Introduction

In 2015 the Belgian banking and finance law landscape underwent certain changesand numerous modifications continue to be expected in 2016. This newsletter highlightscertain changes in EU and Belgian law in the following practice areas: financetransactions; investment funds (undertakings for collective investment); andfinancial institutions.

1. Finance transactions – entry into force of the New PledgeLaw

The Belgian law of 11 July 2013 on security interests over movable assets(“Wet van 11 juli 2013 tot wijziging vanhet Burgerlijk Wetboek wat de zakelijke zekerheden op roerende goederen betreften tot opheffing van diverse bepalingen ter zake”/“Loi du 11 juillet 2013 modifiant le Code civil en ce qui concerne lessûretés réelles mobilières et abrogeant diverses dispositions en cette matière”),which introduces a new law concerning security interests over movable assets(the “New Pledge Law”), is expected to enter into force at the latest on 1 January 2017.

The New Pledge Law regulates, among other things, the creation,perfection and enforcement of a right of pledge (the security interest over a movableasset). The main feature of the New Pledge Law is the introduction of a nationalpledge register that enables the perfection of security interests over movableassets located in Belgium by registering such security interests in this nationalpledge register. As a result, it will no longer be required that possessionover a movable asset be transferred to create a security interest over it.

Following the entry into force of the Pledge Law, the Belgian law of 25October 1919 concerning the creation of pledges over a business will beabolished. A business pledge that has been validly created and perfected beforesuch entry into force remains valid and enforceable, but it will lose its rankunless it has been registered in the Pledge Register within 1-year after thePledge Law enters into force.

More information on the New Pledge Law can be found in our newsletter ofDecember 2014, which is available here: New Belgian Pledge Law - Newsletter ALTIUS December 2014.

2. Investment Funds (undertakings for collectiveinvestment)

2.1 Entry into force of ELTIF Regulation

Regulation2015/760 of 29 April 2015 on European Long-Term Investment Funds was publishedin the Official Journal of the European Union on 19 May 2015 (the “ELTIF Regulation”). The ELTIFRegulation is binding in its entirety and directly-applicable in all the MemberStates, since 9 December 2015.

Moreinformation on the ELTIF Regulation can be found in our newsletter of September2015 which is available here:Focus on ELTIF - “European Long-Term Investment Fund” - NewsletterALTIUS September 2015.

2.2 Establishment of a tax shelter system for investments in start-ups

The Belgian law of 10 August 2015 introduced, from 1 July 2015, a taxshelter applying to investments in certain types of start-ups. The tax shelteris: (a) only available to individuals investing in start-ups (i) directly, or (ii)through a crowd-funding platform recognised by the Belgian Financial Servicesand Markets Authority (the “FSMA”) ora similar supervisory authority of an European Economic Area Member State, or(iii) through a starter fund recognised by the FSMA; and (b) subject to strictconditions.

2.3 Adoption and entry into force of the Regulation on transparency ofsecurities financing transactions and of reuse

On 16 November 2015, the Council of the European Union adopted the textof the Regulation on transparency of securities financing transactions (“SFTs”) and of reuse (the “SFT Regulation”). The SFT Regulationlays down rules to increase SFTs’ transparency and is one of the measures toregulate shadow banking. To achieve this goal, the SFT Regulation imposes anobligation: (a) on SFTs’ counterparties to report and keep records of the detailsof such SFTs with a trade repository registered with the ESMA; (b) on themanagement companies of UCITs and AIFMs to inform the investors of, among otherthings, their SFT activities; and (c) on the reuser to obtain a priorauthorisation of the client/counterparty to proceed to the reuse of financialinstruments and to inform the client/counterparty of the risks linked to reuse.The SFT Regulation will enter into force on the 20^th day following itspublication in the Official Journal of the European Union and will apply fromthat date. Regarding collective investment undertakings, the SFT Regulationwill apply in addition to the provisions of Directives 2009/65/EC and2011/61/EU as implemented in Belgium by the respective AIFM law of 19 April2014 and the UCITs law of 3 August 2012.

2.4 Implementation and applicability of MiFID II and MiFIR

In 2014, the MiFID rules were updated to establish a safer, moretransparent and more responsible financial system. A new directive (Directive 2014/65/EU of the EuropeanParliament and of the Council of 15 May 2014 on markets in financialinstruments and amending Directive 2002/92/EC and Directive 2011/61/EU – “MiFIDII”) and a new regulation (Regulation(EU) No 600/2014 of the European Parliament and of the Council of 15May2014 on markets in financial instruments and amending Regulation (EU) No 648/2012– “MiFIR”) were published in the Official Journal of the EuropeanUnion.

