SWEDSEC'S LICENSING RULES AND REGULATIONS with commentaries 1 January 2011
Table of Contents Chapter 1
Companies and persons covered by the Rules and Regulations
Associated Companies' obligations
Licence Holders' obligations
Proficiency requirements and Licensing Examination
The handling of disciplinary matters by SwedSec 30
Chapter 10 Procedure before the Disciplinary Board
Chapter 11 Conflicts of interest
Chapter 12 Fees
Chapter 1. Introductory provisions Purpose Section 1. The aim of the Swedish Securities Dealers Association is to maintain a sound, strong and efficient securities market. As part of this work, the Swedish Securities Dealers Association has formed the subsidiary SwedSec AB ("SwedSec") via its whollyowned subsidiary Svenska FondhandlarefĂśreningen Service AB. SwedSec works to ensure that employees in the security market have a high level of knowledge and comply with the rules. This will contribute to maintaining a high level of confidence in the securities market. SwedSec requires that employees of Associated Companies operating on the securities market be licensed by means of proficiency requirements being tested in a licensing examination and by means of an annual update of their knowledge. In order to continue to hold a Licence, it is required that the Licence Holder is in compliance with the rules. In order to be able to obtain a Licence, in addition to the imposition of stringent requirements for knowledge, stringent requirements are imposed regarding suitability and the ability to comply with generally accepted practices and the regulatory regime governing the securities market. The Licence Holder must undertake to comply with the Rules and Regulations and generally accepted practices on the securities market. Commentary Chapter 2, sections 2 and 3 set forth the employees who are subject to the obligatory Licence requirement. In the provisions, it is also emphasised that Licence Holders give an undertaking to comply with the Rules and Regulations and generally accepted practices on the securities market. Chapter 4, section 1 provides that Licence Holders who breach their undertaking may be subject to disciplinary sanctions. The Financial Advice to Consumers Ordinance (SFS 2003:862) and the Swedish Financial Supervisory Authorityâ€™s Regulations on securities business (FFFS 2007:16) impose a requirement that all persons who provide financial advice or investment advice must possess sufficient skills for this. SwedSec's ambition is not to impose an obligatory requirement that all persons who perform such advisory services hold a Licence. The reasons for this are primarily as follows. Pursuant to the Financial Advice to Consumers Ordinance and the Securities Market Act (SFS 2007:528) ("SMA"), the Swedish Financial Supervisory Authority has issued regulations, among other things, as to the subject areas in which an advisor must be proficient in order to fulfil the proficiency requirements of the Act and the regulations. However, the proficiency requirements in the respective subject areas are adapted to the operations conducted by the Associated Company and to the advice provided by the respective advisor. On the other hand, the proficiency requirements in SwedSec's Licensing Examination are the same for all Licence Holders. Thus, SwedSec's Licence requirements for advisors focus on the operations of the Associated Company, at which the requirements regarding advisors' proficiency should be particularly stringent. In contrast to the Financial Advice to Consumers Ordinance and the Securities Market Act and its associated regulations, SwedSec's Rules and Regulations also impose individual liability on the Licence Holder, which ultimately may result in disciplinary sanctions following a decision by SwedSec's Disciplinary Board.
Definitions Section 2. In these Rules and Regulations: 1. Active Licence means a Licence based on a Licensing Examination or on long experience, which is issued by SwedSec pursuant to Chapter 6, sections 1, 2 or 8, first paragraph. 2. Associated Representative means a natural person or legal entity defined as stated in Chapter 1, section 5, subsection 1 of the Securities Market Act (SFS 2007:528). 3. Associated Company means companies, branch offices or other parties pursuant to Chapter 2, section 1, who have acceded to the Rules and Regulations in writing. 4. Employee/Employed/Employment means a person employed by an Associated Company or a person who is an Associated Representative or who is employed by an Associated Representative. 5. Disciplinary Board means a Board appointed by the Board of Directors of SwedSec to determine disciplinary matters. 6. Disciplinary Committee means a committee appointed by the Board of Directors of SwedSec charged with duties in accordance with Chapter 9, section 2. 7. Client means clients, both professional investors and other clients, of the Associated Company. 8. Qualified Advice means such advice as referred to in Chapter 2, section 3. 9. Licence means an Active Licence or Inactive Licence. 10. Licence Holder means a natural person who holds an Active Licence or Inactive Licence and who has registered as a Licence Holder with SwedSec. 11. Licensing Examination: means a test to verify that the person who applied for an Active Licence satisfies the proficiency requirements imposed by SwedSec. 12. Online Service: means SwedSec's electronic system for the administration of Licence Holders, the booking of tests, the application for Licences, etc. The Online Service can be found on SwedSec's website (www.swedsec.se). 13. Review Board means a board appointed by the Board of Directors of SwedSec which, among other things, imposes the proficiency requirements that shall apply for the Licensing Examination and the annual update of knowledge referred to in Chapter 6, section 3. 14. Rules and Regulations means the Licensing Rules and Regulations in force from time to time. 15. SwedSec means SwedSec AB, company no. 556601-8569, Box 1426, 111 84 Stockholm. 16. Inactive Licence means a licence pursuant to Chapter 6, section 4.
Commentary The concepts of Active Licence and Inactive Licence are crucial. A person who holds an Active Licence may perform the work duties set forth in Chapter 2, sections 2 and 3. An Active Licence can be obtained by passing a Licensing Examination and otherwise fulfilling the conditions set forth in Chapter 6, section 1. Licensing Examination. Finally, an Active Licence can be obtained through the special exemption procedure stated in Chapter 6, section 8, first paragraph. A person who has obtained a Licence and performs duties covered by the provision in Chapter 2, section 4 on a voluntary Licence also holds an Active Licence. Certain persons can also hold an Active Licence based on older transitional provisions, see Chapter 6, section 2. A Licence Holder whose Licence is based on a Licensing Examination obtains an Inactive Licence when he terminates his Employment. An Inactive Licence may also be issued to a Licence Holder with work duties that previously belonged to the obligatory area for a Licence pursuant to Chapter 2, sections 2 or 3 but have changed such that the Licence Holder is subject to the provision in Chapter 2, section 4 and the Associated Company finds no reason to allow the Licence Holder to retain an Active Licence. An Associated Representative has, in relation to the securities institution with which it has entered into an agreement, a position similar to an employment relationship in relation to the Rules and Regulations. If the institution is an Associated Company, the Rules and Regulations should therefore be applied to Associated Representatives in the same manner as for a person who is or, where appropriate, was Employed by the Associated Company. Application Section 3. The Rules and Regulations are adopted by the Board of Directors of SwedSec and, unless special cause otherwise dictates, reviewed at the close of every year and halfyear. Decisions regarding any amendment to the Rules and Regulations shall be posted on SwedSec's website stating the date of entry into force. Commentary: Proposed amendments to the Rules and Regulations must be discussed first within the industry. Accordingly, procedures have been established for consultation with the industry prior to amendments and supplements to the Rules and Regulations, which also ensures that regulatory amendments are published in due time prior to the date of entry into force. Section 4. Licence Holders and Associated Companies must comply with the Rules and Regulations applicable from time to time. Section 5. The Rules and Regulations shall apply to Licence Holders commencing on the date on which they are licensed by SwedSec. Section 6. The Rules and Regulations shall apply to Associated Companies commencing on the date on which SwedSec has approved the company's agreement acceding to the Rules and Regulations. Commentary: The provisions in sections 4-6 state the manner in which Licence Holders and Associated Companies will become bound by the Rules and Regulations and the date from which such
shall apply. Future amendments and supplements to the Rules and Regulations are also covered. Duty to provide information, etc. Section 7. Licence Holders and Associated Companies are obliged, upon written request by SwedSec, to provide SwedSec with the information which SwedSec requests and requires for the application of these Rules and Regulations. Specific provisions in Chapter 3, section 7, Chapter 9, section 3 and Chapter 10, sections 5 and 6 govern the duty of Associated Companies to provide information, etc. in connection with disciplinary proceedings. Commentary: Associated Companies must comply with the confidentiality rules applicable to the business. In certain cases this may require that information be provided to SwedSec in de-identified form. However, it is important that SwedSec obtains access to the information required for application of the Rules and Regulations. Employees of, or service providers to, SwedSec have a duty of confidentiality and are obligated to sign a confidentiality undertaking, see section 9. The duty to provide information, etc. applicable to Associated Companies in disciplinary matters is set forth in the second paragraph. The reason it has been deemed important to clarify the Associated Companies' stated obligations, etc. in these matters is that the disciplinary procedure is quasi-judicial in nature and due process considerations require that the procedure be regulated in order to avoid ambiguities. Chapter 3, section 7 sets forth the duty of Associated Companies to report to SwedSec regarding Licence Holders who have acted in such a manner that there exists reason to assume that this may result in sanctions. Chapters 9 and 10 contain provisions regarding the rights of the Associated Company during the preparation of the disciplinary matter at SwedSec and before the Disciplinary Board. Section 8. Certificates, reports and notices from the Associated Company to SwedSec pursuant to these Rules and Regulations shall take place in accordance with procedures adopted by SwedSec. Duty of confidentiality Section 9. A person who is or has been connected to SwedSec as employee or service provider may not, without authorisation, disclose or utilise information obtained in the course of the employment or service with respect to the business circumstances or personal circumstances of Associated Companies, Licence Holders or any other parties. SwedSec shall ensure that employees and service providers sign a confidentiality undertaking the content of which shall be as stated in the first paragraph. Commentary: The provision corresponds to the provisions regarding the duty of confidentiality contained in Chapter 1, section 10 of the Banking and Financing Business Act (SFS 2004:297) and Chapter 1, section 11 of the SMA. The duty of confidentiality applies to information which an employee or service provider has obtained with respect to the business or personal
circumstances of Associated Companies and Licence Holders, as well as any other party. Accordingly, the duty of confidentiality applies not only to Board members and employees but also to service providers who have received information about such matters as are covered by the duty of confidentiality, such as accountants and consultants. The concept of authorisation should be interpreted in the same way as in the banking business legislation, i.e. if SwedSec discloses information about a Licence Holder because SwedSec is legally obliged to do so, SwedSec is not deemed to be acting without authorisation. An example is information to the Swedish Financial Supervisory Authority which the Authority has requested pursuant to Chapter 6, section 1(a) of the Financial Instruments Trading Act (SFS 1991:980). It is important that SwedSecâ€™s employees and service providers comply with the duty of confidentiality. In order for such persons to be bound by the provisions in the first paragraph, pursuant to the second paragraph SwedSec is under an obligation to ensure that each employee and service provider signs a confidentiality undertaking. In addition thereto, SwedSec must formulate internal instructions regarding the handling and storage of documents provided to SwedSec which contain information classified as confidential.
