Royal Decree of 19 December 2017 laying down the rules and procedures for transposing the Directive on markets in financial instruments

Title

2017032214

19 DECEMBER 2017. - Royal Decree laying down the rules and procedures for transposing the Directive concerning markets in financial instruments (NOTE: Consultation of versions prior to 27-12-2017 and updated to 19-06-2024)

Source: Finances

Publication: 27 December 2017

Number: 2017032214

page: 114825

File number: 2017-12-19/04

Entry into force: 3 January 2018

Erratum: Publication of 12 January 2018, number 2018030130, page 1498 image of the official publication

This text modifies the following text:

2007003294

2 archived versions

1 implementing decree

TITLE 1st. - General provisions
Art. 1-4
TITLE 2. - Inducements
Art. 5-8
TITLE 3. - Specific organizational rules related to algorithmic trading, the provision of direct electronic access to trading venues and clearing member activity CHAPTER 1st. - Scope Art. 9 CHAPTER 2. - Algorithmic trading Art. 10-11 CHAPTER 3. - Provision of direct electronic access to trading venues Art. 12 CHAPTER 4. - Clearing member activity Art. 13 TITLE 4. - Organizational requirements for establishments providing investment services CHAPTER 1st. - Scope Art. 14 CHAPTER 2. - Safeguarding of financial instruments and client funds Section 1st. - Safeguarding of financial instruments and client funds Art. 15 Section 2. - Deposit of client financial instruments Art. 16 Section 3. - Deposit of client funds Art. 17 Section 4. - Use of client financial instruments Art. 18 Section 5. - Misuse of financial collateral arrangements with title transfer Art. 19 Section 6. - Reports of auditors Art. 20 CHAPTER 3. - Product governance requirements Art. 21-23 TITLE 5. - Repealing and final provisions Art. 24-26 ANNEX. Art. N

Text

TITLE 1st. - General provisions

Article 1st. This decree partially transposes Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU and of Delegated Directive (EU) 2017/593 of the Commission of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.

Art. 2. For the application of the Law of 2 August 2002 on the supervision of the financial sector and financial services and of decrees and regulations adopted for its implementation, the term "professional client" shall mean any client meeting the criteria defined in the Annex to this decree.

Art. 3. § 1st. For the application of the same law and of decrees and regulations adopted for its implementation, the term "eligible counterparties" shall mean:
1° investment firms;
2° credit institutions;
3° insurance undertakings;
4° collective investment undertakings and their management companies; 5° pension funds and their management companies; 6° other financial institutions authorized or regulated under European Union law or the national law of a Member State; 7° national governments and their departments, including public bodies responsible for the management of public debt at national level; 8° central banks; 9° supranational organizations. The classification as an eligible counterparty in accordance with the first paragraph is without prejudice to the right of the entities concerned to request, either generally or for each transaction, to be treated as clients whose business relationships with the regulated entity fall under the provisions provided for by and under Articles 27 to 28 of the same law. § 2. Undertakings falling into one of the categories of clients to be regarded as professional clients in application of Section I, points 1, 2 and 3, of the Annex to this decree may also be treated as eligible counterparties. In the case of a transaction where the potential counterparty is established in another Member State, the regulated entity takes into account the status of the undertaking concerned, as defined by the law or measures in force in the Member State where it is established. The regulated entity that concludes transactions with such undertakings in accordance with Article 26, paragraph 7, of the same law, must obtain from the potential counterparty explicit confirmation that it accepts to be treated as an eligible counterparty. The regulated entity may obtain this confirmation either in the form of a general agreement or for each transaction. § 3. Entities from third countries equivalent to the categories of entities mentioned in paragraph 1, first paragraph, may also be treated as eligible counterparties. Undertakings from third countries such as those referred to in paragraph 2, first and second paragraphs, may also be treated as eligible counterparties under the same conditions and subject to the same requirements as those set out in the same paragraph.

Art. 4. For the application of this decree, the following terms shall mean:
1° "the Law of 2 August 2002": the Law of 2 August 2002 on the supervision of the financial sector and financial services; 2° "the Law of 25 April 2014": the Law of 25 April 2014 on the status and supervision of credit institutions and stockbroking companies; 3° "the Law of 25 October 2016": Law of 25 October 2016 on access to the activity of providing investment services and on the status and supervision of portfolio management companies and investment advice companies; 4° "financial instrument": a financial instrument within the meaning of Article 2, paragraph 1, 1°, of the Law of 2 August 2002; 5° "distribution channels": the distribution channels within the meaning of Article 1st, paragraph 1, 26°, of the Law of 2 August 2002; 6° "group", with regard to a regulated entity: the group to which this regulated entity belongs, consisting of a parent undertaking, its subsidiaries and the entities in which the parent undertaking or its subsidiaries hold participations, as well as undertakings linked to each other by a relationship within the meaning of the Companies Code; 7° "securities financing transaction" a transaction within the meaning of Article 3, point 11), of Regulation (EU) 2015/2365 on transparency of securities financing transactions and of the reuse; 8° "qualifying money market fund": a collective investment undertaking authorized under Directive 2009/65/EC, or subject to supervision and, where applicable, authorized by an authority in accordance with the national law of the Member State granting the authorization, and which meets all of the following conditions:
(a) its main investment objective must be to maintain the net asset value of the undertaking either constantly at par (after deduction of gains) or at the value of the initial capital invested, plus gains; (b) to achieve its main investment objective, it is required to make its investments only in high-quality money market instruments with a maturity or residual maturity not exceeding 397 days, or for which regular yield adjustments in accordance with this maturity are made, and with a weighted average maturity of 60 days. It may also achieve this objective by investing on an ancillary basis in deposits with credit institutions; (c) it must ensure liquidity by means of daily or "T + 1" settlement. For the purposes of point b), a money market instrument is considered to be of high quality if the management/investment company has carried out its own documented assessment of the credit quality of the money market instruments and that it allows it to consider the instrument in question as of high quality. When one or more credit rating agencies registered and supervised by ESMA have rated the instrument, the internal assessment carried out by the management/investment company should take into account in particular these credit ratings; 9° "high-frequency algorithmic trading technique": any algorithmic trading technique characterized by:
a) infrastructure designed to minimize computer latencies and other types of latency, including at least one of the following systems for algorithmic order placement: co-location, proximity hosting or high-speed direct electronic access; b) the system's determination of the commitment, creation, routing or execution of an order without human intervention for individual transactions or orders; and c) a high intraday message throughput consisting of orders, quotes or cancellations; 10° "the FSMA": the Financial Services and Markets Authority; 11° "the Bank": the National Bank of Belgium; 12° "Regulation (EU) no 596/2014": Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC; 13° "Directive 2003/71/EC": Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC; 14° "Directive 2004/109/EC": Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements regarding information on issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC; [1 15° sustainability factors: sustainability factors within the meaning of Article 2, point 24, of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on the disclosure of sustainability information in the financial services sector.]1 Terms that are not defined in this Royal Decree have the meaning given to them in the Laws of 2 August 2002, 25 April 2014 and 25 October 2016.

(1)<AR 2022-12-05/03, art. 2, 002; En vigueur : 22-12-2022>

TITLE 2. - Inducements

Art. 5. § 1st. This Title is applicable to the undertakings referred to in Article 26, paragraph 1st, of the Law of 2 August 2002, hereinafter referred to as "regulated entities":
§ 2. The provisions of this Title also apply to regulated entities when they market structured deposits or provide advice on such deposits to clients.

