CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
1.
External auditors’ notice
The present questionnaire shall be read in conjunction with the content of the long form audit
report of the entity.
Responses to the questionnaire reflect our findings resulting from procedures of an audit nature
which may vary according to individual circumstances and our professional judgment.
Our procedures were designed to provide a reasonable but not absolute level of assurance that
the information subject to our work is free of material misstatement.
2.
Objectives of the questionnaire and scope of the CSSF Circular 07/326 (“the Circular”)
This questionnaire is intended to establish whether the various conditions applicable to
Luxembourg incorporated credit institutions and investment firms that wish to carry on activities in
other Member States of the European Union by the establishment of branches or by the free
provision of services are applied in accordance with the CSSF Circular 07/326 (hereafter “the
Circular”).
The Circular has been issued pursuant to the transposition into Luxembourg law of Directive
2004/39/EC of the European Parliament and of the Council on markets in financial instruments
(“MiFID Directive”) through the law of 13 July 2007 on markets in financial instruments (“MiFID
Law”) amending the law of 5 April 1993 on the financial sector (“LFS”) and updates the circulars
that existed in this field (IML 93/99, IML 98/148).
The purpose of the circular is to provide additional information on the role of the CSSF as home
authority and to point out to credit institutions and investment firms incorporated in Luxembourg
the provisions under the new regime that must be complied with when establishing a branch or
providing services in another Member State.
The Circular concerns credit institutions incorporated in Luxembourg that perform activities
covered by their authorisation as defined in Annexe I (Annexe II for investment firms) to the LFS in
another Member State by means of a branch or the freedom to provide services.
Pursuant to Annexe I of Directive 2006/48/EC on the taking up and pursuit of the business of
credit institutions (“CRD Directive”), the services and activities provided for in sections A and B of
Annexe I to the MiFID Directive, when referring to the financial instruments provided for in section
C of Annexe I to that Directive, are subject to mutual recognition in accordance with the CRD
Directive.
Where a credit institution or investment firm incorporated in Luxembourg appoints a tied agent (as
defined in article 1(1) of the LFS) established in another Member State, this tied agent shall be
subject to the national provisions applicable to branches of EU credit institutions and investment
firms.
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CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
3. Branches of credit institutions and investment firms incorporated in Luxembourg established in
another Member State (“the branch” or “the branches”)
3.1 Notifications relating to the establishment of a branch
Page no.
CSSF
07/326
4-5
Applicable conditions
Yes
No
N/A
Ref.
Has the institution notified to the CSSF its intention to establish a
branch? The notification contains the following information:
a) the Member State within the territory of which it plans to
establish a branch;
b) a programme of operations;
c) the address of the head place of business in the host Member
State from which documents may be obtained;
d) the name(s) of those to be responsible for the management of
the branch.
Obtain copy of the notification file/letter sent to the CSSF.
5
Has the name, or any change, of the institution’s executive
management member responsible for the branch’s operations
been communicated to the CSSF?
Obtain copy of the notification file/letter sent to the CSSF.
5
Has the institution communicated to the CSSF a detailed
description of the limit systems and powers delegated to the
branch?
Obtain copy of the notification file/letter sent to the CSSF.
6
Where a credit institution or an investment firm operates in
another Member State by using a tied agent, has the CSSF been
provided with a programme of operations setting out the types of
business performed by the tied agent and the supervisory and
control measures to which that tied agent is subject?
Obtain copy of the notification file/letter sent to the CSSF.
6
Where a MTF is operated in another Member State by means of
a branch, has the CSSF been provided with the following:
- a programme of operations listing the type of business;
- the rules governing the functioning and the organisational
structure?
Obtain copy of the notification file/letter sent to the CSSF.
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CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
Page no.
CSSF
07/326
6
Applicable conditions
Yes
No
N/A
Ref.
Yes
No
N/A
Ref.
Has the institution communicated in written any change to the
notification information (programme of operations, address of the
head place of business and names of the managers of the
branch) to the competent authority of the host country and to the
CSSF (only to the CSSF for investment firms) at least one month
before making the change?
Obtain copy of the letter sent to the competent authority in the
host country and the CSSF.
7
Has the branch started its activities after communication from
competent authority of the host Member State?
Or, if such communication is missing, has the branch started its
activities more than two months after the transmission date of the
communication by the CSSF?
Review correspondence with the competent authority of the host
Member State and the CSSF.