Chapter 2. Companies and persons covered by the Rules and Regulations Companies Section 1. Companies may accede to the Rules and Regulations if they conduct any of the following activities in Sweden: 1. securities operations pursuant to the Securities Market Act (SFS 2007:528); or 2. fund operations pursuant to the Investment Funds Act (SFS 2004:46); or 3. insurance business pursuant to the Insurance Business Act (SFS 1982:713) which provides Qualified Advice and/or manages the company's own financial instruments; or 4. insurance broking pursuant to the Insurance Broking Act (SFS 2005:405) which provides Qualified Advice; or 5. Swedish branches of foreign companies that conduct equivalent activities to those referred to in sub-sections 1 â€“ 4. Parties that conduct operations in Sweden other than those stated in the first paragraph may also accede to the Rules and Regulations where separately agreed, following an assessment by the Board of Directors of SwedSec in each individual case. Commentary: SwedSec's activities are primarily focused on the main operators on the securities market, i.e. banks, investment firms and fund managers. However, the trend in recent times has meant that it is natural and desirable for insurance companies and insurance brokers that conduct activities as referred to in the provision to be offered affiliation to SwedSec. Affiliation to SwedSec is voluntary. However, affiliation constitutes support for the values and objectives which constitute the basis for SwedSec's existence and activities and means that Associated Companies are required to be in good faith compliance with the Rules and Regulations.
As referred to above, the Rules and Regulations primarily aimed at banks that conduct securities operations, investment firms and fund managers, and Swedish branches of foreign companies that conduct equivalent activities in Sweden. As regards insurance companies and insurance brokers, the provision states that affiliation requires that such company conducts one of the activities, Qualified Advice or, as far as concerns insurance companies, management of the company's assets on the securities market. Sections 2 and 3 state which officers are subject to the requirements for an obligatory Licence in the various categories of Associated Companies. According to the second paragraph, there is a possibility for other parties to accede to the Rules and Regulations. The intention is that SwedSec's Board of Directors be afforded the possibility to allow accession by parties other than those listed in the first paragraph. These may include both Swedish and foreign companies and organisations. The possibility of such companies acceding to the Rules and Regulations must, however, be considered extremely small. In order for affiliation to take place, licensing of personnel at such parties must appear to be meaningful. In these cases, SwedSec should, among other things, consider the extent to which the disciplinary procedure may be enforced. In addition, these parties may contractually undertake, where appropriate, to license an equivalent group of employees as are referred to in sections 2 and 3. The intention is not that Associated Representatives could be an Associated Company. The reason for this is that the same requirements are not made of Associated Representatives with regard to organisation, capital, monitoring of regulatory compliance etc. as apply to securities institutions or other companies under supervision. Neither are Associated Representatives subject to the supervision of the Swedish Financial Supervisory Authority. Instead, the securities institution that has entered into an agreement with an Associated Representative verifies that the Representative has adequate knowledge and qualifications for the operations it intends to provide. The securities institution is also liable for pure economic loss that the Representative has caused clients in the course of his operations as a representative. If the Representative is deficient in any respect, the securities institution may be subject to intervention by the Swedish Financial Supervisory Authority. An Associated Representative has a position that in many ways resembles employment. It therefore appears appropriate in cases where an Associated Representative wishes to obtain a Licence to instead allow the securities institution, which has entered into an agreement with the Associated Representative, to have a position equivalent to that of the employer on application of the Rules and Regulations. Obligatory Licence Section 2. A person who is Employed by an Associated Company is obliged to hold an Active Licence if such person holds any of the following positions: 1. the managing director of: a securities institution, 50 per cent or more of whose activities are derived from the securities operations, and such person’s temporary replacement; or a fund manager, and such person's temporary replacement; or an insurance broker, and such person's temporary replacement, 2. the executive officer in charge of material parts of a securities institution's Swedish securities operations; or
the executive officer in charge of material parts of a fund manager's Swedish fund management operations; the executive officer in charge of an insurance company's Swedish securities management operations, and such person's temporary replacement; a compliance officer working within the areas referred to in sub-sections 2-4; risks managers, internal accountants or other persons holding positions in material control functions and who spend 50 per cent or more of their work time in control functions within the areas referred to in sub-sections 2-4.
Commentary: The provision states which officials must possess an Active Licence in order to engage in their profession. . Many companies conduct operations both in Sweden and in other countries. The provision is intended to extend to officials who are responsible for operations in Sweden. Companies are organised in different ways and it is not always certain that all of the functions covered by the provision exist or fit in the organisation possessed by such companies. Thus, when deciding which persons should be subject to the rule, Associated Companies should conduct a comprehensive assessment in light of the purpose of the licensing. In cases of doubt, there may be reason to consult with SwedSec. According to Chapter 6, section 8, second paragraph, it is also possible for SwedSec to grant an exemption from the licence requirement where exceptional reasons exist. Section 1 states that managing directors and their temporary replacements in the enumerated categories of institutions are subject to the requirement for an obligatory Licence. For the securities institutions, the requirement only covers those banks and investment firms 50 per cent or more of whose activities are derived from the securities operations. This means that managing directors in large banks and banks with limited securities operations are not subject to the licence requirement. However, managing directors of banks which predominantly conduct securities operations are subject to the requirement for an obligatory Licence. Sub-sections 2â€“4 of the provision contain requirements that the person responsible for material parts of the securities operations or the equivalent at a securities institution, fund manager or insurance company must have an obligatory Active Licence. This may include those individuals within a securities institution who are managers of own trading, portfolio management, client trading, analysis, corporate finance, back-office (securities administration) and middle office (risk control). For fund managers, this may mean managers of different aspects of the fund management, i.e. front office, back office and middle office. For an insurance company, this may mean managers within an insurance company's securities management department (front office) and managers of the company's back office and middle office. The Associated Company may, based on its own organisation, make an assessment as to which person or persons should be subject to the licence requirement. The provision is not aimed at IT managers, HR managers, information managers or other managers who are not directly involved in the securities operations or the equivalent. With respect to Compliance Officers, only such persons as are employed within the part of the Associated Companies' operations which concern securities operations, fund operations and advice are covered. For example, within larger banks and insurance companies, there may be several Compliance Officers with different duties. The intention is that only those Compliance Officers who work within the division or divisions or units in which securities
transactions, analysis or corporate finance are carried out are covered. Consequently, neither those Compliance Officers who are solely involved with banking operations or insurance operations nor centrally located legal counsel who are not directly involved in the day-to-day operations within the above operational areas are covered. The primary duties of Compliance Officers are to monitor compliance with the rules and regulations, provide information regarding new rules and regulations, ensure that requisite instructions are in place and provide advice internally in the company regarding matters relating to rules and regulations. Failure to perform these duties can hardly trigger disciplinary sanctions. Thus, it might be called into question whether there is any need to require an obligatory Licence for such compliance officers. As a result of the major requirements regarding rules and regulations and generally accepted practices on the securities market, and the great attention paid thereto, those persons charged with monitoring compliance on such issues are becoming of greater importance in companies. Thus, there are well-grounded reasons for demanding that such persons possess the stamp of quality conveyed by the SwedSec Licence. In this context, there may be reason to point out an example of when a compliance officer may breach the rules and regulations. Compliance officers are normally subject to the obligation to report their own securities transactions, and those of closely- related persons. A failure to do so might lead to disciplinary sanctions. Duties of risk managers include identification, measurement, governance and reporting, as well as controlling the risks associated with trading in and holding securities. Those persons who perform these important duties should, in addition to their specialist expertise, also possess the broad knowledge regarding the securities market required to pass the Licensing Examination. The requirement for an obligatory Licence is imposed on those risk managers who spend 50 per cent or more of their work time performing these control functions. As regards the compliance officer and risk manager functions, the provision is aimed at those individuals who perform the work duties which are typically covered by these functions. Accordingly, it is not the title which is important to the issue of whether there is a requirement for an obligatory Licence. The provision is aimed at employees. Accordingly, lawyers, accountants and consultants are not subject to the licence requirement. Section 3. A person Employed by an Associated Company is obliged to hold an Active Licence if his or her work duties: 1. consist of the provision of Qualified Advice to Clients; or 2. include the provision of discretionary portfolio management of Clients' funds in financial instruments; or 3. consist of (at least 50% of their work time) accepting and forwarding orders from Clients or executing orders on behalf of Clients or carrying out trading on behalf of the Associated Company; or 4. include compiling investment analyses; or 5. include the provision of Qualified Advice within the area of corporate finance. Commentary: A person who devotes any part of his work time to providing Qualified Advice or managing client funds must hold a Licence. As mentioned in the commentary to Chapter 1, section 1, SwedSec's obligatory licence requirement is aimed at a sub-segment of advisors. Thus, the
