A part of Watch Media

AMWatchWednesday4 October 2023

  • Latest
  • Search
  • Log in
  • Fund Management
  • Pension
  • Responsible Investing
  • People
  • Search
  • Log in
AMWatchWednesday4 October 2023
  • Search
  • Log in
  • Fund Management
  • Pension
  • Responsible Investing
  • People
Fund Management

Danish FSA to banks: We will be keeping an eye on you after Mifid II

The Danish Financial Supervisory Authority will be keeping an eye on the doings of banks in Denmark after the implementation of Mifid II. In an interview with FWAM, the FSA reminds Danish banks that rules regarding investment counseling are still in process of formulation in the European countries.
Birgitte Søegaard Holm og Thomas Brenøe, deupty directors general of the Danish FSA. | Photo: PR
Birgitte Søegaard Holm og Thomas Brenøe, deupty directors general of the Danish FSA. | Photo: PR
by ANNE LOUISE HOUMANN

This summer, substantial changes will take effect in legislation regarding banks' investment counseling. Danish banks are already well under way preparing themselves and clients.

Clients must agree to the new counseling agreements, and as FWAM has previously described, some banks are offering to transfer clients to new investment products in place of the portfolio management agreements that are prohibited from July 1 due to a ban on commission payments.

These very activities are what the Danish Financial Supervisory Authority are planning to keep an eye on.

"We're naturally going to keep an eye on this. It's going to be interesting to see if there will be more of these fund-of-funds solutions. In these cases, if you want to transfer the client, it has to be for the benefit of the client," says Birgitte Søgaard Holm, Deputy Director General at the Danish Financial Supervisory Authority.

FWAM visited the Financial Supervisory Authority in Copenhagen in order to discuss the ban on commission payments, of which the Financial Supervisory Authority published an interpretation last week, before the new legislation takes effect on July 1as part of the Mifid II EU directive.

"It's actually not so unusual that an interpretation is published before legislation takes effect, and it's a way of helping banks to not reorganize themselves incorrectly and end up in trouble with the FSA," says Holm.

It is estimated that due to the ban on commission payments in relation to portfolio management agreements, banks may take losses of approx. DKK 2.4 billion (approx. USD 343 million), or around one tenth of the banks' total net fee income.

Warning from FSA Director General

As FWAM has reported, Jyske Bank and Sparekassen Kronjylland, among others are offering their clients to be transferred to new investment solutions that puts all their investments under a single general fund, which covers a fund of funds solution, so that the final product is similar to portfolio management.

However, because there is only invested in one general fund, the agreement does not fall under portfolio management, but is instead covered by regulations for investment counseling, where there will not be a ban on commission payments to the banks.

Prior to the Financial Supervisory Authority publishing their interpretation of the new legislation, Director General of the Danish Financial Supervisory Authority, Jesper Berg, warmed banks against getting overly creative ahead of the implementation of Mifid II.

"Generally, I would like to tell the banks that they should think it over thoroughly before planning their business models after Mifid II. If a bank is unsure whether their model is in accordance with legislations, and they carry through regardless, they risk having to redo the model," Berg said to FWAM.

New requirements for investment counseling

The Danish Financial Supervisory Authority last year had a case in which a bank specifically asked whether a single general fund would fall under the term "investment counseling", and thus not fall under portfolio management.

"We ruled that it would be considered investment counseling, and we stand by that decision. But we haven't yet determined whether the model in question fulfills all requirements that come with investment counseling," says Thomas Brenøe, Deputy Director General at the Financial Supervisory Authority, responsible for legal affairs and consumer protection. He refers to the fact that rules for investment counseling, which are already part of the Mifid II directive, do not take effect until January 1, 2018, while the ban on commission payments takes effect on July 1, 2017.

"Rules for investment counseling are being discussed across the EU still, so it is a work in progress, and so banks should be careful that they don't cling too tightly onto one idea, because it might change a bit," says Brenøe.

Ban on commission payments only covers portfolio management

The Mifid II rules differentiate between portfolio management agreements, which are covered by the prohibition of banks receiving commission payments from the mutual funds that they choose, and investment counseling, where banks may continue to receive commissions.

"The reason that Mifid II differentiates here is that in the case of investment counseling, clients are supposed to be able to decide for themselves between the individual investment recommendations. It is different from portfolio management, where the bank has a proxy agreement to make investments," Brenøe explains.

