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New type of authorization for investment firmsKPMG Legal Advisers, Brussels

The March 10 1999 law has introduced a new type of authorization for investment firms: the authorization to act as a company to place orders for financial instruments, which is added to the authorization to act as a stockbroking firm, a portfolio management company or a financial instrument broking firm.

This authorization covers the following services:

  • Reception and transmission, on behalf of investors, of orders in relation to one or more financial instruments;
  • Execution of the orders other than for the company's own account;
  • Bringing two or more investors into contact, to make it possible for those investors to effect a transaction in relation to a financial instrument; and
  • Placement of issues of any financial instrument.

The non-core services which can be delivered to clients under this authorization are investment advice and financial engineering advice.

In order to obtain the authorization, identical conditions to those in place for other investment firms must be respected. These conditions concern, more precisely, the legal form, the initial minimum capital, the shareholders, the managers and the organization of the company itself.

Apart from the fact that companies placing orders in financial instruments cannot offer portfolio management services, this new type of investment company must follow similar rules as those applicable to portfolio management companies. For example, both companies are prohibited from receiving funds or financial instruments belonging to investors.

Finally, the Royal Decree of April 26 2000 has made the protection system for investors established by the December 17 1998 law, applicable to companies for the placing of orders in financial instruments. In the circular of February 23 2000, the Belgian Banking and Finance Commission informed companies concerned with the placing of orders in financial instruments of the list of circulars and circular letters which, although originally destined for other investment firms, it deemed applicable wholly or partly to the activity of these companies.

Yvan Stempnierwsky

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