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, and the SFSA publicly announces when it is investigating a particular company for possible infringements.

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.

The Swedish Authority for Privacy Protection (SAPP) is the supervisory authority responsible for monitoring compliance with EU General Data Protection Regulation (GDPR) and supplementing regulations related thereto. The SAPP issues guidelines and regulations for the usage and processing of personal data and has become increasingly important for fintech companies as fintech services are often data-heavy. The SAPP’s mandate includes all GDPR-related issues in Sweden. The SAPP may inspect companies and can issue fines under the GDPR.

Which activities trigger a licensing requirement in your jurisdiction?

The following activities could trigger a licensing requirement:

• consumer lending and mediation;
• mortgage lending, mediation or advising;
• lending, factoring and invoice discounting in combination with accepting repayable funds from the public;
• deposit-taking;
• management of alternative investment funds (AIFs) or undertakings for collective investment in transferable securities (UCITS);
• insurance mediation;
• provision of payment services; and
• activities under Capital Requirements Regulation No. 575/2013.

Furthermore, a licence is required for offering the services and products covered by 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 could trigger a registration requirement:

• currency exchange;
• management or trading in virtual currencies;
• lending and mediation of credits to non-consumers as well as leasing and provision of guarantees and similar commitments (if not combined with accepting repayable funds from the public);
• issuing of means of payments;
• participating in securities issues;
• providing economic advice;
• safe custody services;
• operating a cryptocurrency trading platform; and
• foreign exchange trading.

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 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) (SBFBA) (should the company instead, given the operations carried out, be considered a credit institution (as defined in Capital Requirements Regulation No. 575/2013) 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).

Sweden has rules regarding high-cost credits, which are 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.

The high-cost credits include certain caps where: (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 is also subject to certain requirements regarding moderation and restraint. These rules include an explicit requirement for all such marketing to be moderate. This requirement is applicable to all types of consumer credits and, thus, not solely to high-cost credits (as defined above).

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, 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.

On 1 July 2020, the SFSA introduced new consumer credit regulations that forbid payment service providers from presenting credit purchase as the first payment option, or to have it set as the default payment option for online purchases where an option to pay the goods or service directly is also available.

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. However, on 18 February 2021, the SFSA stated that lenders that fund their lending by issuing bonds must now apply for a financing business licence under the SBFBA unless the bonds are subject to a transfer restriction preventing them from being acquired by the public.

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 (AML), 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) (CFORDA) and comply with provisions relating to, for example, AML, 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.

While there is currently no specific regulation of crowdfunding services under Swedish law, certain crowdfunding schemes may fall within the scope of the general financial services framework. However, EU Regulation 2020/1503 on Crowdfunding Service Providers (the Crowdfunding Regulation) entered into force on 10 November 2020 and will apply from 10 November 2021, establishing a harmonised framework for crowdfunding service providers in the EU. Particular for the Swedish market as regards the Crowdfunding Regulation is that, due to the prohibition in the Swedish Companies Act (2005:551) for Swedish private companies or shareholders from attempting to sell shares or subscription rights in the company or debentures or warrants issued by the company to the public, shares in such companies would not be admitted instruments for crowdfunding purposes.

Describe any specific regulation of invoice trading in your jurisdiction.

In accordance with the CFORDA, 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, AML, 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?

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.

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 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. Typically, marketing that is not covered by the scope of the IDA is characterised by the fact that it is not possible for potential customer to, directly or indirectly, take out an insurance in connection with the marketing measure. If an insurance can be taken out in connection with the marketing measure, it will constitute insurance distribution unless the exemptions of ancillary insurance distribution apply. Sweden has 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 SAPP 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.