It is, as mentioned, still unclear where the exact distinction is to be placed in regard to rules for investment counseling. However, it is clear that the bank must be able to document that it is providing "quality enhancing services".

Price must match service

Danish politicians have chosen to make the implementation of the Mifid II directive close to the original directive, and it appears from the proposed legal guidelines, which has just now been published for comments from relevant parties, that in cases of investment counseling, commissions may only be received if a number of conditions are fulfilled regarding "quality enhancing services".

"The rules here specify that you must provide quality enhancing services for this price, and the service must be proportional with the price. So if you receive double up in commissions, you must prove to us that it actually gives twice as much value for the client," says Birgitte Søgaard Holm.

According to the draft for the announcement, "quality enhancing services" include, among other things, that clients have the option to invest in funds from different suppliers, that the bank at least once a year contacts the client regarding counseling, and that the bank provides clients with financial tools.

English Edit: Marie Honoré

Share article

Sign up for our newsletter

Stay ahead of development by receiving our newsletter on the latest sector knowledge.

Newsletter terms

Front page now

Following Ingrid Bonde's resignation, Jan-Olof Jacke has been appointed acting chair of Alecta's board. | Photo: Evelina Carborn / Alecta PR
Pension

Bonde was losing support at Alecta prior to departure, Swedish daily reports

The resignation of pension giant Alecta’s chair may have been caused by pending criticism from the authorities caused by the pension giant’s risky investments – as well as a lack of internal support.
  • Alecta’s chair resigns from board of the troubled Swedish pension giant
  • Despite predicting more losses, Alecta is prepared to increase Heimstaden investment

For subscribers



Adam Kybird is the fund manager of the Triodos Food Transition Europe Fund. | Photo: PR/Triodos
Fund Management

Impact pioneer eyes investor appetite for a food revolution

For subscribers



70 companies are part of the Science Based Targets climate initiative. | Photo: Jens Dresling
Responsible Investing

Two Danish pension funds first in the world to receive approval from climate initiative

For subscribers


Ingrid Bonde has stepped down as chair of Alecta's board. | Foto: Evelina Carborn / Alecta PR
Pension

Alecta’s chair resigns from board of the troubled Swedish pension giant

For subscribers


Head of the public pension sector at Storebrand, Jon M. Hippe. | Foto: Kristian Skalland Moen/Storebrand
Pension

Storebrand maintains its first municipal pension deal

For subscribers


Ole Mikkelsen joined as head of commercial real estate fund BI Erhvervsejendomme in January 2020 and has since then also been responsible for residential rental properties fund BI Boligejendomme. | Photo: PR / Bankinvest
Fund Management

BankInvest's two alternative funds in negative territory

For subscribers


  • Carl Haglund (l.), CEO of Veritas and Carl Pettersson, CEO of Elo. | Foto: PR Veritas and Elo.

    Finnish pension fund CEOs propose higher risk to overcome demographics

    CEOs of pension insurance companies Veritas and Elo comment on the Finnish government’s plans to kick off yet another pension reform as part of efforts to save the welfare state.

    For subscribers


  • Hanna Porkka will join OP Financial Group next spring as executive vice president, wealth management. | Foto: PR OP.

    S-Bank's head of WM moves to bigger role and asset volumes at OP

    S-Bank is looking for a new head of wealth management and deputy CEO, following Hanna Porkka’s announcement that she is joining OP Financial Group next spring. 

    For subscribers


  • Mandatum headquarters in Helsinki, Finland. | Foto: PR / Mandatum

    Mandatum set to debut in Helsinki in biggest listing since 2005

    Sampo Oyj is spinning off its unit Mandatum, the biggest addition to Helsinki’s stock market in almost two decades.

    For subscribers


  • Kim Mikkelsen (left) sees positive prospects in Jan Johan Kühl and Polaris' decision to enter the market for listed companies. | Foto: Strategic Investments/Polaris

    Polaris welcomed into new territory: "There is a huge need for capital"

    Kim Mikkelsen, CIO of Strategic Investments, thinks that valuations are currently at an attractive level in the small-cap segment.

    For subscribers


  • Foto: Agustin Marcarian/Reuters/Ritzau Scanpix

    AP2 teams up with think tank to identify deforestation exposure in global portfolios

    A collaboration between Swedish buffer fund AP2 and think tank Climate & Company aims to offer other investors a guideline to identify potential exposure to deforestation.