MiFID II: (a) extends the scope of the appropriateness test; (b) regulates thebest execution regime further; (c) requires firms to provide an accuratesuitability report to the client when providing investment advice; (d)introduces product governance rules applicable to product manufacturers anddistributors; (e) extends requirements concerning the information to beprovided to clients (including in respect of costs and charges); (f)distinguishes independent advice from non-independent advice; (g) introduces theOrganised Trading Facility (or OTF), which is a new multilateral trading venuefor non-equity instruments (bonds, structured finance products, emissionallowances or derivatives); (h) regulates remuneration and limits inducements; (i)introduces an obligation for investment firms to record relevant telephoneconversations; (j) establishes a framework to deal with cross-selling (ESMA publishedits Guidelines on Cross-Selling Practices under MiFID II on 22 December 2015);and (k) introduces rules on high-frequency trading.

The MiFIR’s main objectives are (according to its recitals): “to establish uniform requirements relatingto financial instruments in relation to disclosure of trade data, reporting oftransactions to the competent authorities, trading of derivatives and shares onorganised venues, non-discriminatory access to CCPs, trading venues andbenchmarks, product intervention powers and powers on position management andposition limits, provision of investment services or activities bythird-country firms”.

The Member States must adopt and publish the laws, regulations andadministrative provisions necessary to comply with MiFID II by 3 July 2016. Thesenew laws, regulations and administrative provisions must apply from 3 January2017, except for the provisions transposing Article 65(2) of MiFID II which willapply from 3 September 2018. In Belgium, certain existing MiFID rules will haveto be amended or replaced to comply with MiFID II. MiFIR will apply directly inBelgium from 3 January 2017.

2.5 Restrictions on certain vulture funds

The Belgian law of 12 July 2015 to restrict the activities of vulturefunds (“Wet teneinde de activiteiten vande aasgierfondsen aan te pakken”/“Loirelative à la lutte contre les activités des fonds vauteurs”) (the “Vulture Funds Law”) was published inthe Belgian State Gazette on 11 September 2015.

The Vulture Funds Law applies to creditors seeking to obtain anillegitimate advantage by buying a loan granted to a sovereign state or a sovereign state’s debt (a “Creditor”).Such an illegitimate advantage exists if: (a) the purchase price is clearlydisproportionate to the nominal value of the loan or debt or to the amounts forwhich the Creditor demands payment from the sovereign state; and (b) the sovereignstate or the Creditor meet one of the criteria set out in the Vulture FundsLaw. The Vulture Funds Law applies irrespective of the law governing therelation between the Creditor and the sovereign state.

To the extent the Vulture Funds Law applies, the Creditor’s enforcementrights are restricted as follows: (a) the Creditor’s rights against the sovereign state will be limited to the purchase price paid by the Creditor toacquire the loan or debt; and (b) the Creditor will not be able to obtain anillegitimate advantage by (i) obtaining an executory title in Belgium or (ii)taking any conservatory or enforcement measures in Belgium.

3. Financialinstitutions

3.1 Applicability of MiFID rules to insurance

Since 1 May 2015, certain “conduct of business” rules apply to insurancemediation services taken up or pursued in Belgium regarding both life andnon-life insurance products. These conduct of business rules are similar to theMiFID conduct of business rules. As a general rule, the providers of insurancemediation services in Belgium must act in a loyal, fair and professional mannerand in the best interests of their clients when providing insurance mediation servicesin Belgium. These providers must also comply with certain rules regarding: (a)pre-contractual information obligations; (b) a duty of care (ensuring that theinsurance products offered by it are adjusted to the client’s demands and needs);(c) the management and disclosure of conflicts of interests; (d) remuneration,fees and inducements; (e) reporting obligations; and (f) client file and recordkeeping.

The FSMA has published a revised version of its circular on theapplicability of the MiFID “conduct of business” rules to the insuranceindustry on 1 September 2015.

3.2 Adoption of the proposal and entry into force of the InsuranceDistribution Directive

On 3 July 2012, the European Commission proposed revising the currentDirective 2002/92/EC of the European Parliament and of the Council of 9December 2002 on insurance mediation (the “IMD”).This proposal led to a directive on insurance distribution (the “IDD”) that was adopted by the EuropeanParliament on 25 November 2015 and by the Council of the European Union on 14 December2015. The EU’s Member States must transpose the IDD into national law 24 monthsafter the IDD’s entry into force (which will occur on the 20^th dayfollowing its publication in the Official Journal of the European Union).