Art. 6. § 1st. Regulated entities that pay or receive a fee or commission, or provide or receive a non-monetary benefit in connection with the provision of an investment service or ancillary service to a client ensure that all the conditions set out in Article 27, § 7, of the Law of 2 August 2002, and the requirements set out in paragraphs 2 to 7 are permanently respected. § 2. A fee, commission or non-monetary benefit is deemed to have the purpose of improving the quality of the service concerned to the client if all of the following conditions are met:
1° the inducement is justified by the provision of an additional or higher level of service to the client, proportionate to the inducement received, such as:
a) the provision of non-independent investment advice on a wide range of appropriate financial instruments and access to these instruments, including an appropriate number of instruments from third-party product providers not closely linked to the regulated entity; b) the provision of non-independent investment advice combined with either an offer to the client to assess, at least annually, whether the financial instruments in which he has invested continue to suit him, or another ongoing service likely to be useful to the client, for example advice on the optimal suggested allocation of his assets; or c) the provision of access, at a competitive price, to a wide range of financial instruments likely to meet the client's needs, including an appropriate number of instruments from third-party product providers not closely linked to the regulated entity, supplemented either by the provision of value-added tools, such as objective information tools helping the client to make investment decisions or allowing him to monitor, evaluate and adapt the range of financial instruments in which he has invested, or by the provision of periodic reports on the performance of financial instruments and on the costs and fees associated with them; 2° it does not directly benefit the entity, its shareholders or its staff members without the client deriving a tangible benefit; 3° it is justified by the provision of an ongoing service to the client in relation to an ongoing inducement. A fee, commission or non-monetary benefit is not acceptable if it results in a distortion of the services provided to the client. § 3. Regulated entities permanently respect the requirements provided for in paragraph 2 as long as they pay or receive the fee, commission or non-monetary benefit. § 4. Regulated entities keep available justifications showing that the fees, commissions and non-monetary benefits paid or received by the entity aim to strengthen the quality of the service concerned to the client:
1° by keeping an internal list of all fees, commissions and non-monetary benefits received from third parties by the regulated entity in connection with the provision of investment or ancillary services; and 2° by recording how the fees, commissions and non-monetary benefits paid or received by the regulated entity, or intended to be used, improve the quality of services provided to the clients concerned, as well as the measures taken to ensure that the regulated entity does not harm its obligation to act honestly, fairly and professionally in the best interests of its clients. § 5. With regard to payments and benefits received from third parties or paid to third parties, regulated entities provide the client with the following information:
1° before the provision of the investment or ancillary service, the regulated entity communicates to the client information on the payment or benefit concerned in accordance with Article 27, § 7, paragraph 2, of the Law of 2 August 2002. Minor non-monetary benefits may be described in a generic manner. Other non-monetary benefits paid or received by the regulated entity in connection with the investment service provided to the client are described separately and their pricing is provided separately; 2° when a regulated entity communicates to its client the method of calculating the amount of a payment or benefit to be paid or received instead of the exact amount because it is unable to establish this amount a priori, it provides this exact amount to its client a posteriori; and 3° at least once a year, as long as the regulated entity receives (ongoing) inducements in connection with investment services provided to clients, it informs them individually of the actual amount of payments or benefits received or paid. Minor non-monetary benefits may be described in a generic manner. § 6. When implementing these requirements, regulated entities take into account the rules on costs and fees set out in Article 27bis, § 5, paragraph 1st, of the Law of 2 August 2002 and in Article 45 of Delegated Regulation (EU) 2017/565 of the Commission of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions applicable to investment firms and the definition of certain terms for the purposes of that Directive. § 7. When several entities participate in a distribution channel, each regulated entity providing an investment or ancillary service complies with its information obligations towards its clients.

Art. 7. § 1st. Regulated entities that provide independent investment advice or portfolio management services reimburse their clients for all fees, commissions and monetary benefits paid or provided by third parties and by persons acting on behalf of third parties in connection with the services provided to these clients as soon as possible after receipt. All fees, commissions and monetary benefits received from third parties in connection with the provision of independent investment advice and portfolio management services are fully transferred to the client. Regulated entities establish and implement a policy to ensure that all fees, commissions and monetary benefits paid or provided by third parties and by persons acting on behalf of third parties in connection with the provision of independent investment advice and portfolio management services are allocated and transferred to each client. Regulated entities inform clients of the fees, commissions and monetary benefits transferred to them, for example as part of the periodic statements provided to the client. § 2. Regulated entities that provide independent investment advice or portfolio management services do not accept non-monetary benefits other than those that can be considered as minor in accordance with paragraph 3. § 3. The following benefits are considered as acceptable minor non-monetary benefits only if they are:
1° information or documents relating to a financial instrument or investment service that are of a generic nature or personalized according to the situation of a particular client; 2° written documents from third parties, ordered and paid for by an entity to promote a new issue that it is carrying out or intends to carry out, or from third parties contractually engaged and remunerated by the issuer to produce such documents on an ongoing basis, provided that this relationship is clearly stated in the documents and that they are made available at the same time to all regulated entities wishing to receive them or to the general public; 3° participation in conferences, seminars and other informative events on the benefits and characteristics of a given financial instrument or investment service; and 4° reception expenses of a low and reasonable amount, such as those related to meals and drinks during business meetings or conferences, seminars or informative events such as referred to in 3°. Acceptable minor non-monetary benefits are reasonable and proportionate and of such a magnitude that it is unlikely that they will influence the behaviour of the regulated entity in a way that harms the interests of the client. Minor non-monetary benefits are disclosed before the provision of the relevant investment or ancillary services to clients. Minor non-monetary benefits may be described in a generic manner.

Art. 8. § 1. The provision of research services by third parties to regulated entities that provide portfolio management services or other investment or ancillary services to clients is not considered an inducement if these services are received in exchange for one of the following:

direct payments from the regulated entity's own resources;
payments from a separate research fee account controlled by the regulated entity, provided that the following conditions regarding the operation of this account are met:
a) the research fee account is funded by specific research fees billed to the client; b) when establishing a research fee account and agreeing on the amount of research fees financed by its clients, the regulated entity establishes and regularly evaluates the research budget as an internal administrative measure; c) the regulated entity is responsible for the research fee account; d) the regulated entity regularly evaluates the quality of purchased research based on robust quality criteria and the ability of this research to contribute to better investment decisions; With regard to paragraph 1, first subparagraph, 2°, when a regulated entity uses the research fee account, it provides the following information to its clients:
a) before providing an investment service to its clients, information on the budget planned for research and the estimated amount of research fees for each of them; b) annual information on the total costs incurred by each of them for third-party research.

§ 2. When a regulated entity operates a research fee account, it provides, at the request of its clients or the FSMA, a summary indicating the providers paid by this account, the total amount paid to these providers over a given period, the benefits and services received by the regulated entity, and a comparison between the total amount paid from the account and the budget set by the entity for this period, noting any rebates and carry-forwards if funds remain in this account. For the application of paragraph 1, first subparagraph, 2°, a), specific research fees:

are based solely on a research budget set by the regulated entity for the purpose of establishing the need for third-party research related to investment services provided to its clients; and
are unrelated to the volume and/or value of transactions executed on behalf of clients.

§ 3. Operational arrangements for collecting research fees from the client, if this collection is not separate but linked to a transaction commission, must separately identify research fees and fully comply with the conditions set out in paragraph 1, first subparagraph, 2° and second subparagraph.

§ 4. The total amount of research fees collected may not exceed the research budget.

§ 5. The regulated entity agrees with its clients, in the entity's investment management agreement or in its general terms and conditions, on the budgeted research fees and the frequency with which specific research fees will be deducted from the client's resources during the year.
Increases to the research budget only take place after clients have been clearly informed of such planned increase. If the research fee account shows a surplus at the end of the period, the regulated entity should provide a process to return these funds to the client or include them in the budget and research fees calculated for the following period.

§ 6. For the application of paragraph 1, first subparagraph, 2°, b), the research budget is exclusively managed by the regulated entity and is based on a reasonable assessment of the need for third-party research. The allocation of the research budget to the purchase of third-party research is subject to appropriate control mechanisms and supervision by the general management to ensure that this budget is managed and used in the best interests of the entity's clients. These control mechanisms include an audit trail of payments made to research providers and show how the amounts paid were calculated with reference to the quality criteria referred to in paragraph 1, first subparagraph, 2°, d). Regulated entities do not use the research budget and the research fee account to fund internal research.

§ 7. For the application of paragraph 1, first subparagraph, 2°, c), the regulated entity may delegate the management of the research fee account to a third party, provided that such an arrangement facilitates the purchase of third-party research and payments to research providers on behalf of the regulated entity as promptly as possible in accordance with the instructions of the regulated entity.

§ 8. For the application of paragraph 1, first subparagraph, 2°, d), regulated entities record all necessary elements in a written policy, which they make available to their clients. This policy also addresses the extent to which research purchased through the research fee account can benefit client portfolios, including taking into account, where appropriate, the investment strategies applicable to different types of portfolios and the approach pursued by the entity to fairly allocate these costs across the portfolios of different clients.

§ 9. A regulated entity providing execution services separately presents the fees for these services, which reflect only the execution cost of the transaction. The provision of any other service or service by the same regulated entity to regulated entities established in the European Union is subject to separately identifiable fees. The provision of these services and the fees associated with them are not influenced or conditioned by the payment levels for execution services.

TITLE 3. - Specific organizational rules related to algorithmic trading, the provision of direct electronic access to trading platforms, and clearing member activity

CHAPTER 1. - Scope

Art. 9. This Title is applicable:

to credit institutions and investment firms under Belgian law, including for activities carried out in another Member State;
to branches established in Belgium of credit institutions and investment firms subject to the law of a third country;
to members or participants of regulated markets referred to in Article 4, § 4, of the Law of 26 October 2016.
The institutions referred to in the first subparagraph are designated in this Title by the term "regulated entities".