aim is not that the obligatory licence requirement should extend to all persons who engage in provision of advice to consumers pursuant to the Financial Advice to Consumers Ordinance or investment advice pursuant to the Securities Market Act. The meaning of “Qualified Advice” is set forth below. Furthermore, the provision states that a prerequisite for an obligatory Licence is that the employee is a portfolio manager or devotes more than 50% of his work time to accepting and forwarding orders or executing orders on behalf of Clients or carrying out trading on behalf of the Associated Company. The latter comprises both trading in own stock at a securities institution and where employees at an insurance company manage the insurance company's assets in the form of financial instruments. The degree of work is linked to the individual's work time. Thus, the rules entail that e.g. a person who devotes at least 50% of a half-time job to the stated duties fulfils the requirements for an obligatory Licence. Associated Representatives who conduct one of the activities listed are also subject to the requirement for an obligatory Licence pursuant to the provision. It is likely that the main emphasis as regards the requirement for an obligatory Licence for an Associated Representative will fall on individuals who provide Qualified Advice. The category of employees covered by this provision also includes individuals who are authorised to carry out trading on stock exchanges or MTFs’ trading systems. With respect to employees of insurance companies and insurance brokers that accede to the Rules and Regulations, the obligatory Licence requirement will relate primarily to qualified advisors and asset managers at insurance companies. Analysts and certain individuals who work in the area of corporate finance are also subject to the requirement for an obligatory Licence. Within both of these areas, stringent requirements for expertise and experience are imposed. The work duties include giving recommendations and advice of a professional nature. For analysts, this means recommendations based on the object of the investment, while Qualified Advice for those who work in the area of corporate finance relates to tailor-made advice based on the situation of the investor. There are therefore strong reasons for arguing that all individuals who perform such duties must be licensed. The Rules and Regulations provide no real definition of “Qualified Advice”. It has not been deemed meaningful to state objective, measurable factors in order to distinguish Qualified Advice from other advice. Instead, it is incumbent on the Associated Company to assess for itself when the conditions for Qualified Advice are fulfilled. As guidance for this assessment, examples are provided here of several factors which should be relevant. The examples are not exhaustive and there are undoubtedly also other relevant factors that should be factored in. When providing investment advice or financial advice to consumers, the advisor must conduct a suitability assessment. However, this assessment does not give cause to classify the advice as qualified. Factors such as that the advice includes investments in high-risk instruments, less well known or complex financial instruments, more qualified tax advice and large amounts relative to the Client's circumstances should, however, constitute a basis for the assessment whether the advisor should be licensed. Other circumstances related to the Client's experience in investing in financial instruments should be taken into consideration. For example, this might involve a Client who is to invest
a large amount on the financial market and lacks any previous experience. Here, a careful review with the Client is required regarding the Client's financial situation, the risks associated with the investments sought by the Client, investment horizon, the willingness to take risks, etc. Also in such a situation, the advice should be provided by a Licence Holder. If the Associated Company has established a special unit or a special category of staff for advisory services, such staff should in principle be Licence Holders. The reason for this is that a Client who is referred to such a special unit or category of staff has reason to assume that Qualified Advice is provided by the unit or the category of advisor. The requirement for Qualified Advice must be interpreted widely in the Associated Company's assessment of whether a Licence is required for the work duties. Voluntary Licence Section 4. An Employee of an Associated Company is entitled to apply for an Active Licence, subject to the consent of the Associated Company. Commentary: The provision fulfils a desire from the Associated Companies. It entails that all Employees of an Associated Company are entitled to apply for an Active Licence, provided the Associated Company grants its consent. The equivalent applies to Associated Representatives. In practice, the main consequence of the provision will probably be that employees who belong to the groups of officers referred to in section 3 and who are not subject to the requirement for an obligatory Licence, or who are exempted from the Licence Requirement pursuant to section 5, will utilise the possibility to become Licence Holders by virtue of this provision. The requirements for voluntary Licences are the same as for obligatory Licences. A person who obtains a voluntary Licence pursuant to this provision has an Active Licence and is subject to the Rules and Regulations and thus may be subject to disciplinary sanctions. For the sake of clarity, it should be noted that the possibility of obtaining a voluntary Licence does not extend to service providers other than Associated Representatives. External auditors, lawyers or consultants engaged by Associated Companies are thus not covered by the provision. Exemption from the requirement for an obligatory Licence Section 5. Employees at Associated Companies who are responsible for, or engage in, management, analysis or carry out transactions regarding fixed-income or currencyrelated financial instruments are not obliged to hold a Licence, notwithstanding the provisions in sections 2 or 3. The foregoing exemption does not apply to Employees with work duties within automated order-driven trading in interest-bearing products on an exchange or MTF which is primarily aimed at retail clients. Commentary: Officers working within the bond and currency markets are exempted from the licence requirement, with the exception of those persons who work with automated order-driven trading in interest-bearing products on an exchange or MTF, provided that they fulfil the 50% requirement pursuant to section 3. The reason why officers working with automated orderdriven trading in interest-bearing products on an exchange or MTF are covered by the licence requirement is that they act on a market with, primarily, private clients and there exists a clear consumer protection interest.
As stated in section 4, there is also a possibility for all employees mentioned in the provision to obtain a voluntary Licence.
Chapter 3. Associated Companies' obligations Obligations Section 1. An Associated Company shall ensure that those persons within the company who are covered by the Rules and Regulations in Chapter 2, sections 2 and 3 hold a Licence. Furthermore, an Associated Company is obliged to ensure that Licence Holders who hold an Active Licence keep their knowledge updated. In addition, the Associated Company must conduct an appropriate proficiency assessment to ensure that Licence Holders who hold an Active Licence are able to fulfil their obligations pursuant to Chapter 6, section 3. Prior to the end of November each year, the Associated Company shall certify to SwedSec that the companyâ€™s Licence Holders who hold an Active Licence have updated their knowledge in accordance with Chapter 6, section 3 and that a proficiency assessment has been conducted. Commentary: It is incumbent on the Associated Company to ensure that Licence Holders who hold an Active Licence keep their knowledge updated in accordance with the requirements stated by SwedSec. In addition, the Company must verify that the Licence Holders actually used the information or training which they received. The commentary in Chapter 6, section 3 enlarges upon what is required of the Associated Companies and Licence Holders in this respect. Section 2. An Associated Company shall endeavour to ensure that the Company's Clients receive assistance from Licence Holders who hold an Active Licence, where they so request. Commentary: Clients probably request assistance from a Licence Holder in situations where the Client wishes to obtain advice. Thus, Associated Companies should ensure that the organisation includes advisors who are Licence Holders who can ensure that the Client's request pursuant to this provision can be met. Section 3. An Associated Company shall issue a certificate of suitability for Employees who apply for a Licence. Such a certificate shall state that the applicant is Employed by the Associated Company and that the Employee is qualified to hold a Licence. SwedSec has issued a recommendation to serve as guidance as to how the suitability assessment may be conducted. Commentary: No requirement for a certain period of experience is imposed in order to qualify for a Licence. This does not, however, mean that professional experience is irrelevant. It is incumbent on the Associated Company to take into account the applicant's experience when conducting the assessment of suitability that the company is obliged to carry out. The suitability assessment must at all times be conducted on a comprehensive basis and provide a basis for the Associated Company to make a relevant assessment of the Employee's or Associated
Representativeâ€™s conditions to be a Licence Holder, irrespective of whether he or she previously held a Licence with another Associated Company. There may be situations where a person whose suitability is to be assessed previously held a Licence which has expired or become inactive. Also in such situations, it is important that the Associated Company verify the information that the previous employer has provided in accordance with section 4. (cf. the Licence Holder's obligation pursuant to Chapter 4, section 2). Section 4. An Associated Company shall notify SwedSec within ten days, in the Online Service, of the termination of a Licence Holder's Employment. It shall thereupon be stated specifically whether the termination of the employment is related to a reported violation in accordance with section 7. Where the violation is discovered after the termination of the Employment and a report is filed in accordance with section 7, the Associated Company shall be obliged to send a new notification in accordance with the provisions of the first paragraph. The Associated Company must also provide a corresponding notification to the Licence Holder pursuant to the first and second paragraphs. Commentary: The notification that the Associated Company is obliged to issue in accordance with the first paragraph shall contain information that the employment has ceased due to a violation only where a report has been filed with SwedSec. Pursuant to Chapter 3, section 7, this specific duty to provide information (report) is limited to situations where disciplinary sanctions may be issued. Notification to SwedSec in accordance with the first paragraph of this provision should be electronic in the Online Service. At the same time as SwedSec is notified, the Associated Company shall ensure that the Licence Holder receives corresponding notification. The second paragraph relates to the situation where the Associated Company discovers, after the termination of the Employment or the assignment as an Associated Representative or the employment at an Associated Representative, that the Licence Holder has committed a violation which must be reported to SwedSec. In this situation, the Associated Company must issue a new notification which replaces the one previously issued. This notification must be provided in the manner determined by SwedSec. Situations may, however, arise where a considerable period of time elapses before a violation committed by a previous Licence Holder is discovered. In some individual cases, such a long period of time may elapse that the committed violation is no longer relevant. Such assessment is made by the Associated Company which, in the event of doubt, may consult with SwedSec. It is worth noting that the notification obligation applies irrespective of the reason for the termination of the employment or assignment. Thus, it applies even where the employee has retired, the Associated Company or the Associated Representative has gone into insolvent liquidation or liquidation, or other circumstances arise which result in the termination of the employment or the assignment. Section 5. Where a Licence Holder whose Licence has been declared inactive is Employed by an Associated Company and the Company decides that the Licence shall be activated, this must be reported to SwedSec in the Online Service.
