First-step analysis: fintech regulation in Sweden

Financial regulation

Which bodies regulate the provision of fintech products and services?

The Swedish Financial Supervisory Authority (SFSA) generally acts as the competent regulator responsible for ongoing supervision of fintech products and services and for the issuance of supplementary regulations and formal guidance. The SFSA is responsible for ensuring that the business of (regulated) fintech companies is carried out in accordance with applicable laws and regulations.

All marketing activities that have the purpose of furthering the sale of any product in Sweden, including fintech products of various nature, are subject to the Swedish Marketing Practices Act (2008:486 (MPA)), which requires, for example, that marketing is carried out in accordance with generally accepted marketing practices. The Swedish Consumer Agency, which includes the Consumer Ombudsman, is the primary authority responsible for ensuring that marketing material is compliant with the MPA.

Which activities trigger a licensing requirement in your jurisdiction?

The following activities trigger a licensing requirement:

• consumer lending;
• mortgage lending;
• consumer credit mediation;
• lending in combination with accepting repayable funds from the public;
• factoring and invoice discounting (when combined with accepting repayable funds from the public);
• deposit taking (for deposits over 50,000 kronor);
• management of alternative investment funds (AIFs) or undertakings for collective investment in transferable securities (UCITS);
• foreign exchange trading;
• insurance mediation;
• provision of payment services; and
• activities under the Capital Requirements Regulation No. 575/2013 (the Capital Requirements Regulation).

A licence is, furthermore, required for offering the services and products covered by the Markets in Financial Instruments Directive 2014/65/EU (MiFID II), such as the reception and transmission of orders in relation to one or more financial instruments, the execution of orders on behalf of clients, dealing on own account, portfolio management, advising on investments in financial instruments, underwriting of financial instruments or placing of financial instruments on a firm commitment basis, and placing of financial instruments without a firm commitment basis.

The following activities trigger a registration requirement:

• currency exchange;
• management or trading in virtual currencies;
• deposit taking (for deposits up to 50,000 kronor); and
• lending and credit mediation to non-consumers (if not combined with deposit taking).

Is consumer lending regulated in your jurisdiction?

Yes, consumer lending is regulated through, inter alia, the Swedish Consumer Credit Act (2010:1846), which includes relevant provisions relating to, among other things, sound lending practices, marketing of consumer loans, credit assessments, information prior to the conclusion of and in relation to documentation of loan agreements, interest, fees and repayment of loans.

To offer or provide consumer loans, the relevant company is required to be authorised by the SFSA under, for example, the Swedish Consumer Credit (Certain Operations) Act (2014:275 (CCCOA)) (should the company solely provide or act as intermediary in relation to consumer loans), the Swedish Banking and Financing Business Act (2004:297) (should the company instead, given the operations carried out, be considered a credit institution (as defined in the Capital Requirements Regulation)) or the Swedish Housing Credit Operations Act (2016:2014 (HCOA)) (should the company solely provide, act as an intermediary in relation to or provide advice regarding consumer loans in the form of mortgages).

Since 1 September 2018, new rules regarding high-cost credits apply, defined as credits granted to consumers that have an interest rate of 30 percentage points above the reference rate according to the Swedish Interest Act (1975:635), as determined by the Swedish Central Bank, and that do not primarily relate to a credit purchase or residential immovable property.

Pursuant to the new rules, certain caps have been introduced whereby: (1) the maximum amount of interest, as well as any default interest, that may be charged under a credit agreement may not exceed 40 percentage points above the aforementioned reference rate; and (2) the maximum amount of fees under a credit agreement may not exceed the credit amount.

For the purposes of (2), fees are defined as costs for the credit (comprising the aggregate amount of interest rate, credit fees and other costs that the consumer is obliged to pay under the loan, inclusive of necessary costs for valuation but excluding notarisation fees), default interest and costs pursuant to the Swedish Compensation for Collection Costs Act (1981:739), comprising costs that the creditor has incurred for measures taken for the purposes of obtaining payment including, for example, payment reminders and collection demands.

The marketing of consumer credits has previously been subject to certain requirements regarding moderation and restraint. The new rules also include an explicit requirement for all such marketing to be moderate. The new requirement is applicable to all types of consumer credits and, thus, not solely to high-cost credits (as defined above). It is not entirely clear what the meaning of moderation entails, and it remains to be seen how this requirement will be applied by Swedish courts and authorities in practice.

The authorities have paid more attention to the moderation requirement recently, and it is clear that a comprehensive assessment of all relevant circumstances will be made. In particular, the authorities and courts will assess:

• whether the credit is presented in a way that misleads the consumer about the financial consequences of the credit or brings the consumer to make an unfounded decision to enter into a credit agreement;
• whether the credit is presented as a carefree solution to the consumer’s financial problems; and
• whether the credit is neutral in a way that enables the consumer to decide whether the credit is favourable or not.

Pursuant to the Swedish government preparatory works implementing the above changes, it is stipulated that the marketing should be as neutral and factual as possible and may not be intrusive (by way of, for example, targeting certain types of possible consumers via digital means). The marketing should also be balanced in the sense that certain terms of the credit should not be disproportionately highlighted, thereby reducing the consumer’s ability to make a well-founded decision.

Are there restrictions on trading loans in the secondary market in your jurisdiction?

There are no particular restrictions on trading loans in the secondary market in Sweden.

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Collective investment undertakings are regulated through the Swedish UCITS Act (2004:46), stipulating that the management of a Swedish UCITS, the sale and redemption of units in the fund and administrative measures relating thereto may only be conducted following authorisation from the SFSA (with foreign EEA management companies authorised in their respective home state being able to rely on passporting regulations to carry out operations in Sweden).

