Investment firms

Authorisation requirement – investment services and activities

Investment services provided to third parties, and investment activities performed on a professional basis, may only be carried out by investment firms authorised to do so by Finanstilsynet, and by credit institutions authorised to provide such services and perform such activities under the Financial Institutions Act, cf. Section 9-1 of the Securities Trading Act.

An investment activity is provided on a professional basis if it is provided against remuneration. If the activity generates income or reduces costs for the service provider, the activity will also normally be considered to be provided on a professional basis.

The activities falling within the definition of investment services and activities and therefore subject to authorisation, follow from Section 2-1(1) of the Securities Trading Act. These are:

1. reception and transmission of orders relating to one or more financial instruments,
2. execution of orders on behalf of clients,
3. dealing in financial instruments on own account,
4. portfolio management,
5. investment advice,
6. underwriting of financial instruments or placing of financial instruments on a firm commitment basis,
7. placing of financial instruments without a firm commitment basis,
8. operation of a multilateral trading facility (MTF),
9. operation of an organised trading facility (OTF).

Reception and transmission of orders

Reception and transmission of orders is traditionally the core business of investment firms, and relates to transmission of orders to buy and sell financial instruments. The investment service also covers situations where the investment firm brings together two or more investors so that they can complete a transaction.

Execution of orders on behalf of clients

Execution of orders on behalf of clients means conclusion of agreements to buy or sell financial instruments on behalf of clients, including agreements to sell financial instruments at the time of their issuance when the issuer is the investment firm or the credit institution itself, cf. Section 2-3(1) of the Securities Trading Act.

Dealing in financial instruments on own account (dealing on own account)

Dealing in financial instruments on own account (dealing on own account) means trading against the undertaking's proprietary capital, cf. Section 2-3(2) of the Securities Trading Act. Dealing on own account on a professional basis is subject to authorisation, even if it is not provided as a service to third parties. If the undertaking does not provide other investment services or perform other investment activities than dealing on own account, the activity will normally be exempted from the authorisation requirement pursuant to Section 9-3(2) point 6 (the exemption is described below). This means that an undertaking dealing on own account will be subject to authorisation if, for example, it provides investment advice in relation to the own account dealing (investment advice is described below).

Portfolio management

Portfolio management means discretionary management of investors' portfolios of financial instruments on a client-by-client basis and in accordance with investors' mandates, cf. Section 2‑3(3) of the Securities Trading Act.

Investment advice

Investment advice means personal recommendation to a client, at the initiative of the client or the investment firm, in respect of one or more transactions relating to specific financial instruments, cf. Section 2-3(4) of the Securities Trading Act. If an investment is presented as suitable for the client, or could be understood as being based on the circumstances of the client, this could suggest that the client has been given an investment advice.

Placing of financial instruments

Placing of financial instruments involves acting as an intermediary between the issuer of financial instruments and an investor, primarily by way of marketing subscription offers to potential investors on behalf of the issuer, often combined with the transmission of investors' subscriptions back to the issuer. The authorisation requirement is not affected by whether the intermediary itself participates in the issue, as long as other investors are also invited to subscribe. The type of activity in the issuing company, and whether it is a private placement, is also not decisive. The placement services are divided into two alternative investment services: underwriting of financial instruments or placing of financial instruments on a firm commitment basis, cf. Section 2-1(1) point 6 of the Securities Trading Act, and placing of financial instruments without a firm commitment basis, cf. Section 2-1(1) point 7 of the Securities Trading Act.

Multilateral trading facility (MTF)

Multilateral trading facility (MTF) means a multilateral system that facilitates the bringing together in the system of multiple third-party buying and selling interests in financial instruments in accordance with objective trading rules, in order to enable a binding trade to be concluded, cf. Section 2-7(5) of the Securities Trading Act.

Organised trading facility (OTF)

Organised trading facility (OTF) means a multilateral system which is not a regulated market or MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in order to enable a binding trade to be concluded, cf. Section 2-7(6) of the Securities Trading Act.

Exemption from authorisation requirement

Section 9-3 of the Securities Trading Act lists a number of exemptions from the authorisation requirement. The provision exempts certain types of undertakings from the scope of application of the Act. Furthermore, the provision exempts persons providing investment services or performing investment activities in specific situations which would otherwise be covered by the rules. Some important exemptions are listed below.

Section 9-3(2) point 1 of the Securities Trading Act exempts from the authorisation requirement in Section 9-1 anyone who provides investment services in an incidental manner in the course of other professional activity regulated by law or by the profession itself. Examples of such activity regulated by law or by the profession itself are lawyers and auditors. Situations covered by the exemption could be, for example, where lawyers transmit orders relating to estate administration, or give investment advice relating to tax planning.

Section 9-3(2) point 2 of the Securities Trading Act exempts from the authorisation requirement in Section 9-1 anyone who provides investment services only to companies within the same group. The exemption does not apply to placing of financial instruments (cf. Section 2-1(1) points 6 and 7 of the Securities Trading Act) when the subscribers are not within the group, as these investment services are considered to be provided to the investors to whom a subscription offer is marketed.

