Prudential supervision for Professionals of the Financial Sector (PSF)

Means of supervision

The CSSF has several instruments to exercise its supervision. The key means are as follows:

• Regular receipt of financial information used to permanently monitor the PSF’ business and related risks. In addition, there is a regular check of the capital adequacy ratio and the limitation of large exposure for investment firms (Art. 56 of the Law)
• The report drawn up on a yearly basis by the registered company auditor. This report includes a certificate relating to combating money laundering and terrorist financing and a management letter dealing in particular with compliance with the Law and applicable CSSF circulars
• For investment firms, a detailed analytical audit report (CSSF circular 03/113 as amended by CSSF circular 10/486) broadly covering the risk control and internal control system, including compliance with rules of conduct and a description and assessment of the Internal audit and Compliance functions (refer to part 5 Role of the réviseur d’entreprises agréé for PSF for a detailed view of the role of the registered company auditor and the scope of relevant certificates). The CSSF may also expressly ask a registered company auditor to audit one or more aspects of the PSF’s business or operations
• The CSSF is also sent, for specialised and support PSF, the annual internal audit reports on the controls performed over the last period and the reports by the PSF’s management on the status of internal control. For investment firms, once a year, the authorised management shall confirm compliance with CSSF circular 12/552 by way of a single written sentence followed by the signatures of all the members of the authorised management to the CSSF, as well as provide the ICAAP report and the summary reports of the internal control functions

• On-site audits. Furthermore, since 2009 the CSSF has stepped up its work in the field by conducting an increasing number of this type of audit including welcome visits for newly licensed PSF within the first months following the ministerial authorisation
• By virtue of CSSF regulation 13-02, the CSSF is also competent to receive complaints from clients sent to PSF and to take action with them to settle these disputes amicably
• Under the provisions of Article 57 of the Law, the CSSF must grant prior authorisation to PSF wishing to have a qualifying holding
• Lastly, the CSSF also has powers to sanction, i.e. rights of injunction and suspension in the event that legal provisions are breached or in the absence of guarantees with respect to the management and durability of the PSF’s operations and commitments. The penalties also referred to in Article 59 of the Law, where the PSF has failed to remedy the injunctions within the allotted time, extend from suspending the persons responsible for the PSF’s governance and management, to suspending the voting rights attached to the stocks or shares held by shareholders or partners having a negative influence on the sound and prudent management of the PSF, or suspending operations or a given business line of the PSF

Financial information to be regularly reported to the CSSF

CSSF circular 05/187 as amended and supplemented by CSSF circular 10/433 presents the outlines of financial information to be submitted to the CSSF.

The table below summarises all the reports to be submitted to the CSSF.