Banking and Securities: Overview and Implementation of EC Directives in Austria
The Austrian Financial Market Authority (Finanzmarktaufsicht - "FMA") was established on April 1, 2002, as an integrated financial supervisory authority.
The FMA is the single statutory supervisory body directly responsible for supervising credit institutions, insurance undertakings, pension funds, severance payment funds, investment service providers, and the Vienna Stock Exchange. The FMA is independent from state authorities and is vested with administrative penal power and has the capacity to enforce its supervisory rulings. It also has the power to issue ordinances. No ordinary appeal of any kind is possible against rulings issued by the FMA, except for administrative penal rulings. It is possible, however, to file a complaint against rulings of the FMA to the Constitutional Court or the Administrative Court but such a complaint does not have suspension effects unless granted by the court.
The FMA is a public law institution with an Executive Board and a Supervisory Board. The Executive Board consists of two directors, who are appointed on the basis of a proposal by the Federal Minister of Finance and the Austrian Central Bank (Oesterreichische Nationalbank - "OeNB").
The Supervisory Board consists of the chairman, the deputy chairman and six other members. It also oversees the management and the conduct of business of the FMA, and certain measures require its approval; these include finance plans, purchase of property, annual accounts and rules of procedure.
A Financial Market Committee with no decision-making powers has been created, in addition, to strive for cooperation and the exchange of views between the Federal Ministry of Finance and institutions responsible for the Austrian financial market, and to provide advice on supervisory matters.
The budgetary independence of the FMA is guaranteed as the costs of supervision are borne foremost by the supervised institutions themselves. The Republic of Austria pays an amount of EUR 3.5 million per fiscal year.
Directive implementation in Austria
Austria has implemented most of the directives of the European Financial Services Action Plan by passing federal laws or by implementing and amending provisions in existing laws.
Directives not yet implemented
• (i) Directive on credit agreements for consumers (2008/48/EC).
• (ii) Directive amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims (2009/44/EC).
• (iii) Directive amending Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, as regards the implementing powers conferred on the Commission (2008/20/EC).
• (i) Directive on the taking up, pursuit and prudential supervision of the businesses of electronic money institutions (2000/46/EC).
Implemented by E-Money-Law (E-Geldgesetz), Official Gazette I No 45/2002.
• (ii) Directive amending the insurance directives and the ISD to permit information exchange with third countries (2000/64/EC). Implemented by the Insurance Supervision Law (Versicherungsaufsichtsgesetz), Official Gazette I No 33/2003.
• (iii) Directive on the reorganisation and winding-up of insurance undertakings (2001/17/EC). Implemented by the Federal law regarding International Insolvency Law (Bundesgesetz über das internationale Insolvenzrecht), Official Gazette I No 36/2003.
• (iv) Directive amending the money laundering directive (2001/97/EC)
Implemented by amendment of the Banking Act (Bankwesengesetz), Official Gazette I No 35/2003. The provisions of the Third Money Laundering Directive (2005/60/EC) as well as directive 2006/70/EC with regard to the definition of politically exposed persons were put into force by amendments of the Banking Act (Bankwesengesetz), Official Gazette I No 108/2007).
• (v) UCITS II and III (2001/107/EC) and (2001/108/EC).
Put into force by amendments to the Investment Funds Act (Investmentfondsgesetz), Official Gazette I No 33/2003.
• (vi) Directive on financial collateral arrangements (2002/47/EC).
Implemented by the Financial Collateral Agreement Law (Finanzsicherheiten-Gesetz), Official Gazette I No 117/2003.
• (vii) Directive amending the 4th and 7th Company Law Directives to allow fair value accounting (2001/65/EC). Implemented by the Fair Value Valuation Law (Fair Value-Bewertungsgesetz), Official Gazette I No 118/2003.
• (viii) Directive on the taxation of savings income in the form of interest payments (2003/48/EC).
Implemented by the EU Withholding Tax Law (EU-Quellensteuergesetz), Official Gazette I No 33/2004.
