Volume 12 - Issue 63
/ March 2023
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http:// www.amazoniainvestiga.info ISSN 2322- 6307
DOI: https://doi.org/10.34069/AI/2023.63.03.8
How to Cite:
Lepekh, S. (2023). Legal status of entities providing consumer financial services: reforming the institutional structure of the
market. Amazonia Investiga, 12(63), 87-98. https://doi.org/10.34069/AI/2023.63.03.8
Legal status of entities providing consumer financial services:
reforming the institutional structure of the market
Правовий статус суб’єктів надання споживчих фінансових послуг: реформування
інституційної структури ринку
Received: February 15, 2023 Accepted: April 5, 2023
Written by:
Svitlana Lepekh1
https://orcid.org/0000-0002-2111-1100
Abstract
The article analyzes the peculiarities of the legal
status of banks, credit unions, pawnshops, financial
companies, leasing companies, insurers, non-state
pension funds, payment service providers. It also
offers a description of credit organizations under
national and foreign legislation.
Attention is focused on legislative changes to the
principles of activity of financial intermediaries
associated with the adoption of the Law of Ukraine
«On Financial Services and Financial Companies».
At the same time, the classification of certain
participants in the financial services market to the
list of financial intermediaries is criticized. The
activity of financial organizations in attracting
financial resources and placing them on their own
behalf is called financial intermediation, taking into
account its economic essence. Based on a
generalized analysis of the specifics of the legal
status of these subjects, it is proposed under
providers of consumer financial services to
understand financial organizations, and in cases
specified by law, other legal entities that, on the
basis of a license, provide for fee services regarding
the use of financial means for the purpose of
obtaining profit or other property benefit by
consumers or third parties to meet their personal,
family needs, not related to related to
entrepreneurial or independent professional
activity.
Key words: bank, financial company, credit union,
insurance company, pawnshop.
1
Candidate of Law, Associate Professor, Associate Professor of the Theory of Law and Human Rights Department, Ukrainian
Catholic University , Lviv, Ukraine.
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Introduction
With the development of the national economy,
there was a gradual formation of the financial
services market, without which the effective
functioning of the socially oriented structural and
innovative model of the economy is impossible.
However, the modernization of this sector of the
national economy was negatively affected by the
financial and economic crisis, the difficult
political situation, and martial law. In the
conditions of world globalization processes, one
of the strategic tasks of the state should be the
further reform of the financial services market in
order to establish the sustainable development of
the national economy. Maslyaeva K. V. (2009)
suggests to improve the definition of the
economic and legal category «market» and
defines that the market is the sphere of economic
relations that arise between the subjects of
market relations regarding the manufacture and
sale of products, the performance of works and
the provision services by agreeing on the price
and are regulated by the state.
There are two main models of state regulation of
the financial services market: monoregulatory
and polyregulatory. Monoregulatory model is the
model of a single regulator is typical for Great
Britain and France. It is characterized by the
functioning of a single body of state power,
which regulates the activities of all financial
intermediaries without exception, the powers of
self-regulatory organizations are limited. The
polyregulatory model assumes the presence of
several state authorities that regulate the financial
services market. In the countries of the
polyregulatory system, a system of self-
regulatory organizations is developed, including
the USA and Ukraine (Yashchyshchak, 2010).
Since 01.07.2020, state regulation of financial
services markets is carried out by the National
Securities and Stock Market Commission in
relation to securities and derivatives markets,
professional activities in the securities market
and activities in the accumulated pension system,
and in relation to other non-bank financial
markets services and banking services market -
by the National Bank of Ukraine. Therefore, the
functions of state regulation of financial services
markets are divided between these two
authorized bodies.
The market of financial services, according to its
purpose, should ensure the movement and
redistribution of temporarily free financial
resources between business entities, the state and
consumers, it performs the role of an
intermediary in the movement of funds from their
owners to people who need them at the moment
(Venetska, 2007). Economists propose to divide
the market of financial services into the market
of banking services, the market of investment
services and the market of insurance services
based on the types of services provided
(Voitenko, 2011).
Markets of financial services cover the spheres of
circulation of financial means as capital. In
accordance with Article 1 of the Law of Ukraine
«On Financial Services and Financial
Companies» (which will be implemented from
January 1, 2024) (Law No. 1953-IX, 2021),
financial means are funds, bank metals, financial
instruments, debt obligations and the right to
claim debt, which are not included in financial
instruments. For example, money is the object of
a wide variety of civil relations, but the subject
of regulation of the legislation on financial
services is its functioning as capital (it fulfills the
functions of preservation, accumulation,
multiplication of wealth), and not as payment,
determining the measure of the value of other
objects civil rights. Such capital is a commodity
whose professional sphere of circulation is
financial services markets.
