1. LEGAL ASPECTS OF FINANCE Lecture 3 Case 3 Matti Rudanko

2. Case 3: : Investment Services Contract Tasks: see next slides

3. Possible Tasks and Questions 1 Account for the rights and duties of parties to an asset management agreement. Please pay attention to the provisions in legislation (especially Act on Investment Services (14.12.2012 / 747; Ch. 9 and 10), lower official norms and self-regulation concerning the duties of securities brokers in the relationship with the client. Legal Aspects of Finance 1 3

4. Possible Tasks and Questions 2 Please consider also the applicability of rules on damages liability and the invalidity or adjustment of an agreement to this case. Legal Aspects of Finance 1 4

5. Possible Tasks and Questions 3 How does the interplay of the following provisions (in force then) affect the case: an asset management agreement should contain no provision on guarantee responsibility of the asset manager, whose liability is limited to damages caused by negligence. However, the liabilities and duties of the parties should be defined exactly. The contract should indicate especially the profit expectations and risk level agreed upon by the parties. an agreement of the current type should be concluded in a written form Legal Aspects of Finance 1 5

6. Topics and Issues Duties of an Investment Services Firm towards the Client Disclosure Duties Other Marketing Rules ”Know Your Customer” Advising Duties Legal Liabilities of an Investment Services Firm Liability for Damages in Securities Markets Invalidity of Contracts? Adjustment of Contracts Legal Aspects of Finance 1 6

7. Regulation DIRECTIVE 2004/39/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 April 2004 (Markets in Financial Instruments Directive, MiFID) on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (Directive on Investment Services Undertakings) COMMISSION DIRECTIVE 2003/125/EC of 22 December 2003 –implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest (Commission Investment Recommendations Directive) Legal Aspects of Finance 1 7

8. Legal Aspects of Finance 5 8 Regulation, Cont. (National Norms) Act on Investment Services (14.12.2012 / 747) Repeals: Act on Investment Service Companies (2007) FSA Standard No 1.3: Reliable Administration and Arrangement of Activities FSA Standard No 2.1: Standard on code of conduct for the provision of financial services. FSA Standard No 2.3: Standard on financial services agreements FSA Standard 2.4: Customer identification and customer due diligence. Prevention of money laundering, terrorism financing and market abuse FSA Standard 5.5: Investment recommendations and accepted market practices

9. Regulation, Cont. (National Norms) And: –Securities Markets Act (14.12.2012 / 746; http://www.finlex.fi/fi/laki/kaannokset/2012/en20120746.pdf ) http://www.finlex.fi/fi/laki/kaannokset/2012/en20120746.pdf –Repeals: Former SMA (495/1989) –Ch. 3 – 5 on disclosure duties –Marketing and issuance of securities, duty of disclosure (SMA ch. 1 sect. 2 – 4) Legal Aspects of Finance 1 9