up in the same State by an establishment
managing funds for third parties with headquarters in another State shall be
regarded as a single branch;
– “Tribunal” shall mean the Tribunal d’Arrondissement de Luxembourg
[Luxembourg District Court] sitting in its capacity as a commercial court.”
Art. 60-1 Scope

“This Part shall apply to establishments managing funds for third parties.”
“Chapter 1: Suspension of payments”226
“Section 1: Provisions governing the opening of proceedings for suspension of payments

by establishments governed by Luxembourg law”227
Art. 60-2 Opening of proceedings for suspension of payments

“(1) Suspension of payments may occur where:
(a) the creditworthiness of the establishment is undermined or it finds itself in an
insoluble liquidity crisis, whether or not there is a cessation of payments;
(b) the entire ability of the establishment to meet its commitments is compromised;
(c) the authorisation of the establishment has been withdrawn and the withdrawal
decision has not yet become definitive.
(2) Only the CSSF or the establishment may apply to the Tribunal for a suspension
declaration.
(3) The application, duly supported by a statement of reasons and by documentary
evidence, shall be lodged in the Registry of the Tribunal.
(4) Where the application is made by the establishment, it shall be required, on pain of
inadmissibility of the application, before bringing the matter before the Tribunal, to
give the CSSF advance notice thereof. The Registry shall certify the date and time
on which the application was lodged and shall immediately inform the CSSF thereof.
226
227
137
(5) Where the application is made by the CSSF, it shall be required to serve it on the
establishment by means of service by a bailiff/process-server. The record of service
by bailiff/process-server shall be exempt from stamp duty and registration fees and
from the formality of registration.
(6) The lodgement of the application by the establishment or, where it is brought by the
CCSF, the service thereof shall automatically operate to bring about, in favour of the
establishment and pending a final decision on the application, a suspension of all
payments by that establishment and the prohibition, on pain of nullification, of all acts
other than precautionary and protective measures unless authorised by the CSSF or
by any contrary legal provision.
(7) Save where otherwise provided for by any contrary legal provision, payments,
operations and other acts, including those relating to the furnishing by an
establishment of collateral and the realisation of such collateral, shall be valid and
enforceable as against third parties, as against the establishment and as against the
administrators, provided that such payments, operations and acts were effected prior
to lodgement of the application or, as the case may be, service of the notice of
lodgement thereof, or were effected without the beneficiary being aware of such
lodgement or service.
(8) The Tribunal shall adjudicate speedily on the application, at a hearing in open court
taking place on a date and at a time previously communicated to the parties. If the
Tribunal has received observations from the CSSF, and if it considers that it has
sufficient information, it shall give its ruling forthwith in open court without hearing the
CSSF or the establishment. If the CSSF has not submitted observations and the
Tribunal considers it necessary, it shall call upon the CSSF and the establishment,
through the Registrar, to appear before it no later than three days after lodgement of
the application. It shall hear them in chambers and shall deliver its ruling in open
court. The judgment shall state the time at which it was delivered.
(9) The Registry shall forthwith inform the CSSF of the essential content of the
judgment. It shall notify the judgment to the CSSF and to the establishment by
registered post.
(10) The judgment shall lay down, for a period not exceeding six months, the conditions
and detailed arrangements governing the suspension of payments.
(11) No application may be brought by any of the parties or by any third party to set aside
the judgment on the grounds of its having been given in default or in the absence of
any party, even where it is delivered without any hearing of the parties or any of
them. It shall be immediately enforceable on the authority of the original thereof,
prior to registration and without the furnishing of any security, notwithstanding the
bringing of any appeal.
(12) The CSSF and the establishment may appeal against the judgment within fifteen
days from notification thereof in accordance with paragraph 9, by notice of appeal
lodged in the Registry of the Tribunal. Any such appeal shall be determined as a
matter of urgency by one of the chambers of the Cour Supérieure de Justice [High
Court of Justice] dealing with civil and commercial cases. The parties to the appeal
shall not be required to appear through counsel. The parties shall be called upon,
through the Registrar of the Cour Supérieure de Justice, to appear before it within a
period not exceeding eight days. The parties shall be heard in chambers. The Cour
Supérieure de Justice shall deliver its ruling at a hearing in open court taking place
on a date and at a time previously communicated to the parties. No appeal in
cassation may be lodged against the appellate judgment.
(13) Where any party fails to appear, no application may be brought to set aside the
appellate judgment on the grounds of its having been given in default or in the
absence of any party.
138
(14) Where the first-instance judgment grants leave for a suspension of payments, it shall
appoint one or more administrators, who shall control the management of the
establishment’s assets.
(15) The written authorisation of the administrators shall be required for all acts and
decisions of the establishment, without which such acts and decisions shall be null
and void. However, the Tribunal may limit the scope of the operations which are to
be subject to such authorisation. The administrators may submit for deliberation by
the bodies of the establishment any proposals which they deem expedient. They
may take part in the deliberations of the general meeting of shareholders and of the
administrative, executive, managerial or supervisory bodies of the establishment.
(16) Any dispute arising between the bodies of the establishment and the administrators
shall be determined by the Tribunal upon application by one of the parties. The
parties shall be heard in chambers. The decision of the Tribunal shall be final and
unappealable.
(17) The CSSF shall automatically act as administrator pending delivery of the first-
instance judgment on the application provided for by paragraph 3.
(18) The Tribunal shall determine the amount of the costs and fees payable to the
administrators; it may order that advance payments be made to them.
(19) Upon request by the CSSF, the establishment or the administrators, the Tribunal
may alter the detailed terms of any first-instance judgment delivered pursuant to this
article.
(20) Within eight days after delivery thereof, any first-instance judgment granting leave for
a suspension of payments and appointing one or more administrators, and any first-
instance judgment modifying the terms of an earlier judgment, shall be published in
the form of extracts, at the expense of the establishment and through the offices of
the administrators, in the Mémorial [Luxembourg Official Journal] and in at least two
Luxembourg newspapers and one foreign newspaper having a sufficiently large
circulation, to be specified by the Tribunal.
Any first-instance judgment granting leave for a suspension of payments and any
first-instance judgment modifying the terms of an earlier judgment shall in addition
be published in the form of extracts in two national newspapers in each host State.
Where branches of credit institutions are located in other EC Member States,
publication shall also take place in the Official Journal of the European Union. To
that end, the administrators shall, within eight days from delivery of the same,
forward extracts from any first-instance judgment granting leave for a suspension of
payments and from any first-instance judgment modifying the terms of an earlier
judgment to the Office for Official Publications of the European Communities.
The notices published in the newspapers must in particular indicate, in one of the
official languages of Luxembourg and, for the purposes of advertisement in the host
States, in the official language or languages of those host States, the purpose and
legal basis of the measure taken and the appeal remedies available.
(21) Any judgment given on appeal which varies a first-instance judgment as referred to
in the preceding paragraph shall be published without delay, in the form of extracts,
at the expense of the unsuccessful party and through the offices of the CSSF, in the
Mémorial [Luxembourg Official Journal] and in the same newspapers as those in
which the first-instance judgment was published.
(22) Any deeds or documents which may enlighten the Tribunal in its consideration of the
application may be produced or lodged without needing first to be endorsed with an
official stamp and without needing to undergo the formality of registration. Orders
and judgments given in proceedings for suspension of payments shall be exempt
from stamp duties and registration fees.
139
(23) The fees of the administrators and all other expenses occasioned by the
proceedings for suspension of payments shall be borne by the establishment in
question. The fees and expenses shall be regarded as administration expenses and
shall be deducted from the assets before any distribution of funds takes place.
(24) All actions against the administrators acting in their capacity as such shall become
time-barred five years after the date of publication of the closure of the suspension of
payments procedure.
All actions against the administrators in respect of acts done in the performance of
their duties shall become time-barred five years after the date of such acts or, where
they have been concealed by fraud, five years after the date of discovery of those
acts.”
“(1) The Tribunal shall have sole jurisdiction to declare a suspension of payments in
respect of an establishment governed by Luxembourg law, including in respect of its
branches established outside Luxembourg.
(2) The suspension of payments shall operate in accordance with the laws, regulations
and procedures applicable in Luxembourg, save in so far as this Part otherwise
provides.
(3) The suspension of payments shall have universal effect; it shall apply to branches
and assets of the establishment located outside Luxembourg.”
Art. 60-4 Information to be provided by the CSSF to foreign competent authorities
“The CSSF shall without delay inform, by any available means, the competent
authorities of the host States of the lodgement of the application or of service thereof
on the establishment. That information is to be communicated to the competent
authorities of the States concerned, if possible prior to lodgement of the application
or service thereof on the establishment or otherwise immediately thereafter. It must
mention, in particular, the effects of the measure.”
“Section 2: Special provisions applicable to Luxembourg branches of Community

establishments”228

“(1) The administrative or judicial authorities of the home Member State shall alone be
empowered to decide on the implementation of one or more reorganisation
measures in an establishment, including branches of that establishment in
Luxembourg.
(2) The law applicable to those reorganisation measures shall be that of the home
Member State, save in so far as this Part otherwise provides.
(3) The reorganisation measures shall be fully effective in Luxembourg, without any
further formalities, in accordance with the legislation of the home Member State. This
228
140
rule shall also apply where Luxembourg law does not provide for such measures or
makes their implementation subject to conditions which are not fulfilled.
The reorganisation measures shall be effective in Luxembourg once they become
effective in the Member State where they have been taken.
The reorganisation measures shall apply irrespective of the legal requirements of the
home Member State in relation to publication and shall be fully effective as against
creditors unless otherwise provided for by the administrative or judicial authorities or
the legislation of the home Member State.
(4) If the CSSF considers it necessary to arrange for the implementation in Luxembourg
of a reorganisation measure relating to a branch of a Community establishment, it
shall without delay inform the competent authority of the home member State to that
effect.”
“Section 3: Special provisions applicable to Luxembourg branches of non-Community


“(1) Reorganisation measures which are decided upon by the administrative or judicial
authorities of the State in which the establishment has its head office and which,
according to the law of that State, are effective in Luxembourg shall be fully effective
in Luxembourg, without any further formalities, in accordance with the legislation of
the home State. This rule shall also apply where Luxembourg law does not provide
for such measures or makes their implementation subject to conditions which are not
fulfilled.
The reorganisation measures shall be effective in Luxembourg once they become
effective in the State where they have been taken.
(2) Notwithstanding paragraph 1, the Tribunal shall have jurisdiction to declare, upon
application by the CSSF, a suspension of payments in respect of a Luxembourg
branch of a non-Community establishment. The CSSF alone shall be competent to
apply to the Tribunal for a declaration of suspension of payments, if it considers this
necessary in order to preserve the interests of creditors of the Luxembourg branch.
A suspension of payments declared by the Tribunal shall be governed by
Luxembourg law and shall operate in accordance with the procedures applicable in
Luxembourg, save in so far as this Part otherwise provides.”
Art. 60-7 Reorganisation measures concerning non-Community credit institutions
present in more than one location within “the European Union”230
“(1) In the case of non-Community credit institutions present in more than one location
within the “European Union”231, the CSSF shall without delay inform, by any
available means, the competent authorities of the other “European Union”232 host
Member States in which the credit institution has branches which are included on the
229
230
231
232
141
list of credit institutions authorised in the “European Union”233, as published in the
Official Journal of the European Union, of the lodgement of the application or of
service thereof on the institution in question. That information is to be communicated
to the competent authorities of the other host Member States concerned, if possible
prior to lodgement of the application or service thereof on the institution or otherwise
immediately thereafter. It must mention, in particular, the effects of the measure.
(2) The Tribunal shall contact the administrative or judicial authorities of the other host
Member States concerned, with a view to coordinating the action taken by them.”
233
142
“Chapter 2: Winding up”234
“Section 1: Voluntary winding up”235
Art. 60-8 Voluntary winding up

