Following inspections conducted by the FFSA in 2015 and 2016, the FFSA issued on 6 March 2017 public warnings to and imposed penalty payments on four Finnish investment advisors. The inspections focused on the sale of investment fund products and structured financial instruments to non-professional clients over the age of 70. The public warnings were issued for negligence in relation to the obligations to obtain information from clients and to assess the suitability of the investment products prior to offering relevant investment advice The penalty payments, ranging from EUR 20,000 to EUR 1,000,000, were ordered first and foremost for omissions concerning documentation requirements in relation to the information obtained from clients and suitability assessments.
The inspections by the FFSA revealed multiple cases of non-compliance with statutory obligations. Violations were identified in relation to the obligation to obtain information on, among other things, the clients’ investment objectives, experience and knowledge, risk appetite and risk profile. One of the companies had failed to take adequate action to identify and prevent conflict of interest situations. In addition, there were shortcomings in the documentation of the information obtained and in the documentation of suitability assessments. The FFSA stressed that proper records enable an ex post verification of the course of events, which is necessary for the functioning and effectiveness of the FFSA’s supervision.
The decisions of the FFSA are a stark reminder of the detailed conduct of business rules and obligations that investment service providers must comply with. The decisions highlight the importance of well-designed and functioning internal processes to ensure compliance, proper training of relevant staff members and prudent adherence to the documentation and client assessment requirements. In providing investment advice, special attention must be given to the circumstances, risk profiles and expectations of individual clients. Investment advice must be guided by the interests of the client and extra precautions must be taken to avoid potential conflict of interests.
For further information, please contact