Wealth management by "family offices" in Poland and the licensing requirements

Undoubtedly, the demand for such services has grown with the increased affluence of society, which is also reflected by the increased interest in the topic of family foundations. It is not uncommon for entities offering "family office" services to also advise on current investments, recommend financial instruments, or mediate in the process of acquiring and disposing of them. The activity of "family offices" has attracted the attention of the Polish FSA, which recently reminded the market of this.

The regulator’s first warnings

In 2019, the Polish FSA intervened publicly for the first time in a matter concerning the permissible limits of the activity of "family offices". It then published a statement warning entities providing such services that they may be subject to the obligation to obtain a (MiFID) brokerage license. In the opinion of the Polish FSA, there was a significant risk that some of the services offered in relation to wealth planning constituted investment advice or portfolio management within the meaning of MIFID.  Similarly, support and mediation in acquiring financial instruments (eg shares, bonds, participation units) may constitute unlicensed brokerage activity.  Since unlicensed brokerage activity entails criminal liability, the Polish FSA warned of the impending consequences.

Latest regulatory actions

The above actions and statement of the Polish FSA did not end the activity of unregulated entities offering wealth management services and at the same time entered the area of brokerage activity. On 21 December 2023, the Polish FSA published another statement on this topic and again identified irregularities.

In its statement, the Polish FSA pointed to specific scenarios of activity that, in the regulator's opinion, require a brokerage license.

One of the ways that "family office" entities function was based on the informal cooperation of its representatives (acting under the relevant powers of attorney) with supervised entities. On this basis, the representatives of the "family office" acquired and disposed of, on behalf and for the benefit of their clients, financial instruments. This took place within the freedom of selecting financial instruments for clients' portfolios.  In the opinion of the Polish FSA, such activity may be classified as a brokerage activity (eg portfolio management service, investment advice, or receiving and transmitting orders to acquire or dispose of financial instruments) requiring a MIFID license.  After discovering such cases, the Polish FSA may notify the prosecutor that it suspects a crime of unauthorised brokerage activity has been committed, which is punishable by a fine of up to PLN5 million or imprisonment for up to five years, or both penalties jointly.

In particular, the Polish FSA stated that any cooperation of investment firms (or any other supervised entity) with "family offices" operating without the required brokerage license may also lead to criminal sanctions and supervisory actions against these entities.

What's next?

As we observed, the Polish FSA has already taken supervisory actions against some "family offices".  Each such entity or financial market participant cooperating with them should assess their current cooperation and take a closer look at the factual scope of their performed activities and whether they constitute regulated services.