The IDD will apply to any natural or legal person who is established ina Member State or who wishes to be established there to take up and pursue thedistribution of insurance and reinsurance products. The IDD will not apply toancillary insurance intermediaries carrying out insurance distributionactivities if certain conditions are met. Please note that the name of thedirective was changed from the “insurance mediation directive” to the “insurancedistribution directive” to stress that the IDD also covers direct sales by insuranceor reinsurance undertakings. Insurance and reinsurance distributors, therefore,include insurance and reinsurance intermediaries as well as insurance andreinsurance undertakings.

The IDD’s key features are:

(a) insurance, reinsurance, and ancillary insurance intermediaries must be registeredwith a competent authority in their home Member State;

(b) insurance, reinsurance, and ancillary insurance intermediaries registered with acompetent authority in their home Member State benefit from a passport and maytake up or pursue the activity of insurance distribution in other Member Statesunder the freedom to provide services or the freedom of establishment;

(c) insurancedistributors must meet certain professional and organisational requirements;

(d) MembersStates must ensure that out-of-court redress procedures are available; and

(e) insurancedistributors will be subject to certain conduct of business rules similar toMiFID conduct of business rules such as: (i) an obligation to act honestly,fairly and professionally in accordance with the best interests of thecustomers; (ii) requirements to manage and be transparent about conflicts ofinterests; (iii) information conditions; (iv) specific requirements when givingadvice; (v) rules on cross-selling; (vi) product oversight and governancerequirements; and (vii) suitability and appropriateness tests (as mentionedabove, certain “conduct of business” rules already apply to insurance mediationservices taken up or pursued in Belgium regarding both life and non-lifeinsurance products).

3.3 Recovery and resolution of credit institutions:bail-in tool

Directive 2014/59/EU of the European Parliament and of the Council of 15May 2014 establishing a framework for the recovery and resolution of creditinstitutions and investment firms and amending Council Directive 82/891/EEC,and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC,2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and(EU) No 648/2012, of the European Parliament and of the Council (the “Recovery and Resolution Directive”) wasalready partially transposed into Belgian law following the law of 25 April2014 on the legal status and supervision of credit institutions (the “Credit Institutions Law”). Since 1January 2016, the Credit Institutions Law has been amended following the Royal Decreeof 18 December 2015 that further transposes the Recovery and Resolution Directiveinto Belgian law by making a bail-in tool available to the resolutionauthority.

3.4 Entry into force of the Transversal Royal Decree partially delayed

The Royal Decree of 25 April 2014 regarding certain informationobligations for the marketing of financial products to non-professional clients(the “Transversal Royal Decree”) imposescertain information obligations and publicity requirements on entities commercialising - as part of their business activities - financialproducts on Belgian territory to non-professional clients.

It was originally envisaged that the entire Transversal Royal Decreewould enter into force on 12 June 2015. However, following a Royal Decree of 2June 2015, only a part of the Transversal Royal Decree entered into force on 12June 2015. This part included certain rules regarding the advertising offinancial products and the distribution of certain other documents and notices whenmarketing financial products to non-professional clients. For instance, theFSMA, in certain circumstances will have to approve the advertising materialsand certain minimum information must be included therein (such as a risklabel).

The other part, which will enter into force at a later date to bedetermined by the Belgian King, introduced the obligation to provide certain information (including an information sheet) to potential non-professionalclients.

The rationale of this delay isthat the scope and goals of the Transversal Royal Decree partially overlap withthose of Regulation (EU) No 1286/2014 of 26 November 2014 on Packaged RetailInvestment and Insurance Products (“PRIIPSRegulation”) that has not yet entered into force. The Belgian legislator wouldlike to avoid potential conflicts between the Transversal Royal Decree and thePRIIPS Regulation.

On 27 October 2015 the FSMA published a circular providing furtherguidance on the Transversal Royal Decree. This circular is expected to beamended once all provisions of the Transversal Royal Decree enter into force.

3.5 The Prospectus Directive – proposal EuropeanCommission

The European Commission launched a consultation concerning Directive2003/71/EC of the European Parliament and of the Council of 4 November 2003 onthe prospectus to be published when securities are offered to the public oradmitted to trading and amending Directive 2001/34/EC (the “Prospectus Directive”). Following thisconsultation, on 30 November 2015 the European Commission published alegislative proposal to recast the Prospectus Directive through a newregulation on the prospectus to be published when securities are offered to thepublic or admitted to trading (the “DraftProspectus Regulation”). The adoption of a regulation avoids that the rulesare implemented differently in the EU’s Member States and facilitates issuingfinancial instruments throughout the EU (although it should be noted that evenunder the Draft Prospectus Regulation, the Member States enjoy certain types ofdiscretion).

