Is Your Advisor Correctly Licensed and Registered? 

by | Sep 11, 2023

Don’t add more risk to your investments by choosing an unlicensed or incorrectly registered advisor. 

Expats who reside in the Czech Republic often look to locally based financial advisor firms that specialize in providing non-Czech residents with investment advice. It seems to us that the ever-changing rules on regulation and the Commercial Code are not always being followed. 

Such compliance lapses should be a concern for expat investors that entrust their savings and pensions with such companies. 

What’s the issue? 

Any company filing for a business license in the Czech Republic does so by submitting their articles of association through the Commercial Register, which includes listing their scope of business activities. This register then lists the business license for the stated business activities of that business. This should seem somewhat obvious, so why mention it? 

Before 2019, a ‘catch-all’ term was used to cover business activities related to the specific listed activities, which said: ‘production, trade and services not included in Annexes 1 to 3 of the Trade Licensing Act.’ 

However, the Czech Supreme Court changed this by ruling that this practice is ‘contrary to the applicable legislation due to its lack of certainty.’ In other words, they decided that the term was too vague to know which business activities the company was actually conducting. 

Hence, if a business is still using the old, vague term, they are not correctly registered for unspecified activities in the Czech Commercial Register. 

Why should I care? 

Any failure to comply with the correct listing of the company’s activities may, in extreme cases, result in liquidation of the company ordered by the court, or in a fine of up to CZK 100,000 despite an additional appeal at the court. 

So, if your money is invested through a company that has not properly registered the activities upon which it actually engages, where do you stand if the company is liquidated? 

Additionally, if a company is providing services that are not stated among their business activities, they are doing so outside of the rules, as per the Czech Supreme Court ruling. So, the inevitable question arises, ‘What else have they got wrong?’ 

Current example of unclear activity 

We’ll look at an two examples. 

Business A: The Czech Commercial Register lists their business activities as, specifically, ‘consulting in the field of economics, intermediary activity in the field of trade, and insurance broker.’  

However, the Czech National Bank, the regulating entity, confirms this firm is not an insurance broker. Because the services are different between what the firm is offering as per the licensing of the Czech National Bank and the activities on the Commercial Register, there is a breach of the Commercial Code. 

Additionally, their public website promotes their services in which they specifically state that they do not provide insurance broking services- in direct contradiction to the Commercial Register. 

Business B:  In this case, the company is registered by the Czech National Bank to provide several specific insurance-related services. 

But the Commercial Register lists their services as: ‘rental of real estate, apartments and non-residential premises without the provision of other than basic services ensuring the proper operation of real estate, apartments and non-residential premises’. These are obviously very different business activities than selling insurance, which is the service they offer the public. 

They also use the now-defunct phrase ‘production, trade and services not listed in Annexes 1 to 3 of the Trade Act’ which does not cover their other business activities. 

Bottom Line 

Your financial advisor must be registered with the Czech National Bank, the regulating authority, and listed in the Czech Commercial Register for the specific advisory services they are offering, including Wealth Management, Insurance, etc. There is no longer a vague regulation they can use to cover them for advice they may be unqualified or unlicensed to give. 

Don’t add more risk to your investments by choosing an unlicensed or incorrectly registered advisor. 

How to do your research 

Go online to the Czech National Bank Register. 

  • Click Search 
  • New window: Type the name of the business in the Institution Name box, then Search 
  • New window: Click on the company’s name 
  • New window: Click on Authorized Activities 

Go online to Czech Business Register. 

  • Type in the name of the company 
  • New window: Click on List of Valid. 

Contact Aisa International for a free consultation to ask questions, learn about our services, and consider beginning your financial plan. 

Image by Drazen Zigic on Freepik 

The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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Post written by:

Chris Lean

In the UK he worked with accountants as an independent financial adviser, qualified as a Chartered Financial Planner and became an examiner for the Chartered Insurance Institute. He also qualified as a European Financial Planner and specializes in investment and pension advice to clients.

Aisa International is the only financial advice service company specialising in advice for expats that is regulated as a Securities Trader in the Czech Republic, USA, and UK.