Third country undertakings’ right to provide investment services in Norway

Background

Section 9-39 a of the Securities Trading Regulations entitles, under certain terms and conditions, undertakings with their head office outside the EEA to provide investment services and perform investment activities in relation to Norwegian eligible counterparties and the Norwegian Banks' Guarantee Fund without a Norwegian authorisation. This provision allows for the provision of services directly from a place of business outside the EEA. It replaces the temporary regulation of 20 December 2018 no. 2204 on investment activities and investment services provided by third country undertakings to professional clients and eligible counterparties in Norway (contract continuity), which has now been repealed.

Content of the provision

According to the Securities Trading Regulations, Section § 9-39 a subsection (2), third country undertakings must have an authorisation in their home state covering the investment services provided and the investment activities performed in Norway, and must be under supervision in their home state.

Furthermore, Finanstilsynet and the supervisory authorities in the undertaking’s home state must have a bilateral or multilateral agreement on supervisory cooperation in the securities area. Finanstilsynet assumes that this condition will be met by signing the ‘IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information’ (IOSOC MMoU). The signatories to the IOSCO MMoU are listed in Appendix A to the MMoU.

The undertaking's home state cannot be listed by the Financial Action Task Force (FATF), which means that the home state cannot be on the FATF's ‘black list’ or ‘grey list’. If the undertaking wishes to provide services in Norway via a branch in another third country, the branch's activities must be subject to similar rules and supervision as the head office.

The terms and conditions of the new Section 9-39 a of the Securities Trading Regulations must be met at all times in order for the third country undertaking to provide services to Norwegian eligible counterparties and the Norwegian Banks' Guarantee Fund. Finanstilsynet would like to point out that other rules, such as the sanctions regulations, may also contain restrictions as to which parties the undertakings can legally enter into agreements with and receive investment services from.

Third country undertakings can provide investment services without an authorisation only to Norwegian eligible counterparties and the Norwegian Banks' Guarantee Fund. Section 10-23 subsection (2) of the Securities Trading Act provides an exhaustive list of undertakings recognised as eligible counterparties:

1. investment firms
2. credit institutions
3. insurance undertakings
4. collective investment undertakings and management companies for such undertakings
5. pension undertakings and their management companies
6. other authorised or regulated financial institutions
7. public bodies at the national level, including central banks and supranational organisations

Undertakings mentioned in Section 10-23 subsection (2) of the Securities Trading Act will be recognised as eligible counterparties pursuant to Section 9-39 a of the Securities Trading Regulations even if they ask to be treated as professional clients, do not agree to be treated as eligible counterparties or for other reasons are given a higher degree of investor protection than what follows from the rules on eligible counterparties.

Section 9-39 a of the Securities Trading Regulations applies to all investment services and investment activities referred to in Section 2-1 of the Securities Trading Act that are provided by undertakings outside the EEA to eligible counterparties in Norway.

The right to provide ancillary services pursuant to Section 2-6 of the Securities Trading Act is not regulated by Section 9-39 a of the Securities Trading Regulations. Several of the ancillary services may be provided in Norway without special authorisation. Finanstilsynet assumes that these may also be provided by third country undertakings that provide investment services pursuant to Section 9-39 a of the Securities Trading Regulations. However, other rules may have an impact on the right to provide ancillary services. For example, the provision of custodial/safekeeping services may require an authorisation pursuant to the Norwegian Central Securities Depository Act, the Public Limited Liability Companies Act or the Securities Funds Act. Similarly, the provision of credit and foreign exchange activities generally requires an authorisation pursuant to the Financial Institutions Act. Section 9-39 a of the Securities Trading Regulations does not authorise the provision of ancillary services that require a special authorisation under Norwegian law.

Other grounds for the provision of services by third country undertakings

Third country undertakings may also apply for an authorisation from Finanstilsynet for the provision of investment services and performance of investment activities in Norway through the establishment of a Norwegian branch pursuant to section 9-36 of the Securities Trading Act. Furthermore, Section 9-39 a of the Securities Trading Regulations does not restrict third country undertakings’ right to provide investment services directly from a place of business outside the EEA at the exclusive initiative of the client (reverse solicitation), cf. the Securities Trading Act, Section 9-36 subsection (4).