Bank Finance and Regulation Survey. LIECHTENSTEIN Marxer & Partner Rechtsanwälte

Transcription

1 Bank Finance and Regulation Survey LIECHTENSTEIN Marxer & Partner Rechtsanwälte CONTACT INFORMATION Michael Grabher Marxer & Partner Rechtsanwälte Heiligkreuz 6 LI-9490 Vaduz Liechtenstein michael.grabher@marxerpartner.com I. BANKS AND FINANCIAL INSTITUTIONS SUPERVISION 1) Applicable laws and regulations. Provide a list of the main laws and regulations that refer to the supervision and control of banks and financial institutions. Give a brief summary of the substance of each of them. 1. Act on Banks and Brokers (Bankengesetz - BankG) Ordinance on Banks and Brokers (Bankenverordnung - BankV) The Act and the Ordinance define the business banks and brokers are respectively authorized to conduct, the requirements and the procedure for being licenced, the powers of the regulator, passporting provisions for crossborder-business into EEA-member states and into other countries; solvability issues etc. 2. Asset Management Act (Vermögensverwaltungsgesetz - VVG) Asset Management Ordinance (Vermögensverwaltungsverordnung - VVO) The Act and the Ordinance govern the preconditions for providing or arranging to provide asset management on a professional basis and serve to protect clients and to secure confidence in the Liechtenstein financial center. 3. Payment Services Act (Zahlungsdienstgesetz - ZDG) Payment Services Ordinance (Zahlungsdienstverordnung - ZDV) The Act and the Ordinance govern the licencing and supervision of payment institutions and their rights and duties; the Act and the Ordinance aim at securing the proper functioning of the market for payment services inside the EEA. 4. Due Diligence Act (Sorgfaltspflichtgesetz - SPG) Due Diligence Ordinance (Sorgfaltspflichtverordnung - SPV) The Act and the Ordinance contain Anti-Money-Laundering-provisions applicable to financial intermediaries as defined therein. Besides, a range of further acts and ordinances are applicable to banks and financial institutions, such as in particular: 1. Act on Investment Undertakings (Gesetz über

2 Investmentunternehmen - IUG) Ordinance on Investment Undertakings (Verordnung über Investmentunternehmen - IUV) 2. Act on Insurance Contract Law (Versicherungsvertragsgesetz - VVG) 3. Act on the Supervision of Insurance Undertakings (Versicherungsaufsichtsgesetz - VerAG) Ordinance on the Supervision of Insurance Undertakings (Versicherungsaufsichtsverornung - VersAV) 4. Law on Insurance Mediation (Versicherungsvermittlungsgesetz - VersVermG) Ordinance on Insurance Mediation (Versicherungsvermittlungsverodnung - VersVermV) 5. Company Pension Sheme Act (Gesetz über die betriebliche Personalvorsorge - BPVG) Company Pension Sheme Ordinance (Verordnung über die betriebliche Personalvorsorge - BPVV) 6. Old Age and Survivors Insurance Act (Alters- und Hinterbliebenenversicherungsgesetz - AHVG) Old Age and Survivors Insurance Ordinance (Alters- und Hinterbliebenenversicherungsverordnung - AHVV) 7. Pension Funds Act (Pensionsfondsgesetz - PFG) Pension Funds Ordinance (Pensionsfondverordnung - PFV) 8. Act on Professional Fiduciaries (Gesetz über die Treuhänder - TrHG) 9. Act on Auditors and Auditing Companies (Gesetz über die Wirtschaftsprüfer und Revisionsgesellschaften - WPRG) 10. Act on Attorneys-at-Law (Gesetz über Rechtsanwälte - RAG) 11. Act on Patent Attorneys (Gesetz über die Patentanwälte) 12. Public Disclosure Act (Offenlegungsgesetz - OffG) Public Disclosure Ordina 2) Entities/Authorities in charge of the control and supervision. Purposes, powers and functions of each of them-their organization and structure (i.e. public or private, independency or body of the Government to which they belong, size, etc.) The Regulator is called Finanzmarktaufsicht or FMA. It is a separate legal entity incorporated by the legislator pursuant to the Act on the Financial Market Surveillance Authority (Finanzmarktaufsichtsgesetz - FMAG). Although the Financial Market Surveillance Authority ("FMA") is subject to the supervision of the Liechtenstein government, which also appoints the non-executive board, the FMA is not subject to the directives of the government. In addition, the Financial Intelligence Unit coordinates the fight against money laundering pursuant to the Act on the Financial Intelligence Unit. 3) Describe briefly the activities under supervision and give a list of the different types of licenses available. See answers to item 1 above. There are different licenses available for i.) banks and brokers, ii.) asset management companies and iii.) payment institutions: i.) Banks and brokers: -Bank license for bank business according to art 3 para 3 of the Act on Banks and Brokers; -Broker license for broker business according to art 3 para 4 and annex 2 of the Act on Banks and Brokers; -License for representative offices according to art 30a of the Act on Banks and Brokers; -License for a branch from third states according to art 30m of the Act on Banks and Brokers; -License for operation of a regular market according to art 30p of the Act on Banks and Brokers; -License for multilateral trading facilities according to art 30q of the Act on Banks and Brokers. ii.) Asset management companies: -License for asset management business according to art 3 of the Asset Management Act. iii.) Payment institutions: -License for payment service business according to art 2 of the Payment Services Act. 4) Describe briefly non-regulated financial and banking activities. n/a