“(1) An establishment may not place itself in voluntary liquidation without first having
notified the CSSF of its intention so to do at least one month before the calling of the
general meeting which is to decide upon such winding up. The notice calling such
meeting shall contain the agenda and shall be given by means of advertisements
published twice, on dates at least eight days apart and not less than eight days
before the meeting, in the Mémorial [Luxembourg Official Journal] and in at least two
Luxembourg newspapers and one foreign newspaper having a sufficiently large
circulation; failure to comply with these provisions shall render such notice null and
void.
(2) A voluntary winding-up decision shall not preclude the CSSF or the State Prosecutor
from applying to the Tribunal for an order declaring applicable the procedure for
judicial winding up as provided for in Section 2.”
“Section 2: Provisions governing proceedings for the judicial winding up of

establishments governed by Luxembourg law”236
Art. 61 Winding-up proceedings

“(1) An establishment may be dissolved and wound up where:
(a) it is apparent that the suspension of payments scheme provided for by the
preceding chapter, as previously decided upon, is not able to rectify the
situation which caused it to be ordered;
(b) the financial situation of the establishment is undermined to such an extent that
it can no longer meet the commitments which it owes to all its debtors, obligees
and holders of participatory rights;
(c) the authorisation of the establishment has been withdrawn and the withdrawal
decision has become final and definitive.
(2) Only the CSSF or the State Prosecutor, with the CSSF being duly joined as a party
to the proceedings, may apply to the Tribunal for an order for the dissolution and
winding up of an establishment.
(3) The application, duly supported by a statement of reasons and by documentary
evidence, shall be lodged in the Registry of the Tribunal and served by the applicant
on the establishment.
(4) The CSSF or the State Prosecutor shall be required to serve the notice of lodgement
of the application on the establishment by means of service by a bailiff/process-
234
235
236
143
server. The record of service by bailiff/process-server shall be exempt from stamp
duty and registration fees and from the formality of registration.
(5) The Tribunal shall adjudicate speedily on the application, at a hearing in open court
taking place on a date and at a time previously communicated to the parties. It shall
call upon the establishment and the CSSF, through the Registrar, to appear before it
no later than three days after lodgement of the application. It shall hear them in
chambers and shall deliver its ruling in open court. The judgment shall state the time
at which it was delivered.
(6) The Registry shall forthwith inform the CSSF of the essential content of the
judgment. It shall notify the judgment to the CSSF and to the establishment by
registered post.
(7) When ordering the winding up, the Tribunal shall appoint an official receiver and one
or more liquidators. It shall determine the manner in which the winding up is to be
carried out. It may order, in such measure as it shall determine, that the rules
governing bankruptcy are to apply. In that event, it may fix the point in time at which
the cessation of payments took place as being a date preceding, by no more than six
months, the date of lodgement of the application referred to in Article 60-2(3). The
manner in which the winding up is to be carried out may be modified subsequently,
either by the Tribunal of its own motion or upon application by the liquidators or by
the CSSF.
(8) Save where otherwise provided for by any contrary legal provision, payments,
operations and other acts, including those relating to the furnishing by an
establishment of collateral and the realisation of such collateral, shall be valid and
enforceable as against third parties and as against the liquidators, provided that
such payments, operations and acts were effected prior to delivery of the judgment
ordering the winding up or were effected in ignorance of the winding up.”
(9) No application may be brought by any of the parties or by any third party to set aside
the judgment declaring the dissolution and ordering the winding-up on the grounds of
its having been given in default or in the absence of any party. It shall be
immediately enforceable on the authority of the original thereof, prior to registration
and without the furnishing of any security, notwithstanding the bringing of any
appeal.
(10) The CSSF, the State Prosecutor or the establishment may appeal against the
judgment by notice to the Registrar of the Tribunal. The time-limit for appealing shall
be fifteen days from notification of the judgment in accordance with paragraph 6.,
Any such appeal shall be determined as a matter of urgency by one of the chambers
of the Cour Supérieure de Justice [High Court of Justice] having jurisdiction to
adjudicate on civil and commercial cases. The parties to the appeal shall not be
required to appear through counsel. The parties shall be called upon, through the
Registrar of the Cour Supérieure de Justice, to appear before it within a period not
exceeding eight days. The parties shall be heard in chambers. The Cour Supérieure
de Justice shall deliver its ruling at a hearing in open court taking place on a date
and at a time previously communicated to the parties.
(11) Where any party fails to appear, no application may be brought to set aside the
appellate judgment on the grounds of its having been given in default or in the
absence of any party.
(12) Within eight days after delivery thereof, any first-instance judgment declaring the
dissolution and ordering the winding up of an establishment and appointing an
official receiver and one or more liquidators, and any first-instance judgment
modifying the terms of an earlier judgment, shall be published in the form of extracts,
at the expense of the establishment and through the offices of the liquidators, in the
Mémorial [Luxembourg Official Journal] and in at least two Luxembourg newspapers
144
and one foreign newspaper having a sufficiently large circulation, to be specified by
the Tribunal.
Any first-instance judgment declaring the dissolution and ordering the winding up of
an establishment and appointing an official receiver and one or more liquidators and
any first-instance judgment modifying the terms of an earlier judgment shall in
addition be published in the form of extracts in two national newspapers in each host
State. Where branches of credit institutions are located in other EC Member States,
publication shall also take place in the Official Journal of the European Union. To
that end, the liquidators shall, within eight days from delivery of the same, forward
extracts from any first-instance judgment declaring the dissolution and ordering the
winding up of an establishment and appointing an official receiver and one or more
liquidators and from any first-instance judgment modifying the terms of an earlier
judgment to the Office for Official Publications of the European Communities.
The notices published in the newspapers must in particular indicate, in the official
language or languages of Luxembourg and of the host States, the purpose and legal
basis of the measure taken and the appeal remedies available.
(13) The Tribunal shall determine the amount of the costs and fees payable to the
liquidators; it may order that advance payments be made to them. In the event that
the official receiver establishes any non-existence or insufficiency of assets, the
procedural formalities shall be exempt from all court fees and registration charges
and the costs and fees of the liquidators shall be borne by the Treasury.
(14) The liquidators shall each year provide the creditors with information in an
appropriate manner, particularly with regard to progress in the winding up.
(15) Sums or assets owed to creditors who have not come forward by the close of the
winding up shall be lodged in the Caisse des Consignations [State Fund for Official
Deposits], for the benefit of whomever may be entitled thereto.
(16) Upon completion of the winding up, the liquidators shall furnish to the Tribunal a
report on the use made of the assets of the establishment and shall submit the
accounts and supporting documentation. The Tribunal shall appoint one or more
auditors to examine the documents. Following receipt of the auditors’ report, a ruling
shall be given on the management by the liquidators and on the closure of the
winding up, details of which shall be published in accordance with paragraph 12.
Such publication shall in addition cover the following matters:
(a) it shall specify the place designated by the Tribunal in which the company’s
books and documents are to be lodged for a period of not less than five years;
(b) it shall specify the measures taken in accordance with paragraph 15 with a view
to the deposit in the Caisse des Consignations of sums and assets owed to
creditors and shareholders which it has not been possible to remit or return to
them.
(17) All actions which may be brought against the liquidators acting in that capacity shall
become time-barred five years after publication of the closure of the winding up.
Actions brought against the liquidators in relation to facts and matters arising from
the performance of their duties shall become time-barred five years after the
occurrence of those facts and matters or, if they have been deceitfully concealed,
five years after they are discovered.
(18) Without prejudice to paragraph 7, Book III of the Commercial Code, the provisions of
the Law of 4 April 1886 on court-approved compositions and arrangements with
creditors aimed at preventing bankruptcy, as amended, and the provisions of the
Grand-Ducal Decree of 24 May 1935 supplementing the legislation relating to
suspensions of payments, court-approved compositions and arrangements with
145
creditors aimed at preventing bankruptcy and bankruptcy following on from the
setting-up of a controlled management scheme, shall not apply to establishments.
(19) Any deeds or documents which may enlighten the Tribunal in its consideration of the
application may be produced or lodged without needing first to be endorsed with an
official stamp and without needing to undergo the formality of registration. Orders
and judgments given in winding-up proceedings shall be exempt from stamp duties
and registration fees.
(20) The fees of the liquidators and all other expenses occasioned by the winding-up
proceedings shall be borne by the establishment in question. The fees and expenses
shall be regarded as administration expenses and shall be deducted from the assets
before any distribution of funds takes place.”
Art. 61-1 Competent jurisdiction
“(1) The Tribunal shall have exclusive jurisdiction to order the dissolution and winding up
of an establishment governed by Luxembourg law, including its branches
established outside Luxembourg.
(2) The CSSF shall without delay inform, by any available means, the competent
authorities of the host States of the lodgement of the application or of service thereof
on the establishment. That information is to be communicated to the competent
authorities of the States concerned, if possible prior to lodgement of the application
or service thereof on the establishment or otherwise immediately thereafter. It must
mention, in particular, the effects of the judgment declaring the dissolution and
ordering the winding up.”
Art. 61-2 Applicable law
“(1) An establishment managing funds for third parties shall be wound up in accordance
with Luxembourg laws and the procedures applicable Luxembourg, save in so far as
this Part otherwise provides.
(2) Luxembourg law shall determine in particular:
(a) the goods subject to administration and the treatment of goods acquired by the
establishment after the opening of winding-up proceedings;
(b) the respective powers of the establishment and the liquidator;
(c) the conditions under which set-offs may be invoked;
(d) the effects of winding-up proceedings on current contracts to which the
establishment is party;
(e) the effects of winding-up proceedings on proceedings brought by individual
creditors, with the exception of lawsuits pending, as provided for in Article 61-
21;
(f) the claims which are to be lodged against the establishment and the treatment
of claims arising after the opening of winding-up proceedings;
(g) the rules governing the lodging, verification and admission of claims;
(h) the rules governing the distribution of the proceeds of the realisation of assets,
the ranking of claims and the rights of creditors who have obtained partial
satisfaction after the opening of insolvency proceedings by virtue of a right in
rem or through a set-off;
(i) the conditions for, and the effects of, the closure of insolvency proceedings;
146
(j) creditors’ rights after the closure of winding-up proceedings;
(k) who is to bear the costs and expenses incurred in the winding-up proceedings;
(l) the rules relating to the voidness, voidability or unenforceability of legal acts
detrimental to all the creditors, subject to Article 61-19.”
Art. 61-3 Withdrawal of an establishment’s authorisation
“(1) Where an establishment is wound up, its authorisation shall be withdrawn. In that
event, the CSSF shall inform the competent authorities of the States in which the
establishment has branches of such withdrawal.
(2) The withdrawal of authorisation provided for in the preceding paragraph shall not
prevent the liquidator or liquidators from carrying on some of the establishment’s
activities insofar as that is necessary or appropriate for the purposes of winding up.
Such activities shall be carried on with the consent, and under the supervision, of the
CSSF.”
Art. 61-4 Provision of information to known creditors
“(1) The liquidator or liquidators shall without delay individually inform, by letter sent by
registered post, known creditors who have their domiciles, normal places of
residence or head offices outside Luxembourg of the judgment declaring the
dissolution and ordering the winding up of the establishment.
(2) The letter sent by registered post shall state that the Registry of the Tribunal is
empowered to accept the lodgement of claims, accompanied by documents
evidencing entitlement thereto. That communication shall in particular deal with time
limits, the penalties laid down in regard to those time limits and the other measures
laid down. It shall also state that creditors whose claims are preferential or secured
in rem need to lodge their claims.
(3) The information shall be provided to the creditors in one of the official languages of
Luxembourg. For that purpose, a form shall be used bearing, in all the official
languages of the European Union, the heading “Invitation to lodge a claim. Time
limits to be observed”.”
Art. 61-5 Lodgement of claims
“(1) Any creditor, including public authorities, shall have the right and the obligation to
lodge in the Registry of the Tribunal a statement of his claims, within the period
prescribed in the judgment ordering the winding up. The Registry shall keep a record
of such statement and shall provide an acknowledgement of receipt thereof.
(2) Any creditor who has his domicile, normal place of residence or head office outside
Luxembourg may lodge his claim in the official language or one of the official
languages of his home State. In that event, however, the lodgement of his claim
shall bear the heading “Lodgement of claim” in one of the official languages of
Luxembourg. In addition, he may be required by the Tribunal, at his own expense, to
provide a translation of the lodgement of claim into one of the official languages of
Luxembourg.
(3) The claims of all creditors whose domiciles, normal places of residence or head
offices are outside Luxembourg shall be treated in the same way and accorded the
same ranking as claims of an equivalent nature which may be lodged by creditors
having their domiciles, normal places of residence, or head offices in Luxembourg.
147
(4) A creditor shall send copies of supporting documents, if any, and shall indicate the
nature of the claim, the date on which it arose and its amount, as well as whether he
alleges preference, security in rem or reservation of title in respect of the claim and
what assets are covered by his security.”
“Section 3: Special provisions applicable to Luxembourg branches of Community


