Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
19 September 2013 [shall
come into force on 1 January 2014];
8 October 2015 [shall come into force on 6 November
2015];
30 March 2017 [shall come into force on 26 April
2017];
26 October 2017 [shall come into force on 9 November
2017];
21 June 2018 [shall come into force on 18 July
2018];
25 October 2018 [shall come into force on 28 November
2018];
20 June 2019 [shall come into force on 16 July
2019];
23 September 2021 [shall come into force on 20 October
2021];
30 September 2021 [shall come into force on 2 November
2021];
28 April 2022 [shall come into force on 31 May
2022];
13 October 2022 [shall come into force on 3 November
2022].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
|
The Saeima1 has adopted and
the President has proclaimed the following law:
Law on
Alternative Investment Funds and Managers Thereof
Chapter I
General Provisions
Section 1. Terms Used in the Law
The following terms are used in the Law:
1) alternative investment fund (hereinafter also - the
fund) - an undertaking for collective investments which raises
capital from several investors in order to invest it for the
benefit of the abovementioned investors according to an
investment policy. The fund shall not constitute an investment
fund within the meaning of the law On Investment Management
Companies;
2) sub-fund - a separated compartment of the fund
property formed by investments made in return for investment
units, and also assets obtained in transactions involving this
property;
3) alternative investment fund manager (hereinafter
also - the manager) - a legal person the regular business of
which is the management of funds;
4) fund property - assets the aggregate of which forms
the fund;
5) branch - territorially or otherwise separated part
of the manager which does not hold the status of a legal person
and which provides services under a license issued by a
supervisory authority of a Member State;
6) carried interest - a profit share of the fund which
the manager has the right to receive as remuneration for the fund
management and which does not include the profit share of the
fund which the manager makes as a return on its investments into
the fund;
7) close links - a mutual link of two or more
persons:
a) in the form of a participation - direct holding, comprising
20 per cent and more of the voting rights or the equity capital
of a commercial company, or the control over the voting rights or
the equity capital of such amount;
b) by control;
c) if they are linked with the same person by control;
8) control - a condition where a person has control
over a commercial company if:
a) this person has a decisive influence in the commercial
company on the basis of holding;
b) this person has a decisive influence in the commercial
company on the basis of a group of companies agreement;
c) there is another relationship between this person and the
commercial company which is analogous to the relationship
referred to in Sub-clause "a" or "b" of this Clause;
9) place of founding - a place where:
a) the manager has its registered office;
b) the fund has its registered office unless it has been
registered in a supervisory authority of the fund, or the country
of supervisory authority of the fund;
c) the custodial bank has its registered office or address of
location of the branch;
d) the authorised legal person has its registered office or
address of location of the branch;
e) the authorised natural person has address of his or her
permanent place of residence;
10) Member State fund - a fund founded in a Member
State or a fund the registered office of which is in a Member
State;
11) Member State fund manager - the manager the
registered office of which is in a Member State;
12) investment unit - an investment certificate, a
share, a document confirming an investment of limited and general
partners or another document confirming holding of a fund
investor in the fund or sub-fund and the rights deriving from
this holding;
13) investment certificate - a security confirming an
investment which confirms holding of a fund investor in the fund
founded as the aggregate of assets in accordance with Section 30
of this Law;
14) fund value (hereinafter also - the net asset value
of the fund) - the difference between the value of assets and the
value of liabilities of the fund. The sub-fund value is the
difference between the value of assets and the value of
liabilities of the sub-fund;
15) master fund - the fund the investor of which is a
feeder fund;
16) feeder fund - the fund which conforms to at least
one of the following criteria:
a) at least 85 % of the fund assets are invested in investment
units of another fund;
b) at least 85 % of the fund assets are invested in investment
units of such master funds the investment strategies of which are
identical;
c) at least 85 % of the fund assets are at an investment risk
not referred to in Sub-clauses "a" and "b" of this Clause which
is related to the master fund;
17) holding company - a parent company which conducts
on a long-term basis commercial activities through subsidiaries
or associated commercial companies [within the meaning of
Commission Regulation (EC) No 1126/2008 of 3 November 2008
adopting certain international accounting standards in accordance
with Regulation (EC) No 1606/2002 of the European Parliament and
of the Council] or with holding in other commercial companies by
carrying out an activity for its benefit, and the capital
securities of which are admitted on a regulated market of a
Member State or which does not operate in the favour of investors
by selling assets of subsidiaries and associated commercial
companies, and clearly reflect such activity in the financial
report (annual);
18) home Member State of the fund - the Member State
where the fund has been founded or registered for the first time
(if it has been registered several times) or, if the fund has not
been founded in a Member State, then the Member State where the
registered office of the fund is located;
19) home Member State of the manager - the Member State
where the registered office of the manager is located but for a
third country manager - the relevant reference Member State which
is determined in accordance with the provisions of Section 75 of
this Law;
20) host Member State of the manager - the Member State
where the Member State manager manages a Member State fund and
