Professional Documents
Culture Documents
International Survey of
Investment Adviser Regulation
THIRD EDITION
Marcia L. MacHarg
Kenneth J. Berman
Editors
Published by:
Kluwer Law International
PO Box 316
2400 AH Alphen aan den Rijn
The Netherlands
Website: www.kluwerlaw.com
ISBN 978-90-411-3602-2
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without
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Printed and Bound by CPI Group (UK) Ltd, Croydon, CR0 4YY.
Table of Contents
Preface
lxxv
List of Abbreviations
lxxvii
Introduction
lxxxi
Argentina
Patricia Lopez Aufranc
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Table of Contents
3.
4.
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6.
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15.
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Australia
Steven Rice
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Table of Contents
2.3.3. Specific Exclusions From Financial Products
2.3.4. Exclusions from Financial Product Advice
2.3.5. Exclusions from the definition of dealing
2.4. Registration of Associated Persons
2.5. Registration of Affiliates
2.6. Registration of Non-Australian Advisers
2.7. Exemptions
B. The Registration Process
1. How to Register
1.1. Registration Form
1.2. Registration Fee
1.3. How Long Does the Registration Process Take?
1.4. Reciprocity
1.5. Are There Different or Additional Registration Provisions
for Non-Australian Applicants?
1.6. Information Required
1.6.1. Proof Documents
1.6.2. People Proofs
1.6.3. Other Core Proofs
1.6.4. Non-core Proofs
1.7. Scope of the License
1.8. Substantive Requirements for Registration
1.8.1. General Standards for Granting Registration
1.8.2. Organizational Competence and Responsible
Managers
1.8.2.1. General
1.8.2.2. Overseas Qualifications
1.8.3. Adequate Compliance Arrangements
1.9. Jurisdiction of Organization
1.10. Nationals/Residents Serving as Directors, Officers or
Employees
2. Withdrawal from Registration
3. Grounds for Denial and Rescission of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
4. Compensation Terms
5. Can the Advisory Contract Be Assigned by the Investment
Adviser?
6. Disclosure Requirements
6.1. Wholesale Clients and Retail Clients
6.2. Disclosures to Retail Clients
7. Personal Securities Trading
8. Performance-Based Fees
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Table of Contents
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Consumer Privacy and Data Protection
E. Enforcement Proceedings
F. Extraterritorial Application
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Austria
Michael Binder & Stefan Frank
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Table of Contents
2. Disclosure Requirements
2.1. Information Required
2.2. Classification of Clients
2.2.1. Professional Clients
2.2.2. Eligible Counterparties
2.2.3. Retail Clients
3. Insider Trading; Personal Transactions
4. Compensation and Performance-Based Fees
5. Soft Dollars
6. Agents
7. Record Keeping
8. Custody Regulations
9. Regulatory Inspections
D. Anti-money Laundering and Data Protection
1. Anti-money Laundering
2. Data Protection
E. Enforcement Proceedings
F. Extraterritorial Application
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Belgium
Marc Vermylen & Jan Missoul
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Table of Contents
2.2. Compliance, Audit and Risk Management
2.3. Jurisdiction of Organization and Other Obligations
2.4. Capital and Liquidity Requirements
3. Denial and Withdrawal of Licenses
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Duty of Care
1.2. Market Abuse
1.3. Conflicts of Interest
1.4. Codes of Conduct
2. Insider Trading
2.1. Insiders and Inside Information
2.2. Obligations to Prevent Insider Trading
2.3. Administrative and Criminal Offense
3. Conduct of Business Rules; Suitability
3.1. Client Classification
3.2. Disclosure Requirements
4. Advertising
5. Electronic Media and Use of the Internet
6. Personal Securities Trading
7. Compensation of Professionals
7.1. General Requirements
7.2. Performance-Based Remuneration
8. Solicitation by Intermediaries
9. Custody
10. Soft Dollars; Fees
11. Regulatory Inspections
D. Anti-money Laundering and Data Protection
1. Anti-money Laundering
2. Data Protection
E. Enforcement Proceedings
F. Extraterritorial Application
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Brazil
Joaquim Simoes Barbosa & Paulo Eduardo Penna
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Table of Contents
2.1.3. Investment Analysts and Autonomous
Investment Agents
2.2. Definition of Securities
2.3. Registration of Associated Persons
2.3.1. Officer, Administrator or Managing Partner
2.4. Registration of Non-Brazilian Managers or Consultants
2.5. Exemption from Registration
B. The Registration Process
1. How to Register with the CVM
1.1. Investment Manager Registration
1.1.1. Individuals
1.1.2. Corporate Entities
1.2. Investment Consultant Registration
1.3. Registration Fee
1.4. How Long Does the Registration Process Take?
1.5. Reciprocity
2. Information Required
2.1. Individual Investment Managers
2.2. Corporate Investment Managers
2.3. Investment Consultants
2.3.1. Individuals
2.3.2. Corporate Entities
3. Substantive Requirements
3.1. Capital or other Financial Requirements
3.2. Jurisdiction of Organization
3.3. Nationals Serving as Officers,
Directors or Employees
4. Withdrawal from Registration
5. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading and Privileged Information
3. Contractual Relationship with Clients
4. Disclosure Requirements
4.1. Reports to the CVM
5. Personal Securities Trading
6. Performance-Based Fees
7. Advertising Restrictions
8. Electronic Media; Use of Internet
9. Client Solicitors
10. Books and Records
11. Custody Regulations
12. Soft Dollars
13. Regulatory Inspections
14. Loans
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Table of Contents
15. General Responsibility
16. Other Activities
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
E. Enforcement Proceedings
1. Administrative Proceedings
2. Penalties
3. Private Rights of Action
F. Extraterritorial application
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Canada
Bryce Kraeker & Paul Dempsey
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Table of Contents
1.6. Information Required
1.7. Associated Persons
1.8. Financial Statements
2. Substantive Requirements for Registration
2.1. Working Capital and Insurance
2.2. Jurisdiction of Organization
2.3. Nationals or Residents Serving as Directors, Officers
or Employees
3. Withdrawal from Registration
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Conflicts of Interest
2. Insider Trading
3. Contractual Relationship with Clients
3.1. Required Terms and Conditions
3.2. Standard of Care
4. Compensation Terms
5. Assignments of Advisory Contracts
6. Disclosure Requirements
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
16. Tied Settling and Selling
D. Anti-money Laundering, Data Protection
and Consumer Privacy
1. Anti-money Laundering
2. Data Protection
3. Consumer Privacy
E. Enforcement
1. Enforcement Authority
2. Enforcement Powers and Remedies
3. Private Right of Action
F. Extraterritorial Application
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Chile
Jose Maria Eyzaguirre B. & Luisa Fernanda Nunez P.
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Table of Contents
1.1. General
1.2. Regulatory Authorities
2. Investment Advisory Activities of Specially Regulated or
Licensed Entities
2.1. Broker-Dealers and Stockbrokers
2.2. Registration of Broker-Dealers and Stockbrokers
2.3. Management of Securities Portfolios
2.4. Ancillary Activities
2.5. Advice with Respect to Non-Chilean Securities
2.5.1. Mandate Agreement
2.6. Advisory Activities by Unlicensed Entities
B. Overview of Substantive Regulation
1. General
2. Insider Trading
3. Conflicts of Interest and Risk Management
4. Contractual Relationship with Clients
4.1. General
4.2. Written Contracts
4.2.1. Portfolio Management Agreements
4.3. Compensation
4.4. Assignments
5. Disclosure Requirements
6. Use of the Internet
7. Books and Records
8. Custody
9. Regulatory Inspection
C. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
1.1. FAU
1.2. AML and Terrorism Regulations
2. Data Protection and Consumer Privacy
D. Enforcement Proceedings
E. Extraterritorial Application
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Table of Contents
2.3. Securities Companies with Asset Management Business
Qualification (SCAMBQs)
3. Registration Requirements
3.1. Securities Investment Fund Management Companies
3.1.1. Securities Investment Fund Management
3.1.2. PRC Companies
3.1.3. Registration of Affiliates
3.1.4. Registration of Non-PRC Companies
3.2. Securities Investment Consulting Companies
3.2.1. PRC Companies
3.2.2. Registration of Affiliates
3.2.3. Registration of Non-PRC Companies
3.3. Securities Companies with Asset Management Business
Qualification
3.3.1. PRC Companies
3.3.2. Registration of Affiliates
3.3.3. Registration of Non-PRC Companies
B. Approval and Registration Process
1. Securities Investment Fund Management Companies
1.1. Requirements for Approval
1.1.1. Shareholder Requirements
1.1.2. Foreign Shareholder Requirements
1.2. Information Required
1.2.1. PRC Applicants
1.2.2. Foreign Joint Venture Applicants
1.3. Qualifications of Associated Persons
1.4. Registration Fee
1.5. How Long Does the Approval Process Take?
1.6. Grounds for Rejection
2. Securities Investment Consulting Companies
2.1. Requirements for Approval
2.2. Information Required
2.3. Qualifications of Associated Persons
2.4. Registration Fee
2.5. How Long Does the Approval Process Take?
2.6. Grounds for Rejection
3. Securities Companies with Asset Management Business
Qualification
3.1. Requirements for Approval
3.1.1. Pooled Asset Management Business
3.2. Information Required
3.3. Qualifications of Associated Persons
3.4. Registration Fee
3.5. How Long Does the Approval Process Take?
3.6. Grounds for Rejection
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Table of Contents
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
3.1. Securities Investment Fund Management Companies
3.2. Securities Investment Consulting Companies
3.3. Securities Companies with Asset Management Business
Qualification
4. Compensation Terms
4.1. Securities Investment Fund Management Companies
4.2. Securities Investment Consulting Companies
4.3. Securities Companies with Asset Management Business
Qualification
5. Assignment
6. Disclosure Requirements
6.1. Securities Investment Fund Management Companies
6.2. Securities Companies with Asset Management Business
Qualification
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer
Privacy
E. Enforcement Proceedings
F. Extraterritorial Application
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Denmark
Regina M. Andersen
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Table of Contents
2.2.
2.3.
2.4.
2.5.
2.6.
2.7.
2.8.
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10. Personal Securities Trading
11. Performance-Based Fees
12. Advertising Restrictions
13. Electronic Media; Use of Internet
14. Client solicitors
15. Books and Records
16. Custody Regulations
17. Soft Dollars
18. Regulatory Inspection
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection
2.1. Persons Covered by the PPD Act
2.2. Collection and Processing of Personal Data
2.3. Notification Requirement
2.4. Transfer of Data Outside the EEA
2.5. Disclosure Requirements
3. Consumer Privacy
E. Enforcement Proceedings
F. Extraterritorial Application
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European Union
Anthony McWhirter & Philip Orange
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Table of Contents
1.3. Reciprocity
1.4. Are there Different or Additional Registration Provisions
for Foreign Applicants?
