Client Alert September 10, 2015 For more information, please contact Pierre Berger Partner email@example.com Isabelle Van Biesen Associate firstname.lastname@example.org Stéphanie Liebaert Associate email@example.com Baker & McKenzie CVBA/SCRL Meir 24 2000 Antwerp FSMA publishes a revised Circular regarding the interpretation of insurance MiFID rules New Record Keeping Requirements 1. Introduction On 1 September 2015, the Belgian Financial Services and Markets Authority (hereinafter the FSMA) published circular FSMA_2015_14 (hereinafter the Circular), which revises circular FSMA_2014_02 of 16 April 2014 regarding the interpretation of insurance MiFID rules.1 This client alert briefly sets out the amendments made with regard to the previous version of the text, which should be taken into consideration by insurance service providers when offering insurance mediation services on the Belgian territory. 2. Textual amendments In order to enhance the readability of the text, some textual amendments have been introduced in the Circular. Most importantly, reference is made to the new date of entry into force of the insurance MiFID rules. Following the Belgian Constitutional Court's ruling of 11 June 2015, the date of entry into force was postponed from 30 April 2014 to 1 May 2015. Please refer to our client alert "Belgian Constitutional Court postpones date of entry into force of insurance MiFID rules to 1 May 2015" in this regard. Also, the text was amended in order to refer to the provisions of the new Act of 4 April 2014 on insurances, instead of the Act of 25 June 1992 on nonmarine insurances. Please refer to our client alert "The new Insurance Act" in this regard. 1 The text of the Circular can be found in Dutch at http://www.fsma.be/nl/Supervision/finbem/vohvo/circmedprak/circ.aspx and in French at http://www.fsma.be/fr/Supervision/finbem/vohvo/circmedprak/circ.aspx. 2 3. Substantive amendments - New Record Keeping Requirements The only significant substantive amendment made in the Circular2 relates to the obligation of insurance undertakings and insurance intermediaries to keep all necessary records and client files.3 While these obligations were only briefly mentioned in the previous version of the text, they are extensively discussed in the Circular. The types of data that should be kept by the service provider are divided into five different categories, which are as follows: 1. Data on the organisation and control of the service provider 2. Advertising data used by the service provider 3. Data on the identity of the service provider's clients 4. Data on the offering - by the service provider - of insurance mediation services to its client 5. Data being a part of the client file of the service provider These data should be kept for at least five years on a durable medium (e.g., on paper, a hard drive or in a "cloud"), which implies that it should not be possible to transform, modify or edit key data after they have been kept for the fulfilment of the MiFID obligations mentioned in the Circular. For instance, when a savings or investment insurance is recommended to a client by a different service provider than the insurance undertaking, which is the "issuer" of the insurance in question, the obligation to retain the data relating to the advice provided to the client is imposed on the broker and not on the insurance undertaking. We will briefly summarise the requirements with regard to these five categories of data below. Please refer to the Circular for a more extensive description. 3.1. Data on the organisation and control of the service provider The FSMA recommends retaining the following information regarding the organisation and control of the service provider: - Information on its activities, internal organisation and key policies and procedures for compliance, only if it concerns an insurance undertaking - Its approved conflicts of interest policy - Its register of conflicts of interest - The agreements concluded by the service provider with an insurance company regarding the distribution, by that service provider, of that insurance undertaking's insurance contracts or any other documents containing information on the inducements relating to the distribution of those insurance contracts 2 Please refer to Chapter 9 of the Circular. 3 This is in accordance with Articles 278 §1 and 286 §2 of the Act of 4 April 2014 on insurances; Article 27 §7, first paragraph, of the Act of 2 August 2002 on the supervision of the financial sector and on financial services, as further clarified by Article 4, 5° of the Royal Decree of 21 February 2014 regarding rules concerning the application on the insurance industry of Articles 27 till 28bis of the Act of 2 August 2002 on the supervision of the financial sector and on financial services; and Article 34 §1 of the Act of 2 August 2002 on the supervision of the financial sector and on financial services. 3 3.2. Advertising data used by the service provider In order to be able to prove that the service providers comply with the rules on marketing communications, the FSMA believes that the service provider should keep a copy of the advertising data it used. 3.3. Data on the identity of the service provider's clients The service provider is required to retain data on its client's identity, which affect the way the service provider provides insurance mediation services to that client and which imply specific MiFID vigilance obligations (e.g., if the client is a legal person, the client's marital status, etc.). 3.4. Data on the offering - by the service provider - of insurance mediation services to its client For all types of insurance agreements, the FSMA recommends service providers to retain information on: (i) the client's demands and needs; (ii) the fact that the insurance contract meets these demands and needs and (iii) inducements. If the service provider offers advice, additional information should be kept such as information on: (i) the fact that an advice was provided to the client; (ii) the nature and extent of the advice and (iii) the elements of the impartial advice, if applicable. Furthermore, for savings or investment insurances, information that should be kept include: (i) the client's knowledge and experience; (ii) the fact that the offered or recommended insurance is suitable or appropriate; (iii) the service provider's warning that the insurance is not suitable and (iv) the service provider's warning that it cannot determine if the insurance is suitable if the client does not communicate the required information or if the information regarding its knowledge and experience is insufficient. If the service provider offers advice, additional information particularly: (i) the client's financial capacity and (ii) investment objectives should also be kept. 3.5. Data being a part of the client file of the service provider The service provider should be able to identify for each of its clients which agreements have been concluded with it or via its mediation. Service providers should also retain proof should a client opt for another durable medium than paper. Should the service provider use standardised documents, the service provider could retain a copy of those documents in the client's file or in a separate file. More generally, service providers should keep track of any significant changes to those agreements, documents and information. In addition, service providers should keep a copy of the adequate reports sent to their clients. * * * ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. 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