CHAPTER 2. - Algorithmic Trading

Art. 10.§ 1. [1] Regulated entities using algorithmic trading have effective and appropriate risk management systems and controls adapted to their activity to ensure that their trading systems are resilient and have sufficient capacity in accordance with the requirements set out in Chapter II of Regulation (EU) 2022/2554, that they are subject to appropriate trading thresholds and limits, and that they prevent the sending of erroneous orders or any other system malfunction likely to create or contribute to a market disruption.[1] [1] They also have effective business continuity mechanisms to deal with any failure of their trading systems, including a policy and plans for ICT business continuity and ICT disaster recovery plans put in place in accordance with Article 11 of Regulation (EU) 2022/2554, and they ensure that their systems are fully tested and appropriately monitored to guarantee that they meet the general requirements set out in this paragraph and the specific requirements set out in Chapters II and IV of the same Regulation.[1] They also have effective business continuity plans to deal with any failure of their trading systems and ensure that their systems are fully tested and appropriately monitored to guarantee that they meet the requirements of this paragraph.

§ 2. Regulated entities using algorithmic trading notify the FSMA and the National Bank, as well as the competent authorities of the trading platform on which they use algorithmic trading, as members or participants of the trading platform.
The FSMA may request regulated entities using algorithmic trading to provide, on a regular or ad hoc basis, a description of the nature of their algorithmic trading strategies and detailed information on the trading parameters or limits to which the system is subject, on the main compliance and risk controls put in place to ensure that the conditions set out in paragraph 1 are met, and on the tests conducted on its systems. The FSMA may, at any time, request the latter for additional information on its algorithmic trading and on the systems used for it. The FSMA communicates, at the request of a competent authority of a trading platform on which the regulated entity uses, as a member or participant of the trading platform, algorithmic trading and without undue delay, the information referred to in the preceding subparagraphs that it receives from the regulated entity using algorithmic trading. Regulated entities ensure that a record is kept of the activities referred to in this paragraph and ensure that it is sufficient to allow the FSMA to verify their compliance with the Law of 2 August 2002, the Law of 25 April 2014, the Law of 25 October 2016, the Law of 21 November 2017 on financial market infrastructure and this Royal Decree. Regulated entities that implement high-frequency algorithmic trading techniques keep, in a validated form, an accurate and chronological register of all orders they place, including order cancellations, executed orders, and quotes on trading platforms, and make it available to the FSMA upon request.

(1)<AR 2024-05-25/29, art. 2, 003; En vigueur : 17-01-2025>

Art. 11. § 1. Regulated entities using algorithmic trading for the implementation of a market-making strategy, taking into account the liquidity, size, and nature of the particular market and the characteristics of the traded instrument:

carry out this market making continuously during a determined proportion of the trading hours of the trading platform, except in exceptional circumstances, with the result of providing liquidity to this trading platform in a regular and predictable manner;
conclude a binding written agreement with the trading platform specifying at least the obligations of the regulated entity in accordance with 1°; and
have effective systems and controls to ensure that they comply at all times with the obligations incumbent on them under the agreement referred to in 2°.

§ 2. For the purposes of this Article and Article 22, § 2, of the Law of 21 November 2017 on financial market infrastructure, a regulated entity is considered to be applying a market-making strategy when, as a member or participant in one or more trading platforms, its strategy, when trading for its own account, involves the simultaneous display of firm and competitive prices for buying and selling transactions of comparable size relating to one or more financial instruments on a single trading platform or on different trading platforms, with the result of providing liquidity to the market as a whole in a regular and frequent manner.

CHAPTER 3. - Provision of direct electronic access to trading platforms

Art. 12. § 1. Regulated entities providing direct electronic access to a trading platform have effective systems and controls ensuring that the suitability of clients using this service is duly assessed and examined, that these clients are prevented from exceeding pre-established appropriate trading and credit thresholds, that the transactions carried out by these clients are properly monitored, and that appropriate risk controls prevent any trading likely to create risks for the regulated entity itself or likely to create or contribute to a market disruption or be contrary to Regulation (EU) No 596/2014 or the rules of the trading platform. Direct electronic access without these controls is prohibited.

§ 2. Regulated entities providing direct electronic access are responsible for ensuring that clients using this service comply with the requirements of the Law of 2 August 2002, the Law of 25 April 2014, the Law of 25 October 2016, the Law of 21 November 2017 on financial market infrastructure and this Royal Decree, as well as the rules of the trading platform. Regulated entities monitor transactions to detect any violation of said rules, any trading condition likely to disrupt the market, or any behavior potentially indicative of market abuse, which should be reported to the FSMA and/or the National Bank, to the extent it falls within their competence.

§ 3. Regulated entities ensure that a binding written agreement is concluded between themselves and the client concerned regarding the essential rights and obligations arising from the provision of this service and that, under said agreement, they remain responsible for compliance with the Laws of 2 August 2002, 25 April 2014, 25 October 2016, 21 November 2017 on financial market infrastructure and this Royal Decree.

§ 4. Regulated entities providing direct electronic access to a trading platform notify the FSMA and the National Bank and the competent authorities of the trading platform on which they provide this access.
The FSMA and the National Bank may request regulated entities to provide, on a regular or ad hoc basis, a description of the systems and controls referred to in paragraph 1 and proof that they have been applied.
The FSMA communicates, at the request of a competent authority of a trading platform to which the regulated entity provides direct electronic access, without undue delay the information referred to in the second subparagraph that it or the National Bank receives from the regulated entity.

§ 5. Regulated entities ensure that a record is kept of the activities referred to in this Article and ensure that it is sufficient to allow the FSMA and the National Bank to verify their compliance with the requirements of the Laws of 2 August 2002, 25 April 2014, 25 October 2016, 21 November 2017 on financial market infrastructure and this Royal Decree.

CHAPTER 4. - Clearing Member Activity

Art. 13. Regulated entities acting as a clearing member for other persons have effective systems and controls to ensure that clearing services are applied only to appropriate persons, meeting clear criteria, and that adequate requirements are imposed on these persons to reduce risks for the regulated entity and the market. Regulated entities ensure that a binding written agreement is concluded between themselves and the person concerned regarding the essential rights and obligations arising from the provision of this service.

TITLE 4. - Organizational requirements for institutions providing investment services

CHAPTER 1. - Scope

Art. 14. For the purposes of this Title, "regulated entity" means:

credit institutions and investment firms under Belgian law, including for activities carried out in another Member State;
branches established in Belgium of credit institutions and investment firms subject to the law of third countries.

CHAPTER 2. - Safeguarding of financial instruments and client funds

Section 1. - Safeguarding of financial instruments and client funds

Art. 15. § 1. Regulated entities must meet the following requirements regarding the safeguarding of financial instruments and client funds:

They must keep registers and accounts enabling them to distinguish at all times and immediately the assets held for a given client from those held for other clients and from their own assets;
They must keep their registers and accounts in a manner ensuring their accuracy, and in particular their correspondence with the financial instruments and funds held for clients, and enabling them to be used as an audit trail;
They must regularly reconcile their internal accounts and registers with those of any third party holding these assets;
They must take the necessary measures to ensure that all client financial instruments that have been deposited with a third party, in accordance with Article 16, can be distinguished from their own financial instruments and from the financial instruments belonging to that third party by means of accounts with different labels in the books of that third party or by other equivalent measures ensuring the same degree of protection;
They must take the necessary measures to ensure that client funds that have been deposited, in accordance with Article 533 of the Act of 25 April 2014, with a central bank, a credit institution, a bank authorized in a third country, or a qualified money market fund, are held in an account or accounts separate from any other account used to hold funds belonging to them;
They must make appropriate organizational arrangements to minimize the risk of loss or depreciation of client assets, or rights related to these assets, due to abuse or fraud on these assets, poor management, poor accounting, or negligence.

§ 2. Where, for reasons arising from applicable law, particularly in matters of property or insolvency, regulated entities are unable to comply with paragraph 1 by safeguarding their clients' rights in a manner that satisfies the requirements of Articles 65, 65/1, 528, 529 and 533 of the Act of 25 April 2014, regulated entities must make arrangements to ensure that the objectives of safeguarding client rights set out in paragraph 1 are met.

§ 3. Where the applicable law in the territory where client funds or financial instruments are held prevents regulated entities from complying with the provisions of paragraph 1, 4 or 5, regulated entities must take any adequate measure having an equivalent effect in terms of safeguarding client rights. In this case, regulated entities must inform their clients that they do not then benefit from the provisions provided for by the Act of 25 April 2014 and this Royal Decree.

§ 4. Security interests, preferential claims or set-off rights on client financial instruments or funds that allow a third party referred to in paragraph 1, 4 or 5 to transfer the financial instruments or funds in question in order to recover claims that are not related to these clients or to the provision of services to these clients are not permitted, unless this is required by applicable law in a third country where the funds or financial instruments of these clients are held.

When regulated entities are required to conclude agreements that create such security interests, preferential claims or set-off rights, they must communicate this information to clients by indicating the risks associated with such agreements.

When security interests, preferential claims or set-off rights are granted by a regulated entity on a client's financial instruments or funds, or when the regulated entity has been informed of the granting of such types of rights, these must be recorded in the client's contracts and in the regulated entity's own accounts so that the ownership status of the client's assets is clear, particularly in the event of insolvency.

