Crossborder investment services and activities license in Denmark. An Update for Brexit
The Danish Financial Business Act contains provisions under article 33 for foreign credit institutions and investment firms intending to obtain a crossborder investment services and activities license in Denmark, with or without ancillary services, to deal exclusively with eligible counter-parties or professional clients. In a recent Brexit related press release, the Danish Financials Services Authority (FSA) highlighted the route provided by article 33 of the Danish Financial Business Act as one alternative for UK investment service providers in order to maintain access to Danish clients for their services.
This brief post will provide some high-level indication of the main requirements and the process to follow in order to obtain such cross-border investment services and activities license in Denmark.
Third Country Regime in Denmark and its Conditions
Following Brexit, there have been increasing discussions around the concept of third country, which has nevertheless been always entertained in European regulation. And whilst the European regulation on financial services contains rules and requirements for participants from any such third country to carry out activities and provide services in Europe, not all domestic laws in the various European domiciles contain ad hoc rules for third country participants.
In the case of Denmark, whilst there is no regime of exemptions like in some other countries, there is still the possibility for third country investment service providers to register in order to carry out certain activities and provide certain services to a specific set of investors. Of course, there are requirements to abide to obtain a crossborder investment services and activities license in Denmark and we have highlighted on a non-exhaustive basis below the most relevant:
- The third country provider is subject to authorisation and supervision in its home country;
- The activities and services for which a crossborder license is applied for in Denmark are covered in the third country existing authorisation of the applicant.
- There is in place a framework and a mechanism for the exchange of information between the Danish and the third country authorities (e.g. IOSCO Memorandum of Understanding);
- The third country has adequate regulation and supervision of matters related to financial service and undertakings providing these services;
- The third country undertaking is in good standing in its home country.
Brexit Related Conditions for UK Providers
As a consequence of the uncertainty surrounding Brexit, it is possible that the Danish FSA will grant only temporary crossborder investment services and activities license in Denmark to UK based applicants, with a lifespan that is expected to be 12 months from the no-deal Brexit date, if any.
There are also additional – Brexit related – conditions to be fulfilled exclusively for UK applicants, an overview of the most relevant ones is below:
- The UK becomes a third country as defined under MiFID II, Article 4(1) no.57;
- The European Union has not entered into an agreement for the financial and economic area with the UK and there are no equivalence decisions pursuant to MiFIR article 47
Applying for the crossborder Investment Services License
No template form has been released and no fees should be charged for the notification as well. No official timing for processing the application either has been confirmed for the time being from the Danish FSA, if not a recommendation, specifically for UK firms but generally for all applicants interested, to apply well in advance of Brexit, when a peak in application is expected to take place.
The application to obtain a crossborder investment services and activities license in Denmark should generally include documentation pertaining the existing home country authorisation of the investment service provider as well as a description of the services and activities intended to be carried out in Denmark. The investment services and activities provided and carried out in Denmark will imply compliance with specific sections of the local Financial Business Act as well as Capital Markets Act.