• (ix) Directive on the reorganisation and winding-up of banks (2001/24/EC). Implemented by the Federal law regarding International Insolvency Law (Bundesgesetz ueber das internationale Insolvenzrecht), Official Gazette I No 36/2003.
• (x) Directive on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (2002/87/EC). Implemented by the Financial Conglomerate Law (Finanzkonglomerategesetz), Official Gazette I No 70/2004.
• (xi) Directive on the distance marketing of financial services (2002/65/EC). Implemented by the Financial Services Distance Marketing Law (Fern-Finanzdienstleistungs-Gesetz), Official Gazette I No 62/2004.
• (xii) Directive supplementing the statute for a European Company with regard to the involvement of employees (2001/86/EC). Implemented by amendments to the Labour Frame Law (Arbeitsverfassungsgesetz), Official Gazette I No 82/2004.
• (xiii) Directive on insider dealing and market manipulation (2003/6/EC). Implemented by amendments to the Stock Exchange Act (Börsegesetz), Official Gazette I No 127/2004.
• (xiv) Directive modernising the accounting provisions of the 4th and 7th Company Law Directives (2003/51/EC). Implemented by Accounting Provisions Amendment Act (Rechnungslegungsänderungsgesetz 2004), Official Gazette I No 161/2004.
• (xv) Directive on insurance mediation (2002/92/EC). Implemented by amendments to the Agency Act (Maklergesetz), Official Gazette I No 131/2004.
• (xvi) Directive on prospectuses (2003/71/EC). Implemented by amendments to the Capital Market Act (Kapitalmarktgesetz), Official Gazette I No 78/2005.
• (xvii) Directive on the prudential supervision of pension funds (2003/41/EC). Implemented by amendments to the Pension Fund Act (Pensionskassengesetz), Official Gazette I No 8/2005.
• (xviii) Directive on Takeover Bids (2004/25/EC). Implemented by amendments to the Takeover Act (Uebernahmegesetz), Official Gazette I No 75/2006.
• (xix) Directive on the taking up and pursuit of the business of credit institutions (2006/48/EC). Implemented by amendments to the Banking Act (Bankwesengesetz) and other related laws, Official Gazette I No 141/2006.
• (xx) Directive on the capital adequacy of investment firms and credit institutions (2006/49/EC). Implemented by amendments to the Banking Act (Bankwesengesetz) and other related laws, Official Gazette I No 141/2006.
• (xxi) Transparency Directive (2004/109/EC). Implemented by amendments to the Banking Act (Bankwesengesetz) and Stock Exchange Act (Börsegesetz), Official Gazette I No 19/2007.
• (xxii) Directive on Markets in Financial Instruments ("MiFiD" - 2004/39/EC). Implemented in the Securities Supervision Act 2007 (Wertpapieraufsichtsgesetz 2007), Official Gazette I No 60/2007.
• (xxiii) Directive amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector (2007/44 EC). Implemented by amendments to the Banking Act (Bankwesengesetz) and other related laws, official Gazette I No 22/2009.
• (xxiv) Directive on payment services in the internal market (2007/64/EC). Implemented by the Financial Service Act (Zahlungsdienstegesetz) and other related laws, Official Gazette I No 66/2009,
Financial crimes are in general prosecuted under the Austrian Criminal Act and the Financial Penalties Act. The various regulatory laws in the fields of banking and finance include criminal offences such as the abuse of insider information, market manipulation or money laundering. Typical financial offences may be punished with imprisonment or high financial penalties calculated on the income of the offender, but some crimes constitute administrative offences that can lead to administrative fines.
Scope of Regulation
Transactions in financial instruments which are listed on the official market, the semi-official market, the unregulated third market of the Vienna Stock Exchange or in a regulated market in an EEA member state are subject to ongoing supervision by the FMA. The FMA monitors both the stock market and the over-the-counter trade.
Due to the implementation of MiFID (Directive 2004/39/EC), investment firms offering commodities are now subject to the ongoing supervision of the FMA, have to fulfill licensing requirements, and above all have to observe the rules of good conduct laid down by the Securities Supervision Act 2007 (Wertpapieraufsichtsgesetz 2007).
