Provision of investment services in investments other than financial instruments
The MiFID II Directive (2014/65/EU, Markets in Financial Instruments Directive) regulates the provision of investment service in financial instruments. MiFID was implemented in Finland by the Act on Investment Services (747/2012), which provides a national permission for investment firms to provide certain investment services also in investments other than financial instruments. This right is directly based on law and does not require a separate decision on authorisation. When providing service in such other investments, the investment firm must comply with the provisions of the Act on Investment Services the same way as when providing service in financial instruments. Service in such investments may not be provided under the so-called notification procedure to other EEA member states. Such other investments could include, for example, loan agreements other than financial instruments.
As a rule, the content of portfolio management service is the same, regardless of whether it concerns financial instruments or other investments. The asset manager manages the client’s portfolio and has the client’s authorisation to make investment decisions and perform related actions (buy, sell, switch, subscribe) on behalf of the client and in the client’s name. The nature of the service is the management of an investment portfolio with a focus on investment decisions, and not some other kind of management of individual investments in the portfolio. For example, as regards equity holdings, the service could include, at the maximum, a proxy assignment to participate in general meetings of a company on behalf of the client. On the other hand, as regards real estate, this means that various property management activities, such as extensive technical management, real estate development, contracting etc. may neither be included in a portfolio management service nor be deemed comparable to custodial and administration services for financial instruments.
When a unit-linked insurance policy is distributed, the investment firm always functions as an insurance intermediary representing the insurance company. In this case, the investment firm is obliged to comply with the provisions of the Act on Insurance Mediation. Therefore, advice on an insurance contract is not investment advice within the meaning of the Act on Investment Services.
Service related to unit-linked insurance
In accordance with section 2, subsection 1 of the Act on Insurance Distribution, the distribution of insurance refers to the preparation of an insurance contract, the provision of a personal recommendation on an insurance contract and other information concerning the contract, conclusion of the contract and assistance in the management and fulfilment of the insurance contract. A unit-linked policy is an insurance product consisting of an insurance element (so-called insurance wrapper) and underlying investments linked to the policy, which determine its value. Hence, it is an insurance contract referred to in law.
The linking of investments to an insurance policy does not mean that the investments are purchased and held by the policyholder. Rather, it is an insurance-technical action related to the determination of the value of the policy. Hence, the selection of the policy and the underlying investments cannot be separated and governed by different legislation. In the FIN-FSA’s view, the mere selection of potential investments that can be linked to a policy is part of the preparation of an insurance contract, and actions related to the investments, i.e. potential switches of investments, are part of the management and fulfilment of the policy.
In circumstances where a client decides to take out an insurance policy, the whole process of selecting the policy and the investments to be linked to it as well as the conclusion of the insurance contract and the management of the insurance contract must take place in accordance with the Act on Insurance Distribution and, where necessary, the Act on Insurance Contracts. The service provider must also register to the FIN-FSA’s register of insurance intermediaries as an agent for the insurance companies whose policies are involved in this activity.