First-step analysis: fintech regulation in Belgium

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Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

The Financial Services and Markets Authority (FSMA) and the National Bank of Belgium (NBB) are generally the bodies responsible for regulating the provision of fintech products and services in Belgium.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

A large number of financial activities trigger licensing requirements in Belgium. The following providers of financial services are regulated (among others): credit institutions, certain lenders, stockbroking and investment firms, fund management companies, payment institutions, e-money institutions, and insurance and reinsurance firms.

The supervision of financial institutions in Belgium is organised according to a ‘twin peaks’ model, by which the competences are shared between two autonomous supervisors: the NBB and the FSMA. Each regulator has a specific set of objectives. The NBB is the principal prudential supervisor for (among others) banks, insurance companies, stockbroking firms, payment and e-money institutions, on both a macro- and micro-level. The FSMA is responsible for supervising the financial markets and the information circulated by companies, certain categories of financial service providers (including investment firms and fund management companies) and intermediaries, compliance by financial institutions with conduct of business rules and the marketing of financial products to the public. The Federal Public Services Economy, small and medium-sized enterprises (SMEs), Self-employed and Energy (FPS Economy) also has certain supervisory powers (eg, consumer credit, payment services).

Only credit institutions may receive deposits from the public in Belgium or solicit the public in Belgium in view of receiving deposits. Credit institutions are regulated by the Belgian Act of 25 April 2014 relating to the status and supervision of credit institutions and stockbroking firms. Besides deposit-taking, the majority of the activities listed under Annex I of the Capital Requirements Directive may only be carried out by entities that are licensed or subject to specific regulations, or both. Certain lenders are also subject to local supervision (eg, consumer lenders and consumer mortgage lenders). Commercial lending (on a stand-alone basis) does not require a licence but specific rules of conduct apply where lending to SMEs. These rules of conduct include a duty of rigour, a duty of information and a right of prepayment for the enterprise. SMEs are individual or legal entities pursuing an economic purpose in a sustainable manner or liberal professions (eg, lawyers and notaries) that have no more than one of the following criteria in their last and penultimate closed financial year: 50 employees on an annual basis, annual turnover of €9 million and total balance sheet of €4.5 million.

All investment services contemplated by the second Markets in Financial Instruments Directive are regulated and may only be carried out by duly licensed entities. Investment services include reception and transmission of orders, execution of orders, proprietary trading, portfolio management, investment advice, underwriting and placing of financial instruments and operation of multilateral trading facilities, where they are carried out in respect of financial instruments such as transferable securities (shares, bonds, puts or calls on shares or bonds, etc), money market instruments, units in collective investment undertakings (UCITS), derivative contracts and instruments. Dealing in foreign exchange spot and forward contracts (on one’s own account or as agent) is also regulated in Belgium. Investment services are carried out by (Belgian or foreign) investment firms. Belgian investment firms can be set up either as stockbroking firms (subject to the Act of 19 April 2014 on alternative investment firms and their managers) or portfolio management and investment advice firms (subject to the Act of 25 October 2016 on investment firms and services).

The Act of 3 August 2012 implemented the Undertakings for Collective Investments in Transferable Securities Directive and regulates UCITS funds, UCITS management companies and funds investing in receivables. The Act of 19 April 2014 has implemented the Alternative Investment Fund Managers Directive (AIFMD) and regulates alternative investment funds and their managers.

Payment services institutions and e-money institutions are regulated by the Act of 11 March 2018, which implemented the second Payment Services Directive (PSD2) in Belgium. Insurance and reinsurance companies are ruled by the Act of 13 March 2016. Insurance contracts are regulated by the Act of 4 April 2014.

Intermediaries in banking and investment services, insurance intermediaries and consumer credit intermediaries are also subject to local supervision.

It is an offence to carry out any of the above regulated financial services in Belgium without being duly licensed by or registered with the relevant regulator, subject to applicable EU passporting rules.

Consumer lending

Is consumer lending regulated in your jurisdiction?

Consumer lending is a regulated activity in Belgium under Book VII of the Belgian Code of Economic Law. ‘Consumer’ means any individual acting for purposes that do not fall within his or her trade, business, craft or professional activity.

A licensing requirement applies to consumer lenders (including consumer mortgage lenders) and intermediaries in consumer lending. Certain (limited) exemptions are available. In addition, there are ongoing requirements that have to be complied with by the lenders (eg, provision of information, documents and statements, and form and content of the credit agreement itself).

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

Provided that the borrowers do not qualify as consumers and the loan itself is being traded and not a loan instrument, there are in principle no restrictions on trading (receivables in respect of) loans in the secondary market in Belgium. However, the loan agreement must not prohibit the assignment and civil law requirements may have to be complied with to ensure the enforceability of the transfer of the loan (and, as the case may be, the security rights attached thereto) in relation to third parties.

Receivables in respect of consumer loans may only be transferred to a limited number of assignees (including credit institutions, regulated lenders, credit insurers and a specific category of collective investment scheme designed for making investments in receivables, the société d’investissement en créances or vennootschap voor belegging in schuldvorderingen). The transfer of consumer mortgage loans is also subject to specific rules.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

In Belgium, collective investment schemes (CISs) and the management of CISs are regulated entities and activities respectively. In general, a CIS is any entity whose purpose is the collective investment of financial means collected from investors through an offer of financial instruments. The persons participating in the scheme (the investors) must not have day-to-day control over the management of the property. Furthermore, the contributions of the participants and the profits or income out of which payments are to be ma
de to them must be pooled and the property managed as a whole.

Whether a fintech company will fall within the scope of this regime will depend on the exact nature of its business. Fintech companies that manage assets on a pooled basis on behalf of investors should give particular consideration to whether they may be operating a CIS. Fintech companies that are geared more towards providing advice or payment services may be less likely to operate a CIS, but should nonetheless check this and have regard to their other regulatory obligations.

Alternative investment funds

Are managers of alternative investment funds regulated?

Managers of alternative investment funds are regulated in Belgium under the AIFMD, which was implemented in Belgium by the Act of 19 April 2014 relating to alternative investment funds and their managers, implementing royal decrees and circulars and guidance issued…

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