Introduction to robo-advisory services (part I/II)

Industry consultations on the draft “Position of the Polish Financial Supervision Authority on the provision of robo-advisory services” are underway until 29 May 2020 (details available here). It is one of the first in Europe (and perhaps even the first) documents presenting the position of the financial supervisory authority on robo-advisory services which makes it a breakthrough.

As indicated in the draft, robo-advisory services are a form of automated investment advice based on advanced algorithms with the use of mechanisms and tools, such as:

• artificial intelligence (AI);
• machine learning;
• big data analysis.

Robo-advisory services aim to promote investment advisory services by distributing them to a wide range of clients thanks to modern digitalisation.

The regulations of Polish and European law on the provision of investment advice do not distinguish between traditional advice and advice with the use of modern technical solutions; we can, therefore, speak of neutrality of regulations concerning new techniques and tools. The neutrality of the legislation entails the unchanged understanding of the investment firm’s responsibility for the services provided, regardless of the outsourcing of the technical maintenance of the new-tech tools used in the advisory services to an external provider, the investment firm remains solely liable to the client.

The liability of the investment firm for damage caused to clients as a result of non-performance or improper performance of the agreement referred to in Article 81a(1) of the Act on Trading in Financial Instruments (i.e. the agreement under which the investment firm entrusted the entrepreneur or foreign entrepreneur with the performance of activities related to the business conducted by that investment firm) by the entrepreneur or foreign entrepreneur cannot be excluded or limited.

Robo-advisory services within the Polish legal system mean the conduct of brokerage activity which is the provision of a service to clients consisting in the transmission of transaction signals generated by the designed algorithm via e-mails or text messages. Signals are transmitted at a specific moment and include the financial instrument, the direction of the transaction (buying, selling), as well as the expiry date of the signal.

To conduct this type of activity, it is necessary to obtain a permit for making recommendations within the meaning of Article 76 of the Act on Trading in Financial Instruments (provided that they concern financial instruments listed in Article 2 of the Act). However, it should be borne in mind that the recommendations must be personalised. Addressing them to an unlimited or unspecified circle of addressees will result in an exemption from the obligation to obtain a permit to issue recommendations, which does not mean that such an activity, after considering all the conditions of its provision, will not be able to fall into the regulations provided for in separate regulations.

The processed draft is based on a number of important pillars and theses about robo-advisory services, which will be presented in the second part of the cycle about robo-advisory services.

Authors:

Jarosław Rudy, attorney-at-law

Dominika Bielecka, trainee attorney-at-law