3 5) Describe briefly non-permitted financial and banking activities and/or government monopolies. The Liechtenstein financial and banking market is very liberal. As a matter of principle, all standard financial and banking activities that are generally performed worldwide are admitted in Liechtenstein, provided, however, the relevant applicable rules are complied with. II. BANKING ACTIVITIES 6) Different types of banking licenses. Activities permitted under each of them. Activities prohibited. There are several types of banking licenses as mentioned above under item10. The ordinary bank license for bank business according to art 3 para 3 of the Act on Banks and Brokers permits the following activities: -the acceptance of deposits and other repayable monies; -the lending of thirdparty monies to an indeterminate circle of borrowers; -custodian and safekeeping services; -the providing of investment services and ancillary services referred to in Annex 2 Sections A and B of the Act on Banks and Brokers as well as the execution of other bank-related off-balance-sheet transactions; -the issuing of electronic money in accordance with art 3 (a) of the E -Money Act. 7) Procedures to be followed and requirements to be met to obtain each of the different licenses. Formalities to be fulfilled, documentation to be submitted, guaranties requested, time estimation, etc. Please refer to the FMA homepage at and click on "requirements to obtain a license for the taking up and pursuit of banking activities and investment activities in the Principality of Liechtenstein". The applicable provisions of the Act on Banks and Brokers are articles 17 to 24. 8) Legal structure admitted/requested for each of the different licenses. a) Different types of legal structures that may be used, i.e. corporations, limited liability partnership, branches, subsidiaries, etc. Article 18 of the Act on Banks and Brokers stipulates: Legal form and registered office 1) Banks and brokers may only be established in the legal form of a limited company or a European company (SE ). In justified cases, the Government may permit exceptions. 2) The registered office and the central administration must be situated in Liechtenstein. b) Capital requirements and own fund rules. Article 24 of the Act on Banks and Brokers stipulates: Initial capital 1) The initial capital must be paid up in full and amount to: a) in the case of banks, at least ten million francs or the equivalent in euros or U.S. dollars; b) in the case of brokers under this Act, at least one and a half million francs or the equivalent in euros or U.S. dollars. 2) Depending on the type and scope of the business circle, the FMA may require a higher initial capital. 3)

