sou · H3B32 · 2015-01-29 00:00:00 — the client, unless the client has been informed of the benefit and the benefit is designed to enhance the quality of the service con- cerned and does not prevent the firm from complying with its duty to act in the best interest of its clients. This rule already exists in Regulations. The Inquiry proposes that the rule be incorporated into the Securities Market Act. Other investor protection and conduct of business rules (Chapter 9) Apart from the rules concerning benefits from third parties MiFID II contains a number of stricter requirements and new regulations in the area of client protection. These apply to the rules on compe- tence requirements, assessment of suitability, information on appropriateness of advice, packaged products, conflicts of interest and rules on developing and distributing products. These rules, together with new rules on recording and other documentation of orders are dealt with in Chapter 9. Under MiFID II investment firms must ensure that the natural persons that provide investment advice as well as the natural per- sons that provide information on financial instruments, investment services or ancillary services have the knowledge and competence required to fulfil their obligations. The criteria used to assess know- ledge and competence are to be published. The Inquiry proposes that a provision on this be incorporated into the Securities Market Act and that be entitled to issue more detailed regulations on competence requirements. The rules concerning assessment of suitability for investment advice and portfolio management in MiFID II are by and large the same as in the 2004 Directive. The rules stipulate that firms must obtain information about clients knowledge and experience in the investment field, about the clients financial situation and about the clients investment objectives, so as to be able to use the informa- tion obtained to give suitable advice or propose a suitable manage- ment strategy. In MiFID II the rules have been developed somewhat to specify that the information about the clients finan- cial situation must include the clients ability to bear losses and the information on the clients investment objectives must include the clients risk tolerance, and suitability is to be assessed, particularly in relation to this and the clients ability to bear losses. In addition there is a new provision that firms recommending a package of bundled services or products – for example an investment together with a loan – must consider in their assessment whether the overall bundled package is suitable. Another new feature compared with the 2004 Directive is that an investment firm must inform the client whether the firm will provide periodic assessment of the suitability of the financial instruments recommended to them. Another new provision in relation to the 2004 Directive is that an investment firm providing investment advice must inform the client why the advice given by the firm is suitable. The information must be provided in written form before the transaction proposed by the firm takes place, and it must state how the advice meets the needs, preferences and other characteristics of the client. The In- quiry proposes that the provisions in the Securities Market Act be amended to include the new requirements. In the area of conflict of interest the Inquiry proposes that the current rules on conflict of interest, in line with the system of the Directive, be broken down into one rule imposing requirements on the organisation of firms and another imposing requirements on identification, prevention and handling of conflicts of interest, as well as in some cases providing information to clients. This break- down facilitates interpretation and application of the rules. The Inquiry also proposes that firms provide information to clients concerning conflicts of interest in a durable medium, and the infor- mation should be sufficiently detailed to enable the client to make an informed decision with respect to the investment service or ancillary service in the context of which the conflict of interest arises. The Inquiry also proposes that the Securities Market Act be supplemented with a provision that investment firms may not remunerate or assess the performance of their staff in a way that conflicts with the firms obligation to safeguard clients interests. The firms must in particular avoid remuneration systems that may lead to staff recommending a particular financial instrument to a non-professional client when the firm should have proposed another instrument which would better meet that clients needs. MiFID II regulates the situation where an investment firm pro- vides a package solution consisting of an investment service together with another service or product, or where the provision of a service or product is a condition for another service or product. One example of this kind of package is a securities institute providing a custody service (safe-keeping of financial instruments) together with custodial credit (lending). The Inquiry proposes that a pro- vision be included in the Securities Market Act stipulating that investment firms that provide a package solution consisting of an investment service bundled with another service or product, or that stipulate that provision of a service or product is a condition for another product or service, must inform the client whether it is possible to buy the different components of the package separately and of the cost of each separate component. In the event that the package in itself entails a heightened risk compared with provision of the different components separately, the firm must inform the client how the different