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Financial company

In accordance with the definition provided for in Article 2-A (kk) of the Legal Framework, financial companies are companies, other than credit institutions, whose principal activity is to carry out one or more of the activities authorised to banks, aside from accepting deposits or other repayable funds from the public, including investment firms. This definition shall not apply to holding companies subject to supervision by Banco de Portugal, under the provisions of Article 117 of the Legal Framework, nor to payment institutions.

Financial companies may only carry out the operations permitted by the laws and regulations governing their activity (Article 7 of the Legal Framework).

Type of activities to be carried out

Type of activities to be carried out, in accordance with the type of financial company (Article 8 (2) of the Legal Framework):

  • lending, including the granting of guarantees and other commitments, financial leasing and factoring; 
  • payment services, as referred to in Article 4 of the Legal Framework of Payment Services and Electronic Money;
  • issuing and administering other means of payment not covered by the foregoing subparagraph, e.g. paper cheques, paper travellers’ cheques and bankers’ drafts;
  • trading for own account or for account of customers in money market and foreign exchange instruments, financial futures and options, exchange and interest rate instruments, goods and transferable securities;
  • participation in securities issues and placement and provision of related services;
  • money broking;
  • portfolio management and advice, safekeeping and administration of securities;
  • portfolio management and advice in relation to other assets;
  • provision of the investment services and investment activities referred to in Article 199-A of the Legal Framework, not covered by the preceding subparagraphs;
  • issuance of electronic money; 
  • other similar transactions not forbidden by law.

1. Investment firm

1.1 Application 

In order to provide one or more investment services to third parties and/or to perform one or more investment activities, in accordance with the Legal Framework and  Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments , applicants shall submit an application to Banco de Portugal for the authorisation to set up an investment firm. 

The investment firms mentioned in Article 4-A (1) (a) to (d) and (g) of the Legal Framework are classified as financial companies.

In accordance with Article 199-C of the Legal Framework, the authorisation of investment firms whose head office is in Portugal (mutatis mutandis and with the changes listed therein) is governed by the provisions of Articles 14 to 35-A of the Legal Framework. 

Type of legal act: Authorisation or non-authorisation decision

Competent authority: Banco de Portugal 

1.2 Applicable regulations

European Union law: 

  • Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments. 

National law: 

  • Legal Framework and other specific legislation regulating the activity of the different types of investment firms listed in Article 4-A of the Legal Framework.
Investment services and activities

(Annex I to Directive 2004/36/EC and Article 199-A of the Legal Framework)

  • reception and transmission of orders in relation to one or more financial instruments;
  • execution of orders on behalf of clients;
  • dealing on own account;
  • portfolio management;
  • investment advice;
  • underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
  • placing of financial instruments without a firm commitment basis;
  • operation of multilateral trading facilities (MTF).

Type of investment firm

Activities

Applicable law

Dealers

  • reception and transmission of orders in relation to one or more financial instruments;
  • execution of orders on behalf of third parties;
  • management of portfolios belonging to third parties;
  • placement in public distribution offers;
  • registration and deposit of securities;
  • credit granting, including the loan of securities, for securities-trading operations with the involvement of the dealer;
  • advice on transferable securities investment, advice on the capital structure, industrial strategy and related issues, as well as on the merger and acquisition of corporations;
  • assistance in public offer of securities;
  • foreign exchange and safety deposit box rental service related to the provision of investment services.

Decree-Law No 262/2001 of 28 September 2001

Brokers

  • reception and transmission of orders relating to one or more financial instruments;
  • execution of orders on behalf of third parties;
  • management of portfolios belonging to third parties;
  • placement in public distribution offers, without underwriting;
  • registration and deposit of securities;
  • advice on transferable securities investment.

Decree-Law No 262/2001 of 28 September 2001

Wealth management companies

  • management of portfolios belonging to third parties;
  • investment advice.

Decree-Law No 163/94 of 4 June 1994

Foreign-exchange or money-market mediating companies

Foreign-exchange or money-market mediating companies

Decree-Law No 110/94 of 28 April 1994

1.3 Requirements

Within the scope of  an application for authorisation to set up an investment firm, Banco de Portugal shall check whether the following general requirements, listed in Article 14 of the Legal Framework, as amended by Article 199-C of the Legal Framework, are complied with:

 

  • correspond to one of the corporate types provided for in Portuguese law;
  • have as their sole purpose the activities legally permitted under the law;
  • have an initial capital not lower than than the legal minimum capital;
  • have their head office and effective management in Portugal;
  • have robust governance arrangements in place;
  • have effective processes in place to identify, manage, monitor and report risks;
  • have adequate internal control mechanisms in place;
  • have remuneration policies and practices in place promoting and consistent with a sound and prudent risk management;
  • have management and supervisory bodies composed of members whose reputation, professional qualification, independence and availability, at an individual level or at the level of the bodies as a whole, provide guarantees of sound and prudent management.