markets investment units of a Member State or third country fund,
but this country is not the home Member State of the manager, or
the Member State where the Member State manager provides the
services referred to in Section 5, Paragraphs seven and eight of
this Law, but this country is not the home Member State of the
manager;
21) host Member State of a third country manager - the
Member State where the third country manager manages a Member
State fund and markets investment units of a Member State or
third country fund, but this country is not a reference Member
State of the third country manager which is determined in
accordance with the provisions of Section 75 of this Law;
22) issuer - a joint-stock company registered in a
Member State the shares of which or transferable securities
equivalent thereto that ensure holding in the equity capital of
the joint-stock company are admitted on a regulated market;
23) legal representative - a natural person the
permanent place of residence of which is in a Member State, or a
legal person the registered office of which is in a Member State
that has been authorised by a third country manager to represent
its interests in the relationships with public bodies, clients,
organisations, and counterparties of the third country manager in
Member States;
24) leverage - any transaction as a result of which the
manger increases the exposure of the fund managed by it by
borrowing cash or securities or executing transactions in
derivative financial instruments or otherwise;
25) marketing - initial placement of investment units
performed by the manager itself or on behalf of the manager or
offering thereof to investors the registered office or permanent
place of residence of which is in a Member State;
26) third country fund - a fund which is not a Member
State fund;
27) company not admitted on a regular market - a
capital company registered in a Member State the shares (stocks)
of which or transferable securities equivalent thereto that
ensure holding in the equity capital of the capital company are
not admitted on a regulated market;
28) parent undertaking - a commercial company
controlling another commercial company;
29) prime broker - a credit institution or an
investment firm that has been licensed in a Member State and has
the right to provide one or several investment services and
non-core investment services to professional investors, including
to finance or execute transactions in financial instruments as a
counterparty, and also to operate accounts and to deliver and
hold financial instruments, to issue financial instrument loans,
and to ensure a customised information system;
30) professional investor - an investor the status of
which conforms to the status of a professional client or who is
granted such status, upon request, by the manager or an
investment service provider in accordance with the procedures
laid down in the Financial Instrument Market Law;
31) qualifying holding - a holding acquired directly or
indirectly by a person or several persons acting in concerted
action under an agreement which comprises 10 per cent and more of
the equity capital or the number of shares with voting rights of
a commercial company or which makes it possible to exercise a
significant influence over the financial and operational policy
of the commercial company;
32) employees' representatives - persons who have the
right to represent employees in accordance with norms of the
Labour Law;
33) subsidiary - a commercial company which is
controlled by another commercial company;
34) Group of Ten - countries that have agreed to
participate in the General Arrangements to Borrow with the
International Monetary Fund;
35) free capital - value of assets belonging to a
person which is reduced by the value of liabilities of such
person and by the value of those assets which are regarded as
long-term investments;
36) Member State - a European Union or European
Economic Area country;
37) third country - a country which is not a Member
State;
38) officials of the manager - members of the executive
board of the manager and persons who are authorised to manage a
fund, to issue orders in respect of the fund property, or to
dispose of it on behalf of the manager;
39) stakeholders of the manager - members of the
executive board and supervisory board, officials, shareholders of
the manager who own 10 and more per cent of the manager's shares
with voting rights, and also spouses, parents, and children of
all natural persons referred to in this Clause;
40) investment fund - a fund registered in accordance
with the law On Investment Management Companies;
41) stress testing - an analysis conducted by the
manager in order to determine and evaluate the potential impact
of different extraordinary, likely unfavourable events or changes
in market conditions on the investment portfolio or liquidity of
the fund;
42) Financial Action Task Force - an international
authority which determines the international standard for the
fight against money laundering, terrorism financing,
proliferation of weapons of mass destruction, and other threats
to integrity of the international financial system, and also
promotes efficient implementation of legal, regulatory, and
operational measures;
43) money market fund - an alternative investment fund
to which the requirements laid down by Regulation (EU) 2017/1131
of the European Parliament and of the Council of 14 June 2017 on
money market funds (Text with EEA relevance) (hereinafter -
Regulation 2017/1131) shall be applicable;
44) pre-marketing - provision of information or
communication, direct or indirect, on potential investment
strategies or investment objects by a manager licensed in Latvia
or a Member State or on its behalf, to potential professional
investors the permanent place of residence or registered office
of which is in a Member State in order to test the interest of
the potential professional investors in a fund or a sub-fund
which is not yet established, or which is established, but not
yet notified for marketing of investment units in accordance with
Sections 66, 67, and 68 of this Law, in that Member State where
the permanent place of residence of potential investors or their
registered office is located, and therefore the investment units
of the fund or sub-fund are not traded or an offer is not made to
the potential professional investors to invest in the investment
units of the fund or sub-fund.