Commentary: Where any person who holds an Inactive Licence obtains new work, it is not certain that the new employment or the assignment as or the employment at an Associated Representative requires possession of a Licence. Accordingly, and also in consideration of the fact that the possibility for a voluntary Licence has been introduced, the Associated Company's reporting obligation in accordance with the provision will arise only when the Associated Company has decided that the Licence shall be activated. A new certificate of suitability must thereupon be issued. It should also be verified that the periods stated in Chapter 6, section 4, first or second paragraph have not been exceeded. Moreover, the company is required to certify that the Licence Holder has updated his knowledge in accordance with Chapter 6, section 3, second paragraph. Section 6. Where an Associated Company employs a Licence Holder, the Company shall verify the written notification provided by the previous employer or in the case of an Associated Representative, the Associated Company which was the principal, in accordance with section 4. Commentary: Chapter 4, section 2 sets forth the Licence Holder's obligation to present a new employer with the notification which the previous employer or principal is obliged to provide upon termination of the employment or the assignment. In this context, it is irrelevant whether or not the Licence Holder performs work duties at the new employer or principal which require an obligatory Licence. The purpose of the provision is to ensure that the new employer or principal obtains the information stated in the notification. An Associated Company may also verify the notification in the Online Service. Section 7. An Associated Company shall provide a report to SwedSec immediately in writing in the event a Licence Holder has acted in a manner as stated in Chapter 8, sections 1 or 2 and there is reason to assume that this may result, or might have resulted, in disciplinary sanctions pursuant to Chapter 8. The aforesaid shall also apply regarding an Employee or former Employee whose Licence has expired. The report shall contain a description of the circumstances on which it is based. Where the report lacks details for an assessment of the matter or is otherwise deficient, SwedSec may request supplementary information. Where the report relates to such behaviour stated in Chapter 8, section 1, the Associated Company's reporting obligation pursuant to the first paragraph shall apply even if the Licence Holder has terminated his Employment at the time the matter is discovered. Commentary: The Licence Holder's obligations are stated in Chapter 4, section 1. In the event the Licence Holder breaches such obligations, this may trigger sanctions by the Disciplinary Board. Sanctions may also be triggered where the Licence Holder commits a crime or, due to his personal circumstances, otherwise appears to be unfit to be a Licence Holder. The reporting obligation arises where there is reason to assume that a violation may result in disciplinary sanctions. The reporting obligation also covers employees or former employees whose Licence has expired, provided that the violation of the rules is committed during a period in which the person was a Licence Holder as stipulated in the first sentence. It also applies to an Associated Representative or former Associated Representative. If, in its report to SwedSec,
the Associated Company cites a breach of internal rules, these rules or relevant extracts therefrom must be appended to the report. The second paragraph governs the situation where the Licence Holder has changed employer at the time the matter is discovered. In such cases, the former employer is obliged to report to SwedSec if the Licence Holder has committed a crime which is connected with the operations or if the Licence Holder has breached the provisions of Chapter 4, section 1 and there is reason to assume that this may result in disciplinary sanctions. If, on the other hand, it becomes evident that the Licence Holder has acted in the manner stated in Chapter 8, section 2, the reporting obligation will rest with the new employer. In the case of Associated Representatives, the Associated Companyâ€™s reporting obligation applies in a similar manner, if the Licence Holder has obtained new employment at another Associated Representative or another Associated Company or if the assignment agreement with the Associated Representative has been terminated. It has not been deemed necessary to state any period of time after termination of the employment or the assignment during which the Associated Company is subject to such reporting obligation. As is stated in the commentary to section 4, such an extended period of time may elapse that the violation is no longer relevant. After an Associated Company has reported a violation to SwedSec, SwedSec assumes responsibility for investigation of the matter. This entails that SwedSec may request supplementation by the Associated Company where the report is deficient or where information is otherwise lacking which is required for examination of the matter. As stated in section 9, the failure to provide SwedSec with such information may result in a conditional fine. It should be noted that, following a report to SwedSec, the Associated Company is no longer in control of the matter. Accordingly, the Associated Company cannot withdraw a submitted report. Where the Associated Company subsequently discovers that no report should have been filed or that the information initially provided is incorrect, the Associated Company must notify SwedSec thereof. SwedSec must thereafter assess the new circumstances that have arisen and the consequences thereof as regards the examination of the matter. The aforesaid may be regarded as inherent in the Associated Company's obligation to provide the information of significance for examination of the matter, and no other specific rules are required. Section 8. The Associated Company shall notify SwedSec of the identity of a person who shall be responsible for contacts with SwedSec. Such person shall possess the requisite expertise in securities law issues and be well acquainted with the Rules and Regulations. The notification shall contain information regarding such person's name, address, telephone number and e-mail. Commentary: The rule is aimed at ensuring that sufficiently competent personnel at the Associated Company are responsible for contacts with SwedSec being handled in a satisfactory manner. In practice, this duty will be allocated to the compliance officer. The rule does not, however, entail that a single person must handle all contacts with SwedSec. Administrative routines associated with the licensing procedure may, for example, be
delegated to other personnel. This possibility of delegation has been noted in the text of the provision by stating that the person "shall be responsible for the contacts". The rule entails only an administrative responsibility. Thus, the contact person has no personal responsibility for ensuring that the Associated Company fulfils its obligations under the Rules and Regulations. Fines Section 9. An Associated Company which fails to perform its obligations pursuant to section 1, 4, 5 or 7 or Chapter 1, section 7 may be ordered to pay a fine of not less than SEK 25,000 and not more than SEK 5,000,000 to SwedSec. Commentary: The issue of fines for failure to provide information or the provision of incorrect information may primarily arise only where the Associated Company does so with intent or through gross negligence. It is not justified to impose a fine in less serious cases. Incorrect information may be due to a scanty investigation of a course of events in a disciplinary matter or to the fact that new circumstances come to light at a later stage. For example, the issue of a disciplinary matter must be reported to SwedSec immediately pursuant to section 7. A prompt procedure is thus necessary. An Associated Company should not find itself in a situation in which it is subsequently forced to pay a fine notwithstanding that it has acted with normal care in connection with the investigation made prior to reporting to SwedSec. Section 10. The Board of Directors of SwedSec shall decide whether a fine is to be imposed and the amount of such fine. In determining the fine, consideration shall be given to the consequences or risks resulting from the Associated Company's acts or omissions as regards Licence Holders, SwedSec, other Associated Companies and confidence in the securities market. Commentary: The size of the fine shall be such that it results in a stiff sanction in relation to the Associated Companyâ€™s financial circumstances. Section 11. Disputes regarding fines shall be determined conclusively by arbitrators. The Associated Company and SwedSec shall thereupon appoint arbitrators from among the members of the Disciplinary Board. In adjudicating an issue regarding a fine, where appropriate the procedure stated in Chapter 10 regarding the procedure before the Disciplinary Board shall be applied. Commentary: Arbitrators are appointed from among the members of the Disciplinary Board. It is left to the Associated Company and SwedSec to determine how many and which of the Board's members shall participate in the proceedings. Exclusion of an Associated Company Section 12. If the Associated Company has seriously violated its obligations under the Rules and Regulations, SwedSec's Board of Directors may order that the company is no longer permitted to be an Associated Company (exclusion). Prior to a decision being made in respect of the matter, the Board of Directors shall afford the Associated Company an
opportunity to provide comments thereon. A decision regarding exclusion must state the reasons on which the decision is based. If the Swedish Financial Supervisory Authority revokes the Associated Company's Licence to conduct operations, the Company's accession to the Rules and Regulations ceases on the date determined by SwedSec. Following a decision by the Board of Directors of SwedSec, accession to the Rules and Regulations may also cease, if the Associated Company ceases to conduct operations pursuant to Chapter 2, section 1. Commentary: The aim of the provision in the second paragraph is that, during a phase-out period, the Associated Company shall continue to be obliged to report violations of the Rules and Regulations and to provide information to SwedSec in accordance with Chapter 1, section 7.