  

1.4 Procedures

The authorisation procedures to set up an investment firm comprise two stages:

 

1st Stage – Licencing /authorisation

 

  • Application Procedure

The application for  authorisation to set up an investment firm shall be submitted to Banco de Portugal, together with, generically, all the elements set forth in Article 17 of the Legal Framework, applicable pursuant to Article 199-C of the Legal Framework, as well as other elements deemed significant to the assessment.

Elements listed in Art 17 of the Legal Framework
  • characterisation of the type of investment firm to be set up; 
  • draft of the articles of association; 
  • programme of operations, including the type of operations to be carried out, geographical location, internal organisation, material, technical and human resources to be used and prospective accounts for each of the first three business years; 
  • identity of the founding shareholders, indicating the amount of capital subscribed by each of them; 
  • reasoned explanation of the adequacy of the shareholder structure for the stability of the investment firm;
  • statement of commitment to the effect that on the date of setting-up and as a prerequisite of the same, the amount of capital stock required by law will be deposited with a credit institution; 
  • robust corporate governance arrangements; 
  • identification of the members of the management and supervisory bodies, accompanied by a justification from the applicants of their suitability to ensure the sound and prudent management of the institution; 
  • in the case of founding members who are legal persons with qualifying holdings in the investment firm to be set up, the application shall be further accompanied by the following information on those founding members:
      1. articles of association or by-laws;
      2. list of the members of the management body;
      3. balance sheet and accounts for the last three years;
      4. list of the shareholders who have a qualifying holding therein;
      5. list of the undertakings in which the legal person in question has a qualifying holding;
      6. explanatory memorandum of the structure of the group.
Other elements
  • information confirming compliance with the general requirements listed in Article 14 of the Legal Framework; 
  • certificate authorising the trade name or company name and provisional corporate number (NIPC) issued by the National Registry of Companies (RNPC);
  • provisional information for each of the first three business years regarding own funds and compliance with applicable ratios and prudential limits; 
  • the underlying assumptions of the prospective accounts for each of the first three business years;
  • the information referred to in Notice of Banco de Portugal No 5/2008, regarding the internal control systems of supervised entities; 
  • the information referred to in Notice of Banco de Portugal No 5/2010 regarding the proposed shareholders/partners (both legal and natural persons) of the investment firm, including detailed information on the financial resources used for the setting up of the investment firm and their source (broken down by shareholder/partner), as well as on the means and network/circuit used for the transfer of funds to the project/to the credit institution in which the initial capital required by law has been deposited, with information on the respective source and country/jurisdiction of origin;
  • information on the possible compliance with some of the assumption(s) listed in Article 13-A (1) of the Legal Framework, in the calculation of qualifying holdings on the investment firm to be set up;
  • identification of the beneficial owner pursuant to Article 2 (1) (h) of Law No 83/2017 of 18 August 2017, regarding: 
      1. the institution to be set up;
      2. the legal persons holding share capital in the institution to be set up.
    • estimated number of internal employees (‘colaboradores’) and relevant employees (‘colaboradores relevantes’) pursuant to Article 2 (5) and (6) of Notice of Banco de Portugal No 5/2013;
    • detailed information on the following (Article 4 (5) of Notice of Banco de Portugal No 5/2013):
      1. the inherent risks to the specific activity that the investment firm intends to carry out as well as the method used to identify and evaluate those risks;
      2. the means and control procedures to be put in place and their suitability for mitigation of the identified risks;
      3. how the financial institution intends to monitor the adequacy and effectiveness of the means and control procedures to be put in place.
    • detailed information on the policies, means and procedures integrating the institution’s internal control system regarding to the prevention of money laundering/terrorist financing (MLTF), including its customer acceptance policy;
    • detailed information on human, financial, material and technical resources to be allocated to the prevention of MLTF;
    • draft contracts of services to be provided by third parties, including accounting services; 
    • statement by a specialised entity of good repute, ensuring the sufficiency and adequacy of IT tools to the needs of the institution to be set up, namely as regards the provision of information to supervisory authorities.
    •  Assessment of the application

After receiving the application, Banco de Portugal assesses whether the applicant complies with all the authorisation conditions laid down in the applicable national law.

