3 June 2021 Investment Funds

MiFID Top-Up permissions

Introduction

Any authorised AIFM may apply to their home regulator for “MiFID Top-Up” permissions, i.e. authorisation to provide certain additional investment services as per Article 6 AIFMD.

MiFID Top-Up permissions enable an authorised AIFM to manage and market discretionary mandates, or market and provide investment advice regarding funds not currently managed by such AIFM, thereby significantly expanding the scope of its operations.

Scope of additional MiFID services

Using the MiFID Top-Up permissions, the authorised AIFM will be able to provide the core service of management of portfolios of investments, including those owned by pension funds, in accordance with mandates given by investors on a discretionary, client-by-client basis, where such portfolios include one or more financial instruments. Financial instruments are those listed in section C of annex I of MiFID II.

In addition to this core service, an authorised AIFM may, in addition, become authorised to provide one or all of the following non-core services:

  • investment advice concerning one or more financial instruments;
  • safe-keeping and administration in relation to shares or units of collective investment undertakings; and
  • reception and transmission of orders in relation to financial instruments.
Regulatory application in Luxembourg

Application and supporting documentation

There is currently no CSSF template form with respect to obtaining a MiFID Top-Up licence, and the application will very much depend on the specific circumstances/set-up contemplated.

In a nutshell, the application will typically include:

  • the background regarding the application and an overview of the nature of the business currently conducted by the AIFM;
  • a description of the additional MiFID II services that the AIFM proposes to undertake and how the AIFM will increase its resources (e.g. staff, internal procedures) to carry out such activities;
  • a description of whether it is contemplated to delegate the new services, and presentation of the delegation setup;
  • a confirmation of compliance with the newly applicable capital adequacy and MiFID II rules; and
  • a confirmation of adherence to the Système d’indemnisation des investisseurs Luxembourg, the Luxembourg investor compensation scheme.

In addition, supporting documents need to be prepared and included in the main application to the CSSF (e.g. programme of activities, updated articles of incorporation, draft agreements, etc.).

Timing considerations

Approval times widely vary, depending on the complexity of the proposed setup and the quality of the application file. CSSF approval can hence take from approximately four to twelve months.