§ 5. Regulated entities must make information relating to client financial instruments and funds available upon request to the following entities: the FSMA and the National Bank, liquidators and resolution authorities. The information to be made available includes:

the internal accounts and registers related thereto that allow the balances of funds and financial instruments held for each client to be easily identified;
the location where client funds are held by the regulated entity in accordance with Articles 528, 529 and 533 of the Act of 25 April 2014 and Article 17 of this Royal Decree, as well as the details of the accounts on which client funds are held and the agreements concluded with the corresponding entities;
the location where financial instruments are held by the regulated entity in accordance with Article 16, as well as the details of accounts opened with third parties and the agreements concluded with these entities;
the contact details of third parties who perform any related outsourced tasks and the details of any outsourced tasks;
the key persons involved in the processes related in the regulated entity to the requirements for safeguarding client assets, including the person responsible for monitoring compliance with these requirements; and
the relevant agreements establishing clients' ownership rights over the assets.

Section 2. - Deposit of client financial instruments

Art. 16. § 1. Regulated entities are authorized to deposit the financial instruments they hold on behalf of their clients in one or more accounts opened with a third party, provided that they act with all the competence, care and diligence required for the selection and designation of that third party as well as for the periodic review of that decision and the provisions governing the holding and safekeeping of these financial instruments.

Regulated entities must in particular take into account the expertise and reputation enjoyed by the third party concerned in the market, as well as any legal requirement related to the holding of these client financial instruments that could adversely affect clients' rights.

§ 2. When a regulated entity deposits client financial instruments with a third party, it must only deposit them with a third party located in a territory where the safekeeping of financial instruments for the account of another person is subject to specific regulation and supervision to which said third party is subject.

In this regard, the regulated entity must take into account the existence of legal or regulatory provisions prohibiting the use of client financial instruments without prior authorization.

Furthermore, when the regulated entity has a choice between several third parties, it must, as far as possible, try to prioritize the third party where the nature of the rights arising from the registration of financial instruments in an account allows for the recovery of financial instruments notwithstanding the opening of insolvency proceedings affecting that third party.

§ 3. Regulated entities must not deposit financial instruments held on behalf of clients with a third party located in the territory of a third country in which the holding and safekeeping of financial instruments for the account of another person are not regulated, unless one of the following conditions is met:

the nature of the financial instruments or the investment services related to these financial instruments requires them to be deposited with a third party located in the territory of that third country;
the financial instruments are held on behalf of a professional client who has requested in writing from the regulated entity to deposit them with a third party located in the territory of that third country.

§ 4. The requirements provided for in paragraphs 2 and 3 also apply when the third party referred to in the aforementioned paragraphs has delegated any of its functions concerning the holding and safekeeping of financial instruments to another third party.

Section 3. - Deposit of client funds

Art. 17. § 1. Any stock exchange company that does not deposit its clients' funds with a central bank must act with all the competence, care and diligence required for the selection and designation of the credit institution subject to the law of a Member State, the credit institution subject to the law of a third country, or the qualified money market fund with which these funds are placed, as well as for the periodic review of that decision and the provisions governing the holding of these funds, and must examine within the framework of its due diligence obligations whether it is necessary to diversify the deposit of said funds.

Stock exchange companies must take into account the expertise and reputation enjoyed by these institutions or qualified money market funds in the market, as well as any legal or regulatory requirement or market practice related to the holding of client funds that could adversely affect clients' rights.

Stock exchange companies must ensure that clients give their express consent to the placement of their funds in a qualified money market fund. In order for this right to consent to be effective, stock exchange companies must inform clients that funds placed with a qualified money market fund will not be held in accordance with the client fund safeguarding requirements defined by this Royal Decree.

§ 2. When they deposit client funds with a credit institution subject to the law of a Member State, a credit institution subject to the law of a third country, or a qualified money market fund that is part of the same group as them, stock exchange companies must limit the total amount of funds they deposit with one or more group entities to twenty percent of all client funds.

A stock exchange company may not comply with this limit if it is able to demonstrate that, given the nature, scope and complexity of its activity, as well as the degree of security offered by the third parties referred to in the previous paragraph, and in any case the low balance of client funds, the requirement established in the previous paragraph is not proportionate. Stock exchange companies must periodically review the assessment made in accordance with this paragraph and notify their initial assessment and their reviewed assessments to the National Bank.

Section 4. - Use of client financial instruments

Art. 18. § 1. Regulated entities are prohibited from engaging in securities financing operations using the financial instruments they hold on behalf of a client or from using such financial instruments in any other manner for their own account or for the account of any other person or any of their other clients, unless the following two conditions are met:

the client has given their prior express consent to the use of the instruments under specific conditions, in writing, with confirmation by signature or by an equivalent substitution mechanism;
the use of the financial instruments of that client is limited to the specific conditions to which they consented.

§ 2. Regulated entities are prohibited from engaging in securities financing operations using the financial instruments they hold on behalf of a client in an omnibus account managed by a third party or from using in any other manner financial instruments held in such an account for their own account or for the account of any other person, unless, in addition to the conditions set out in paragraph 1, at least one of the following conditions is met:

each client whose financial instruments are held in an omnibus account has given their prior express consent in accordance with paragraph 1, 1;
the regulated entity has put in place systems and controls that allow it to ensure that only financial instruments belonging to clients who have given their prior express consent in accordance with paragraph 1, 1 will be used in this manner.

The information recorded by the regulated entity includes the contact details of the client whose instructions led to the use of the financial instruments and the number of financial instruments used belonging to each client who has given consent, in order to allow for a correct distribution of any potential losses.

§ 3. Regulated entities must take appropriate measures to prevent the unauthorized use of client financial instruments for their own account or for the account of any other person, including:

the conclusion of agreements with clients on the measures to be taken by the regulated entity in the event that a client does not have sufficient provision on their account on the settlement date, for example the borrowing of corresponding securities on behalf of the client or the unwinding of the position;
the close monitoring by the regulated entity of its ability to deliver on the settlement date and, in the absence of this ability, the implementation of corrective measures; and
the close monitoring and prompt request for financial instruments to be received on the settlement date and beyond.

§ 4. Regulated entities must adopt specific provisions for all their clients to ensure that the borrower of financial instruments belonging to clients provides appropriate collateral and that they themselves verify that these collateral remain appropriate and take the necessary measures to maintain the balance between the value of the collateral and the value of the financial instruments concerned.

§ 5. Regulated entities must not conclude contracts containing provisions prohibited by Article 27, § 9, of the Act of 2 August 2002.

Section 5. - Inappropriate use of financial guarantee contracts with transfer of ownership

Art. 19. § 1. Regulated entities must duly examine, and be able to demonstrate that they have done so, the appropriateness of using financial guarantee contracts with transfer of ownership in the context of the link between the client's obligations towards the entity and the client's assets subject to the financial guarantee contract with transfer of ownership.

§ 2. When they examine the appropriateness of resorting to financial guarantee contracts with transfer of ownership and document this examination, regulated entities must take into consideration all of the following factors:

whether there is only a very weak link between the client's obligations towards the entity and the use of financial guarantee contracts with transfer of ownership, including whether the probability of the client's obligations towards the entity is low or negligible;
whether the amount of client funds or financial instruments subject to the financial guarantee contract with transfer of ownership far exceeds the client's obligations, or is even unlimited if the client has any obligation towards the entity; and
whether all financial instruments or client funds are subject to financial guarantee contracts with transfer of ownership, regardless of the respective obligations of each client towards the entity.

§ 3. When they resort to financial guarantee contracts with transfer of ownership, regulated entities must highlight to professional clients and eligible counterparties the risks incurred as well as the effects of any financial guarantee contract with transfer of ownership on the client's financial instruments and funds.

Section 6. - Reports by auditors

Art. 20. Regulated entities must ensure that the persons responsible for auditing their accounts report at least once a year to the FSMA and the National Bank on the adequacy of the measures taken by them under Articles 65, 65/1, 528, 529 and 533 of the Act of 25 April 2014, Article 27, § 9, of the Act of 2 August 2002, and this Chapter.

CHAPTER 3. - Product governance requirements

Art. 21. The provisions of this Chapter also apply to regulated entities when they market structured deposits or provide advice on such deposits to clients.

[Art. 22] § 1. This article applies to regulated firms that produce financial instruments, which includes the creation, development, issuance, and/or design of such instruments.

Regulated firms that produce financial instruments comply, in an appropriate and proportionate manner, with the requirements set out in paragraphs 2 to 15, taking into account the nature of the financial instrument, the investment service, and the target market of the product.

§ 2. Regulated firms establish, implement, and maintain operational procedures and measures ensuring that the production of financial instruments is carried out in accordance with conflict of interest management requirements, including remuneration. In particular, any regulated firm that produces financial instruments ensures that the design of the financial instrument, including its features, does not have a negative impact on end clients nor harm market integrity by allowing it to mitigate its own risks or exposures related to the underlying assets of the financial instrument or to dispose of them, when it already holds the underlying assets for its own account.

