Answer ... (a) Crowdfunding, peer-to-peer lending

Crowdfunding is a regulated activity in Lebanon under Capital Markets Authority (CMA) Decision 3/2013.

Subject to a prior licence from the CMA and approval to commence operations, the following entities only may carry out crowdfunding activities in Lebanon:

• Lebanese joint stock companies with the main objective of providing crowdfunding services and with share capital of at least LBP 1 billion; and
• foreign crowdfunding companies, through a branch opened in Lebanon and the allocation of LBP 1 billion for the branch’s activities in Lebanon.

In carrying out its activities, a licensed institution must, among other things:

• cooperate in order to facilitate the CMA’s monitoring duties;
• prepare and provide the CMA with periodical reports on its operations and technical, organisational and financial conditions;
• have its external auditors prepare annual reports;
• refrain from providing any advice to investors or the company seeking to raise capital through crowdfunding;
• refrain from receiving deposits of any kind;
• refrain from using the electronic platform to offer any financial products or derivatives to the public other than ‘equities and shares’;
• refrain from direct or indirect trading in ‘equities and shares’ on the electronic platform designed to provide the crowdfunding service; and
• abide by certain technical rules and procedures to ensure that it has in place:
• • an effective electronic system (eg, hardware, operating systems, software and network);
  • system protection software (eg, anti-spam, anti-virus, firewalls);
  • encryption measures; and
  • investors’ protection procedures when logging in (log-in access), including an authentication procedure.

No specific regulations govern peer-to-peer lending in Lebanon. Lending activities are specifically regulated under the Code of Money and Credit (13513/1963) and Banque du Liban (BDL) regulations, and must be undertaken only by licensed banks, financial institutions or other specialised lending entities.

(b) Online lending and other forms of alternative finance

Online lending activities are not explicitly regulated in Lebanon. They must be subject to the laws and regulations governing lending in general, including the Code of Money and Credit and BDL regulations.

Lending activities may be undertaken only by banks, financial institutions licensed by the BDL and specialised lending entities. Specialised lending entities do not require a licence from the BDL, but must notify the BDL prior to engaging in any activity.

Additionally, BDL Basic Circular 124/2010 on Transparency, Conditions and Means of Credit sets out certain conditions on licensed institutions carrying out lending activities, including the following:

• Any direct or indirect advertisements for lending activities must be clear, comprehensive and accurate, and must not include any reference to any benefits or services if unavailable (eg, 0% interest, overdraft, weekly instalments);
• The contract and application forms adopted by the institution must be clear, comprehensive and accurate; and
• The institution must ensure that certain conditions and provisions are included in the application forms, such as the currency of the credit and its duration.

BDL Basic Circular 69/2000 on Electronic Payment and Financial Operations also applies to online lending and licensed institutions must comply with its provisions, including the following:

• registering with the BDL to carry out electronic payments and financial operations; and
• obtaining prior approval from the BDL to carry out electronic banking or financial operations executed via applications or software on mobile and fixed electronic devices and using bank cards (see question 3.1(b)).

Furthermore, online lending is also subject to the provisions of the Electronic Transactions and Personal Data Law, including the provisions relating to digital signatures. However, the implementing regulations for this law have not yet been issued.

(c) Payment services (including marketplaces that route payments from customers to suppliers (eg, Uber and AirBnb)

Electronic payment services are regulated by BDL Basic Circular 69/2000, and electronic banking and financial services are governed by the Electronic Transactions and Personal Data Law, which grants the BDL extensive regulatory powers in this respect. Electronic banking and financial operations may be carried out only by banks, financial institutions and any other institution that obtains a prior licence from the BDL (see question 3.1(a)).

Electronic payment and banking operations include:

• operations concluded, executed or promoted through electronic or photo-electronic means (eg, mobile, computer, internet, ATMs);
• operations executed by issuers or promoters of all types of electronic charge, debit or credit cards;
• electronic transfers of cash; and
• offers, purchases, sales and all other electronic banking services executed through specialised websites.

These services are subject to the supervision of the BDL. Payment service providers must take all necessary measures and submit the requested documents to facilitate and ensure the efficiency of such supervision.

(d) Forex

Forex is a regulated activity and is subject to the Forex Profession Law. Forex activities may be carried out only by banks, financial institutions, financial brokerage firms and forex companies that have obtained a licence from the BDL. The BDL is vested with discretionary power to grant or reject a licence, depending on whether it serves the public interest.

The shareholdings of forex companies are subject to nationality restrictions and, depending on the legal form of the company, there is a minimum threshold of parts or shares that must be owned by Lebanese nationals.