Banco de Portugal shall reject applications that do not comply with the said requirements, in particular when any of the situations described in Article 20 (1) of the Legal Framework occurs.

If Banco de Portugal considers that the application does not meet all the legal requirements, Banco de Portugal shall notify the applicants and offer them a reasonable time period to address and remedy any of the identified shortcomings, before rejecting the authorisation.

 

      • Decision on the application

Banco de Portugal adopts a decision to grant or refuse the authorisation.

The decision to grant the authorisation is notified to the applicants within six months from the receipt of a complete application or, where applicable, of receipt of the additional information required from the applicants, but in any case within twelve months from the receipt of the initial application. Non-notification of the decision within the above-mentioned periods shall imply tacit refusal of the application (Article 19 of the Legal Framework, applicable pursuant to Article 199-C of the Legal Framework).

The decision to grant the authorisation allows the applicants to set up an investment firm. The relevant investment firm, however, may not commence its activity without being subject to a special registration with Banco de Portugal, pursuant to Article 65 of the Legal Framework.

The authorisation does not require the applicants to set up an investment firm and lapses if the entity fails to commence its activity within a period of twelve months following the authorisation. Banco de Portugal may, upon request of the applicants, extend this time limit laid down for the commencement of activity for another period of twelve months (Article 21 of the Legal Framework, applicable pursuant to Article 199-C of the Legal Framework).

2nd Stage – Special registration with Banco de Portugal 

After being granted an authorisation to set up an investment firm, and prior to its special registration with Banco de Portugal, the applicants implement the means and conditions to carry out the authorised activity.

Registration will be refused, in particular, when it is demonstrated that any of the conditions for the authorisation necessary for the setting-up of the investment firm or for the pursuit of its activity are not met.

Once the applicants consider that the investment firm meets all the conditions to commence its activity, they  request Banco de Portugal to check, at the premises of the entity, whether the minimum legal and operational requirements necessary for the carrying out of the authorised activity are met, and whether the conditions mentioned in the project submitted to and authorised by Banco de Portugal are met. 

After obtaining a favourable opinion from Banco de Portugal regarding the means and conditions to commence their activity, the applicants may request the special registration of the investment firm with Banco de Portugal. 

The registration of the investment firm covers the items listed in Article 66 of the Legal Framework. 

After the respective registration, the investment firm may commence its activity.  

 

2. Other financial companies

2.1 Application 

In order to carry out the operations allowed by the laws and regulations governing the activity of financial companies, applicants shall submit an application to Banco de Portugal for the authorisation to set up a financial company. 

In order to set up a securities investment fund management company or a real estate investment fund management company, applicants shall submit an application to Banco de Portugal. 

According to the Legal Framework, the following are financial companies:

  • Companies, the principal activity of which is to carry out one or more of the activities listed in points 2 to 12 and 15 of Annex I to Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013, including:
    • Credit financial companies (‘Sociedades Financeiras de Crédito’);
    • Investment firms;
    • Financial leasing companies;
    • Factoring companies;
    • Mutual guarantee companies;
    • Regional development companies;
    • Exchange offices;
    • Credit securitisation fund management companies;
    • Microcredit financial companies.
  • Securities and real estate investment fund management companies, as referred to in Article 199-A (6) and (7) of the Legal Framework respectively.

Type of legal act: Authorisation or non-authorisation decision

Competent authorityBanco de Portugal 

 

2.2 Applicable Regulations

European Union law: 

  • Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013. 

National law: 

  • Legal Framework and other legislation regulating the activity of the different types of financial companies.

Type of financial company

Activities

Applicable law

Credit financial company

  • carrying out operations authorised to banks, except taking deposits and other repayable funds from the public and the provision of payment services and issuance of electronic money.

Decree-Law No 100/2015 of 2 June 2015

Investment firm

  • financial operations;
  • provision of related services as referred to in Article 3 of its respective legal framework.

Decree-Law No 260/94 of 22 October 1994

Financial leasing company

  • financial leasing activities;
  • incidentally, it may also sell, assign operation, lease or carry out other management acts over assets that have been reinstated, and lease movable property under conditions other than those described above.

Decree-Law No 72/95 of 15 April 1995

Factoring company

  • acquisition of short-term credit, resulting from proceeds of the sale of products or the provision of services in both the internal and external markets.

