The CSSF has recently updated its Q&A (Part II) on the status of professionals of the financial sector (the Q&A) clarifying the notion of ‘public’ in the framework of the activities of professionals carrying out lending operations in the sense of article 28-4 of the law of 5 April 1993 on the financial sector (the LFS).
According to article 28-4 of the LFS, professionals carrying out lending operations are professionals engaging in the business of granting loans to the public for their own account. However, the concept of public is not defined in the LFS and this has resulted in uncertainties surrounding activities that could require prior authorisation from the CSSF. Although the CSSF had narrowed uncertainties by addressing certain situations in its Q&A from time to time, doubts remained until recently about the exact boundaries of the term ‘public’.
Generally, the concept of public refers to a multitude of non-identifiable persons. Consequently, the CSSF had already confirmed in its Q&A that loans granted to a limited circle of previously determined persons should not be viewed as granted to the public, falling therefore outside of the scope of article 28-4 of the LFS. The same reasoning applies in the context of loans granted through a Luxembourg SPV to a limited circle of persons previously determined by an entity that wholly owns or directly or indirectly controls the SPV (application of a look-through approach).
The CSSF has now clarified further how this notion of public should be interpreted in the framework of lending activities (question 52 of the Q&A). It considers that lending activities will not be directed to the public within the meaning of article 28-4 of the LFS when:
- the nominal value of the loans is in excess of EUR 3,000,000 (or the equivalent amount in another currency); and
- the loans are granted exclusively to professionals within the meaning of the Consumer Code (that is, broadly, any physical or legal person acting in the framework of its commercial, industrial, craft or liberal activities).
Each situation that remains uncertain despite these guidelines should be submitted beforehand to the CSSF in view of obtaining prior clearance, where necessary, from the CSSF for the contemplated lending activities.
This clarification is expected to boost the Luxembourg alternative lending industry, shaping greater legal certainty and a favourable regulatory framework for lending activities by non-licensed lenders targeting exclusively commercial borrowers.