components affect the risk level. MiFID II stipulates that investment firms must have a process for the approval of financial instruments developed for sale to the firms clients. The process is to be designed so that the firm identi- fies a target market of end clients for which the financial instru- ment in question is adapted. This may consist for example of con- sumers with certain experience or a certain risk profile. On the basis of the intended target market, the investment firm must assess whether the instrument in question is typically suitable, for example as regards the risks associated with an investment. The assessment must also include the changes that may occur, for example value changes due to market events. When the instrument has been through the approval process and constitutes a part of the invest- ment firms offer, the firm must periodically review the instrument – taking into account any events that could materially affect the target market – to assess whether the target market and distri- bution are still suitable. There are similar rules for investment firms that do not themselves produce investment products but distribute those of others, stipulating that the firm should have arrangements in place to obtain information concerning the product approval process, and be able to understand the characteristics of the instru- ment in question and the intended target market. The firm should also ensure that the instruments are distributed to the intended target market and only offered to clients when it is in the clients interest. The Inquiry proposes that provisions be included in the Securities Market Act on the product approval process that corre- spond to the provisions of the Directive. MiFID II contains provisions stipulating that investment firms must record telephone conversations intended to result in trans- actions in financial instruments when dealing on own account or on behalf of clients. Electronic communication for the same pur- pose must be retained. The records must be kept for five years – or longer where requested by the competent authority, though no more than seven years – and be provided to the client involved on request. Clients orders received otherwise than via telephone or electronic communication must be documented in a durable medium. The Inquiry proposes that provisions be included in the Securities Market Act on recording etc. that correspond to the provisions of the Directive. Cross-border activities (Chapter 10) The rules governing cross-border activities in MiFID II are, for European firms, by and large the same as in the 2004 Directive. The changes in this area consist of the rules on branches also being applicable when an investment firm uses a tied agent in another . New in MiFID II are rules on firms from countries outside the EEA that establish branches within the EEA. The In- quiry proposes in this area that utilise the opportunity offered by MiFID II to impose a requirement that firms outside the EEA must establish a branch in order to provide investment services in . Corporate governance etc. (Chapter 11) MiFID II supplements the generally formulated requirements that boards of directors and managing directors of investment firms and market operators must be of sufficiently good repute, possess sufficient knowledge, skills and experience, with provisions that the board of directors and managing director must collectively have sufficient knowledge, skills and experience to understand the firms activities in general and risks of the business in particular. All of the board members as well as the managing director must act with honesty, integrity and independence of mind to be able to effect- tively assess and challenge the decisions of senior management and to monitor decision-making. The Directive also contains a restric- tion on the number of directorships a person may hold at the same time. Applicable to all firms is that a general reasonability assess- ment must be made of the number of directorships an individual board member should have. The assessment is dependent on the nature, scale and complexity of the business. For firms of consider- able size there is also an explicit quantitative restriction. The In- quiry assesses that the requirements of the Directive concerning the board and its members and the managing director of invest- ment firms are already implemented through the provisions imple- menting corresponding requirements under the Capital Require- ments Directive6. The Inquiry proposes that the corresponding provisions for market operators – concerning the collective know- ledge and experience of the board, restriction on the number of directorships members of management may hold and the require- ment to commit sufficient time to be able to perform their func- tions – shall be included in the Securities Market Act. The more specific requirements in MiFID II concerning the board and its members as well as the managing director in a market operator are to be implemented through agency regulations. MiFID II imposes requirements on corporate governance by the management body. In Swedish law the management body refers to the board of directors or the board of directors and the managing director. The requirements are generally worded. The management body must design and implement (or monitor implementation of) governance arrangements that ensure effective and manage- ment of the organisation, including the segregation of duties in the firm and prevention of conflicts of interest. This is specified in more detail for investment firms. The management body must define, approve and oversee the organisation of the firm as regards the provision of investment