THE REGULATION OF FINTECH IN AUSTRIA
At the EU level, the continued increase in the digitalisation of financial services across the banking, insurance and securities sectors has been noted by the European Supervisory Authorities, which have already assessed the potential benefits and risks of automation in financial advice in 2015. In Austria, however, there are no specific laws or regulations relating to the automation in the provision of investment services, including investment advice.
Nonetheless, the Austrian regulator, the Austrian Financial Market Authority (Finanzmarktaufsichtsbehörde (FMA)) has published a non-binding (but in practice, will be followed) statement on “FinTechs”. Companies that are active in the field of innovative financial market technologies are known as FinTechs. These technologybased financial innovations may include new payment methods, online investments, trading robots, automated investment advice or other systems.
FinTech models may be offered by supervised financial market participants such as banks or investment firms but also non-regulated entities. FinTechs that are not supervised may only provide services in Austria that are not subject to a licensing obligation under Austrian law.
The role of the FMA in respect to developments in the Austrian financial markets is also to supervise and regulate the operations of FinTechs and new technologies in Austria. The FMA provides support to FinTechs by providing clarification on various issues including licensing obligations under Austrian law.
Regarding the provision of automated advice, the FMA’s opinion is that if the system generates personal recommendations to a person to buy/sell/hold a specific financial instrument, and such recommendation is tailored to that person, then the service rendered is likely to constitutes investment advice pursuant to section 3 (2) no. 1 of the Austrian Securities Supervision Act (Wertpapieraufsichtsgesetz 2007). In this context, the FMA has explicitly stated that automated investment advice systems may only be operated by licensed entities, regardless of the level of automation involved.
It should be noted that the sole conceptualisation and set up of the automated advice system does not automatically trigger the licensing obligation. That means that a company may set up the advice system without holding a license, but it may not operate the system in its own name. The unlicensed entity may solely make the system available for operation by a licensed undertaking