[8 October 2015; 25 October 2018; 30 September
2021]
Section 2. Purpose of the Law
The purpose of this Law is to promote stability and
development of the financial system by preventing the potentially
detrimental effect of risks associated with activities of an
alternative investment fund manager on the financial system, and
also to ensure efficient cooperation between supervisory
authorities in the supervision and mitigation of such risks.
Section 3. Scope of Application of
this Law
(1) In order to achieve the purpose of this Law referred to in
Section 2, the Law shall prescribe the following:
1) the legal status of alternative investment fund managers,
the activities, disclosure requirements, responsibility, and
supervision thereof;
2) the procedures for registering and licensing the managers
in Latvia;
3) the procedures by which the manager from another Member
State or third country provides management services in
Latvia;
4) the activities of funds and the procedures for registering
funds and marketing investment units of funds, and also the
range, rights, obligations, and responsibility of the persons to
which requirements of this Law are applicable.
(2) The Law shall also govern activities of such manager which
founds and manages the following:
1) a European venture capital fund, insofar as the rules of
operation thereof are not governed by Regulation (EU) No 345/2013
of the European Parliament and of the Council of 17 April 2013 on
European venture capital funds (Text with EEA relevance)
(hereinafter - Regulation No 345/2013);
2) a European social entrepreneurship fund, insofar as the
rules of operation thereof are not governed by Regulation (EU) No
346/2013 of the European Parliament and of the Council of 17
April 2013 on European social entrepreneurship funds (Text with
EEA relevance) (hereinafter - Regulation No 346/2013);
3) a European long-term investment fund, insofar as the rules
of operation thereof are not governed by Regulation (EU) No
2015/760 of the European Parliament and of the Council of 29
April 2015 on European long-term investment funds (Text with EEA
relevance) (hereinafter - Regulation No 2015/760);
4) a money market fund, insofar as the rules of operation
thereof are not governed by Regulation 2017/1131.
(3) The Law shall also prescribe the procedures by which an
investment firm or credit institution may perform initial
marketing of fund investment units or market fund investment
units in Latvia.
(4) Activities of such fund which has been founded as a
limited partnership or joint stock company shall be governed by
this Law and the Commercial Law, unless it is laid down otherwise
in this Law.
[8 October 2015; 25 October 2018]
Section 4. Exceptions to the
Application of the Law
This Law shall not be applied to:
1) holding companies;
2) private pension funds;
3) the European Central Bank, the European Investment Bank,
the European Investment Fund, the European Development Finance
Institutions and bilateral development banks, the World Bank, the
International Monetary Fund, and similar international
organisations which manage funds in the public interest;
4) central banks of the Member States;
5) managers of funds of the State funded pension scheme;
6) schemes for accumulation of funds created by an employer
for the benefit of employees;
7) securitisation entities created for special purpose the
only activities of which are securitisation in accordance with
Article 1(2) of Regulation (EC) No 24/2009 of the European
Central Bank of 19 December 2008 concerning statistics on the
assets and liabilities of financial vehicle corporations engaged
in securitisation transactions;
8) the manager which manages one or several funds the only
investors of which are the manager itself or a parent company or
subsidiary thereof, or subsidiaries of another parent company of
the manager, provided that none of such investors is the fund
itself.
Chapter
II
Activities, Registration, and Licensing of the Manager
Section 5. Activities of the
Manager
(1) The primary activity of the manager shall be the fund
management which includes the following services:
1) managing the fund investments;
2) managing the risk.
(2) The manager may also provide the following non-core
services:
1) administrative management of the fund which includes the
following activities:
a) arrangement of legal affairs and accounting of the
fund;
b) provision of information upon request of the fund
investors;
c) determination of the fund value and the price of investment
unit;
d) supervision of conformity with the requirements governing
activities of the fund;
e) fund income distribution;
f) issue and repurchase of investment units;
g) performance of the settlements arising from contracts;
h) maintenance of accounting of transactions related to the
fund resources;
i) maintenance of the register of holders of the fund
investment units;
2) marketing of investment units;
3) required activities related to the management of fund
assets which include management of the infrastructure, management
of immovable property, advice to commercial companies on capital
structure, sectoral strategy, and similar issues, advice and
services in respect of the mergers and purchase of commercial
companies, and also other activities related to the management of
such funds, companies, and other assets in which the manager has
made investments.