“(1) The administrative or judicial authorities of the home Member State shall alone be
empowered to decide on the opening of winding-up proceedings concerning an
establishment, including branches of that establishment in Luxembourg.
(2) The Luxembourg branch shall be wound up in accordance with the laws, regulations
and procedures applicable in the home Member State, save in so far as this Part
otherwise provides.
(3) A decision to open winding-up proceedings taken by the administrative or judicial
authority of the home Member State shall be recognised, without further formality,
within the territory of Luxembourg and shall be effective there when the decision is
effective in the State in which the winding-up proceedings are opened.
(4) The CSSF shall be the competent authority for the purposes of receiving from a
competent authority abroad notification of a decision to open winding-up
proceedings taken by the administrative or judicial authority of the Member State
concerned in relation to an establishment having one or more branches in
Luxembourg.”
“Section 4: Special provisions applicable to Luxembourg branches of non-Community


“(1) The administrative or judicial authorities of the State in which the establishment has
its head office shall be empowered to order the winding up of that establishment,
including branches of that establishment in Luxembourg.
The Luxembourg branch shall be wound up in accordance with the laws, regulations
and procedures applicable in the home State, save in so far as may be otherwise
provided for by Luxembourg law.
A decision ordering winding up which, according to the law of the home State, is
effective in Luxembourg shall be effective in Luxembourg, without further formality, in
accordance with the legislation of the home State.
(2) Notwithstanding paragraph 1, the Tribunal shall have jurisdiction to order, upon
application by the CSSF, the dissolution and winding up of a Luxembourg branch of
237
238
148
a non-Community establishment. The CSSF alone shall be competent to apply to the
Tribunal for a dissolution and winding-up order, if it considers this necessary in order
to preserve the interests of creditors of the Luxembourg branch.
In that event, the Luxembourg branch shall be wound up in accordance with
Luxembourg law and in conformity with the procedures applicable in Luxembourg,
save in so far as this Part otherwise provides.”
Art. 61-8 Non-Community credit institutions present in more than one location within
the “European Union”239
“(1) In the case of non-Community credit institutions present in more than one location
within the “European Union”240, the CSSF shall without delay inform, by any
available means, the competent authorities of the other host Member States in which
the credit institution has branches which are included on the list of credit institutions
authorised in the “European Union”241, as published in the Official Journal of the
European Union, of the decision to open winding-up proceedings in respect of the
Luxembourg branch of a non-Community credit institution. That information is to be
communicated to the competent authorities of the other host Member States
concerned, if possible before the opening of the winding-up proceedings or
otherwise immediately thereafter. It must mention, in particular, the effects of the
ordering dissolution and winding up.
(2) The Tribunal shall contact the administrative or judicial authorities of the other host
Member States concerned, with a view to coordinating the action taken by them.”
“Chapter 3: Provisions common to reorganisation measures and winding-up

proceedings”242
Art. 61-9 Effects on certain contracts and rights

“The effects of a suspension of payments or the opening of winding-up proceedings
on:
(a) employment contracts and relationships shall be governed solely by the law of
the State applicable to the employment contract;
(b) a contract conferring the right to make use of or acquire immovable property
shall be governed solely by the law of the State within the territory of which the
immovable property is situated. That law shall determine whether property is
movable or immovable;
(c) rights in respect of immovable property, a ship or an aircraft subject to
registration in a public register shall be governed solely by the law of the State
under the authority of which the register is kept.”
239
240
241
242
149
Art. 61-10 Third parties’ rights in rem
“(1) The opening of proceedings for a suspension of payments or of winding-up
proceedings shall not affect the rights in rem of creditors or third parties in respect of
tangible or intangible, movable or immovable assets – both specific assets and
collections of indefinite assets as a whole which change from time to time –
belonging to the establishment which are situated outside Luxembourg at the time of
the adoption of the opening of such proceedings.
(2) The rights in rem referred to in preceding paragraph shall in particular include:
(a) the right to dispose of assets or have them disposed of and to obtain
satisfaction from the proceeds of or income from those assets, in particular by
virtue of a lien or a mortgage;
(b) the exclusive right to have a claim met, in particular a right guaranteed by a lien
in respect of the claim or by assignment of the claim by way of a guarantee;
(c) the right to demand the assets from, or to require restitution by, anyone having
possession or use of them contrary to the wishes of the party so entitled;
(d) a right in rem to the beneficial use of assets.
(3) The right, recorded in a public register and enforceable against third parties, under
which a right in rem within the meaning of paragraph 1 may be obtained, shall be
considered a right in rem.
(4) Paragraph 1 shall not preclude the actions for voidness, voidability or
unenforceability laid down in Article 61-2(2)(l).”
Art. 61-11 Reservation of title
proceedings concerning an establishment purchasing an asset shall not affect the
seller’s rights based on a reservation of title where at the time of the opening of such
proceedings the asset is situated outside Luxembourg.
(2) The opening of proceedings for a suspension of payments or of winding-up
proceedings concerning an establishment selling an asset, after delivery of the
asset, shall not constitute grounds for rescinding or terminating the sale and shall not
prevent the purchaser from acquiring title where at the time of the opening of such
proceedings the asset sold is situated outside Luxembourg.
(3) Paragraphs 1 and 2 shall not preclude the actions for voidness, voidability or
unenforceability laid down in Article 61-2(2)(l).
(4) Where at the time of the opening of the proceedings an asset referred to in
paragraphs 1 or 2 is situated in Luxembourg, Article 567-1 of the Commercial Code
shall apply.”
Art. 61-12 Set-off
proceedings shall not affect the right of creditors to demand the set-off of their claims
against the claims of the establishment managing funds for third parties, where such
a set-off is permitted by the law applicable to that establishment’s claim.
150
(2) The preceding paragraph shall not preclude the actions for voidness, voidability or
unenforceability laid down in Article 61-2(2)(l).”
Art. 61-13 Lex rei sitae
“The enforcement of proprietary rights in instruments or other rights in such
instruments the existence or transfer of which presupposes their recording in a
register, an account or a centralised deposit system shall be governed by the law of
the State where the register, account, or centralised deposit system in which those
rights are recorded is held or located.”
Art. 61-14 Netting agreements
“Netting agreements shall be governed solely by the law of the contract which
governs such agreements.”
Art. 61-15 Repurchase agreements
“Without prejudice to Article 61-13, repurchase agreements shall be governed solely
by the law of the contract which governs such agreements.”
Art. 61-16 Regulated markets
“Without prejudice to Article 61-13, transactions carried out in the context of a
regulated market shall be governed solely by the law of the contract which governs
such transactions.”
Art. 61-17 Proof of the appointment and powers of administrators and liquidators
“(1) The administrator’s or liquidator’s appointment shall be evidenced by a certified copy
of the original decision appointing him or by any other certificate issued by the
administrative or judicial authority of the home State.
Where the liquidator wishes to act in Luxembourg, the certificate shall be translated
into one of the official languages of Luxembourg. No legalisation or other similar
formality shall be required.
(2) Subject to their being compatible with public order, and subject to the provisions of
paragraph 3, administrators and liquidators shall be entitled to exercise in
Luxembourg all the powers which they are entitled to exercise within the territory of
the home State. They may also appoint persons to assist or, where appropriate,
represent them in the course of the reorganisation procedure or winding-up
proceedings, in particular in order to help overcome any difficulties encountered by
creditors in Luxembourg.
(3) In the exercise of his powers, acts lodged by an administrator or liquidator must be in
conformity with Luxembourg law where he is acting in Luxembourg, in particular with
regard to procedures for the realisation of assets and the provision of information to
employees. Those powers may not include the use of force or the right to rule on
legal proceedings or disputes.”
151
Art. 61-18 Registration in a public register
“(1) The administrator, liquidator or any administrative or judicial authority of the home
State must request that a reorganisation measure or the decision to open winding-up
proceedings be registered in the Luxembourg Commercial and Companies Register
and published in the C Series of the Mémorial [Luxembourg Official Journal].
The provisions of the Law on the Commercial and Companies Register shall apply.
(2) Where compulsory registration is provided for by the legislation or procedures of the
State in which the Luxembourg establishment has branches or assets, the
administrator or liquidator appointed by the Tribunal must take such measures as
are necessary in order to ensure such registration.
The costs of registration shall be regarded as costs and expenses incurred in the
proceedings.”
Art. 61-19 Detrimental acts
“(1) Article 61-2 shall not apply as regards the rules relating to the voidness, voidability or
unenforceability of legal acts detrimental to the creditors as a whole, where the
beneficiary of those acts provides proof that:
– the act detrimental to the creditors as a whole is subject to a system of law
other than Luxembourg law, and
– that foreign law does not allow any means of challenging that act in the case in
point.
(2) Where the decision of the Tribunal ordering a suspension of payments prescribes
rules relating to the voidness, voidability or unenforceability of legal acts detrimental
to the creditors as a whole performed before lodgement of the application in the
Registry of the Tribunal or service thereof on the establishment, Article 60-3(2) shall
not apply in the cases provided for in the preceding paragraph.”
Art. 61-20 Protection of third parties
“Where, by an act concluded after the opening of proceedings for a suspension of
payments or the opening of winding-up proceedings, the establishment disposes, for
consideration, of:
– an immovable asset,
– a ship or an aircraft subject to registration in a public register, or
– instruments or rights in such instruments the existence or transfer of which
presupposes their being recorded in a register, an account or a centralised
deposit system,
the validity and enforceability of that act shall be governed by the law of the State
within the territory of which the immovable asset is situated or under the authority of
which that register, account or deposit system is kept.”
152
Art. 61-21 Lawsuits pending
“The effects of a reorganisation measure or of winding-up proceedings on a pending
lawsuit concerning an asset or a right of which the establishment has been divested
shall be governed solely by the law of the State in which the lawsuit is pending.”
Art. 61-22 Professional secrecy
“All persons required to receive or divulge information in connection with the
information or consultation procedures laid down in Articles 60-4, 60-5(4), 60-7,
61(18), 61-1, 61-6 and 61-8 shall be bound by professional secrecy, in accordance
with the rules and conditions laid down in Article 44 of this Law, with the exception of
any judicial authorities to which existing national provisions apply.”
“Art. 61-23”243 (repealed by the law of 5 August 2005)
“Chapter 4: Special provisions applicable to payment and securities settlement

systems”244
“Art. 61-24”245 Provisions specific to settlement finality in payment and securities

settlement systems authorised in Luxembourg
“(1) A transfer order may no longer be revoked or called in question by a participant in a
system authorised in Luxembourg, or by a third party, from the moment of its entry
into that system. By the same token, from that moment on, the netting may no longer
be called in question for any reason whatever, notwithstanding any legislative
provision, regulation, contractual term or custom providing for the setting aside of
contracts and transactions concluded before the moment of opening of insolvency
proceedings as defined in Article 34-2(l).
The moment of entry of a transfer order into a system authorised in Luxembourg
shall be defined by the rules of that system.
(2) Even in the event of insolvency proceedings against a participant, transfer orders
and netting within systems authorised in Luxembourg shall be legally enforceable as
between the parties and binding on third parties, provided that transfer orders were
entered into a system before the moment of opening of such insolvency proceedings
as defined in Article 34-2(l).
Transfer orders entered into a system after the moment of opening of insolvency
proceedings and carried out on the day of opening of such proceedings shall be
legally enforceable as between the parties and binding on third parties only if, after
the time of settlement, the system operator, the settlement agent, the central
counterparty or the clearing house can prove that they were not aware, nor should
have been aware, of the opening of such proceedings.
(3) Insolvency proceedings shall not have retroactive effects on the rights and
obligations of a participant arising from, or in connection with, its participation in a
243
244
245
153
system earlier than the moment of opening of such proceedings as defined in Article
34-2(l).
(4) The opening of insolvency proceedings against a participant shall not prevent funds
or securities available on that participant’s own settlement account from being used
to fulfil that participant’s obligations in the system on the day of the opening of the
insolvency proceedings.
Any credit facility of such a participant connected to the system may be used against
available, existing collateral security to fulfil that participant’s obligations in the
system.
(5) (Law of 13 July 2007) “No settlement account maintained with a system operator or
settlement agent, and no transfer, via a credit institution incorporated under Luxembourg
law or foreign law to such settlement account, may be seized, sequestered or blocked in
any way by a participant (other than the system operator or settlement agent), a
counterparty or a third party.”
“Art. 61-25”246 Provisions specific to insulation of the rights of holders of collateral