Decree-Law No 171/95 of 18 July 1995

Mutual guarantee company

  • financial operations;
  • provision of related services to the benefit of micro, small and medium-sized enterprises;
  • financial operations and provision of related services to the benefit of other legal and natural persons, especially students and researchers.

Decree-Law No 211/98 of 16 July 1998

Regional development company

  • promoting productive investment in the respective region and supporting its economic and social development.

Decree-Law No 25/91 of 11 January 1991

Exchange office

  • buying and selling foreign banknotes and coins or travellers’ cheques;
  • incidentally, it may also buy gold and silver, as well as coins for numismatics purposes;
  • exchange offices may also act as payment institutions or electronic money institutions having their head office in Portugal or in another EU Member State, under the conditions set out in their own legal framework.

Decree-Law No 3/94 of 11 January 1994

Credit securitisation fund management company

  • management of credit securitisation funds.

Decree-Law No 453/99 of 5 November 1999

Microcredit financial company

  • granting of small amounts of credit to households and corporations intending to engage in an economic activity;
  • advise borrowers and monitor funded projects.

Decree-Law No 12/2010 of 19 February 2010

Securities investment fund management company

  • managing, alternatively or cumulatively, collective investment undertakings in securities, alternative investment funds in securities and investment undertakings in non-financial assets, according to Article 68 of its legal framework;
  • securities investment fund management companies whose main activity is the management of securities investment funds may also, upon prior registration with CMVM (Portuguese Securities Market Commission), carry on the following activities:
    1. portfolio management, on a discriminatory or customer-by-customer basis, on behalf of customers, including those corresponding to pension funds and occupational pension institutions, in accordance with mandates granted by participants;
    2. investment advice regarding the financial instruments referred to in the foregoing paragraph;
    3. registration and deposit of units of collective investment undertakings.
  • when the regular business of the securities investment fund management company covers the management of alternative investment undertakings in transferable securities or investment undertakings in non-financial assets:
    1. a. the portfolio management, on a discriminatory or customer-by-customer basis, on behalf of customers, in accordance with mandates granted by participants and the investment advice may refer to other assets;
    2. the company may also receive and transfer orders regarding financial instruments.

Law No 16/2015 of 24 February 2015, which approves the Legal Framework of Collective Investment Undertakings (RGOIC)

Article 199-L of the Legal Framework

  • securities investment fund management companies may, incidentally, manage:
    1. a. venture capital investment undertakings, social entrepreneurship investment undertakings, and special alternative investment funds, and funds as referred to in EU law, whenever their investment covers assets eligible for collective investment undertakings in transferable securities and venture capital investment undertakings;
    2. securities investment undertakings.

Real estate investment fund management company

  • management of real estate investment undertakings. These may also:
    1. provide real estate investment advice, including studies and analysis on the real estate market;
    2. individual management of real estate, in accordance with the legal and regulatory provisions applicable to portfolio management on behalf of third parties.

Collective Investment Undertakings (RGOIC)

Article 199-L of the Legal Framework

2.3 Requirements

Within the scope of an application for authorisation to set up a financial company, Banco de Portugal shall check whether the following general requirements, listed in Article 14 of the Legal Framework, as amended by Article 174-A or Article 199-L of the Legal Framework, are complied with:

  • correspond to one of the corporate types provided for in Portuguese law;
  • have as their sole corporate purpose the activities legally permitted under the law;
  • have an initial capital not lower than the legal minimum capital;
  • have their head office and effective management in Portugal;
  • have robust governance arrangements in place;
  • have effective processes in place to identify, manage, monitor and report risks;
  • have adequate internal control mechanisms in place;
  • have remuneration policies and practices in place promoting and consistent with sound and prudent risk management;
  • have management and supervisory bodies composed of members whose reputation, professional qualification, independence and availability, at an individual level or at the level of the bodies as a whole, provide guarantees of sound and prudent management.

  

2.4 Procedures

The authorisation procedures set out for investment firms shall apply mutatis mutandis pursuant to Article 174-A of the Legal Framework or, in the case of investment fund management companies, pursuant to Article 199-L of the Legal Framework.

As regards investment fund management companies, the decision to grant an authorisation is notified to the applicants  within three months from the receipt of a complete application, extendable for another three months by decision of Banco de Portugal, starting from the notification to the applicant, whenever the specific circumstances of the application so justify, in accordance with Article 199-L (2) (f) of the Legal Framework.

Collective investment management companies

 

Procedures for entities managing collective investment undertakings to obtain the authorization and registration needed for the pursuit of their business in Portugal.

 

Contact to present applications or to request information: welcome_mancom@bportugal.pt

 

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