Order on Competence Requirements for Employees Providing Investment Advice and Disseminating Information on Certain Investment Products

Order on Competence Requirements for Employees Providing Investment Advice and Disseminating Information on Certain Investment Products¹)

Pursuant to Section 43, paragraph 4, and Section 373, paragraph 4, of the Act on Financial Business, cf. Act No. 406 of 29 March 2022, Section 46 and Section 270, paragraph 1, of Act No. 1155 of 8 June 2021 on Securities Firms and Investment Services and Activities, and Section 6, paragraph 2, and Section 26, paragraph 4, of the Act on Financial Advisors, Investment Advisors and Mortgage Credit Intermediaries, cf. Act No. 2016 of 11 November 2021, it is hereby determined:

Scope of Application

Section 1. This Order applies to credit institutions, investment management companies, managers of alternative investment funds providing investment services covered by Annex 1 to the Act on Securities Firms and Investment Services and Activities, and securities firms in this country, which provide the following to retail customers:

1. Investment advice on investment products or portfolios of investment products, cf. however paragraph 4.
2. Advice on pension funds, cf. Section 2, no. 3, of the Order on Certain Tax-Advantaged Savings Forms in Credit Institutions.
3. Dissemination of information on investment products.

Paragraph 2. This Order also applies to:

1. A branch of a credit institution and an investment firm that has been granted authorization to provide or perform investment services and activities in a country within the European Union or in a country with which the Union has concluded an agreement in the financial area, when the branch provides the activities mentioned in paragraph 1, nos. 1-3, in this country.
2. A branch of a credit institution and an investment firm that has been granted authorization to provide or perform investment services and activities in a country outside the European Union, with which the Union has not concluded an agreement in the financial area, when the branch provides the activities mentioned in paragraph 1, nos. 1-3, in this country.

Paragraph 3. This Order further applies to associated agents, cf. Section 10, no. 12, of the Act on Securities Firms and Investment Services and Activities, established in this country, as well as investment advisors and financial advisors, cf. Section 2, nos. 1 and 3, of the Act on Financial Advisors, Investment Advisors and Mortgage Credit Intermediaries, to the extent that they provide the services mentioned in paragraph 1 to retail customers.

Paragraph 4. This Order also applies to management companies that have been granted authorization for investment services in another country within the European Union or in a country with which the Union has concluded an agreement in the financial area, and which carry out such business in this country through a branch.

Paragraph 5. This Order does not apply to advice on mortgage bonds, specifically covered mortgage bonds (SDROs), specifically covered bonds (SDOs) or mortgage deeds, when this is done in connection with and as a prerequisite for the customer's borrowing, repayment, or restructuring of a loan secured by real estate.

Definitions

Section 2. In this Order, the following terms are understood as:

1. Investment products: a) Instruments, cf. Annex 2 to the Act on Securities Firms and Investment Services and Activities. b) Structured deposits. c) Guarantee certificates. d) Share certificates. e) Mortgage deeds.
2. Retail customer: A customer who is neither a professional customer nor an eligible counterparty, cf. Annexes 1 and 2 to the Order on Investor Protection in Securities Trading.
3. Investment advice: Personal recommendations to a customer, either upon request or on the investment advisor's own initiative, regarding one or more transactions related to financial instruments, cf. Annex 2 to the Act on Securities Firms and Investment Services and Activities, and structured deposits.
4. Personal recommendation: A recommendation given to a person in their capacity as an investor, which takes as its starting point the person's own circumstances and constitutes a recommendation to take one of the following steps: a) To buy, sell, subscribe, exchange, redeem, hold, or guarantee a specific financial instrument, or b) To exercise or refrain from exercising a right arising from a specific financial instrument to buy, sell, subscribe, exchange, or redeem a financial instrument.
5. Dissemination of information: Direct information to customers about investment products or ancillary services, either upon request from the customer or on the initiative of the business in connection with the provision of one of the services and activities listed in Annexes 1 and 2 to the Act on Securities Firms and Investment Services and Activities.

Competence Requirements

Section 3. The business must ensure that its employees who provide investment advice, advice on pension funds, or disseminate information on investment products, cf. Section 1, paragraph 1, nos. 1-3, are capable of providing sound advice or dissemination, cf. paragraphs 2-4.

Paragraph 2. The employee must have 6 months of documented full-time experience in providing the service that the employee provides pursuant to Section 1, paragraph 1, nos. 1-3, and competencies in the following areas:

1. Relevant legislation.
2. Investment products.
3. Economic understanding.

Paragraph 3. Employees who provide investment advice and advice on pension funds, cf. Section 1, paragraph 1, nos. 1-2, must have the competencies listed in Annex 1 to this Order.

Paragraph 4. Employees who disseminate information on investment products, cf. Section 1, paragraph 1, no. 3, must have the competencies listed in Annex 2 to this Order.

Paragraph 5. The business must evaluate at least once a year whether the employee meets the requirements in paragraphs 2-4.

