Circular CSSF 20/758 is a CSSF circular on central administration, internal governance and risk management, published 7 December 2020.
\nLegal basis: Law of 5 April 1993 on the financial sector.
\nRelevant for: Investment firms.
\nMain topic: MiFID II. Keywords: Accounting, Audit Committee, Central administration, Information and communications technology (ICT), Internal governance, Outsourcing, Risk management, Whistleblowing.
\nAmended by Circular CSSF 21/785.
\nCircular CSSF 20/758 as amended by Circulars CSSF 21/785 and CSSF 22/806 Re: Central administration, internal governance and risk management Luxembourg, 7 December 2020
\nLadies and Gentlemen, Articles 17(1a) and 38-1 of the Law of 5 April 1993 on the financial sector (“LFS”),
\nTo all investment firms
\nsupplemented by Regulation CSSF No 15-02 relating to the supervisory review and evaluation (“RCSSF 15-02”) 1 require investment firms to have robust internal governance arrangements, which shall include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks to which they are or might be exposed, adequate internal control mechanisms, including sound administrative and accounting procedures and remuneration policies and practices allowing and promoting sound and effective risk management, as well as control and security mechanisms for their IT systems. This Circular specifies the measures investment firms must take pursuant to the provisions of the LFS and RCSSF 15-02 2 as regards central administration, internal governance and risk management. It reflects the European and international principles, guidelines and recommendations which apply in this respect, translating them, in a proportionate way, in the context of the Luxembourg financial sector. Where, due to the size, the nature and the complexity of the activities and the organisation, the application of the principle of proportionality requires enhanced central administration, internal governance or risk management, the institutions shall refer to the principles set out in Chapter 2 of Part I and to the abovementioned guidelines and recommendations for guidance on this implementation. This concerns especially the European Banking Authority (“EBA”) Guidelines on internal governance (EBA/GL/2017/11) and the joint EBA and the European Securities and Markets Authority (“ESMA”) Guidelines on the assessment of the suitability of members of the management body and key function holders (EBA/GL/2017/12). This Circular repeals and replaces Circular CSSF 12/552 on central administration, internal governance and risk management (as amended by Circulars CSSF 13/563, CSSF 14/597, CSSF 16/642, CSSF 16/647, CSSF 17/655 and CSSF 20/750) with regard to investment firms.
\nRCSSF 15-02 only applies to CRR institutions, i.e. to credit institutions and CRR investment firms.
\nIdem
\nAs regards the appointments of directors, authorised managers and key function holders, this Circular should be read in conjunction with the Prudential Procedure in this respect published on the CSSF website. The Circular is divided into four parts: the first part contains definitions and establishes the scope, the second part is dedicated to central administration and internal governance requirements, the third part covers specific risk management requirements and the fourth part provides for the entry into force of this Circular.
\nTABLE OF CONTENTS Part I - Definitions and Scope 7 Chapter 1. Definitions and abbreviations 7 Chapter 2. Scope and proportionality 9 Part II. Central administration and internal governance arrangements 11 Chapter 1. Central administration 11 Chapter 2. Internal governance arrangements 11 Chapter 3. General characteristics of “robust” central administration and internal governance arrangements 13 Chapter 4. Board of Directors and authorised management 14 Sub-chapter 4.1. Board of Directors 14 Section 4.1.1. Responsibilities of the Board of Directors 14 Section 4.1.2.
\nThe text above is the opening of the document; the PDF carries the whole.
\nDocument page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.
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