Abolition of Public Representatives in Financial Sector
Directions to Stockbroking Companies

Abolition of Public Representatives in Financial Sector

Bill 1997 of April 9 2002 implements changes to the Danish Commercial and Savings Banks Act and abolishes public representatives in the financial sector.

Changes are made to provisions regarding banking boards and representatives committees. In future, boards must comprise at least four members (or at least five members if there are no employee representatives).

Board members will be elected by a bank's general assembly unless the bylaws state that election is to be made by the representatives committee. Board members are appointable for a maximum period of four years at a time.

All provisions relating to mandatory public representatives are revoked.

Directions to Stockbroking Companies

The Danish Financial Supervisory Authority has issued directions which interpret Section 15(2) of the Act on Financing Activities with regard to stockbroking companies. The directions cover:

  • general issues relating to stockbroking companies;
  • general procedures; and
  • control measures, including the need for (i) good administrative and accounting practices, (ii) written procedures for all major activity areas, and (iii) adequate control and security measures for IT usage.

Banking boards
Part 1 of the directions deals with work carried out by banking boards and covers the following issues:

  • Company bylaws. The Supervisory Authority is not to approve company bylaws, which should be be registered with the Danish Commerce and Companies Agency. The recommended content of the bylaws is outlined.
  • Board procedures. All requirements laid down in the Companies Act are listed, as are the board's obligations (which supplement those listed in the Companies Act).
  • Participants in board meetings. Pertinent issues include (i) the right to participate in board meetings, (ii) the possibility for external legal counsel to participate in meetings on an ad hoc basis; and (iii) the prohibition against board members allowing others to participate in their place. Shareholders who are not official board members cannot participate in board meetings.
  • Minutes of board meetings. An issue cannot be determined unless all board members have an opportunity to participate in a discussion of it. The risk of changes, corrections or deletions to a meeting's minutes must be minimized.
  • The tasks of the board. A number of the board's annual tasks are outlined, with detailed instructions as to how some of them must be undertaken to comply with the requirements of the Financial Supervisory Authority.
  • The board's written guidelines on the distribution of work between the board and management. Requirements are listed as to the distribution of work, as are a number of measures designed to ensure that either the board or management takes responsibility accordingly.
  • Reporting by management to the board. The guidelines set out the basic requirements that must be satisfied for reporting.

Part two of the directions deals with risk-entailed activities, laying down the minimum requirements that must be met in order for a stockbroking company to comply with the relevant criteria set out by the Financial Supervisory Authority.

Customer relations
Finally, Part 3 addresses the relationship between customers and stockbroking companies, and highlights a number of areas that must be addressed by the latter with regard to customer relations, including the submission of management reports to the board about, for example, customer complaints.

For further information on this topic please contact Anders M Hansen at Osborne Clarke by telephone (+45 33 12 95 12) or by fax (+45 33 12 95 15) or by email ([email protected]).