There is no single method of structuring the
financial services market. The classifications of
financial services markets by various criteria
offered by economists are quite approximate.
Obviously, this is why lawyers try to adopt more
simplified approaches as a basis. Thus, in Article
1 of the Law of Ukraine «On Financial Services
and State Regulation of Financial Services
Markets» (Law No. 2664-III, 2001), financial
services markets include professional services in
the markets of banking services, insurance
services, investment services, capital and other
types of markets that ensure the circulation of
financial assets. Instead, in Article 1 of the Law
of Ukraine «On Financial Services and Financial
Companies» (Law No. 1953-IX, 2021), the
financial services market is defined as the set of
participants in the financial services market and
the relationships between them related to the
provision and receipt of financial and
accompanying services.
This article aims to research the legal status of
certain types of financial intermediaries and,
based on the identification of common principles
and features of their activities, formulate the
conceptual concept of providers of consumer
financial services.
Lepekh, S. / Volume 12 - Issue 63: 87-98 / March, 2023
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Literature review
A specific feature of the financial services market
that characterizes it as an independent market
segment is the mandatory presence of a financial
intermediary as a specific subject of the financial
services market. General provisions regarding
the activities of financial intermediaries were the
subject of scientific research by both economists
and lawyers (for example, Maslyaeva K. V.,
Dragan O. V., Reznikova V. V.). Peculiarities of
the legal status of individual financial
intermediaries were analyzed in the works of
such scientists as Bezklubyi I. A., V. I. Borysov,
V. I. Vitka, Y. V., Gorbachova O.O., and others.
Etymologically, the term «mediation» comes
from the English "intermediation", which means
the help of a third party (party), connected with
others by a relevant agreement (Dragan, 2011).
In economic studies, the activity of such
organizations as financial intermediaries is
revealed through the use of contractual
constructions different from intermediary
contracts. Financial intermediaries are
considered as investment and credit financial
institutions that accumulate funds of individual
investors and use them for investment or
crediting (Uninets-Khodakivska, 2009). For
example, Lavryk O. L. (2015) notes that «the
degree of development of the financial market is
characterized by the number and variety of
financial intermediaries, as well as the range of
financial services they provide to market
participants... the key role in the implementation
of intermediary activities on the financial market
in Ukraine belongs to banks, and the main
services they provide are bank crediting». This
understanding of the essence of financial
intermediation is established in economic
science.
Reflecting the economic essence of the status of
financial institutions as financial intermediaries
and the characteristics of the main types of
activities they are engaged in should have found
a certain assessment by lawyers as well.
Reznikova V. V. (2011) suggested the definition
of the concept of financial intermediation as a
professional business activity of attracting and
placing funds of individual investors (clients),
which involves long-term relations between
individual investors and financial intermediaries
and, accordingly, the accumulation of assets on
the balance sheets of these financial
intermediaries, and financial institutions, whose
functions consist in the accumulation of funds of
citizens and legal entities (individual investors)
and their subsequent provision on a commercial
basis to the disposal of borrowers, are called
financial intermediaries. Analyzing the role of
financial intermediaries in the securities market,
Dragan O. V. (2011) concludes that it is
manifested in the performance of the following
main functions: consolidation (accumulation) of
savings of individual investors into a single pool
and subsequent diversified investment of the
accumulated capital in various projects with
promising capitalization; increasing the liquidity
of the securities market through professional
portfolio management of entrusted and
purchased assets; ensuring balance in the market
through matching the supply and demand for
financial resources; redistribution and reduction
of financial risks; specification (recognition;
consolidation) of property rights of client-
trustees.
Methodology
The methodological basis of the research consists
of general scientific and special legal methods.
The dialectical method accompanied the entire
research process and made it possible to consider
the trends in the formation of legislative
requirements for financial intermediaries as
subjects of the provision of financial services, in
particular, to analyze the patterns of the
development of the principles of activity of
financial services market participants and their
transformation at certain stages of updating the
legislation.
The methods of analysis and synthesis, as well as
the logical-semantic method, were used in
connection with the formulation of the definition
of the concept of providers of consumer financial
services. The comparative legal method was used
during the analysis of the civil legislation of
Ukraine and foreign countries (France,
Switzerland, Poland), in particular, about the
characteristics of the types of banking activity,
banking operations, and the peculiarities of the
legal status of the credit organizations and
financial companies. In the process of preparing
the research, the formal-legal method was used
(regarding the analysis of legislative
prescriptions that regulate the participation of
banks and other financial organizations in
contractual obligations to provide financial
services), and therefore to formulate the main
theoretical provisions and conclusions on
problematic issues of the legal status of financial
intermediaries in the market of financial services.
