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Regulatory Radar

Latest issue - April 2019

Overview of the key regulatory changes impacting the financial services industry

Highlights in this issue

Publication of the Belgian Brexit Act introducing the Insurance Underwriter Agent category

On 10 April, the Act of 3 April 2019 regarding the withdrawal of the UK from the EU was published in the Belgian Official Journal (FR/NL). This new Act introduces in the Insurance Act of 4 April 2014 a new insurance intermediary category: the insurance underwriter agent. An additional category, reserved for underwriting agents, will be created in the FSMA’s register of intermediaries.

As defined by the new Act, an underwriter agent is an insurance intermediary who, as an authorized representative of one or more insurance undertakings, has the power to accept to cover risks and to conclude and manage insurance contracts in the name and on behalf of the latter.

The underwriter agent needs to be registered as an insurance intermediary and is subject to some specific provisions introduced by the new regulation, on top of the new rules of conduct introduced by the Insurance Distribution Directive into the Insurance Act of 4 April 2014.

The purpose of this new Act is to create a greater clarity on the existence of underwriting agents, both for clients (policyholders, insureds, beneficiaries) as for insurance intermediaries who collaborate with underwriting agents. It also aims to avoid  frauds perpetrated by unauthorized persons or underwriters collaborating with insurance companies not duly licensed in Belgium and to ensure that persons engaged in such activities have a sufficiently and entrusted organization.

This part of the Brexit Act entered into force on 10 April 2019. A transitory period is however foreseen:

  • within three months from the entry into force of the law, entities already performing insurance underwriting activities in Belgium under an insurance intermediary licence must notify the FSMA; and
  • within 12 months from the entry into force of the law, these entities must either stop/transfer their insurance underwriting activities or apply to the FSMA for a registration as insurance.

ESMA updates MiFID II supervisory briefing on appropriateness and execution-only

On 4 April, ESMA published an updated version of its MiFID II supervisory briefing on appropriateness and execution-only. This supervisory briefing is an updated version of ESMA’s 2012 supervisory briefing on the same topic and takes into account the new version of ESMA’s guidelines on suitability  published on 28 May 2018 with respect to aspects also relevant to the appropriateness rules.

The key takeaways of the updated supervisory briefing can be summarised as follows:

Execution only
  • firms relying on the exemption for execution-only should ensure that their internal policies and procedures define and meet the requirements for the execution-only exemptions in every instance that the exemption is relied on; and
  • firms may define lists of investment products that may be regarded as “non-complex” for the purposes of the appropriateness requirements. However, these lists should be regularly reviewed and updated. Products that are not included in this list should still be assessed.
Obtaining information from clients

The updated briefing puts forward a number of questions, which should be used to assess a firm’s approach to obtaining information about a client’s knowledge and experience. When obtaining information about a client’s knowledge and experience, firms should consider the increasing complexity of products, which may require additional or more detailed questioning. When using a questionnaire to obtain client information, firms should consider elements such as the complexity of the questions, inconsistencies between different responses, but also whether the general design of the questionnaire enables the collection of required information in an accurate manner.

Assessment of appropriateness

Again, the updated briefing puts forward a number of elements, which should be used to evaluate a firm’s approach to the assessment of appropriateness.

Warnings to clients

The updated briefing elaborates on how generic the wording of the warning can be, as well as potentially using different warnings depending on the risk level and complexity of the products.

Qualifications from staff

Firms should consider how relevant staff is trained and account for the specific training requirements on all aspects of the appropriateness process.

Recordkeeping

The updated briefing note sets forward a number of questions, which can be used by regulators to assess whether a firm has in place sufficient recordkeeping arrangements on the assessment of appropriateness.

Furthermore in this issue

Download the full version of this newsletter for more information on:

  • Conduct of Business & Products
  • Financial Crime & Market Integrity
  • Governance & Risk Management
  • Capital & Liquidity
  • Disclosure & Reporting
  • Crisis Management
  • Market Stability and Financial Markets Infrastructure
  • Regulatory Perimeter
  • Technology & Innovation
  • Supervision
April 2019 edition
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