Fintech companies would generally not fall within the scope of the above-mentioned regulatory regime. 

Are managers of alternative investment funds regulated?

Yes, managers of AIFs (AIFMs) are regulated through the Swedish Alternative Investment Fund Managers Act (2013:561 (AIFMA)), implementing the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD). Small AIFMs (ie, AIFMs managing AIFs below the thresholds specified in article 3(2) of the AIFMD) may be exempted from the licensing requirements but must register with the SFSA and may not passport the registration into any other EU member state.

Similar to the case in relation to UCITS, fintech companies would generally not fall within the scope of the AIFMA.

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

Companies facilitating peer-to-peer or marketplace lending, comprising loan intermediation or brokering, are regulated by and require authorisation pursuant to the CCCOA (if the borrowers are consumers) or the HCOA (if the borrowers are consumers and the loans relate to purchases of residential immovable property). Both the CCCOA and the HCOA contains regulations on, for example, anti-money laundering measures, sound practices for loan intermediation operations, and ownership and management assessments.

Business operators providing those services to borrowers that are not consumers are required to register its operations with the SFSA (by way of notification to the SFSA) in accordance with the Swedish Certain Financial Operations (Reporting Duty) Act (1996:1006) and comply with provisions relating to, for example, anti-money laundering, as well as undergo ownership and management assessments. Should the relevant company also be responsible for the transactions of funds between lenders and borrowers (including keeping funds on a client account, or similar), the operations would instead fall under and require authorisation pursuant to the Swedish Payment Services Act (2010:751 (PSA)), which imposes additional requirements relating to, for example, own funds and information and technical processes relating to the execution of payment transactions.

Describe any specific regulation of crowdfunding in your jurisdiction.

There is currently no specific regulation of crowdfunding under Swedish law. Certain crowdfunding schemes may, however, fall within the scope of the general financial services framework. In the case of equity-based crowdfunding, the Swedish Companies Act (2005:551) prohibits a private company or a shareholder thereof from attempting to sell shares or subscription rights in the company or debentures or warrants issued by the company to the public.

In July 2016, the Swedish government appointed a special committee to analyse the need for further regulations with regard to, and to improve the legal and regulatory opportunities for, peer-to-peer and grassroots financing in Sweden. A legislative proposal was published in February 2018 that proposes the introduction of a new Swedish Financing Mediation Act (SFA). The proposed SFA includes licensing requirements for the activities that fall within the scope of the SFA and provisions on operational requirements, supervision and sanctions. The SFSA would be the authority responsible for licensing, registration and supervision, and companies authorised under the proposed SFA would be subject to the provisions of the Money Laundering and Terrorist Financing Prevention Act (2017:630), implementing the Fourth Anti-Money Laundering Directive 2015/849/EU, as amended. The proposed SFA would apply to business activities where the purpose is to – in exchange for payment – bring together natural or legal persons who intend to acquire financing from other natural or legal persons, where the financing is in the form of:

• loan-based crowdfunding (credit granted by companies in exchange for payment, where the creditor is not licensed by the SFSA to conduct lending or loan mediation);
• share-based crowdfunding (financing through the transfer of debt or ownership rights in the legal person seeking financing);
• reward-based crowdfunding (financing through the offer to provide a service or commodity by the person seeking financing); or
• donation-based crowdfunding (financing without an obligation for the person seeking financing to provide any payment or performance).

Licensing will mainly be required for share-based and loan-based crowdfunding. Companies that receive authorisation to mediate share-based or loan-based crowdfunding will be referred to as licensed capital mediators. The proposal has, however, not yet been adopted into law.

Describe any specific regulation of invoice trading in your jurisdiction.

In accordance with the Certain Financial Operations (Reporting Duty) Act, a company participating in financing, for example, by acquiring claims (invoice trading), is required to register its operations with the SFSA (by way of notification to the SFSA), and it is further obliged to comply with provisions relating to, for example, anti-money laundering, and to undergo ownership and management assessments.

Are payment services regulated in your jurisdiction?

Yes. Payment services are regulated under the Second Payment Services Directive (EU) 2015/2366 (PSD2), which has been implemented into Swedish law through the PSA. Money remittance, execution of payment transactions, acquisition of payment instruments, payment initiation and account information services are among the services currently regulated under the PSA.

Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?

The obligation for financial institutions to make customer or product data available to third parties under PSD2 has been implemented without change in Sweden.

Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?

Yes, if the selling and marketing is classified as ‘insurance distribution’. Insurance distribution is regulated under the Swedish Insurance Distribution Act (2018:1219 (IDA)) implementing Directive (EU) 2016/97 on Insurance Distribution (IDD). The IDA entered into force in Sweden on 1 October 2018. The IDD is a minimum harmonisation directive, enabling member states to impose stricter regulation. The IDA includes the same definition of ‘insurance distribution’ and the same exemptions from regulation as the IDD. Sweden has, however, imposed stricter regulations regarding third-party remunerations, conditions for providing advice on a fair and personal analysis, certain marketing prohibitions and information to a customer on remuneration. The stricter regulatory framework introduced by the IDD regarding insurance-based investment products also applies to the distribution of pension insurance that is exposed to market volatility.

Are there any restrictions on providing credit references or credit information services in your jurisdiction?

Yes. Credit references and credit information services are regulated under the Swedish Credit Information Act (1973:1173) and the Swedish Credit Information Regulation (1981:955). A licence from the Swedish Data Protection Authority is required when carrying out credit-rating operations in Sweden.

Law stated date

Give the date on which the above content is accurate.

10 July 2020.