Results and discussion
In the context of the adaptation of national civil
legislation to the principles of the EU, the
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legislative basis for the functioning of the
institutional structure of the financial services
market is also being gradually updated. The
requirements for the functioning of the
foundations of consumer financial services are
changing. In that way, in the research process,
it`s necessary to ascertain which financial
intermediaries will have the right to provide
financial services to individuals as consumers
and specify the types of such services and the
requirements to which these entities must
respond. Such research will allow analyzing the
expedience of relevant legislative changes in
Ukraine, incorporating the positive foreign
experience in this area and formulating a
generalized characterization of financial
intermediaries as providers of consumer financial
services.
Subjects of the right to carry out financial
services operations are defined by Article 5 of the
Law of Ukraine «On Financial Services and State
Regulation of Financial Services Markets»
(Law No. 2664-III, 2001). Financial services are
provided by financial institutions, as well as, if it
is expressly provided by law, by natural persons
- entrepreneurs. The possibility and procedure for
providing certain financial services by legal
entities that are not financial institutions by their
legal status are determined by laws and
regulations of state bodies that regulate the
activities of financial institutions and financial
services markets, issued within their competence.
Instead, in Art. 1 of the Law of Ukraine «On
Financial Services and Financial Companies»
(Law No. 1953-IX, 2021), the approach to
determining the requirements for such entities
has been changed and the provider of financial
services is named a financial institution, and in
cases expressly defined by special by law -
another legal entity or a branch of a foreign legal
entity that has the right to provide financial
services in accordance with this Law and special
laws. At the same time, natural persons and
natural persons - entrepreneurs, along with legal
entities, can provide accompanying (auxiliary
and intermediary) services.
In Art. 1 of the Law of Ukraine «On Financial
Services and Financial Companies»
(Law No. 1953-IX, 2021) proposes the definition
of a financial institution as a legal entity, the
purpose of which is to provide financial services,
which, in accordance with the law, provides one
or several financial services based on the relevant
license issued by the regulator. Providers of
accompanying services who do not also provide
financial services at the same time, as well as
other persons who received a license to provide
financial services without acquiring the status of
a financial institution, are not financial
institutions. Therefore, according to the
functional purpose, such participants of the
financial services market are more clearly
divided as providers of financial and
accompanying services. At the same time, the
issue of using legal terminology remains
debatable. Article 83 of the Civil Code of
Ukraine (Code No. 435-IV, 2003) refers to any
legal entity as an organization, and distinguishes
a partnership and an institution as organizational
and legal forms of legal entities under private
law. That is, all legal entities are organizations,
but some of them can be created in the form of
companies, others - institutions. Therefore, the
term "institution", guided by the norms of the
Civil Code of Ukraine, should also be used in
other legislative acts to denote the organizational
and legal form of a legal entity. Therefore, for
financial organizations, only an institution
should act as an organizational and legal form in
accordance with the above legislative provisions.
Financial institutions include, in particular,
banks, credit unions, pawnshops, leasing
companies, insurance companies, and others.
The largest group among them are banks that are
created in the form of a joint-stock company or a
cooperative bank. Also, insurance companies,
pawnshops, and financial companies are business
associations, not institutions. In addition, the
very definition of the concept of an institution as
an organization created by one or more persons
(founders) who do not participate in its
management, by combining (separating) their
property to achieve the goal determined by the
founders, at the expense of this property, does not
comply with the principles of functioning of the
specified legal entities engaged in financial
activities. Borysov V. I. (2016) notes that there
are significant differences between the types of
financial institutions that are created only in the
organizational and legal form established by
special legislation, and which can be both non-
entrepreneurial and entrepreneurial, public and
private legal entities, do not provide an
opportunity to recognize the institution as an
organizational and legal form of legal entities -
participants in the financial services market. In
order to avoid inaccuracies in the application of
legal terminology, it would be more correct to
call legal entities engaged in professional
activities related to the circulation of financial
assets financial organizations, rather than
institutions. Therefore, entities providing
financial services (banks, insurance companies,
financial companies, etc.) by their legal status are
financial organizations under private law, and
entities such as the National Bank of Ukraine, the
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Individual Deposit Guarantee Fund are financial
organizations under public law.
