sou · GUB350 · 2007-01-01 00:00:00 — proposes that , in dialogue with the firms, continues the work of the Committee requiring this item. The Government, or the authority appointed by the Government, should be empowered to issue regulations, first concerning whether the reporting should also cover other instruments, for example financial instruments that are admitted to trading on an MTF and derivative instruments for which the underlying asset constitutes an instrument that is admitted to trading on a regulated market or MTF, and second regarding what further information the reports should contain about each trans- action. It is expected that, before such authorisation is granted, will present the result of its future investiga- tions to the Government. Protection for investors (Chapter 12) MiFID contains a number of rules aimed at protecting investors. Besides the general obligation to protect the clients interests, this chapter deals with the provisions on the exchange of information between the undertaking and clients, the requirements for assess- ments of suitability, handling conflicts of interest and provisions on how clients securities orders should be managed to achieve the best possible result. Several of the provisions of MiFID on the protection of investors, for example the rules on observing the clients interests, the obligation to provide certain information, and the requirements on best execution, resemble to a large extent the provisions con- tained in the Act on Factors and Commercial Agents, which governs the private law relationship between the client and the agent. In this chapter, the Committee deals with the relationship of MiFIDs rules with the Act on Factors and Commercial Agents on the basis of the amendments to the Act proposed in the Com- mittee presented by the Commission on in the report Commission on – and a new Commission Act (– och en ny kom- missionslag – SOU 2005:120). has concluded that no further amendments are required as a result of MiFID other than those proposed in the report submitted by the Committee. MiFIDs requirements to observe clients interests and provide information about services, the undertaking and the risks associ- ated with certain services and investment alternatives have corresponding rules as such according to the Swedish system. However, the Committee concludes that the rules under MiFID are more detailed than the current Swedish rules. This also applies to client protection rules, and the Committee therefore proposes that the current proper conduct of business section contained in Chapter 1, Section 7 of the Securities Business Act is replaced by a proper conduct of business chapter formulated in accordance with MiFIDs rules, both materially and terminologically. The chapter opens with a general provision about the investment firms having to observe their clients interests and thereafter comply with the provisions about what information the firm should provide and , reporting to clients about the services performed, etc. It is proposed that the provisions of the Act apply regardless of whether or not the client is a professional. detailed require- ments will ensue from the regulations associated with the various provisions contained within the Act. These detailed regulations – which will be worded in accordance with the Implementing Direc- tive – impose in their turn greater and more detailed requirements on the undertaking if the client is retail than if the client is profes- sional. The client protection rules contain a requirement that the investment firms should assess whether or not a certain service or a particular instrument is appropriate for a client. The obligation of a investment firm depends upon which investment service the undertaking performs. If investment advice or portfolio management is involved, the firm should consequently obtain details of the clients financial situation, experience and knowledge, etc., and on the basis of this information propose services and instruments that are appropriate to the client. If the firm performs other services, for example effects orders, the requirement on the assessment of suitability is less extensive. The firm should then assess whether the service or instrument is suitable for the client in relation to the clients knowledge and experience. If the service or instrument is not suit- able, the undertaking should advise the client not to proceed. Both kinds of assessments closely resemble those required according to the Act. However, this Act is restricted to consumers and certain measures are imposed that differ from MiFID and the implementing measures contained in the Act and the regulations issued under the Act. The Commit- tee therefore proposes that the commercial law provisions of the Act (Sections 4 and 5 of the Act) should not apply to investment firms. It is proposed that these provisions replace the provisions contained in the Securities Market Act. This also has the consequence that the current regulations in the area as regards the investment firms must be replaced by regulations that are compatible with the imple- menting measures and be issued under the Securities Market Act. As regards the assessment of suitability that must be conducted in connection with services other than investment advice and portfolio management, there are exemptions from this obligation if the service only comprises the pure execution of orders on the clients initiative and the undertaking makes it clear to the client that no assessment will be made of whether the service/instrument is suitable for the client. A further precondition is that the order relates to uncomplicated instruments, for example shares admitted to trading on a regulated market. proposes that a rule is introduced into the Swedish Act providing for an exemption for pure order execution. Furthermore, the Committee proposes that the requirements contained in MiFID on written documentation about what the client and the