Order on Liability Insurance, Guarantees, and Handling of Client Funds for Investment Advisors and Mortgage Intermediaries

Order on Investment Advisors' and Mortgage Intermediaries' Liability Insurance, Guarantee Provision, and Handling of Entrusted Funds 1)

Pursuant to Section 3, subsection 8, and Section 26, subsection 4, of the Act on Financial Advisors, Investment Advisors, and Mortgage Intermediaries, as consolidated in Act No. 1095 of 21 October 2024, it is hereby prescribed:

Scope of Application

Section 1. This Order applies in accordance with the Act on Investment Advisors and Mortgage Intermediaries to:

1. Investment advisors; and
2. Mortgage intermediaries.

Liability Insurance or Guarantee Provision

Section 2. An investment advisor or a mortgage intermediary must have liability insurance or a corresponding guarantee from an insurance company or a credit institution. The liability insurance or corresponding guarantee must meet the following conditions:

1. The liability insurance or guarantee must ensure that the insurance company or credit institution is immediately liable to the injured party for the liability for damages incurred by an investment advisor or mortgage intermediary due to negligence in the business or by anyone for whom the business is liable.
2. The liability insurance or guarantee for investment advisors must cover claims within this country, and for mortgage intermediaries, it must cover claims within countries within the European Union and countries with which the Union has concluded agreements in the financial sector. The liability insurance or guarantee must cover claims brought and reported no later than 3 years after the termination of the liability insurance or guarantee, to the extent that no new liability insurance has been taken out with another insurance company, or no new guarantee has been provided for the business by another credit institution with full retroactive coverage.
3. The liability insurance or guarantee must include coverage for the reinstatement of the coverage amount in the event that it is exhausted as a result of one or more damages in an insurance year (policy reinstatement).

Coverage Amount for Liability Insurance or Guarantee Provision

Section 3. Stk. 1. An investment advisor must have liability insurance or a corresponding guarantee, cf. Section 2, with a coverage amount of at least DKK 7.5 million per damage event per insurance year and at least DKK 11.2 million for all damage events per insurance year.

Stk. 2. A mortgage intermediary must have liability insurance or a corresponding guarantee, cf. Section 2, with a coverage amount of at least EUR 460,000 per damage event per insurance year and at least EUR 750,000 for all damage events per insurance year, in accordance with Commission Delegated Regulation (EU) No 1125/2014 of 19 September 2014 supplementing Directive 2014/17/EU of the European Parliament and of the Council as regards regulatory technical standards on the minimum amount of professional liability insurance or equivalent guarantee that credit intermediaries must have.

Stk. 3. If the liability insurance or corresponding guarantee, cf. Section 2, for an individual business is established as part of a collective scheme covering several cooperating businesses or as a member of an industry association, the coverage amounts stated in subsection 1 or 2 apply to each participating business.

Termination of Liability Insurance or Guarantee

Section 4. Liability insurance or a corresponding guarantee, cf. Section 2, may be terminated no earlier than one month after the Danish Financial Supervisory Authority has received notice thereof from the insurance company or credit institution.

Declaration of Liability Insurance or Guarantee Provision

Section 5. Stk. 1. An investment advisor or a mortgage intermediary must have a declaration from an insurance company or a credit institution stating that the business is covered by liability insurance or a corresponding guarantee that meets the conditions in Section 2.

Stk. 2. The declaration must be provided on a form prepared by the Danish Financial Supervisory Authority and submitted to the Danish Financial Supervisory Authority simultaneously with the submission of the application for permission to conduct business as an investment advisor or mortgage intermediary.

Special Rules for Mortgage Intermediaries Regarding Entrusted Funds

Section 6. If a mortgage intermediary receives entrusted funds in connection with advisory activities, these must be deposited in a separate account at a credit institution (client account) that is covered by a guarantee, cf. Section 13.

Stk. 2. A mortgage intermediary must, simultaneously with the application for permission to the Danish Financial Supervisory Authority, or if permission has been granted, when such funds are received, submit proof of the establishment of the client account.

Section 7. Amounts that a customer may pay to a mortgage intermediary for onward transmission to others or for insurance payouts, which the business receives in connection with advisory activities, must be deposited in a client account, cf. however subsections 2 and 3.

Stk. 2. Amounts covered by a release certificate from an insurance company must not be deposited in the client account.

Stk. 3. Commission, including advances thereon, and other remuneration that a mortgage intermediary receives in connection with advisory activities must not be deposited in the client account.

Section 8. A client account must be opened in the name of the mortgage intermediary and is subject to the business's control.

Section 9. A client account may only be opened at a credit institution that has committed not to set off, or otherwise dispose of, amounts in a client account that are necessary to cover the business's liability to third parties for entrusted funds.

