Regulatory framework

Regulatory authorities

What national authorities regulate the provision of financial products and services?

The Finnish Financial Supervisory Authority (FIN-FSA) is the principal regulatory authority supervising regulated entities within the financial and insurance sector in Finland. The FIN-FSA is an independent entity organised under the Bank of Finland with the purpose of ensuring financial stability and the smooth operation of credit institutions and other supervised entities in the financial sector to maintain confidence in the financial markets. The FIN-FSA engages in international cooperation in the fields of regulation and supervision, and is part of the European system for the supervision of the financial sector.

In addition, the Regional State Administrative Agency of Southern Finland (ESAVI) acts as a registration and supervisory authority under the Finnish anti-money laundering legislation with respect to certain financial service providers that are not supervised by the FIN-FSA.

The Finnish Financial Ombudsman Bureau (FINE) provides advisory services for individuals and small enterprises in the fields of banking, insurance and securities. Recommendations issued by the FINE are non-binding but are generally followed by financial market participants.

The Finnish Competition and Consumer Authority (FCCA) and the Consumer Ombudsman, which works in conjunction with the FCCA, are responsible for monitoring compliance with the Finnish Consumer Protection Act (38/1978) and other laws and regulations protecting consumers. They have a broad competence to intervene in matters that include offer, sale and other marketing of consumer products and services by financial sector operators and other entities that offer, sell or market goods or services to consumers.

In addition to the above authorities, there are authorities that are not specific to the financial sector with competence to supervise aspects of businesses carried out by financial services providers. The Data Protection Ombudsman, for example, supervises companies’ compliance with data protection legislation.

What activities does each national financial services authority regulate?

The FIN-FSA supervises the activities of individual financial market participants, such as banks, payment institutions, investment firms, stock exchanges and insurance companies in Finland. Generally, all activities in scope of the relevant licence or registration held by the regulated entity and granted by the FIN-FSA are within its scope. More specifically, the FIN-FSA monitors, for example, the provision of retail and investment banking services, consumer credit, payment services, crowdfunding services, fund management services, investment advisory and other investment services, and the issuance of, and trading in, financial instruments and operations by the regulated market (the Helsinki Stock Exchange).

The ESAVI is responsible for supervising compliance with registration and other obligations of the Finnish anti-money laundering legislation by certain financial service providers that are not supervised by the FIN-FSA, such as foreign exchange service providers. The anti-money laundering register for such service providers is maintained by the ESAVI.

The purpose of the FINE is to provide consumers, small and medium-sized enterprises and corresponding consumers with advice on insurance, banking and investment operations as well as to provide recommendations on solutions to related complaints. Services are provided free of charge to consumers in an effort to promote the public interest and the development of sound practices in the financial sector.

The FCCA and the Consumer Ombudsman are responsible for the supervision of consumer protection. They regulate and supervise the offer, sale and other marketing of products and services (including financial products and services) to consumers.

What products does each national financial services authority regulate?

The regulatory competence of each financial service authority is not divided by product category, but by the regulatory and licensable nature of the business activities carried out by financial service providers. Consequently, there is no exhaustive list of regulated products.

The Finnish acts applicable to different financial service activities typically include definitions of the type of services that require an authorisation from the FIN-FSA. For example, banking and deposit taking services are subject to a credit institution licence under the Act on Credit Institutions (610/2014), subjecting the entire business of the relevant credit institution to the supervision of the FIN-FSA. Similarly for investment services, a licence is required when services qualifying as investment services are offered by an entity in or into Finland. According to the Investment Service Act (747/2012), investment services refer to, for example, reception and transmission of orders and the provision of investment advice.

The ESAVI supervises anti-money laundering and counter-terrorism financing compliance by financial service providers that are not supervised by the FIN-FSA. The ESAVI maintains a non-exhaustive example list of services the provision of which may give rise to an obligation to register in the ESAVI’s anti-money laundering register.

Authorisation regime

What is the registration or authorisation regime applicable to financial services firms and authorised individuals associated with those firms? When is registration or authorisation necessary, and how is it effected?

General

The registration or authorisation process depends on the requisite licence sought by the undertaking and whether the financial services will be provided by a Finnish entity or on a cross-border basis with or without the establishment of a branch in Finland. Individuals associated with financial service firms do not, as a general rule, require a separate authorisation. Instead, the fitness and propriety of key individuals of the firm is investigated as a part of the authorisation process.