4 The initial capital consists of the paid-up capital (with the exception of cumulative preference shares), including any issue premium and any reserves and accumulated profits. c) Transfer of control and ownership regime. Is it regulated? The respective provisions of Article 17 of the Act on Banks and Brokers stipulate: 4) Prior to granting a licence to a bank or broker, the FMA must consult the competent authorities of another EEA Member State if: a) a subsidiary or a subsidiary of the parent undertaking of a bank, financial institution, insurance company or broker authorised in another EEA Member State is to be established; b) the bank or broker to be established is controlled by the same natural or legal person as a bank, financial institution, insurance company or broker authorised in another EEA Member State. 5) Shareholders with a qualifying holding must meet the demands placed in the interest of ensuring sound and prudent management of the bank or broker. 6) Where paragraph 4 applies, the FMA shall in particular consult the competent authorities of other EEA Member States when assessing the suitability of the shareholder with qualifying holdings and the reputation and experience of persons also serving in management functions of other undertakings in the same group. The FMA shall exchange all information with the competent authorities of other EEA Member States concerning the suitability of the shareholders with qualifying holdings and the reputation and experience of persons entrusted with business management when such information is of relevance to the granting of an authorisation as well as the ongoing assessment of compliance with operating conditions. d) Personal requirement and restrictions that may apply in each case for officers, directors, shareholders, etc. The persons entrusted with the administration and business management of a bank or broker firm shall at all times guarantee impeccable business operation both from a professional and a personal point of view (art 19 of the Act on Banks and Brokers). The persons intended to serve as members of the board of directors, head of the internal audit authority, and members of the management board shall be sufficie e) Special requirements/restrictions for foreigners either individual or legal entities (including short description of WTO/GATS commitments and exemptions). 9) Is there a Deposits Insurance? Is it mandatory or based on self-regulations? Provide a brief explanation of how it operates. In line with the applicable EU directives, article 7 of the Liechtenstein Banking Law contains provisions on the guarantee of bank deposits and the protection of investors. Article 7 requires banks to ensure sufficient protection of deposits and investments at banks, either by creating their own institutions or participating in foreign guarantee schemes. The Liechtenstein Bankers Association (LBA) decided to offer its own solution, establishing the Deposit Guarantee and Investor Protection Foundation of the Liechtenstein Bankers Association (Einlagensicherungsund Anlegerschutzstiftung des Liechtensteinischen Bankenverbands, EAS). The EAS is an autonomous foundation under Liechtenstein law. The Foundation has assumed the obligation, in the event of the insolvency or bankruptcy of a bank, to pay compensation up to a specified maximum amount. All banks operating in Liechtenstein participate in the EAS. By offering these