2. Substantive Requirements for Registration
2.1. Specific MiFID Requirements
2.2. Close-Link Relationships
2.3. Scope of Business; Shareholders; Suitability of Personnel
3. Withdrawal from Registration
4. Doing Business in other Member States
4.1. The MiFID Passport
4.2. Passporting Investment Services and Activities
4.3. Establishing a Branch in a Host Member State
C. Overview of Substantive Regulation
1. Home Member State Regulation
2. Operational Requirements; Policies and Procedures
3. Conduct of Business Requirements
4. Client Categories
4.1. Professional Clients; Eligible Counterparties
4.2. Retail Clients
5. Capital Requirements
5.1. Applicable Directives
5.2. Initial Capital Requirements
5.3. Risk Capital Requirements
5.4. Liquidity Standards
5.5. Remuneration Policies
6. Insider Trading
6.1. Inside Information
6.2. Market Manipulation
7. Acquiring Interests in Investment Firms
7.1. Notification of Acquisition of Qualifying Holding
7.2. Assessment of Proposed Acquirer
8. Reporting to Member State Authorities
8.1. Changes in Control
8.2. Transactions in Financial Instruments
9. Electronic Media; Use of the Internet
10. Investor Compensation
11. Auditors Duty to Whistleblow
12. Collective Investment Undertakings
13. Alternative Investment Fund Managers Directive
14. Cooperation among Member States
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection
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Table of Contents
E.
F.
Enforcement Proceedings
1. Enforcement Reserved to Member States
2. Judicial Review
3. Individual Private Rights of Action
Extraterritorial Application
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France
Antoine dOrnano
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Table of Contents
1.5. Reciprocity
1.5.1. EEA Member States
1.5.1.1. MIF Advisers
1.5.1.2. Financial Advisers
1.5.2. Countries outside the EEA
1.6. Information Required
2. Substantive Requirements for Authorization or Registration
2.1. Capital Requirements for MIF Advisers
2.2. Capital Requirements for Financial Advisers
2.3. Jurisdiction of Organization for MIF Advisers
2.4. Jurisdiction of Organization of Financial Advisers
2.5. Nationals or Residents Serving as Directors,
Officers, and Employees
3. Voluntary withdrawal from Authorization or Registration
3.1. MIF Advisers
3.2. Financial Advisers
4. Grounds for Denial of Authorization or Registration
4.1. MIF Advisers
4.2. Financial Advisers
5. Grounds for Termination of Authorization
5.1. MIF Advisers
5.2. Financial Advisers
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. MIF Advisers
1.2. Financial Advisers
2. Client Suitability
2.1. MIF Advisers
2.2. Financial Advisers
3. Conflicts of Interest
3.1. MIF Advisers
3.2. Financial Advisers
4. Insider Trading
4.1. MIF Advisers
4.2. Financial Advisers
5. Contractual Relationships with Clients
5.1. MIF Advisers
5.1.1. Categorization of Clients
5.1.2. Disclosure of Information to Clients
5.1.3. Written Contracts
5.2. Financial Advisers
5.2.1. Categorization of Clients
5.2.2. Disclosure of Information to Clients
5.2.3. Written Contracts
5.3. Can the Contracts Be Assigned?
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6. Disclosure Requirements
6.1. MIF Advisers
6.1.1. Disclosure Prior to Service
6.1.2. Ongoing Disclosure
6.2. Financial Advisers
6.2.1. Disclosure Prior to Service
6.2.2. Ongoing Disclosure
7. Personal Securities Trading
7.1. MIF Advisers
7.2. Financial Advisers
8. Performance-Based Fees
8.1. MIF Advisers
8.2. Financial Advisers
9. Advertising
9.1. MIF Advisers
9.2. Financial Advisers
10. Electronic Media; Use of Internet
10.1. MIF Advisers
10.2. Financial Advisers
11. Client Solicitors
11.1. MIF Advisers
11.2. Financial Advisers
12. Books and Records
12.1. MIF Advisers
12.2. Financial Advisers
13. Custody Arrangements
13.1. MIF Advisers
13.2. Financial Advisers
14. Soft Dollars
14.1. MIF Advisers
14.2. Financial Advisers
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
E. Enforcement Proceedings, Private Right of Action
1. MIF Advisers
1.1. Criminal Sanctions
1.2. Professional Sanctions
1.3. Civil Claims
2. Financial Advisers
2.1. Criminal sanctions
2.2. Professional Sanctions
2.3. Civil Claims
F. Extraterritorial Application
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Table of Contents
Germany
Marcia L. MacHarg, Ina von Raven & Daniel Wiedmann
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Table of Contents
C. Overview of Substantive Regulation
1. General
2. Duty of Care and Best Execution
3. Insider Trading and Market Manipulation
3.1. Insider Trading
3.2. Market Manipulation
4. Client Classification
5. Suitability
6. Conflicts of Interest
7. Contractual Relationship with Clients
8. Assignment of Advisory Contracts
9. Disclosure Requirements
9.1. Required Information
9.2. Disclosure to Retail Clients
9.3. Disclosure to BaFin
10. Fees
11. Soft Dollars; Incentive Payments
12. Advertising Restrictions
13. Electronic Media; Use of Internet
14. Client Solicitors
15. Books and Records
16. Custody
17. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and Terrorist Financing
1.1. Client Due Diligence
1.2. Recordkeeping
1.3. Reporting
2. Data Protection
E. Enforcement Proceedings
1. Administrative Proceedings
1.1. Corrective Actions
1.2. Administrative Fines
2. Criminal Offenses
F. Extraterritorial Application
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Greece
Vassiliki Lazarakou & Michalis Pattakos
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Table of Contents
2. Registration Requirements
2.1. Activities or Actions Requiring Registration
2.1.1. Investment Advice; Portfolio Management
2.2. Definition of Financial Instruments
2.3. Ancillary Services
2.4. Exemptions
2.5. Certification of Associated Persons
2.5.1. Officers and Directors
2.5.2. Qualified Personnel, Compliance and
Internal Audit
2.6. Registration of Affiliates
2.7. Registration of Advisers from Outside Greece
B. The Registration Procedure
1. How to Register
1.1. Authorization Form
1.2. Authorization Fee
1.3. How Long Does the Authorization Process Take?
1.4. Reciprocity
1.5. Information Required
1.5.1. Applicant Entity
1.5.2. Board of Directors
1.5.3. Controlling Shareholders
1.6. Financial Information
2. Substantive Requirements for Licensing
2.1. Capital Requirements
2.2. Jurisdiction of Organization; Type of Legal Entity
2.3. Nationals or Residents Serving as Directors,
Officers or Employees
3. Termination or Withdrawal of License
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Conflicts of Interest
3. Insider Trading
3.1. Privileged Information Relating to Financial Instruments
3.2. Privileged Information Relating to Derivatives
3.3. Persons Covered
3.4. Policies and Procedures against Market Abuse
4. Contractual Relationship with Clients
4.1. Written Agreements
4.2. Classification of Clients
4.2.1. Professional Clients
4.2.2. Non-Professional Clients
4.3. Notification of Guarantee Scheme
5. Compensation Terms
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320
321
322
323
323
323
323
324
324
325
325
325
326
327
327
327
327
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328
328
329
329
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330
331
331
331
332
332
332
332
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6. Can the Contract be Assigned?
7. Disclosure Requirements
7.1. Client Disclosures
7.2. Ongoing Disclosure to the CMC
8. Personal Securities Trading
9. Performance-Based Fees
10. Advertising Restrictions
11. Electronic Media; Use of Internet
12. Client Solicitors
13. Books and Records
14. Custody Regulations
15. Regulatory Inspections
15.1. Role of CMC and BoG
15.2. Inspections of EU and Non-EU Firms
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and Counter-Terrorism
2. Data Protection and Consumer Privacy
2.1. Data Protection
2.2. Consumer Protection
E. Enforcement Proceedings
1.1. Regulatory Authorities
1.2. Private Right of Action
F. Extraterritorial Application
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335
336
337
338
339
339
339
340
340
341
341
341
342
343
343
344
344
345
345
Hong Kong
Rory Gallaher & Alice Qian
347
347
347
347
348
349
349
349
350
350
xxvi
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351
351
351
351
352
352
Table of Contents
2.10. Registration of Entities from Outside Hong Kong
2.11. Provisional Licenses
2.12. Exemptions from Licensing Requirements
2.12.1. Incidental Exemption
2.12.2. Advising Wholly Owned Group Companies
2.12.3. Exemptions from Adviser Licensing
2.13. Activities in Hong Kong
B. The Licensing Process
1. How to Obtain a License
1.1. Application Form
1.2. Licensing or Registration Fees
1.3. How Long Does the Licensing Process Take?
1.4. Information Required
1.4.1. Information about Associated Persons
1.4.2. Information on Financial Resources
1.5. Financial Statements
1.5.1. Reciprocity
1.6. No Additional Licensing Provisions for Foreign
Applicants
2. Substantive Requirements for Licensing
2.1. Fit and Proper Criteria
2.2. Capital and Other Financial Requirements for Licensed
Corporations
2.3. Insurance Requirements
2.4. Competence Requirements for Associated Persons
2.4.1. Individuals
2.4.2. Test of Competence for Responsible Officers
2.4.3. Test of Competence for Licensed Representatives
2.5. Jurisdiction and Form of Organization
2.6. Number of Residents Serving as Directors, Officers or
Employees
3. Withdrawal from Carrying on Licensed Regulated Activity
4. Grounds for Denial of License
5. Revocation or Suspension of a License
5.1. Individuals
5.2. Corporations
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Insider Dealing
1.1.1. Duty of Officers to Implement Policies and
Procedures
1.2. Market Misconduct
1.2.1. False Trading
1.2.2. Price Rigging
1.2.3. Disclosure of Information about Prohibited
Transactions
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354
354
355
355
355
355
356
357
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358
358
358
358
359
359
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1.2.4. Disclosure of False or Misleading Information
Inducing Transactions
1.2.5. Stock Market Manipulation
2. Contractual Relationship with Clients
2.1. Required Terms and Conditions
2.2. Standard of Care
2.3. Compensation Terms
2.4. Assignment of Client Agreement
3. Disclosure Requirements
3.1. The Securities and Futures (Contract Note, Statement of
Account and Receipts) Rules (the Rules)
3.1.1. Receipts for Deposits of Money or Securities
3.1.2. Monthly Statements of Account
3.2. Ongoing Disclosure Requirements for Licensed Persons
3.2.1. Submission of Audited Accounts
3.2.2. Submission of Financial Resources Returns
3.2.3. Submission of Annual Returns
3.2.4. Notification of Certain Events and Changes
3.3. Disclosure of Financial and Disciplinary Action
4. Personal Securities Trading
4.1. Disclosure of Interests in Securities
5. Performance-Based Fees
6. Advertising Restrictions
7. Electronic Media; Use of Internet to Provide or Advertise
Services
8. Client Solicitors
9. Books and Records
10. Custody Regulations
10.1. Client Money
10.2. Client Securities/Securities Collateral
11. Soft Dollars
12. Regulatory Inspections
12.1. Who Can Conduct Inspections of Licensed Investment
Advisers?
12.2. Inspection Process
D. Anti-money Laundering, Data Protection and
Consumer Privacy
1. Anti-money Laundering Regulations
2. Data Protection
E. Enforcement Proceedings
1. Enforcement Authority
2. Enforcement Powers
2.1. Disciplinary Action
xxviii
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369
369
369
369
369
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370
370
371
371
371
372
373
373
374
374
375
376
376
376
377
377
378
378
378
378
378
379
379
379
379
379
Table of Contents
F.
380
381
381
381
382
India
Cyril Shroff
383
383
383
383
384
384
385
386
386
386
386
387
387
387
387
388
389
389
389
389
390
391
391
391
392
392
393
393
393
393
393
394
394
394
395
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Table of Contents
F.