(3) The fund may be managed by an external or internal
manager.
(4) An external manager may manage the fund founded thereby as
the aggregate of assets or the fund which has been founded as a
commercial company and in relation to which this external manager
has been appointed as the manager by this fund or by a person
authorised on behalf of the fund.
(5) An internal manager is the fund itself which has been
founded as a joint-stock company and carries out the obligations
of the manager. The internal manager may not provide the services
referred to in Paragraphs one and two of this Section to another
fund.
(6) The manager may not provide solely non-core services and
the services referred to in Paragraphs seven and eight of this
Section if it does not carry out the principal activity of the
manager. A fund investment management service may not be
provided, unless a risk management service is provided, but the
risk management service may not be provided, unless the fund
investment management service is provided. The manager is not
entitled to provide services not referred to in this Law.
(7) A licensed external manager may carry out individual
management of the financial instrument portfolio of an investor
according to the authorisation of the investor if such portfolio
consists of one or several financial instruments referred to in
Section 3, Paragraph two of the Financial Instrument Market
Law.
(8) If a licensed external manager is authorised to provide
the service referred to in Paragraph seven of this Section, it
may provide advice on investments in the financial instruments
referred to in Section 3, Paragraph two of the Financial
Instrument Market Law, hold and administer investment units of
funds and investment certificates of investment funds, and also
make and transmit orders of investors for execution in respect of
transactions in financial instruments.
(9) A licensed external manager may not provide solely the
services referred to in Paragraph eight of this Section if it is
not authorised to provide the services referred to in Paragraph
seven of this Section in accordance with this Law.
(10) A licensed external manager that is authorised to provide
the services referred to in Paragraph seven of this Section may
manage assets of the pension schemes created by private pension
funds in accordance with the Private Pension Fund Law.
(11) A licensed external manager may register and distribute a
pan-European Personal Pension Product in accordance with
Regulation (EU) 2019/1238 of the European Parliament and of the
Council of 20 June 2019 on a pan-European Personal Pension
Product (PEPP) and Chapter III.1 of the Private
Pension Fund Law.
[8 October 2015; 30 September 2021; 28 April 2022; 13
October 2022 / See Paragraph 22 of Transitional
Provisions]
Section 6. Firm Name and
Commencement of Activities of the Manager
(1) The manager shall be founded as a capital company in
Latvia. The manager shall constitute a financial institution
acting in accordance with this Law, the directly applicable legal
acts of the European Union, the Commercial Law, other laws and
regulations, and articles of association.
(2) An internal manager shall only be registered with the
Commercial Register after a decision by Latvijas Banka to issue a
licence for the activities of an alternative investment fund
manager or a decision to register the manger has been submitted
to the Commercial Register Office.
(3) The firm name of the manager shall contain the phrase
"alternative investment fund manager" or the abbreviation thereof
"AIFM".
(4) A commercial company which does not carry out the regular
business provided for in this Law may not include in its firm
name any additions which are directly or indirectly indicative of
the manager.
(5) In addition to the legal acts referred to in Paragraph one
of this Section, the manager that founds and manages a European
venture capital fund shall comply with Regulation No 345/2013,
the manager that founds and manages a European social
entrepreneurship fund shall comply with Regulation No 346/2013,
the manager that founds and manages a European long-term
investment fund - Regulation No 2015/760 but the manager that
founds and manages a money market fund - Regulation No
2017/1131.
(6) The manager may commence its activities after Latvijas
Banka has, in accordance with the procedures laid down in this
Law, registered it or issued a licence for the activities of an
alternative investment fund manager. A Member State manager or a
third country manager shall commence its activities in Latvia in
accordance with the procedures laid down in Chapters IX and XI of
this Law.
(7) The licence shall specify the permitted investment
strategies and those services and non-core services which the
manager is entitled to provide in accordance with Section 5 of
this Law.
(8) Latvijas Banka shall issue the licence without a time
limit.
[8 October 2015; 25 October 2018; 23 September 2021 /
The new wording of Paragraph two and amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 7. General Provisions for
the Registration of the Manager
(1) The manager is entitled to commence its activities in
Latvia after registration with Latvijas Banka if the manager
itself, or jointly through a commercial company with which it has
close links or in which it has a qualifying holding, manages
funds assets that do not reach EUR 500 million in total, provided
that operational rules of any fund do not provide for the use of
leverage and the repurchase of investment units for a period of
five years from the day when the first investment is made in the
fund.
