CZECH REPUBLIC Law and Practice Contributed by: Ondřej Mikula, Jan Šovar and Markéta Klabouchová, FINREG PARTNERS
models, depending on whether the fees are paid by product providers or customers. In payment services, fee-based models dominate, with fees charged either per transaction or on a recurring basis, or a combination thereof. Disclosure and Other Obligations Related to Compensation Models In general, regulated entities (eg, payment insti - tutions or investment firms) must meet pre-con - tractual and ongoing information requirements, including full fee disclosure. The disclosure obligation is stricter when the recipient of the service is a consumer, as a result of local leg - islation implementing EU consumer protection law (eg, the Consumer Credit Directive (Direc - tive 2008/48/EC) or the Distance Marketing of Consumer Financial Services Directive (Directive 2002/65/EC). Regulated entities are usually also subject to conflicts of interest rules, which may affect the compensation models used. Furthermore, specific rules apply to the provision and receipt of inducements. These rules aim to ensure that the service provider acts in the best interests of the customer and avoids conflicts of interest. In the field of investment services, including some pension products, an inducement received from or provided to third parties other than cus - tomers is only permissible if: • it is intended to contribute to improving the quality of the service/product provided; or • it facilitates the provision of the service or is necessary for that purpose, provided that it is properly disclosed and it does not conflict with the service provider’s obligation to act in the customer’s best interest.
In addition, inducements will be excluded, sub - ject to exceptions, in the case of investment advisory services provided independently or portfolio management services. 2.4 Variations Between the Regulation of Fintech and Legacy Players In line with technological neutrality, the Czech Republic has no specific fintech regulation. Fin - tech companies must comply with relevant rules applicable to legacy players if they fall under specific regulations. 2.5 Regulatory Sandbox In 2024, the Czech Republic launched its first fintech and decentralised finance (DeFi) sand - box to accelerate the development of an inno - vative fintech ecosystem. The sandbox offers a dedicated space for legal and technical testing of new fintech solutions in regulated industries. It is open to SMEs with innovative solutions requiring sandbox testing to clarify their regula - tory status and/or who need access to datasets to determine the functioning, usefulness and via - bility of the tested solution. The solution must be beneficial for the financial market in the Czech Republic, sustainable and have growth potential. Selected participants receive indirect support, mainly in the form of regulatory testing, busi - ness mentoring or other advisory services. They also have the opportunity to engage with public authorities and independent experts and discuss the regulatory aspects of the proposed solution to ensure it complies with the applicable regula - tion. The sandbox is a pilot project that may inspire similar initiatives in other areas (eg, AI).
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