LUXEMBOURG Law and Practice Contributed by: Vassiliyan Zanev and Natalja Taillefer, Loyens & Loeff Luxembourg S.à r.l.
odic Reporting ) will be subject to authorisation and prudential supervision by the CSSF. Please see 4.10 SPEs or Other Entities with regard to the application of the AIFMD and the AIFM Law to the securitisation undertakings. Passive Management While the Securitisation Law permits any kind of assets to be securitised, the nature of securiti - sation transactions requires that the securitised risks stem exclusively from the assets acquired or assumed by a securitisation undertaking in the course of the securitisation and not from any entrepreneurial or commercial activity of the securitisation undertaking. Thus, Luxem - bourg securitisation undertakings must gener - ally have a passive attitude when managing their assets. This rule is not applicable to undertak - ings securitising debt securities, debt financial instruments and receivables, provided that the securitisation undertakings do not issue financial instruments to the public. The role of the securiti - sation undertakings investing in non-debt assets should be limited to the administration of finan - cial flows linked to a securitisation transaction itself and to the “prudent-man” management of the securitised risks, and exclude all activities likely to qualify the securitisation undertaking as entrepreneur. Any management of such assets by the securitisation undertaking that creates increased risk in addition to the risk inherent thereto or which aims to create additional wealth or promote the commercial development of the securitisation undertaking’s activities would be incompatible with the Securitisation Law, even if the actual management had been delegated to an external service provider. Loan Origination Loan origination by a Luxembourg SPE is in principle allowed. Structures originating loans
instead of acquiring them on the secondary mar - ket may fall under the definition of securitisa - tion, provided that the securitisation undertaking does not finance its loan origination activity from the funds raised from the public and that the issuance documentation either clearly defines the assets servicing the repayment of the loans originated by the SPE or clearly describes the borrowers and/or the borrower selection criteria, as well as information on characteristics of the loans granted. Assignment of Assets and Granting of Security Interests A securitisation undertaking cannot assign its assets, except in accordance with the provisions set forth in its constitutional or issuance docu - ments. It may only grant security interests over its assets in order to secure the obligations that are related to the securitisation transaction. 4.12 Participation of Government- Sponsored Entities Luxembourg is not known to participate in the securitisation market through government-spon - sored entities. 4.13 Entities Investing in Securitisation The vast majority of securitisation undertak - ings in Luxembourg are not regulated and, as a result, they usually target investors that are “professional clients” for the purposes of MiFID II, including credit institutions and investment funds. In most cases, the investors in Luxembourg securitisation transactions are located abroad. Luxembourg does not impose any additional obligations in terms of such investors, but they must comply with their local rules and regula - tions (eg, diversification and capital adequacy rules).
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