1 Introduction
The Norwegian Financial Supervisory Authority has found that a substantial amount of institutions providing financial services to retail clients in Norway is not affiliated with an authorised complaints board. This specifically relates to branches or agents of foreign institutions in Norway and foreign institutions providing cross-border services into Norway. The FSA has prepared a proposal for regulations that will ensure such affiliation with authorised complaints board, and the Norwegian Ministry of Finance has initiated a public consultation with a deadline for comments on 25 December 2019.
2 Background
Today, only Norwegian payment institutions (Nw: Betalingsforetak), electronic money institutions (Nw: E-pengeforetak) and account information service providers (Nw: Opplysningsfullmektiger), and Norwegian branches of such foreign institutions, are obliged to be affiliated with an authorised complaints board.
Authorisation of complaints boards are regulated in accordance with EU Directive 2013/11/EU on alternative dispute resolution for consumer disputes and EU Regulation 524/2013 on online dispute resolution for consumer disputes. The purpose of the authorisation of complaints boards is to strengthen the protection of retail clients by establishing a reasonable out-of-court dispute resolution, and the complaints boards have to comply with the requirements of impartiality, low fees and short processing times.
The EU regulations on dispute resolution provides a cross-border complaints system for retail clients. This means that retail clients of foreign institutions may file their complaint to their home state complaints board. The home state complaints board will then assist the retail client transferring the complaint to the correct complaints board in the home state of the foreign institution.
3 Existing alternative dispute resolutions in Norway
The Norwegian Financial Services Complaints Board (Nw: Finansklagenemnda) is the only authorised complaints board for the financial sector in Norway, and got its authorisation in 2014. The Financial Services Complaints Board deals with disputes that arises between retail clients and financial institutions, insurance undertakings, management companies and investment firms (although limited to the investment service investment advice). A substantial amount of Norwegian institutions is affiliated with the Financial Services Complaints Board.
The Financial Services Complaints Board is participant of the EU wide Financial Dispute Resolution Network. However, only a few foreign institutions are affiliated with the Financial Services Complaints Board, hereunder some Norwegian branches of foreign institutions, and only a few insurance undertakings and management companies providing cross-border services into Norway. This is illustrated by the fact that the Financial Services Complaints Board only transferred one complaint in 2017 and six complaints in 2018 to foreign complaints boards on behalf of Norwegian retail clients.
Norwegian alternative dispute resolutions for the financial sector that do not have authorisation is limited to the Norwegian Insurance Activities Complaints Board (Nw: Klagenemnda for forsikrings- og gjenforsikringsmeglingsvirksomhet) operated by the FSA, the Norwegian Securities Dealers Association’s Ethical Council (Nw: Verdipapirforetakenes Forbunds Etiske Råd) and The Norwegian Alternative Investment Association’s Complaints Board (Nw: Norsk Kapitalforvalterforenings klageordning). These unauthorised complaints boards face an uncertain future if the proposed regulations are passed. They probably have to amend their structure and apply for authorisation.
4 Proposed new regulations
The following proposed new regulations will apply to all institutions operating in Norway, either Norwegian institutions, branches or agents of foreign institutions in Norway, or foreign institutions providing cross-border services into Norway.
The FSA proposes that all financial institutions (Nw: Finansforetak) (except payment institutions, electronic money institutions and account information service providers that are already obligated as mentioned above) have to be affiliated with an authorised complaints board in Norway. The dispute resolution shall comprise all services being provided to retail clients (Nw. Forbrukere).
The FSA also proposes that all investment firms (Nw: Verdipapirforetak) that provides services to non-professional clients and management companies (both UCITS IV and AIFMD management companies) (Nw: Forvaltningsselskap for verdipapirfond og AIF-forvaltere) that are marketing funds to non-professional clients have to be affiliated with an authorised complaints board in Norway.
Further, the FSA proposes that institutions for occupational retirement provision (Nw: Pensjonsforetak) have to be affiliated with an authorised complaints board in Norway. The FSA notes that it will be the member, whose past or current occupational activities entitle or will entitle him/her to retirement benefits in accordance with the provisions of the pension scheme, who will have the right to file a complaint.
With regards to insurance companies (Nw: Forsikringsselskap), the FSA proposed regulations making affiliation with an authorised complaints board in Norway mandatory for such institutions when preparing implementation of the EU Directive 2016/97 on insurance distribution. However, the directive has not yet been incorporated into the EEA-agreement.
5 EU legal issues
The FSA’s proposal touches in several EU legal issues. First, it is uncertain whether the proposed mandatory affiliation with authorised complaints board in Norway is in accordance with the EU regulations specifically regulating financial institutions (PSD II and CRD IV), investment firms (MiFID II), management companies (UCITS IV and AIFMD) and insurance companies (IDD). These regulations regulates complaints differently, and as mentioned above, only payment institutions, electronic money institutions and account information service providers have a similar obligation. However, the FSA is of the opinion that the EU Directive 2013/11/EU on alternative dispute resolution for consumer disputes mentioned above have precedence over the specific regulations governing operations of the institutions.
Second, it is also uncertain whether the proposed mandatory affiliation with authorised complaints board in Norway is in accordance with article 36 of the EEA-agreement governing the right to provide services cross-border into other EEA states. In accordance with article 36, there shall be no restrictions on freedom to provide services cross-border, except when the restriction is deemed necessary based on imperative public interest. The FSA is of the opinion that the legal protection of retail clients may only be ensured if they are given the opportunity to file complaints to complaints boards in their home state, particularly because of language issues and familiarity with the home state legal system.
It will be interesting to read the comments to the proposal with regards to these issues, as well as the Ministry of Finance’s final assessment.
6 Implementation
The FSA does not propose to regulate certain complaints boards in the new regulations, the only requirement is that the complaints boards are authorised. As mentioned above, the Norwegian Financial Services Complaints Board is the only authorised complaints board for the financial sector in Norway at the moment. However, the FSA rely on the financial industry in Norway to establish the necessary amount of new authorised complaints boards. The FSA states that it will monitor the development, and consider to regulate complaints boards should the financial industry fail to establish the necessary amount of authorised complaints boards.
The FSA proposes a transitional period of six months from the new regulations enters into force.
SVW’s Financial Regulation Group has extensive experience in guiding financial institutions, insurance companies, investment firms and management companies, both Norwegian and foreign, on all regulatory matters. We regularly assist clients in cases involving alternative dispute resolution and complaints boards, and may be of assistance should your company need affiliation to complaints board in Norway.