investment firm have agreed as regards the parties rights and obligations should be formulated as in MiFID. As regards reporting to clients, the Committee proposes that the cur- rent requirements on contract notes and depository statements be replaced by a generally formulated requirement for reporting. The detailed rules about what reporting can be made and the content should, according to the Committees proposal, comply with implementing provisions, formulated in accordance with the Implementing Directive. A further aspect of client protection is the handling of conflicts of interest. Conflicts of interest can, for instance, prevail between various client groups. Clients of the firms corporate finance department can, for example, have an interest in the firms brokers and advisors advising their clients to accept offers or to subscribe for new issues that are being dealt with by the corporate finance department, regardless of whether this is to the advantage of the clients. There can also be conflicts of interest between the firm itself and the client. When the investment firm makes deals on its own behalf, the firm is interested in purchasing at a low price and selling at a higher price – but the clients will be interested in selling cheaply and buying at a high price in relation to the firms own stock. In this respect, in accordance with MiFID, the Com- mittee proposes that the investment firms should identify and deal with conflicts of interest so that the clients interests are not nega- tively affected. The generally framed provisions of the Act regard- ing this should be supplemented with implementing provisions that, like the Implementing Directive, stipulate minimum require- ments for the various operations separate from each other. The firm analysis operations are one of the areas where the problem of conflicts of interest becomes clear. The readers of analyses and investment recommendations should be entitled to assume that the analyst has proceeded from the perspective of the investors and not formulated the analysis either on the basis of the firms own interests and possible holding in the analysed under- takings or on the basis of other clients interests, for example clients of the corporate finance operation. As regards analysis operations, there are special rules contained in the Implementing Directive, based, among other things, on principles that were adopted by the Commis- sions (IOSCO). The Committee concluded here that the proposed generally-framed rules contained in the Act combined with the regulations formulated as analysts rules in the Implementing Directive are sufficient to deal with this conflict of interest. would it be compatible with MiFID to introduce nationally deviating rules within this area taking into consideration the prohi- bition contained in the Implementing Directive on goldplating. One component of the obligation to observe the clients inter- ests is an obligation to execute the clients orders so that the best possible result is achieved. MiFID contains explicit rules on best execution and the handling of client orders generally. These rules basically mean that the clients orders should be executed in the order in which they have been received by the firm and in such a way that the best possible result, primarily regarding the price, is achieved. In order to achieve the best possible result, the firms should assess how and on which market place the order should be executed. Should the deal be concluded outside a market place against its own stock or against another clients order or should the order be executed on a regulated market or MTF, and in that case which? The firm should stipulate how these assessments and choices are made in a policy for best policy order execution and the clients should accept this policy. proposes that rules corresponding to the rules contained in MiFID should be included in the Swedish Act. Market places (Chapter 13) MiFID regulates two kinds of market places: regulated markets and MTFs. In Chapter 13, the Committee deals, among other things, with rules concerning the relationship between the market place and those who participate in trade and concerning the market places relationship to the instruments that are traded and the issu- ers of such instruments. The Committee concludes that the current rules on stock exchange membership correspond to a large extent with MiFIDs rules on participation in trade on a regulated market and only some minor supplements and clarifications are proposed. However, the Committee proposes that the current misleading term member of a stock exchange is replaced by the word participant. For partici- pation in trade on an MTF, the Committee proposes that similar rules are introduced. However, on an MTF it should be possible for natural persons to participate directly in the trade, as is the case today for participation in trading on an authorised market place. MiFIDs rules for admitting financial instruments to trading on a regulated market have corresponding rules in Swedish law regarding registration on a stock exchange and listing on an exchange or authorised market place. proposes in this respect that the listing is replaced with MiFIDs term admit- ted to trading. The minimum requirements that a stock exchange must impose for an instrument to be admitted to trading on a regulated market then follow the rules contained in the Imple- menting Regulation. also deliberates in this chap- ter whether the term registration should be retained. The rules on registration have been introduced to incorporate the codified Listing Directive requirements and the Committee proposes that these rules are retained. However, with the system proposed by the Committee, all instruments that are traded on a regulated market- place should be admitted to trading. Some of these instruments may also be registered. However, for the latter it is a precondition that the stock exchange in question has chosen to have