services. When designing the organi- sation, the nature, scale and complexity of the business must be taken into account. The management body must also define, approve 6 Directive 2013/36/EU of Parliament and of 2013 on access to the activity of credit institutions and the supervision of credit insti- tutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC. and oversee a policy as to the services, activities, products and operations offered or provided by the firm. This is to be in accordance with the risk tolerance of the firm and taking into account the characteristics and needs of the clients. The management body must also draw up a remuneration policy aiming to encourage fair treatment of clients and avoid conflicts of interest. Finally, the management body must monitor and periodically assess the firms governance arrangements and policies for provision of services and take appropriate steps to address any deficiencies. The management body must also have access to all information needed to oversee and monitor management decision-making. The Inquiry proposes that a catalogue of the board of directors and managing directors tasks be included in the Securities Market Act. Supervision (Chapter 12) Implementation of MiFID II entails some expansion of Finans- inspektionens supervisory tools. In this respect the Inquiry pro- poses that supervisory toolbox be supplemented by the ability to apply for attachment to secure a claim relating to a financial penalty, the right to prohibit actions that may be assumed to violate the law or MiFIR (including the right to prohibit some professional activities), the right to require a person to take action to reduce the size of a position or exposure, the right to restrict a persons ability to enter into a commodity derivative, and the right to stop marketing or sale of financial instruments or structured deposits if an investment firm has failed to develop or apply an effective process for product development, or if the firm has other- wise failed to comply with the product development process. MiFID II regulates cooperation between competent authorities in different Member States and cooperation between European supervisory authorities. In the opinion of the Inquiry, after some minor amendments the current Swedish rules fulfil the require- ments of the Directive concerning collaboration and exchange of information between the Agency for the Cooperation of Energy Regulators () and Securities and Markets Autho- rity (). One new feature in MiFID II is the provisions on mechanisms and protection for whistle-blowers. The Directive imposes require- ments partly for effective mechanisms for reporting and protection of persons reporting infringements to the competent authority and partly for firms subject to licensing to have in place appropriate procedures for internal reporting. An employee who reports serious infringements must be protected against retaliation, discrimination or other types of unfair treatment. In addition, the identity of both the person who reports the infringements and the person allegedly responsible (if it is a natural person) must as a general rule be pro- tected. The purpose of special reporting systems, called whistle- systems, is to make it possible primarily for all staff to report serious events without fear of reprisals. The Inquiry pro- poses that the obligation of competent authorities to set up effect- tive procedures to receive and follow up reports of infringements be implemented through regulations at ordinance level. As regards protection of identity, in the assessment of the Inquiry this has been taken care of by Chapter 30, Section 4 b of the Public Access to Information and Secrecy Act (2009:400) that was recently intro- duced to implement the corresponding provision of the Capital Requirements Directive. However, the Inquiry proposes that the Public Access to Information and Secrecy Act be supplemented by a provision stipulating that anonymity will also apply to a natural person that is identified in a report as responsible for an infringe- ment. The Inquiry also proposes that the existing provision in the Securities Market Act stipulating that investment firms must have appropriate systems for dealing with reports on alleged irregularities within the firms, is also to apply to market operators and suppliers of data reporting services. Interventions (Chapter 13) The provisions on administrative sanctions and measures in MiFID II differ substantially from the corresponding provisions of the 2004 Directive, which were designed to direct Member States to ensure that there were effective sanctions in place against infringements of the provisions of the Directive. The more detailed wording of the sanctions was then left to each . MiFID II are considerably more detailed. They specify the infringe- ments that may give rise to sanctions; that natural persons in firms management bodies may be subject sanctions; the various types of sanctions that should exist and the size of fines. To implement these provisions the Inquiry proposes that for Swedish investment firms, market operators and Swedish suppliers of data reporting services it be specified which provisions of the Act and MiFIR that may entail intervention for an infringement. If a Swedish invest- ment firm, a market operator or a Swedish supplier of data repor- ting services has infringed a provision of the Securities Market Act or of MiFIR, it must be possible to impose sanctions on the firm. In such cases it shall also be possible to impose a sanction on a member of the board or a managing director of the firm or market operator, or their substitute, if the person in question intentionally or through gross negligence