With a new act, the regulation of investment advisors will be transferred from the Financial Business Act to the Act on financial advisors and mortgage credit intermediaries. As the change introduces restrictions as to which financial instruments investment advisors must advise on, investment advisors may now also receive and transmit orders from investors.
On 30 May 2017, the Danish parliament adopted a bill introducing strict rules concerning advice on specific types of financial instruments which will require a permission as security trader in the future. The regulation of investment advisors will be transferred with the effect that these may not advise on all types of financial instruments in the future under the Financial Business Act. The rules imply that investment advisors must obtain permission as brokers to advise on specific derivatives such as swaps, options and FRAs.
The new rules will restrict the investment advisors’ advisory spectrum to include only negotiable securities and shares in undertakings for collective investment. Investment advisors may still provide general investment advice, including to companies concerning capital structure, but they may not perform portfolio management or sell financial instruments.
TRANSMISSION OF ORDERS
But the new rules open up the possibility for investment advisors receiving investment orders from customers and transmitting them to a security trader appointed by the customer.
The investment advisors must still be registered with the Danish FSA and will be subject to the provisions on conflict of interest and fair business practices under the Act on Financial Advisors and mortgage credit intermediaries.
This extended possibility for investment advisors means that they will be able to offer a more complete service to the investor.
The bill will come into force on 3 January 2018, and we will follow the development in the area closely. If you have any questions concerning the new act, you may contact Lars Lüneborg or Kristian Kaltoft Nielsen.