 

Banking

Any entity that receives repayable funds from the public and grants credit or other finance on its own account must obtain a licence to pursue the business of a credit institution as either a deposit bank or as a financing institution. Only entities licensed as deposit banks can receive repayable deposits from the public. Financing institutions are credit institutions that provide banking services but are not authorised to receive deposits. However, to the extent that no repayable funds are raised from the public, the provision of loans and factoring services to corporate customers is generally permissible in Finland.

A credit institution licence is sought by way of a written application with supporting documents attached. The application is submitted to the FIN-FSA. The FIN-FSA submits its proposed decision to the European Central Bank, which approves or refuses it. The outcome is announced by the FIN-FSA, which recommends that the applicant contacts them before submitting the application to ensure a smooth process.

The FIN-FSA grants licences for:

  • central bodies belonging to an amalgamation of deposit banks;
  • local branches of third country-licensed credit institutions; and
  • deposit banks and financing institutions to carry out the activity of a mortgage bank.

 

The application for a credit institution licence is free of form. The application can be in Finnish, Swedish or English. The Finnish Ministry of Finance has issued a detailed decree (697/2014) on the information and documents that must be submitted to the FIN-FSA in connection with the application.

The founder of the credit institution and individuals who directly or indirectly own at least 10 per cent of the share capital of the credit institution, or a portion that gives a share of voting rights of at least 10 per cent in the credit institution, must be reliable, as defined in law. Also, members of the board and executives of the credit institution must be reliable and reputable, and may not be subjected to bankruptcy, banned from business or have limited personal capacity to act.

 

Investment firms

Investment services may be provided pursuant to the Investment Service Act (747/2012) only by duly licensed investment firms and credit institutions as well as by fund management companies and alternative investment fund managers (AIFMs) authorised to provide portfolio management and investment advice under the Act on Common Funds (213/2019) or the Act on Alternative Investment Fund Managers (162/2014), respectively.

Investment services are defined to include the following core investment services, in each case relating to financial instruments:

  • reception and transmission of orders;
  • execution of orders;
  • dealing on own account;
  • discretionary asset management;
  • investment advice;
  • underwriting;
  • placing without a firm commitment basis;
  • operation of multilateral trading facilities; and
  • operation of organised trading facilities.

 

If securities or derivatives are offered in a way described above, a licence according to the Investment Service Act (747/2012) is necessary.

 

Payment services

Pursuant to the Act on Payment Institutions (297/2010), payment services can be provided in Finland only by authorised payment institutions or entities that the FIN-FSA approves for provision of payment services without actual authorisation (this refers to a registration process that is sufficient if the payment transactions are lower in value). In addition, a credit institution may provide payment services based on its own authorisation.

Payment services include:

  • services enabling cash to be placed on or cash to be withdrawn from a payment account and all of the operations required for operating or providing a payment account;
  • the execution of payment transactions by means of account transfers, transfer of funds to the service provider’s payment account, direct debit, or payment cards or similar devices;
  • issuing of payment instruments;
  • acquiring of payment transactions on the basis of a contractual relationship, resulting in a transfer of funds to the payee;
  • money remittance;
  • payment initiation services; and
  • account information services.

 

A registration or an authorisation is obtained by way of a written application (using the FIN-FSA application form) with supporting documents attached. The Ministry of Finance has issued a detailed decree (1040/2017) on the information and documents that must be submitted to the FIN-FSA in connection with the application for authorisation.

 

Fund management companies and alternative investment fund managers

In accordance with the Act on Alternative Investment Fund Managers (162/2014) and the Act on Common Funds (213/2019), the operations of a company managing funds or alternative investment funds (AIFs) can only be pursued by entities that have been granted authorisation. A written application (using the FIN-FSA application form) is submitted to the FIN-FSA, with supporting documents attached. The applications should, among other things, include descriptions of the activities intended to be carried out and information on the marketing of funds. The application for an AIFM should also include information on the AIFs marketed or intended to be marketed.

 

Anti-money laundering register

Registration with the ESAVI is required if the entity provides financial services but the services do not require a licence or registration from the FIN-FSA. The following information must be provided to the ESAVI:

  • applicant’s business name, auxiliary business name (if any), business ID and the street addresses of the offices where the activities take place; and
  • description of the conducted business on the basis of which the applicant is obliged to be registered in the anti-money laundering register.

 

The applicant must meet the following qualifications:

  • the applicant has the right to conduct business in Finland;
  • the applicant is not banned from business operations; and
  • the applicant provides the information required for the application.

 

The ESAVI will check and obtain necessary information from publicly available sources to verify these conditions.