Credit institutions are distinguished among
financial institutions. The definition of the term
credit organization is contained in Directive
2013/36/EU of the European Parliament and of
the Council of 26 June 2013 on access to the
activity of credit institutions and the prudential
supervision of credit institutions and investment
firms, amending Directive 2002/87/EC and
repealing Directives 2006/48/EC and
2006/49/EC (Directive 2013/36/EU, 2013) and
Regulation (EU) No 575/2013 of the European
Parliament and of the Council of 26 June 2013 on
prudential requirements for credit institutions
and investment firms and amending Regulation
(EU) No. 648/2012 (European Union, 2013). So,
in accordance with Clause 1, Part 1, Art. 4 of
Regulation No. 575/2013, a credit organization is
defined as an enterprise whose activity consists
in accepting deposits or other refundable assets
from an unspecified number of persons and
granting loans at its own expense. At the same
time, in accordance with paragraph 1 of Article 9
of Directive No. 2013/36/UE, member states are
obliged to prohibit individuals or enterprises that
are not credit organizations from carrying out
activities to attract deposits and other assets on a
revolving basis from an undefined circle of
persons.
No legislative act in Ukraine contains a list of
credit organizations, which also has negative
consequences for law enforcement activities.
According to Art. 1 of the Law of Ukraine «On
Financial Services and Financial Companies»
(Law No. 1953-IX, 2021) credit institutions are
defined as financial institutions that, in
accordance with the law on the activities of the
relevant financial institution, have the right to
provide financial loans on their own risk.
Therefore, they are professionally engaged in the
accumulation and redistribution of monetary
capital. The difference in the given definitions of
a credit organization is the definition of the circle
of persons whose assets can be involved on the
basis of return: according to the Directive and the
Regulation, this is an undefined circle of persons,
and the Law does not specify this aspect.
Peculiarities of the legal regime of the funds
involved, bank metals that can be credited in the
future, make it possible to distinguish the
specifics of the credit organization from other
financial structures and outline its legal status.
Those involved on the basis of returnability are
invited to consider funds, bank metals, the receipt
of which has the consequence of the emergence
of a fixed-term debt obligation for the same or
greater amount. The Law of Ukraine «On
Financial Services and Financial Companies»
(Law No. 1953-IX, 2021) does not contain a
definition of the concept of a credit institution,
however, it is proposed to distinguish the raising
of funds by financial institutions as the provision
of a financial service and other cases of raising
financial assets. In accordance with Article 14,
financial institutions also have the right to attract
funds from: 1) participants, shareholders, owners
of significant participation and affiliated persons
of the financial institution - in any form; 2) other
providers of financial services - in the form of a
loan and/or credit, if there is a right to provide
such a financial service as the provision of funds
on credit; 3) international financial organizations
- in any form; 4) individuals whose requirements
are established by the Regulator, and legal
entities - in the form of an interest-free loan
(revolving financial assistance) or subordinated
debt; 5) any persons - by placing emission debt
securities, in accordance with the Law of Ukraine
«On Capital Markets and Organized Commodity
Markets» (Law No. 3480-IV, 2006). 6) any
persons - by issuing shares when increasing
(decrease) the size of the authorized capital of the
joint-stock company; 7) Regulator - in cases
provided by law; 8) any persons (including non-
residents of Ukraine) - in the form of a charitable
contribution, donation, grant, financial
assistance, technical assistance - exclusively on
an irrevocable basis and in the manner
determined by the legislation of Ukraine. Such
fundraising is not considered a financial service.
This approach is also not without certain
drawbacks. For example, financial companies
and pawnshops will be able to provide loans at
the expense of the funds they received on credit
from banks. Such double intermediation between
the entity that owns free funds and the entity that
needs them to meet consumer or commercial
needs will contribute to a significant increase in
the interest rate. So, in Ukraine, banks and credit
unions have the right to engage in activities
related to the attraction of assets as a financial
service for the purpose of their further placement
through lending. The difference is that banks can
attract financial resources from an unspecified
range of persons, while restrictions are set for
credit unions.
According to article L.511-1 of the Monetary and
financial code of France (Legifrance, 2001),
credit institutions are enterprises that carry out
their activities in their own name and as a
professional occupation, in order to attract
repayable funds from an unspecified circle of
persons mentioned in Article L. 312-2, and the
provision of loans mentioned in Article L. 313-1.
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Financial companies are legal entities, other than
credit organizations, that carry out credit
operations for their own account and on their
own behalf under the conditions and restrictions
determined by their accreditation. They are
financial organizations within the meaning of
article L.511-21.
According to article L. 311-1 of the Monetary
and financial code of France (Legifrance, 2001),
banking operations include the raising of funds
on the basis of returns from an unspecified circle
of persons, credit operations and payment
banking services.
In Switzerland, the activities of financial
institutions are regulated by the Federal law «On
financial institutions» (Federal law No. 954.1,
2018), which in Article 2 defines the entities to
which it applies, namely: managers (managers,
administrators) of assets, trusts, managers of
collective assets, fund management companies,
securities firms. According to Article 3,
commercial activity within the meaning of this
law is granted if there is an independent
economic activity aimed at permanent profit. The
Federal Council establishes minimum
requirements for the organization of financial
institutions, taking into account the different
business activities and sizes of companies, as
well as the risks of financial institutions.