security provided in the context of Community payment or securities
settlement systems or in the context of operations of central banks of
the Member States or the European Central Bank from the effects of the
insolvency of the provider
“(1) For the purposes of this article “collateral security” shall mean all realisable assets,
including money, provided under a pledge, a repurchase agreement, a fiduciary
transfer or otherwise, for the purpose of securing rights and obligations potentially
arising in connection with a system within the meaning of Article 34-2(a), or provided
to central banks of the Member States or to the European Central Bank.
(2) The rights of:
– a participant to collateral security provided to it in connection with a system
within the meaning of Article 34-2(a), and
– central banks of the Member States or the European Central Bank to collateral
security provided to them in the context of operations carried out in their
capacity as central banks,
shall not be affected by insolvency proceedings against the participant or
counterparty to those central banks which provided the collateral security.
Notwithstanding any provision to the contrary laid down by the law relating to
insolvency proceedings, such collateral security may be realised for the satisfaction
of the rights covered thereby.
(3) Where securities, including rights in securities, are provided as collateral security to
participants or central banks of the Member States or the European Central Bank as
described in the preceding paragraph, and their right (or that of any nominee, agent
or third party acting on their behalf) with respect to the securities is legally recorded
on a register, account or centralised deposit system located in a Member State, the
determination of the rights of such entities as holders of collateral security in relation
to those securities shall be governed by the law of that Member State.”
246
154
“Art. 61-26”247 Provisions specific to the opening of insolvency proceedings against a
participant in a payment or securities settlement system
“(1) In the event of insolvency proceedings being opened against a participant in a
system authorised in Luxembourg, the rights and obligations arising from, or in
connection with, the participation of that participant shall be determined by
Luxembourg law.
In the event of insolvency proceedings being opened against a Luxembourg
participant in a system (within the meaning of Article 34-2(a)) of another Member
State, the rights and obligations arising from, or in connection with, the participation
of that participant shall be determined by the law governing that system.
(2) Where, in relation to a Luxembourg participant in a system within the meaning of
Article 34-2(a), an application is made to the “Tribunal”248, or that court delivers a
judgment which, by application of “Chapters 1 and 2 of Part IV”249 of this Law or of
the provisions referred to in Article “61(20)”250 of this Law, has the effect of
suspending payments by that participant, the Registry of the Tribunal shall forthwith
notify the CSSF of the application or decision in question, stating the time at which it
was respectively lodged or delivered.
The Registry of the Tribunal d’Arrondissement shall similarly notify the CSSF of any
subsequent decision the effect of which is to terminate the suspension of payments
by the participant or to modify the legal basis thereof.
(3) The CSSF shall in turn ensure that it takes steps without delay to notify the Central
Bank and the operator of the system authorised in Luxembourg of any application or
decision to open insolvency proceedings in respect of a Luxembourg participant.
Where the matter concerns a Luxembourg participant in a system of another
Member State, the CSSF shall without delay notify the decision to the competent
authorities, designated for that purpose, of the other Member States concerned.
The CSSF shall be the competent authority for the purposes of receiving, from an
authority of another Member State or of a third country designated for that purpose,
notification of a decision to open insolvency proceedings taken by the competent
judicial or administrative authority of that Member State or third country in relation to
a participant in a system authorised in Luxembourg.”
Art. 62 (repealed by the Law of 19 March 2004)
247
248
249
250
155
“PART IVa: Deposit-guarantee schemes in credit institutions
Chapter 1: Protection of persons depositing funds with credit institutions governed by

Luxembourg law and with Luxembourg branches of credit institutions having their head
office “in a third country”251”252

“(1) In order to be recognised by the CSSF, deposit-guarantee schemes set up in
Luxembourg must ensure, in the event of unavailability of deposits, that
compensation is provided to natural and legal persons that have deposited funds
with credit institutions governed by Luxembourg law, including their branches in
other “Member States”253, and to natural and legal persons that have deposited
funds with Luxembourg branches of credit institutions having their head office “in a
third country”254, within the limits, subject to the conditions and in accordance with
the detailed rules laid down in this Part.
The CSSF shall keep an official list of the deposit-guarantee schemes set up in
Luxembourg which are recognised by it.
(2) For the purposes of this Part, “deposit” shall mean any credit balance which results
from funds left in an account or from temporary situations deriving from normal
banking transactions and which a credit institution must repay under the legal and
contractual conditions applicable, and any debt evidenced by a certificate issued by
a credit institution.
Mortgage bonds and public sector bonds issued by credit institutions shall not
constitute deposits.
For the purposes of calculating a credit balance, the rules and regulations relating to
set-off and counterclaims shall apply, in accordance with the legal and contractual
conditions applicable to the deposit concerned.
(3) The following deposits shall be excluded from any compensation by deposit-
guarantee schemes:
– deposits made by other credit institutions on their own behalf and for their own
account,
– funds constituting “own funds” as defined by the CSSF pursuant to Article 56 of
this Law,
– deposits arising out of transactions in connection with which there has been a
criminal conviction for money laundering “...”255.
(4) The following deposits may be excluded from cover or subject to a lower level of
cover by deposit-guarantee schemes:
– “deposits by financial institutions”256,
– deposits by insurance undertakings,
251
252
253
254
255
256
156
– deposits by government and central administrative authorities,
– deposits by provincial, regional, local and municipal authorities, whether they
are Luxembourg or foreign authorities,
– deposits by collective investment undertakings,
– deposits by pension and retirement funds,
– deposits by members of a credit institution’s own administrative and
management bodies, deposits by members personally liable, deposits by
natural and legal persons holding at least 5% of the credit institution’s capital
and deposits by natural and legal persons of similar status in other companies
in the same group as that of which the credit institution forms part,
– deposits by close relatives and kin of the depositors referred to in the preceding
indent, and deposits by third parties acting on behalf of such depositors and of
their close relatives and kin,
– deposits by other companies in the same group as that of which the credit
institution forms part,
– non-nominative deposits,
– deposits for which the depositor has, on an individual basis, obtained from the
same credit institution rates and financial concessions which have helped to
aggravate the financial situation of that institution,
– debt securities issued by the same institution and liabilities arising out of own
acceptances and promissory notes,
– deposits by companies other than those which may be permitted to draw up
abridged balance sheets pursuant to Article 215 of the Law of 10 August 1915
on commercial companies, as amended, and those which are of a comparable
size under the law of another “Member State”257 .
(5) Deposits maintained with a credit institution when its authorisation is withdrawn shall
continue to be covered by the deposit-guarantee scheme.
Where the authorisation of a credit institution is withdrawn, it shall remain obliged to
participate in the deposit-guarantee scheme and to fulfil its obligations vis-à-vis that
scheme for as long as the funds deposited with that credit institution are covered by
the deposit-guarantee scheme. In particular, the credit institution shall remain liable
to pay sums owed to the scheme and to make a contribution in the event of any
recourse to the guarantee offered by the scheme.”
“(1) For the purposes of calculating the amount of compensation to be paid to the
depositor under the guarantee, account shall be taken of all deposits as defined in
Article 62-1(2), subject to the provisions of Article 62-1(3) and (4).
(2) Subject to the provisions of Article 62-1(3) and (4), deposit-guarantee schemes must
cover the aggregate deposits of each depositor, regardless of the number thereof,
the currency in which they are denominated and their location within the “European
Union”258, up to a value equivalent to 20 000 “euros”259.
257
258
259
Article 2 of Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to
the introduction of the euro (OJ L 162, 19.6.1997, p. 1).
157
“...”260
(3) Deposit-guarantee schemes may limit the guaranteed amounts to a specified
percentage of deposits. The percentage guaranteed must, however, be equal to or
exceed 90 % of the aggregate deposits of each depositor until the amount to be paid
under the guarantee reaches a value equivalent to 20 000 “euros”261.
“...”262
“(4)”263 Where an account is opened in the names of two or more persons, or two or more
persons have rights over an account that may operate against the signature of one
or more of those persons acting in a capacity other than that of authorised agent, the
share of each depositor shall be taken into consideration for the purposes of
calculating the amount to be paid under the guarantee.
In the absence of special provisions, the deposit shall be deemed to be held in equal
shares by the depositors.
“(5)”264 Where two or more persons have rights over an account as members of a business
partnership, association or grouping of a similar nature, without legal personality, the
deposit shall be treated, for the purposes of calculating the amount to be paid under
the guarantee, as if made by a single depositor and only one amount of
compensation shall be due under the guarantee.
“(6)”265 Where the depositor is not absolutely entitled to the sums held in an account, the
person who is absolutely entitled shall be covered by the guarantee, provided that
that person has been identified or is identifiable before the date on which the CSSF
makes the determination described in Article 62-3(1) or on which the “Luxembourg
Tribunal d’Arrondissement [District Court], sitting as a commercial court”266, orders
“the suspension of payments”267 or the liquidation of the credit institution, if its
judgment making such order is delivered prior to the determination by the CSSF.
The persons absolutely entitled shall be deemed to be identifiable only if the
depositor has informed the credit institution that he is acting on behalf of third parties
and has communicated to it the number of persons absolutely entitled who have a
right to repayment, as well as the share due to each person absolutely entitled to the
account. Payment of compensation under the guarantee shall be conditional on
communication of the identity of the persons absolutely entitled.
Where there are several persons who are absolutely entitled to the sums deposited
in an account, the share of each of them shall be taken into account for the purposes
of calculating the amount to be paid under the guarantee.
In the absence of special provisions, the deposit shall be deemed to be held in equal
shares by the persons absolutely entitled.
This paragraph shall not apply to collective investment undertakings.
268
“(7)” Where a depositor is the holder or joint holder of, or the person absolutely entitled to,
more than one account with the same credit institution, he shall have the right to
receive only one amount of compensation under the guarantee.”
260
261
Article 2 of Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to
the introduction of the euro (OJ L 162, 19.6.1997, p. 1).
262
263
264
265
266
267
268
158
“(1) Deposit-guarantee schemes must be in a position to pay duly verified claims by
depositors in respect of deposits due and payable within three months of the date on
which the CSSF determines the unavailability of deposits or on which the
“Luxembourg Tribunal d’Arrondissement [District Court], sitting as a commercial
court”269, orders “the suspension of payments”270 or the liquidation of the credit
institution, if its judgment making such order is delivered prior to the determination by
the CSSF.
The CSSF shall determine the unavailability of deposits where it forms the view that
a credit institution is no longer in a position, for reasons connected with its financial
situation, to repay those deposits which are due and payable in accordance with the
legal and contractual terms applicable to repayment thereof and that there is no
early prospect of the institution being able to do so. That determination shall be
made as soon as possible, and in any event by no later than twenty one days after it
has been established for the first time that the credit institution has not repaid the
deposits which are due and payable.
(2) The CSSF shall determine any request by the scheme for an extension of the time-
limit within which the amount due under the guarantee is to be paid to the
depositors. No more than three extensions of time may be granted, none of which
shall exceed three months. Decisions granting such extensions may be made only in
very exceptional circumstances and in special cases.
(3) The time-limits laid down in paragraphs 1 and 2 shall not prejudice the right of
deposit-guarantee schemes to verify the right to compensation of depositors and
persons absolutely entitled, and the claims submitted, in accordance with the
standards and procedures laid down by them, before paying the compensation due
under the guarantee.
(4) Where a depositor has been unable to assert his claim to payment of compensation
under the guarantee within the time-limits laid down in paragraphs 1 and 2, he shall
retain his right thereto notwithstanding the expiration of those time-limits.
(5) The documents relating to the conditions to be fulfilled and the formalities to be
completed to be eligible for a payment under the guarantee shall be drawn up in
detail in one of the official languages of Luxembourg. Those documents shall in
addition be made available in the official language or languages of the “Member
States”271 in which the credit institutions governed by Luxembourg law maintain
branches, in the manner prescribed by the law of the Member State in which the
branch is established.
(6) Notwithstanding the time-limits laid down in paragraphs 1 and 2, where a depositor
or any person entitled to sums held in an account has been charged with the offence
of money laundering (...)272, the deposit-guarantee scheme concerned may suspend
any payment pending the judgment of the court.
(7) Deposit-guarantee schemes which make payments under guarantee shall be
subrogated, up to an amount equal to the payment made, to the rights of the
depositors and persons absolutely entitled who have obtained payment. Deposit-
guarantee schemes shall be reimbursed in priority to such depositors and persons
absolutely entitled.
269
270
271
272
159
(8) Deposit-guarantee schemes shall obtain from their members all information needed
for the implementation of the guarantee.
(9) (Law of 27 July 2000) “The liquidators of a credit institution shall be required to
collaborate with the deposit-guarantee schemes concerned, so as to enable the
latter to meet their obligations within the time-limits laid down.”
“(10)”273 The right to compensation of the depositor and, as the case may be, of the person
absolutely entitled to the sums deposited in an account may be the subject of an
action by that depositor or person against the deposit-guarantee scheme.
“(11)”274 Without prejudice to paragraph 1, the amount of the contribution which a credit
institution is required to pay to a deposit-guarantee scheme as a member of that
scheme may not exceed, on an annual basis, five per cent of its own funds as
defined by the CSSF pursuant to Article 56 of this Law.
“(12)”275 Deposits shall be guaranteed neither by the [Luxembourg] State nor by the CSSF.
The responsibility of the State and of the CSSF shall be limited, vis-à-vis depositors,
to ensuring the establishment and recognition in Luxembourg of at least one deposit-
guarantee scheme fulfilling the conditions laid down in this Part.”
“(1) Credit institutions governed by Luxembourg law, their branches established in other
“Member States”276 and the Luxembourg branches of credit institutions having their
head office “in a third country”277 shall on request make available to actual and
intending depositors information relating to the deposit-guarantee scheme of which
they are members or relating to an alternative arrangement as provided for in Article
62-5(4). The depositors shall be informed, at the very least, of the percentage
guaranteed and the scope of the cover offered by the guarantee scheme or, as the
case may be, by an alternative arrangement, and of the conditions for compensation
and the formalities which must be completed to obtain compensation.
(2) Credit institutions governed by Luxembourg law, their branches established in other
head office “in a third country”279 shall make the information referred to in paragraph
1 available to depositors in one of the official languages of Luxembourg. Branches
established by credit institutions governed by Luxembourg law in other “Member
States”280 shall in addition make that information available to depositors in the official
language or languages of the Member State in which the branch is located, in the
manner prescribed by national law.
head office “in a third country”282 shall inform actual depositors when they join
another deposit-guarantee scheme. Where the level or scope, including the
percentage, of cover offered by the scheme which the credit institution joins is lower
than the level or cover offered by the guarantee scheme which the credit
273
274
275
276
277
278
279
280
281
282
160
establishment has left, this shall not vest any acquired rights in persons who have
deposited funds with that credit institution.
head office “in a third country”284 shall not be authorised to mention in any
advertising the amount and scope, including the percentage, of the guarantee or
details of the operation of the guarantee scheme of which they are members. A
factual reference by a credit institution to the deposit-guarantee scheme of which it is
a member shall not constitute advertising.”
“(1) If a credit institution governed by Luxembourg law or a Luxembourg branch of a
credit institution having its head office “in a third country”285 fails to comply with the
obligations incumbent on it as a member of a deposit-guarantee scheme entered in
the official list maintained by the CSSF, the deposit-guarantee scheme shall inform
the CSSF accordingly. The CSSF shall call upon the credit institution in writing to
remedy the situation found to exist within a time-limit fixed by it.
(2) If, upon expiry of the time-limit fixed by the CSSF, the credit institution has not
regularised its situation, the CSSF may impose the administrative fines provided for
in Article 63 of this Law or take the suspension measures referred to in Article 59(2).
(3) In the absence of any rectification of the situation following the measures taken in
accordance with paragraphs 1 and 2, the deposit-guarantee scheme may, with the
prior consent of the CSSF, notify the credit institution in writing of its intention to
exclude it on the expiry of a period of notice of not less than twelve months.
If, upon the expiry of the notice period, the credit institution has not fulfilled its
obligations, the guarantee scheme may, subject to the express agreement of the
CSSF, proceed to exclude it. However, deposits made before the expiry of the notice
period shall continue to be covered by the scheme.
(4) A credit institution excluded from the deposit-guarantee schemes entered in the
official list maintained by the CSSF may continue, with the express agreement of the
CSSF, to take deposits if, before its exclusion, it has made alternative guarantee
arrangements which, in the opinion of the CSSF, ensure that depositors will enjoy a
level and scope of protection at least equivalent to that offered by the deposit-
guarantee schemes entered in the official list maintained by the CSSF.”
Art. 62-6 Supplementary cover for persons depositing funds with branches set up by
credit institutions governed by Luxembourg law in other “Member States”286
“(1) Branches established by credit institutions governed by Luxembourg law in other
“Member States”287 may voluntarily join one of the official deposit-guarantee
schemes set up in the Member State in which the branch is established, in order to
supplement the cover which their depositors enjoy pursuant to Article 62-1(1).
Branches of credit institutions governed by Luxembourg law shall be required to
comply with the membership conditions laid down by the deposit-guarantee scheme
283
284
285
286
287
161
of the host Member State, including in particular payment of any contributions and
other charges.
(2) Where the CSSF is informed that a branch of a credit institution governed by
Luxembourg law which has made use of the option provided for in paragraph 1 is not
complying with its obligations vis-à-vis the deposit-guarantee scheme of the host
Member State, it shall take, in collaboration with the deposit-guarantee scheme of
the host Member State, all appropriate measures to ensure that the aforementioned
obligations are complied with.
(3) In the absence of any rectification of the situation following the measures taken, the
CSSF may give its consent to the possible exclusion of the branch by the deposit-
guarantee scheme of the host Member State on the expiry of a period of notice of
not less than twelve months.”
“Chapter 2: Protection of persons depositing funds with Luxembourg branches of credit

