Directors Held Liable for Negligent Non-Compliance

A New Era of Accountability in Portugal’s Financial Services Industry

Lisbon, Portugal - In a significant shift, directors of financial entities in Portugal are now facing civil and criminal liability for their failure to comply with regulatory provisions. The recent trend has seen directors held accountable for the breach of rules and regulations, resulting in insolvency and financial losses for shareholders and third parties.

Liability for Non-Compliance

According to sources, directors may be held liable when it is proven that they were aware of the breach and failed to take measures to prevent its occurrence. In extreme cases, criminal liability may also apply if a company commits a criminal offense through the actions of a director acting on behalf of the company.

Standard of Care for Customers

The standard of care for customers has been deemed as the highest level of diligence, with financial intermediaries required to inform clients about specific risks and provide them with detailed information regarding service fees. The standard of care varies depending on the sophistication of the client, with more demanding requirements for non-professional clients.

Regulatory Developments

In a major shift, the Bank of Portugal and the CMVM have taken a proactive approach in regulating the financial services industry. While there is no mandatory consultation process for secondary legislation, both authorities are likely to submit draft regulations for public consultation and take comments into consideration.

Cross-Border Regulation

Cross-border regulation has also become increasingly important, with national financial services authorities approaching issues through the freedom to provide services under EU legislation or by establishing a branch or representative office. The Bank of Portugal may supervise foreign credit institutions providing services in Portugal to ensure compliance with Portuguese legal provisions.

International Standards

International standards play an essential role in shaping regulations in Portugal, serving as guidelines and influencing regulatory decisions. However, they do not have binding force, allowing the authorities to deviate from them if necessary.

Conclusion

The recent developments highlight the importance of directors being held accountable for their actions and the need for stricter regulation in the financial services industry. As the Portuguese economy continues to evolve, it is crucial that regulatory bodies remain vigilant and take swift action against non-compliance.