(2) The procedures for calculating funds assets under
management shall be determined by Commission Delegated Regulation
(EU) No 231/2013 of 19 December 2012 supplementing Directive
2011/61/EU of the European Parliament and of the Council with
regard to exemptions, general operating conditions, depositaries,
leverage, transparency and supervision (hereinafter - Regulation
No 231/2013).
[20 June 2019; 23 September 2021; 13 October 2022 /
Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Section 8. Documents to be Submitted
for the Registration of the Manager
(1) The manager shall include in a submission for registration
to Latvijas Banka the information on its firm name, registered
office, registration number, and place of registration, and also
append the following information and documents:
1) the manager's contact details, articles of association, or
another document of incorporation;
2) the document referred to in Section 10, Paragraph two,
Clause 1 of this Law;
3) the information on the number of funds intended to be
managed, the names thereof, and the total value of assets
intended to be managed;
4) the information specified in Article 5 of Regulation No
231/2013.
(2) Latvijas Banka shall take the decision to register or to
refuse to register the manager within a month after receipt of
all the documents specified in this Law which are necessary for
taking the decision.
(3) Latvijas Banka has the right to request additional
information or explanations if it is necessary to clarify the
information referred to in Paragraph one of this Section.
(4) Latvijas Banka shall take the decision to refuse to
register the manager if:
1) this Law or other laws or regulations have not been
complied with upon founding the manager;
2) the initial capital of the manager does not conform to the
requirements of this Law;
3) the manager has failed to submit the information and
documents specified in Paragraph one of this Section.
(5) Prior to taking the decision on registration, the manager
shall immediately inform Latvijas Banka of any changes in the
information and documents specified in Paragraph one of this
Section if such changes have been made.
(6) Latvijas Banka shall publish a list of registered managers
on its website.
[20 June 2019; 23 September 2021 / Amendment
regarding the replacement of the word "Commission" with the words
"Latvijas Banka" shall come into force on 1 January 2023 and
amendment to Paragraph six regarding the replacement of the words
"internet website" with the word "website" shall come into force
on 1 January 2024 and shall be included in the wording of the Law
as of 1 January 2024. See Paragraphs 19 and 23 of
Transitional Provisions]
Section 9. Operational Rules of a
Registered Manager
(1) A registered manager may market investment units to
professional investors, and also provide fund management services
and non-core services.
(2) Investment units of the fund under management of a
registered manager may also be marketed to an investor that is
not a professional investor if this investor provides the
confirmation referred to in Section 41, Paragraph eight of this
Law, and the minimum amount of the investor's purchase of
investment units in the relevant fund is EUR 20 000 or more.
(3) If activities and amount of assets of funds under
management of the manager reach or exceed the criterion referred
to in Section 7, Paragraph one of this Law, the manager shall act
in accordance with Article 4 of Regulation No 231/2013.
(4) If activities and amount of assets of funds under
management of the manager conform to the criterion referred to in
Section 7, Paragraph one of this Law, the manager has the right
not to submit to Latvijas Banka a submission for registration of
the manager if it submits the submission in order to obtain a
licence for the activities of an alternative investment fund
manager in accordance with the requirements of this Law and
Regulation No 231/2013.
(5) The provisions of Section 16, Paragraph fourteen, Sections
21 and 29, Chapter IV (except for Section 30, Paragraph six,
Section 33, Section 37, Paragraph four, Section 38, Paragraph
one, Clause 3, Paragraphs two, three, four, eight, nine, and ten,
Section 39, Paragraphs four, five, six, seven, eight, nine, and
ten, Section 40, Paragraph two, Clause 4, Paragraphs four, five,
and nineteen), Chapter V (except for Section 46, Paragraphs four
and twelve), Chapter VII (except for Section 60.1),
Sections 81 and 82, and Section 90, Paragraphs 1.1,
two, five, eight, and ten of this Law shall be binding on a
registered manager. For withdrawal of registration, the
provisions of Section 20, Paragraph one, Clauses 1, 3, 5, 6, 7,
8, and 9 and Paragraph two of this Law shall be applied to a
registered manager.
(6) [20 June 2019]
(7) [20 June 2019]
(8) [20 June 2019]
(9) [20 June 2019]
(10) [20 June 2019]
(11) [20 June 2019]
[8 October 2015; 25 October 2018; 20 June 2019; 28
April 2022; 23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 10. Documents and
Information to be Submitted for Obtaining a Licence
(1) In order to obtain a licence, the manager shall submit to
Latvijas Banka a submission for obtaining a licence appending
other documents referred to in this Section thereto. An external
manager shall also include in the submission the information on
its firm name, registered office, registration number, and place
of registration.