Mortgage lending is regarded as a banking activity under Section 1, para 1, lit 3, of the Austrian Banking Act and includes entering into money loan contracts and the granting of money loans if conducted on a commercial basis.
The Austrian pension system consists of a state pensions scheme (first pillar), an employment-based pension scheme (second pillar), and individual pensions schemes that partly benefit from tax incentives (third pillar). One of the individual pension schemes is also offered with a state bonus consisting of a yearly fixed percentage of the paid-in amounts.
Within the European Union or European Economic Area, financial services may rely on the freedom to provide services or the freedom of establishment. The different directives relating to financial services for credit institutions, insurance companies, investment firms, investment funds etc., can make it possible to render financial services either cross-border or by establishing a branch in other member states of the EU or EEA. Such financial services providers may obtain a "European Passport" by following a notification procedure under those directives that entitled them to deliver cross-border services to the extent these are covered by the license obtained in their home member state. These services are covered by the harmonised activities under these directives.
For providers without a European Passport, the question of the extent to which financial services delivered cross-border to customers domiciled in Austria are subject to Austrian regulatory law and the supervision by the FMA is disputed. No relevant decision by the Administrative Court or Constitutional Court exists, and no guidelines from the FMA are available. Considerable legal uncertainties exist in this area. The question of whether cross-border services trigger license requirements has to be examined on a case-by-case basis and depends on the nature of the financial service provided and the ways it is marketed and supplied to customers in Austria. In 2007, the Austrian Supreme Court for Civil Law rendered a judgement in this respect. A foreign bank is, therefore, likely to be subject to Austrian license requirements if its marketing structure in Austria (e.g., an Austrian resident sales representative initiating loan arrangements with Austrian customers) is comparable to a domestic branch office.
Redress and Compensation
Banking, finance, insurance and pension compensation claims have to be brought forward in Civil Courts.
Credit institutions that take deposits and some financial service providers (portfolio managers as well as persons soliciting the reception and transmission of orders in relation to one or more financial instruments) are obliged to participate in an investor compensation scheme of €20,000 per investor).
The law makes certain provisions in favour of investors; for example, Section 100 Banking Act which stipulates that those who carry out a banking business without the required licence have no right to any remuneration from transactions, such as the right to collect interest and commission.
The terms of banking or financial services in Austria is only permitted if the relevant license under Austrian law has been obtained from the FMA. Credit institutions or investment firms from the EU and EEA that hold a "European passport" may conduct banking business or carry out investment services in Austria on the basis of its home country license. Before providing such services to customers in Austria, the competent authority from the home member state of the investment firm has to inform the FMA about the intention of the institution to provide services in Austria under the principle of freedom to provide services cross-border.
Data Protection Standards
The EU Data Protection Directive 95/46/EC was implemented in Austria by the Austrian Data Protection Act 2000 (Datenschutzgesetz—DSG 2000).. Legal entities as well as natural persons may be data subjects, and the Austrian constitution provides for a data protection base right. Data protection regulations are enforced by the Austrian Data Protection Authority (Datenschutzkommission). Deliberate infringements of certain data protection regulations may even be punished as a crime (Section 51 DSG 2000).
By law, all data processing has to be registered on a public register. Most types of this are listed to a certain decree (StMV 2004) and, therefore, do not need to be registered. Intra-group transfers, however, are not listed and still have to be registered.
In principle, the DSG 2000 allows data transfers within the EU provided that
• (i) the data derives from a lawful data processing,
• (ii) the recipient of the data is entitled to receive the data, and
• (iii) the data subject´s rights are not infringed by this transfer (Section 7 para 2 DSG 2000).
The data transfers outside of the EU are only lawful if either the subject or the Data Protection Authority approves of such a transfer.
Please note that the information provided above only summarizes the main aspects of the issues addressed and is not complete, nor is it necessarily up-to-date. It cannot replace advice on individual cases.
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