Enforcement Proceedings
1. Penalties under the SEBI (Intermediaries)
Regulations, 2008
2. Adjudication Proceedings under Chapter VI A of
the SEBI Act
3. Directives under Section 11 and 11B of the SEBI Act
4. Criminal Prosecution under Section 24 of the SEBI Act
G. Extraterritorial Application
H. Recent Legislative Developments
395
396
396
396
397
397
398
Indonesia
Miranti Malikus-Ramadhani & Dian Lindajanti
399
399
399
399
400
400
400
400
401
401
401
401
402
402
402
403
403
403
403
404
404
xxx
404
404
404
404
405
407
408
408
408
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Table of Contents
5. Grounds for Rejection of Application
6. Revocation of License
B. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
4. Compensation Terms
5. Can the Advisory Contract Be Assigned by the Investment
Adviser?
6. Disclosure Requirements
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records; Reports to Regulators
12.1. Books and Records
12.2. Reports to Bapepam-LK
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
C. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
1.1. Know Your Customer Working Units and Guidelines
1.2. Acceptance and Identification of Clients
1.3. Identification and Verification of Documents Provided by
Prospective Clients
1.4. Monitoring Accounts and Transactions
1.5. Risk Management Policies
2. Data Protection and Consumer Privacy
D. Enforcement Proceedings
1. Enforcement
1.1. Administrative Sanctions
1.2. Criminal Sanctions
1.2.1. Failure to Obtain a License
1.2.2. Fraud, Market Manipulation or Insider Trading
1.2.3. Management of Reksa Dana
1.2.4. Inspection
E. Extraterritorial Application
409
409
410
410
410
410
411
411
411
412
412
412
413
413
414
414
414
414
415
415
416
416
416
417
417
418
418
419
419
419
419
420
420
420
420
420
420
Ireland
Darragh Murphy, John OHalloran & Ciara Murphy
423
423
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Table of Contents
1. Applicable Laws and Regulations
1.1. Regulatory Structure
1.2. Role of the Central Bank of Ireland
2. Authorization Requirements
2.1. Activities Requiring Authorization
2.2. Definition of Financial Instruments
2.3. Ancillary Services
2.4. Authorization of Associated Persons
2.4.1. Director and Manager Qualifications
2.4.2. Employees Generally
2.4.3. Compliance Officer
2.5. Internal Audit and Risk Management
2.5.1. Authorization of Affiliates
2.6. Change of Control
2.7. Registration of Advisers from Outside Ireland
2.8. Exemptions from Authorization
2.8.1. Investment Advice Exemption
2.8.2. Intra-Group Exemption
2.9. Territorial Safe Harbor
B. The Authorization Process
1. How to Obtain an Authorization
1.1. Authorization Form
1.2. Authorization Fees
1.3. Documentation Required
1.4. How Long Does the Authorization Process Take?
1.5. Reciprocity
1.5.1. EEA Member States
1.5.2. Countries Outside the EEA
1.6. Information Required for Authorization
2. Substantive Requirements for Authorization
2.1. Capital Requirements
2.2. Jurisdiction of Organization
2.3. Nationals or Residents Serving as Directors
3. Withdrawal from Registration
4. Grounds for Denial of Authorization
5. Grounds for Withdrawal of Authorization
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Best Results for Clients
3. Client Suitability
4. Conflicts of Interest
5. Insider Trading
6. Contractual Relationship with Clients
6.1. Categories of Clients
6.2. Professional Clients; Eligible Counterparties
xxxii
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424
424
424
425
426
426
426
427
427
428
428
428
429
430
430
430
431
431
431
431
431
432
432
433
433
434
434
434
434
436
436
436
437
437
439
439
439
439
440
440
441
441
442
Table of Contents
6.3.
6.4.
6.5.
6.6.
Retail Clients
Agreements with Retail Clients
Compensation Terms
Can the Advisory Contract be Assigned by the
Investment Adviser?
7. Disclosure Requirements
8. Personal Securities Trading
9. Performance-Based fees
10. Advertising Restrictions
11. Electronic Media; Use of Internet
12. Client Solicitors
13. Books and Records
14. Custody Regulations
15. Soft Dollars
16. Regulatory Inspections
D. Anti-money Laundering; Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
2.1. Fair Collection and Processing
2.1.1. Criteria for Legitimizing the Processing of
Personal and Sensitive Data
2.1.2. Security Measures
2.1.3. Accuracy of Personal Data; Retention
2.2. Transfer of Data Outside the European Economic Area
2.3. Processing of Personal Data by Data Processor
2.4. Marketing
E. Enforcement Proceedings
1. Criminal Proceedings
2. Administrative Sanction Regime
3. Withdrawal of Authorization
4. Extraterritorial Application
442
442
443
443
444
444
445
446
447
447
447
448
449
449
451
451
452
452
452
453
453
453
453
453
454
454
455
456
457
459
459
459
459
460
461
461
461
462
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Table of Contents
2.1.4. Portfolio Management
2.1.5. Exemptions from Licensing
2.2. Registration of Associated Persons
2.3. Registration of Affiliates
2.4. Registration of Non-Israeli Providers of Investment
Services
2.5. Extraterritorial Application
B. The Registration Process
1. How to Register
1.1. Registration Form
1.2. Registration Fee
1.3. How Long Does the Registration Process Take?
1.4. Registration Provisions for Non-Israeli Applicants and
Reciprocity
1.5. Incorporation and Information Required
1.5.1. Investment Advice License
1.5.2. Investment Marketing License
1.5.3. Portfolio Management License
1.6. Substantive Requirements for Registration
1.6.1. Substantive Requirements for Companies
1.6.2. Substantive Requirements for Individuals
1.7. Jurisdiction of Organization
1.8. Nationals/Residents Serving as Directors, Officers or
Employees
2. Withdrawal from Registration
3. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
4. Compensation Terms
5. Can the Advisory Contract Be Assigned by the Investment
Adviser?
6. Disclosure Requirements
6.1. Portfolio Manager Disclosures
6.1.1. Investment Advisers and Investment Marketers
Disclosures
6.1.2. Licensee Disclosures
6.1.3. Details Concerning Investment Advice
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records
xxxiv
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463
465
466
466
466
466
466
466
467
467
467
469
470
470
471
472
472
473
474
474
475
475
476
476
477
478
479
479
479
479
480
480
480
480
481
482
483
483
483
Table of Contents
13. Custody Regulations
13.1. Separation of Assets
13.2. Separate Account Management
13.3. Prohibition of Using Clients Assets
14. Soft Dollars
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering Regulations
2. Privacy Protection
E. Enforcement Proceedings
1. Securities Authority Disciplinary and Administrative
Enforcement
1.1. Monetary Sanctions
1.2. Administrative Sanctions
1.2.1. Monetary Sanctions
1.2.2. Payment to the Party Injured by the Violation
1.2.3. Corrective Measures
1.2.4. Prohibition on Serving as Senior Office Holder
1.2.5. Revocation or Suspension of a License
1.2.6. Publication
1.2.7. Responsibility of a General Manager or Partner
1.2.8. Judicial Review
1.2.9. Administrative proceedings and Criminal
Proceedings
1.3. Prohibition on Indemnification and Insurance
2. Criminal and Disciplinary Sanctions
3. Client Lawsuits
F. Extraterritorial Application
484
484
484
484
484
485
485
485
486
487
487
488
489
491
492
492
492
493
493
493
494
494
494
494
495
495
Italy
Alessandro Portolano & Salvo Arena
497
497
497
497
498
498
498
498
499
499
499
500
500
xxxv
Table of Contents
2.7. Advisers from Outside Italy
2.7.1. Non-EU Intermediaries
2.7.2. EU Intermediaries
B. The Registration Process
1. How to Register
1.1. Registration of SIMs
1.1.1. Application
1.1.2. Corporate Form
1.1.3. Capital Requirements
1.1.4. Timing of Application
1.1.5. Information Required
1.1.6. Qualification of Shareholders
1.1.7. Qualification of Management Personnel
1.2. Registration of Banks Carrying Out Investment
Services
1.3. Registration of SGRs
1.3.1. Information Required
2. Withdrawal from Registration
3. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Conflicts of Interests
2. Anti-fraud Provisions
3. Insider Trading
4. Client Suitability
5. Contractual Relationship with Clients
5.1. Advisory Services Contracts
5.1.1. Definition of Retail and Professional Clients
5.2. Portfolio Management Contracts
5.2.1. General Requirements
5.2.2. Retail Customers
6. Compensation Terms
7. Can the Advisory Contract Be Assigned by the Investment
Adviser?
8. Disclosure Requirements
9. Personal Securities Trading
9.1. Regulations Applicable to Personal Transactions
9.2. Policies and Procedures
10. Performance-Based Fees
11. Advertising Restrictions
12. Electronic Media; Use of Internet
13. Financial Salesmen
14. Books and Records
15. Custody Regulations
16. Regulatory Inspections
xxxvi
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501
502
502
502
503
503
503
503
503
504
504
505
506
507
507
508
508
508
508
509
509
510
511
511
511
512
512
513
513
514
514
516
516
517
517
518
518
519
520
521
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Table of Contents
D. Anti-money Laundering, Data Protection and Consumer
Privacy
1. Anti-money Laundering Regulation
2. Data Protection and Consumer Privacy
E. Enforcement Proceedings
1. Administrative Sanctions
2. Criminal Sanctions
F. Extraterritorial Application
521
521
524
524
524
526
526
Japan
Kei Ito & Shinya Uchida
527
527
527
527
527
528
528
528
528
529
529
529
529
530
531
532
533
534
534
535
536
537
537
537
538
538
538
538
538
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Table of Contents
1.3. How Long Does The Registration Process Take?
1.4. Are There Different Registration Requirements for
Non-Japanese Applicants?
2. Required Information
3. Substantive Requirements for Registration
3.1. Investment Management Business
3.1.1. Capital Requirements
3.1.2. Jurisdiction of Organization
3.1.3. Compliance Framework
3.1.4. Human Resources Requirements
3.1.5. Withdrawal and Denial of Registration
3.1.6. Additional Requirements in the Case
of Investment in Beneficial Interests in
a Trust of Real Estate
3.1.7. Investment Management Business Targeting Only
Accredited Investors
3.2. Non-Discretionary Investment Advisory Business
3.2.1. Capital Requirements and Deposit
3.2.2. Jurisdiction of Organization
3.2.3. Compliance Framework and Human Resources
Requirements
3.3. Withdrawal and Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
4. Standard of care
5. Compensation Terms
6. Assignment of Advisory Agreements
7. Disclosure Requirements
7.1. Initial Disclosure to Client
7.2. Subsequent Disclosure to Clients
7.3. Regulatory Reports
8. Personal Securities Trading
9. Performance-Based Fees
10. Advertising Restrictions
11. Electronic Media; Use of Internet
12. Client Solicitors
13. Books and Records
14. Custody Regulations
15. Soft Dollars
16. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer
Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
xxxviii
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539
539
541
541
541
541
541
542
543
545
545
545
545
545
545
546
547
547
548
549
549
550
550
550
550
550
551
552
552
552
553
553
554
555
555
555
556
556
556
Table of Contents
E.
F.
557
557
557
558
559
559
559
Korea
Sang Man Kim & Sung-You Choi
561
561
562
562
562
562
562
563
563
563
563
564
565
565
565
566
566
566
566
566
566
566
567
568
571
571
571
571
571
572
572
572
572
xxxix
Table of Contents
1.2. Regulations applicable to Discretionary Investment
Management Companies
2. Insider Trading
3. Contractual Relationship with Clients
3.1. Execution and Delivery of the Client
Agreement
3.2. Duties and Obligations
3.2.1. Principle of Trust and Faith
3.2.2. Duty of Care
3.2.3. Duty of Good Faith
4. Compensation Terms
5. Can the Advisory Contract be assigned by the Investment
adviser?