a possibility of registration. also proposes that it should be possible for financial instruments to be admitted to trading on a regulated market without the issuer having applied or consented to this. When this relates to transferable securities, one precondition for this is that the security has already been admitted to trading on another regulated market within the EEA. However, the issuer whose securities are admitted to trading without an application or consent should not be covered by the requirements applicable to the provision of information, etc., that apply to those who applied to be admitted. Besides being an alternative marketplace for an instrument that is admitted to trading on a regulated market, an MTF may also function as an alternative for small undertakings that cannot satisfy all the requirements imposed on an undertaking whose securities are admitted to trading on a regulated market. therefore proposes that only a generally-framed requirement of suitability should be imposed for admittance to trading on an MTF. This chapter also deals with the principles of free access and neutrality for participants and issuers in a regulated market. proposes here that these principles, as previously, shall apply to their full extent for participants in trading and issuers of registered securities. However, it is proposed that the principle of free access should not apply in relation to a party who applies to be admitted to trading. However, when a security is actually admitted to trading, the issuer shall be dealt with as all other issuers – i.e. the principle of neutrality shall apply. Finally, the rules on market supervision and suspension of trading are dealt with in this chapter. As regards market super- vision, the Committee proposes that this shall be attended to by the stock exchange within the framework of its independent func- tion as described in Section 8.3.2. As regards suspension of trading, the Committee proposes that the current provisions are amended so that, in accordance with MiFID, it becomes clear that it is decision on suspension of trading of an instrument on a market place that will result in suspension of trading even on other market places. Supervision and sanctions (Chapter 14) Through the incorporation of the Market Abuse Directive, the Prospectus Directive and the Transparency Directive, Finansin- spektionens control powers and sanctions have been extended in several areas. The list of control powers and sanctions contained in MiFID is approximately the same as in the said directives. has observed that already has several of the control powers that a competent authority should have according to MiFID. However, in order to keep the rules that incorporate MiFID together, the Committee proposes that the provisions on the agencys supervisory powers regarding invest- ment firms and regulated markets be brought together in the Secu- rities Market Act. The right to implement on-site inspections has in previous legislative matters been deemed to result from the obligation of those undertakings subject to a licence obligation to provide the information required by the agency. However, in conjunction with the implementation of the Prospectus Directive, an express statu- tory provision regarding on-site inspections has been introduced regarding stock exchanges and authorised market places. therefore proposes that the rule on on-site inspections contained in the Securities Market Act should also apply to investment firms. It is stated in MiFID that the competent authority must be entitled to at least temporarily revoke a licence. The Committee concludes in this connection that the Directive as such can be interpreted so that the right to definitively revoke the licence satis- fies the Directives requirements to at least be able to revoke the licence. However, the Committee considers that a temporary revo- cation of the licence may be an appropriate sanction power, for example in those cases where a investment firm mismanages one of the operations for which the firm has a licence so seriously that a revocation as such is justified, but at the same time it is possible to conclude that the deficiencies will be rectified. therefore proposes that is given the right to temporarily revoke licences for investment firms and stock exchanges. New sanction powers are also dealt with in this chapter, for example the administrative penalties that have been introduced in the banking sector in . In order to coordinate the rules in the area of securities with the rules contained in the Banking and Financial Business Act and bring about competitive neutrality, the Committee proposes that the same sanction system as for banks, including administrative penalties and charges for delay, be intro- duced into the Securities Market Act. Cooperation between competent authorities (Chapter 15) MiFIDs rules on cross-border operations and of branches are based as mentioned on the principle that a licence in one country within the EEA should also be sufficient for an undertaking to be able to conduct its operation in other countries in the EEA, Passport. According to the main rule, the undertaking is subject to supervision by the competent author- ity in the country in which the undertaking was granted a licence. This also applies if an undertaking conducts cross-border opera- tions. However, for branches, the host is responsible for the supervision of the branchs operation in some respects – for example, regarding the rules on protection of investors. In order for Passport and the shared supervision described to be able to function, cooperation is required between the competent authorities and the authorities must exchange information. MiFID contains a number of rules about how the cooperation and exchange of information shall be effected. proposes that these parts of the Directive are incorporated through a generally framed provision that should cooperate and exchange information with other