LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
ments, rules laid out in Directive 2014/65/ EU on markets in financial instruments, as amended (MiFID II), and related regulations would apply. Most of the aforementioned legislation is accom - panied by technical standards, regulations, cir - culars and guidance issued by the competent authorities, which should also be considered. In addition, each of the activities above may be subject to, among others, anti-money laundering regulations (see 2.14 Impact of AML and Sanc- tions Rules ) and data protection regulations (see 2.11 Implications of Additional, Non-Financial Services Regulations ). 2.3 Compensation Models The compensation models that industry partici - pants are allowed to use to charge customers vary mainly depending on the service provided by the fintech entity and the relevant customer type. Disclosure obligations relating to fees vary depending on the same factors. Typically, regu - lated entities, such as investment firms, are sub - ject to certain pre-contractual obligations, which include the obligation to disclose costs charged by the service provider. 2.4 Variations Between the Regulation of Fintech and Legacy Players As a general rule, there is no difference between the regulation of fintech companies and legacy players, as long as the services they provide fall under the scope of regulated activities. Howev - er, given the size and business model of fintech companies, certain rules applicable to legacy players would typically not apply to fintech com - panies. In addition, in some cases the applicable regulations depend directly on the scale of the business, for example the EU crowdfunding reg - ulation provides certain regulatory exemptions
as long as the yearly funding remains under the threshold of EUR5 million. 2.5 Regulatory Sandbox There is currently no general regulatory sandbox regime in Luxembourg applicable to all fintechs. However, the adoption of Regulation (EU) 2022/858 has introduced a pilot regime for mar - ket infrastructures based on DLT (the “DLT Pilot Regime” ), which is fully applicable from March 2023. The DLT Pilot Regime provides a tempo - rary exemption from certain regulatory require - ments for eligible firms for the development of market infrastructures used for the trading or settlement of financial instruments that are issued, recorded, transferred and stored using DLT. In addition, the CSSF has established an innova - tion hub that seeks to foster an open and con - structive dialogue with the fintech industry. The innovation hub is a single point of contact for any person who wishes to present an innovative project or exchange views on challenges facing Fintech companies may be supervised by sev - eral regulators in Luxembourg, of which the fol - lowing are the most relevant. The CSSF The CSSF is the competent authority of the pru - dential supervision of credit institutions, profes - sionals of the financial sector, alternative invest - ment fund managers, undertakings for collective investment, authorised securitisation undertak - ings, regulated markets, payment institutions, electronic money institutions and other entities operating in the financial sector. In addition, the CSSF is also the competent authority to ensure financial innovation in Luxembourg. 2.6 Jurisdiction of Regulators
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