There are various conditions to abide by in order to obtain licenses for investment funds in Luxembourg. The obligation to obtain one can appear based on the type of fund investors want to set up. This requirement is not imposed only on the fund itself, but it can also apply to various companies managing an investment fund (as it can be the case of a management company).
Not all types of funds need to be licensed, therefore those who want to open a Luxembourg fund are advised to address our team of financial advisors for assistance. Our team can help clients acquire licenses for investment funds in Luxembourg and prepare the documentation imposed in each case.
Please know that investment funds in Luxembourg must obtain an authorization (the equivalent of a license). The license per se is mandatory for other parties involved in financial/investment operations.
Institution in charge with licenses for investment funds in Luxembourg
All matters concerning the registration of investment funds in Luxembourg are under the control of the Commission de Surveillance du Secteur Financier (CSSF). The institution has the following responsibilities:
- supervising the activity of any investment fund in Luxembourg;
- authorizing investment funds, banking institutions, insurance companies, services providers (such as management companies or private equity in Luxembourg);
- enforcing the legislation;
- imposing measures for non-compliant companies and funds.
Authorization of funds in Luxembourg
In most cases, investors have to obtain an authorization for their funds. This can apply for those who want to open a SICAV in Luxembourg. The same applies to a SIF in Luxembourg and to the majority of funds set up here. Investors must meet the requirements imposed for each type of fund in order to obtain the authorization for operating in this country.
However, this is not the case for investors who will open a SPF in Luxembourg, as this structure does not need an authorization from CSSF. The same applies to the RAIF in Luxembourg. Still, the latter needs to be managed by an AIFM, which needs a license for providing its services.
What types of activities need to be licensed in Luxembourg?
Many activities require to be licensed in Luxembourg, but when it comes to investment and financial services, there are 4 main categories, as follows:
- investment companies;
- specialized professionals of the financial sector (PFS);
- support PFSs;
- portfolio companies, management companies, administration companies.
Another way to engage in investment related operations is to set up a SOPARFI in Luxembourg (a holding company), which, in certain situations, may need to apply for a business license.
Licenses for investment fund managers in Luxembourg
Many investment funds must be managed by investment fund managers. The obligation to have an investment fund manager/management company varies not only based on the type of fund, but also on the legislation the fund is regulated under.
For instance, a SICAR in Luxembourg that operates as an alternative investment fund (AIF) does not have to be managed by a management company. However, the same type of fund registered under the Law of 15 June 2004 must appoint an alternative investment fund manager (AIFM).
The AIFM must be organized as a legal entity and is required to apply for suitable licenses, issued by the CSSF. The same rule is available for any type of management company providing this type of services to local funds (it applies to those who want to open a SIF in Luxembourg as well).
Some of the characteristics of management companies (known as investment fund managers, which includes all types of firms managing the assets of investment funds) are:
- they are all regulated under the CSSF Circular 18/698 of 23 August 2018;
- management companies established in other EU states can set up a branch in Luxembourg as per the Chapter 17 of the 2010 Law (they must abide by the same licensing and registration rules applicable to local companies);
- such companies need to have a capital of at least EUR 125,000;
- they also need to have a managing body comprised of minimum 3 members and have at least 3 full-time employees, according to the Association of the Luxembourg Fund Industry (ALFI).
We invite you to address our team if you want to know more on the authorization process of investment funds and the licensing requirements of other entities involved in the investment and finance industry.