15/10/13

Better Protection of Consumers and More Competences for FSMA

The Laws of 30 and 31 July 2013 increasing the protection of purchasers of financial products and services and broadening the competences of the financial regulator were published in the Belgian Official Journal on 30 August 2013 (Wetten tot versterking van de bescherming van de afnemers van financiële producten en diensten alsook van de bevoegdheden van de Autoriteit voor Financiële Diensten en Markten en houdende diverse bepalingen/Lois visant à renforcer la protection des utilisateurs de produits et services financiers ainsi que les compétences de l'Autorité des services et marchés financiers, et portant des dispositions diverses; the “Laws”). With the exception of specific provisions, they entered into force on 9 September 2013.

The Laws seek to increase the supervisory efficiency of the financial sector and the protection of consumers of financial products and financial services. The main amendments can be summarised as follows:

More repressive competences for the FSMA

Although most laws dealing with matters falling under the supervision of the Financial Services and Markets Authority (the “FSMA”) provide for enforcement measures, they almost all remain silent regarding the possibility of the FSMA adopting such measures. The Laws now arm the FSMA with a legal basis for taking repressive enforcement measures. Furthermore, the administrative sanctions will enable the FSMA to react in a proportional fashion to the infringement (under the previous regime, the only measure which the FSMA could take was the suspension or the withdrawal of the authorisation).

Improved protection of general public

Previously, the FSMA enjoyed limited powers for the purpose of protecting the general public. The Laws now empower the FSMA to carry out investigative acts, to add more information to the alerts which it addresses to the public and to intervene more repressively when violations are being established. Further, the relevant criminal provisions protecting the general public have also been revised.

Introduction of “mystery shopping” and other techniques

The introduction of the “mystery shopping” technique enables the FSMA to put to the test the persons under its supervision. The FSMA now also benefits from the remote control technique allowing it to request a financial institution to give access to specific parts of its website reserved to its clients (however, without access to the clients’ data). Furthermore, once a year the FSMA may request the external complaint department to provide aggregated data on the nature of the most frequent complaints and the follow-up thereof.

Restraining market abuses and increasing transparency

The Laws also implement Regulation 236/2012/EU of 14 March 2012 on short selling and certain aspects of credit default swaps. In this regard, the Laws extend the possibility for the FSMA to impose, in exceptional market circumstances, temporary measures regarding the trading of financial instruments. The prohibition of market manipulation now also applies to manipulations through derivatives or “credit default swaps”. Furthermore, the manipulation of benchmark indices is henceforth subject to administrative and criminal sanctions.

New rules of conduct

The MiFID rules of conduct provide for general and specific rules for credit institutions and investment firms, as well as their agents. As of 1 January 2014, the Laws subject the brokers of these institutions and firms to the specific rules of conduct under MiFID while, previously, they were only subject to the general rules. The specific rules should be adapted in the near future by Royal Decree to take into account the particularities of brokers. These rules may also be made to apply to insurance firms and intermediaries.

The Laws introduce a level playing field between banks, insurance companies and intermediaries. Both insurance companies and intermediaries will now have to act in an honest, fair and professional way and provide their clients with correct, clear and non-misleading information.

Express knowledge requirement for persons in contact with the general public

An effective protection of consumers requires that any person in contact with consumers knows and understands the essential features of the products (e.g., fixed income or not, risk of financial loss, legal nature of the product) so as to be in a position to provide practical information.

Implementation of Omnibus I Directive

Finally, the Laws implement parts of Directive 2010/78/EU (the “Omnibus I Directive”) amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority). The Omnibus I Directive introduced ad hoc collaboration mechanisms in different directives, which required adaptations to national law.

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