Agefi Luxembourg - juin 2026

Juin 2026 21 AGEFI Luxembourg Fonds &Marchés By Daniel PETSCH, Counsel, Arendt & Medernach & HoaLE,SeniorManager,ArendtRegulatory&Consulting D evelopments at European level have prompted increased scrutiny by national competent authorities, including the Commission de Surveil­ lance du Secteur Financier (CSSF), when carrying out their role as su­ pervisory authority. The CSSF has clearly becomemore asser­ tive and regularly uses onsite inspection of investment fund managers (IFMs) as a supervi­ sory instrument, often resulting in regulatory sanctions. It is not surprising therefore that onsite inspections are often perceived as highrisk events, but they should also be viewed as an opportunity for IFMs to assess the effectiveness of their compliance frame­ works. This article provides practical in­ sights into CSSF onsite inspections, with a focus on sanction powers, sanctioning trends, and recourse options. CSSF sanctioning powers SanctionsimposedonIFMsfollowingonsiteinspec­ tions aremost commonlybasedon the lawof 17De­ cember 2010 relating to undertakings for collective investment (UCITS Law) or the law of 12 July 2013 on alternative investment fund managers (AIFM Law). However, theCSSF sometimes relies onmore specific sectoral laws, such as the law of 15 March 2016 onOTCderivatives, central counterparties and trade repositories, which contains the legal basis for sanctions related to noncompliance with the Euro­ pean Market Infrastructure Regulation (commonly referred to as EMIR). The CSSF has a broad range of administrative mea­ sures at its disposal. These range fromwarnings and fines of EUR 250 to EUR 250,000 for AIFMs licensed under theAIFMLaw, or to EUR 5,000,000 or 10% of total annual turnover for management companies subject to the UCITS Law, up to — in extreme cases —withdrawaloflicences.Individualscanalsobetar­ geted,includingmembersofanIFM’sseniormanage­ ment, although the typical sanction consists of a fine imposedon the IFMconcerned. Evolution of inspections and sanctions Parallel tomore frequent applicationof sanctions, the CSSF has increased the number and scope of onsite inspections in recent years. Inspections have also be­ come more thematic, targeting not only corporate governance (still the prevailing topic), but more spe­ cific areas such as AML/CFT frameworks, ESG, or EMIR. When assessing an IFM’s overall compliance, theCSSFappliesaholisticapproachanddoesnotlimit itselftoaformalticktheboxexercise.Itregularlyiden­ tifiesgovernanceframeworkswhichmaybeformally compliant but are operationally ineffective. Frequent findings that lead to sanctions include dis­ crepancies between written procedures and actual practices, weak decisionmaking documentation, in­ sufficient supervision of delegates, and overreliance ongrouppolicies andprocesses. Itisworthnotingthataconsiderablenumberofsanc­ tions imposed in recent years were due to IFMs fail­ ing to implement their policies and procedures in practice and failing to follow theirwritten processes. TheCSSF’s approach is that if there is no evidence of a certain control having been done, that control is deemednottoexist.Furthermore,staffmembersand decisionmakers often place too much reliance on standardised checklists without considering the cir­ cumstancesofagivensituation,resultingincasespe­ cific elements not receiving sufficient attention, for instancewhenitcomestodelegationoversightorrisk managementcontrols.Peopleoftenbelievethatacer­ tainway of doing businessmust be acceptable to the regulatorbecause“everybodydoesitthatway”–this is a dangerous but avoidable trap. The intention un­ derlying these trends is clear: create incentives for IFMstobuildcoherentcomplianceframeworkslong before theCSSFknocks at thedoor. It isnot sufficient for compliance frameworks to be put in place, they must be lived up to consistently and in an opera­ tionally effectivemanner. The real cost of sanctions: Reputation, disclosure andmarket perception The CSSF’s publication practice regarding sanctions shouldnotbeunderestimated.Inprinciple,theCSSF publishes all sanction decisions, usually by including the name of the sanctioned entity, the nature of the breach, and the amount of any fine imposed. In recent years, these publicationshavebeenquitedetailedinsev­ eralcases,disclosingnotonlythenatureofthe breach but the relevant findings in depth. In fact, most affected IFMs are much more concerned about the publication than thefine itself, becauseof the reputational implications. Investor confidence may be damaged, prospective in­ vestors or other stakeholders may become reluctant to en­ gage,andhiringcanbemore challenging. Depending on thespecificsituation,itisoc­ casionally possible to prevent pub­ lication where it can be proven to the CSSF that disclosurewouldcausedisproportionateharmtothe partiesinvolvedorwouldseriouslyjeopardisethefi­ nancial markets. In most instances, successful chal­ lenges topublicationare basedon