Forex companies must comply with the BDL’s regulations and must:

• submit to the BDL all information, accounting data, statistics and documents evidencing the legality of their operations; and
• maintain a special register that documents every transaction that exceeds a certain threshold set by the BDL.

Forex companies must not accept deposits, grant facilities or incur indebtedness other than for their forex activities. They are subject to the anti-money laundering/counter-terrorist financing (AML/CFT) legislation.

(e) Trading

Trading in securities is a regulated activity under CMA Series 2000. It includes the following:

• dealing in or trading a security as principal or as agent; and
• selling, buying or taking an order to sell or buy a security.

Trading is reserved to institutions licensed by the CMA. The institution must be:

• established in Lebanon as a bank, financial institution or financial intermediation institution duly registered with the CMA or the BDL; or
• established in Lebanon as a branch of a foreign financial entity whose parent company engages in securities business and is licensed by a competent authority in a recognised jurisdiction.

Individuals carrying out certain activities within the licensed institution – such as the finance officer, CEO or senior executive officers – must also be licensed by the CMA.

The conduct of licensed institutions is regulated by CMA Series 4000, which sets out obligations when carrying out transactions on the market. Such obligations include refraining from the disclosure of inside information and from manipulative and deceptive acts.

(f) Investment and asset management (private management)

Investment and asset management activities in Lebanon are regulated activities governed by:

• the Collective Investment Schemes Law;
• the Capital Markets Law;
• the Law regulating the Financial Intermediation Profession; and
• CMA Series 2000 and 8000.

Asset management is reserved for:

• institutions that are licensed by the CMA and carry out securities business activities such as managing a security or a portfolio of securities for another person on a discretionary basis or managing a collective investment scheme (CMA Series 2000);
• Lebanese joint stock companies and branches of foreign financial intermediation institutions that have obtained a prior licence from the BDL and whose main object is to undertake financial intermediation activities (ie, asset management); and
• banks and financial institutions registered with the BDL.

Investment activities are undertaken by collective investment schemes, which must take the form of a mutual fund or a joint stock company. They must obtain a prior licence from the CMA and their constitutive act is subject to the CMA’s approval. The latter enjoys discretionary power in this respect and will grant a licence insofar as it benefits the public interest. Collective investment schemes must provide the CMA with any document or record requested both before and during the commencement of activities.

The manager of a collective investment scheme established in Lebanon must disclose to the CMA any information relating to a scheme that is necessary for the CMA to carry out its responsibilities in a timely, accurate and complete manner.

Collective investment schemes must adhere to the provisions of the Banking Secrecy Law and AML/CFT legislation.

(g) Risk management

Every Lebanese bank must establish a risk committee to supervise the implementation of the risk management rules, as issued by the BDL and the Banking Control Commission, both in the bank in Lebanon and in its branches and affiliates abroad.

CMA Series 2000 requires any institution requesting a licence from the CMA to conduct securities activities to demonstrate that it has established sufficient systems, policies and procedures covering risk management. This series further obliges the institution to engage a risk management officer, who will be responsible for the design and implementation of an approved risk management policy.

(h) Robo-advice

Robo-advice activities are not specifically regulated in Lebanon. However, robo-advice may be considered as an advisory securities business which is a regulated activity under CMA Series 2000. This includes:

• advising another person on the benefits and risks of his or her investment or dealing in any type of securities;
• advising on the exercise of any right relating to a security; and
• providing financial advice relating to investments, dealing in securities, corporate finance matters or mergers and acquisitions.

Consequently, we believe that institutions conducting robo-advice must be approved and licensed by the CMA and ar subject to the code of conduct set out in CMA Series 4000.

(i) Insurtech

No specific legislation governs insurtech in Lebanon. We believe that such activities may be subject to Decree 9812/1968 regulating Insurance Companies.

Any company, institution or organisation conducting insurance activities in Lebanon must obtain a licence from the minister of economy and trade.

Every Lebanese entity conducting insurance activities must be established as a joint stock company which satisfies the following conditions:

• Its object is restricted to the performance of insurance activities as detailed in Article 1 of Decree 9812/1968;
• It has a minimum capital of LBP 2.25 billion;
• It hires a general manager and assistant general manager with a good reputation, a university degree and at least 10 years’ experience of insurance work; and
• It hires an insurance actuary if it conducts life insurance activities and offers child and marital insurance plans, among other things.

Insurance entities are subject to the supervision of the Ministry of Economy and Trade and the Insurance Control Commission, which is the regulatory authority in charge of the insurance sector in Lebanon.