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Securities companies scrutinised

During 2008 the Swedish Financial Supervisory Authority (SFSA) conducted live inspections at no less than 106 Swedish securities companies holding local Swedish licences to conduct securities operations. The purpose of the inspections was to assess how well those companies have adapted to the new rules imposed by the Markets in Financial Instruments Directive (Mifid) and also whether the companies held the correct licences for their businesses. The inspections resulted in an SFSA report which was published on April 9 2009.

The report concludes that the securities companies have been active in their implementation measures and that, overall, the general level of adaption to Mifid was satisfactory. However, it not only praises from the SFSA. In fact, every company receives some kind of remark, although sanctions are considered in only four of the 106 cases. Many companies have deficiencies in their policies for the compliance function and, amongst other things, it is stressed that the legal requirement of a control function for the compliance department must be manifested in the internal policies of the company. The SFSA will follow up on the inspections as a part of its continuous supervision. Extra attention will be paid to the compliance with the best execution rules.

In the future the SFSA will conduct a review of insurance intermediaries that will also affect securities companies since the SFSA will then take a closer look at their cooperation. The outcome of this review will be interesting since provisions applicable to insurance intermediaries are not as far reaching as the ones set out in Mifid. It is also worth noting that the SFSA will conduct live inspections at Swedish branches of foreign financial institutions during 2009. Companies will have little time to catch their breath.

It is clear that the SFSA expects companies to keep making efforts to become more compliant with the rules imposed by Mifid. In addition to this, securities companies will have a big challenge adapting to the new anti-money laundering rules imposed by Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, now also (finally) implemented into Swedish legislation. The results of this are, though, still to come.

Lina Dvärsäter

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