PORTUGAL Law and Practice Contributed by: João G Gil Figueira, Rodrigue Devillet Lima and Catarina Andrade Miranda, GFDL Advogados
The particulars of each commission or fee model will largely depend on the regulatory landscape covering a given business activity, which, in some cases, may need to be segregated into different vehicles to obtain the practical effect desired by the industry participant. For example, asset management and investment fund companies can draw commissions as established in their management rules. Still, they will not be allowed to charge a commission when a specific fund invests in other funds that the managing company of the fund controls. In the context of payment and e-money institutions, there is the possibility of granting loans so long as they are associated with and exclusively granted for the sole purpose of the payment operation requested by the user and so long as the loan is reimbursed within 12 months. In such cases, the payment or e-money institution must ensure that the user disposes of suf - ficient funds under the ordinances issued by the Bank of Portugal. The main rule to be followed is that the compensation model deployed by an industry participant needs to be: • transparent; • proportionate; • explained in detail to the customers or users; and • designed so that no conflict of interest arises from its application. Compensation model disclosure must occur before entering a contract or transaction (as applicable). 2.4 Variations Between the Regulation of Fintech and Legacy Players There are no main differences between the regulation of fintech industry participants and legacy players. The Portuguese legislature has significantly narrowed the previous legal framework asymmetry between fintech and legacy players by mirroring its EU counterparts and adopting the “same activity, same risks, same rules” principle. In practical terms, the convergence between the applicable legal framework set for legacy players and that for fintech industry participants has translated
into higher entry costs to “new players” but, at the same time, has provided much-needed legal security when deploying a new financial solution in the market. Legacy players are expected to have an initial advan - tage when digging into the fintech space, consid - ering the need to comply with tighter and heftier compliance, supervision and regulatory obligations. However, if they are able to overcome the regulatory burden set by the national and EU regulations, new players will often enjoy more flexible management and a swifter decision-making process, allowing them to develop and deploy new solutions to address market needs that are “off the radar” of legacy players. In some cases, some regulatory exemptions will apply, which may render the development of a fintech project substantially easier. 2.5 Regulatory Sandbox In 2021, the Portuguese government enacted general principles for creating and regulating Technological Free Zones, which could lead to the creation of regu - latory sandboxes. Nonetheless, there is no particular regulatory sandbox in Portugal for fintech projects. This means that most industry participants must com - ply in part or in full with applicable regulations (some of which are listed in 2.2 Regulatory Regime ). In 2018, the Portuguese regulators created an inno - vation hub named the “Portugal FinLab”, opening a communication channel with new players in the fintech industry. The three main regulators participating in the FinLab are Autoridade de Supervisão de Seguros e Fundos de Pensões (Insurance and Pension Funds Supervisory Authority), Banco de Portugal (Bank of Portugal) and CMVM (Portuguese Securities Market Commission), which are usually the three leading independent regulators in the Portuguese jurisdiction. Portugal FinLab’s purpose is to provide a commu - nication channel between the regulators that allows start-ups and new players to navigate the complexity of the legal framework. However, it is not a sandbox facilitator. The only sandbox regime applicable is the DLT Pilot Regime, but it is not domestic in nature. In 2023, CMVM launched a new sandbox initiative called “The Sandbox Market4Growth”. This initia -
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