Asset and portfolio management
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.
Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.
Attitude of the country towards modern asset and portfolio management services
The laws of Republic of Serbia regulate portfolio management, whereas the asset management is not explicitly the subject of regulation but may be seen to fall under the definition of the investment advice. The Securities Commission (“SEC”) is the relevant regulator for this aspect of business.
In case these services are provided in Serbia from abroad, besides licensing issues, the services providers must also be aware of the strict forex legal framework which regulates in detail payments to/from abroad.
Provision of modern asset and portfolio management services is still underdeveloped. However, it seems that there is a growing interest for such services on the market.
Obligations and requirements to provide asset and portfolio management, or ancillary services described above
The currently applicable law is the Capital Markets Law (“CM Law”) which is to a large extent aligned with MiFID I but not with MiFID II. Another important part of the Serbian legal framework are the official opinions of the Serbian Securities Commission. These opinions have an important role when interpreting the provisions of the CM Law in certain specific situations.
The CM Law recognizes portfolio management as an investment service. Portfolio management is defined as managing individual portfolios in accordance with instructions given by the client pursuant to a contract concluded with the client, whereas such portfolios include one or more financial instruments. Provision of asset management is not explicitly regulated but it may fall under the definition of the investment advice under the CM Law, which is defined as an investment service of providing a personal recommendation to the client, either at the client's request or at the initiative of the investment firm in respect of one or more transactions in financial instruments.
Investment services in Serbia can be provided by the investment companies or authorised banks licensed by the SEC. Cross-border provision of investment services is not allowed, nor is it possible to apply for a “passport” of the foreign license in Serbia.
The documents necessary for obtaining the license are listed in the CM Law and relevant SEC decisions/by-laws and include for example a business plan, information about qualifications of the management of the investment company, proof of fulfilment of staff and technical requirements, organizational structure, capital requirements proof, etc.
In order to become licensed, the investment company should fulfil certain conditions, such as to obtain license issued by the Securities’ Commission (“SEC”) and satisfy minimum capital requirements, which is EUR 125,000 in case of provision of the portfolio management services. Also, the CM Law establishes the obligation of investment companies to keep records in relation to portfolio management, such are: (i) buy/sell indicator, financial instrument identification code, unit price and quantity notation; (ii) nature of the order if other than buy or sell; and (iii) type of order, etc.
Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
Note that the existing CM Law is applicable in Serbia until 6 January 2023. New Law on Capital Market (“New CM Law”) was adopted on 5 January 2022, but its application is delayed until 6 January 2023. The New CM Law is part of a comprehensive reform of the entire capital market legal framework in Serbia and introduces significant changes as it aims to align the rules with all relevant EU regulations/directives, which is a part of Serbia’s accession process (MiFID1, MiFID2, directives on prospectus, transparency, settlement finality, MAD, EMIR etc.). A major part of the new law is set to start applying from 6 January 2023, while certain parts will be delayed until accession to EU (no definite timing). Due to the wide reach of the changes and many new concepts, the New CM Law requires material alignment of secondary regulations, as well as adjustment of operations of all relevant market players and institutions. In view of complexity of the process, secondary regulations for implementation of the New CM Law are set to be enacted within 6 months, while CrHOV (Local CSD) and Belgrade Stock Exchange have nine months to align their acts with the new law.
Market size for asset and portfolio management services and biggest companies in this business area
At the moment, asset management is not present in Serbia whereas portfolio management is provided by investment companies with licensed portfolio managers. Currently, only three (3) investment companies are providing portfolio management services. There is no information about the number of customers in this segment.
Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area