5.1. Assignment under Business Transfer
5.2. Client Consent for Assignment
5.3. Delegation
6. Disclosure Requirements
6.1. Delivery of Solicitation Document
6.2. Ongoing or Periodic Disclosure Requirements
6.2.1. Reports to Clients
6.2.2. Reports to Regulators
7. Personal Securities Trading
8. Performance-based Fees
9. Advertising Restrictions
10. Electronic Media; Use of the Internet
10.1. Regulations governing the Use of the Internet or
Electronic Media
10.2. Substantive Requirements governing the Use of the
Internet or Electronic Media
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and
Consumer Privacy
1. Anti-money Laundering Regulations
2. Consumer Privacy or Data Protection
Regulations
E. Enforcement Proceedings
1. Enforcement Authority
2. Enforcement Powers or Remedies
3. Private Right of Action
F. Extraterritorial Application
xl
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577
577
579
579
579
579
580
580
580
580
580
581
581
582
582
583
584
584
584
585
585
585
586
586
587
587
588
589
589
589
590
590
590
590
591
Table of Contents
Luxembourg
Alex Schmitt & Philipp Mossner
593
593
593
593
594
594
595
595
595
595
596
596
597
597
597
598
598
599
600
600
600
600
600
600
601
601
602
602
603
603
603
604
604
604
604
605
605
606
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Table of Contents
4. Compensation Terms
5. Performance-Based Fees
6. Can the Advisory Contract Be Assigned?
7. Disclosure Requirements
8. Personal Securities Trading
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
16. Other
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection
3. Consumer Privacy
E. Enforcement Proceedings
F. Extraterritorial Application
606
607
607
607
608
609
609
609
610
610
611
611
612
612
612
613
613
614
615
The Netherlands
Antonia A.F. Netiv, Jesler J. Hartman Kok & Walter A.M. Schellekens
617
617
617
617
618
619
619
620
xlii
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621
621
622
622
623
623
623
624
624
625
625
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626
Table of Contents
2.6. What Constitutes Performing Services in the Netherlands?
2.7. Limitations to the License Requirements
2.7.1. Limitations on Scope of FSA
2.7.2. Exceptions from Licensing for Certain Financial
Enterprises
2.7.3. EEA Member State Exceptions
2.7.4. Non-EEA Member State Exemptions; Other
Exemptions and Limitations
B. The Registration Process
1. How to Register
1.1. Application Form
1.2. Application Fees
1.3. Information Required
1.4. Reciprocity
1.5. How Long Does the Licensing Process Take?
2. License Modification, Withdrawal and Limitations
2.1. Notifications for Licensed Investment Firms
2.2. License Withdrawal or Limitations
C. Overview of Substantive Regulation
1. General
1.1. Compliance Officer
2. Anti-fraud Provisions
3. Insider Trading
3.1. Insider Trading: Price Sensitive Information
3.2. Obligation to Report Insider Trading
4. Conflicts of Interest
5. Contractual Relationship with Clients
5.1. Form and Content Requirements
5.2. Providing Information
6. Clients
6.1. Due Care; Know Your Customer Requirements
6.2. Categories of Clients
6.2.1. Professional Investors; Eligible Counterparties
6.2.2. Non-Professional Investors
6.2.3. Reclassification of Professional Investors; Eligible
Counterparties
7. Compensation Terms
8. Transfer of the Advisory Contract
9. Disclosure Requirements
9.1. Initial Disclosures to Clients
9.2. Ongoing Disclosures to Clients
10. Personal Securities Trading
11. Performance-Based Fees; Compensation
12. Advertising Restrictions
13. Electronic Media; Use of Internet
626
627
627
629
629
630
631
631
631
631
631
633
634
634
634
634
635
635
636
636
636
636
637
638
639
639
640
640
640
641
642
642
643
643
644
644
644
645
645
646
647
647
xliii
Table of Contents
14. Client Solicitors
15. Books and Records
16. Custody Regulations
17. Soft Dollars
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
E. Regulatory Inspections and Enforcement
1. Regulatory Inspections
2. Enforcement: General
3. Administrative Enforcement
3.1. General
3.2. Issuing an Instruction
3.3. Appointment of a Trustee
3.4. Prohibitions on Activities or Transactions
3.5. Dismissal of an Accountant or Actuary
3.6. Penalty-Backed Duty
3.7. Administrative Fines
3.8. Public Warnings
3.9. Publication of Fines and Penalty-Backed Duties
3.10. Withdrawing a License
4. Administrative Measures and Criminal Prosecution
649
649
650
651
652
652
652
653
653
654
655
655
655
656
656
657
657
657
657
657
658
658
Norway
Peter Hammerich & Markus Heistad
661
661
661
661
662
662
662
662
662
663
663
663
664
664
665
665
666
666
666
666
xliv
Table of Contents
1.3. How Long Does the Registration Process Take?
1.4. Jurisdiction of Organization; Type of Legal Entity
1.5. Nationals or Residents Servings as Directors, Officers
or Employees
1.6. EEA Investment Advisers and Portfolio Managers
1.7. Non-EEA Investment Advisers and Portfolio Managers
2. Withdrawal from Authorization
3. Grounds for Denial or Rescission of Authorization
C. Substantive Regulations
1. Anti-fraud Provisions
1.1. Conflicts of Interest
1.2. Employee Activities
1.3. Best Execution
2. Insider Dealing
3. Contractual Relationship with Clients
4. Compensation Terms
5. Assignment of Advisory Agreement
6. Disclosure Requirements
6.1. The Brochure
6.2. Ongoing Reporting Obligations
6.3. Financial and Disciplinary Disclosure
7. Personal Securities Dealing
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media
11. Client Solicitors
12. Books and Records
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
E. Enforcement Proceedings
F. Extraterritorial Application
667
667
667
667
667
668
668
668
668
669
669
669
669
670
670
671
671
671
671
671
672
672
672
673
673
673
673
674
674
674
674
675
675
676
The Philippines
Rafael A. Morales
677
677
677
677
677
678
678
678
xlv
Table of Contents
2. Registration Requirements
2.1. Activities or Actions Requiring Registration
2.1.1. Investment Management Activity
2.1.2. Non-Discretionary Investment Advice
2.2. Definition of Securities
B. The Authorization Process
1. The Monetary Board
1.1. Banks
1.2. Investment Houses
1.3. Other Entities
2. SEC Registration
2.1. How to Register
2.2. Authorization Process
2.3. Registration Fees
2.4. How Long Does Registration Take?
2.5. Information Required
3. Application of Authorization Requirements to Non-Philippine
Advisers
C. Overview of Substantive Regulation
1. Anti-fraud Provisions and Conflicts of Interest
2. Insider Trading
3. Disclosures and Other Obligations
4. Taxation
5. Currency for Settlement
6. Management of Investment Companies
6.1. Corporate Form
6.2. Investment Company Service Contract
6.3. Subcontract
6.4. Exclusions
7. Commodity Trading Advisers
D. Consumer Privacy, Anti-money Laundering and Data Protection
E. Enforcement
F. Extraterritorial Application
679
679
679
679
679
680
680
680
680
681
681
681
682
682
682
682
682
683
683
683
684
684
684
684
684
685
685
685
686
686
687
687
Poland
Magdalena Scibor
689
689
689
689
690
691
691
691
691
xlvi
Table of Contents
2.2. Requirement to Employ Individual Professional
Investment Advisers
2.3. Definition of Financial Instruments
2.4. Ancillary Activities
2.5. Registration of Associated Persons
2.5.1. Management Board Qualifications
2.6. Compliance, Internal Audit and Risk Management
Functions
2.7. Registration of Affiliates
2.7.1. Non-EU Affiliates
2.7.2. Member States
2.8. Acquisition of Shares and Control Acquisitions
2.9. Registration of Non-Polish Firms
2.9.1. Registration of Non-Polish Firms Domiciled
Outside the EU
2.9.2. Registration of Non-Polish Firms Domiciled
in the EU
2.9.3. Enrollment of Non-Polish Citizens as Individual
Investment Advisers
2.10. Exemptions from Registration
B. The Registration Process
1. How to Register
1.1. Registration Form for Individual Investment Advisers
1.2. Registration Form to Conduct Brokerage Activities
1.3. Registration Fee
1.4. How Long Does the Registration Process Take?
1.5. Reciprocity
1.6. Are There Different or Additional Registration Provisions
for Foreign Applicants?
1.7. Information Required for a Brokerage Authorization
1.7.1. The Applicant
1.7.2. Affiliates of the Applicant
1.8. Information Requirements for Investment Advisers
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.2. Jurisdiction of Organization
2.3. Nationals or Residents Serving as Directors, Officers or
Employees
3. Withdrawal from Registration
4. Grounds for Denial of Registration
4.1. General
4.2. Grounds for Canceling a License
4.3. Grounds for Refusal to Enroll an Applicant on the
List of Investment Advisers
4.4. Grounds for Removal from the List of Investment
Advisers
692
693
693
693
693
693
694
694
695
695
697
697
697
698
698
700
700
700
700
700
701
701
701
701
701
703
704
705
705
706
707
707
707
707
708
708
709
xlvii
Table of Contents
C. Overview of Substantive Regulation
1. Conflicts of Interest
1.1. Guidelines for Addressing Conflicts of Interest
1.2. Personal Securities Trading
1.2.1. Policies and Procedures
1.2.2. Records of Personal Transactions
1.4. Trading by Research Personnel
2. Insider Trading
3. Contractual Relationship with Clients
3.1. Professional Clients
3.2. Retail Clients
3.3. Best Interest of Client
4. Compensation Terms
5. Can the Advisory Contract Be Assigned by the Investment
Adviser?