competent authorities within the EEA to the extent provided by MiFID. also proposes that the provisions of Finansin- spektionens supervisory authority be formulated so that the agency can intervene directly in relation to branches through recti- fication orders as regards enforcement of the client protection rules, transaction reporting and the transparency rules applicable to investment firms. In such cases, shall notify the competent authority in the undertakings home if the undertaking does not comply with the order. As regards cross-border operations and those parts of the branch operation for which the agency does not have the supervisory responsibility, the Committee proposes that the agency shall inform the competent authority in the undertakings home country if the operation violates the rules adopted pursuant to MiFID. If despite this the undertaking continues to trade in such a way that clearly damages the interests of investors or results in the markets not functioning properly, the agency may prohibit the undertaking from conducting transactions in . In accordance with the Committees proposal, a reciprocal procedure shall also be applied to regulated markets and MTFs outside if Swedish under- takings participate in the trading. Consequences (Chapter 17) The incorporation of MiFID into Swedish law will entail a number of changes to the existing set of rules. Even if in several cases these do not involve any overall changes, the large number of changes entails increased costs for , the investment firms and the stock exchanges. Some of the proposed changes – for example, the requirement for transaction reporting – are however rather extensive and in this section an estimate is made of the costs that these requirements may entail. However, the costs cannot yet be assessed with any great precision, among other things because they depend upon which regulations will make. also concludes that the new requirements for transparency and the increased opportunities for competition between various market places involve a risk of fragmentisation of trade on the one hand, but on the other hand may have positive effects over the somewhat longer term. uppdrag enligt direktiven är att se över frågor som rör lagstiftningen för värdepappersinstitut, börser och auktoriserade marknadsplatser.1 Uppdraget kan delas in i fyra delar. I den fösta delen, som får betecknas som utredningens huvud- uppgift, ingår att analysera vilka lagändringar som krävs för att genomföra och rådets direktiv /39/EG av om marknader för finansiella instrument och om ändring av rådets direktiv /611/EEG och 93/6/EEG och Europa- parlamentets och rådets direktiv /12/EG samt upphävande av rådets direktiv /22/EEG (MiFID). Direktivet är ett led i arbetet med att skapa en integrerad marknad för finansiella tjänster inom EU. Direktivet syftar till att skapa förutsättningar för effektiva och väl fungerande marknader för finansiella instrument, till att öka konkurrensen på dessa marknader samt till att säkerställa ett gott investerarskydd. Utredningen ska särskilt överväga hur MiFID:s definition av överlåtbara värdepapper och finansiella instrument förhåller sig till begreppen fondpapper och finansiella instrument i handelslagen. Utredningen ska så långt möjligt beakta de genom- förandebestämmelser som kommissionen föreslår eller antar. Det bör alltså understrykas att utredningens arbete när det gäller huvuduppgiften inte har bedrivits förutsättningslöst utan inriktats på en implementering av det berörda direktivet och kommissionens – synnerligen omfattande och detaljerade – genomförandebestäm- melser. I den andra delen ingår att se över de sanktionsmöjligheter som har att tillgå vid överträdelser av regler på värdepappersmarknadsområdet och särskilt överväga behovet av att 1 Dir. 2004:90, 2004:172, 2005:46, 2005:149 och 2006:45. Direktiven finns intagna som bi- lagor till betänkandet. samordna sanktionsmöjligheterna med dem som gäller på bank- området. Det kan nämligen i många fall anses motiverat med lik- artade regler för olika typer av finansiella företag. Utredningen ska även i övrigt överväga om regelverket för värdepappersinstitut behöver anpassas med anledning av de reformerade reglerna på bankområdet. I den tredje delen ingår att överväga vilket ansvar som Finans- inspektionen bör ha för fastställande av noteringskraven på de reglerade marknaderna samt om det finns behov av en särskild reglering när en reglerad marknad eller annan marknadsplats tar upp ett finansiellt instrument till handel utan emittentens sam- tycke. Slutligen ingår i den fjärde delen att överväga de förslag som har föreslagit i sitt betänkande Närings- livet och förtroendet (SOU 2004:47) om hanteringen av intresse- konflikter i värdepappersbolag och börsens roll när det gäller upp- rätthållandet av förtroendet för aktiemarknaden. En av utgångspunkterna för utredningen har varit att skapa en modern samlad lagstiftning på värdepappersmarknadsområdet som står redo att möta de framtida anpassningar av regelverket som kommer att bli nödvändiga, bl.a. genom det fortsatta arbete som pågår inom EU på värdepappersmarknadsområdet. En naturlig utgångspunkt har därvid varit att i samband med genomförandet av MiFID överväga om den reglering som är spridd i flera olika lagar bör samlas i en ny värdepappersmarknadslag. Utredningen kom på ett tidigt stadium fram till att så borde ske. De bestämmelser som i första hand är aktuella att flyttas över till den nya lagen är bestämmelserna i lagen om värdepappersrörelse (1991:980) och lagen (1992:543) om börs- och clearingverksamhet (börs- och clearinglagen). Utredningen har även övervägt om vissa bestämmelser i lagen (1991:980) om handel med finansiella instru- ment (handelslagen), t.ex. definitionerna av finansiella instrument m.m. bör flyttas över till den nya lagen. Utformningen av de nya bestämmelserna och motiveringen till dessa har ingående diskuterats med de sakkunniga. fortlöpande och vid ett tiotal möten för ändamålet.