7
Where opening additional places of business constitutes a
change of the programme of operations and/or implies a change
to the address of the head place of business, has the
Luxembourg institution informed the competent authorities before
the opening of additional places of business (competent authority
of the host country and CSSF for credit institutions, CSSF only for
investment firms)?
Review the correspondence with the competent authorities.
8
Has the institution transmitted to the CSSF by 31 January, on an
annual basis, a list stating the addresses of the places of
business that the branch has in another Member State.
Review the correspondence with the CSSF.
3.2 Delegation of powers to the persons responsible within the branch
Page no.
CSSF
07/326
8
Applicable conditions
Has the institution defined clearly the powers that it has accepted
to delegate to the branch?
Ask definition of all the powers.
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CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
Page no.
CSSF
07/326
8
Applicable conditions
Yes
No
N/A
Ref.
Has the institution set down detailed procedures and a consistent
system of limits for foreign exchange and other financial
instruments positions?
This should be covered by appropriate procedures which should
be tested as part of the audit.
8
Has the credit institution defined procedures and limits for the
granting of credit?
Obtain procedures and limits for the granting of credit.
3.3 Risk management function, compliance function and internal audit function of the branch
Page no.
CSSF
07/326
8
Applicable conditions
Yes
No
N/A
Ref.
Do regulations applicable in Luxembourg for internal control (IML
Circular 98/143), compliance (CSSF Circular 04/155) and conduct
of business rules in the financial sector (CSSF Circular 07/307)
apply to the institution’s branches?
This should be covered by appropriate procedures which should
be tested as part of our audit.
9
Where the branch has a significant size, have an internal audit
and compliance functions specific to the branch been set up?
Do the branch’s internal audit and compliance functions report
directly to the internal audit and compliance function of the head
office?
Obtain the organisational chart and reporting lines of the branch.
9
Has an inspection at the branch’s premises been done during the
year by the head office’s internal audit department?
Has this internal audit covered in a representative manner all
aspects of the branch’s activities?
10
Are local regulations for the prevention of money laundering and
terrorism financing applied by the branch(es)?
The list of “third countries which impose equivalent requirements”
within the meaning of the law of 12 November 2004 on the fight
against money laundering and terrorism financing as amended is
presented in the grand-ducal regulation of 29 July 2008.
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CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
3.4 Supervision of the branch
Page no.
CSSF
07/326
11
Applicable conditions
Yes
No
N/A
Ref.
If the branch decided to report to the CSSF the transactions
undertaken and constituting investment services provided outside
of the territory of the host Member State, has the CSSF been
informed of this choice?
Review the correspondence with the CSSF.
11
Has the branch (of credit institution only), after verification by the
head office, complied with all reporting requirements towards the
CSSF as described in point I.1 of the Annexe 3 to the CSSF
Circular 07/316?
Review
procedures
implemented
correspondence for any exceptions.
12
review
CSSF
Has the branch (of investment firm only), after verification by the
head office, provided the CSSF with information relating to:
-
The monthly financial situation?
The quarterly profit and loss account?
The quarterly staff numbers?
The quarterly off-balance sheet?
Review
procedures
implemented
correspondence for any exceptions.
12
and
and
review
CSSF
Have all branches been included by the external auditor in the
audit of the annual accounts of the institution?
Does the long form report of the institution include a chapter on all
branches in which the auditor reviews the financial aspects of the
branch’s activities, risks and organisation?
Ensure that instructions have been sent to local auditor, if
appropriate. Review the audit plan and report of head office’s
internal audit and assess branches’ coverage.
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CSSF CIRCULAR 07/326
Provisions relating to Luxembourg incorporated credit institutions and investment firms
established in another Member State by way of branches or exercising their activities in
another Member State by the free provision of services
Audit questionnaire
4. Free provision of services by Luxembourg incorporated branches of credit institutions and
investment firms established in another Member State
Page no.
CSSF
07/326
Applicable conditions
12
Has the institution notified the CSSF all the activities it wished to
perform among the activities listed in Annexe I (Annexe II section
A for investment firms) of the LFS before providing services within
the territory of another Member State?
12
If applicable, did the institution (investment firms only) state
whether it intends to use a tied agent within the territory of the
host Member State?
12
Has the institution commenced its activities in the host Member
State once it has been informed that the CSSF has transmitted
the notification to the competent authority of the host Member
State?
12
Has the institution notified in writing the CSSF about changes in
the notification at least one month before the implementation of
these changes?
Yes
No
N/A
Ref.
Review the correspondence with the CSSF.
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