Paragraph 6. If the employee does not have the competence or relevant experience pursuant to paragraph 2, the employee may provide investment advice, advice on pension funds, and dissemination of information, cf. paragraph 1, under the supervision of an employee who meets the competence requirements in paragraphs 1-4, for a period of up to four years.

Documentation

Section 4. The business must draw up a procedure for a systematic training course that ensures that all of the business's employees who provide investment advice on investment products that are not complex investment products, or who provide advice on pension funds or investment advice on portfolios of investment products that are not complex investment products, have the competencies set out in Section 3, paragraphs 2 and 3. The business must ensure that these employees have completed the training course before they begin providing investment advice or advice on pension funds.

Section 5. In drawing up the procedure for a systematic training course, cf. Section 4, the business must further ensure that all of the business's employees who disseminate information on investment products have the necessary competencies, cf. Section 3, paragraph 4. The business must ensure that these employees have completed the training course before they begin disseminating information on investment products.

Section 6. Employees who, prior to employment with a business, have completed a training course pursuant to Section 4 or Section 5 at another business, may provide investment advice or advice on corresponding products and disseminate information on investment products without having to complete the training course again at the new business.

Section 7. The business must ensure that the business's employees who provide investment advice on products other than non-complex products cf. Section 14, paragraph 1, no. 1, letters a-f, of the Order on Investor Protection in Securities Trading, have passed an exam offered by an exam provider approved by the Danish Financial Supervisory Authority, cf. Section 8, which documents that the employee possesses the necessary competencies regarding the investment products the employee advises on, cf. Annex 1. The exam must be passed before the employee begins providing advice.

Paragraph 2. The business must ensure that the employee passes a new exam every three years, cf. paragraph 1, which documents that the employee continues to possess the necessary competencies, cf. Annex 1.

Section 8. An exam provider wishing to administer the exam mentioned in Section 7 must apply to the Danish Financial Supervisory Authority for approval as an exam provider. The Danish Financial Supervisory Authority approves, after consultation with the Education Committee, cf. Section 9, paragraph 1, the framework for holding an exam, cf. Annex 3. The Danish Financial Supervisory Authority approves, after consultation with the Expert Committee, cf. Section 10, the detailed learning objectives for the individual investment products, cf. Annex 1. In the Expert Committee's assessment of whether the detailed learning objectives for the investment products in the exam provider's exam meet the requirements of the Order, emphasis will be placed on the fact that the employee taking the exam acquires competencies corresponding to the competencies listed in Annex 1.

Paragraph 2. An application for approval as an exam provider, cf. paragraph 1, must address all matters set out in Annexes 1 and 3. The detailed learning objectives for the investment products must, upon submission for approval by the Danish Financial Supervisory Authority, be accompanied by a statement from a generally recognized expert in investment, attesting that the objectives meet the requirements of Annex 1.

Paragraph 3. The exam provider must annually report to the Danish Financial Supervisory Authority regarding any changes made to the exam compared to the detailed learning objectives for individual investment products and the framework for holding the exam approved by the Danish Financial Supervisory Authority. If the exam provider no longer meets the detailed learning objectives for individual investment products, cf. Annex 1, and the framework for holding the exam, cf. Annex 3, the Danish Financial Supervisory Authority may withdraw the approval as an exam provider.

Section 9. The Danish Financial Supervisory Authority appoints an Education Committee. The Committee consists of 6 members. The members of the Committee are appointed after each of the following organizations has nominated one member to the Committee:

1. The Finance Union.
2. Finance Denmark.
3. The Employers' Association for the Financial Sector.
4. The Consumer Council.
5. The Danish Securities Dealers Association.
6. The Danish Shareholders Association.

Paragraph 2. A representative of the Danish Financial Supervisory Authority is the chairman of the Education Committee.

Section 10. The Danish Financial Supervisory Authority appoints, upon nomination from the organizations mentioned in Section 9, paragraph 1, an Expert Committee consisting of one chairman and two ordinary members, all of whom are generally recognized experts in investment.

Section 11. The Danish Financial Supervisory Authority provides secretariat services for the Committees mentioned in Sections 9 and 10.

Section 12. The Danish Financial Supervisory Authority maintains a register of employees who have passed an exam approved pursuant to Section 8.

Supervision and Penal Provisions

Section 13. The Danish Financial Supervisory Authority may issue orders to correct matters that are in conflict with Section 3, paragraphs 1 and 2, and Sections 4, 5, and 7.

Section 14. Violations of Section 4, second sentence, Section 5, second sentence, and Section 7 are punishable by fine.

Paragraph 2. Whoever fails to comply with an order pursuant to Section 13 is punishable by fine.

Paragraph 3. Companies etc. (legal persons) may be subject to criminal liability pursuant to the rules in Chapter 5 of the Criminal Code.

Entry into Force and Transitional Provisions

Section 15. This Order enters into force on 1 January 2023, cf. however paragraph 2.

Paragraph 2. Sections 8-11 of this Order enter into force on 1 July 2022.

Paragraph 3. Order No. 864 of 23 June 2017 on competence requirements for employees providing investment advice and disseminating information on certain investment products is repealed.

