Since the entry into force on 5 April 2012 of the Royal Decree of 12 March 2012 approving the Financial Services and Markets Authority ("FSMA") Regulation of 27 October 2011 (the "FSMA Regulation"),[1] company officers entrusted with overseeing compliance with conduct-of-business rules must meet certain requirements as regards knowledge, experience and training and be approved by the FSMA, pursuant to a mandatory procedure.
Introduction to the position of compliance officer
The position of compliance officer is not very well known to the general public. According to the FSMA, however, this position is important in order to guarantee the proper functioning of the financial sector and, in particular, the protection of consumers, who expect honest, fair and professional treatment from financial institutions. The compliance officer is also a key link in the FSMA's supervision of compliance with the conduct-of-business rules.
The position of compliance officer has existed for several years. Over time, however, the compliance officer's duties, assignments and areas of expertise have progressively evolved to reflect developments in financial sector regulation.
The position of compliance officer derives from the longstanding obligation of credit institutions to put in place an appropriate administrative and accounting organisation and internal control procedures. It was only in 2001, however, that the FSMA (previously the CBFA) established a frame of reference for the position of compliance officer. At that time, the compliance officer was defined as an independent position within a credit institution appointed to investigate and promote compliance by the institution with the rules on banking integrity and ensure effective implementation of the integrity policy adopted by management.
The position of compliance officer has since been extended to other types of financial institutions and to new areas, such as the rules implementing MiFID.
The Anti-money Laundering Act[2] also provides for the appointment of one or more persons entrusted with overseeing the implementation of this legislation. Even though their role differs from that of the compliance officer and is based on other legislation, in practice, both positions are usually held by the same person(s), namely the compliance officer(s).
Since 1 April 2011, Belgian financial institutions[3] and branches of financial institutions established in Belgium must, pursuant to Article 87bis of the Act of 2 August 2002,[4] appoint one or more compliance officers who demonstrate adequate professional integrity, knowledge and training to ensure compliance with conduct-of-business and integrity rules. In particular, the compliance officer examines and evaluates the appropriateness and effectiveness of internal policies, procedures and measures adopted in order to ensure compliance by the institution and its employees with conduct-of-business rules. The compliance officer also advises and assists the financial institution's employees and staff on compliance with conduct-of-business rules.
The conduct-of-business rules in question include inter alia the rules implementing MiFID, rules on financial markets and transactions in financial instruments, various legislation on the supervision of financial institutions, and the provisions of the act on insurance contracts.
Mandatory approval of compliance officers
Considering the importance of compliance officers for the proper functioning of the financial sector, they must, since 1 April 2011, be approved by the FSMA.
Approval is only required for compliance officers that report directly to the institution's senior management, e.g. the head of the compliance department within a financial institution or upper-level compliance officers. Approval is therefore not required for all persons that perform compliance-related duties within a financial institution.
The FSMA Regulation introduces a mandatory approval procedure and requirements with respect to knowledge, experience, training and professional integrity. The FSMA Regulation was adopted by the Royal Decree of 12 March 2012, published on 26 March 2012 in the Belgian State Gazette, and entered into force on 5 April 2012.
Any person who wishes to obtain FSMA approval as a compliance officer must henceforth meet the following criteria:
- have appropriate experience acquired during at least 3 years in the framework of a position involving the exercise of independent judgment;
- hold a Belgian master's degree or an equivalent foreign diploma or have equivalent practical experience and appropriate knowledge of financial matters, as determined by the FSMA;
- pass an exam testing knowledge of the conduct-of-business rules (compliance officers appointed before 1 April 2012 do not need to take this exam);
- be covered by an appropriate insurance policy;
- be "fit and proper" and not have committed any infraction or violation resulting in a prohibition to exercise management positions within a financial institution, proof of which must be provided by means of a certificate of good conduct (no criminal record).
Once approved, compliance officers must also participate regularly in continuing education courses in order to update their knowledge.
The FSMA will publish a list of approved compliance officers on its website as soon as possible, but in any case not before 5 July 2012.
Practical formalities
Financial institutions must appoint one or more compliance officers, approved by the FSMA.
At the end of March, the FSMA contacted all financial institutions, asking them to submit the appropriate applications for their compliance officers.
Financial institutions that already have one or more compliance officers must submit to the FSMA an individual application for the approval of each officer. The FSMA Regulation does not stipulate a particular time period within which the applications must be submitted. Please note, however, that in order to benefit from the exemption from the abovementioned exam for compliance officers appointed before 1 April 2012, the applications must be received by the FSMA by 5 July 2012.
[1] Royal Decree of 12 March 2012 approving the Financial Services and Markets Authority Regulation on the approval of compliance officers, Belgian State Gazette, 26 March 2012.
[2] Act of 11 January 1993 on prevention of the use of the financial system for the purpose of money laundering and terrorism financing, Belgian State Gazette,9 February 1993.
[3] Namely, credit institutions, investment firms, management companies of undertakings for collective investment, and insurance companies.
[4] Act of 2 August 2002 on the supervision of the financial sector and on financial services, Belgian State Gazette, 4 September 2002, as amended.
