Consumer protection

MiFID II / Liechtenstein

The Liechtenstein banking centre implemented the Markets in Financial Instruments Directive (MiFID) on 1 November 2007. MiFID simplifies cross-border financial services and allows investment firms, banks and stock markets to also offer their services in other EU / EEA member states. Furthermore, they are required to conduct precise client and product analyses as well as disclose information on compensations and commissions.

The Amendment (MiFID II) and the accompanying Regulation (MiFIR) came into force in the EU on 3 January 2018, one year later than originally planned. They provide for further regulation of the financial markets and investment services. MiFIR also regulates trading transparency. Besides the refinement of regulations since MiFID, the aim of MiFID II is to create greater transparency in the markets and to increase investor protection.

High-frequency trade will be made more transparent and subject to stricter supervisory controls, while position limits on commodity trading will be stricter. Throughout the EU, consultations at bank branches and consultations by telephone must record and document in a comprehensive manner why a financial product was recommended and how it matches the client’s risk profile.

In Liechtenstein, the implementation of MiFID II required comprehensive changes to the Banking Act and the Asset Management Act, the Banking Ordinance and the Asset Management Ordinance, as well as amendments in particular to the Act on Certain Undertakings for Collective Investment in Transferable Securities (UCITS Act) and the Financial Market Supervision Act (FMA Act). The legislative process has been completed at national level and the amendments came into force on 3 January 2018. LLB has implemented MiFID II within the specified time.

FinSA / Switzerland

Switzerland intends to conceptually reshape the guiding principles of its financial centre in order to transpose investor protection issues arising from MiFID II, in particular, into national law. The ordinances from the Swiss Financial Market Supervisory Authority (FINMA) are expected for autumn 2019: the Financial Services Ordinance (FinSO) and the Financial Institutions Ordinance (FinIO). The acts and ordinances enter into force on 1 January 2020, whereby different transition periods apply.

The Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) create a level playing field for financial intermediaries and improve client protection in Switzerland. The FinSA contains rules of conduct towards clients that Swiss financial service providers must comply with. It also provides for prospectus requirements and requires a basic information sheet for financial instruments that is easy to understand. The FinIA essentially standardises the authorisation rules for financial service providers in Switzerland.

New rules of the game in the EU payment systems market

For LLB, the harmonisation and the digitalisation of the European payment systems market are important topics. As an EEA country, Liechtenstein will adopt the second EU Payment Services Directive (PSD II) in 2019. The new regulations take into account the increased requirements for data protection and the security of electronic payments. In addition, the transparency for clients is to be increased, thereby strengthening consumer protection. The PSD II allows market access to new payment service providers such as fintechs, thereby increasing competition and innovation. The directive now requires banks to grant third parties access to a client’s accounts if the client so wishes. There would be no need to have any direct interaction with the bank where the account is held. LLB plans to make the adjustments required to implement the PSD II in 2019.

EU Mortgage Credit Directive

The Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property has been in force in the EU member states since 20 March 2014. As a member of the EEA, Liechtenstein is obliged to transpose this directive into national law. With the corresponding legislative process underway, it is expected to come into force in January 2020. The directive serves to protect consumers taking out loans to buy residential property. Under the directive, the banks are subject to various obligations when granting a loan. These include, in particular, (pre-)contractual information requirements, creditworthiness assessment requirements and qualification requirements for bank employees involved in granting loans.

LLB will implement the law in a timely manner. In 2019, the specialist departments and marketing and distribution units will incorporate the new provisions into the relevant processes. The advisory process, in particular, will be adjusted due to legal requirements.