 

Stock exchanges

The operation of a regulated market (a stock exchange) requires authorisation by the Ministry of Finance. Authorisation may be granted to a Finnish limited liability company or to a European public limited company that has received similar authorisation in another European Economic Area (EEA) state and intends to move its registered office to Finland.

 

Cross-border authorisations

Undertakings licensed to provide banking or other financial services in their home EEA member state may seek to provide such services in or into Finland on a cross-border basis with or without establishing a branch in Finland. The notification process for providing financial services across borders into Finland is mainly completed with the home state's regulatory authorities, who will in turn notify the FIN-FSA of the operations.

Legislation

What statute or other legal basis is the source of each regulatory authority’s jurisdiction?

The duties and activities of the FIN-FSA are mainly regulated under the Act on the Financial Supervisory Authority (878/2008).

The sources of regulatory authority for the ESAVI are the Act on Preventing Money Laundering and Terrorist Financing (444/2017) and the Act on Regional State Administrative Authorities (896/2009).

The sources of authority for the FCCA and the Consumer Ombudsman are the Consumer Protection Act (38/1978) and the Act on the Finnish Competition and Consumer Authority (661/2012), according to which the sphere of authority of the FCCA includes the implementation of competition and consumer policy, and the protection of the consumer’s economic and legal interests.

Additionally, the Act on Certain Competencies of the Consumer Protection Authorities (566/2020) regulates certain investigation and enforcement powers of the above authorities in the area of consumer protection.

What principal laws and financial service authority rules apply to the activities of financial services firms and their associated persons?

The principal laws applicable to the financial sector operators are listed below. Additionally, certain matters are regulated more specifically by government or other decrees, regulatory guidelines or special legislation. In most cases such secondary legislation is referenced in the principal statute governing the relevant financial services.

The principal laws governing the financial sector are the following:

  • the Act on Credit Institutions (610/2014);
  • the Payment Services Act (290/2010);
  • the Act on Payment Institutions (297/2010);
  • the Act on Operation of the Foreign Payment Institutions in Finland (298/2010);
  • the Act on Trading in Financial Instruments (1070/2017);
  • the Act on Alternative Investment Fund Managers (162/2014);
  • the Act on Common Funds (213/2019);
  • the Act on the Financial Supervisory Authority (878/2008);
  • the Act on Preventing Money Laundering and Terrorist Financing (444/2017);
  • the Consumer Protection Act (38/1978);
  • the Companies Act (624/2006);
  • the Investment Service Act (747/2012); and
  • the Securities Markets Act (746/2012).

 

Furthermore, the following acts apply on resolution actions taken in respect of credit institutions and implement Directive 2014/59/EU on Bank Recovery and Resolution, and Regulation (EU) No. 806/2014 establishing uniform rules and procedures for the resolution of credit institutions:

  • the Act on the Financial Stability Authority (1195/2014); and
  • the Act on the Resolution of Credit Institutions and Investment Firms (1194/2014).

 

In addition, the FIN-FSA issues regulations and guidelines applicable to financial services providers.

Scope of regulation

What are the main areas of regulation for each type of regulated financial services provider and product?

Each principal act regulating the provision of financial services covers mainly the same areas of regulation. The acts usually lay out provisions on registration, general business requirements (eg, preparatory obligations and conditions for outsourcing of services), establishment of branches and provision of cross-border services, requirements for management, inducements and remuneration, recovery plans, risk management, capital and liquidity, internal controls, financial statements, procedures applicable in customer relationships, indemnity provisions and administrative penalties. Additionally, the acts may include more specific areas that are relevant for the particular financial service or activity (eg, regulation on depositaries in the case of fund companies).

Additional requirements

What additional requirements apply to financial services firms and authorised persons, such as those imposed by self-regulatory bodies, designated professional bodies or other financial services organisations?

Finance Finland, which is an interest organisation for financial sector operators, issues guidelines and compilations of best practices for the financial sector. Although not legally binding, these guidelines reflect the established practices in the financial sector and are widely complied with among these companies. Finance Finland has, for example, issued guidelines on banking secrecy. These guidelines are an interpretation of data privacy rules in the banking sector.

The Finnish Financial Ombudsman Bureau provides recommendations relating to customer complaints in the financial sector. Although the recommendations are not legally binding and thus not enforceable, such recommendations are followed by financial sector operators at large.

The Consumer Ombudsman also regularly issues guidelines and decisions on interpretation of the application of the Consumer Protection Act (38/1978) and other laws and regulations relating to consumer protection, which should be complied with in consumer relations.