FinSA Rules of Conduct
Rules of conduct set in FinSA include the following duties:
- Information duties
- Suitability and appropriateness duties
- Documentation and accountability duties
- Transparency and diligence duties
When dealing with institutional clients, none of the duties above are mandatory.
When dealing with professional clients (non-institutional), the rules of conduct are mandatory. However, professional clients may waive this requirement in writing insofar as the information and the documentation and accountability duties are concerned.
When dealing with private clients, all the above duties are mandatory.
- Key information about the provider (name, address, scope of activities)
- Supervision status of the provider
- Procedures to initiate a conciliation before an ombudsman
- Risk and costs information
- Commissions and other third-party economic ties
- Potential conflict of interests related to the service offered
- Market offers considered for the selection of financial instruments
Suitability and appropriateness duties
The financial service provider must verify in advance whether the service offered is suitable or appropriate for a client. The type of verification depends on the type of advice provided:
- Test of appropriateness: if the investment advice is given for an isolated transaction, without considering the client’s portfolio, the provider must verify that the client has sufficient knowledge and experience for the product.
- Test of suitability: if the investment advice is given taking into consideration the whole client portfolio, the provider must verify, in addition to appropriateness, that they know the client’s financial situation and investment objective, and whether the service offered is suitable.
Documentation and accountability duties
Providers must document their services appropriately. They must record:
- Orders received and executed
- The composition, evaluation and evolution of the client portfolio, if applicable
- The costs
Records must be kept in a way that the client can receive them within 10 business days of the execution of orders. They must be provided on a regular basis as agreed with the client, or on request of the client.
These duties are detailed in articles 18 and 19 of FinSO.
Transparency and diligence duties
Providers must ensure that the client’s orders are handled in good faith, on an equal-treatment basis, and in the best interest of the client. Directives need to exist regarding the execution of client orders.
These duties are detailed in articles 20 and 21 of FinSO.