6. Disclosure Requirements
6.1. Disclosures to Retail Clients
6.2. Disclosure to Portfolio Management Clients
6.3. Reports to the PFSA
7. Performance-Based Fees
8. Advertising Restrictions
9. Electronic Media; Use of Internet
10. Client Solicitors
11. Books and Records
12. Custody Regulations
13. Soft Dollars
14. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and Terrorist Financing
2. Data Protection
E. Enforcement Proceedings
F. Extraterritorial Application
709
709
710
710
710
711
711
712
713
714
715
716
716
Portugal
Diogo Leonidas Rocha & Bruno Ferreira
729
729
729
729
730
731
731
731
731
731
xlviii
716
717
717
718
719
719
720
720
721
722
723
723
723
725
725
726
726
727
Table of Contents
2.5. Registration of Associated Persons
2.6. Registration of Affiliates
2.7. Registration of Non-Portuguese Entities
2.7.1. General
2.7.2. Use of Internet or Website
2.8. Exemptions from Regulation
B. Registration Process
1. General
1.1. Registration of Portuguese Entities and Individuals
1.2. Registration of Non-Portuguese Entities and Individuals
1.2.1. Entity Domiciled in the EU
1.2.2. Entity Domiciled Outside the EU
2. Registration Form
3. Registration Fees
4. Length of Registration Process
5. Reciprocity
6. Information Required
6.1. General
6.2. EU Branch
7. Substantive Requirements for Registration
7.1. Capital Requirements
7.2. Personnel Qualifications
7.3. Jurisdiction of Organization
7.4. Nationality of Officers and Directors
8. Withdrawal and Denial of Registration
C. Overview of Substantive Regulation
1. Conflicts of Interest
1.1. Qualified Investors
2. Insider Trading
3. Contractual Relationships with Clients
4. Compensation Terms
5. Assignment of the Contract
6. Disclosure Requirements
7. Personal Securities Trading
7.1. Research Personnel
7.2. Trading on Confidential Information
8. Performance-Based Fees
9. Soft Dollars
10. Advertising Restrictions
11. Electronic Media
12. Client Solicitors; Tied Agents
13. Books and Records
14. Custody Regulations
15. Regulatory Inspections
732
732
732
732
733
734
735
735
735
735
735
736
736
737
737
737
737
737
738
739
739
739
739
739
740
740
740
741
742
743
744
744
744
745
745
746
746
746
747
747
749
750
750
751
xlix
Table of Contents
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection and Consumer Privacy
E. Enforcement Proceedings; Private Right of Action
F. Extraterritorial Application
751
752
752
753
753
Russia
Alyona Kucher, Alan Kartashkin & Yulia Sazykina
755
755
755
756
756
756
757
757
757
758
758
758
758
759
759
759
761
761
761
762
763
763
763
763
763
764
766
766
768
769
769
770
770
770
770
Table of Contents
2.1.2. PIF and AIF Managers
2.1.3. OFBU Managers
2.2. Personnel Qualification Requirements
2.3. Other Requirements
2.4. Limitations of Ownerships
3. Grounds for Denial of License
D. Overview of Substantive Regulation
1. Conflict of Interest and Other Prohibited Actions
1.1. Securities Trust Managers
2. PIF and AIF Managers Duties and Obligations
3. Insider Trading
3.1. Definitions
3.2. Policies and Procedures
4. Contractual Terms
4.1. Securities Trust Managers
4.2. PIF and AIF Managers
4.2.1. PIF Managers
4.2.2. AIF Managers and AIFs
4.3. OFBU Managers
5. Continuing Reporting Obligations
6. Disclosure Requirements
7. Reporting to Clients or Shareholders
7.1. Securities Trust Managers
7.2. PIF and AIF Managers; AIFs
7.3. OFBU Managers
8. Fees
8.1. Securities Trust Managers
8.2. PIF and AIF Managers; AIFs
9. Advertising Regulations
10. Segregation of Accounts; Custody
11. Client Solicitors
12. Use of the Internet
13. Assignment of Trust Management
14. Regulatory Inspections
14.1. Types of Inspections
14.2. Inspection Process
14.3. SRO Inspection
15. Books and Records
16. Soft Dollars
E. Money Laundering, Data Protection and Consumer Privacy
1. Money Laundering
2. Data Protection and Consumer Privacy
F. Enforcement
1. Enforcement by the FSFM
1.1. License Suspension and Cancellation
770
770
771
771
772
772
773
773
773
774
774
774
775
776
776
777
777
777
777
778
778
780
780
780
781
781
781
781
782
783
784
785
785
786
787
787
788
788
789
790
790
792
792
792
792
li
Table of Contents
1.2. Grounds for Suspension or Cancellation
1.2.1. Securities Trust Managers
1.2.2. PIF and AIF Managers, AIFs
1.3. Procedure for Suspension or Cancellation
1.3.1. Securities Trust Managers
1.3.2. PIF and AIF Managers, AIFs
1.4. Other Means of Enforcement
2. Criminal Penalties
3. Private Rights of Action
G. Extraterritorial Application
1. Civil Jurisdiction
2. Criminal Jurisdiction
792
792
793
794
794
794
795
795
795
796
796
796
Saudi Arabia
Tom Travers
799
799
799
799
800
800
800
800
801
801
802
803
805
805
806
806
806
806
807
807
lii
807
809
810
811
812
812
812
813
Table of Contents
2. Withdrawal from Registration
3. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Confidentiality
3. Conflicts of Interest
4. Market Manipulation and Insider Trading
5. Contractual Relationship with Clients
6. Compensation Terms
7. Assignment of the Advisory Contract
8. Disclosure Requirements
8.1. Disclosure to CMA
8.2. Disclosure to Client
9. Personal Securities Trading
10. Performance Fees
11. Advertising Restrictions
12. Electronic Media; Use of Internet
13. Client Solicitors
14. Books and Records
15. Custody Regulations
16. Soft Dollars
17. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Consumer Privacy and Data Protection Regulations
E. Enforcement Proceedings
F. Extraterritorial Application
813
814
815
815
816
816
817
819
819
820
820
820
822
824
825
825
825
826
826
826
828
828
829
829
829
830
831
Singapore
Arnold Tan & Leong Lu Yueh
833
833
833
834
834
834
835
835
835
836
836
836
836
liii
Table of Contents
1.3. Definition of Securities
1.4. Definition of Investment Product
2. Registration Requirements
2.1. Actions or Activities Requiring Registration
2.1.1. Fund Management
2.1.2. Boutique Fund Management
2.1.3. Financial Advisory Service
2.2. Registration of Representatives and Directors
2.2.1. Representatives
2.2.2. Chief Executive Officer and Directors
2.3. Exemptions from Registration
2.3.1. Exempt Fund Managers
2.3.2. Exemption for Certain Financial Advisers
2.3.3. Thirty Qualified Investor Fund Manager
Exemption
2.3.4. Proposed Exemption for Managers of Immovable
Assets
2.3.5. Exclusions from Fund Manager Registration
2.3.6. Exempt Financial Advisers
2.3.7. Excluded Financial Advisers
2.4. Corporate Form of Organization
B. How to Register
1. The Application Process
1.1. The Application Form
1.2. Fees
1.3. How Long Does the Licensing Process Take?
1.4. Required Information
1.5. Appointment of a Representative
1.5.1. Procedure for Application for a Representatives
License
1.5.2. Standards for Approval
2. Substantive Requirements For Registration
2.1. Capitalization
2.2. Minimum Assets Under Management
2.3. Staffing Requirements
2.4. Registration of Non-Singaporean Companies
3. Grounds for Denial of Registration
4. Withdrawal from, or Revocation of, Registration
4.1. Fund Management License Holder
4.2. Chief Executive Officer and Directors
4.3. Representatives
C. Overview of Substantive Regulation
1. Anti-fraud Provisions; Business Conduct Rules
2. Independent Valuations
3. Insider Trading; Market Manipulation
liv
837
837
838
838
838
838
839
839
839
840
841
841
842
843
846
846
847
848
850
850
851
851
851
852
852
853
853
853
856
856
856
857
857
858
859
859
859
861
861
862
862
863
Table of Contents
4. Fund Management Agreements: Fees and Confidentiality
5. Assignment of Fund Management Contracts; Change of
Control
6. Disclosure Requirements
7. Personal Securities Trading
8. Advertising
9. Solicitors (Introducers)
10. Books and Records
10.1. Customer Records
10.2. Proprietary Transactions
10.3. Register of Employee and License Holder Interests in
Securities
10.4. Accounting Records and Financial Statements; Reports
to MAS
10.5. Other Information
11. Custody of Client Funds and Securities
12. Brokerage and Soft Dollars
13. Regulatory Inspections
14. Other Laws Applicable to FM License Holders
14.1. Restrictions on Granting of Unsecured Credit and
Credit Facilities
14.2. Securities Borrowing and Lending
14.3. Outsourcing
D. Anti-money Laundering; Data Protection and Consumer Privacy
1. Anti-money Laundering
1.1. General
1.2. Monetary Authority of Singapore (Anti-terrorism Measures)
Regulations
1.3. Duty to Report Suspicious Transactions
1.4. Prevention of Corruption Act
2. Confidentiality of Customer Data
E. Enforcement
1. Criminal Enforcement
2. Civil Enforcement
3. Regulatory Enforcement
F. Extraterritorial Application
865
866
866
867
867
868
869
869
869
869
870
871
871
871
872
873
873
873
873
874
874
874
874
875
876
876
876
876
877
877
877
South Africa
Johann Scholtz & Dawid de Viliers
879
879
879
879
880
lv
Table of Contents
2. Registration Requirements
2.1. Activities or Actions Requiring Registration
2.1.1. Advice
2.1.2. Intermediary Services
2.1.3. Financial Products
2.2. No Distinction Based on Type of Client
2.3. Registration of Associated Persons
2.3.1. Required Personnel
2.3.2. Key Individuals; Representatives
2.3.3. Compliance Officer
2.4. Registration of Affiliates
2.5. Registration of Advisers from Outside South Africa
2.6. Exemptions from Registration
B. The Registration Process
1. How to Register
1.1. Registration Form
1.2. Registration Fee
1.3. How Long Does the Registration Process Take?
1.4. Reciprocity
1.5. Registration Requirements for Foreign Applicants
1.6. Information Required
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.2. Jurisdiction of Organization
2.3. Nationals/Residents Serving as Directors, Officers or
Employees
3. Withdrawal from Registration
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Financial Intelligence Centre Act
2. Conflicts of Interest
3. Insider Trading
4. Contractual Relationship with Clients
5. Compensation Terms
6. Assignment of Contracts
7. Disclosure Requirements
8. Personal Securities Trading
9. Performance-Based Fees
10. Advertising Restrictions
11. Electronic Media; Use of Internet
12. Client Solicitors
13. Books and Records
14. Custody Regulations
15. Soft Dollars
lvi
880
880
880
881
881
882
883
883
883
884
884
884
885
886
886
886
886
886
886
887
887
887
887
889
889
889
889
890
890
890
890
891
891
892
892
893
893
894
894
895
896
896
897
897
Table of Contents
16. Regulatory Inspections
16.1. General
16.2. Inspection Process
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Privacy
E. Enforcement Proceedings
1. Actions by the Registrar
2. Private Right of Action
F. Extraterritorial Application
898
898
898
898
898
900
901
901
901
902
Spain
Javier Ybanez & Luis de la Pena
903
903
903
903
904
905
905
905
905
906
906
906
906
907
907
907
907
907
908
908
908
909
909
909
909
909
910
910
910
910
911
911
lvii
Table of Contents
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.2. Personnel Qualifications
2.2.1. Directors and other Employees
2.2.2. Compliance, Audit, and Risk Management
2.2.3. Compliance
2.2.4. Internal Audit
2.2.5. Risk Management
2.2.6. Disqualifications
2.3. Nationals or Residents Serving as Directors, Officers or
Employees
2.4. Jurisdiction of Organization
3. Withdrawal from Registration
4. Grounds for Denial of Registration
5. Revocation of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Impartiality and Good Faith
1.2. Other Prohibited Forms of Conduct
1.3. Conflicts of Interest
1.4. Codes of Conduct
1.5. Register of Transactions and Orders
1.6. Accreditation of Clients and Custody of Documents
2. Insider Trading
2.1. Inside Information
2.1.1. Prohibitions on Use of Inside Information
2.1.2. Information Barriers
2.1.3. Criminal Offense
3. Contractual Relationship with Clients
3.1. Forms of Agreements
3.1.1. Standard Forms for Investment Advisory Services
3.1.2. New Standard Forms for Discretionary
Management Services
3.2. Standards for Professional and Retail Clients
3.2.1. Professional Clients
3.2.2. Retail Clients
4. Compensation Terms
4.1.1. Fee Disclosure
4.1.2. Information on Costs and Charges
5. Assignment of the Contract
6. Client Disclosure Requirements
6.1. Disclosures to Retail Clients
6.1.1. Information regarding the Firm and Services
6.1.2. Client Statements
lviii
912
912
912
912
913
913
913
913
914
914
914
914
915
915
916
916
916
916
917
917
917
917
918
918
918
918
919
919
919
920
920
921
921
922
922
922
923
923
924
924
924
925
Table of Contents
6.1.3. Investment Risks
6.1.4. Other Disclosure
6.2. Disclosures to Professional Clients
7. Other Substantive Regulations
7.1. Client Claims
7.2. Investor-Compensation Scheme
7.3. Suitability Determinations
8. Solicitation Fees; Non-Monetary Benefits
9. Personal Securities Trading
9.1. Personal Securities Trading by Advisory Personnel
9.1.1. Policies and Procedures
9.1.2. Exempt Transactions
10. Advertising Restrictions
11. Electronic Media; Use of the Internet
11.1. Substantive Requirements
11.2. Contract Requirements
12. Client Solicitors
13. Books and Records
14. Custody Regulations
15. Soft Dollars
16. Regulatory Inspections
16.1. Role of CNMV
16.2. Inspection Fees
16.3. Authority to Inspect Controlling Entities
D. Consumer Privacy, Anti-money Laundering, and Data Protection
1. Consumer Privacy
2. Data Protection
2.1. Scope of Data Protection Laws
2.2. Data Protection Obligations
2.3. Internet Communications
3. Anti-money Laundering and Counter-Terrorism
3.1. Customer Due Diligence
3.2. Examination and Reporting Requirements
3.3. Books and Records
3.4. Policies and Procedures
3.5. Training
E. Enforcement Proceedings
1. Authority of CNMV
2. Role of Economy and Competitiveness Minister
3. Remedies
3.1. Sanctions Against Non-Spanish Firms
3.2. Cooperation of CNMV with EU Member State
Regulators
3.3. Cooperation by the CNMV with the Non-EU Regulators
925
926
926
927
927
927
928
928
928
929
929
930
930
932
932
933
933
934
935
936
936
936
937
937
938
938
938
939
939
940
940
940
941
942
942
942
942
942
943
943
944
945
945
lix
Table of Contents
F.
