Investment service crime is a very rare crime, on the basis of which only a few criminal investigations have been initiated in Finland.
Secretive The operations of the investment company Ermitage have been transferred to the police for investigation. According to information from Helsingin Sanomat, the Finnish Financial Supervisory Authority (Fiva) has submitted an investigation request to the Helsinki police about Ermitage Partners Oy.
The subject of the investigation request is a suspected investment service crime. According to HS information, the matter is currently being investigated by the police.
Investment service crime is a very rare crime, on the basis of which only a few criminal investigations have been initiated in Finland.
You can be guilty of an investment service crime if you intentionally or through gross negligence offer an investment service without permission from the authority. An investment service crime can result in fines or up to one year in prison.
Hermitage Partners oy became public this year, when the company announced that it had collected more than one billion euros in investment assets from Finnish professional investors and other individuals in a short period of time. According to Ermitage, the investors’ funds are invested in foreign capital investment funds.
The company, which was only founded in 2019, has partnered with some of the world’s best-known private equity companies.
HS Vision reported in May that Ermitage appears to offer investment services, and its operation resembles a management company. However, the Finnish authorities did not monitor the company’s operations in any way.
Ermitage’s clients include Finland’s largest foundations, wealthy families and business leaders.
Ermitage Partners Oy responded to Helsingin Sanomat’s request for comment through its lawyer. According to his statement, the company’s responsible persons are not aware of the start of the preliminary investigation.
“However, the possible criminal suspicion is denied. We have received information about the possible start of a preliminary investigation from the editor of Helsingin Sanomat, and so far we have not been able to make sure that this information is correct,” the lawyer’s email reads.
in Finland A company offering investment services must apply for a business license from the Financial Supervisory Authority. In the legislation, investment services refer to, for example, investment advice, sale and marketing of investment products, and the transmission of assignments regarding financial instruments.
Chairman of the board of the company Jerome Bouix told HS Visio in May that Ermitage does not offer investors services that require permits.
Bouix said at the time that Ermitage had entered into a cooperation agreement with a few foreign fund managers. Ermitage acts as a seller and marketer of foreign asset managers in Finland and guides Finnish investors to become their clients. Ermitage receives a fee for the arrangement from a foreign asset manager.
“We are the eyes and ears of foreign investors in the Finnish market. We just open doors and help people find each other,” said Bouix.
“We don’t even have a euro in assets under management, and the money never flows through Ermitage Partners either.”
Financial Supervisory Authority denied at the beginning of June Ermitage Partners oy for providing investment services without a license.
Finanssivalvonta considered that Ermitage has offered investment services without the license required by law, even though the company’s operations have fulfilled the hallmarks of the brokerage of commissions in the Investment Services Act.
The Financial Supervisory Authority made the decision after Ermitage had applied for a license to provide investment services.
“During the business license processing, it has become apparent that the company has already offered investment services during 2022 and will continue in 2023 without an investment service company’s business license, even though the company has been aware of its necessity and the processing of the company’s business license to provide investment services has not been completed,” Finanssivalvonta wrote at the beginning of June.
The Financial Supervisory Authority therefore considered that Ermitage was aware of the need for the missing permit. That’s why Fiva had no choice but to request an investigation to the police.
Fiva’s prohibition decision is not legally binding, as Ermitage appealed to the Helsinki Administrative Court. The Administrative Court has not yet made a decision on the matter.
The Financial Supervisory Authority’s decision is still valid and Ermitage’s investment services are therefore frozen. According to the Linkedin website, at least one Ermitage partner has transferred to another employer during the fall.
Police has very rarely investigated investment service crimes in Finland, and there are few legal cases. The most recent judgment is reportedly from August 2016.
The Helsinki Court of Appeal sentenced the CEO of a Helsinki-based company to a 20-day fine for an investment service crime. The Supreme Court did not grant leave to appeal the verdict.
The Court of Appeal considered that the company had offered its customers individual investment advice, even though it did not have a business license.
The company had also engaged in licensed trading as referred to in the Investment Services Act by constantly selling bonds on behalf of the company, the Court of Appeal found.
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