Family Office health check and remedy - Is your Family Office in line with regulation? | Deloitte solution |
Context
Since the adoption of law on the activity of Family Offices on 21 December 2012, Luxembourg has become one of the first countries worldwide to have a specific regulatory framework tailored to the activity of Family Offices. In this context, Family Offices now need to reassess their regulatory compliance.
Applicability
The passed law defines Family Office activity as professionally providing services and/or advice on private wealth issues to:
- Individuals or families
- Private wealth entities (e.g. trust or foundation), which owners or funders are private individuals or families
More specifically, Family Office activities include direct private wealth planning, organisation and supervision, but also coordinating activities such as choosing, coordination and controlling third party service providers.
The law is not applicable to the following:
- Single Family Offices
- Activities conducted by board members of entities such as foundations, trusts, trust protectors, fiduciaries
Professional intending to act as Family Office are either:
a) existing professionals, already automatically authorised as regulated professionals such as credit institutions, private portfolio managers, investment advisers, lawyers etc.)
b) or professional that fall into the scope of the new law and will therefore be required to send an application to the CSSF to act within this new category of PSF. If all conditions are met and the application is successful, the professional will be authorised by the Minister of Finance and henceforth constantly supervised by the CSSF
Existing unregulated professionals involved in Family Office activities benefit from a grandfathering period ending 2 July 2013.
Since the approval of the application may take up to 3 months, the application should be submitted to the CSSF by end of March 2013.
Impacts
The law does not only require Family Office professionals to register with the CSSF, but more importantly to comply with further business requirements. These relate to numerous aspects such as:
- Definition of business plan and Target operating model, articles of incorporation
- Structure of shareholding, infrastructure, HR, administrative office
- Internal procedures handbook
- Description of the Risk Control, internal audit and compliance function
- Outsourcing relations if applicable
- Name of the independent auditor as well as internal auditor
- Anti-Money Laundering Policies
- Remuneration Transparency
- Data protection and professional secrecy
Therefore, it may be necessary to review current situation and questions may arise like:
- Is my Company in line with regulatory requirements?
- Is my current controlling transparent enough to provide all the documentation required by the CSSF?
- Is my IT-Infrastructure up-to date to cope with data protection and security requirements?
- Do I already have appointed an internal and an external auditor? Both are required to complete the CSSF application.
The before mentioned points are the most apparent direct impacts of the new Law and the required PSF status. However, there are likely to be additional impacts in the organisation of the Family Office and its daily business.
Clear due diligence processes must be in place and it may be necessary to review the contractual arrangements in place with the staff and third party providers to ensure full compliance with the new law.
Our services
Our multi-disciplinary competencies and experience with Family Offices, combined with our deep knowledge of Luxembourg regulations enable us to offer tailor-made solutions for implementing the necessary changes stemming from the new Family Office law and ensuring a rapid, successful application for the PSF status. We propose a four step approach:
- Discussion of your current situation and future positioning
- High level or detailed gap analysis and executive impact assessment
- Assistance with the remediation of gaps, this included but is not limited to the design of the organisation and operational model drafting of procedures and business continuity plans
- Assistance in the preparation of the application package (to be submitted to the CSSF by end of March 2013
The above approach can be complimented with additional services. For example we can combine tax review and/or draft an employee remuneration policy. Furthermore we offer supplementary services such as external or internal audit as well as risk and compliance.
Given the limited time to provide the CSSF with the application documents, we have put in place a team ready to support our clients quickly and efficiently.
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Family Office health check and remedy - Is your Family Office in line with regulation?
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