However, the effect of this law does not extend
to individual entities, in particular, banks whose
activities are regulated by the Federal law of
Switzerland «On banks and savings banks»
(Federal law No. 952.0., 1934). The expression
«bank» or «banker» alone or in combination with
the words may only be used in the company
name, in the description of the commercial
purpose and in the estimate for institutions that
have received a license from FINMA (the
supervisory authority for the Swiss financial
market) as a bank.
A bank is anyone who works mainly in the
financial sector and: a. accepts deposits from the
public of more than 100 million Swiss francs on
a commercial basis or publicly recommends
itself to do so b. commercially accepts deposits
from the public up to 100 million Swiss francs or
publicly recommends them and invests or pays
interest on these deposits from the public; or c. is
largely refinanced from several banks that do not
take a significant part in it, for the purpose of
financing an unspecified number of people or
companies with which it does not in any way
form an economic unit on its own account. The
types of financial services that are provided in the
course of the activity of financial institutions are
determined by Federal law of Switzerland «On
Financial Services» (Federal law No. 950.1,
2018).
In the Republic of Poland, Law «On banking
law» (Law No. 140, 1997) divides types of
banking into 2 groups. The purely banking types
(of the first group) include those that are carried
out on the basis of a license, namely, accepting
cash deposits (on demand or time), keeping
accounts for these deposits; maintaining other
bank accounts, lending, providing and
confirming bank guarantees, opening and
confirming letters of credit, carrying out bank
cash settlements, carrying out other types of
activities provided exclusively for the bank in
separate acts. The second group includes
activities that can be carried out not only by
banks, but also by non-banking organizations, if
the provisions of individual acts allow them to do
so. Such services include, for example, check and
promissory note transactions and transactions,
the subject of which is a guarantee, provision of
payment services and issuance of electronic
money, purchase and sale of monetary claims,
other.
In Ukraine, among financial institutions, banks
and non-bank financial institutions are
distinguished, as well as the provision of
financial services by legal entities without the
status of a financial institution is regulated by
separate normative acts. A significant part of
consumer financial services is provided by
banks. In the Law of Ukraine «On Banks and
Banking Activity» (Law No. 2121-IІІ, 2000)
(Article 2) a bank is defined as a legal entity that,
on the basis of a banking license, has the
exclusive right to provide banking services,
information about which is entered in the State
Register banks. The peculiarity of banking
activity is determined by the exclusive right of
banks to perform banking services in aggregate,
which, in accordance with Article 47 of the Law
«On Banks and Banking Activity», include
1) attracting funds and bank metals from an
unlimited number of legal entities and
individuals into deposits (deposits); 2) opening
and maintaining customer current
(correspondent) accounts, including bank metals,
and escrow accounts; 3) placement of funds and
bank metals involved in deposits (deposits),
including current accounts, on one's own behalf,
on one's own terms and at one's own risk.
Bezklubyi I. A. (2006) notes that the peculiarity
of financial services with the participation of the
bank is that there is a constant redistribution of
quite significant funds within this sphere. In
connection with this, the question arises
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regarding the ratio of private and public interests
of the subjects of the relevant relations. The
impact of public law norms on bank activity is
due to the need to minimize the risks of loss of
assets of both bank clients and the bank itself,
which in turn affects the stability of the banking
system and the economic indicators of the
country as a whole.
Currently, the development of the financial
market is closely related to the development of
financial technologies (FinTech) of financial
organizations (Roshylo et al., 2020). Non-banks
that provide their services online are gaining
considerable popularity in the financial markets.
Such digital banks do not have branches, offices,
they work with clients remotely, via mobile
phones and computers. The first neobanks began
to appear in Europe (Great Britain, Germany,
France, Finland) in 2015. Famous neobanks in
the world are Monzo Bank, Revolut, Roketbank,
Atom Bank, Number 26, Nemea, Fidor Bank,
Saxo Bank, Sberbank Direct and TVB Direct,
Neat, Mondo, Solaris Bank.
Neobanking usually includes such functions as a
classic or virtual payment card; mobile deposits;
individual payments using phone numbers, e-
mails or even identifiers in social networks;
mobile budgeting tools and real-time digital
technologies.
According to analysts, in the near future more
than 99% of transactions will be conducted
online (Guba et al., 2019). There are 2 types of
neobanks: 1) which independently provide
financial services on the basis of a license;
2) cooperate with traditional banks that have a
license, receive financial services from them
wholesale, so to speak, and then sell them retail
(Payments Cards & Mobile, 2018). So, in
Ukraine, in 2017, Monobank was created as a
Ukrainian internet banking that uses the license
of Universal Bank for its work. This digital
mobile bank has no branches and provides all
services through mobile applications.