Chapter 4. Licence Holders' obligations Section 1. Licence Holders shall comply with the laws and regulations applicable to the operations as well as generally accepted practices on the securities market. In addition, Licence Holders shall comply with the Associated Companies' internal rules which are based on laws, regulations, general guidelines or industry recommendations. Licence Holders at Associated Companies as referred to in Chapter 2, section 1, second paragraph who may, for example, be companies and organisations that are not subject to the supervision of the Swedish Financial Supervisory Authority shall, in addition, comply with the Associated Companies' internal rules which are based on obligations in agreements with SwedSec. Commentary: The majority of the laws, regulations, general guidelines and sector recommendations that apply to Associated Companies are of a commercial law nature and are therefore not directly aimed at employees. However, in order that the commercial law requirements shall be fulfilled, it is necessary where appropriate that the employees or Associated Representatives pay attention to and comply with the rules and regulations that apply to the operations. The employees or Associated Representatives must therefore act in a manner that is in compliance with the rules and regulations, whether this affects them directly or only indirectly. The first paragraph of the provision contains an obligation on the Licence Holder to comply with the rules and regulations on the securities market as well as the internal instructions which the company has adopted and which are based on the stated rules and regulations. In the case of companies covered by the provision in Chapter 2, section 1, second paragraph, the company and SwedSec may agree in the affiliation agreement that the company should comply with additional rules and regulations which are otherwise not applicable to the company. These may involve behaviour rules, such as rules regarding the employee's obligation to report his own transactions or the Swedish Financial Supervisory Authority's general guidelines regarding ethical rules. However, other rules may also be involved depending on the operations conducted by such company. The purpose of the second
paragraph is that it shall be possible to subject Licence Holders to adjudication by the Disciplinary Board in the event of violation of the rules in the affiliation agreement. See also the argument made in the commentary on Chapter 8, section 1. Section 2. Upon commencement of new Employment by the Licence Holder at another Associated Company, the Licence Holder shall present such company with the notification referred to in Chapter 3, section 4. Commentary: One of the purposes of the licensing is to maintain public confidence in those operating on the securities market. Violations which have resulted in the termination of a Licence Holderâ€™s employment at an Associated Company or Associated Representative or in the termination of the agreement with an Associated Representative are an indication that the Licence Holder has acted in a manner that does not create confidence. In the event of a change in employment or when an Associated Representative signs an agreement with another Associated Company, it is important that the new employer or the principal is notified of such circumstances. Thus, an express requirement should be imposed that the Licence Holder must present the notification that the former employer or the principal is obliged to submit to both SwedSec and the Licence Holder in accordance with the provision in Chapter 3, section 4. The requirement is intended for Licence Holders who hold obligatory as well as voluntary Licences. A person whose Licence has expired or been revoked is no longer a Licence Holder and there is no obligation to provide notification pursuant to Chapter 3, section 4. In these cases, a potential new employer may verify the circumstances at SwedSec, should special cause exists.
Chapter 5. Proficiency requirements and Licensing Examination Review Board Section 1. The Board of Directors of SwedSec shall appoint a Review Board. The members shall possess comprehensive and broad knowledge of the securities market. Proficiency requirements Section 2. The Review Board shall stipulate the proficiency requirements which shall apply to the Licensing Examination and the annual update of knowledge. The Committee shall ensure that these proficiency requirements correspond to developments on the financial market and that the Licensing Examination corresponds to the proficiency requirements. Licensing Examination Section 3. SwedSec shall develop a Licensing Examination as well as procedures for carrying out and grading the examination. Section 4. Every person shall be entitled to take the Licensing Examination. SwedSec shall provide persons with an opportunity to take the Licensing Examination to the extent required and at the time and place determined by SwedSec.
Section 5. SwedSec's website shall provide information regarding the time and place for the Licensing Examination and the requirements for participation. Applications to take the examination shall be made via the Online Service. Section 6. The Licensing Examination shall be graded in accordance with SwedSec's established procedures. A pass grade shall apply for five years in respect of an application for a Licence. Section 7. A written certificate that the examination has been passed may be retrieved via the Online Service. Information on proficiency requirements Section 8. SwedSec shall inform the Associated Companies of the proficiency requirements in accordance with section 2. Commentary: The members of the Review Board are appointed by the Board of Directors of SwedSec. The number of members of the Review Board is not stated in the Rules and Regulations; it is for SwedSec to determine from time to time the number of members of the Review Board. An Active Licence is based on passing the Licensing Examination or on long experience in accordance with Chapter 6, section 2. For both these licence categories, the Licence Holder is required to update his knowledge annually in order to retain the Licence, see Chapter 6, section 3. Each and every person is entitled to take the Licensing Examination against payment of the fee. However, it is only Employees of Associated Companies also covered by the rules in Chapter 2, sections 2-4 who may obtain an Active Licence. A person who has passed the Licensing Examination but for other reasons is not entitled to obtain a Licence may, if circumstances change, invoke the Licensing Examination in order to obtain an Active Licence, provided that the examination was not more than five years ago and that the annual updates of knowledge have been performed.
Chapter 6. Licences Active Licence Section 1. In order to obtain a Licence, the applicant must: 1. be Employed by an Associated Company; 2. be qualified to hold a Licence, which fact is certified by the Associated Company; 3. pass the Licensing Examination in a manner determined by SwedSec, undertake to comply with these Rules and Regulations and submit to decisions taken by SwedSec and the Disciplinary Board; 4. if a Licensing Examination is taken earlier than the same year in which an application is made, also perform the annual updates of knowledge which occur between the examination and application; 5. consent to information that he/she holds a Licence being registered and processed by SwedSec and to such information being disclosed to the public.
