On July 1 2004 the new Swedish Financial Advice Consumers Act will enter into force. The act has been established on the basis that there is a need for special consumer protection legislation regarding financial advice and will apply to financial advice that a business provides to a consumer and that involves the placement of a consumer's assets in financial instruments (for example shares, fund units and bonds) or in life assurance where the capital is placed in financial instruments selected by the consumer itself (so-called unit-linked policies). Compliance with the act is mandatory for undertakings providing financial advice to consumers.
Under the act, undertakings must ensure that employees providing advice have the necessary skills. The legislator has not set out any detailed requirements as regards training and experience, but has delegated this to the relevant supervisory authority. Undertakings must also observe good advisory practice and exercise due care in protecting the interests of consumers.
Furthermore, undertakings must adapt advice to the individual consumer's wishes and needs. In this respect, factors such as the consumer's existing knowledge and financial situation, and the purpose of the placement together with the level of acceptable risk must form the basis of recommendations. The act also imposes an obligation on the undertaking to advise the consumer to decline the implementation of measures that cannot be deemed appropriate for the consumer.
The act also provides for a statutory right to damages for the financial loss that may arise as a consequence of financial advice. Liability for damages will arise if the adviser intentionally or negligently caused the loss. However, by introducing liability for negligent advice, it is not intended to introduce extensive liability for bad advice. The fact that a consumer loses money due to such factors as a fall in the share price is not generally the consequence of negligent advice.
The Swedish Consumer Agency (Konsumentverket) and the Swedish Financial Supervisory Authority (Finansinspektionen) will undertake a supervisory role. The Financial Supervisory Authority will be responsible for the supervision of those financial undertakings now subject to the supervision of the authority, while the Consumer Agency will exercise supervision of other undertakings.
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