§ 3. Regulated firms analyze potential conflicts of interest whenever a financial instrument is produced. In particular, they assess whether the financial instrument creates a situation likely to have a negative impact on end clients if they take:
1° an inverse exposure to that previously held by the firm itself; or 2° an inverse exposure to that which the firm intends to hold after the sale of the financial instrument.

§ 4. Regulated firms examine whether the financial instrument may pose a threat to the orderly functioning or stability of financial markets before deciding to launch the financial instrument.

§ 5. Regulated firms ensure that personnel involved in the production of financial instruments possess the necessary expertise to understand the characteristics of the financial instruments they intend to produce and the risks they present.

§ 6. Regulated firms ensure that the legal administrative body exercises effective control over the firm's product governance process. Regulated firms ensure that compliance reports submitted to the legal administrative body always contain information on the financial instruments produced by the firm, including information on the distribution strategy. Regulated firms make these reports available to the FSMA and/or the National Bank upon request.

§ 7. Regulated firms ensure that their compliance function supervises the development and periodic review of product governance arrangements to detect any risk of the firm failing to comply with the obligations set out in this article.

§ 8. When they create, develop, issue, and/or design a financial instrument in collaboration, including with entities that are not credit institutions or investment firms or with firms from third countries, regulated firms record their mutual responsibilities in a written agreement.

§ 9. Regulated firms define the potential target market for each financial instrument at a sufficient level of detail and specify the type(s) of clients who have needs, characteristics, and objectives, including, possibly, sustainability objectives, with which this instrument is compatible.

In the course of this process, regulated firms define the potential group(s) of clients with needs, characteristics, and objectives with which this instrument is not compatible, without taking into account any sustainability factors. When regulated firms cooperate to produce a financial instrument, they are only required to identify one target market.

Regulated firms that produce financial instruments distributed by other regulated firms determine the needs and characteristics of clients with which the financial instrument is compatible based on their theoretical knowledge and their experience of the financial instrument or similar financial instruments, financial markets, as well as the needs, characteristics, and objectives of potential end clients.

§ 10. Regulated firms conduct a scenario analysis of their financial instruments assessing the risk that the financial instrument performs poorly for end clients, and under what circumstances these results may occur. They assess the consequences that negative situations would have on the financial instrument, such as cases where:
1° the market environment deteriorates;
2° the producer or a third party involved in the production and/or operation of the financial instrument faces financial difficulties, or another counterparty risk materializes; 3° the financial instrument never becomes commercially viable; or 4° demand for the financial instrument is much higher than expected, straining the firm's resources and/or creating tensions in the underlying instrument market.

§ 11. Regulated firms determine whether a financial instrument meets the identified needs, characteristics, and objectives of the target market, including by examining:
1° whether the risk/reward profile of the financial instrument is consistent with the target market; 2° whether the sustainability factors of the financial instrument, if any, are consistent with the target market; 3° whether the features of the financial instrument are designed to benefit the client and are not based on a business model that requires, to be profitable, that the results are unfavorable to the client.

§ 12. Regulated firms examine the proposed fee structure for the financial instrument, and in particular the following aspects:
1° whether the costs and fees of the financial instrument are compatible with the needs, objectives, and characteristics of the target market; 2° whether the fees do not compromise the expected remuneration of the financial instrument, as in the case where the costs and fees of the instrument are almost equal to, equal to, or greater than the amount of its expected tax benefits; and 3° whether the fee structure of the financial instrument is sufficiently transparent for the target market and does not conceal fees or make them too difficult to understand.

§ 13. Regulated firms ensure that the information provided to distributors on a financial instrument includes information on the appropriate distribution channels for the financial instrument, the product approval process, and the target market assessment, and is of sufficient quality to enable distributors to understand and recommend or sell the financial instrument appropriately.

The sustainability factors of the financial instrument are presented transparently and provide distributors with relevant information to enable them to duly take into account any sustainability objective pursued by the client or potential client.

§ 14. Regulated firms regularly review the financial instruments they produce, taking into account any event likely to have a significant impact on the potential risk for the defined target market. Regulated firms verify whether the financial instrument remains consistent with the needs, characteristics, and objectives, including any sustainability objectives, of its target market, and whether it is distributed on that target market, or whether it reaches clients with needs, characteristics, and objectives with which it is not compatible.

§ 15. Regulated firms review financial instruments before any new issuance or reissuance if they are aware of any event likely to have a significant impact on the potential risk for investors and assess at regular intervals whether the instruments function as intended.

Regulated firms rely on relevant factors to determine the frequency of the review of their financial instruments, including the complexity or innovative nature of the investment strategies pursued. They also identify key events likely to have an impact on the potential risk or expected remuneration of the financial instrument, such as:
1° the breach of a threshold that will affect the remuneration profile of the financial instrument; or 2° the solvency of certain issuers whose securities or collateral may have an impact on the performance of the financial instrument.

When such events occur, the regulated firm takes appropriate measures, which may consist of:
1° communicating any useful information on the event and its consequences on the financial instrument to clients or, if the regulated firm does not directly offer or sell the financial instrument to clients, to the distributor of the financial instrument; 2° changing the product approval procedure; 3° ceasing the issuance of the financial instrument; 4° modifying the financial instrument to avoid unfair contractual clauses; 5° determining whether the distribution channels through which the financial instrument is sold are appropriate, when the regulated firm observes that the financial instrument is not sold as intended; 6° contacting the distributor to discuss a change in the distribution process; 7° terminating the relationship with the distributor; or 8° informing the relevant competent authority.

[Art. 23] § 1. When deciding on the range of financial instruments issued by themselves or by other firms and the services they intend to offer or recommend to their clients, regulated firms comply in an appropriate and proportionate manner with the requirements set out in paragraphs 2 to 10, taking into account the nature of the financial instrument, the investment service, and the target market of the product.

Regulated firms also comply with the requirements of the Law of 2 August 2002 when they offer or recommend financial instruments produced by entities that do not fall under this law. As part of this process, these firms put in place arrangements that enable them to obtain sufficient information on these financial instruments from these producers.

Regulated firms determine the target market for each financial instrument even if the producer has not defined such a target market.

§ 2. Regulated firms put in place adequate product governance arrangements, which ensure that the products and services they intend to offer or recommend are compatible with the needs, characteristics, and objectives, including any sustainability objectives, of the defined target market and that the planned distribution strategy is consistent with this target market. Regulated firms identify and assess the situation and needs of clients they intend to target to ensure that the interests of said clients will not be compromised due to commercial or financing pressures. In the course of this process, regulated firms identify the potential group(s) of clients with needs, characteristics, and objectives with which the product or service is not compatible, without taking into account any sustainability factors.

Regulated firms obtain from producers subject to the Law of 25 April 2014 or the Law of 25 October 2016 information enabling them to understand and know sufficiently the products they intend to recommend or sell so that they are distributed in accordance with the needs, characteristics, and objectives of the defined target market.

Regulated firms also take all reasonable measures to obtain adequate and reliable information from producers not subject to the Law of 25 April 2014 or the Law of 25 October 2016 enabling them to distribute the products in accordance with the needs, characteristics, and objectives of the target market. When the necessary information has not been made public, the distributor takes all reasonable measures to obtain this information from the producer or its agent. Acceptable public information is clear, reliable information produced to satisfy regulatory obligations, such as the disclosure obligations provided for by Directive 2003/71/EC or Directive 2004/109/EC. This obligation concerns products sold on primary and secondary markets and applies proportionately according to the degree of availability of public information and the complexity of the product.

Regulated firms use the information obtained from producers and information concerning their own clients to define the target market and distribution strategy. When a regulated firm acts both as a producer and distributor, a single target market assessment is required.

§ 3. To decide on the range of financial instruments and services they offer or recommend and the different target markets, regulated firms maintain procedures and measures ensuring compliance with all applicable requirements of the Laws of 25 April 2014, 25 October 2016, and 2 August 2002, including those relating to publication, adequacy or appropriateness assessment, detection and management of conflicts of interest, and incentives. In this context, particular precautions must be taken when the distributor intends to offer or recommend new products, or when there are variants for the services it provides.

§ 4. Regulated firms regularly review and update their product governance arrangements so that they remain robust and fit for purpose, and take appropriate measures if necessary.

§ 5. Regulated firms regularly review the investment products they offer or recommend and the services they provide, taking into account any event likely to have a significant impact on the potential risk for the defined target market. Regulated firms assess at a minimum whether the products or services remain consistent with the needs, characteristics, and objectives, including any sustainability objectives, of the defined target market and whether the planned distribution strategy remains appropriate. Regulated firms consider changing the target market and/or updating their product governance arrangements as soon as they observe that they have defined the target market incorrectly for this product or service or that it no longer meets the conditions of the defined target market, for example if the product becomes illiquid or highly volatile due to market variations.