Art. 1 of the Law of Ukraine «On Credit Unions»
(Law No. 2908-III, 2001) contains a definition of
the concept of a credit union as a non-profit
organization founded by individuals, trade
unions, and their associations on a cooperative
basis to meet the needs of its members in mutual
lending and provision of financial services at the
expense of the combined monetary contributions
of the members of the credit union. A credit
union is a financial institution, the exclusive type
of activity of which is the provision of a list of
financial services defined by law. This financial
institution accepts introductory and mandatory
share and other contributions from union
members; provides loans to its members on the
terms of their payment, term and security in cash
and non-cash form. Farms and private enterprises
owned by the members of the credit union can
also receive loans on behalf of the members of
the credit union. The total amount of funds
raised, including credits, cannot exceed 50
percent of the value of the total liabilities and
capital of the credit union at the time of
attraction.
Non-state pension provision is implemented by
pension funds by concluding pension contracts
between administrators of pension funds and
depositors of such funds; by insurance
organizations by concluding lifetime pension
insurance contracts with fund participants,
insuring the risk of disability or death of a fund
participant; by banking institutions by
concluding contracts on opening pension deposit
accounts for the accumulation of pension savings
within the limits of the amount determined for
the reimbursement of deposits by the Individual
Deposit Guarantee Fund.
The principles of the functioning of non-state
pension funds are defined by the Law of Ukraine
«On non-state pension provision»
(Law No. 1057-IV, 2003). A non-state pension
fund (NPF) is a legal entity that has the status of
a non-profit organization (non-entrepreneurial
company), functions and conducts activities
exclusively for the purpose of accumulating
pension contributions for the benefit of pension
fund participants with further management of
pension assets, and also makes pension payments
to participants of the specified fund in the manner
determined by the laws of Ukraine. In an open
pension fund, participants can be any natural
persons, regardless of the place and nature of
their work, and in a professional pension fund,
the founder(s) can be organizations of employers,
their associations, associations of citizens, trade
unions, their associations or individuals related
by the type of their professional activity
(occupation), defined in the foundation's charter.
Participants of such a fund can be exclusively
natural persons related by the type of their
professional activity (occupation), defined in the
fund charter, as well as natural persons who are
employees of employers' organizations, their
associations, members or employees of
professional unions, their associations that
created such a fund. A fund contributor is a
person who pays pension contributions for the
benefit of a fund participant by transferring funds
to the pension fund in accordance with the terms
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of the pension contract and the law. These
contributors can be the fund participant himself
or his wife (husband), children, parents and
employer, as well as a professional association of
which he is a member. A participant of any NPF
can be its depositor at the same time. The amount
of pension payments from the National Pension
Fund is determined based on the amount of
accumulated funds of the participant, which
depends on the amount of pension contributions,
the period of their accumulation and distributed
investment income.
To ensure the legal personality of the non-state
pension fund, the council concludes agreements
on the administration of the NPF, on the
management of the assets of the NPF and on the
maintenance of the NPF by the custodian. The
administrator of a non-state pension fund can be
1) a legal entity that provides professional
services in the administration of the NPF
(professional administrator); 2) a legal entity that
is the sole founder of a corporate pension fund
that has made a decision to independently
administer such a fund; 3) asset management
company (AMC). A legal entity that intends to
carry out activities in the administration of the
NPF must obtain a license to carry out activities
in the administration of non-state pension funds.
The provision of non-state pension fund
administration services can only be combined
with asset management activities.
The administrator acts on behalf of the pension
fund and in the interests of its participants, in
particular, he concludes contracts with
depositors, ensures the implementation of
pension payments to participants. Vitka Y.V.
(2010) notes that the legal relationship between
the administrator and the NPF contains elements
of the civil-law institution of representation,
questions the attribution of administration
services to financial services and suggests that
under «administration» we understand the legal
relationship between the NPF and the
administrator, which consists in the provision by
the administrator for a fee for a set of services for
accepting pension contributions, making pension
payments, keeping personalized records,
organizational, technical and material support for
the activity of the board and meetings of the
founders of the fund, as well as advertising,
agency, accounting, information and explanatory
services. It should be agreed that the
administrator does not provide a financial
service, since the subject of the administration
contract is not financial means. The administrator
enters into contracts with the contributors and
raises their funds on a representative basis for the
NPF, and the rights and obligations under the
pension contract arise for the NPF, the depositor
and the member, and not for the administrator. It
is proposed to exclude from the list of financial
services the activities of NPF administration,
provided for in Article 41 of the Law of Ukraine
«On Capital Markets and Organized Commodity
Markets» (Law No. 3480-IV, 2006). Instead, the
financial service is provided on the basis of the
pension contract itself, which is the basis for
attracting depositors' funds and, in the future,
non-state pension provision of participants.