Commentary: The provision states what is required in order to obtain a Licence. In this context, no distinction is drawn between obligatory Licences and voluntary Licences. The requirements are the same. It is incumbent on the Associated Company to conduct a suitability assessment in accordance with Chapter 3, section 3. As stated in Chapter 5, section 6, a Licensing Examination pass grade is valid for five years. Accordingly, a person who has passed a Licensing Examination without, at such time, being entitled to obtain a Licence, may invoke the passed examination if the circumstances have so changed during a five-year period that a right to obtain a Licence arises. This is conditional on the annual updates of knowledge between the Licensing Examination and an application for a Licence having also been performed. Section 2. A Licence is also held by a person who has been granted an exemption from the Licensing Examination in accordance with special older transitional provisions. A Licence in accordance with the first paragraph is based on long experience and applies for such time as the Licence Holder is Employed by the Associated Company at which he/she worked when the Licence was obtained. If the Licence Holder changes employer, due to reorganisation at the employer, through merger or acquisition, the Licence Holder shall continue to be regarded as Employed by the Associated Company. Commentary: Certain earlier transitional provisions have been discarded since the time limits stated therein have expired. It is thus no longer possible to obtain the types of exemptions that applied in connection with the entry into force of the Rules and Regulations on 1 January 2002 or amendments to the Rules and Regulations on 1 July 2004. Annual updates of knowledge Section 3. A person who holds an Active Licence must keep his knowledge updated in accordance with the proficiency requirements stipulated pursuant to Chapter 5, section 2 and is obliged to undergo the proficiency assessment required by the Associated Company. Any person who holds an Inactive Licence is not subject to any requirements to update his knowledge annually. However, where the Inactive Licence is to be converted to an Active Licence, the Licence Holder is required to perform the annual updates of knowledge which occurred during the period in which the Licence was inactive. Commentary: A person who holds an Active Licence must keep his knowledge updated in order to retain the Licence. It is incumbent on the Associated Company to ensure and to verify to SwedSec that the Licence Holder has updated his knowledge, in accordance with the requirements which SwedSec has stipulated pursuant to Chapter 5, section 2 and of which SwedSec has informed the company pursuant to Chapter 5, section 8. The intention is that at the end of each year, SwedSec should inform the Associated Companies of the areas in which the Licence Holders must receive training or information. As seen from Chapter 3, section 1, the Associated Companies should certify not later than 30 November that the Licence Holders have updated their knowledge and also certify that
proficiency assessments have been conducted. The requirements for annual training or information to be imposed by SwedSec concern new matters included in the proficiency requirements (syllabus) for SwedSecâ€™s Licensing Examination. It is thus not a question of training in areas which only affect employees in a certain specialist area. It may also concern areas which the Review Board considers particularly important or which are important to include for other reasons, such as areas which the majority of those taking the Licensing Examination have had problems with or for various reasons have become more relevant. The objective of the provision is that the Licence Holders should have up-to-date knowledge in the areas covered by the Licensing Examination. The Associated Companies can choose the method for updating the knowledge of the Licence Holders. All types of training or information to the Licence Holders are acceptable. Training can take the form of courses, seminars or e-learning. The Associated Company certifies that the Licence Holders have updated their knowledge. However, it is not sufficient for the Licence Holders to have merely participated in training. It is also required that the Associated Company verify that the Licence Holders have actually used the training. If the Licence Holders have conducted training via e-learning that employs control questions which demonstrate that they have the requisite knowledge, this is sufficient. If, on the other hand, the Licence Holders participated in seminars or the like or only conducted training by means of self-study, and a proficiency assessment has not taken place, it is also a requirement that the Associated Company verify that the Licence Holders possess actual knowledge. If the Licence Holder refuses to participate in any training offered by the Employer, in certain circumstances the sanctions referred to in section 9 may be imposed. Inactive Licence and expiry of Inactive Licence or experience Licence Section 4. An Inactive Licence expires five years from the date on which the Licence Holder passed the Licensing Examination or from 1 December of the year in which the Licence Holder last fulfilled the requirements for annual updating of knowledge. If the Employment at an Associated Company is terminated for a person who holds an Active Licence, the Licence becomes inactive for a maximum period of five years calculated from the date of termination of Employment, after which the Licence expires. For a person whose Licence is based on long experience, the Licence expires on the date of termination of Employment. If a Licence Holder who holds an Active Licence cannot fulfil his obligation to update his knowledge within the period stated in Chapter 3, section 1, second paragraph, due to illness, parental leave or other similar reason, the Licence shall be declared inactive. An Associated Company may submit a request to SwedSec that an Active Licence be declared inactive or that an Inactive Licence be activated where reasons for this exist. Commentary: A Licence can be inactive for a maximum of five years in accordance with the first paragraph. The reason is that the holder of an Inactive Licence is not required to keep his knowledge updated. It appears reasonable in these circumstances not to allow such a Licence to be
reactivated after five years without the person concerned first taking a new Licensing Examination. The second paragraph states what happens to the Licence when a Licence Holderâ€™s Employment at an Associated Company or employment at an Associated Representative or assignment agreement with an Associated Representative is terminated. The third paragraph deals with the situation where a Licence Holder who holds an Active Licence could not fulfil his obligation to update his knowledge due to illness, parental leave or other similar reason. It must thus not be a matter of a refusal on the part of the Licence Holder to receive the information or training offered by the Associated Company. When the Licence Holder returns to work, as seen from the fourth paragraph, the Associated Company can apply to SwedSec for the Licence to be activated. Beforehand, the company must ensure that the Licence Holder has updated his knowledge. The periods stated in the first and second paragraphs must also be observed. This provision should also be applied to a person holding a Licence based on long experience. The fourth paragraph has introduced the possibility for Associated Companies to request that an Active Licence be declared inactive. There may be reasons for making such a request where a holder of a Licence changes work duties and thereby ends up outside the obligatory area but still covered by the voluntary area for Licences. Such may also be the case where an Associated Company no longer deems it economically defensible to pay the cost of an Active Licence in respect of a person who holds a voluntary Licence. As mentioned in the previous paragraph, when an Inactive Licence is to be declared active, the Associated Company is required to verify that the periods stated in the first and second paragraphs have not been exceeded and to factor in that the Licence Holder has updated his knowledge to the necessary extent in its suitability assessment. New Licence Section 5. A person whose Licence is revoked pursuant to Chapter 8, sections 1 or 2, or would have been revoked if the individual were still a Licence Holder pursuant to Chapter 8, section 7, may not obtain a new Licence in accordance with section 1 until three years have elapsed from the date on which the Licence was conclusively revoked or a decision was issued pursuant to Chapter 8, section 7 by the Disciplinary Board. Where the Board has decided that the revocation should be or would have been temporary, however, the period of time determined by the Board shall apply. Commentary: The Disciplinary Board's decision to revoke a Licence may be for an indefinite or definite period of time. Where a Licence is revoked without any time indication, a new Licence may not be obtained until three years have elapsed. Where a Licence is revoked for a certain period of time pursuant to Chapter 8, section 3, a new Licence may be sought upon expiry of the revocation period. Where the Licence has been revoked, a new Licensing Examination must be taken before a new Licence is issued. The time limits stated in the section shall apply even in cases where the Disciplinary Board, in applying Chapter 8, section 7, states that the Licence would have been revoked if the person were still a Licence Holder. Significance of a Licence Section 6. Only persons holding an Active Licence may call themselves "SwedSeclicensed.
Section 7. The designation "SwedSec-licensed" may only be used when the Licence Holder performs work duties as referred to in Chapter 2, subsections 2-4 and Chapter 2, section 5, second sentence at an Associated Company or at an Associated Representative. Commentary: The holder of an Inactive Licence who has terminated his employment or has ceased working with operations requiring an Active Licence may thus not refer to himself as "SwedSeclicensed". Exemptions Section 8. SwedSec may issue an Active Licence without the applicant being required to take a Licensing Examination, provided other conditions pursuant to section 1 are fulfilled and where special cause exists. SwedSec may grant an exemption from the licence requirement during a limited period of time provided special cause exists. Such exemption may also be granted without any time limitation where exceptional reasons exist. SwedSec may also grant an exemption for a limited period in order to perform the annual update of knowledge where special cause exists. An application for an exemption pursuant to the first and second paragraphs may be made by an Associated Company. Commentary: The first paragraph addresses the possibility of obtaining a Licence without taking the Licensing Examination. This possibility may, for example, be applied in cases where the applicant is considered to possess sufficient skills but special circumstances result in a deviation from the requirement to take a Licensing Examination. A Licence pursuant to this provision may be issued by virtue of section 1 and the recipient of such a Licence thereby holds an Active Licence. The provision should be applied with significant restrictiveness. The intention is not to reintroduce a possibility of obtaining a Licence based on long experience. The provision can be applied to persons who have fulfilled equivalent proficiency requirements in another country and who perform work duties in Sweden for a limited period, which are subject to a Licence requirement. By obtaining a Licence in Sweden, they are subject to the disciplinary procedure. The first sentence of the second paragraph addresses the case where SwedSec allows a person to perform his duties notwithstanding the absence of a Licence. The provision is applied primarily in cases where a person takes up a position which requires an obligatory Licence. In such case, it is appropriate that the person be granted an exemption for a number of months in order to take the Licensing Examination. There may also be other situations when such a time-limited exemption may be appropriate. A person who is not subject to the 50% requirement in Chapter 2, section 3 and who reduces his work time due to illness, parental leave or suchlike, but retains his work duties regarding, e.g., acceptance of orders and thereby exceeds the 50% limit, should be able to obtain an exemption during a certain period of time. The second sentence of the second paragraph states that, in exceptional cases SwedSec may also grant an exemption from the licence requirement without any time restriction. This may
relate to cases where the licence requirement is based on the provision in Chapter 2, section 2 but, due to the Associated Company's organisation, the actual responsibility is delegated to another person who holds a Licence. The last sentence of the second paragraph deals, to begin with, the following situation. According to Chapter 6, section 4, third paragraph, the Licence must be declared inactive if the Licence Holder is unable to perform the annual update of knowledge on time due to illness, parental leave or another similar reason. The problem that arises when the Licence Holder returns to work following absence is that the Licence Holder is not immediately able to perform his work duties. The Licence Holder must first update his knowledge before the Licence can be activated. This may result in the Licence Holder being unable to perform his ordinary work duties for one or more days. The last sentence of the second paragraph in the previous paragraph affords SwedSec an opportunity, where special cause exists, to grant an exemption for a limited period to enable the Licence Holder to perform his work duties until the update of knowledge has been performed and the Licence can be declared active again. The possibility to grant an exemption according to the last sentence of the second paragraph must be applied restrictively. The extension of the time period which may be granted should not exceed one month. The general rule is that the Licence must be declared inactive according to section 4, third paragraph. The third paragraph clarifies that it is only the Associated Company that has the possibility to apply for an exemption. Expiry of Licences Section 9. If a Licence Holder who holds an Active Licence does not receive the training offered and does not undergo the proficiency assessment in accordance with his obligation under Chapter 6, section 3, SwedSec may order that the Licence expire. Commentary: As seen from Chapter 3, section 1, it is incumbent on the Associated Company to ensure that the companyâ€™s and the Associated Representativeâ€™s Licence Holders who hold an Active Licence are offered training or information related to the stipulated proficiency requirements in accordance with Chapter 5, section 2. In addition, the company must verify that the Licence Holder has used the training. Pursuant to Chapter 6, section 3, a Licence Holder is obliged to keep his knowledge updated according to the requirements stipulated by SwedSec and to complete the proficiency assessments required by the company. When the company has offered training to the Licence Holder and has conducted a proficiency assessment, it is assumed that the Licence Holder has acquired the necessary knowledge. A sanction is incurred only where the Licence Holder has not received the training offered and fails to undergo a proficiency assessment according to the requirements imposed by the company. The provision covers all Licence Holders, including those who hold a Licence based on long experience. Matters relating to the expiry of a Licence are determined by SwedSec. This is conditional on the Associated Company having notified SwedSec that a Licence Holder has refused to receive training offered, etc.