§ 6. Regulated firms ensure that their compliance function supervises the development and periodic review of product governance arrangements to detect any risk of failing to comply with the obligations set out in this article.

§ 7. Regulated firms ensure that their concerned personnel have the necessary skills to understand the characteristics and risks of the products they intend to offer or recommend and the services provided, as well as the needs, characteristics, and objectives of the defined target market.

§ 8. Regulated firms ensure that the legal administrative body exercises effective control over the firm's product governance process aimed at determining the range of products offered or recommended and the services provided to respective target markets. Regulated firms ensure that compliance reports submitted to the legal administrative body always contain information on the products offered or recommended and on the services provided. They make these compliance reports available to the FSMA upon request.

§ 9. Distributors provide producers with information on sales and, where applicable, on the reviews referred to above to support the product reviews carried out by producers.

§ 10. When multiple regulated firms cooperate to distribute a product or service, the responsibility for complying with the product governance obligations set out in this article lies with the firm that has a direct relationship with the client.

However, intermediary firms:
1° ensure that relevant product information is transmitted from the producer to the final distributor in the chain; 2° enable the producer requesting information on the sales of a product to ensure compliance with its own product governance obligations to obtain this information; and 3° comply, in relation to the services they provide, with the product governance obligations applicable to producers.

[TITLE 5.] - Repealing and Final Provisions

[Art. 24] The Royal Decree of 3 June 2007 establishing rules and procedures for the transposition of the Directive on financial instrument markets, last amended by the Royal Decree of 26 September 2013, is repealed.

[Art. 25] This decree and its Annex A enter into force on 3 January 2018.

[Art. 26] The Minister responsible for Finances is charged with the execution of this decree.

[ANNEX.]

CLIENTS PROFESSIONNELS

A professional client is a client who possesses the necessary experience, knowledge, and expertise to make their own investment decisions and to correctly assess the risks incurred. To be considered a professional client, the client must satisfy the following criteria.

I. Categories of clients considered as professional

For the purposes of this Royal Decree, the following are considered professional for all investment services and activities and for all financial instruments:

Entities that are required to be authorized or regulated to operate on financial markets. The list below is understood to encompass all authorized entities carrying out activities characteristic of the entities mentioned, whether authorized by a Member State under a directive, authorized or regulated by a Member State without reference to a directive, or authorized or regulated by a third country:
a) credit institutions; b) investment firms; c) other authorized or regulated financial institutions; d) insurance undertakings; e) collective investment undertakings and their management companies; f) pension funds and their management companies; g) commodity dealers and derivatives dealers in respect thereof; h) local firms; i) other institutional investors;
Large enterprises other than those referred to in point 1, which meet two of the following size criteria, on an individual basis:
a) balance sheet total: twenty million euros; b) net turnover: forty million euros; c) own funds: two million euros;
The Belgian State, the Communities and the Regions, foreign national and regional authorities, public bodies managing public debt at the national or regional level, central banks, international and supranational institutions such as the World Bank, the IMF, the ECB, the EIB, and other similar international organizations;
Other institutional investors whose main activity consists of investing in financial instruments, including entities dealing with asset securitization or other financing operations.

The aforementioned entities are considered professional clients. However, they may request the treatment reserved for retail clients, and regulated firms may agree to grant them a higher level of protection. Where the client of a regulated firm referred to in Article 26 of the Law of 2 August 2002 is an enterprise mentioned above, the regulated firm must, before providing any service, inform the client that, based on the information available to it, the client is considered a professional client and will be treated as such, unless otherwise agreed between the regulated firm and the client. The regulated firm must also inform the client that they may request a modification of the contract to benefit from greater protection.

It is incumbent upon the client deemed to be professional to request this higher level of protection if they believe they are unable to correctly assess or manage the risks to which they are exposed.

This higher level of protection is granted when a client deemed to be professional concludes a written agreement with the regulated firm stipulating that they should not be treated as a professional client for the purposes of applicable conduct rules. This agreement specifies the services or transactions, or types of products or transactions, to which it applies.

II. Clients who may be treated as professionals at their own request

II.1. Identification criteria for clients to be considered as professional

Clients other than those mentioned in Section I, including public sector bodies, local authorities, municipalities, and retail investors, may also be authorized to waive part of the protection afforded to them by conduct rules.

Regulated firms referred to in Article 4, 3°, of this Royal Decree are therefore authorized to treat each of these clients as a professional client, subject to compliance with the applicable criteria and the following procedure. However, these clients are not presumed to possess market knowledge and experience comparable to those of the categories of professional clients listed in Section I.

The client may validly waive the protection conferred by conduct rules only on the condition that an adequate assessment by the regulated firm of the client's competence, experience, and knowledge provides the regulated firm with reasonable assurance, in light of the nature of the envisaged transactions or services, that the client is capable of making their own investment decisions and understanding the risks incurred.

The aptitude criteria applied to the directors and senior management of authorized entities based on financial directives may serve as an example for the assessment of the client's competence and knowledge. In the case of a small enterprise, this assessment focuses on the person authorized to conduct transactions on behalf of the enterprise.

In the context of this assessment, at least two of the following criteria must be satisfied:

During the previous four quarters, the client has executed on average ten significant transactions per quarter on the relevant market;
The value of the client's portfolio of financial instruments, defined as including bank deposits and financial instruments, exceeds 500,000 euros;
The client has held, or has held for at least one year, a professional position in the financial sector requiring knowledge of the transactions or services envisaged.

II.2. Procedure

These clients may waive the protection arising from conduct rules only if the following procedure is respected:

The client notifies the regulated firm in writing of their wish to be treated as a professional client, either generally, or for a specific investment service or transaction, or for a type of transaction or product;
The regulated firm clearly and in writing warns the client of the protections and compensation rights under the investor protection regime from which they risk depriving themselves;
The client declares in writing, in a document separate from the contract, that they are aware of the consequences of waiving the aforementioned protections.

Before deciding to accept this waiver of protection conferred by conduct rules, the regulated firm is required to take all reasonable measures to ensure that the client wishing to be treated as a professional client meets the criteria set out in Section II.1.

Regulated firms must implement appropriate internal policies and procedures, recorded in writing, allowing for the classification of clients. It is incumbent upon professional clients to inform the regulated firm of any change likely to modify their classification. However, the regulated firm that observes that a client no longer meets the conditions required to be treated as a professional client must take appropriate measures.

Signatures

Given in Brussels, on 19 December 2017.
PHILIPPE
By the King:
The Minister of Finance,
J. VAN OVERTVELDT

Preamble

PHILIPPE, King of the Belgians,
To all, present and future, Greetings.
Having regard to the Law of 2 August 2002 on the supervision of the financial sector and financial services, Articles 2, paragraph 1, 28°, amended by the Royal Decree of 3 March 2011, 26, paragraph 8, inserted by the Law of 21 November 2017, and 27, § 7, paragraph 4, replaced by the Law of 21 November 2017; Having regard to the Law of 25 April 2014 on the status and supervision of credit institutions and stockbroking companies, Articles 65, § 2, 65/1, § 2, inserted by the Law of 25 October 2016, 65/2, § 3, inserted by the Law of 21 November 2017, 65/3, inserted by the Law of 21 November 2017, 528, 529, 529/1 and 533, § 4, paragraph 1, replaced by the Law of 21 November 2017; Having regard to the Law of 25 October 2016 on access to the activity of providing investment services and on the status and supervision of portfolio management companies and investment advisory firms, Articles 26/1, § 3 to 26/2, inserted by the Law of 21 November 2017; Having regard to the Royal Decree of 3 June 2007 laying down the rules and procedures for transposing the Directive on financial instrument markets; Having regard to the consultation open under Article 2, paragraph 1, 18°, of the Law of 2 August 2002 on the supervision of the financial sector and financial services, which was organized by the FSMA from 15 December 2016 to 20 January 2017; Having regard to the opinion of the FSMA, given on 25 October 2017; Having regard to the opinion of the National Bank of Belgium, given on 31 October 2017; Having regard to Opinion 62.524/2 of the Council of State, given on 13 December 2017 in application of Article 84, § 1, paragraph 1, 2°, of the laws on the Council of State, coordinated on 12 January 1973; On the proposal of Our Minister of Finance, We have decreed and decree:

Modification Sheet

Royal Decree of 25-05-2024 published on 19-06-2024

Article modified: 10

Royal Decree of 05-12-2022 published on 12-12-2022

Articles modified:
4; 22; 23

Report to the King

REPORT TO THE KING

Sire,

The objective of the decree we have the honor to submit to Your signature is to complete the transposition of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (hereinafter "MiFID II Directive"), which has already been largely transposed by the Law of 21 November 2017 on financial market infrastructures and transposing Directive 2014/65/EU.

This law contains several royal authorizations aimed at specifying certain rules and modalities for the implementation of the transposition provisions of the MiFID II Directive it contains.

