CZECH REPUBLIC Law and Practice Contributed by: Ondřej Mikula, Jan Šovar and Markéta Klabouchová, FINREG PARTNERS
Based on the ESMA Q&A on MiFID II, at the course of a service that constitutes an ongo - ing relationship, transactions of services within the scope of the unsolicited request can be pro - vided. The concept of “own exclusive initiative” under MiFID has been implemented into local law but has not been defined locally. However, we believe that the CNB is likely to follow the ESMA’s guidance on the interpretation of “own exclusive initiative” in its Q&A on MiFID II. We also believe that where all aspects of the relationship with the client take place on a cross- border basis (eg, any marketing materials are sent from offshore), this further demonstrates that the services are not undertaken in the juris - diction where reverse solicitation is being relied on. 3. Robo-Advisers 3.1 Requirement for Different Business Models Although the provision of robo-advisory services in relation to some asset classes does not con - stitute a licensable activity (eg, certain crypto- assets that are not “financial instruments” or loans), robo-advisory activities are normally pro - vided in relation to asset classes such as shares, bonds or units in collective investment undertak - ings (eg, ETFs) which qualify as “financial instru - ments” and are regulated under the CMBA. The provision of robo-advisory activities in relation to “financial instruments” often consti - tutes provision of investment services relating to “financial instruments” (usually investment advice and/or portfolio management), which are licensable activities under the CMBA. For the
provision of portfolio management services an authorisation as an investment firm is required, unless an exemption applies, while for the provi - sion of investment advice a light-touch licensing regime of the so-called investment intermediary can be availed. Alternatively, a licence obtained under other sectoral legislation (eg, banking or investment funds) may be leveraged to provide robo-advisory services constituting investment services, provided that the investment services are covered by the respective licence. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Only a few legacy players in the Czech Repub - lic have implemented solutions introduced by robo-advisors. One of the largest banks, Československá obchodní banka (ČSOB), was among the first to offer a robo-advisory service to help clients build investment portfolios. Other traditional players have integrated robo-advisory solutions through start-ups within their business groups or by acquiring third-party robo-advisors. However, the robo-advisory market in the Czech Republic remains small. 3.3 Issues Relating to Best Execution of Customer Trades The application of the best execution obliga - tion to robo-advisers depends on whether they provide a regulated investment service and their role in executing client orders. When the robo- advisory activities involve services like execu - tion of orders on behalf of clients, reception and transmission of orders, or portfolio management, the entity is subject to the best execution obli - gation, just like entities using human advisers. This means the robo-advisory firm must take all reasonable steps to ensure client orders are exe - cuted on the most favourable terms. The specific requirements depend on the type of investment
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