Register of Licence Holders Section 10. SwedSec shall maintain a register of all Licence Holders. Information regarding Licence Holders who hold an Active Licence, including the Licence Holder's name and employer, are public documents. Commentary: Only information regarding persons holding an Active Licence is available on SwedSec's website. Information regarding holders of Inactive Licences and historic information regarding revocation and expiry of Licenses is saved by SwedSec. Licence certificates Section 11. SwedSec shall issue a licence certificate upon application by a person who fulfils the requirements for a Licence. The licence certificate shall contain information regarding the Licence Holder and Associated Company. Section 12. In the event of the loss of a licence certificate, the Licence Holder may obtain a new certificate upon application to SwedSec upon payment of a fee. Section 13. Upon the expiry or revocation of a Licence, the Associated Company shall return the licence certificate to SwedSec. Commentary: In cases where a Licence Holder terminates his employment at an Associated Company or at an Associated Representative or the assignment relationship with an Associated Representative is terminated, the Licence should be declared inactive. In these cases, it is incumbent on the Associated Company to destroy the licence certificate.
Chapter 7. Disciplinary Board Section 1. There is a Disciplinary Board to determine issues of a disciplinary nature. Provisions regarding the procedures, etc. of the Disciplinary Board are set forth in Chapter 10. Section 2. The Chairman, Deputy Chairman and other members of the Disciplinary Board shall be appointed by the Board of Directors of SwedSec. Section 3. The Disciplinary Board shall be convened by the Chairman who shall determine the time and place for the meetings.
Chapter 8. Disciplinary sanctions, etc. Revocation of Licences Section 1. Where a Licence Holder has committed an offence which relates to the operations or has otherwise seriously breached his obligations in office, the Disciplinary Board may revoke the Licence. Commentary: The disciplinary procedure is aimed at the Licence Holders and not the Associated Companies. The Associated Companies come under the supervision of the Swedish Financial Supervisory Authority and may, if they behave improperly, be subject to a sanction following 26
a decision by the Authority. Thus, the Disciplinary Board has no sanction against the Associated Companies. The present grounds for revocation relate to the Licence Holderâ€™s obligations in accordance with Chapter 4, section 1. As stated in the commentary below the provision, the majority of laws and regulations in the securities sector are aimed at companies and not directly at employees. It is therefore incumbent on the individual Licence Holder to act in such a manner that the company where he or she is employed complies with the rules and regulations on the securities market. In many cases, correct conduct is ensured by means of the companyâ€™s internal instructions and regulations, and a breach of internal rules may then mean that the Licence Holder breaches his obligations in office. However, situations may also arise in which a certain course of action appears self-evident and natural in relation to the duty of the company, such as in accordance with public regulation, without this having been explicitly stated in any written instruction. The operations of the Associated Companies are extensive and it is impossible and often undesirable to provide explicit instructions for all conceivable situations. The company is often dependent on stating certain guidelines and principles for how the operations shall be conducted. In order that the underlying purpose of the provision can be fully satisfied, a Licence can therefore be revoked in the event of a breach of what applies to the task, even though this has not been explicitly regulated in internal or external rules and regulations aimed at the Licence Holder. The equivalent argument should be applicable to a Licence Holder at an Associated Representative on account of the Associated Companyâ€™s liability for the Associated Representative with respect to his operations as a representative. The Associated Company is obligated to report to SwedSec any breach by the Licence Holder of his obligations pursuant to Chapter 3, section 7. Revocation of a Licence may relate to Active Licences and Inactive Licences. Chapter 1, section 7 sets forth the Licence Holder's obligation to provide information to SwedSec. This entails an obligation to assist in the investigation with the information requested by SwedSec. If, following a report in accordance with Chapter 3, section 7, the Licence Holder fails to fulfil the obligation to provide information, such failure cannot, however, lead to sanctions. A failure to provide information in a sanction matter may, however, result in the Associated Company's description of the facts being accepted as correct by the Disciplinary Board, in the absence of information from the Licence Holder. Accordingly, a Licence Holder who wishes to have all aspects of his case considered should assist in the investigation. Section 2. Where a Licence Holder has committed a criminal act other than as stated in section 1 or due to personal circumstances may otherwise be deemed unfit to hold a Licence, the Disciplinary Board may revoke the Licence. Commentary: The provision corresponds to the suitability assessment that the Associated Company is obliged to conduct in connection with an Employee obtaining a Licence; see Chapter 6, section 1. If the Associated Company subsequently finds that the Licence Holder is no longer qualified to hold a Licence in light of some criminal act or the Licence Holder's personal circumstances in general, the company is obliged to report the matter to SwedSec.
The rule provides that this basis for revocation involves crimes other than such as are directly connected with the operations. The assessment that the Disciplinary Board must conduct, with respect to criminal acts, is of a general nature and is based on an assessment of whether the perpetration of a criminal act disqualifies a person from continuing to hold a Licence. The provision requires, however, a few further comments. The crimes at issue here have happened outside the workplace. The investigation will be carried out by the police and prosecutor. The Associated Company will not be able to provide any evidence. A considerable period of time may elapse before the Associated Company learns that the Licence Holder is suspected, or has been convicted, of a crime. No requirement can be imposed that the Associated Company report that the Licence Holder has committed a crime until the Licence Holder has been found guilty through a judgment which has become final. Thus, the situation described here differs from the situation where the Licence Holder has committed a crime in connection with the operations or, in the case of an Associated Representative, the operations covered by the role of representative. In the latter situation, the Associated Company can, by means of its own investigation, clarify the facts and the Associated Company can report the matter to SwedSec when the circumstance is discovered. In such situation, the circumstances might also be such that the Disciplinary Board can decide the matter before the issue of criminal guilt is adjudicated by the court. Following an overall assessment of the circumstances the Board may, through the evidence provided by the Associated Company, conclude that the Licence Holder has seriously violated his obligation pursuant to Chapter 4, section 1, instead of applying the crime which constitutes a basis for revocation. Depending on the Licence Holder's personal circumstances, a report to SwedSec may also be required for an assessment of the Licence Holder's suitability to hold a Licence. The question the Associated Company should ask itself in such situation is whether the Licence Holder, based on his personal circumstances, is qualified to carry out the work duties required as a result of holding a Licence. Thus, in principle, it is the same assessment of suitability as is carried out in conjunction with receipt of a Licence. Section 3. Where cause is shown, the Disciplinary Board may decide to make the revocation temporary. Such revocation shall apply for a period as determined by the Board, but no longer than one year. Commentary: The Disciplinary Board may order that a Licence be temporarily revoked for a period not exceeding one year. If the Board revokes a Licence without stating any time limit, an application for a new Licence may be made only after three years have elapsed. This is stated in Chapter 6, section 5. Provisional revocation Section 4. Where delay would be prejudicial, a Licence may be revoked by SwedSec's Disciplinary Committee with immediate effect. Such provisional revocation shall be reviewed by the Disciplinary Board within thirty days. The Board may, following a review, order that the Licence continue to be provisionally revoked pending the Board's final decision on the matter.
Commentary: According to the provision, SwedSec's Disciplinary Committee (see Chapter 9, section 2) may provisionally revoke a Licence. In order for this to occur, any delay must be prejudicial. In practice, it is probably in conjunction with serious violations that the Associated Company, immediately upon the event becoming known, reacts by prohibiting the Licence Holder from continuing his work. When the event is notified to SwedSec, delay is not normally prejudicial. The reason for the provision is to provide the Disciplinary Committee with a tool in those exceptional cases which might arise as a consequence of the Associated Company failing to react with appropriate promptness. For reasons of due process, the Disciplinary Board must review the Disciplinary Committee's decision within 30 days. Censure Section 5. The Disciplinary Board may issue a censure to the Licence Holder for a violation: 1. where there are grounds for revocation but there are special circumstances which render a censure sufficient; or 2. where the violation is not so serious as to justify revocation. Caution or no sanctions Section 6. Where the Disciplinary Board finds the Licence Holder's violation to be of minor importance or excusable, the Board may issue the Licence Holder with a caution or not impose any sanctions at all. Commentary: A censure may be issued where the violation in itself is of such a serious nature that there are grounds for revocation but there are special circumstances which render a censure sufficient, and where the violation is not of such a serious nature to justify revocation. "Special circumstances" mean, for example, that a long period of time has elapsed between the date on which the violation was committed and the date on which the violation was reported to SwedSec, or there are other special circumstances which make a revocation appear to be too severe a measure. Section 7. In a matter concerning a person whose Licence has expired, the Disciplinary Board must determine whether there were reasons for disciplinary sanctions and thereby determine the sanctions which would have been issued under this Chapter if the person was still a Licence Holder. Commentary: There may be situations where a person has committed a violation of the rules during a period in which such person was a Licence Holder, but the decision of the Disciplinary Board is made after the expiry of the Licence pursuant to Chapter 6, section 4 or section 9. The aim of this rule is to subject violations of the rules committed by a former Licence Holder to an assessment, notwithstanding the expiry of the Licence, because sanctions affect the possibility to obtain a new Licence either because a certain period of time must elapse after a revocation of the Licence or a censure or a caution may affect the suitability assessment which the Associated Company is required to make in accordance with Chapter 3, section 3. The Disciplinary Board was previously explicitly afforded this possibility under the Rules and Regulations if the Licence was to be revoked in accordance with Chapter 8, section 1. The possibilities for the Disciplinary Board to issue sanctions have now been extended to cover all situations and sanctions referred to in this Chapter. It should be noted that in a previous
decision (decision 2004:1), the Disciplinary Board stated that if the person had still been a Licence Holder, the sanction would have been a censure. The insertion of this provision therefore constitutes a codification of standard practice.