the argument that the IFM concerned would otherwise be dispropor­ tionately harmed. Recourse options: Challenging sanction decisions CSSF decisions, including sanction decisions, can be challengedbothoutsideandwithinthecourtsystem. The least confrontational instrument is the “ recours gracieux” , a noncontentious administrative appeal filed with the CSSF requesting it to review its deci­ sion. From a procedural standpoint, the recours gra­ cieux is not subject to strict formalities. However, it shouldbecarefullypreparedinwriting,containcon­ vincing legal arguments, and be supported by evi­ dence and/or factual clarifications.An IFMmay also decidetoinitiatea“ recourscontentieux” beforethead­ ministrative courts. Belowisthetypicalsequenceofeventsincaseswhere a sanction is imposed. TheCSSFformallyannouncesitsintentiontoimpose a sanction by sending a letter to the IFM concerned, alongwithadraftofthecontemplatedadministrative act. The CSSF must grant the IFM a minimum of eight days to state its ownpositionbut often exceeds this minimum. It is recommended to request an ex­ tension if and as needed. After considering the IFM’s position, the CSSF de­ cides whether to impose a sanction. If a sanction is imposed, the IFM is notified of the decision and given onemonth to either initiate legal proceedings against the sanctionbefore the administrative courts (art. 52(2) of theAIFMLaw) or file a recours gracieux with the CSSF. If a recours gracieux is filed: (i) the onemonth period for initiating legal proceedings before the adminis­ trative courts is suspended (art. 13(2) of the law of 21 June 1999 regulating theprocedurebefore the ad­ ministrative courts (Law of 21 June 1999)), and (ii) theCSSFhas threemonths to adopt anewdecision. Anew onemonth period starts to run as from the date of notification of the newdecision takenby the CSSF following the recours gracieux (art. 13(2) of the Lawof 21 June 1999). The IFMhas one month following the date of noti­ fication of the newdecision taken by the CSSF after the recours gracieux to take legal actionbefore the ad­ ministrative courts ( recours en réformation ). In addition to the main legal proceedings, a “ requête en sursis à execution ” (summary proceedings) is also available (art. 11(2) of the Law of 21 June 1999). This is anaction reserved for urgent cases,with the aimof obtaininganinterimjudgmentbywayofaccelerated proceedings. The request is filed with the President of theAdministrativeCourt and seeks suspensionof executionofthesanction.Ifthe“ requête ”issuccessful, executionofthesanctiondecisionissuspendedbyan “ ordonnance ” (order) of the President of the Admin­ istrative Court. The order ceases to have effect once theAdministrativeCourt has ruledon themain case (art. 11(6) of the Lawof 21 June 1999). Two conditions must be met for the “ requete ” to be admissible: (i) the entity concerned must establish that the sanctionwill cause it serious and definitive harm, and (ii) the recours en réformation has increased chances of success. The latter condition is satisfied where there is a high likelihood that the opponent’s legal arguments are not viable. In practice, IFMs need to carefully assess the strate­ gic implications of initiating legal proceedings against the CSSF. Litigation can be lengthy, costly, and uncertain. Deciding to challenge a CSSF sanc­ tion before the administrative courts should there­ fore be preceded by a thorough legal and strategic assessment, taking into account not only the likeli­ hood of success, but also timing, cost, and reputa­ tional impact. Building inspectionready compliance frameworks Operationally effective compliance frameworks are essential, as is honest and thorough preparation for any onsite inspection announced. IFMs opting to proactively ensure robust governance, strong doc­ umentation, and effective implementation of con­ trols not only have a clear advantage when an inspection or investigation occurs, they also benefit generally fromhaving a reliable compliance frame­ work. Ultimately, an onsite inspection should be seen as an opportunity for the IFMto strengthen its compliance framework. CSSF onsite inspections: How to prepare for them and navigate them effectively By Derek RUSSELL, Country Manager Luxembourg, iBanFirst T he prospect of a deal between Iran and the UnitedStates, which is still far fromremoving all uncertainty, does nothing to alter the core issue. Inflation is here to stay and is likely to persist for at least several more quarters. It is obviously linked to the surge in energy prices, but not exclusively. In thewake of thewar, several countries introduced export restrictions onkey commodi­ ties. The latest example is In­ donesia, whichhas curbed coal exports even though a large share of themfuels the Chinese economy. The consequences are unlikely to be insignificant. Another problem is now adding tothemix:risingfoodprices.These are being driven by soaring fertil­ izer costs, which have