Act on Securities Trading (Securities Trading Act)

Part 3. Investment firms

Chapter 9. Application and conditions for authorisation

II. Conditions for authorisation

Section 9-9.Form of organisation
(1) Authorisation to provide investment services or perform investment activities may be granted to private limited companies or public limited companies.
(2) The company shall have its registered office and head office in Norway.
(3) The ministry may make regulations to supplement this section and by regulations make exceptions from the requirement as to form of organisation in subsection (1), and may if required make further provision concerning organisation of the business etc.
Section 9-10.Requirements on the management of the firm
(1) Board members, the general manager and others participating in the actual management of an investment firm shall at all times have sufficient qualifications and experience, be of good repute and otherwise not have displayed improper conduct giving reason to presume that the position or office will not be discharged in a satisfactory manner. Persons as mentioned in the first sentence shall submit an ordinary criminal record certificate pursuant to the Police Records Act section 40.
(2) Persons as mentioned in subsection (1) shall commit sufficient time to performing their duties in the investment firm. In assessing how many offices and positions a person may hold in addition to their office or position in the investment firm, account shall be taken of individual circumstances and the nature, scope and complexity of the investment firm's activities.
(3) Persons as mentioned in subsection (1) in an investment firm considered significant in terms of its size, internal organisation and the nature, scope and complexity of its activities, may only hold one of the following combinations of positions and offices at the same time:
1.one position as general manager combined with two non-executive directorships,
2.four non-executive directorships.
(4) Positions or offices in organisations which do not pursue predominantly commercial objectives are not taken into account for the purposes of subsection (3). Positions as general manager or non-executive directorships in undertakings within the same group, or in undertakings which are members of the same deposit insurance scheme, provided that the conditions of Article 113 no. 7 of Regulation (EU) No. 575/2013 are met, or undertakings in which the investment firm has a qualifying holding, see section 9-12, shall count as a single position or single office. Finanstilsynet may authorise persons as mentioned in subsection (3) to hold one additional non-executive directorship. Subsection (3) shall not apply to persons representing the State of Norway.
(5) The board of directors of the firm shall collectively possess broad experience and sufficient knowledge and skills to be able to understand the firm's business, including the main risk factors associated with the business.
(6) Board members shall act with honesty, integrity and independence of mind to effectively assess and monitor, and when needed challenge, the decisions of the firm's senior management. The board of directors, the general manager or others participating in the actual management may under no circumstance be of detriment to the effective, sound and prudent management of the firm or to the integrity of the market.
(7) Investment firms shall commit adequate resources to the training of persons as mentioned in subsection (1).
(8) Investment firms shall ensure a sufficiently broad set of qualifications and skills when recruiting persons as mentioned in subsection (1), and shall adopt guidelines to promote diversity in such recruitment.
(9) Investment firms shall notify Finanstilsynet of any changes to the composition of the board of directors and any change of general manager or others participating in the actual management of the business. The investment firm shall submit all information necessary to assess whether the investment firm meets the requirements of this section and section 9-11.
(10) The actual management of an investment firm shall be in the hands of at least two persons who meet the requirements in subsections (1) and (2). Finanstilsynet may by regulations or by individual decision make exceptions from the requirement of the first sentence.
(11) The chairperson of the board cannot serve as general manager of the firm unless satisfactory grounds are given by the firm and Finanstilsynet gives its approval.
(12) The ministry may make regulations to supplement this section.
Section 9-11.Functions and responsibilities of the board of directors
(1) The board of directors has overarching responsibility for the management of the investment firm and shall monitor the firm's activities. The board of directors shall ensure that the firm is organised and managed in an effective and prudent manner, including in a manner that avoids conflicts of interest, and promotes the integrity of the market and the interests of clients.
(2) The following principles shall underpin the board of directors' management and oversight of the investment firm:
1.The board of directors shall establish, and monitor the implementation of, the firm's strategic objectives, risk strategy and internal governance arrangements.
2.The board of directors shall ensure that the systems for accounting and financial reporting are robust, inspire confidence and are in accordance with laws, regulations and relevant standards.
3.The board of directors shall monitor publication and communication processes.
4.The board of directors shall supervise the firm's senior management effectively.