    For subscribers


  • Bettina Lange has been responsible for Castellum's Danish activities for the past seven years. | Foto: PR

    Castellum's Danish country manager to join Norwegian pension investor

    Swedish Castellum loses its Danish country manager, Bettina Lange, who will become CEO of Norwegian-owned KLP Ejendomme based in Copenhagen.

    For subscribers


Further reading

Adam Kybird is the fund manager of the Triodos Food Transition Europe Fund. | Photo: PR/Triodos
Fund Management

Impact pioneer eyes investor appetite for a food revolution

As interest from institutional investors grows, Dutch impact investor Triodos Investment Management is aiming to make several new additions to its Food Transition Europe Fund.

For subscribers



70 companies are part of the Science Based Targets climate initiative. | Photo: Jens Dresling
Responsible Investing

Two Danish pension funds first in the world to receive approval from climate initiative

In the future, AkademikerPension and PensionDanmark will push their portfolio companies to meet CO2 targets due to the Science Based Targets initiative’s validation of the funds’ climate plans.

For subscribers



Ingrid Bonde has stepped down as chair of Alecta's board. | Foto: Evelina Carborn / Alecta PR
Pension

Alecta’s chair resigns from board of the troubled Swedish pension giant

Ingrid Bonde has chaired Alecta during a turbulent period when risky investments in Heimstaden Bostad and three US niche banks came under increased scrutiny. Now she is history at the pension giant. 

For subscribers


Charlotte Mansson (left) and Elisabeth Sterner are BlackRock's head of sustainable & transition solutions, Nordics and Netherlands, and head of Nordics, respectively. | Foto: BlackRock PR / Jeppe Carlsen / Håkan Målbäck
Responsible Investing

BlackRock: High number of US investors plan to increase allocation to green transition

More than half of the institutional investors polled in a new BlackRock survey are planning to increase their low-carbon allocation. In the Nordic region and the US, the percentage is even higher.

For subscribers



Antti Törmänen (l.) and Jussi Kallasvuo, general partners at Antler. | Foto: PR Antler.
AMWatch

Startup investor with Nordic roots expands into Finland, kicks off new fund

Startup investment company Antler aims to invest in more than 6,000 companies by 2030 and is determined to involve Finnish institutional investors.

For subscribers



Carl Haglund (l.), CEO of Veritas and Carl Pettersson, CEO of Elo. | Foto: PR Veritas and Elo.
Pension

Finnish pension fund CEOs propose higher risk to overcome demographics

CEOs of pension insurance companies Veritas and Elo comment on the Finnish government’s plans to kick off yet another pension reform as part of efforts to save the welfare state.

For subscribers


Jobs

  • CEO - easySure Denmark

  • Senior Associate (Financing)

  • Chief Investment Officer (CIO)

See all jobs

Latest news

  • Bonde was losing support at Alecta prior to departure, Swedish daily reports –
  • Castellum's Danish country manager to join Norwegian pension investor –
  • Impact pioneer eyes investor appetite for a food revolution –
  • Two Danish pension funds first in the world to receive approval from climate initiative –
  • Storebrand maintains its first municipal pension deal –
  • Alecta’s chair resigns from board of the troubled Swedish pension giant –
  • BankInvest's two alternative funds in negative territory –
  • S-Bank's head of WM moves to bigger role and asset volumes at OP –
  • Finnish pension fund CEOs propose higher risk to overcome demographics –
  • Polaris welcomed into new territory: "There is a huge need for capital" –
See all

Jobs

  • CEO - easySure Denmark

  • Senior Associate (Financing)

  • Chief Investment Officer (CIO)

See all jobs

Colophon

AMWatch
Search

Sections

  • Fund Management
  • Pension
  • Responsible Investing
  • People
  • Sitemap
  • RSS feeds

Editor

Anne Louise Houmann

alh@amwatch.dk

Tel.: +45 2830 5142

  • About AMWatch

Editor-in-chief

Anders Heering

Publisher

JP/Politiken Media Group Ltd

Banner Advertising

annoncering@infowatch.dk

Tel.: +45 7077 7491

Advertising

Job Advertising

job@infowatch.dk

Tel.: +45 7077 7491

Jobs

Subscription

Try AMWatch or get an offer for a subscription meeting the exact needs of you or your company.

amwatch@infowatch.dk

Tel.: +45 7077 7491

Learn more about subscriptions here

Address

AMWatch

Rådhuspladsen 37

1785 Copenhagen K, Denmark

Tel.: +45 3330 8382

Guidelines

  • Privacy Policy

Copyright © AMWatch — All rights reserved