5 guarantees, the EAS contributes substantially to the protection of creditors and to the reputation and stability of the Liechtenstein financial center. Deposits of private clients up to a maximum of CHF 100,000 or the equivalent in another currency are guaranteed. Deposits mean account balances of all kinds as well as call money and time deposits. If a client has several accounts at a bank or if the client additionally has a share of a joint account, then the upper threshold does not apply to each account separately, but rather to all the accounts added together. In addition to deposits, investments at banks up to a maximum of CHF 30,000 are guaranteed as well. These investments include securities and similar investment instruments. However, this guarantee is unlikely to play a major role in practice, since in the event of bankruptcy of the bank, the entire custody account of a client will be separated out of the estate exclusively for the benefit of the client. If, pursuant to bankruptcy or a moratorium on debt enforcement, a so-called "guarantee case" arises, the members of the EAS are required to make money available so that the EAS can pay out claims up to a maximum of CHF 400 million to entitled depositors and investors. In a guarantee case, the Foundation immediately notifies the potential claimants through publication in the daily press and on the website of the Foundation. Both the Foundation and the affected bank will have fact sheets available containing the necessary information, along with the registration forms. Duly submitted and reviewed claims of depositors and investors will be paid out by the Foundation within three months. In return for payment, the depositors and investors cede their claims vis-à-vis the bank to the Foundation. The Foundation may then assert the ceded claims during the bankruptcy of the affected bank. 10) Interest rate. Is it regulated? Should the answer be affirmative, explain briefly its regulatory framework. The applicable interest rate is subject to negotiation and agreement between the parties. In the absence of such agreement, statutory default provisions apply. 11) Sanctions (civil, administrative, or criminal) for violations of the legal and regulatory dispositions. Pursuant to Art 63 of the Act on Banks and Brokers, the following conduct constitutes a misdemeanours punishable by the Court of Justice with imprisonment of up to one year or with a monetary penalty of up to 360 daily rates to: a) violation or inducement of the violation or attempt of inducement of violation of secrecy obligations; b) performance of an activity within the meaning of article 3 without a licence; c) operation of a representative office within the meaning of article 30a without a licence; d) operation of a branch within the meaning of article 30o without an authorisation; e) operation of a branch of a bank, financial institution, broker firm before the preconditions set out in article 30d are met; f) failure to meet the requirements on deposit guarantee or investor protection. 2) The Court of Justice shall punish with imprisonment of up to six months or with a monetary penalty of up to 180 daily rates for committing a misdemeanour anyone who: a) violates conditions imposed in connection with a licence; b) violates the prohibition against using nomenclature that indicates activities as a bank or broker ; c) fails to make the stipulated allocations to legal reserves; d) repledges or carries over pledges contrary to the provisions of article 12; e) gives false information to the FMA or the independent auditor; f) does not keep account books properly or does not retain account books and receipts; g) as an auditor, grossly violates his or her responsibilities, in particular by making untrue statements in the audit report or withholding significant facts, by failing to make required requests to the bank or the broker, or by failing to submit required reports and notifications. h)

6 engages in activities by virtue of the free movement of services before the preconditions set out in article 30e have been met; i) outsources data processing to foreign countries without observing the conditions set out in article 14a; k) makes false statements or conceals significant facts in the periodic reports or notifications; l) does not have sufficient own funds as set out in article 4. 3) The FMA shall punish with a fine of up to 100,000 francs for committing an infraction anyone who: a) fails to compile or publish the business report, the consolidated business report, or certain other statements as required; b) fails to have the ordinary audit or an audit requeste by the FMA conducted; c) fails to fulfil his or her responsibilities vis-à-vis the independent auditor; d) fails to submit the required notifications to the FMA in a proper and timely manner; d) fails to submit the required notifications to the FMA in a proper and timely manner; e) fails to comply with a demand to bring about a lawful state of affairs or with any other order by the FMA ; etc. III. BANK SECRECY LAWS 12) Is clients information protected? Are there any restrictions for its use? Yes, the Liechtenstein bank secrecy laws are at least as strict as the Swiss bank secrecy. Article 14 Act on Banks and Brokers: Banking secrecy 1) The members of the governing bodies of banks and their employees as well as any persons otherwise working for such banks shall keep secret all facts that they are entrusted with or that become accessible by them as a result of the business relations with clients. The obligation of secrecy shall apply without any time limit. 2) Paragraph 1 is without prejudice to the legal provisions on the obligation to give testimony or information to the criminal courts and to supervisory bodies as well as the provisions on cooperation with other supervisory authorities. 3) T he provisions of paragraphs 1 and 2 shall apply mutatis mutandis to the members of the governing bodies of broker firms and their employees as well as to any persons working for such broker firms. 13) Should answer to number 12) be affirmative, please describe the legal framework, i.e. scope, limitation, exceptions. see above question ) Sanctions (civil, administrative, or criminal) for violations. Art. 63 para 1a Act on Bank and Brokers: 1) The Court of Justice shall punish with imprisonment of up to one year or with a monetary penalty of up to 360 daily rates for committing a misdemeanour anyone who: a) as a member of an governing body of, an employee of, or any other person acting on behalf of a bank or broker, or as an auditor or member of the FMA Complaints Commission or employee or mandatary of the FMA violates secrecy obligations or who induces such a violation or attempts to induce it;