5.The board of directors shall establish and monitor the organisation of the firm's business, including the resources, procedures and systems for the firm's performance of its activities and provision of services, as well as employee qualification requirements, taking account of the nature, scope and complexity of the firm's business and the requirements applicable to the firm.
6.The board of directors shall establish and monitor strategies for the firm's performance of its activities and provision of services, taking account of the firm's risk tolerance, as well as the clients and their needs, and including carrying out stress testing whenever needed.
7.The board of directors shall establish and monitor a remuneration strategy for employees involved in the provision of services to clients, in order to promote responsible business conduct and equitable treatment of clients, as well as to avoid conflicts of interest.
(3) The board of directors shall monitor and periodically assess the effectiveness of the investment firm's governance arrangements, as well as assess the adequacy and the implementation of the firm's strategic objectives and strategies for the performance of the firm's activities, including the services provided to the clients of the firm. The board of directors shall take appropriate steps to address any deficiencies.
(4) The board members shall have adequate access to information and documents they need to monitor decisions made by the firm's senior management.
(5) The ministry may make regulations to supplement this section.
(6) The ministry may make regulations on nomination committees.
Section 9-12.Ownership structure etc.
(1) Anyone with a qualifying holding in an investment firm shall be fit to ensure sound and prudent management of the firm.
(2) ‘Qualifying holding’ means a holding representing ten per cent or more of the capital or the voting rights of the investment firm, or otherwise making it possible to exercise significant influence over the management of the firm and its activities. Any holdings of a person's related parties within the meaning of section 2-5 shall be deemed equivalent to such person's own holdings.
(3) In the calculation of a qualifying holding, account shall not be taken of any holdings or voting rights acquired by a credit institution or an investment firm as a result of providing investment services or investment activities specified in section 2-1 subsection (1) no. 6, provided that these are not used to exert any influence over the firm and are disposed of within one year of acquisition.
(4) The ministry may make regulations to supplement this section.
Section 9-13.Notification of the acquisition of holdings in investment firms etc.
(1) Any natural person or legal entity, or such persons or entities acting in concert, who has decided to acquire, directly or indirectly, a qualifying holding in an investment firm, shall notify Finanstilsynet accordingly in writing. The same applies to any direct or indirect acquisition that would result in such qualifying holding being increased such as to reach or exceed 20, 30 or 50 per cent, respectively, of the capital or the voting rights of the investment firm, or such holdings giving decisive influence as referred to in the Private Limited Companies Act section 1-3 over the investment firm. Section 9-12 subsection (3) applies.
(2) Any acquisition falling within the scope of subsection (1) can only be implemented after authorisation has been given by Finanstilsynet.
(3) Any notification pursuant to subsection (1) shall specify the size of the holding it is aimed to acquire, and any information necessary to carry out a suitability assessment pursuant to section 9-15.
(4) Anyone who has decided to dispose of a qualifying holding or to reduce it so that the holding would fall below any of the thresholds mentioned in subsection (1) shall notify Finanstilsynet accordingly in writing.
(5) An investment firm shall notify Finanstilsynet without undue delay if it becomes aware of any acquisition whereby someone has acquired or acquires a qualifying holding in the firm. The same applies to any acquisition whereby a holding will reach or exceed the thresholds specified in subsection (1). The notification obligation also applies upon the disposal of qualifying holdings or any disposal whereby the thresholds specified in subsection (1) are reached or crossed.
(6) Investment firms shall at least once a year provide Finanstilsynet with a specification of owners of qualifying holdings.
(7) The ministry may make regulations to supplement this section.
Section 9-14.Procedural deadlines etc.
(1) Finanstilsynet shall immediately, and no later than two working days after receipt of notification pursuant to section 9-13 subsection (1), confirm receipt thereof in writing to the acquirer. The same applies after receipt of information laid down in subsection (3).
(2) Finanstilsynet shall assess the notification within 60 working days, reckoned from the date on which Finanstilsynet confirmed receipt of the notification and the information laid down in section 9-3 subsection (3). Finanstilsynet shall upon confirming receipt pursuant to subsection (1) inform the acquirer concerned of the date of expiry of the assessment period.