The Draft Prospectus Regulation’s principal aims are: (a) to make iteasier for all issuers, in particular small and medium-sized enterprises orSME’s, secondary issuers, frequent issuers, issuers of non-equity securities,to issue financial instruments; and (b) to protect investors further by makingthe prospectus a more valuable information tool. For example, the Draft Prospectus Regulation proposes extending the scope ofthe exemption for small scale offers by making the Draft Prospectus Regulationnot apply to offers of securities to the public for a consideration below EUR500,000 (calculated over a 12 month period); but, according to the EuropeanCommission, this extension “will notpreclude Member States from requiring appropriate forms of disclosure for suchissuance sizes, as long as Member States calibrate such requirements in aproportionate way, in keeping with the spirit of simplification and better integrationof markets”. Member States would also be allowed to exempt offers that haveno cross-border effects, provided that such offers do not exceed a totalconsideration of EUR10,000,000 (calculated over a 12 month period). Inaddition, the Draft Prospectus Regulation also proposes new disclosure regimesfor secondary issuances and SMEs and a universal registration document that wouldreduce the administrative burden of frequent issuers. The prospectus exemptionfor offers of securities with a denomination above EUR 100,000 would be removed.To protect investors further, the Draft Prospectus Regulation proposes: (i) toremodel the prospectus summary and make it more in line with the keyinformation document required under the PRIIPS Regulation; and (ii) that ESMA should makeavailable an online centralised storage mechanism that facilitates investors’ searchesand supervisory authorities’ enforcement.

Moreinformation on the Draft Prospectus Regulation, including its full text, can befound on the website of the European Commission: European Commission -Prospectus Directive.

3.6 Belgian laws on Consumer Credit and Residential Mortgage Credit –recent changes

The Belgian Parliament, in recent years, has codified substantial partsof Belgian economic legislation into a new Code of Economic Law (“Wetboek van economisch recht”/“Code du droit economique”). The Code ofEconomic Law consists of 18 Books, including one on payment and credit services(“Boek VII. – Betalings- enkredietdiensten”/“Livre VII. –Services de paiement et de crédit”, “BookVII”).

One large part of Book VII, mainly concerning payments services, enteredinto force on 29 May 2014 and another large part, mainly concerning consumercredit, entered into force on 1 April 2015.

The remainder of Book VII, which mainly deals with the licencerequirements for providers of credit to consumers, entered into force on 1November 2015. As a result, the providers of credit to consumers andintermediaries must take action to remain authorised to provide consumer creditor to act as an intermediary in Belgium. The type of action such creditors andintermediaries must take is discussed in Section 4 (Grandfathering rules inrespect of new rules and procedures on licences and registrations (deadline: 30April 2017)) of our newsletter of July 2015, which can be found here: Belgian laws on Consumer Credit and Residential Mortgage Credit – recentchanges - Newsletter ALTIUS July 2015.

3.7 Mortgage Credit Directive – to be implemented in Belgium

Directive 2014/17/EU of the European Parliament and of the Council of4February 2014 on credit agreements for consumers relating to residentialimmovable property and amending Directives 2008/48/EC and 2013/36/EU andRegulation (EU) (the “Mortgage CreditDirective”), which aims to “develop amore transparent, efficient and competitive internal market, throughconsistent, flexible and fair credit agreements relating to immovable property,while promoting sustainable lending and borrowing and financial inclusion, andhence providing a high level of consumer protection” (recital 6 of theMortgage Credit Directive), must be implemented by the Member States at thelatest by 21 March 2016.

The Mortgage Credit Directive’s implementation in Belgium requiresamendments to the parts of Book VII of the Belgian Code of Economic Law dealingwith residential mortgage credit.

3.8 Payment Services Directive II – to be implemented in Belgium

On 23 December 2015, Directive(EU) 2015/2366 of the European Parliament and of the Council of 25 November2015 on payment services in the internal market, amending Directives2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, andrepealing Directive 2007/64/EC was published in the Official Journal of theEuropean Union (the “PSD II”). The PSD II will replace the old paymentservices directive 2007/64/EC (the “PSD I”) with effect from 13 January2018.

The main reason why a new payment servicesdirective has been adopted is to take into account new types of paymentservices. The PSD II will, therefore, have a broader scope of application thanthe PSD I. Consumers will also be protected further under the PSD II.

The PSD II must be transposed into nationallaw by 13 January 2018. By that date, Belgium must amend the parts dealing withpayment services in Book VII of the Belgian Code ofEconomic Law.

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