New Order on Securities Intermediaries’ Execution of Orders

Date 8 aug. 2011


On 1 July 2011, a new executive order on securities intermediaries’ execution of orders (the “Executive Order”), Executive Order No. 811 of 30 June 2011, entered into force. The Executive Order implements changes in relation to the statutory investor protection in activities by investment funds and investment management companies.

The purpose of the Executive Order is to ensure stability, security and transparency for clients in the financial market.


The Executive Order concern securities intermediaries, investment companies and credit institutions ("Securities Intermediaries") obligation to comply with "best execution" principle, which implies that the Securities Intermediaries, in execution of received orders shall take all reasonable measures to obtain the best possible result for its customers, taking into account price, costs, speed of execution and settlement probability, extent, type and other relevant factors. Securities Intermediaries are also required to prepare and implement an order execution policy to ensure compliance with best execution principle.


In the Danish legal capital market system, the several mandatory rules on investor protection are generally not applicable to transactions with “authorised counterparties”. Authorised counterparties are defined in Annex 2 to the executive order on investor protection, and includes investment companies, credit institutions, insurance companies, investment management companies and administration companies, pension funds, governments, other public bodies and other investors who by their nature do not need special protection regarding their investments.


However, the Ministry of Economy & Business Affairs, who issued the Executive Order, have found it appropriate to extend the protection contained in the best execution principle to orders made ​​by investment management companies for collective investment funds in accordance with Annex 6 to the Financial Business Act. The appendix describes the investment management business, defined as investment management, administration and marketing of investment funds, special-purpose funds, professional associations, restricted associations, hedge funds, other collective investment schemes and UCITS.


With regard to investment funds this only applies when the daily management is not passed to an investment management company, and with regard to investment management companies it only applies when they engage in certain activities. Previously, the activities of investment funds and investment management companies' have not given reason to specific requirements on investor protection.


The changes are a result of the latest of the UCITS directive (Undertakings for Collective Investment in Transferable Securities) (DIRECTIVE 2009/65/EC, 'UCITS IV') adopted by the European Parliament 13. January 2009.


The changes mean that retail customers (customers who are not professional clients or authorised counterparties in Annex 1 or Annex 2, respectively, to the executive order on investor protection) can address the investment management companies directly when they want to invest. Banks, which have been the general forum for the facilitation of retail customers' investments, are according to the current provisions required to ensure a high level of investor protection for both professional clients and retail customers. Professional clients are defined in Annex 1 to executive order on investor protection including, among others, municipalities, institutional investors and larger business enterprises who meet two of the following requirements: i) balance sheet total of 20,000,000 EUR, ii) net turnover of 40,000,000 EUR and / or iii) equity of 2,000,000 EUR. Retail customers are all customers who are not authorised counterparties or professional clients.


Since retail customers now got the opportunity to invest directly through investment management companies, it is appropriate to require the investment management companies and investment funds to comply with best execution principle and establish internal procedures to ensure compliance.


The changes to the directives are implemented to expand and streamline the European capital market. By the implementation ​​cross-border transactions and cross-border supply of financial instruments are made easier and more transparent to both clients and providers, as rules will be made similar throughout the member countries.


Besides adding that investment funds and investment management companies are now required to use the best-execution principle, and to prepare and implement an order execution policy, there has been no material changes in the Executive Order compared to the 2007-executive order.

If you have any questions or require any additional information on the above, please contact partner Dan Moalem ( or attorney Lennart Meyer Østenfjeld (


The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions of considerations.