institutions governed by the law of another “Member State”288”289

“(1) “(...)”290 Natural and legal persons depositing funds with Luxembourg branches of
credit institutions governed by the law of another “Member State”291 shall be covered
by one of the official deposit-guarantee schemes established in the Member State
which granted authorisation to the credit establishment having the Luxembourg
branch.
(2) Where the level or scope, including the percentage, of the cover enjoyed by
depositors in Luxembourg branches of credit institutions governed by the law of
another “Member State”292 is lower than the level or scope of the cover offered by
the deposit-guarantee schemes entered in the official list maintained by the CSSF,
such Luxembourg branches of credit institutions governed by the law of another
“Member State”293 may join the Luxembourg schemes in order to supplement the
cover which their depositors enjoy pursuant to paragraph 1.”
“(1) Deposit-guarantee schemes shall take such measures and steps as may be
necessary to enable Luxembourg branches of credit institutions governed by the law
of another “Member State”294 to join them in order to supplement the cover which
their depositors enjoy pursuant to Article 62-7. In particular, they shall lay down
objective and generally applied conditions for membership of such branches.
The admission of Luxembourg branches of credit institutions governed by the law of
another Luxembourg branches of credit institutions governed by the law of another
288
289
290
291
292
293
294
162
“Member State”295 shall be conditional on compliance with the membership
conditions laid down by the deposit-guarantee schemes, including in particular
payment of any contributions and other charges. Branches’ membership of one of
the deposit-guarantee schemes entered in the official list maintained by the CSSF
shall be governed by the guiding principles set out in Article 62-9.
(2) Where a Luxembourg branch of a credit institution governed by the law of another
Luxembourg branches of credit institutions governed by the law of another “Member
State”296 which has made use of the option provided for in Article 62-7(2) is not
complying with its obligations vis-à-vis the Luxembourg deposit-guarantee scheme,
that scheme shall refer the matter to the prudential supervision authority of the
Member State which granted authorisation to the credit institution having the
Luxembourg branch. The Luxembourg deposit-guarantee scheme shall take, in
collaboration with the prudential supervision authority of the Member State of origin,
all appropriate measures to ensure that the aforementioned obligations are complied
with.
In the absence of any rectification of the situation, the Luxembourg deposit-
guarantee scheme may, with the consent of the prudential supervision authority of
the Member State of origin, exclude the branch on the expiry of a period of notice of
not less than twelve months. Deposits made before the date of exclusion shall
continue to be covered, until their maturity, by the scheme voluntarily joined by the
branch.
Depositors in the Luxembourg branch shall be informed by that branch or, in default,
by the CSSF of the cessation of the supplementary cover.”
Art. 62-9 Relationship between Luxembourg deposit-guarantee schemes and schemes
established and officially recognised in other “Member States”297
“(1) For the purposes of applying Article 62-8, Luxembourg deposit-guarantee schemes
shall lay down, bilaterally with the relevant deposit-guarantee scheme in the Member
State of origin, appropriate rules and procedures for the payment of compensation to
depositors in the Luxembourg branch. Those procedures, and the conditions of
membership applicable to a Luxembourg branch of a credit institution governed by
the law of another “Member State”298, shall be determined in conformity with the
guiding principles set out in paragraph 2 et seq.
(2) Luxembourg deposit-guarantee schemes shall retain full rights to impose their
objective and generally applied rules on branches of credit institutions governed by
the law of another “Member State”299. They may demand from such branches all
such information as may be considered relevant and shall have the right to verify
such information with the prudential supervision authorities of the Member State
which granted authorisation to the credit institution having the Luxembourg branch.
(3) Luxembourg deposit-guarantee schemes shall meet claims for supplementary
compensation upon a declaration from the prudential supervision authority of the
Member State of origin that deposits are unavailable. Luxembourg schemes shall
retain full rights to verify depositors’ entitlement to compensation and claims made
therefor according to their own standards and procedures before paying
supplementary compensation.
295
296
297
298
299
163
(4) Luxembourg deposit-guarantee schemes and the deposit-guarantee schemes in the
Member State of origin shall cooperate fully with each other to ensure that
depositors promptly receive the compensation due. In particular, they shall agree on
how the existence of a counterclaim which may give rise to set-off under either
scheme is to affect the compensation paid to the depositor by each scheme.
(5) Luxembourg deposit-guarantee schemes shall be entitled to demand contributions
from, and to charge, Luxembourg branches of credit institutions governed by the law
of another Member State for supplementary cover on an appropriate basis which
takes into account the guarantee funded by the home Member State’s scheme. To
facilitate the levying of such contributions and charges, the Luxembourg deposit-
guarantee schemes shall be entitled to assume that their liability will in all
circumstances be limited to the excess of the guarantee they have offered over the
guarantee offered by the home Member State’s deposit-guarantee scheme
regardless of whether the home Member State actually pays any compensation in
respect of deposits held in Luxembourg branches.”
“(1) Luxembourg branches of credit institutions governed by the law of another “Member
State”300 shall on request make available to actual and intending depositors
information concerning the amount and scope, including the percentage, of the cover
offered by the home Member State’s guarantee scheme, the amount and scope,
including the percentage, of the supplementary cover offered by the Luxembourg
guarantee scheme, and the conditions for compensation and the formalities which
must be completed to obtain compensation. That information shall be presented in
one of the official languages of Luxembourg.
(2) Luxembourg branches of credit institutions governed by the law of another “Member
State”301 shall not be authorised to mention in any advertising the amount and
scope, including the percentage, of the guarantee or details of the operation of the
guarantee scheme of which they are members. A factual reference by a branch to
the deposit-guarantee scheme by which it is covered shall not constitute
advertising.”
300
301
164
“PART IVb: Compensation schemes for investors in credit institutions and investment
firms
Chapter 1: Protection of investors in credit institutions and investment firms governed by

Luxembourg law and with Luxembourg branches of credit institutions and investment
firms having their head office “in a third country”302”303