The objective of this decree is also to transpose Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards the safeguarding of financial instruments and client funds, the obligations applicable in relation to product governance, and the rules governing the granting or receiving of fees, commissions or any other pecuniary or non-pecuniary advantage (hereinafter "Delegated Directive 2017/593").

In accordance with Article 2, paragraph 1, 28°, of the Law of 2 August 2002 on the supervision of the financial sector and financial services (hereinafter "Law of 2 August 2002"), Article 2 of this decree and its Annex define the notion of "professional client". The Annex of this decree reproduces the criteria described in Annex II of the MiFID II Directive, distinguishing between categories of clients considered automatically as professional clients and those who may be treated as professionals at their own request. The suggestion of the Council of State to replace, in the French version, the notion of "retail client" with that of "non-professional client" is not followed, given the use of this notion in the Law of 2 August 2002. The notion of "retail client" is also used and defined in the French version of the MiFID II Directive.

In doing so, Article 2 and the Annex of this decree transpose Article 4, paragraph 1, 10), of the MiFID II Directive, as well as its Annex II.

This decree may, where appropriate, be subsequently supplemented by the adoption of specific criteria for the assessment of the competence and knowledge of municipalities and local authorities requesting to be treated as professional clients, in accordance with the national option left to Member States in paragraph 6 of point II.1 of Section II of Annex II of the MiFID II Directive.

These criteria may, in this case, replace or supplement those listed in paragraph 5 of point II.1 of Section II of the Annex to this decree.

Article 3 of this decree defines the notion of "eligible counterparty" in accordance with Article 26, paragraph 8, of the Law of 2 August 2002.

In doing so, this article transposes Articles 30, §§ 2 to 4, of the MiFID II Directive. It notably makes use of the options left to Member States in Article 30, §§ 3 and 4, of the MiFID II Directive to treat as eligible counterparties entities from third countries equivalent to the categories of entities mentioned in paragraph 1, first subparagraph, of Article 3 of this Royal Decree, as well as companies that fall under one of the categories of clients that should be considered as professional clients in application of Section I, points 1, 2 and 3, of the Annex to this decree, namely those that are automatically considered as professional clients, excluding other institutional investors (cf. Article 71, § 1, of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive).

It should be noted that the term "pension funds" appearing in Article 3, § 1, first subparagraph, 5° and under point I. 1° f) of the Annex to this Royal Decree does not refer solely to professional pension institutions (IRP) covered by the Law of 27 October 2006 on professional pension institutions taken in application of Directive 2003/41/EC of 3 June 2003, in the meantime replaced by Directive (EU) 2016/2341 of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision. This means that not only IRPs can be considered as professional clients but also, where appropriate, other foreign bodies that manage pensions and do not fall within the scope of Directive (EU) 2016/2341 but which, on the basis of national law, are approved or regulated.

Articles 5 to 8 of this decree transpose literally Articles 11 to 13 of Delegated Directive 2017/593 which govern the granting or receiving of "inducements", namely fees, commissions or any other pecuniary or non-pecuniary advantages received or granted by an investment firm or a credit institution in connection with the provision of an investment service or a ancillary service. These provisions are taken in execution of Article 27, § 7, paragraph 4, of the Law of 2 August 2002.

Article 27, § 7, of the Law of 2 August 2002 prohibits regulated companies from paying or receiving such inducements unless they are intended to improve the quality of the service concerned to the client and provided that they do not impair compliance with the obligation of the regulated company to act honestly, fairly and professionally in the best interests of its clients.

Article 6 of this decree lists the conditions that a fee, commission, or non-pecuniary advantage must meet to be deemed to have the object of improving the quality of the service to the client. This article also describes the justifications that must be kept available by regulated companies, as well as the information to be provided to the client.

Article 7 of this decree describes the specific requirements applicable to regulated companies that provide independent investment advice or portfolio management services, and notably the requirement to pass on to the client the monetary inducements received.

Pursuant to Article 27, §§ 5, 2°, and 6 of the Law of 2 August 2002, regulated companies providing such services are not authorized to accept, by keeping them, inducements, whether monetary or non-monetary, related to the provision of the service to clients, except for possible minor non-monetary advantages that are likely to improve the quality of the service provided to a client and whose size and nature are such that they cannot be considered as preventing the investment firm from respecting its duty to act in the best interests of the client, provided they are clearly signaled to the latter.

Article 7, § 3, of this decree lists the minor non-pecuniary advantages that are accepted. It should be noted that these rules may, where appropriate, be subsequently supplemented by provisions defining which other minor non-pecuniary advantages can improve the quality of the service provided to a client and, given the overall level of advantages provided by an entity or group of entities, are of such size and nature that they are unlikely to prevent the regulated company from complying with its obligation to act in the best interest of the client, in accordance with the optional royal authorization contained in Article 27, § 7, paragraph 5, of the Law of 2 August 2002. A national option in this regard is indeed provided for in Article 12, § 3, e), of Delegated Directive 2017/593.

Article 8 of this decree describes, for its part, the circumstances in which the provision of research work by third parties to regulated companies is not considered an inducement.

These implementation rules regarding inducements apply to the regulated companies referred to in Article 26, first subparagraph, of the Law of 2 August 2002, and also when they market structured deposits or provide advice on such deposits to clients (cf. Article 1, § 2, of Delegated Directive 2017/593).

They also apply to management companies for UCITS and alternative investment fund managers and this by virtue, respectively, of Article 219 of the Law of 3 August 2012 on collective investment undertakings that meet the conditions of Directive 2009/65/EC and credit institutions, and Article 39 of the Law of 19 April 2014 on alternative collective investment undertakings and their managers which makes applicable, inter alia, the rules on inducements of Article 27 of the Law of 2 August 2002 and the decrees taken for their implementation.

Title III (Articles 9 to 13) of this decree sets the organizational rules applicable to credit institutions and investment firms which, in the framework of their investment activity and/or provision of investment services:
1° use algorithmic trading, including when they use it for the implementation of a market-making strategy; 2° provide direct electronic access to a trading platform; and/or 3° act as a clearing member within the meaning of Article 2, 14), of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories.

These provisions implement Articles 65/3 and 529/1 of the Law of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies (hereinafter "Law of 25 April 2014") and Article 26/2 of the Law of 25 October 2016 on access to the activity of providing investment services and the status and supervision of portfolio management and investment advisory companies (hereinafter "Law of 25 October 2016").

In doing so, they transpose Article 17 of the MiFID II Directive.

These rules apply to Belgian credit institutions and investment firms, including for activities carried out in another Member State of the European Union, as well as to branches established in Belgium of such regulated companies subject to the law of a third country.

They also apply to members or participants of regulated markets referred to in Article 4, § 4 of the Law of 25 October 2016, namely persons who benefit from the exemptions referred to in Article 4, § 1, 1°, 9°, 10° and 12°, of the aforementioned law. In doing so, these provisions also transpose Article 1, § 5, of the MiFID II Directive.

Chapter I of Title IV of this decree sets the organizational rules applicable to investment firms and credit institutions that provide investment services and which, in this context, hold financial instruments or client funds. These rules, taken in execution of Articles 65, § 2, 65/1, § 2, 65/2, 528, 529, 529/1 and 533, § 4, first subparagraph, of the Law of 25 April 2014 are therefore not applicable to portfolio management and investment advisory companies, nor to UCITS management companies or alternative investment fund managers who are not authorized to hold client assets.

Article 16, which ensures the transposition of Article 3 of Delegated Directive 2017/593, reproduces the terms of Article 67 of the Royal Decree of 3 June 2007 repealed by this Royal Decree insofar as it specifies that the aforementioned examination will take into account both legal and contractual provisions governing the holding and conservation of financial instruments, notably those prohibiting the use by the third-party depositary of financial instruments deposited with it without the express authorization of the concerned clients and those determining the nature of the right resulting from the registration of financial instruments in an account. This last aspect is essential since the nature of the right vis-à-vis the third party with whom the financial instruments are deposited conditions the protection regime of said financial instruments, notably in the event of insolvency proceedings opened against this third party.

Article 17, for its part, is exclusively applicable to stock exchange companies. Its paragraph 2 constitutes a novelty compared to the existing regime under the Royal Decree of 3 June 2007. It introduces a new limit on the amounts of client funds that a stock exchange company can deposit with establishments belonging to the same group as it. This limit amounts to twenty percent of all client funds held by the stock exchange company.

Derogation from the application of this limit may be granted, in certain circumstances, for reasons of proportionality.

Chapter II of Title IV of this decree is devoted to product governance requirements, taken in execution of Articles 65/2, § 3 and 529 of the Law of 25 April 2014 and Article 26/1, § 3, of the Law of 25 October 2016.

All rules are applicable to Belgian companies, including for activities carried out in another Member State of the European Union, as well as to branches of companies subject to the law of a third country.

Product governance rules also apply to regulated companies when they market structured deposits or provide advice on such deposits to clients (cf. Article 1, § 2, of Delegated Directive 2017/593).