Section 9-3(2) point 6 of the Securities Trading Act exempts from the authorisation requirement in Section 9-1 anyone who does not provide any investment services or perform any investment activities other than dealing on own account in financial instruments, provided that those financial instruments are not commodity derivatives or emission allowances or derivatives thereof. This means that persons who merely manage their own wealth by trading in the securities market, without having clients, will normally be exempt from the authorisation requirement. However, there are certain exceptions to this exemption.  

A full overview of the exemptions from the authorisation requirement can be found in Section 9-3 of the Securities Trading Act.

Application for authorisation

Conditions for authorisation

Authorisation as an investment firm is dependent on the undertaking fulfilling the initial capital requirements. Investment firms providing the investment services dealing on own account, underwriting of financial instruments or placing of financial instruments on a firm commitment basis, operation of an MTF or operation of an OTF shall have initial capital amounting to at least the equivalent of EUR 730,000 in Norwegian kroner. Investment firms authorised to provide only reception and transmission of orders, execution of orders, portfolio management, investment advice or placing without a firm commitment basis, and not authorised to handle clients' financial instruments or financial funds, shall have initial capital amounting to at least the equivalent of EUR 50,000 in Norwegian kroner. Other investment firms shall have initial capital amounting to at least the equivalent of EUR 125,000 in Norwegian kroner.

Furthermore, the investment firm's managers, board members and shareholders with a qualifying holding must be fit and proper, and the investment firm must comply with certain organisational requirements.

Moreover, investment firms must comply with other requirements laid down in Chapters 9 and 10 of the Securities Trading Act and regulations thereto.

• Laws and regulations for investment firms

Form and content of the application

An application for authorisation to provide investment services or perform investment activities shall include information showing that the statutory requirements of Chapters 9 and 10 of the Securities Trading Act and regulations thereto are met.

• Guidelines on the application to provide investment services and perform investment activities (pdf) (Norwegian only)

Processing

An application for authorisation shall be sent to Finanstilsynet. The decision regarding authorisation shall be communicated to the applicant no later than six months after a complete application was received.

• Contact information to Finanstilsynet

Changes to the board of directors and management

Investment firms shall notify Finanstilsynet of any changes to the composition of the board of directors, and any changes in relation to managers and branch managers. The investment firm shall submit all information necessary to assess whether its board of directors and management meet the requirements of the Securities Trading Act. A criminal record certificate shall be obtained for the members of the board of directors, managers and branch managers. Investment firms shall also notify Finanstilsynet of any changes to the compliance function and the anti-money laundering function. 

All such changes shall be notified by using the form KRT-1157.

• Roller og egnethetsvurderinger (KRT-1157) (Roles and fit and proper assessments) (Norwegian form only)

Ownership changes

Any direct or indirect acquisition of a qualifying holding in an investment firm can only be implemented after authorisation has been given by Finanstilsynet. 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 shall be deemed equivalent to such person's own holdings.

Moreover, 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 mentioned in the Private Limited Companies Act Section 1-3 over the investment firm, can only be implemented after authorisation has been given by Finanstilsynet.

A written notification about a direct or indirect acquisition of a qualifying holding, or an increase in a qualifying holding so that it reaches or exceeds any of the thresholds mentioned above shall be submitted when a decision has been taken to acquire the holding. That obligation rests on any natural or legal person, or such persons or entities acting in concert.

No specific form has been prepared for such notifications, but the applicant should ensure that it meets the requirements in Commission Delegated Regulation (EU) 2017/1946, cf. Section 9-6 of the Securities Trading Regulations.

A written notification shall also be submitted to Finanstilsynet from anyone who decides to o dispose of a qualifying holding or to reduce it so that the holding would fall below any of the thresholds mentioned above. No specific form has been prepared for such notifications.

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 any of the thresholds mentioned above, or any disposal whereby the holding would fall below any of the thresholds mentioned above. The notification shall be sent using the form KRT-1157.

Cross-border activity in another EEA state

First-time notifications

Norwegian investment firms or market operators operating an MTF or OTF who wish to provide investment services or perform investment activities in another EEA state have to notify Finanstilsynet accordingly, cf. Sections 9-32 and 9-33 of the Securities Trading Act. Such Norwegian firms may provide investment services or perform investment activities in another EEA state in the following ways:

1. Directly from a place of business in Norway to another EEA state
2. Directly from a tied agent established in Norway to another EEA state
3. Through the establishment of a branch in another EEA state
4. Through a tied agent established in another EEA state

Change in particulars notification

Norwegian investment firms or market operators operating an MTF or OTF that are already providing investment services or performing investment activities in another EEA State have to notify Finanstilsynet of any changes in particulars that have previously been notified, cf. Section 9‑32(6) and 9-33(6) of the Securities Trading Act.

Form for the notification to Finanstilsynet

Formal requirements for first-time notifications or change in particulars notifications are laid down in Section 9-39 of the Securities Trading Regulations, cf. Commission Delegated Regulation (EU) 2017/1018. Standardised forms adapted to the specific type of activity shall be used in the notification to Finanstilsynet. The forms are annexed to Commission Delegated Regulation (EU) 2017/2382, which provides guidance to the modalities on the application of each form.

Form for cross-border activity directly from Norway (Article 34 MiFID II):

• Annex I From place of business/Norwegian tied agent
• Annex IV MTF/OTF

Form for establishment in another EEA State (Article 35 MiFID II):

• Annex VI Branch
• Annex VII Tied agent
• Annex X Cessation of branch/tied agent