(3) If Finanstilsynet has made a written request for additional information no later than on the 50th working day of the assessment period, the period laid down in subsection (2) shall be interrupted pending receipt of the response of the acquirer. Such interruption shall not exceed 20 working days. Finanstilsynet may request further information than that referred to in the first sentence, but this may not result in any further interruption of the assessment period.
(4) Finanstilsynet may extend the interruption laid down in subsection (3) by up to 30 working days if the acquirer is residing in, or governed by the legislation of, a state outside the EEA, or if the acquirer is not subject to supervision under either the Securities Funds Act, the Financial Institutions Act or this Act.
(5) If Finanstilsynet does not oppose the planned acquisition in writing by the expiry of the period referred to in subsection (2), cf. subsections (3) and (4), Finanstilsynet shall be deemed to have authorised the acquisition of the holding stated in the notification to Finanstilsynet under section 9-13 subsection (1).
(6) Finanstilsynet may fix a maximum period for completion of the acquisition.
(7) The ministry may make regulations to supplement this section.
Section 9-15.Suitability assessment upon acquisition etc.
(1) In deciding whether to grant authorisation pursuant to section 9-13 subsection (2), Finanstilsynet shall assess whether the acquirer is suitable, and whether the acquisition of the holding is financially sound. The purpose is to ensure the sound and prudent management of the investment firm, and the likely influence of the acquirer on the investment firm shall be taken into account. In its assessment of the acquisition, Finanstilsynet shall consider the following aspects:
1.the acquirer's reputation,
2.the reputation and experience of persons who after the acquisition will form part of the board of directors or other senior management of the investment firm's business,
3.the acquirer's financial soundness, in particular in relation to the types of activity the firm is engaged in or can be expected to engage in after the acquisition,
4.whether the investment firm will remain in a position to comply with supervisory requirements pursuant to this Act and other relevant financial regulatory provisions, in particular whether the group of which the firm will become a part after the acquisition is organised in such a way as to enable it to exercise effective supervision, as well as effective information exchange and allocation of supervisory responsibilities between affected supervisory authorities, and
5.whether there are grounds to assume that, in connection with the acquisition, money laundering or terrorist financing is being committed or attempted, or that the acquisition will increase the risk thereof.
(2) Authorisation pursuant to section 9-13 subsection (2) can only be withheld if Finanstilsynet finds that there are reasonable grounds for doubting the acquirer's suitability or the financial soundness of the acquisition of the holding, see subsection (1), or if the notification obligation has not been complied with or information provided by the acquirer is incomplete or incorrect.
(3) The ministry may make regulations to supplement this section.
Section 9-16.General requirements on the organisation of the business
(1) An investment firm shall organise its business in the following manner:
1.The firm shall have in place adequate and satisfactory policies, procedures and control mechanisms to ensure compliance by the firm and its managers, employees and tied agents with their obligations pursuant to law and regulations.
2.The firm shall be structured and organised in such a way as to minimise the risk of conflicts of interest between the firm and its clients, or between the clients of the firm, see section 10-2.
3.The firm shall take reasonable steps to ensure continuity and regularity in investment services activities, including having necessary systems, resources and procedures, including ICT systems set up and operated in accordance with Regulation (EU) 2022/2554 Article 7, cf. the Act on Digital Operational Resilience in the Financial Sector section 1.
4.The firm shall take satisfactory measures to minimise operational risk when it utilises a third party to perform operational functions; see subsection (2).
5.The firm shall have in place sound administrative and accounting procedures, satisfactory internal governance arrangements and effective risk assessment procedures, as well as job instructions which specifically regulate the division of responsibilities between the general manager and other managers in the firm.
6.The firm shall have in place satisfactory internal guidelines, procedures and control mechanisms for personal transactions executed by the firm's managers, employees and tied agents.
7.The firm shall have in place systems ensuring reliable and correct information transmission and ensuring that the information is at all times kept confidential, as well as reducing the risk of data corruption, information leakage and other unlawful access to the the information in accordance with the requirements of Regulation (EU) 2022/2554, cf. the Act on Digital Operational Resilience in the Financial Sector section 1.
8.The firm shall ensure documentation of all investment services and all investment activities, including all executed transactions, which shall at minimum be sufficiently comprehensive to enable Finanstilsynet to verify compliance with the rules within Finanstilsynet's area of responsibility. Such documentation shall be retained for at least five years, or for a longer period if so decided by Finanstilsynet.
