Glossary

Other financial service providers

Non-banks

Investors

Client of a bank or other financial service provider from which he obtains or, under the contract, should obtain investment services and ancillary services for financial instruments that require a licence.

Investor claims

Funds and financial instruments that are held, kept in custody or managed by a bank or other financial service provider in connection with investment services that require a licence.

Supervision

The ongoing monitoring of the compliance with the preconditions for granting a license to entities that perform banking and other financial services on a commercial basis as well as the prevention of abuses are core duties of a prudential financial market authority. In Liechtenstein, banks and other financial service providers are supervised by the Financial Market Authority Liechtenstein (FMA).

Banks

Banks are entities of the financial service industry that are especially authorised to perform the following types of business on a commercial basis:

• Acceptance of deposits and other funds subject to repayment (deposit business);
• Lending of third-party funds to an undetermined group of borrowers;
• Safekeeping of financial instruments (custody account business);
• Performance of investment services and ancillary services;
• Proprietary trading or trading for third-party account with currencies (currency business)

Individuals and entities that are not licensed as a bank and governed by the Liechtenstein Banking Act (BankG) are not permitted to accept deposits and other funds subject to repayment on a commercial basis.

Liechtenstein Banking Act (BankG)

Every bank and investment firm that operates in Liechtenstein requires a licence from the FMA and must comply with the provisions of the Liechtenstein Banking Act (BankG).

Call money and fixed-term deposits

Forms of time deposit accounts.

Coverage amount

Maximum amount up to which eligible depositors/investors can be compensated.

EFDI

European Forum of Deposit Insurers, headquartered in Brussels, Belgium (www.efdi.eu). EFDI covers the entire area of the European Council and is regularly consulted by the EU Commission as an expert association.

The EAS has been a member of EFDI since 2010.

Deposits

A deposit is every amount of money that a client entrusts to a bank usually against payment of interest. If the assets are to be mainly invested, they are usually kept in the form of savings or time deposits. If the funds are to be available at short notice for daily use, e.g. for payments, the assets are kept in the form of sight deposits.

Depositor

A bank client who owns one or several deposits.

Compensation case

A compensation case occurs if deposits or investor claims that are due and payable according to the applicable statutory and contractual conditions are not being paid by the banks and other financial service providers and, where either:

1. the responsible authorities have determined that in their view and for reasons directly related to its financial situation, the bank or other financial service providers appears to be unable to pay back the deposit/investor claims for the time being and there are currently no prospects for later repayment;

2. for reasons directly related to the financial situation of the bank or other financial service provider, a court has made a decision which has the effect of suspending the rights of depositors/investors to make claims against the bank or other financial service provider.

EU directives

EU directives are legal acts of the European Union (EU) and as such part of the secondary European Union law. Directives that are legislative acts are generally jointly released according to the ordinary legislative procedure by the Council of the European Union and the European Parliament by proposal of the European Commission.

The individual EU/EEA member states are free to decide how to implement the directives. Thus, they have certain degree of discretion in connection with the transposition of directives. However, if a directive requires the introduction of concrete rights or obligations, the national law that serves its transposition must establish the respective concrete rights or obligations.

Financial instruments

Financial instruments include the following:

• Transferable securities of all classes that are traded on the capital market, such as

  • Equities and similar company interests as well as certificates;
  • Bonds, notes and other securitised debt instruments;
  • All other securities that entitle to buy/sell securities or that lead to a payment (subscription rights);

• Money market instruments such as treasury bills and commercial papers;
• Units in public funds, in investment companies for other securities and real estate and in alternative investment funds;
• Derivatives such as options, futures, swaps, OTC forward transactions and all other derivative contracts;
• Other securities according to Annex 2 Section C of the Liechtenstein Banking Act (BankG).

Also included are blockchain-based instruments issued via distributed ledger technology (DLT) in the meaning of a 'security token'.

FMA

According to its statutory mandate, the Financial Market Authority Liechtenstein (FMA) ensures the stability of the financial market Liechtenstein, the protection of clients, the prevention of abuse and the implementation of and compliance with accepted international standards.

More detailed information is available at www.fma-li.li.

Joint Account

A joint account is a bank account with at least two account holders. Often they are business partners or spouses. Depending on the contract, the holders may dispose of the deposited assets individually ("or" account) or jointly (collective account, "and" account).

Bankruptcy (event of default)

Bankruptcy occurs if an entity is insolvent despite recapitalisation or if it has poor prospects for recapitalisation.

If an insolvent business company cannot be recapitalised, bankruptcy proceedings will be instituted. The court of justice is responsible for instituting and conducting the proceedings.

Liechtenstein Bankers Association (LBA)

The Liechtenstein Bankers Association (LBA) was established in 1969 by the three Liechtenstein banks that existed at that time. Since its establishment, the association has represented the interests of affiliated banks vis-à-vis the government, authorities, the public as well as national and international organisations and associations, and coordinates the joint activities of the member banks.

Further information is available at www.bankenverband.li

Alternative investment fund managers (AIFM)

Alternative investment fund managers (AIFMs) are entities of the financial service industry that manage and sell alternative investment funds (AIFs) on a commercial basis. Provided that they obtain a separate licence, they may also perform individual portfolio management with discretionary mandate. Further permissible services of a management company are listed in Article 29 of the Liechtenstein Alternative Investment Fund Managers Act (AIFMG).

AIFMs are not permitted to accept or hold assets of their clients at any time.

Preferential claims

Preferential treatment of certain deposits in connection with the bankruptcy of a bank (creditor protection).

Foundation

For a particular purpose dedicated assets that are made independent within a separate legal person (legal entity).

Fiduciary and escrow accounts

In principle, a fiduciary account is an account held in one's own name, but for the account of a third-party. An escrow account is a special type of fiduciary account. The holder of the escrow account manages it on a trust basis on behalf of the third party.

Asset structures

Dedicated assets of all types with or without own legal personality that are legally independent and organised under civil law.

This especially refers to foundations or entities whose structure is very similar to that of a foundation (e.g. the liechtenstein "Anstalt") and trusts.

Asset management company (Liechtenstein Asset Management Act, VVG)

Asset management companies are entities of the financial service industry that perform or broker asset management services for third parties on a commercial basis. This especially includes individual portfolio management with discretionary mandate and investment advisory services. Other permissible services of an asset management company are listed in Article 3 of the Liechtenstein Asset Management Act (VVG).

Asset management companies are not permitted to accept or hold assets or funds of their clients at any time.

Management company

Management companies are entities of the financial service industry that manage and sell public funds (UCITS) on a commercial basis. Provided that they obtain a separate licence, they may also perform individual portfolio management with discretionary mandate. Further permissible services of a management company are listed in Art. 14 of the Liechtenstein Collective Investment in Transferable Securities Act (UCITSG).

Management companies are not permitted to accept or hold assets or funds of their clients at any time.

Investment services

Investment services comprise activities in connection with one or several financial instruments:

• Receipt and transmission of orders;
• Execution of orders;
• Individual portfolio management (with discretionary power within the scope of a client mandate);
• Investment advisory services;
• Proprietary trading;
• Underwriting and placement;
• Operation of a multilateral trading system

• Custody and management;
• Securities and financial analysis;
• Granting of credit/loans to investors;
• Consulting services in connection with corporate structuring;
• Others

Securities

Financial instruments

Investment firms

Investment firms are entities of the financial service industry that perform investment services and ancillary services on a commercial basis.

Investment firms are NOT permitted to accept deposits. They may, however, accept funds to be used in connection with investment services and ancillary services. Funds and financial instruments held, kept in custody and managed by investment firms are NOT covered by the deposit guarantee scheme.