Stk. 2. The credit institution must declare compliance with subsection 1 to the Danish Financial Supervisory Authority on a form prepared by the Danish Financial Supervisory Authority.

Section 10. All entrusted funds must be deposited in the client account no later than the next banking day after receipt, including amounts paid to the mortgage intermediary to cover deductions for the customer.

Stk. 2. Excluded from this are amounts that are used immediately after receipt for payment on behalf of the entitled person.

Section 11. A mortgage intermediary must keep an overview of entrusted funds. The mortgage intermediary must have a procedure in place that ensures correct registration of entrusted funds.

Section 12. The Danish Financial Supervisory Authority may at any time order a mortgage intermediary, within a time limit set by the Danish Financial Supervisory Authority, to submit a declaration of audit of the client account from an approved auditor.

Stk. 2. If a mortgage intermediary's overview of entrusted funds, cf. Section 11, has been deficient, or if the mortgage intermediary has otherwise violated the rules on the handling of entrusted funds, the Danish Financial Supervisory Authority may order the mortgage intermediary, for a period set by the Danish Financial Supervisory Authority, or until further notice, to submit the client account declaration, cf. subsection 1, every quarter or at another interval set by the Danish Financial Supervisory Authority.

Special Rules for Mortgage Intermediaries Regarding Guarantee Provision for Entrusted Funds

Section 13. It is a condition for a mortgage intermediary to be able to receive entrusted funds that there is a declaration from an insurance company or a credit institution (guarantor) stating that:

1. The guarantor, as primary obligor, guarantees claims for payment of entrusted funds that may be directed against the mortgage intermediary in connection with its business;
2. The guarantee, by its content, gives the insured a direct claim against the guarantor;
3. The guarantee must cover claims concerning entrusted funds from and including the date the guarantee enters into force until it is terminated (the guarantee period), cf. Section 16; and
4. The guarantee is not subject to other restrictions than those permitted under this Order.

Stk. 2. If the guarantee provision for an individual mortgage intermediary is established as part of a collective scheme covering several businesses, the guarantor may be an independent fund or association, provided that the fund's or association's commitment is covered such that, following a concrete assessment by the Danish Financial Supervisory Authority, there is at all times a corresponding security as per subsection 1.

Section 14. The guarantee provision for mortgage intermediaries may be limited in amount, so that all claims concerning each individual year of the guarantee period are only covered up to a certain amount, cf. however subsection 2.

Stk. 2. The amount according to subsection 1 must be in accordance with the requirement following from Commission Delegated Regulation (EU) No 1125/2014 of 19 September 2014 supplementing Directive 2014/17/EU of the European Parliament and of the Council as regards regulatory technical standards on the minimum amount of professional liability insurance or equivalent guarantee that credit intermediaries must have.

Section 15. The guarantee provision may be limited in time, so that it only covers claims raised against the guarantor no later than 3 years after the completion of the task that triggered the claim.

Stk. 2. The time limit in subsection 1 is suspended by the insured's legal action against the mortgage intermediary.

Section 16. The guarantee provision may only be terminated at the request of the guarantor, effective from a specific date, which cannot occur earlier than one month after the receipt of the request by the Danish Financial Supervisory Authority. However, the guarantor may demand that the guarantee provision be terminated on the day after the receipt of the request by the Danish Financial Supervisory Authority if the request is justified by the mortgage intermediary's fraudulent conduct.

Section 17. Stk. 1. The guarantee declaration according to Section 13 must be prepared by the guarantor. The guarantee declaration must be provided on a form prepared by the Danish Financial Supervisory Authority.

Stk. 2. The form must be submitted to the Danish Financial Supervisory Authority simultaneously with the application for permission as a mortgage intermediary, cf. Section 3 of the Act on Investment Advisors and Mortgage Intermediaries.

Criminal Provisions

Section 18. Violation of Sections 2, 3, 6, 9-11, Section 13, subsection 1, and Section 14 is punishable by a fine.

Stk. 2. Companies and other legal entities may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 19. Stk. 1. This Order enters into force on 3 July 2025.

Stk. 2. Order No. 653 of 30 May 2018 on financial advisors', investment advisors', and mortgage intermediaries' liability insurance, guarantee provision, and handling of entrusted funds is repealed.

Danish Financial Supervisory Authority, 23 June 2025 Louise Mogensen / Ulla Brøns Petersen

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1. The Order contains provisions implementing parts of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential real estate and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010, Official Journal of the European Union 2014, No L 60, page 34.

Law Gazette A 2025 Published on 30 June 2025 23 June 2025. No. 944. Ministry of Industry, Business and Financial Affairs, Danish Financial Supervisory Authority, file no. 25-00096 CQ003290