(2) The following documents shall be submitted to Latvijas
Banka in respect of the manager and the shareholders (members)
thereof:
1) a document confirming payment of the initial capital;
2) a list of the shareholders (members) of the manager and the
following information on the shareholders (members):
a) on natural persons - personal identification data [given
name, surname (in the Latvian language and in the original
language), year and date of birth, personal identity number (if
any)], place of issue of a personal identification document,
document number, expiry date);
b) on legal persons - firm name, registered office,
registration number and place. Legal persons registered abroad
shall also submit notarised copies of registration documents;
c) documents confirming that the shareholders (members) of the
manager which have a qualifying holding in the manager have
sufficient financial resources (indicating the origin of the
financial resources) to make investments in the manager's
capital;
d) information on the owners of the manager's shareholders
(member) - legal persons - (until the natural person on whom
information shall be provided in accordance with Sub-clause "a"
of this Clause) if the shareholders (members) have a qualifying
holding in the manager.
(3) The following documents and information shall be submitted
to Latvijas Banka in respect of officials of the manager:
1) a notification filled in by each official. The notification
shall specify the following information:
a) the firm name of the manager and the office the official
stands for;
b) the given name, surname (in the Latvian language and in the
original language), year and date of birth, personal identity
number (if any), and citizenship;
c) the education (academic degree);
d) skill development;
e) criminal record;
f) whether the right to perform commercial activities has been
withdrawn;
g) the previous places of employment over the last 10 years
and a short description of the work duties;
2) copies of documents confirming education.
(4) The authenticity of information provided in the
notification referred to in Paragraph three, Clause 1 of this
Section shall be confirmed by a signature of the person in
respect of whom the notification has been drawn up, and also the
chairperson of the executive board of the manager.
(5) A list of stakeholders of the manager shall be submitted
to Latvijas Banka. The list shall include the given name and
surname of each person, personal identity number (if any),
education, offices held by him or her over the last five years
and terms and conditions of contracts concluded between the
manager and the relevant person applicable to the job
description. A legal person shall indicate the firm name,
registration number and place, members of the management bodies
thereof, and also submit to Latvijas Banka the annual statement
for the last year.
(6) The following documents shall be submitted to Latvijas
Banka in respect of operational organisation of the manager:
1) a description of the organisational structure with clearly
stated obligations and powers of officials, and also precisely
determined and allocated tasks of the manager's parts and
obligations of the heads of the parts. If the manager intends to
create branches, a description of the organisational structure of
branches and the obligations of branch managers shall also be
submitted to Latvijas Banka;
2) a description of the management information system;
3) the key principles of accounting policy and organisation of
accounting records;
4) the risk management policy;
5) the rules for the protection of the information system,
including the rules for the protection of the register of fund
investment units and the database for the accounting of other
financial instruments under management of the manager;
6) a description of the procedures concerning identification
of unusual and suspicious financial transactions;
7) the remuneration policy and a description of application
thereof;
8) the procedure for the delegation and further delegation of
functions;
9) the procedure for the prevention of conflicts of
interest;
10) a description of the liquidity risk management;
11) a description of the procedure concerning examination of
submissions and complaints (disputes) of investors.
(7) The operational plan developed for at least the following
three years of operation and approved by the manager's meeting of
shareholders (members) shall be submitted to Latvijas Banka on
the planned operation of the manager, reflecting in detail the
operational strategy of the manager, the financial forecasts
including a draft report which reflects the financial standing as
at the end of at least the following three years of operation, a
draft financial performance report for at least the following
three years of operation, a draft own funds calculation, and the
recorded amount of fixed overheads, a description of market
research, and also any other information which provides a clear
and fair presentation of the operations planned by the
manager.
(8) The following documents and information shall be submitted
to Latvijas Banka in respect of each fund which the manager
wishes to manage:
1) information on the investment strategy and the types of the
funds in which the fund makes or has intended to make investments
if the fund is a fund of funds;
2) if it is intended to use the leverage - the policy of the
manager for the use of the leverage, including information on the
circumstances under which the fund may use the leverage, the
permitted types and sources of the leverage transactions, the
risks associated with the leverage, the restrictions on the use
of the leverage and the conditions for a collateral and re-use of
the fund assets, the maximum amount of the leverage which the
manager is entitled to use on behalf of the fund, and also the
grounds for the selection of such amount and a description of the
procedure concerning compliance with the restrictions
specified;
3) information on a risk profile and other characteristics of
activities of the fund, including information on Member States or
third countries in which the fund operates or intends to
operate;
4) information on the master fund if the fund is a feeder
fund;
5) a document of incorporation of each fund;
6) information on the custodial bank and custodial bank
agreement;
7) a fund management contract between the fund and the
manager;
8) the information referred to in Section 58, Paragraphs one
and two of this Law;
9) a key information document developed in accordance with the
requirements laid down in Chapter II, Section II of Regulation
(EU) No 1286/2014 of the European Parliament and of the Council
of 26 November 2014 on key information documents for packaged
retail and insurance-based investment products (PRIIPs) (Text
with EEA relevance) (hereinafter - Regulation No 1286/2014) if
fund investment units are to be marketed to investors that are
not professional investors.
