Réglementation Financière et Conduite Professionnelle

• These notes cover topics related to financial regulations, compliance, and professional conduct

Key Institutions and Regulations

• CSSF (Commission de Surveillance du Secteur Financier) is responsible for overseeing the financial sector
• AML/LCB (Anti-Money Laundering/Lutte Contre le Blanchiment) refers to regulations and efforts against money laundering
• MiFID (Markets in Financial Instruments Directive) is a regulation about financial instruments markets
• CRF (Cellule de Renseignement Financier) is the financial intelligence unit
• ALFI (Association Luxembourgeoise des Fonds d'Investissement) is the Luxembourg Association of Investment Funds
• ABBL (Association des Banques et Banquiers, Luxembourg) is the association of banks and bankers in Luxembourg
• PSF (Professionnel du Secteur Financier) refers to financial sector professionals
• PPE/REP (Personnes Politiquement Exposées/Politically Exposed Persons) are politically exposed individuals
• SICAR (Société d'Investissement en Capital à Risque) is a risk capital investment company
• MTF (Système Multilatéral de Négociation) is a multilateral trading facility
• OPC (Organisme de Placement Collectif) is an undertaking for collective investment
• CC (Établissement de Crédit) is a credit institution
• EI (Entreprise d’Investissement) is an investment firm
• LSF (Loi Modifiée du 5 Avril 1993) is related to law on financial sector

Obligations and Vigilance

• CSSF's actions include managing client complaints (between consumer and professional)
• Entities subject to heightened vigilance include directors, lawyers, states, municipalities, public authorities, EU banks (or those with AML legislation), and listed companies
• Vigilance is mandatory for PEPs/REPs (VIPs), athletes, high-risk countries, and accounts in other banks
• Obligation to notify the CRF and send copy of certain declarations to the CSSF
• All suspicious transactions must be reported to the CRF
• Regulatory obligation derives from a European regulation (06/12/81)
• "US Persons" are not directly involved in the process of being laundered

Professional Secrecy and Exceptions

• Limits to professional secrecy include judicial requests, money laundering cases, client information, legal seizures, CSSF actions, and legal actions
• Exceptions to professional secrecy also involve local administration (VAT, inheritance), shareholders, and financial conglomerates

Client Qualification and Suitability

• Key is the difference between "fonds" (funds, more precise than values, equals to money) and "valeurs" (things that toucan be touched, and can be stored elsewhere)
• Mandatory tests include suitability (client profile, investment objectives, financial knowledge, experience)
• Appropriateness assessment is for active clients, considering their experience and competence
• "Suitability" assessment relates to knowing the client, their investment objectives and experience
• Classification of clients and providing prior information are obligations under MiFID

Market Abuse and Insider Trading

• Market manipulation can involve altering financial prices, using artifices to mislead, or disseminating false information
• Defining attributes of "délit d'initié" (insider trading): confidential information or privileged, of reliable source, potentially impacting the market, connected to a listed company
• Characteristics of insider trading, private/confidential information, and knowledge by an "initié" (insider)
• Insider trading involves using inside information to limit losses or increase gains
• Disclosure of confidential business information and economic offenses are forms of financial crime
• Economic criminality can take the form of insider trading, confidence violations, fraud, and tax evasion

Obligations and Professional Conduct

• Notification to the CSSF is obligatory
• Professional obligations include identifying account holders and beneficial owners, not using funds for personal gain, ensuring confidentiality, examining operations, alerting CSSF if needed, and avoiding "tipping off"
• Professional secrecy applies to information within a professional context

Market Manipulation Typologies

• Manipulating the market involves changing financial prices abnormally, using artifices, and disseminating false information

Confidentiality and Conflicts of Interest

• Confidentiality is protected in a professional scope, while banking secrecy keeps information private for client life
• Business secrecy relates to fabrication secrets, and is to prevent conflicts of interest or market competitiveness
• Situations potentially undermining client interests include conflicts of interest, similar activity, advantage, favoritism etc.

Regulations and Guidelines

• Governance guidelines: CSSF governance circular 12/552
• AML guidelines include CSSF regulation 12-02, circular CSSF 12/556, penal code provisions, and CSSF circular OS/xxx (various dates)
• One must perform enhanced measures of vigilance for PEPs, high-risk AML countries, sports entities, VIPs, correspondent banking relationships

Indemnification and Financial Responsibility

• Indemnification covers up to 100,000 EUR per client and account, or 20,000 EUR for debt securities
• CSSF cannot force a bank to indemnify a client

Key Focus of MiFID

• Key aspect of MiFID is honest and equitable management of conflicts of interest, and ensuring information of products are adequate
• A CSSF notification is an obligation

CSSF oversight

• CSSF monitors the financial sector, while establishing credit, and investment

Actions that are permitted under the legislation

• Professional secrecy is not opposable to the client

Key Focus of MIFID

• Key aspect of MiFID is management of conflicts of interest, and ensuring information of products are adequate
• Obligations under Mitif: information regarding financial markets and instruments, prioritization of client interests, and conflict management