9.The firm shall have in place internal instructions for the employees' right to be a member of the board of directors, corporate assembly or enterprise assembly or to wield such influence in companies as mentioned in the Private Limited Companies Act section 1-3, subsection (2). Such instructions shall also encompass board members who wield such influence in the investment firm as mentioned in the Private Limited Companies Act section 1-3, subsection (2). Corresponding instructions shall be drawn up for cases where exemption is granted pursuant to section 10-4 subsection (2).
10.The firm shall have in place policies and procedures for the calculation and payment of performance-related remuneration.
(2) Investment firms which outsource functions may not leave important operational functions to a third party if as a result:
1.the firm's internal controls and its ability to ensure compliance with its obligations are appreciably impaired, or
2.Finanstilsynet's scope for supervising the business is appreciably impaired or impeded.
(3) The board of directors and the general manager shall draw up internal guidelines and instructions in accordance with subsection (1).
(4) The ministry may by regulations make further provision concerning remuneration arrangements in investment firms. The provisions of the Financial Institutions Act sections 15-1 to 15-5 apply.
(5) The ministry may make regulations to supplement this section.
Section 9-16a.Guidelines for active share ownership
1.An investment firm that provides portfolio management services shall have guidelines for active ownership of shares admitted to trading on a regulated market that is situated, or operates, in the EEA, or an explanation of why the investment firm does not have such guidelines.
2.The guidelines or the explanation shall be available free of charge on the investment firm’s website. If the investment firm does not have its own website, the guidelines or the explanation shall be kept available on another website.
3.The investment firm shall each year publicly disclose how the guidelines have been implemented.
4.The ministry may make regulations regarding guidelines for active ownership.
Section 9-17.Telephone conversations and electronic communications
(1) Documentation pursuant to section 9-16 subsection (1) no. 8 shall include recording of all telephone conversations and retention of all electronic communications relating to the provision of investment services and the performance of investment activities as mentioned in section 2-1 subsection (1) nos. 1 to 7. The documentation shall also include conversations and communications intended to result in the provision of investment services or the performance of investment activities.
(2) In order to meet the requirements of subsection (1), the investment firm shall take all reasonable measures to record and retain relevant telephone conversations and electronic communications made with, sent from or received by equipment provided by the investment firm to an employee or subcontractor, or the use of which by an employee or subcontractor is accepted or permitted by the investment firm. The investment firm shall also take all reasonable steps to prevent an employee or subcontractor from making, sending or receiving relevant telephone calls and electronic communications on privately-owned equipment which the investment firm is unable to record or copy.
(3) The investment firm shall inform its clients that telephone conversations or electronic communications between the investment firm and its clients will be recorded and retained. The investment firm may not, by telephone or electronic communications, provide investment services to or perform investment activities for clients who have not received information in accordance with the first sentence. Such information may be given once in advance of the provision of investment services or the performance of investment activities.
(4) Conversations or communications as mentioned in subsection (1) which are not conducted via telephone or electronically shall be documented in a durable medium. Such conversations from face-to-face meetings shall be recorded in written minutes or notes.
(5) The documentation pursuant to this section shall be retained for at least five years, or for a longer period if so decided by Finanstilsynet, and shall upon request be made available to the affected client.
(6) The ministry may make regulations to supplement this section.
Section 9-18.Client funds and collateral arrangements etc.
(1) Investment firms shall take satisfactory measures to keep the client's financial instruments separate from the firm's financial instruments. Investment firms may only utilise the client's financial instruments on own account where the client has explicitly consented to this.
(2) Investment firms shall take satisfactory measures to keep client funds separate from the firm's funds. Investment firms may not utilise client funds for the firm’s own account.
(3) An investment firm shall not conclude title transfer financial collateral agreements with retail clients with a view to securing or covering the client's present or future obligations.
(4) The ministry may impose further requirements on the safeguarding of client’ financial instruments and client funds, as well as make supplementary regulations to this provision.