(81) The manager shall submit to Latvijas Banka a
document describing and explaining how the investment strategy of
the manager includes exercising of the rights of a shareholder in
the management of this joint-stock company (hereinafter - the
engagement policy) if the investment policy of the fund provides
for investing resources of the fund in the shares of such
joint-stock company the registered office of which is in a Member
State and the shares of which are admitted on a regulated market
of a Member State.
(82) If the manager is planning to provide the
services referred to in Section 5, Paragraphs seven and eight of
this Law, it shall submit documents to Latvijas Banka in
accordance with the requirements of Section 103 of the Financial
Instrument Market Law.
(9) If a submission for obtaining a licence for the activities
of an alternative investment fund manager is submitted by an
investment management company which has already been licensed in
Latvijas Banka, it shall only submit the information and data
which are not at the disposal of Latvijas Banka.
(10) If, prior to taking the decision to issue a licence, any
changes are made to the information or amendments are made to the
documents submitted to Latvijas Banka, the manager has an
obligation to immediately submit to Latvijas Banka the new
information or the full text of the relevant documents including
amendments made thereto.
(11) After obtaining a licence, the manager has an obligation
to immediately inform Latvijas Banka in writing of any amendments
and additions to the documents and information submitted.
Amendments shall enter into effect if Latvijas Banka has not
expressed any reasoned objections within a month from the day of
receipt of the submission and the documents appended thereto. If
examination of the documents requires an additional examination
or additional information is necessary, Latvijas Banka has the
right to extend the period for examination of the submission by
one month, notifying the manager thereof in writing.
(12) Latvijas Banka shall consult the supervisory authority of
the relevant Member State before issuing a licence to such
manager:
1) which is a subsidiary of a credit institution, an insurance
company, an investment firm, an investment management company, or
an alternative investment fund manager registered in the relevant
Member State;
2) which is a subsidiary of such parent company that has
another subsidiary which is a credit institution, an insurance
company, an investment firm, an investment management company, or
an alternative investment fund manager registered in the relevant
Member State;
3) which is controlled by such natural or legal person who
also controls another credit institution, insurance company,
investment firm, investment management company, or alternative
investment fund manager registered in the relevant Member
State.
(13) Prior to issuing a licence, and also during the course of
supervision of a licensed manager, Latvijas Banka shall request
and assess information from the supervisory authority of the
relevant Member State on the suitability of the shareholders
(members) of the manager and the reputation and experience of
those officials of the manager who are involved in the management
of other commercial companies of the group thereof in which the
manager will be included.
[8 October 2015; 30 March 2017; 20 June 2019; 28 April
2022; 23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 11. Requirements for the
Shareholders (Members) of the Manager
(1) A shareholder (member) of the manager may only be a
person:
1) whose identity can be verified;
2) who has an impeccable reputation;
3) whose financial standing is sound, and it can be
documentarily proved.
(2) Upon assessing the reputation and the financial standing
of a person, Latvijas Banka shall verify the identity and
criminal record of the persons referred to in Paragraph one of
this Section, and the documents on their financial standing which
allow to ascertain free capital adequacy in the amount of
investments made in the capital of the manager, and also that the
invested resources have not been obtained as a result of unusual
or suspicious transactions. The free capital adequacy shall not
be taken into account if the person is a credit institution or an
insurance company.
(3) A natural person and shareholders (members) and owners
(actual beneficiaries) of a legal person to whom the restrictions
specified in Section 15, Paragraph three, Clause 1, 2, or 4 of
this Law may apply may not be the shareholders (members) of the
manager.