has acted to cause the infringement. This only applies, however, if the firms infringement is of a serious nature. A provision is also to be introduced into the Act to the effect that no intervention is to be made if the infringement at the same time constitutes a prosecutable act. The sanctions that may be relevant to firms are the same as under current law, for example withdrawal of licences and financial penalties. The sanctions that may be relevant as regards natural persons in the management body of a Swedish firm are prohibition of exercising management functions in an investment firm and financial penalties. Financial penalties for natural persons are to be set at a maximum of an amount corresponding to million or, where the amount is higher and can be determined, at twice the amount of the benefit derived from the infringement. The provision concerning intervention against natural persons in an investment firm´s or market operator´s management body is also to be applied to foreign firms situated outside the EEA and conducting securities operations from a branch in , in which case it shall be possible to impose a financial penalty on the person or person responsible for management of the branch. The new system of sanctions also affects the decision-making procedure for sanctions. The Inquiry proposes that Finansinspek- tionen, as before, is to decide on sanctions referring to legal per- sons, and also on matters concerning natural persons failure to report acquisitions and disposals of a qualified holding in an investment firm, a market operator or a Swedish clearing organisation. As regards sanctions against natural persons responsible in a Swedish invest- ment firm or a market operator, as regards infringements on the part of the firm, Finanspektionen is to consider sanctions issues through sanctions orders. If such an order is not approved within the period prescribed may apply to the County Administrative Court in for the sanction to be decided. Entry into force and transitional provisions (Chapter 14) Under MiFID II adopt and publish, by 3 2016, the laws, regulations and administrative provisions necessary to comply with the Directive. The national provisions are to be applied as of 3 January 2017, with some exceptions. With some exceptions, MiFIR is to start to be applied as of 3 January 2017. Regarding MiFIR, this means that the current provisions in Swedish legislation that correspond to the provisions of MiFIR are to cease to apply on 3 January 2017. No special measures in other respects to ensure that the Regulation starts to be applied in will be taken and no transitional provisions are necessary. As regards MiFID II, the amendments to the Securities Market Act proposed by the Inquiry will come into force on 3 January 2017, with the exception of the provisions on the obligation of a CTP to collect and publish information on trading in bonds, structured financial products, emission allowances and derivatives. These rules will be applied as of . lag om ändring i lagen (2007:528) om värdepappersmarknaden Härigenom föreskrivs1 i fråga om lagen (2007:528) om värde- pappersmarknaden2 dels att 9 kap. 2–10 §§, 10 kap., 11 kap. 9–11 §§ och 25 kap. ska upphöra att gälla, dels att rubrikerna närmast före 9 kap. 2, 9 och 10 §§ samt rubriken närmast före 11 kap. 9 § ska utgå, 1 Jfr och parlamentets direktiv /65/EU av om marknader för finansiella instrument och om ändring av direktiv /92/EU och av direktiv /61/EU (EUT L 173, 12.6.214, s. 349, Celex 32014L0065), senast ändrat genom och rådets förordning (EU) nr 909/2014 av om förbättrad värdepappers- avveckling i Europeiska unionen och om värdepapperscentraler samt ändring av direk- tiv 98/26/EG och 2014/65/EU och förordning (EU) nr 236/2012 (EUT L 257, 28.8.2014, s. 1, Celex 32014R0909). 2 Senaste lydelse av tidigare 8 kap. 8 e § 2014:985 25 kap. 8 § 20 2014:985 8 kap. 21 a § 2013:579 25 kap. 9 § 2014:985 8 kap. 22 a § 2013:579 25 kap. 10 § 2014:985 8 kap. 22 b § 2013:579 25 kap. 12 § 2012:197 8 kap. 36 § 2011:831 25 kap. 13 § 2012:197 8 kap. 37 § 2010:2075 25 kap. 22 § 2008:283 25 kap. 24 § 2012:197 8 kap. 21 a § 2013:379 25 kap. 25 § 2014:985 12 kap. 6 b § 213:554 25 kap. 26 § 2014:985 25 kap. 27 § 2014:985 12 kap. 6 b § 2014:554 25 kap. 28 § 2014:985 25 kap. 1 § 2014:985 25 kap. 1 a § 2014:985 25 kap. 8 § 2014:985 25 kap. 1 b § 2014:985 25 kap. 1 c § 2014:985 25 kap. 22 § 2008:283 25 kap. 4 § 2014:985 25 kap. 5 § 2012:197 25 kap. 25 § 2014:985 dels att nuvarande 8 kap. 8 e § ska betecknas 8 kap. 8 f §, 8 kap. 13 § ska betecknas 8 kap. 17 §, 8 kap. 14 § ska betecknas 8 kap. 33 §, 8 kap. 15–21 §§ ska betecknas 9 kap. 1–7 §§, 8 kap. 21 a och 22 §§ ska betecknas 9 kap. 9 och 10 §§, 8 kap. 22 a–27 §§ ska betecknas 9 kap. 18–24 §§, 8 kap. 28 § ska betecknas 9 kap. 27 §, 8 kap. 29–32 ska betecknas 9 kap. 29–32 §§, 8 kap. 33 § ska be- tecknas 9 kap. 34 §, 8 kap. 34–36 ska betecknas 9 kap. 36–38 §§, 8 kap. 37–40 §§ ska betecknas 9 kap. 40–43 §§, 8 kap. 41 § ska be- tecknas 9 kap. 45 §, 8 kap. 42 § ska betecknas 8 kap. 35 §, 9 kap. 1 § ska betecknas 9 kap. 35 §, och 12 kap. 6 b § ska betecknas 12 kap. 6 f §, dels att 1 kap. 1–4, 5 och 5 a §§, 2 kap. 1, 2 och 5 §§, 4 kap. 4– 6 §§, 5 kap. 1, 4 och 6 §§, 6 kap. 1, 2, 5 och 6 §§, 8 kap. 2 och 10 §§, och de nya 8 kap. 17 och 35 §§, de nya 9 kap. 1–7, 10, 20–24, 27, 29–32, 34–37, 41–43 och 45 §§, 11 kap. 2, 3 och 12 §§, 12 kap. 2 och 10 §§, 13 kap. 7, 9, 12 och 17 §§, 22 kap. 1 och 2 §§, 23 kap. 1, 2, 3, 4–6, 7, 8 och 12 §§, rubrikerna till 8 och 9 kap. samt rubrikerna närmast före 11 kap. 12 § och 13 kap. 9 § ska ha följande lydelse, dels att rubriken närmast före 8 kap. 7 § ska lyda Styrelsens och verkställande direktörens ansvar,