Gorbachova O. O. (2014) suggests considering
the legal nature of the NPF as a special type of
legal entity on whose behalf other persons -
professional subjects of financial services - act,
by exercising the powers of the relevant bodies
of the NPF (executive, supervisory, etc.). Since
the NPF does not have the right to independently
invest pension assets, such services in the
interests of NPF participants are provided by the
persons who manage them. They can be an asset
management company; the bank regarding the
assets of the corporate pension fund created by it,
if it does not act as the custodian of this fund; the
National Bank of Ukraine regarding the assets of
the corporate pension fund created by it; a
professional administrator who received a license
to conduct asset management activities. Asset
management of the pension fund is carried out on
the basis of a license for carrying out professional
activities on the capital markets - asset
management activities, which is issued by the
National Commission for Securities and the
Stock Market in accordance with the procedure
established by it. At the expense of pension
assets, in respect of which such person is
empowered to own, use and dispose with the
restrictions established by the contract, he/she
can conclude, in particular, contracts for a bank
deposit, purchase and sale of real estate,
securities, that is, invest them for the purpose of
obtaining profit. Separate limitations of the
manager's activity are established directly by
law. For example, such person on behalf of the
pension fund cannot grant a loan or take a loan or
credit that is subject to repayment from the fund's
pension assets.
However, the system of non-state pension
provision may be at risk during a period of
prolonged high inflation or a serious financial
market crisis, in addition, the risk of the
decreasing in the value of pension assets due to
objective changes in the financial market rests
with the fund participant.
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Insurance companies play an important role in
the market of financial services, protecting
individuals and legal entities from possible losses
in the event of insurance events. The basis of
special legislation regulating the activities of
insurance companies is the Law of Ukraine «On
Insurance» (Law No. 1909-IX, 2021). Insurance
market participants are insurers, reinsurers and
providers of accompanying services in the
insurance market, their associations, and clients.
An insurer is a financial institution or a branch of
a non-resident insurer that has the right to carry
out insurance activities on the territory of
Ukraine. Insurers in Ukraine are created in the
form of a joint-stock company or a company with
additional liability. The exclusive type of activity
of the insurer is the activity of insurance,
including the activity of providing guarantees,
and the activity of providing accompanying
services in the insurance market. Insurers who
carry out life insurance can grant loans to
policyholders who have concluded life insurance
contracts.
However, to date, the market development is
restrained by a number of factors, in particular, a
number of insurance companies have problems
with solvency and liquidity, there is no clear
business model, and the level of risk
management and corporate governance is low.
All this makes the market opaque and non-
competitive.
According to Article 27 of the Law of Ukraine
«On Financial Services and Financial
Companies» (Law No. 1953-IX, 2021), a
financial company is a financial institution that,
on the basis of a license, can carry out activities
to provide one or more of the following types of
financial services: provision of funds on credit;
provision of guarantees; factoring; financial
leasing; trading in currency values; financial
payment services for transferring funds without
opening an account and/or acquiring payment
instruments. A financial company has the right to
acquire (to purchase) rights of claim under
contracts for the sale of products (goods, works,
services), including contracts for the provision of
financial services, as well as manage debt under
such contracts.
According to Article 28 of the Law of Ukraine
«On Financial Services and Financial
Companies» (Law No. 1953-IX, 2021), a
pawnshop is a financial institution that, on the
basis of a license, has the right to provide
individuals with financial services for lending
funds secured by property. A pawnshop has the
right to provide individuals with the following
financial services if they are included in the
pawnbroker's license: 1) financial payment
services for transferring funds without opening
an account and/or acquiring payment
instruments; 2) trade in currency values. A legal
entity that intends to carry out the activities of a
financial company or a pawnshop acquires the
status of a financial institution and the right to
carry out financial services activities after
obtaining the appropriate license. It specifies all
financial services that a finance company or a
pawnshop is allowed to provide.
A special place among the entities providing
financial services to individuals is occupied by a
broker /legal entity that is formed and functions
in the form of a business partnership and that, in
accordance with the established procedure,
received a license to carry out professional
activities on the stock market (securities market)
- securities trading activities/. A broker can
conclude a general agreement, commission
agreements, and commissions with clients for the
provision of services. Economists draw attention
to the fact that financial intermediation is
significantly different from broker-dealer
activity. The peculiarity of the latter is that
brokers and dealers do not create their own
requirements and obligations, but act on behalf of
clients, receiving income in the form of a
commission (brokers) or the difference in the
purchase and sale rates (dealers). Financial
intermediaries operate in the market in a
completely different way, on their own behalf, on
their own account, creating their own liabilities.