“(1) In order to be officially recognised by the CSSF, investor-compensation schemes set
up in Luxembourg must provide cover in respect of claims arising out of the inability
of a credit institution or investment firm to:
– repay money owed to or belonging to investors and held on their behalf in
connection with investment business,
or
– return to investors any instruments belonging to them and held, administered or
managed on their behalf in connection with investment business,
in accordance with the legal and contractual conditions applicable.
Recognised compensation schemes shall cover investors, whether natural or legal
persons, in credit institutions or investment firms governed by Luxembourg law,
branches located in another Member State of credit institutions or investment firms
governed by Luxembourg law, or Luxembourg branches of credit institutions or
investment firms having their head office “in a third country”304, within the limits,
subject to the conditions and in accordance with the detailed rules laid down in this
Part.
The amount of an investor’s claim shall be calculated in accordance with the legal
and contractual conditions, in particular those concerning set-off and counterclaims,
that are applicable to the assessment, on the date of the determination or ruling
referred to in Article 62-13(1), of the amount of the money or the value, determined
where possible by reference to the market value, of the instruments belonging to the
investor which the credit institution or investment firm is unable to repay or return.
The CSSF shall keep an official list of the investor-compensation schemes set up in
Luxembourg which are recognised by it.
(2) For the purposes of this Part, “investment business” shall mean any investment
service as referred to in Section A of Annex II and any investment service referred to
in point 1 of Section C of Annex II relating to one of the instruments referred to in
Section B of Annex II.
(3) For the purposes of this Part, “instrument” shall mean any instrument listed in
Section B of Annex II.
(4) For the purposes of this Part, “investor” shall mean any person who has entrusted
money or instruments to a credit institution or investment firm in connection with
investment business.
302
303
304
165
(5) Claims arising from business in connection with which there has been a criminal
conviction for money laundering (...)305 shall be excluded from all compensation
under any investor-compensation scheme.
(6) The following investors may be excluded from cover or subject to a lower level of
cover by compensation schemes:
– investment firms,
– credit institutions,
– “financial institutions”306,
– insurance undertakings,
– collective investment undertakings,
– pension and retirement funds,
– other professional and institutional investors,
– supranational institutions, government and central administrative authorities,
– provincial, regional, local and municipal authorities, whether they are
Luxembourg authorities or foreign authorities,
– directors, managers and personally liable members of credit institutions and
investment firms, persons holding at least 5% of the capital of the credit
institution or investment firm, and investors with similar status in other
companies within the same group as that of which the credit institution or
investment firm forms part,
– close relatives and kin, and third parties acting on behalf of the investors
referred to in the preceding indent,
– other undertakings in the same group as that of which the credit institution or
investment firm forms part,
– investors who have any responsibility for or have taken advantage of certain
facts relating to a credit institution or investment firm which gave rise to the
financial difficulties of that institution or firm or contributed to the deterioration of
its financial situation,
– companies other than those which may be permitted to draw up abridged
balance sheets pursuant to Article 215 of the Law of 10 August 1915 on
commercial companies, as amended, and those which are of a comparable size
under the law of another Member State.
(7) After the withdrawal of the authorisation of a credit institution or investment firm,
cover under paragraph 1 shall continue to be provided in respect of investment
business transacted up to the time of that withdrawal.
Where the authorisation of a credit institution or investment firm is withdrawn, it shall
remain obliged to participate in the investor-compensation scheme and to fulfil its
obligations vis-à-vis that scheme for as long as the investment business of that credit
institution or investment firm is covered by the investor-compensation scheme. In
particular, the credit institution or investment firm shall remain liable to pay sums
owed to the scheme and to make a contribution in the event of any recourse to the
cover offered by the scheme.”
305
306
166
“(1) For the purposes of calculating the amount of compensation to be paid to the
investor, account shall be taken of the total claims, within the meaning of Article
62-11(1), made against the same credit institution or investment firm, subject to the
provisions of Article 62-11(4) and (5).
(2) Subject to the provisions of Article 62-11(5) and (6), compensation schemes must
cover the aggregate investment business of each investor, regardless of the number
of accounts, the currency in which they are denominated and their location within the
“European Union”307, up to a value equivalent to 20 000 euros.
(3) Compensation schemes may limit the cover provided for in the preceding paragraph
to a specified percentage of the amount of an investor’s claim. The percentage
guaranteed must, however, be equal to or exceed 90 % of the amount of the claim
until the amount to be paid under the scheme reaches a value equivalent to 20 000
euros.
(4) Each investor’s share in joint investment business shall be taken into account for the
purposes of calculating the cover referred to in the preceding paragraphs.
In the absence of special provisions, claims shall be divided equally amongst
investors.
“Joint investment business” shall mean investment business carried out for the
account of two or more persons or over which two or more persons have rights that
may be exercised by means of the signature of one or more of those persons.
(5) Claims relating to joint investment business to which two or more persons are
entitled as members of a business partnership, association or grouping of a similar
nature which has no legal personality may, for the purpose of calculating the limits
provided for in the preceding paragraphs, be aggregated and treated as if arising
from an investment made by a single investor, and only one amount of
compensation shall be payable under the cover.
(6) Where an investor is not absolutely entitled to the sums or securities held, the
person who is absolutely entitled shall receive the compensation, provided that that
person has been or can be identified before the date of the determination referred to
in Article 62-13(1) or the date on which the “Luxembourg Tribunal d’Arrondissement
[District Court], sitting as a commercial court”308, orders “the suspension of
payments”309 or the liquidation of the credit institution or investment firm, if its
judgment making such order is delivered prior to the determination by the CSSF.
The persons absolutely entitled shall be deemed to be identifiable only if the investor
has informed the credit institution or investment firm that he is acting on behalf of
third parties and has communicated to that institution or firm the number of persons
absolutely entitled and the share due to each person absolutely entitled to the
account. Payment of compensation under the guarantee shall be conditional on
communication of the identity of the persons absolutely entitled.
If two or more persons are absolutely entitled, the share of each of them shall be
taken into account for the purposes of calculating the amount to be paid under the
guarantee.
307
308
309
167
In the absence of special provisions, the investment business shall be deemed to
have been transacted on an equal basis by the persons absolutely entitled.
This paragraph shall not apply to collective-investment undertakings.
(7) Any claim arising from a deposit within the meaning of Article 62-1(2) must be
directed to the deposit-guarantee scheme. No claim shall be eligible for
compensation more than once under the two schemes.”
“(1) Compensation schemes shall provide cover for investors in accordance with Article
62-12 where the CSSF has determined that, in its view, a credit institution or
investment firm appears, for the time being, for reasons directly related to its
financial circumstances, to be unable to meet its obligations arising out of investors’
claims and has no early prospect of being able to do so, or where the “Luxembourg
Tribunal d’Arrondissement [District Court], sitting as a commercial court”310, orders
“the suspension of payments”311 or the liquidation of the credit institution or
investment firm, whichever is the earlier.
(2) The compensation scheme shall take appropriate measures to inform investors of
the determination or judgment referred to in paragraph 1 and, if they are to be
compensated, to compensate them as soon as possible. It may fix a period during
which investors shall be required to submit their claims. That period may not be less
than five months from the date of the aforementioned determination or judgment or
from the date on which that determination or judgment is made public.
(3) Where an investor has been unable to assert his claim to payment of compensation
under the scheme within the time-limits laid down in the preceding paragraphs, he
shall retain his right thereto notwithstanding the expiration of those time-limits.
(4) The scheme shall be in a position to pay an investor’s claim as soon as possible and
at the latest within three months of the establishment of the eligibility and of the
amount of the claim.
(5) The CSSF shall determine any request by the scheme for an extension of the time-
limit within which the amount due under the guarantee is to be paid to the investors.
That extension may not exceed three months. Decisions granting such extensions
may be made only in very exceptional circumstances and in special cases.
(6) The time-limits laid down in the preceding paragraphs shall not prejudice the right of
compensation schemes to verify the right to compensation of investors and persons
absolutely entitled, and the claims submitted, in accordance with the standards and
procedures laid down by them, before paying the compensation due under the
scheme.
(7) The documents relating to the conditions to be fulfilled and the formalities to be
completed to be eligible for a payment under the investor-compensation scheme
shall be drawn up in detail in one of the official languages of Luxembourg. Those
documents shall in addition be made available in the official language or languages
of the Member States in which the credit institutions or investment firms governed by
Luxembourg law maintain branches, in the manner prescribed by the law of the
Member State in which the branch is established.
(8) Notwithstanding the time-limits laid down in the preceding paragraphs, where an
investor or any other person entitled to or having an interest in investment business
310
311
168
has been charged with the offence of money laundering (...)312, the investor-
compensation scheme concerned may suspend any payment pending the judgment
of the court.
(9) Investor-compensation schemes which make compensation payments to investors
shall be subrogated, up to an amount equal to the payment made by them, to the
rights of the investors and persons absolutely entitled who have obtained payment.
Investor-compensation schemes shall be reimbursed in priority to such investors and
persons absolutely entitled.
(10) Investor-compensation schemes shall obtain from their members all information
needed for the implementation of the compensation scheme.
(11) The liquidators of a credit institution or investment firm shall be required to
collaborate with the investor-compensation schemes concerned, so as to enable the
latter to meet their obligations within the time-limits laid down.
(12) The right to compensation of an investor or, as the case may be, of a person
absolutely entitled may be the subject of an action by that investor or person against
the investor-compensation scheme.
(13) The amount of the contribution which a credit institution or investment firm is
required to pay to an investor-compensation scheme as a member of that scheme
may not exceed, on an annual basis, five per cent of its own funds as defined by the
CSSF pursuant to Article 56 of this Law.
(14) Investment business shall be guaranteed neither by the [Luxembourg] State nor by
the CSSF. The responsibility of the State and of the CSSF shall be limited, vis-à-vis
investors, to ensuring the establishment and recognition in Luxembourg of at least
one investor-compensation scheme fulfilling the conditions laid down in this Part.”
“(1) Credit institutions and investment firms governed by Luxembourg law, their branches
established in other Member States and the Luxembourg branches of credit
institutions or investment firms having their head office “in a third country”313 shall on
request make available to actual and intending investors the information necessary
for the identification of the investor-compensation scheme of which they are
members or relating to an alternative arrangement as provided for in Article 62-
15(4). The investors shall be informed of the amount, the percentage guaranteed
and the scope of the cover offered by the compensation scheme or, as the case may
be, by an alternative arrangement, and of the conditions for compensation and the
formalities which must be completed to obtain compensation.
In addition, investors shall be informed of the rules laid down precluding entitlement
to be compensated more than once.
(2) Credit institutions and investment firms governed by Luxembourg law, their branches
institutions or investment firms having their head office “in a third country”314 shall
make the information referred to in paragraph 1 available to investors in one of the
official languages of Luxembourg. Branches established by credit institutions or
investment firms governed by Luxembourg law in other Member States shall in
addition make that information available to investors in the official language or
312
313
314
169
languages of the Member State in which the branch is located, in the manner
prescribed by national law.
institutions or investment firms having their head “in a third country”315 shall inform
actual investors when they join another investor-compensation scheme. Where the
level or scope, including the percentage, of cover offered by the scheme which the
credit institution or investment firm joins is lower than the level or scope of cover
offered by the guarantee scheme which the credit establishment or investment firm
has left, this shall not vest any acquired rights in persons who have invested with
that credit institution or investment firm.
institutions or investment firms having their head office “in a third country”316 shall not
be authorised to mention in any advertising the amount and scope, including the
percentage, of the cover or details of the operation of the compensation scheme of
which they are members. A factual reference by a credit institution or investment firm
to the investor-compensation scheme of which it is a member shall not constitute
advertising.”
“(1) If a credit institution or investment firm governed by Luxembourg law, a branch of
such an institution or firm located in another Member State or a Luxembourg branch
of a credit institution or investment firm having its head office “in a third country”317
fails to comply with the obligations incumbent on it as a member of an investor-
compensation scheme entered in the official list maintained by the CSSF, the
investor-compensation scheme shall inform the CSSF accordingly. The CSSF shall
call upon the credit institution or investment firm in writing to remedy the situation
found to exist within a time-limit fixed by it.
(2) If, upon expiry of the time-limit fixed by the CSSF, the credit institution or investment
firm has not regularised its situation, the CSSF may impose the administrative fines
provided for in Article 63 of this Law or take the suspension measures referred to in
Article 59(2).
(3) In the absence of any rectification of the situation following the measures taken in
accordance with paragraphs 1 and 2, the investor-compensation scheme may, with
the prior consent of the CSSF, notify the credit institution or investment firm in writing
of its intention to exclude it on the expiry of a period of notice of not less than twelve
months.
If, upon the expiry of the notice period, the credit institution or investment firm has
not fulfilled its obligations, the investor-compensation scheme may, subject to the
express agreement of the CSSF, proceed to exclude it. However, the cover provided
for by Article 62-11(1) shall subsist in relation to investment business transacted
during that period.
(4) A credit institution or investment firm excluded from the investor-compensation
schemes entered in the official list maintained by the CSSF may continue, with the
express agreement of the CSSF, to provide investment services if, prior to its
exclusion, it made alternative compensation arrangements which, in the opinion of
315
316
317
170
the CSSF, ensure that investors will enjoy a level and scope of protection that is at
least equivalent to that offered by the investor-compensation schemes entered in the
official list maintained by the CSSF.”
Art. 62-16 Supplementary cover for investors with branches set up by credit institutions
or investment firms governed by Luxembourg law in another Member State
“(1) Branches established by credit institutions or investment firms governed by
Luxembourg law in other Member States may voluntarily join one of the official
investor-compensation schemes set up in the Member State in which the branch is
established, in order to supplement the cover which their investors enjoy pursuant to
Article 62-11(1).
Branches of credit institutions or investment firms governed by Luxembourg law shall
be required to comply with the membership conditions laid down by the investor-
compensation scheme of the host Member State, including in particular payment of
any contributions and other charges.
(2) Where the CSSF is informed that a branch of a credit institution or investment firm
governed by Luxembourg law which has made use of the option provided for in
paragraph 1 is not complying with its obligations vis-à-vis the investor-compensation
scheme of the host Member State, it shall take, in collaboration with the
compensation scheme of the host Member State, all appropriate measures to ensure
that the aforementioned obligations are complied with.
(3) In the absence of any rectification of the situation following the measures taken, the
CSSF may give its consent to the possible exclusion of the branch by the investor-
compensation scheme of the host Member State on the expiry of a period of notice
of not less than twelve months.”
“Chapter 2: Protection of investors with Luxembourg branches of credit institutions or