4. Administrative Penalties
4.1. Classification of Violations
4.2. Penalties
5. Criminal Penalties
6. Private Claims
Extra-territorial Application
945
945
946
946
947
947
Sweden
Thomas Wallinder & Adam Goransson
949
949
949
949
950
950
950
950
951
951
951
952
952
952
953
953
953
954
954
955
955
955
956
956
956
956
956
957
lx
957
957
957
958
958
958
959
Table of Contents
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.1.1. Investment Advisers
2.1.2. Other Securities Companies
2.2. Jurisdiction of Organization
2.3. Form of Organization
3. Withdrawal from Registration
4. Grounds for Denial of Registration
4.1. Swedish Companies
4.2. Non-Swedish Companies Domiciled Outside the EEA
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Client Suitability Determinations
3. Principal Transactions
4. Conflicts of Interest
4.1. Guidelines for Addressing Conflicts of Interest
4.2. Trading by Financial Analysts
5. Insider Trading
6. Client Categorization; Professional and Retail
7. Contractual Relationships with Clients
7.1. Client Agreements
7.2. Agreements with Retail Clients
7.3. Compensation Terms
7.4. Can the Advisory Contract Be Assigned by the
Investment Adviser?
8. Disclosure Requirements
8.1. General
8.2. Disclosure to Professional Clients
8.3. Disclosure to Retail Clients
8.4. Units of Investment Funds
8.5. Information about Investor Protection and Deposit
Guarantee
9. Information to Consumers Receiving Investment Advice
10. Reporting to Clients
10.1. Trade Confirmations
10.2. Discretionary Portfolio Management
10.3. Certain Retail Transactions
10.4. Custody
11. Reporting of Transactions to the SFSA; Post-Trade Disclosure
12. Disclosure Obligations for Investment Research
13. Personal Securities Trading
14. Performance-Based Fees
15. Advertising Restrictions
16. Electronic Media; Use of Internet
17. Client Solicitors
959
959
959
960
960
960
960
960
961
961
962
962
962
962
963
963
963
964
964
965
965
965
966
966
967
967
967
967
969
969
969
970
970
970
970
971
971
972
972
973
973
974
975
lxi
Table of Contents
18. Books and Records
19. Custody Regulations
19.1. Client Financial Instrument Assets
19.2. Client Funds (Cash)
19.3. External Auditor Reports
20. Soft Dollars
21. Regulatory Inspections
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and Anti-Terrorist Financing
1.1. Customer Due Diligence
1.2. Simplified Due Diligence
1.3. Enhanced Due Diligence
1.4. Reporting Obligations; Record Keeping
2. Data Protection
3. Consumer Privacy
E. Enforcement Proceedings
1. Swedish Securities Institutions
2. Non-Swedish Investment Firms
2.1. EEA Investment Firms
2.2. Non-EEA Investment Firms
3. Appeals
4. Private Right of Action
F. Extraterritorial Application
975
976
976
977
977
978
978
979
979
979
979
980
980
980
981
982
982
983
983
984
984
984
984
Switzerland
Shelby R. du Pasquier & Fedor Poskriakov
987
A. Introduction
B. Overview of the Regulatory Structure
1. Applicable Laws and Regulations
1.1. Regulatory Structure
1.2. Financial Intermediaries
1.3. Independent Investment Advisers
1.4. Other Licensable Activities
1.4.1. Banking or Securities Dealing Activities
1.5. Regulatory Authorities
1.5.1. FINMA
1.5.2. Self-Regulatory Organizations
2. Registration Requirements
2.1. Independent Investment Advisers
2.2. Management of Collective Investment Schemes (CIS)
2.3. Banking and Securities Dealing Activities
C. The Registration Process
1. How to Register
987
988
988
988
988
989
989
990
990
991
991
992
992
992
993
994
994
lxii
Table of Contents
1.1. SRO Registration for Financial Intermediaries
1.1.1. SRO Application Form
1.1.2. SRO Registration Fees; Length of Process
1.2. FINMA Registration
1.2.1. FINMA Application Form
1.2.2. FINMA Fees
1.2.3. FINMA Information Required
1.2.4. Form of Organization and Residency Requirements
1.2.5. Reciprocity
1.3. Registration as a CIS Manager with FINMA
1.3.1. Application Form
1.3.2. Fees
1.3.3. Information Required
1.3.4. Personnel Qualifications
1.3.5. Compliance Policies; Auditor
1.3.6. Capital Requirements
1.3.7. Non-Swiss CIS
1.3.8. Reciprocity
2. Withdrawal from Registration
3. Grounds for Denial of Registration
D. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Independent Investment Advisers
1.2. CIS Managers
1.3. Securities Dealers
2. Insider Trading and Market Manipulation
2.1. Insider Trading
2.2. Market Manipulation
2.3. Penalties
3. Contractual Relationship with Clients
3.1. Independent Investment Advisers
3.2. CIS Managers
3.3. Professional Associations
4. Compensation Terms
4.1. Investment Advisers
4.2. CIS Managers
4.3. Third-Party Payments
5. Can the Advisory Contract Be Assigned by the Investment
Adviser?
6. Disclosure Requirements
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
994
994
994
994
995
995
995
995
995
996
996
996
996
997
997
997
998
998
998
998
999
999
999
1000
1000
1001
1001
1001
1002
1002
1002
1003
1003
1004
1004
1004
1005
1005
1006
1006
1007
1007
1007
1008
lxiii
Table of Contents
12.
13.
14.
15.
1008
1009
1009
1009
1009
1010
1010
1010
1011
1011
1013
1013
1013
1014
1015
1015
1015
1016
1017
1019
1019
1019
1019
1020
1020
1020
1021
1021
1021
1021
1021
1021
1022
1022
1024
1024
1024
1024
1025
1025
1025
1025
lxiv
Table of Contents
1.5. Are There Different or Additional Registration
Provisions for Non-Taiwanese Applicants?
1.6. Information Required
1.6.1. Application to Establish a SICE
1.6.2. Application for an Operating License
1.7. Substantive Requirements for Registration
1.8. Jurisdiction of Organization
1.9. Nationals/Residents Serving as Directors, Officers or
Employees
2. Withdrawal from Registration
3. Grounds for Denial of Registration
C. Overview of Substantive Regulations
1. Anti-fraud Provisions
2. Insider Trading
3. Contractual Relationship with Clients
4. Compensation Terms
5. Can the Advisory Contract be Assigned by the Investment
Adviser?