In scientific literature, the dealership contract is
considered by the legal orientation of the result
as a contract on the transfer of property into
ownership (Yavorska, 2009). Acting in the
interests of individuals on the basis of power of
attorney contracts or commissions agreements,
the broker provides a legal service, but not a
financial one. Financial means are not the
material subject of these contracts. Brokerage
services consist in the performance of lawful
actions of a factual and/or legal nature (according
to the broker's sphere of professional activity)
(Orzih, 2008). According to Article 44 of the
Law of Ukraine «On Capital Markets and
Organized Commodity Markets»
(Law No. 3480-IV, 2006), brokerage activity is
the activity of an investment firm to conclude
derivative contracts and perform transactions on
financial instruments at the expense and on
behalf of clients or at the expense of clients, but
on his/her own behalf. The broker performs pre-
arranged transactions regarding financial means,
i.e. does not make independent decisions, and
accordingly does not assume all or part of the
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financial risk in relation to contracts concluded
with a third party, and this is one of the main
goals of the functioning of financial
intermediaries.
For individuals, an investment firm can provide
a financial service on the basis of a contract for
managing a portfolio of financial instruments.
The transfer of property into management is a
way of transfer by the founder and granting the
manager ownership powers over someone else's
property, taking into account the restrictions
defined by the contract and the law (Tsyura,
2017). Representation also differs from property
management in that the representative powers
provide for the performance of, as a rule, clearly
defined acts, which is not typical of the powers
of the property manager, since the essence of
management consists in the implementation of
any lawful actions necessary for the purpose of
trust management, which is not can be
determined by an indication of the commission
of a certain one-time transaction or a
combination of them (Tsyura, 2017). The scope
of powers of the manager is based on the
presumption of the maximum possible range of
powers. The manager has the discretionary
nature of powers, which is manifested in the rule,
according to which, within the limits defined by
law and the contract, the manager independently
determines the actions that must be taken to
achieve the goal of management. The founder of
the administration has no right to interfere in his
activities in cases not provided for by the
contract, and cannot give him binding
instructions (Maidanyk, 2002). The specifics of
the manager's powers determine the assignment
of part of the risks to him.
In accordance with Article 1 of the Law of
Ukraine «On Financial Leasing»
(Law No. 1201-ІХ, 2021), the lessor can be a
legal entity that has acquired the right to provide
financial leasing services in accordance with the
procedure established by law and, on the basis of
a financial leasing contract, transfers possession
to the lessee and use of the object of financial
leasing. Currently, financial leasing services are
provided by banks, financial companies that are
financial institutions, as well as legal entities that
are not financial institutions (leasing companies).
The latter must be included in the Register of
persons who are not financial institutions, but
have the right to provide separate financial
services. In order to carry out financial leasing
services, it is necessary to obtain a license. The
Law on Payment Services defines nine categories
of payment service providers, including: banks,
payment institutions, postal operators, electronic
money institutions, branches of foreign payment
institutions, state authorities (under certain
conditions). Non-bank providers of payment
services (payment institutions, electronic money
institutions, postal operators and some other
payment service providers) have the opportunity
to open payment accounts, to issue payment
cards and electronic money (previously such
opportunities were available only to banks) for
conditions for obtaining a certain authorization.
Conclusions
The presented results of the analysis of the
provisions of national and foreign legislation
regarding the legal status of banks and other
organizations as financial intermediaries testify
to the relevance of scientific research on the issue
of the legal status of providers of consumer
financial services as a basis for changing the
relevant legislative norms in order to improve the
institutional structure of the financial services
market to ensure optimal conditions for
implementation by consumers their rights.
The activity of financial organizations in
attracting financial resources and placing them
on their own behalf is called financial
intermediation, taking into account only its
economic essence. So, the bank is considered a
financial intermediary, as it is engaged in placing
the involved financial resources. However,
among the providers of financial services there
are entities that are not financial intermediaries
even by their economic characteristics (for
example, leasing companies that are not financial
institutions). However, at the same time, the
similarity with the activity of financial
intermediaries is, in particular, in the possibility
of providing leasing services at the expense of
borrowed funds.
The article analyzes legislative norms and
scientific positions regarding the characteristics
of financial intermediaries and other participants
in civil relations as subjects of providing
financial services to individuals. It is suggested
that the providers of consumer financial
services should be understood as financial
organizations, and in cases specified by law,
other legal entities that, on the basis of a license,
provide for a fee services regarding the use of
financial means for the purpose of obtaining
profit or other property benefit by consumers or
third parties for the satisfaction of their personal,
family needs, not related to entrepreneurial or
independent professional activity.
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