investment firms governed by the law of another Member State”318

“(1) Natural and legal persons investing with Luxembourg branches of credit institutions
or investment firms governed by the law of another Member State shall be covered
by one of the official investor-compensation schemes established in the Member
State which granted authorisation to the credit establishment or investment firm
having the Luxembourg branch.
(2) Where the level or scope, including the percentage, of the cover enjoyed by
investors in Luxembourg branches of credit institutions or investment firms governed
by the law of another Member State is lower than the level or scope of the cover
offered by the investor-compensation schemes entered in the official list maintained
by the CSSF, such branches may join the Luxembourg schemes in order to
supplement the cover which their investors enjoy pursuant to paragraph 1.”
318
171
“(1) Investor-compensation schemes shall take such measures and steps as may be
necessary to enable Luxembourg branches of credit institutions or investment firms
governed by the law of another Member State to join them in order to supplement
the cover which their investors enjoy pursuant to Article 62-17. In particular, they
shall lay down objective and generally applied conditions for membership of such
branches.
The admission of Luxembourg branches of credit institutions or investment firms
governed by the law of another Member State shall be conditional on compliance
with the membership conditions laid down by the investor-compensation schemes,
including in particular payment of any contributions and other charges. Branches’
membership of one of the investor-compensation schemes entered in the official list
maintained by the CSSF shall be governed by the guiding principles set out in Article
62-19.
(2) Where a Luxembourg branch of a credit institution or investment firm governed by
the law of another Member State which has made use of the option provided for in
Article 62-17(2) is not complying with its obligations vis-à-vis the Luxembourg
investor-compensation scheme, that scheme shall refer the matter to the prudential
supervision authority of the Member State which granted authorisation to the credit
institution or investment firm having the Luxembourg branch. The Luxembourg
investor-compensation scheme shall take, in collaboration with the prudential
supervision authority of the Member State of origin, all appropriate measures to
ensure that the aforementioned obligations are complied with.
In the absence of any rectification of the situation, the Luxembourg investor-
compensation scheme may, with the consent of the prudential supervision authority
of the Member State of origin, exclude the branch on the expiry of a period of notice
of not less than twelve months. Investment business transacted before the date of
exclusion shall continue to be covered, until its maturity, by the scheme voluntarily
joined by the branch.
Investors in the Luxembourg branch shall be informed by that branch or, in default,
by the CSSF of the cessation of the supplementary cover and of the date on which it
takes effect.”
Art. 62-19 Relationship between Luxembourg investor-compensation schemes and
schemes established and recognised in other Member States
“(1) For the purposes of application of Article 62-18, Luxembourg investor-compensation
schemes shall lay down, bilaterally with the relevant investor-compensation scheme
in the Member State of origin, appropriate rules and procedures for the payment of
compensation to investors in the Luxembourg branch. Those procedures, and the
conditions of membership applicable to a Luxembourg branch of a credit institution
or investment firm governed by the law of another Member State, shall be
determined in conformity with the guiding principles set out in paragraph 2 et seq.
(2) Luxembourg investor-compensation schemes shall retain full rights to impose their
objective and generally applied rules on branches of credit institutions or investment
firms governed by the law of another Member State. They may demand from such
branches all such information as may be considered relevant and shall have the right
to verify such information with the prudential supervision authorities of the Member
State which granted authorisation to the credit institution or investment firm having
the Luxembourg branch.
172
(3) Luxembourg investor-compensation schemes shall meet claims for supplementary
compensation upon a declaration from the prudential supervision authority of the
Member State of origin concluding that a credit institution or investment firm is
unable to repay money owed to investors or to return to investors instruments
belonging to them in accordance with Article 62-11(1). Luxembourg schemes shall
retain full rights to verify investors’ rights to compensation and claims made therefor
according to their own standards and procedures before paying supplementary
compensation.
(4) Luxembourg investor-compensation schemes and the investor-compensation
schemes in the Member State of origin shall cooperate fully with each other to
ensure that investors promptly receive the compensation due. In particular, they
shall agree on how the existence of a counterclaim which may give rise to set-off
under either scheme is to affect the compensation paid to the investor by each
scheme.
(5) Luxembourg investor-compensation schemes shall be entitled to demand
contributions from, and to charge, Luxembourg branches of credit institutions or
investment firms governed by the law of another Member State for supplementary
cover on an appropriate basis which takes into account the guarantee funded by the
home Member State’s scheme. To facilitate the levying of such contributions and
charges, the Luxembourg investor-compensation schemes shall be entitled to
assume that their liability will in all circumstances be limited to the excess of the
guarantee they have offered over the guarantee offered by the home Member
State’s investor-compensation scheme regardless of whether the home Member
State actually pays any compensation in respect of investment business transacted
with Luxembourg branches.”
“(1) Luxembourg branches of credit institutions or investment firms governed by the law
of another Member State shall on request make available to actual and intending
investors information concerning the amount and scope, including the percentage, of
the cover offered by the home Member State’s investor-compensation scheme, the
amount and scope, including the percentage, of the supplementary cover offered by
the Luxembourg investor-compensation scheme, and the conditions for
compensation and the formalities which must be completed to obtain compensation.
That information shall be presented in one of the official languages of Luxembourg.
(2) Luxembourg branches of credit institutions or investment firms governed by the law
of another Member State shall not be authorised to mention in any advertising the
amount and scope, including the percentage, of the guarantee or details of the
operation of the investor-compensation scheme of which they are members. A
factual reference by a branch to the investor-compensation scheme by which it is
covered shall not constitute advertising.”
PART V: Penalties
Art. 63 Administrative fines

“An administrative fine of between 125 and 12,500 euros may be imposed by the
CSSF on persons responsible for the administration or management of institutions
subject to supervision by the CSSF under this Law, and on natural persons subject
to such supervision, in the event that:
173
– they do not comply with the applicable legal regulatory or statutory provisions;
– they refuse to provide accounting documents or other information requested;
– they have provided documentation or other information that proves to be
incomplete, incorrect or false;
– they preclude the performance of the powers of supervision, inspection and
investigation of the CSSF;
– they contravene the rules governing publication of balance sheets and
accounts;
– they fail to act in response to injunctions of the CSSF;
– they act such as to jeopardise the sound and prudent management of the
institution concerned.
The CSSF may disclose to the public the administrative fines issued pursuant to this
article, unless such disclosure would seriously jeopardise the financial markets or
cause disproportionate damage to the parties involved.”
Art. 64 Criminal sanctions
(1) Any person who contravenes or attempts to contravene the provisions of,
respectively, Articles 2, 3(5), 14, “15(6)”319 or “32(1)”320, or of Article 52(2), shall be
punishable by a term of imprisonment of between eight days and five years and/or a
fine of between ““5 000”321 and 125 000 euros”322.
(2) (Law of 11 August 1998) “Any person who contravenes the provisions of Articles
7(3) or 19(4) (...)323 shall be punishable by a fine of between “1 250 and 125 000
euros”324.”
(3) Any person responsible for a financial professional or professionals who fails within
the time-limit for publication laid down pursuant to Article 55(2) to lodge the
accounting documents referred to therein shall be punishable by a fine of between
““500”325 and 25,000 euros”326.
(4) Any member of an administrative, executive or management body of a financial
institution who
– despite having been suspended pursuant to Article 59(2)(a), carries out any act
of disposal, administration or management;
– notwithstanding suspension of the pursuit of the institution’s activities pursuant
to Article 59(2)(c), carries out any act of disposal, administration or
management;
– notwithstanding the provisions of Article “60-2(6)”327, proceeds to make any
payment without being authorised by a judgment so to do;
319
320
321
Art. IX of the Law of 13 June 1994 on the system of penalties (Mém. A 1994, p. 1096).
322
Art. 6 of the Law of 1 August 2001 on the changeover to the euro on 1 January 2002 and amending
certain legislative provisions (Mém. A 2001, p. 2440).
323
324
325
326
327
174
– notwithstanding the provisions of Article “60-2(6)”328, carries out any act other
than a preventive or precautionary act without being authorised by the
executive body of the CSSF so to do; or
– in any case covered by Article “60-2(15)”329, carries out any act of disposal,
administration or management without being authorised by a judgment so to do;
– “issues any pledge certificate without being authorised so to do by Section 3 of
Chapter 1 of Part I330“;
– “deliberately or negligently omits to provide or maintain assets by way of
collateral security pursuant to Section 3 of Chapter 1 of Part I or provides
assets by way of collateral security in the knowledge that those assets are
insufficient331“;
– “fails to comply with the rules regarding the keeping of registers of pledges332“,
shall be punishable by a term of imprisonment of between eight days and five years
and/or a fine of between ““5 000”333 and 125 000 euros”334.
(5) Any person who contravenes the provisions of Article 28-2(2)335 shall be punishable
by a term of imprisonment of between eight days and three months and a fine of
between ““251”336 and 25,000 euros”337.
(6) This article shall apply without prejudice to the penalties laid down by the Penal
Code or by other individual laws.
(7) (...)338
“Art. 64-1 (Law of 13 January 2002)

Any director or employee of a credit institution or of any other institution who
participates in a professional capacity in the handling and supply to the public of
banknotes and coins, including institutions engaging in the business of exchanging
banknotes and coins of different currencies, such as bureaux de change, and who
fails to withdraw from circulation any euro banknotes and coins which he receives
and which he knows or has sufficient grounds to think are false, shall be punishable
by a fine of between 1 250 and 125 000 euros.
The same penalties may be imposed on any person who fails to hand over to the
competent authorities the banknotes and coins referred to in the preceding
paragraph.”
PART VI: Amendments, repeals and transitional provisions

(token entry)
328
329
330
331
332
333
334
335
Law of 12 March 1998 and Law of 2 August 2003.
336
337
338
175
“ANNEXE I339
List of activities referred to in Article 31(1):

1. Acceptance of deposits and other repayable funds.
2. Lending, including, inter alia, consumer credit, mortgage credit, factoring, with or
without recourse, financing of commercial transactions (including forfeiting).
3. Financial leasing.
4. Money transmission services.
5. Issuing and administering means of payment (e.g. credit cards, travellers’ cheques
and bankers’ drafts).
6. Guarantees and commitments.
7. Trading for own account or for account of customers in:
(a) money-market instruments (cheques, bills, certificates of deposit, etc.);
(b) foreign exchange;
(c) financial futures and options;
(d) exchange and interest-rate instruments;
(e) transferable securities.
8. Participation in securities issues and the provision of services related to such issues.
9. Advice to undertakings on capital structure, industrial strategy and related questions
and advice as well as services relating to mergers and the purchase of undertakings.
10. Money broking.
11. Portfolio management and advice.
12. Safekeeping and administration of securities.
13. Credit reference services.
14. Safe-custody services.”
339
176
“ANNEXE II340
Section A: Investment services and activities

1. Reception and transmission of orders in relation to one or more financial
instruments.
2. Execution of orders on behalf of clients.
3. Dealing on own account.
4. Portfolio management.
5. Investment advice.
6. Underwriting of financial instruments and/or placing of financial instruments on a firm
commitment basis.
7. Placing of financial instruments without a firm commitment basis.
8. Operation of Multilateral Trading Facilities (MTF).
Section B: Financial Instruments