already been at record highs since 2022. Unfortunately, the situation could worsen further. American and Europeanmeteorologists arenow forecasting a strongEl Niño event over the coming quarters. They even refer to a ʺSuper El Niñoʺ when sea surface temperatures risemorethan2°Caboveseasonal norms. In 1877, such an episode severely disrupted harvests in Brazil, India, China, and West Africa,triggeringfaminesthatlast­ ed up to three years in some regions.Shouldacomparablesce­ nario materialize, the risk of faminewouldbecomeveryrealin the poorest African countries. For other economies, however, the mainconcernwouldbefoodinfla­ tion which, combined with high energy prices, could turn into a genuine headache for central banks andbusinesses alike. AShort Cycle of RateHikes Take the United States. The new Chairman of the Federal Reserve, KevinWarsh,wasappointedwith the idea of lowering interest rates inorder to reduce the cost of serv­ icing US debt at a time when a large share of outstanding debt must be refinanced. Instead, he may soon be forced to raise rates, probably by 25 basis points as earlyasthismonthor,atthelatest, in July, much like the European Central Bank, Norges Bank, and many others. Money markets have gradually priced in this scenario over recent weeks. Currency swaps nowesti­ mate the probability of a Fed rate hike by the end of 2026 at 80 %, while the SOFR curve the main US shorttermbenchmark rate is now pricing in one rate hike this year,comparedwiththreecutsex­ pected only a fewmonths ago. It is a complete shift in paradigm. Why raise rates when it is well understood that sucha strategy is ineffective against exogenous shockssuchasrisingfoodanden­ ergy prices? Because central banksaredeterminedtoavoidre­ peatingthemistakeof2022,when they reacted too slowly to the in­ flationary shock triggered by Russiaʹs invasion of Ukraine. At the time, nobody anticipated that higher oil and gas prices would lead to a broader inflation cycle fueled not only by excess household savings accumulated during Covid, but also by wage pressures in several advanced economies. Thatsaid,thisdoesnotnecessarily mark the end of the ratecutting cycle, particularly in the United States.Structurally,policyratesare still expected to remain low, cer­ tainly lower than current levels. Shortlybeforetakingoffice,Kevin Warsh summarizedhis economic visioninlightofrecenttechnolog­ ical breakthroughs: ʺArtificial in­ telligence will reduce the cost of almost everything. We are at the beginningofaproductivityboom. Economic growth will not be in­ flationary:weareenteringastruc­ tural phase of declining prices.ʺ That outlook argues in favor of relativelylowpolicyratesoverthe long term. Before getting there, however, markets will probably have to endure a period of ele­ vated interest rates lasting several months, perhaps even several quarters. AMessyCurrencyMarket This new monetary policy envi­ ronment has already had major consequences for currency mar­ kets. Earlier this year, investors were expecting rate cuts, which contributedtoweakeningthedol­ lar.Thatwastheeraofthedebase­ ment trade, marked by concerns over Fed governance and the Trump administrationʹs respect for American institutions. In re­ centweeks,however,theexactop­ posite has happened: the dollar has regained some of its appeal. All this is takingplace against the backdrop of increasingly visible monetary imbalances affecting the entire financial system. In Japan, the central bank is strug­ gling to contain the yenʹs depre­ ciation while longterm yields continue to soar. So far, the effort has failed. Worse still, based on purchasing power parity, which measures the relative value of currencies, the Japanese yen is nowweaker than theTurkish lira, despite the latter having been heavily undermined in recent years byTurkeyʹsunconventional monetary policies. The United Kingdom represents another point of fragilitywithin the inter­ national system. Owing to the political crisis shaking the ruling LabourPartyand the rapidrise in publicdebt,which is increasingly alarming investors, sterling re­ mains under pressure. Against this backdrop, investors are understandably becoming more cautious. The approach of summer, often associated with renewed geopolitical risks and heightened market volatility, is not helping either. Across the major trading and FX hedging desks of investment banks, clients are flocking to safehaven assets. Yet it isnot somuch theUS dollar theyare seeking, but rather the Swiss franc. The Swiss currency has every quality investors are looking for: controlledinflation,solidpublicfi­ nances, the perception of a close relationshipbetweengoldandthe franc, and the probably justified belief that the Swiss National Bank could tolerate an apprecia­ tionofitscurrencyinordertolimit the impact of rising oil prices. The Swiss franc may well emerge as the biggest winner of the newen­ vironment nowunfolding. YouWanted Rate Cuts, You'll Get Hikes ©Magnific