6. Disclosure Requirements
7. Personal Securities Trading
8. Performance-Based Fees
9. Advertising Restrictions
10. Electronic Media; Use of Internet
11. Client Solicitors
12. Books and Records; Regulatory Reports
13. Custody Regulations
14. Soft Dollars
15. Regulatory Inspections; Regulatory Reports
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection; Privacy
E. Enforcement Proceedings
F. Extraterritorial Application
1025
1026
1026
1027
1028
1028
1028
1029
1029
1029
1029
1030
1030
1031
1031
1031
1031
1032
1032
1033
1033
1033
1034
1034
1034
1035
1035
1035
1036
1036
Turkey
Tunc Lokmanhekim & Zeynep Gulsen
1037
1037
1037
1037
1038
1038
1038
1039
1039
lxv
Table of Contents
2.4. Definition of Capital Market Instruments
2.5. Registration of Associated Persons
2.5.1. Personnel Qualifications
2.5.2. Executive and Specialized Personnel
2.5.3. Other Organizational Matters
2.6. Internal Control and Audit Function
2.7. Registration of Affiliates
2.8. Registration of Advisers from Outside Turkey
2.9. Exemptions from Registration
2.9.1. General Exemptions
2.9.2. Exemption for Directive Comments and Advice
B. The Registration Process
1. How to Register
1.1. Application Form
1.2. Registration Fees
1.3. Information Required for Authorization
1.4. Financial Statements
1.5. How Long Does Registration Take?
1.6. Reciprocity
1.7. Cross-Border Operations by Turkish Investment Firms
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.2. Type of Legal Entity
3. Withdrawal from Registration
4. Grounds for Denial of Registration
5. Revocation of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Independence
1.2. Conflicts of Interest
1.3. Code of Conduct
1.4. Requirements for Directive Comments and Advice
2. Insider Trading
3. Contractual Relationship with Clients
3.1. Forms of Agreements
3.2. Professional Obligations to Clients
4. Can the Advisory Contract be Assigned?
5. Client Disclosure Requirements
5.1. Delivery of Advertising Form
5.2. Periodic Regulatory Disclosure Requirements
6. Solicitation Fees; Non-Monetary Benefits
7. Personal Securities Trading
7.1. Personal Securities Trading by Advisory Personnel
7.2. Reporting
lxvi
1040
1041
1041
1041
1042
1042
1042
1043
1043
1043
1044
1044
1044
1044
1044
1045
1045
1045
1046
1046
1046
1046
1047
1047
1047
1048
1048
1048
1048
1049
1049
1049
1050
1050
1050
1051
1052
1052
1052
1052
1053
1053
1053
1054
Table of Contents
8. Performance-Based Fees
8.1. Restrictions
8.2. Exemptions
9. Advertising Restrictions
10. Electronic Media; Use of the Internet
10.1. Investment Advisory Activities
10.2. Directive Comments and Advice
11. Books and Records
12. Custody Regulations
13. Soft Dollars
14. Regulatory Inspections
14.1. Role of CMB
D. Consumer Privacy, Anti-money Laundering, and Data Protection
1. Consumer Privacy
2. Anti-money Laundering and Counter-Terrorism
E. Enforcement Proceedings
1. Authority of CMA
2. Authority of ACMIP
3. Remedies
4. Private Claims
F. Extra-territorial Application
1054
1054
1054
1054
1055
1055
1055
1056
1056
1057
1057
1057
1059
1059
1059
1059
1059
1060
1061
1061
1061
1063
1063
1063
1063
1064
1064
1064
1065
1065
1065
1065
1066
1066
1066
1066
1067
1067
1067
1067
lxvii
Table of Contents
1.3. Documentation Required
1.4. How Long Does the Licensing Process Take?
2. Substantive Requirements for Licensing
2.1. Corporate Form
2.2. Capital Requirements
2.3. UAE Nationals Serving as Directors, Officers or
Employees
2.4. Foreign Applicants
2.5. Companies with Existing Securities/Brokerage
Operations
3. Withdrawal from Registration
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Standard of Care
2. Anti-fraud Provisions
3. Conflicts of Interest; Disclosure and Notification
Requirements
4. Insider Trading
5. Contractual Relationship with Clients
6. Disclosure of Fees
7. Personal Securities Trading
8. Performance-Based Fees and Commissions
9. Advertising; Public Statements and Publication Requirements
9.1. Licensed Company
9.2. Financial Analysts
10. Client Solicitors
11. Books and Records
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and Terrorism Financing
2. Data Protection and Privacy
3. Other Substantive Regulations
E. Enforcement
1. Investigations
2. Suspension and Cancellation of License
3. Right of Appeal
4. Penalties
1067
1069
1069
1069
1069
1069
1070
1070
1070
1070
1071
1071
1071
1072
1074
1074
1074
1074
1075
1075
1075
1076
1077
1077
1078
1078
1078
1079
1079
1079
1080
1080
1080
United Kingdom
Anthony McWhirter & Philip Orange
1081
1081
1081
1081
1082
lxviii
Table of Contents
2. Registration Requirements
2.1. Activities or Actions Requiring Registration
2.2. Definition of Specified Investments
2.3. Registration of Associated Persons
2.3.1. Directors and Officers
2.3.2. Compliance Officer; Risk and Internal Audit
Functions
2.4. Registration of Affiliates
2.5. Registration of Advisers from Outside the UK
2.6. Exemptions from Registration
B. The Registration Process
1. How to Register
1.1. Registration Forms
1.2. Registration Fee
1.3. How Long Does the Registration Process Take?
1.4. Information Required
1.5. Reciprocity
1.6. Are There Different or Additional Registration
Provisions for Foreign Applicants?
2. Substantive Requirements for Registration
2.1. Capital Requirements
2.2. Jurisdiction of Organization
2.3. Nationals or Residents Serving as Directors, Officers
or Employees
3. Withdrawal from Registration
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
2. Conflicts of Interest
3. Insider Trading
3.1. Insider Dealing under the Criminal Justice Act
3.2. Market Abuse
4. Contractual Relationship with Clients
4.1. Retail or Professional Clients
5. Compensation Terms
6. Can the Advisory Contract Be Assigned?
7. Disclosure Requirements
8. Personal Securities Trading
8.1. Best Execution
8.2. Personal Securities Trading
9. Performance-Based Fees
10. Advertising Restrictions
11. Electronic Media; Use of Internet
12. Client Solicitors
13. Books and Records
1082
1082
1083
1083
1083
1084
1084
1085
1085
1086
1086
1086
1086
1086
1087
1087
1088
1088
1088
1088
1088
1089
1089
1090
1090
1090
1091
1091
1091
1092
1092
1093
1094
1094
1094
1094
1095
1096
1096
1096
1097
1098
lxix
Table of Contents
14.
15.
16.
17.
Custody Regulations
Soft Dollars
Regulatory Inspections
Other Regulations
17.1. UCITS Directive
17.2. Bribery Act 2010
17.3. Remuneration Code
17.4. Alternative Investment Fund Managers Directive
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering
2. Data Protection
E. Enforcement Proceedings
F. Extraterritorial Application
1098
1099
1099
1100
1100
1100
1100
1101
1102
1102
1103
1104
1106
1107
1107
1107
1108
1108
1109
1109
1109
1109
1110
1110
1110
lxx
1111
1111
1111
1112
1112
1112
1113
1113
1114
1114
1115
1115
1115
1116
1118
1119
Table of Contents
2.6. Registration of Associated Persons Not Required
2.7. Application of Registration Requirements to
Non-US-Based Advisers
2.8. Registration of Affiliates
2.8.1. Independent Subsidiaries
2.8.2. Subsidiaries and Affiliates Sharing Personnel
with a Parent
3. State Blue Sky Regulation
3.1. State Registration of Advisers
3.2. Persons Exempt from State Registration
3.3. Registration of Investment Adviser Representatives
B. The SEC Registration Process
1. How to Register with the SEC
1.1. Application Form
1.2. Registration Fee
1.3. How Long Does the Registration Process Take?
1.3.1. Registration of Successor Entities
1.3.2. Registration of Certain Affiliates
1.4. Reciprocity
1.5. Are There Different Registration Provisions for
US and Non-US Applicants?
1.6. Information Required
1.6.1. Form ADV
1.6.2. Disciplinary History
1.6.3. Information about Associated Persons
1.7. Exempt Reporting Advisers
1.8. Form ADV Part 2
1.8.1. Form ADV Part 2A
1.8.2. Form ADV Part 2A, Appendix 1: Wrap Fee
Brochure
1.8.3. Form ADV Part 2B
1.9. Financial Statements
1.10. Updating Form ADV
2. Substantive Requirements for Registration
2.1. Net Worth or Other Financial Requirements
2.2. Jurisdiction and Form of Organization
2.3. Number of Nationals Serving as Directors, Officers or
Employees
3. Withdrawal from Registration
4. Grounds for Denial of Registration
C. Overview of Substantive Regulation
1. Anti-fraud Provisions
1.1. Generally
1.2. Anti-fraud Rules
1120
1120
1120
1120
1121
1122
1122
1122
1123
1123
1123
1123
1124
1124
1124
1125
1125
1125
1125
1125
1126
1126
1127
1128
1128
1129
1130
1130
1130
1130
1130
1130
1131
1131
1131
1133
1133
1133
1133
lxxi
Table of Contents
2. Insider Trading
3. Contracts
3.1. Required Contract Terms
3.2. Hedge Clauses
4. Compensation Terms
5. Assignment of Contracts
6. Client Disclosure Requirements
6.1. The Brochure Rule
6.2. Wrap Fee Programs
6.3. Ongoing Client Disclosure Requirements
6.4. Books and Records
7. Personal Securities Trading
8. Performance-Based Fees
8.1. Exception for Fees Based on Assets under
Management
8.2. Exception for Fulcrum Fees
8.3. Exception for Fees Charged to Certain Private Funds
8.4. Exception for Contracts with Qualified Clients
8.5. Exception for Non-US Resident Clients
9. Advertising Restrictions
9.1. General
9.2. Testimonials
9.2.1. Third-Party Ratings
9.2.2. Client Lists
9.3. Specific Recommendations
9.4. Offer of Free Services
9.5. Charts
9.6. Anti-fraud Prohibition
9.6.1. Model Results and Net Performance
9.6.2. Global Investment Performance Standards
(GIPS )
9.7. Compliance Programs and Chief Compliance Officer
9.8. Enforcement Proceedings
10. Electronic Media; Use of the Internet
11. Client Solicitors
12. Books and Records
12.1. General
12.2. Required Records
13. Custody Regulations
13.1. Definition of Custody
13.2. Qualified Custodian
13.3. Surprise Examination Requirement
13.4. Account Statement and Notice Requirements
13.5. Annual Audit Exception
lxxii
1134
1134
1134
1135
1135
1135
1136
1136
1136
1137
1137
1138
1138
1138
1138
1139
1139
1139
1140
1140
1140
1140
1141
1141
1142
1142
1142
1143
1144
1145
1145
1146
1146
1147
1147
1147
1148
1149
1149
1149
1150
1150
Table of Contents
13.6. Related Person Custody
13.7. Inadvertent Custody
13.8. Books and Records
14. Soft Dollars
14.1. General
14.2. Brokerage and Research Services
14.2.1. The Eligibility Finding
14.2.1.1. Brokerage
14.2.1.2. Research Services
14.2.2. The Use Finding
14.2.3. The Reasonableness Finding
14.2.4. Mixed Use Products
14.3. Applicability to Principal Transactions
14.4. Disclosure
15. Regulatory Inspections
15.1. General
15.2. For Cause Examinations
15.3. Routine Examinations
15.4. Special Purpose Examinations
16. Other
16.1. Code of Ethics
16.2. Pay-to-Play Rule
16.2.1. Two-Year Ban
16.2.2. Bundling Ban
16.2.3. Solicitor and Placement Agent Ban
16.2.4. Books and Records
16.3. Proxy Voting
16.4. Business Continuity Plans
D. Anti-money Laundering, Data Protection and Consumer Privacy
1. Anti-money Laundering and US Sanctions Programs
2. Data Protection and Consumer Privacy
2.1. Regulation S-P and FTC Privacy Rules
E. Enforcement
1. Division of Enforcement
1.1. Sources of Information
1.2. Types of SEC Investigations
1.2.1. Informal Investigations
1.2.2. Formal Investigations
2. Enforcement Proceedings
2.1. Authority
2.2. SEC Review
3. Types of Remedies
3.1. Civil Actions
3.2. Equitable Remedies
1150
1150
1151
1151
1151
1152
1152
1153
1153
1154
1154
1154
1155
1155
1156
1156
1157
1157
1158
1158
1158
1159
1159
1160
1160
1160
1161
1161
1161
1161
1162
1163
1164
1164
1164
1164
1164
1164
1165
1165
1165
1166
1166
1167
lxxiii
Table of Contents
F.
1167
1167
1168
1168
1168
1169
1169
1169
1169
1169
1170
1170
1170
1172
1172
Venezuela
Luisa Acedo de Lepervanche & Manuel Acedo Sucre
1175
1175
1175
1176
1176
1177
1177
1178
1178
1178
1179
Index
1181
lxxiv
Preface
Preface
and coordinating with the contributors, as well as in reviewing many of the
chapters. Our colleagues in the Investment Management Group of Debevoise &
Plimpton, Gregory Larkin and Jaime Doninger Schecter, devoted long hours to the
review of many of the chapters in this book. We are truly indebted to each of them
for their excellent and important assistance.
Finally, this book could not have been completed without the substantial
efforts of the staff in the Frankfurt office of Debevoise & Plimpton LLP. Claudia
Naumann supported us throughout the entire process with unfailing professionalism, dedication and good humor, and Anna Gremmers and Abby Carrigan provided
important assistance at crucial times.
Marcia L. MacHarg
Kenneth J. Berman
lxxvi
The Philippines
Rafael A. Morales*
SyCip Salazar Hernandez & Gatmaitan, Manila
A.
In the Philippines, no single set of laws or regulations governs the activities and
operations of investment advisers. Unless specifically subject to Philippine laws and
regulations applicable to banks, investment companies or commodity trading advisers, any person or entity (whether Philippine or foreign) may provide investment
advice while governed by the rules applicable to business enterprises in general.
1.
1.1.
Regulatory Structure
1.1.1.
