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As a member of the European Union, Luxembourg’s legal and regulatory environment is largely determined by the numerous EU Directives and regulations that have been adopted within the framework of the Financial Services Action Plan.

The Luxembourg financial sector is regulated by two fundamental laws which control access to the profession: where banks and professionals of the financial sector are concerned this is the Law of 5 April 1993, as amended, and for the insurance industry this is the law of 6 December 1991, as amended.

However, in transposing Community standards into law the Luxembourg legislator has skillfully taken advantage of margins for manoeuvre available within the Directives to create a financial sector environment that is at the same time stimulating and grounded in the principle of investor protection.

Over the years, specific legal frameworks have been created for niche products and promising services, such as investment funds and alternative investment funds, pension funds, venture capital investment companies, securitisation vehicles, covered bonds, specialised investment funds and the family wealth management company (the SPF).

The legislator has a dual objective: to deliver a robust, competitive legal framework for the financial centre whilst guaranteeing optimal protection for investors. This is why professional activity within the financial sector, and professional activity within the insurance and reinsurance sectors, is subject to prior ministerial agreement. Supervision of the financial sector falls under the Commission de surveillance du secteur financier (CSSF) and the Commissariat aux assurances (CAA), and includes responsibility for the other professionals of the financial sector who provide support services to financial institutions.

While remaining subject to strict rules with regard to financial privacy, actors in the Luxembourg financial centre must respect a set of legal measures in the area of the fight against money laundering and the financing of terrorism.