Section 9-19.Product governance
(1) An investment firm which manufactures financial instruments for sale to clients shall maintain an appropriate process for the approval of each financial instrument and significant adaptations of an existing financial instrument before it is marketed or distributed to clients. As part of the product approval process the firm shall identify a target market of end clients for each financial instrument, ensure that all relevant risks to such identified target market are assessed, and that the financial instrument and the distribution strategy meet the requirements of section 10-9 subsection (2).
(2) An investment firm shall also regularly review the financial instruments offered or marketed by the firm. The investment firm shall, in conducting such review, take into account any event that could materially affect the potential risk to the identified target market, and assess whether the financial instrument remains consistent with the needs of the target market, and whether the firm's distribution strategy remains appropriate.
(3) An investment firm which manufactures financial instruments shall make available to any distributor all appropriate information on each financial instrument and the product approval process under subsection (1), including information on the identified target market.
(4) Where an investment firm offers or recommends financial instruments which it has not itself manufactured, the investment firm shall have in place suitable procedures and systems for obtaining information as mentioned in subsection (3). The investment firm shall ensure that relevant employees understand the characteristics of each financial instrument and the identified target market of the instrument.
(5) An investment firm shall be exempted from the requirements set out in subsections (1) to (3) and in section 10-9 subsections (2) and (3) where the investment service it provides relates to bonds with no other embedded derivative than a make-whole clause or where the financial instruments are marketed or distributed exclusively to eligible counterparties. By make-whole clause is meant a clause that seeks to protect the investor by ensuring that the issuer, upon early redemption of a bond, is obliged to pay the bearer of the bond an amount corresponding to the sum of applicable net value of the remaining expected coupon payments up to maturity, and the redeemed bond’s principal.
(6) The ministry may make regulations to supplement this section.
Section 9-20.Processing of complaints

The ministry may by regulations make provision regarding the processing of complaints.

Section 9-21.Branches
(1) An investment firm shall notify Finanstilsynet before establishing a branch in Norway. The branch shall have a manager who meets the requirements in section 9-10 subsection (1).
(2) Investment firms that are authorised to provide investment services may provide such services in another EEA member state under the rules of section 9-33.
(3) Investment firms may, subject to authorisation from Finanstilsynet, establish branches or subsidiaries outside the EEA.
(4) The ministry may make regulations to supplement this section.
Section 9-22.Definitions of algorithmic trading and direct electronic access
(1) ‘Algorithmic trading’ means trading in financial instruments where a computer algorithm automatically, with limited or no human intervention, determines individual parameters of an order, including whether to initiate the order, the timing, price or quantity of the order, or how to manage the order after its submission. The term does not include any system that is only used for the purpose of routing orders to one or more trading venues for the processing of orders without determination of any trading parameters, or for the confirmation of orders or the post-trade processing of executed transactions.
(2) ‘High-frequency algorithmic trading’ means algorithmic trading characterised by:
1.infrastructure intended to reduce latencies, including at least one of the following systems for algorithmic order entry: co-location, proximity hosting services or high-speed direct electronic access,
2.system determination of order initiation, generation, routing or execution without human intervention for individual trades or orders, and
3.large volumes of orders, quotes or cancellations on each trading day.
(3) ‘Direct electronic access’ means an arrangement where a member, participant or client of a trading venue permits a person to use its trading code so that the person can transmit electronic orders relating to a financial instrument directly to the trading venue, including arrangements which involve a person using the member's, the participant's or the client's infrastructure, or other connecting system provided by the member, the participant or the client, to transmit the orders (direct market access), and other arrangements where such an infrastructure is not used (sponsored access).
(4) The ministry may make regulations to supplement this section.
Section 9-23.Algorithmic trading
(1) An investment firm that engages in algorithmic trading shall have in place effective systems and risk controls suitable to its business to ensure that the firm's trading systems are resilient and have sufficient capacity in accordance with the requirements of Regulation (EU) 2022/2554, chapter II, cf. the Act on Digital Operational Resilience for the Financial Sector section 1, and are subject to appropriate trading thresholds and limits. Such systems and controls shall also prevent the sending of erroneous orders or the systems creating or contributing to a disorderly market. The investment firm shall also have effective systems and risk controls which ensure that the trading systems cannot be used for any purpose that is contrary to the provisions of chapter 3 or the rules of a trading venue to which the firm is connected.