Subsection 53.4 of Republic Act No. 8791, the General Banking Law of 2000 (the
GBL), authorizes local banks to act as advisers of investment accounts, with the
*
Rafael A. Morales is the managing partner at SyCip Salazar Hernandez & Gatmaitan and the
former Head of its Banking, Finance and Securities Department.
Rafael A. Morales
approval of the Monetary Board, the governing body of the Bangko Sentral ng Pilipinas (the Central Bank). The rules implementing subsection 53.4 of the GBL are
set out in Part IV of the Manual of Regulations for Banks (the Bank Manual).
1.1.2.
Investment houses are organized under the Investment Houses Law (the IHL),
Presidential Decree No. 129 (1973), as amended by Republic Act No. 8366 (1997).
The rules implementing the IHL define an investment house as an enterprise
which engages or purports to engage, whether regularly or on an isolated basis,
in the underwriting of securities of another person or enterprise, including securities of the Government and its instrumentalities.
An investment house may engage in the business of a dealer or broker under
Republic Act No. 8799 (2000) (the Securities Regulation Code or SRC)
without obtaining a separate license. An investment house may act as an
investment adviser or financial consultant, as well as engage in such other activities or business ventures as are directly or indirectly related to the dealing in
securities and other commercial papers.
1.1.3.
Section 4(a) of Republic Act No. 2629 (1960), the Investment Company Act (the
ICA), administered by the Securities and Exchange Commission (the SEC),
defines an investment company as any issuer which is or holds itself out as
being engaged primarily, or proposes to engage primarily, in the business of
investing, reinvesting, or trading in securities. Further, the ICA specifically regulates persons or entities that act as advisers of investment companies. Section 3(o)
of the ICA defines an investment adviser to an investment company as:
[A]ny person (other than a bona fide officer, director, trustee, member of an
advisory board, or employee of such company as such) who pursuant to contract with such company regularly furnishes advice to such company with
respect to the desirability of investing in, purchasing or selling securities or
other property, or is empowered to determine what securities or other property
shall be purchased or sold by such company.
Any other person that regularly performs substantially all of the duties undertaken
by an investment adviser, pursuant to contract with such adviser, will also be
deemed an investment adviser to the investment company.
1.2.
The Monetary Board must license banks and investment houseswhich are the
Philippine equivalent of investment or merchant banks (see section A.1.1.2)to
engage in investment management activity. The Monetary Board must provide an
entity with a favorable recommendation before the entity files with the SEC
678
The Philippines
articles of incorporation, or amendments thereto, that include the purpose or power
to act as managing agent, adviser, consultant or administrator of an investment
management, advisory or consultancy account.
2.
Registration Requirements
2.1.
2.1.1.
Section X403.c of the Bank Manual defines investment management activity as:
[A]ny activity resulting from a contract or agreement primarily for financial
return whereby the bank (the investment manager) binds itself to handle or
manage investible funds or any investment portfolio in a representative
capacity as financial or managing agent, adviser, consultant or administrator
of financial or investment management, advisory, consultancy or any similar
arrangement which does not create or result in a trusteeship.
2.1.2.
Definition of Securities
The term securities is broadly defined in subsection 3.1 of the SRC, as follows:
Securities are shares, participation or interests in a corporation or in a
commercial enterprise or profit-making venture and evidenced by a certificate,
contract, instrument, whether written or electronic in character. Securities include:
(i)
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The above definition would include commodity future contracts. However,
under section 11 of the SRC, the public trading of commodity futures contracts
in the Philippines is not allowed, pending the issuance by the SEC of rules and
regulations involving commodity futures contracts to protect investors to ensure
the development of a fair and transparent commodities market. To date, the SEC
has not issued such rules and regulations.
B.
1.
1.1.
Banks
Under subsection 53.4 of the GBL, a Philippine bank may be authorized by the
Monetary Board to act as managing agent, adviser, consultant or administrator of
investment management advisory/consultancy accounts. For this purpose, the
bank normally applies to the Monetary Board for a license to engage in trust
and other fiduciary business. Such other fiduciary business includes investment
management activities. Under subsection X404.1 of the Bank Manual, a bank
desiring to engage in trust and other fiduciary business must file with the Central
Bank an application signed by the banks president (or officer of equivalent rank)
and accompanied by the following documents: (a) a certified true copy of the
resolution of applicants board of directors authorizing the application; and (b)
a certification that the applicant has complied with all the conditions prescribed by
the Central Bank, including the required capital (which is, for instance, PHP 5.4
billion for a universal bank and PHP 2.8 billion for a commercial bank).
1.2.
Investment Houses
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information on any position concurrently held by them in other financial or
banking institutions, if any;
(iii) a projected statement of assets and liabilities of the proposed Investment
House;
(iv) a tentative program of operation for one year, including its investment direction and volume; and
(v) such other information as the SEC may require in support of the application
and to enable the SEC to determine the justifiability of establishing the
proposed enterprise.
The minimum capital requirement for an investment house is PHP 300 million.
1.3.
Other Entities
The Central Bank has unilaterally extended its authority to non-banks by requiring
entities other than banks to secure the favorable recommendation of the Monetary
Board before filing with the SEC articles of incorporation that include the purpose
or power to act as managing agent, adviser, consultant or administrator of
investment management, or advisory or consultancy accounts (section 4414Q of
the Manual of Regulations for Non-Bank Financial Institutions). The covered
purpose or power includes the provision of non-discretionary investment advice
as well as the rendering of investment advice to an investment company.
In practice, therefore, and in accordance with law (section 17 of Batas Pambansa Blg. 68 (1968), the Corporation Code), the SEC endorses to the Monetary
Board the articles of incorporation of any company that wishes to act as an
investment adviser. The Monetary Board then conducts a case-by-case review.
As a matter of unwritten policy, the Monetary Board generally provides a
favorable recommendation to the SEC so long as the applicant proposes to advise
only one entity or perhaps a group of related entities. The Monetary Board will not
recommend the articles of an applicant seeking to provide services to more than
one entity or group of entities.
The procedure is to obtain first the favorable endorsement of the Monetary
Board, prior to filing the articles of incorporation and other incorporation papers
with the SEC. Upon receipt of the said endorsement from the Monetary Board, the
SEC will officially start the incorporation process.
2.
SEC Registration
2.1.
How to Register
Rafael A. Morales
The SEC website (www.sec.gov.ph) contains standard application forms.
2.2.
Authorization Process
The SEC will reject an application for registration if the applicant or its principal
officer or director:
(i)
Registration Fees
The initial registration fee is PHP 10,000 plus a legal research fee of PHP 100.
2.4.
The registration process can be completed in about one month. However, the SEC
may take longer if the application and its supporting documents are not initially in
order.
2.5.
Information Required
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person or entity must establish a business presence in the country. The business
vehicle usually chosen is a stock corporation that is either wholly owned by foreigners or a joint venture with Philippine parties. Foreign individuals can be shareholders in that stock corporation. Alternatively, a non-Philippine entity may establish a Philippine branch. In such case, however, the head office will be subject to
any liabilities of the branch.
Under the Foreign Investments Act of 1991 (Republic Act No. 7042 (1991), as
amended by Republic Act No. 8179 (1996)), the business vehicle chosen to engage
in investment advising will be classified as a domestic market enterprise.
The vehicle may be wholly owned by foreigners as long as:
(i)
(ii)
the vehicle does not engage in banking or underwriting activities (which are
partly nationalized or reserved to Philippine nationals); and
the vehicle has paid-in capital of at least USD 200,000.
C.
1.
Insider Trading
Insider trading is prohibited by section 27 of the SRC, which makes it unlawful for
an insider to sell or buy a security of the issuer if he or she knows a material fact
with respect to the issuer or the security that is not generally available to the public.
However, no insider trading can be found if:
(i)
(ii)
the insider proves that the information was not gained from his or her being
an insider; or
the other party to the transaction (or his or her agent) is identified, and either:
the insider proves that he or she disclosed the information to the other party;
or the other party is also in possession of the information.
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Insider trading is criminally punishable by a fine ranging from PHP 50,000 to PHP
5 million and/or imprisonment from seven years to 21 years, in the discretion of the
court. If the offender is a juridical person, the penalty of imprisonment may be
imposed on the officers responsible for the violation. The insider may also be held
civilly liable.
3.
Taxation
Investment advisers are not subject to any special taxation or exemption from
taxation in the Philippines.
5.
Following the repeal of the Uniform Currency Act (1950) by Republic Act
No. 8183 (1996), it is now possible for contracting parties to agree to settle obligations or transactions in currencies other than the Philippine Peso.
6.
Corporate Form
The phrase any person and the exclusion of certain individuals (e.g., officers,
directors and employees) from the definition suggest than an investment adviser
can be a natural person. In practice, however, the SEC requires that an investment
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adviser to an investment company must be a corporation. For example, such an
adviser must have a board of directors.
6.2.
Pursuant to its service contract, an investment adviser must furnish advice regularly to an investment company with respect to the desirability of investing in
securities or other property. This involves a determination of what securities or
other property will be purchased or sold by the investment company.
It is unlawful for any person to serve or act as an investment adviser to an
investment company, except pursuant to a written contract that:
(i)
(ii)
Subcontract
Exclusions
Rafael A. Morales
(iii) a company that furnishes such services at cost to one or more investment
companies, insurance companies or other financial institutions;
(iv) any person the character and amount of whose compensation for such services must be approved by a court; or
(v) such other persons as the SEC may determine by rules and regulations or
order not to be within the intent of the definition.
7.
Commodity trading advisers are subject to a separate set of licensing and operational requirements under the oversight of the SEC. These requirements are to be
contained in the rules and regulations of the SEC on the public trading of commodity futures contracts.
D.
Under the Anti-Money Laundering Act of 2001 (Republic Act No. 9160 (2001) as
amended by Republic Act No. 9194 (2003)), banks, investment houses, investment
companies, and investment advisers are covered institutions that are required to
submit with the Anti-Money Laundering Council covered transaction reports
and suspicious transaction reports.
A covered transaction is a transaction in cash or other equivalent monetary
instrument involving a total amount in excess of PHP 500,000 within one banking
day. There is no threshold amount in a suspicious transaction but it exists under
any of the following circumstances:
(i)
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to protect individual personal information in information and communications
systems in the government and the private sector.
E.
ENFORCEMENT
The Central Bank is responsible for administrative supervision over those engaged
in investment management activities and may enforce the provisions of the GBL
and the Bank Manual either administratively or through judicial proceedings.
The Central Bank may initiate proceedings against an investment manager or its
principal officers or majority stockholders. Violations of the provisions of the GBL
or its implementing rules (including the Bank Manual) are punishable by a fine not
more than PHP 200,000, imprisonment for not more than ten years, or both.
At the same time, the SEC enforces the provisions of the ICA and the SRC and
the rules adopted under such laws. The SEC may proceed either administratively or
through judicial proceedings.
Violations of the ICA or its implementing rules are punishable by a fine of not
more than PHP 50,000 or imprisonment for not more than five years, or both.
Violations of the SRC or its implementing rules (including the provision on insider
training) are subject to a fine of not less than PHP 50,000 nor more than PHP 5
million, imprisonment of not less than 7 years nor more than 21 years, or both. If
the offender is a corporation or other legal entity, the penalty will be imposed upon
the officer responsible for the violation. Moreover, if such officer is not a Philippine citizen, he or she will, in addition to the penalties prescribed, be deported
without further proceedings after serving his or her sentence.
F.
EXTRATERRITORIAL APPLICATION
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