New rules on financial services provided via the internet
On May 5 2000 the Belgian Banking and Finance Commission (BFC) issued a new circular to credit institutions, investment firms and asset management firms regarding the provision of financial services via the internet.
The circular provides an overview of the most important applicable existing rules and lists the basic starting point for the BFC's reasoning. Those starting points are: (i) that the internet is to be considered as another distribution channel; and (ii) that the company's organization, structure, risk management and control functions must be adapted to the particularities of this new distribution channel. It is noted that the legal risks posed by the internet are not negligible, considering that the elements of the legal framework, in Belgium and abroad, are often new, unclear, incomplete or non-existent. It is important to note that one of the main prerequisites for a credit institution or investment firm's operating permit is involved.
The new challenges posed by the internet in relation to the legal requirement that financial services providers must identify their clients at the start of the professional relationship. This is also addressed in the circular, even though it is likely that the expected modifications to the European Directive 91/308/EEC on money laundering may have an impact on this.
Another important issue addressed by the circular is raised by transactional websites that can perform certain on-line investment operations without human intervention. Such a distribution channel may result in the provision of: (i) financial services to ill-informed and/or inexperienced clients; or (ii) mismatched financial services, leading in certain circumstances to infringements of the applicable rules.
Finally, the circular also touches upon the transnational consequences of websites.