(2) An investment firm that engages in algorithmic trading shall have in place effective contingency plans and systems in accordance with the requirements of Regulation (EU) 2022/2554, Article 11, cf. the Act on Digital Operational Resilience for the Financial Sector section 1, to deal with any failure of its trading systems and shall ensure that the system is fully tested and satisfactorily monitored to ensure that it meets the requirements of this provision and of Regulation (EU) 2022/2554, chapters II and IV, cf. the Act on Digital Operational Resilience for the Financial Sector section 1.
(3) An investment firm that engages in algorithmic trading shall notify this to Finanstilsynet and the national supervisory authority of the trading venue where the investment firm is a member or participant and engages in algorithmic trading.
(4) The investment firm shall document its algorithmic trading strategies, trading parameters and limits, the key compliance and risk controls introduced to ensure that the conditions of subsection (1) are met and details of the testing of its systems. The documentation shall be sufficient to enable Finanstilsynet to verify compliance with the requirements of this Act. Finanstilsynet may at any given time request the firm to make available such documentation and additional information on the firm's algorithmic trading and the systems used for such trading.
(5) An investment firm that engages in high-frequency algorithmic trading shall store accurate and time sequenced records of all placed orders, including cancelled orders, executed orders and quotations on trading venues in an approved format, and shall make them available to Finanstilsynet upon request.
(6) An investment firm that engages in algorithmic trading as part of a market making strategy shall, taking account of the liquidity, scale and nature of the specific market and the characteristics of the instrument traded, carry out this market making continuously during a specified proportion of the trading venue's trading hours, except under special circumstances, with the result of providing the trading venue with liquidity on a regular and predictable basis. The investment firm shall enter into a written agreement with the trading venue which shall at least specify the investment firm's obligations pursuant to the first sentence, and shall have in place effective systems and controls to ensure that the firm fulfils its obligations under the agreement at all times.
(7) An investment firm shall be considered to be pursuing a market making strategy within the meaning of subsection (6) if the firm deals on own account as a member or participant of one or more trading venues, and its strategy involves posting firm, simultaneous two-way quotes of comparable size and at competitive prices relating to one or more financial instruments on a single trading venue or across different trading venues, with the result of providing liquidity on a regular and frequent basis to the overall market.
(8) The ministry may make regulations to supplement this section.
Section 9-24.Direct electronic access
(1) An investment firm that provides direct electronic access to a trading venue shall have in place effective systems and controls which ensure:
1.a proper assessment and review of the suitability of clients that are granted access,
2.that clients granted access are prevented from exceeding appropriate pre-set trading and credit thresholds,
3.that trading by clients using the service is properly monitored, and
4.that appropriate risk controls prevent trading that may create risks to the investment firm or a disorderly market or be contrary to the provisions of chapter 3 or the rules of the trading venue.
(2) An investment firm that provides direct electronic access shall ensure that clients granted such access comply with the rules of the trading venue and the requirements of this Act with the exception of chapters 3 to 8 and chapter 13. The investment firm shall monitor the transactions in order to be able to identify infringements of the said rules, disorderly trading conditions or conduct that may involve market abuse and that is to be reported to Finanstilsynet. The investment firm shall ensure that there is a written agreement with clients that are granted direct electronic access. The agreement shall encompass the key rights and obligations arising from the provision of the service, and it shall state that under the agreement the investment firm retains responsibility under this Act.
(3) An investment firm that provides direct electronic access to a trading venue shall notify Finanstilsynet and the supervisory authority of the trading venue at which the firm provides direct electronic access accordingly.
(4) The investment firm shall document the systems and controls referred to in this section and provide evidence that they have been applied in such a way as to enable Finanstilsynet to verify compliance with the requirements of this Act. Finanstilsynet may at any given time request the firm to make such documentation available.
(5) The ministry may make regulations to supplement this section.
Section 9-25.General clearing member
(1) An investment firm acting as a general clearing member for a client shall have in place effective systems and controls to ensure that clearing services are only offered to clients that are suitable and meet clearly defined criteria, and that appropriate requirements are imposed on those clients to reduce risks to the investment firm and the market. The investment firm shall ensure that there is a written agreement with the client on the key rights and obligations associated with the clearing service.
(2) The ministry may make regulations to supplement this section.