They also apply to UCITS management companies and alternative investment fund managers and this by virtue, respectively, of Article 221 of the Law of 3 August 2012 on collective investment undertakings that meet the conditions of Directive 2009/65/EC and credit institutions, and Article 33 of the Law of 19 April 2014 on alternative collective investment undertakings and their managers which makes applicable, inter alia, the organizational rules on product governance of Article 26/1 of the Law of 25 October 2016, and the decrees taken for its implementation.

Given in Brussels, 19 December 2017.

I have the honor to be,
Sire, of Your Majesty the very respectful and very faithful servant, The Minister of Finance, J. VAN OVERTVELDT

Correspondence Table Delegated Directive (EU) 2017/593 of the Commission of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards the safeguarding of financial instruments and client funds, the obligations applicable in relation to product governance and the rules governing the granting or receiving of fees, commissions or any other pecuniary or non-pecuniary advantage/Belgian law


Provisions of the Directive	Legal or regulatory provisions in which the provisions of the directive are transposed
Article 1 (1)	Art. 221 of the Law of 3 August 2012 (1)Art. 33 of the Law of 19 April 2014 (2)
Article 1 (2)	Art. 5, 14 and 21 Royal Decree MiFID (3) II
Article 1 (3)	Art. 4, paragraph 1, 7°, Royal Decree MiFID II
Article 1 (4)	Art. 4, paragraph 1, 8°, Royal Decree MiFID II
Article 2	Art. 15 Royal Decree MiFID II
Article 3	Art. 16 Royal Decree MiFID II
Article 4 (1)	Art. 533, § 2, of the Law of 25 April 2014 (4)
Article 4 (2) and (3)	Art. 17 Royal Decree MiFID II
Article 5	Art. 18 Royal Decree MiFID II
Article 6	Art. 19 Royal Decree MiFID II
Article 7	Art. 42/1 and 510/1 of the Law of 25 April 2014
Article 8	Art. 20 Royal Decree MiFID II
Article 9	Art. 22 Royal Decree MiFID II
Article 10	Art. 23 Royal Decree MiFID II
Article 11	Art. 6 Royal Decree MiFID II
Article 12	Art. 7 Royal Decree MiFID II Art. 27, § 7, paragraph 5 Law of 2 August 2002
Article 13	Art. 8 Royal Decree MiFID II
Article 14	Not transposable

Notes

(1) Law of 3 August 2012 on collective investment undertakings that meet the conditions of Directive 2009/65/EC and credit institutions.
(2) Law of 19 April 2014 on alternative collective investment undertakings and their managers.
(3) Draft Royal Decree on the rules and modalities to transpose the Directive concerning financial instrument markets.
(4) Law of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies

OPINION 62.524/2 OF 13 DECEMBER 2017 ON A DRAFT ROYAL DECREE "ON THE RULES AND MODALITIES AIMED AT TRANSPOSING THE DIRECTIVE CONCERNING FINANCIAL INSTRUMENT MARKETS"

On 21 November 2017, the Minister of Finance, responsible for the Fight against Tax Fraud, invited the Council of State, Legislative Section, to issue an opinion within thirty days on a draft Royal Decree "on the rules and modalities aimed at transposing the Directive concerning financial instrument markets".

The draft was examined by the Second Chamber on 13 December 2017. The Chamber was composed of Pierre Vandernoot, Chamber President, Luc Detroux and Wanda Vogel, Councillors of State, Christian Behrendt and Marianne Dony, Assessors, and Charles-Henri Van Hove, Acting Clerk.

The report was presented by Jean-Luc Paquet, First Auditor.

The concordance between the French version and the Dutch version was verified under the control of Wanda Vogel.

The opinion, the text of which follows, was given on 13 December 2017.

Preamble

In the second paragraph, it is necessary to specify that Articles 65, § 2, and 65/1, § 2, of the Law of 25 April 2014 "on the status and supervision of credit institutions and stockbroking companies" were inserted by the Law of 25 October 2016.
In the same second paragraph, given that among Articles 65, § 2, 65/1, § 2, and 65/2, § 3, of the Law of 25 April 2014, only Article 65/2, § 3, was inserted by the Law of 21 November 2017, the word "inserted" should be written in the singular.

Dispositive

Article 1

In the French version, the word "de" should be omitted between the words "2011/61/EU" and the words "the Delegated Directive".

Articles 2 and 25 and Annexes

The intention appears to be to make the concordance table between the provisions of Commission Delegated Directive (EU) No 2017/593 of 7 April 2016 "supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and conditions of operation applicable to investment firms and the definition of certain terms for the purposes of that Directive" and the provisions of Belgian law, an annex to the draft decree, as indicated by the mention, under this concordance table, of the words "Seen to be annexed to our Royal Decree of 19 December 2017 on the rules and modalities aimed at transposing the Directive concerning financial instrument markets".

However, it is not customary to annex this kind of concordance table to a legal or regulatory text. It would be better to annex this table to the report to the King accompanying the draft decree.

In this case, the draft decree would no longer have only one annex, and it would not be necessary to number it "A". The words "Annex A", appearing in Articles 2, 3, § 2, first paragraph, and 25 of the draft as well as in the title of the proposed Annex A, will then each time be replaced by the word "Annex".

Article 2

At the end of Article 2, there is no need to specify that it refers to the Annex "to this decree".

Generally speaking, when it is a matter of a reference within the same act or a division thereof (chapter, section, article, paragraph, etc.), it is not appropriate to recall that it is the same act or the same division (1).

Article 6

In paragraph 6, the reference to Article 45 of Commission Delegated Regulation (EU) No 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and conditions of operation applicable to investment firms and the definition of certain terms for the purposes of that Directive will be replaced by a reference to Article 50 of that delegated regulation (see Article 11, paragraph 5, second paragraph, of Delegated Directive (EU) 2017/593).

Furthermore, in the Dutch version of this paragraph 6, it is necessary to write "van de gedelegeerde verordening (EU) 2017/565", instead of "van de Gedelegeerde Richtlijn (EU) 2017/565".

Article 7

At the end of paragraph 2, it is not appropriate to write "following paragraph" but "paragraph 3". If one or more paragraphs were to be inserted subsequently between paragraphs 2 and 3, the reference to the "following paragraph" would no longer be accurate (2).

Article 8

In order to respect the structure of Article 13 of Delegated Directive (EU) 2017/593, it is necessary to transform Article 8, § 1, 3°, of the draft, into a distinct paragraph. The end of paragraph 3 will be adapted accordingly.
Given the observation formulated above, it will be written respectively:
- in paragraph 6: "paragraph 1, first paragraph, 2°, b)" and "paragraph 1, first paragraph, 2°, d)",
- in paragraph 7: "paragraph 1, first paragraph, 2°, c)", and
- in paragraph 8: "paragraph 1, first paragraph, 2°, d)".

Articles 9 and 14

It is not appropriate to leave an article outside the divisions grouping articles. Articles 9 and 14 of the draft must therefore appear in a subdivision of the title under which they respectively appear (3).
Articles 9 and 14 of the draft introduce provisions finding their legal basis respectively in the Law of 2 August 2002 "on the supervision of the financial sector and financial services", in the Law of 25 April 2014 "on the status and supervision of credit institutions and stockbroking companies" and in the Law of 25 October 2016 "on access to the activity of investment service provision and on the status and supervision of portfolio management companies and investment advice companies".
At Article 9, first paragraph, 1°, and at Article 14, 1°, of the draft, the words "of the European Union" will therefore be omitted each time (see the definition of the notion of "third country" appearing in Article 2, 12°, of the Law of 2 August 2002 and the definition of the notion of "Member State" appearing respectively in Article 3, 9°, of the Law of 25 April 2014 and in Article 2, 17°, of the Law of 25 October 2016).

Article 22

In the French version of Article 22, § 9, second paragraph, second sentence, it is undoubtedly necessary to write "regulated firms", as in the Dutch version of this provision and as in the rest of Article 22.

Annex A (read: Annex)

In Section I, second paragraph, second sentence of the French version, it would be appropriate, as in the Dutch version and as in Annex II, Section I, second paragraph, of Directive No 2014/65/EU, to replace the notion of "retail client" with that of "non-professional client".
Since Article 5, § 1, of the draft defines, for Title 2 thereof, the notion of "regulated firm" by referring to Article 26, first paragraph, of the Law of 2 August 2002, it is not necessary, in Section I, second paragraph, third sentence, of the Annex, to recall this reference to Article 26 of the Law of 2 August 2002.

The Clerk
Ch.-H. VAN HOVE

The President
P. VANDERNOOT

(1) Principles of legislative technique - Guide for drafting legislative and regulatory texts, www.raadvst-consetat.be, tab "Legislative technique", recommendation n° 72, a).
(2) Ibidem, recommendation n° 72, b).
(3) Ibidem, recommendation n° 63.