Paragraph 4. Employees who, prior to the entry into force of this Order, have passed the exam requirement in Section 7 may continue to advise on the products on which the employee has passed an exam. However, the employees must pass a new exam no later than three years after the entry into force of this Order.

Ministry of Industry, Business and Financial Affairs, 15 June 2022

Simon Kollerup / Hans Høj

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¹) The Order contains provisions implementing parts of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments amending Directive 2002/92/EC and Directive 2011/61/EU, Official Journal of the European Union 2014, No. L 173, page 349.

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Annex 1

Competence Requirements for Employees of the Business Providing Investment Advice on Investment Products and Advice on Pension Funds, cf. Section 3, Paragraph 3

Competence requirements for employees of the business providing investment advice on investment products and advice on pension funds, cf. Section 3, Paragraph 3.

Employees of the business providing investment advice on investment products and advice on pension funds must have the following competencies:

1.) An understanding of the main characteristics and risks of the investment products and funds offered or recommended, including general tax consequences for the customer in connection with transactions. 2.) Knowledge of the total costs and fees to be borne by the customer in connection with the type of investment product or fund offered or recommended, and the costs associated with providing investment advice and other related services. 3.) Knowledge of how the type of investment product or fund made available by the business may be suitable for the customer, after assessing the relevant information from the customer in relation to possible changes that may have occurred since the relevant information was obtained. 4.) An understanding of how financial markets function and how they affect the value and pricing of the investment products and funds offered or recommended to customers. 5.) An understanding of the impact of economic data as well as national, regional, and global events on markets and the value of investment products and funds offered or recommended to customers. 6.) An understanding of the difference between past results and future result scenarios, as well as the limitations of forecasts. 7.) An understanding of issues related to market abuse and anti-money laundering. 8.) Ability to assess data relevant to the type of investment products and funds offered or recommended to customers, such as documents with key investor information, prospectuses, annual accounts, or financial data. 9.) An understanding of specific market structures for the type of investment products and funds offered or recommended to customers, and, where relevant, their trading systems or the existence of any secondary markets. 10.) A basic knowledge of the principles of valuation of the type of investment products and funds offered or recommended to customers. 11.) An understanding of the basis for portfolio management, including being able to understand the consequences of diversification on individual investment alternatives. 12.) A basic knowledge of relevant legislation.

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Annex 2

Competence Requirements for Employees Disseminating Information on Investment Products, Investment Services, or Ancillary Services in the Business, cf. Section 3, Paragraph 4

Competence requirements for employees disseminating information on investment products, investment services, or ancillary services in the business, cf. Section 3, Paragraph 4.

Employees of the business disseminating information on investment products, investment services, or ancillary services must have the following competencies:

1.) An understanding of the main characteristics, risks, and features of the investment products about which they disseminate information through the business, including general tax consequences and costs to be borne by the customer in connection with transactions. Particular care should be taken when informing about products characterized by a higher degree of complexity. 2.) An understanding of the total costs and fees to be borne by the customer in connection with transactions with an investment product, or in connection with investment services or ancillary services. 3.) An understanding of the characteristics and scope of investment services or ancillary services. 4.) An understanding of how financial markets function and how they affect the value and pricing of the investment products about which they disseminate information to customers. 5.) An understanding of the impact of economic data as well as national, regional, and global events on markets and the value of the investment products about which they disseminate information to customers. 6.) An understanding of the difference between past results and future result scenarios, as well as the limitations of forecasts. 7.) An understanding of issues related to market abuse and anti-money laundering. 8.) Ability to assess data relevant to the investment products about which they disseminate information to customers, such as documents with key investor information, prospectuses, annual accounts, or financial data. 9.) An understanding of specific market structures for the investment products about which they disseminate information to customers, and, where relevant, their trading systems or the existence of any secondary markets. 10.) A basic knowledge of the principles of valuation of the type of investment products about which the information they disseminate relates. 11.) A basic knowledge of relevant legislation.

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Annex 3

The Framework for Holding the Exam, cf. Section 8

The Framework for Preparing and Holding the Exam

1.) The exam provider may only use an exam that has previously been presented to a generally recognized expert in investment, who has attested that the exam meets the detailed learning objectives for the investment products. The exam must be designed as a multiple-choice test that can document the competencies set out in Annex 1. 2.) No later than two months before the holding of the first exam, the exam provider must publish the detailed learning objectives for individual investment products as well as an example of the exam offered. 3.) An exam provider may not examine employees in companies with which the provider is affiliated within a group, cf. Section 5a of the Act on Financial Business. 4.) An employee who has failed the exam three times may only take the exam again one year after the last attempt. The exam provider, together with any other exam providers, shall establish a register of employees who have taken the exam without passing it. 5.) The provider must further document that the exam is held under sound frameworks. Emphasis will be placed on the fact that the exam is held under conditions that ensure that the employee cannot receive help in answering the exam. 6.) The provider must keep proof of a passed exam and immediately after the exam is passed, submit this to the Danish Financial Supervisory Authority, the employee, and the employee's employer, unless special circumstances dictate otherwise.