Chapter 9. The handling of disciplinary matters by SwedSec Section 1. In preparing and handling disciplinary matters, due process and speed are essential. SwedSec shall ensure that a disciplinary matter is investigated to the extent required by the nature of the matter. Commentary: SwedSec may take up the disciplinary matter for adjudication by means of the Associated Company notifying SwedSec of a violation by a Licence Holder. However, SwedSec may, without restriction, personally handle a matter where it has come to SwedSec's attention that a Licence Holder acted in a manner which may trigger sanctions or by means of a party other than the Associated Company reporting an act which may trigger sanctions. Thus, the provision does not specify the manner in which matters should be initiated at SwedSec. Consequently, it should be noted that a former Associated Company may report an act which might result in disciplinary sanctions. If the act is reported by a party other than an Associated Company, such report must also include an account of the circumstances on which it is based, such as which rules the Licence Holder has breached. Section 2. Within SwedSec, there shall be a Disciplinary Committee charged with the duty of deciding upon provisional revocation pursuant to Chapter 8, section 4 or whether a matter shall be submitted to the Disciplinary Board or left without any measures being taken. The Board of Directors of SwedSec appoints the members of the Disciplinary Committee. Section 3. The Associated Company and the Licence Holder shall receive all documents relating to the matter and, unless unnecessary, be afforded an opportunity to submit comments thereon before the Disciplinary Committee has reached its decision in accordance with the provisions of section 2. Section 4. After the Disciplinary Committee has reached its decision, such decision shall be notified to the Associated Company and the Licence Holder. Section 5. Where the Disciplinary Committee has decided to dismiss a matter without any measures being taken, the Associated Company which is affected by the decision may submit a request to the Disciplinary Board that the Committee's decision be reviewed. A request for a review must be in writing and be submitted to the Disciplinary Board, and must have been received by SwedSec within three weeks of the date on which the decision was issued. The Disciplinary Board must apply the procedure referred to in Chapter 10 to the matter. Commentary: Pursuant to Chapter 3, section 7, an Associated Company must report to SwedSec if a Licence Holder has acted in a manner which may result in disciplinary sanctions. The company has thereby made an assessment of the seriousness of the Licence Holder's actions. In cases where
the Disciplinary Committee decides to file a report without taking any measures, it is therefore reasonable that the Associated Company be afforded an opportunity to have such decision reviewed by the Disciplinary Board. Section 6. The Licence Holder shall be entitled to retain counsel. Costs for counsel shall be reimbursed in a certain amount by SwedSec in accordance with the detailed instructions issued by SwedSec from time to time. A request for compensation (bill of costs) must have been received by SwedSec within 30 days of the date on which the disciplinary matter is conclusively resolved and must contain details of the costs. The bill of costs must contain an account of the work performed and the time spent on the matter.
Chapter 10. Procedure before the Disciplinary Board The procedure Section 1. Disciplinary matters shall be taken up for adjudication by the Disciplinary Board following an application by SwedSec. The Swedish Financial Supervisory Authority shall also be entitled to request adjudication. Section 2. A request for adjudication of a disciplinary matter shall be made in writing and contain a description of the circumstances which constitute the grounds for the request. Any written documents referred to shall be submitted to the Board at the same time. The Board may demand that documents in the matter be drafted in or translated into Swedish. Section 3. Where an application for adjudication does not fulfil the provisions of section 2 or is otherwise incomplete, the Disciplinary Board shall afford SwedSec an opportunity to supplement its application. The Board may dismiss an application where: 1. supplemental information is not received within the prescribed time; or 2. the application is so deficient that it cannot serve as a basis for the further handling of the matter. Section 4. Where cause exists, the Disciplinary Board may procure further evidence. Section 5. The proceedings in the Disciplinary Board shall take place in writing. SwedSec and the Licence Holder shall, however, upon request, be afforded an opportunity to present their comments orally to the Board. In conjunction therewith, SwedSec, the Associated Company and the Licence Holder shall be afforded an opportunity to be present. Where necessary for adjudication of the matter, at the request of SwedSec or the Licence Holder the Chairman of the Disciplinary Board may call upon the Associated Company to assist SwedSec or the Licence Holder in conjunction with the oral proceedings before the Board. Section 6. A matter may not be adjudicated without SwedSec, the Associated Company and the Licence Holder having been provided with all information in the matter and an opportunity to comment thereon.
Decisions Section 7. The Disciplinary Board shall consist of not less than five members when adjudicating a matter. Of these members, the Chairman shall have legal training and experience as a judge. Not less than two members shall be well versed in conditions on the securities market. The Chairman may individually take decisions which do not include a final adjudication of the matter. Section 8. Decisions of the Board shall be made by majority vote. In the event of a tied vote, the Chairman shall have the casting vote. Where dissenting opinions arise in conjunction with deliberations regarding a decision, voting shall take place. In conjunction therewith, the provisions of section 18 of the Administrative Procedure Act (SFS 1986:223) shall apply, where appropriate. Section 9. Any decisions of the Board shall be based on the contents of the documents and facts that have otherwise come to light in the matter. The decision shall be issued in writing and state the grounds for the decision. Section 10. Following the Board's decision, the decision shall be sent to SwedSec, the Licence Holder and the reporting Associated Company on the day on which it is issued. Where there is a dissenting opinion, such opinion shall be appended to the decision. Where disciplinary sanctions have been issued, SwedSec shall, without significant delay, issue a press release containing information about the decision. The Chairman of the Disciplinary Board and the Associated Company that reported the matter shall be afforded an opportunity to provide comments on the press release. The decision in its entirety shall thereafter be published by SwedSec without identifying details. However, where the decision entails revocation of a Licence, upon request the name of both the Associated Company involved and the Licence Holder may be withheld. Section 11. Minutes shall be kept at meetings of the Disciplinary Board which shall include the Disciplinary Board's members, SwedSec, the Licence Holder and the reporting party, the nature of the matter and any dissenting opinion. Minutes need not, however, be prepared where the necessary information is set forth in a separately prepared decision. Commentary: Section 10 provides that the Disciplinary Board's decision shall be sent to SwedSec, the Licence Holder and the reporting Associated Company. Where the reporting party is a party other than an Associated Company, there is no reason to send the decision automatically to such party. Such other reporting partyâ€™s interest in promptly obtaining the Board's decision should be deemed satisfied through the publication that must take place in accordance with section 10, second and third paragraphs.
Chapter 11. Conflicts of interest Section 1. Any member of the Disciplinary Board or Disciplinary Committee addressing a matter shall be deemed to have a conflict of interest where the matter concerns such person or his spouse, parents, children, or siblings or some other close relation, or where the outcome of the matter may be expected to entail a particular benefit or loss to the member personally or other closely related person: 1. if he or some other closely related person is representing the person whom the matter concerns or someone who may be expected to obtain particular benefit or suffer particular loss as a result of the outcome of the matter; 2. where he has acted as counsel or received payment to represent a party in the matter; or 3. where other particular grounds exist in the matter which are likely to detrimentally affect confidence in his impartiality in the matter. In issues where impartiality is clearly irrelevant, no conflict of interest shall be deemed to exist. Section 2. Any person who has a conflict of interest may not handle a matter. However, he may undertake steps which no other person is able to undertake without unreasonable delay. Any person who is aware of a circumstance which may be assumed to entail a conflict of interest for such person shall personally raise the matter of conflict of interest. Where the issue of conflict of interest has arisen in respect of a person and no replacement has been appointed in his stead, the Board shall promptly decide the issue of conflict of interest. The person in respect of whom a conflict of interest has been raised may not participate in the assessment of the issue of conflict of interest. Commentary The conflict of interest rules apply to members of the Disciplinary Board and the Disciplinary Committee.
Chapter 12. Fees Section 1. Associated Companies shall annually pay fees determined and invoiced by SwedSec. Detailed provisions regarding the amount of the fees, payment, etc. shall be issued by SwedSec.
Entry into force The rules enter into force on 1 January 2011.