1. Transferable securities.
2. Money-market instruments.
3. Units in collective investment undertakings.
4. Options, futures, swaps, forward rate agreements and any other derivative contracts
relating to securities, currencies, interest rates or yields, or other derivatives
instruments, financial indices or financial measures which may be settled physically
or in cash.
relating to commodities that must be settled in cash or may be settled in cash at the
option of one of the parties (otherwise than by reason of a default or other
termination event).
6. Options, futures, swaps, and any other derivative contract relating to commodities
that can be physically settled provided that they are traded on a regulated market or
an MTF.
7. Options, futures, swaps, forwards and any other derivative contracts relating to
commodities, that can be physically settled not otherwise mentioned in point 6., and
not being for commercial purposes, which have the characteristics of other derivative
financial instruments, having regard to whether, inter alia, they are cleared and
settled through recognised clearing houses or are subject to regular margin calls.
8. Derivative instruments for the transfer of credit risk.
9. Financial contracts for differences.
relating to climatic variables, freight rates, emission allowances or inflation rates or
other official economic statistics that must be settled in cash or may be settled in
cash at the option of one of the parties (otherwise than by reason of a default or
other termination event), as well as any other derivative contracts relating to assets,
rights, obligations, indices and measures not otherwise mentioned in this Section,
340
177
which have the characteristics of other derivative financial instruments, having
regard to whether, inter alia, they are traded on a regulated market or an MTF, are
cleared and settled through recognised clearing houses or are subject to regular
margin calls.
Section C: Ancillary services

1. Safekeeping and administration of financial instruments for the account of clients,
including custodianship and related services such as cash/collateral management.
2. Granting credits or loans to an investor to allow him to carry out a transaction in one
or more financial instruments, where the firm granting the credit or loan is involved in
the transaction.
3. Advice to undertakings on capital structure, industrial strategy and related matters;
advice and services relating to mergers and the purchase of undertakings.
4. Foreign exchange services where these are connected to the provision of
investment services.
5. Investment research and financial analysis or other forms of general
recommendation relating to transactions in financial instruments.
6. Services related to underwriting.
7. Investment services and activities as well as ancillary services of the type included
under Section A or C of this Annexe related to the underlying of the derivatives
included under points 5, 6, 7 and 10 of Section B, where these are connected to the
provision of investment or ancillary services.
ANNEXE III
Criteria to be fulfilled by professional clients
Criteria to be fulfilled by clients of credit institutions or PFS to be considered as professional

clients are the following:
Section A: Categories of investors who are considered to be professionals
The following should all be regarded as professionals in all investment services and activities and
financial instruments for the purposes of this law:
(1) Entities which are required to be authorised or regulated to operate in the financial
markets. The list below should be understood as including all authorised entities
carrying out the characteristic activities of the entities mentioned: entities authorised
by a Member State under a European Directive, entities authorised or regulated by a
Member State without reference to a European Directive, and entities authorised or
regulated by a third country:
(a) Credit institutions.
(b) Investment firms.
(c) Other authorised or regulated financial institutions.
(d) Insurance undertakings and reinsurance undertakings.
(e) Collective investment schemes and their management companies.
(f) Pension funds and management companies of such funds.
178
(g) Commodity and commodity derivatives dealers.
(h) Local firms as defined in article 3(1)(p) of Directive 2006/49/EC.
(i) Other institutional investors.
(2) Large undertakings meeting two of the following size requirements on a company
basis:
– balance sheet total: 20 million euros;
– net turnover: 40 million euros;
– equity: 2 million euros.
(3) National and regional governments, public bodies that manage public debt, Central
Banks, international and supranational institutions such as the World Bank, the IMF,
the ECB, the EIB and other similar international organisations.
(4) Other institutional investors whose main activity is to invest in financial instruments,
including entities dedicated to the securitisation of assets or other financing
transactions.
The entities mentioned above are considered to be professional clients. They can request non-
professional treatment reserved to non-professional clients and credit institutions and investment
firms may agree to provide a higher level of protection. Where the client of a credit institution or
investment firm is an undertaking referred to above, the credit institution or investment firm must
inform it prior to any provision of services, that, on the basis of the information available to the
credit institution or investment firm, the client is deemed to be a professional client, and will be
treated as such unless agreed otherwise.
The credit institution or investment firm must also inform the client that it can request a variation
of the terms of the agreement in order to secure a higher degree of protection.
It is the responsibility of the client, considered to be a professional client, to ask for a higher level
of protection when it deems it is unable to properly assess or manage the risks involved.
This higher level of protection will be provided where a client who is considered to be a
professional client enters into a written agreement with the credit institution or investment firm to
the effect that it shall not be treated as a professional for the purposes of the applicable conduct
of business rules. Such agreement should specify whether this applies to one or more particular
services or transactions, or to one or more types of product or transaction.
Section B: Clients who may be treated as professionals on request

1. Identification criteria
Clients other than those mentioned in section A, including public sector bodies and private
individual investors, may be allowed to waive some of the protections afforded by the conduct of
business rules.
To this end, credit institutions and investment firms are allowed to treat those clients as
professional clients, provided the criteria and procedure defined in this section are fulfilled. These
clients should not, however, be presumed to possess market knowledge and experience
comparable to that of the categories listed in section A.
Any such waiver of the protection afforded by the standard conduct of business regime shall be
considered valid only if an adequate assessment of the expertise, experience and knowledge of
the client, undertaken by the credit institution or investment firm, gives reasonable assurance, in
light of the nature of the transactions or services envisaged, that the client is capable of making
his own investment decisions and understanding the risks involved.
179
The fitness test applied to managers and directors of entities licensed under European Directives
in the financial field could be regarded as an example of the assessment of expertise and
knowledge. In the case of small entities, the person subject to the assessment should be the
person authorised to carry out transactions on behalf of the entity.
In the course of the above assessment, as a minimum, two of the following criteria should be
satisfied:
– the client has carried out transactions, in significant size, on the relevant market
at an average frequency of 10 per quarter over the previous four quarters;
– the size of the client’s financial instrument portfolio, defined as including cash
deposits and financial instruments, exceeds 500,000 euros;
– the client works or has worked in the financial sector for at least one year in a
professional position, which requires knowledge of the transactions or services
envisaged.
2. Procedure
The clients defined in point 1. may waive the benefit of the detailed rules of conduct only where
the following procedure is followed:
– the client states in writing to the credit institution and investment firm that it
wishes to be treated as a professional client, either generally or in respect of a
particular investment service or transaction, or type of transaction or product;
– the credit institution or investment firm must give to the client a clear written
warning of the protections and investor compensation rights it may lose;
– the client must state in writing, in a separate document from the contract, that it
is aware of the consequences of losing such protections.
Before deciding to accept any request for waiver, the credit institution or investment firm must be
required to take all reasonable steps to ensure that the client requesting to be treated as a
professional client meets the relevant requirements stated in point 1.
Client relationships already categorised as professional clients under parameters and procedures
similar to those in this section with credit institutions or investment firms are not intended to be
affected by the new rules adopted pursuant to this Annexe.
Credit institutions and investment firms must implement appropriate written internal policies and
procedures to categorise clients. Professional clients are responsible for keeping the credit
institution or investment firm informed about any change, which could affect their current
categorisation. Should the credit institution or investment firm become aware however that the
client no longer fulfils the initial conditions, which made him eligible for a professional treatment,
the credit institution or investment firm must take appropriate action.”
Doc. parl. No 3600; ord. sessions 1991-1992 and 1992-1993; Dir. 89/646/EEC
Doc. parl. No 3766; ord. sessions 1992-1993 and 1993-1994; Dir. 92/30
Doc. parl. No 4032; ord. sessions 1994-1995 and 1995-1996
Doc. parl. No 4093; ord. sessions 1995-1996 and 1996-1997; Dir. 94/19
180
Doc. parl. No 4066; ord. sessions 1994-1995, 1995-1996, 1996-1997 and 1997-1998; Dir. 93/22
Doc. parl. No 4478; ord. session 1998-1999; Dir. 97/5
Doc. parl. No 4370; ord. sessions 1997-1998 and 1998-1999; Dir. 95/26 and 93/6
Doc. parl. No 4328; ord. sessions 1996-1997, 1997-1998 and 1998-1999
Doc. parl. No 4632; ord. session 1999-2000
Doc. parl. No 4553; ord. session 1999-2000; Dir. 97/9/EC
Doc. parl. No 4611; ord. session 2000-2001; Dir. 98/26/EC
Doc. parl. No 4696; ord. sessions 1999-2000, 2000-2001
Doc. parl. No 4708; ord. session 2000-2001; Dir. 98/33, 77/780, 85/611, 89/647, 92/49, 92/96, 93/6, 93/22
Doc. parl. No 4813; ord. sessions 2000-2001, 2001-2002; Dir. 2000/12/EC, 2000/28/EC, 2000/46/EC
Doc. parl. No 4581; ord. sessions 1998-1999, 1999-2000, 2000-2001, 2001-2002 and 2002-2003
Doc. parl. No 5085; ord. session 2002-2003
Doc. parl. No 5153; ord. sessions 2002-2003 and 2003-2004; Dir. 2001/24/EC
Doc. parl. No 5165; ord. sessions 2002-2003, 2003-2004 and 2004-2004; Dir. 2001/97/EC
181

Law of 5 April 1993 On The Financial Sector, As Amended

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Law of 5 April 1993 On The Financial Sector, As Amended

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In case of discrepancies between the French and the English text, the

French text shall prevail

Law of 5 April 1993 on the financial sector, as amended

PART I: Access to professional activities in the financial sector

PART IIa: Obligations concerning cross-border credit transfers

PART III: Prudential supervision of the financial sector

Chapter 4: Special provisions applicable to payment and securities settlement systems

PART IVa: Deposit-guarantee schemes in credit institutions

PART VI: Amendments, repeals and transitional provisions

– by the Law of 3 May 1994

– by the Law of 11 June 1997

– by the Law of 12 March 1998

– by the Law of 29 April 1999

– by the Law of 31 May 1999 governing the domiciliation of companies and

– by the Law of 27 July 2000 transposing Directive 97/9/EC on investor-compensation

– by the Law of 12 January 2001 transposing Directive 98/26/EC on settlement finality in

– by the Law of 1 August 2001

– by the Law of 1 August 2001

– by the Law of 13 January 2002

– by the Law of 2 August 2003

– by the Law of 22 March 2004 on securitisation and amending

– by the Law of 5 November 2006 relating to the supervision of financial conglomerates

– by the Law of 18 December 2006 implementing Directive 2002/65/EC concerning the

– by the law of 13 July 2007 on markets in financial instruments and transposing:

(Law of 13 July 2007)

(25) “qualifying holding” means a direct or indirect holding in an undertaking which

(26) “third country” means a state other than a Member State;

(31) “UCITS management company” means a management company as defined in

PART I: Access to professional activities in the financial sector

Chapter I: Authorisation of banks or credit institutions established under Luxembourg law.

“Section 2: Specific provisions relating to caisses rurales19 [rural banks]”

“Section 3: Specific provisions relating to banks issuing mortgage bonds20“

“Section 4: Special provisions relating to electronic money institutions”40

Art. 12-10 Definition – Principal activity

Section 1: General provisions”50

Art. 14 Authorisation requirement

Art. 15 Authorisation procedure

Art. 21 (repealed by the law of 13 July 2007)

Art. 22 External auditing

Art. 23 Withdrawal of authorisation

“Section 2: Specific provisions relating to certain categories of PFS

Art. 24 Investment advisers

Art. 24-1 Brokers in financial instruments

Art. 24-2 Commission agents

Art. 24-3 Private portfolio managers

Art. 24-4 Professionals acting for their own account

Art. 24-5 Market makers

Art. 24-6 Underwriters of financial instruments

Art. 24-7 Distributors of units/shares in UCIs

Art. 24-8 Financial intermediation firms

Art. 24-9 Investment firms operating an MTF in Luxembourg

“Subsection 2: Miscellaneous PFS other than investment firms”67

Art. 25 Registrar agents

Art. 27 Operators of a regulated market authorised in Luxembourg

Art. 28 (repealed by the Law of 2 August 2003)

Art. 28-4 Professionals carrying on lending operations

Art. 28-7 Mutual savings fund administrators

“Sub-section 3: PFS carrying on activities related or supplementary to a financial sector

“Art. 29”76 Corporate domiciliation agents

“Art. 29-3. Primary IT systems operators of the financial sector

Art. 30 Community credit institutions and investment firms

Art. 31 Community financial institutions