(4) Latvijas Banka has the right to verify the identity of
shareholders (members) of the manager but, where the shareholders
(members) of the manager are legal persons, information on their
shareholders (members) and owners (actual beneficiaries) until
information is obtained on the owners (actual beneficiaries) who
are natural persons. The abovementioned persons have an
obligation to provide such information to Latvijas Banka if it is
not available on the public registers from which Latvijas Banka
is entitled to receive such information.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 12. Acquisition, Reduction,
and Termination of a Qualifying Holding in the Manager
(1) A person who conforms to the requirements specified for
the shareholders (members) of the manager, and also ensures the
fulfilment of the criteria laid down in Paragraph seven of this
Section may acquire a qualifying holding in the manager.
(2) A person who wishes to acquire a qualifying holding in the
manager shall notify Latvijas Banka thereof in writing in
advance. The notification shall indicate the amount of the
holding to be acquired as a percentage of the manager's equity
capital or the number of shares with voting rights. The
information provided for in regulations of Latvijas Banka which
is necessary to evaluate the conformity of the person with the
criteria referred to in Paragraph seven of this Section shall be
appended to the notification. A list of the information to be
appended to the notification shall be published on the website
created by Latvijas Banka.
(3) Latvijas Banka has the right to request information on the
persons who apply for a qualifying holding (the persons having
acquired a qualifying holding or suspected of acquiring a
qualifying holding), including owners (actual beneficiaries) of
legal (registered) persons who are natural persons in order to
evaluate the conformity of such persons with the criteria
referred to in Paragraph seven of this Section.
(4) If a person wishes to increase the qualifying holding in
the manager, thereby reaching or exceeding 20, 33, or 50 per cent
of the manager's equity capital or the number of shares with
voting rights, or if the manager becomes a subsidiary of such
person, the relevant person shall notify Latvijas Banka thereof
in writing in advance. The notification shall indicate the amount
of the holding to be acquired as a percentage of the manager's
equity capital or the number of shares with voting rights. The
information provided for in regulations of Latvijas Banka which
is necessary to evaluate the conformity of the person with the
criteria referred to in Paragraph seven of this Section shall be
appended to the notification. A list of the information to be
appended to the notification shall be published on the website
created by Latvijas Banka.
(5) Within two working days after the day of receipt of the
notification referred to in Paragraph two or four of this Section
or within two working days after receiving the additional
information requested by Latvijas Banka, Latvijas Banka shall
notify the person in writing of receipt of the notification or of
additional information and of the final date of the assessment
period.
(6) During the assessment period specified in Paragraph seven
of this Section, but not later than on the fiftieth working day
of the assessment period, Latvijas Banka has the right to request
additional information on the persons referred to in this Section
in order to evaluate the conformity thereof with the criteria
referred to in Paragraph seven of this Section.
(7) Not later than within 60 working days from the day when
the information referred to in Paragraph five of this Section on
receipt of the notification has been sent to the person, Latvijas
Banka shall evaluate the free capital adequacy of the person,
soundness and financial feasibility of the planned acquisition of
a holding in order to ensure sound and prudent management of the
manager in which the holding is planned to be acquired and
consider the possible influence of such person on the management
and activities of the manager, and also the following
criteria:
1) whether the person conforms to the requirements laid down
for the shareholders (members) of the manager and whether he or
she has an impeccable reputation;
2) whether the person who, as a result of acquiring the
planned holding, will manage activities of the manager has an
impeccable reputation and experience;
3) whether the financial standing of the person is sound, in
particular in relation to the type of economic activity pursued
or intended in the manager in which it is planned to acquire the
holding;
4) whether the manager will be able to ensure and comply with
the regulatory requirements laid down in this Law and in other
laws and regulations and whether the structure of such group of
commercial companies where this manager is going to be
incorporated does not restrict the possibilities of Latvijas
Banka to exercise the supervisory functions vested to it by law,
to ensure an efficient exchange of information among the
supervisory authorities of the manager, and to determine the
allocation of supervisory powers among the supervisory
authorities of the manager;
5) whether there are no reasonable doubts that in relation to
the planned acquisition of the holding, actual or attempted
laundering of the proceeds from crime or terrorist financing has
been carried out, or that the planned acquisition of the holding
could increase such a risk.
(8) When requesting additional information referred to in
Paragraph six of this Section, Latvijas Banka has the right to
interrupt the assessment period once until the day when such
information is received, but not more than for 20 working days.
Latvijas Banka has the right to extend the abovementioned
interruption of the assessment period for up to 30 working days,
if a person who wishes to acquire, has acquired, wishes to
increase, or has increased a qualifying holding in the manager is
not subject to the supervision of the activities of insurance
companies, reinsurance companies, credit institutions, investment
management companies, managers, or investment firms or if the
place of registration of such person is not in a Member State. If
Latvijas Banka has interrupted the assessment period of 60
working days, the period of interruption shall not be included in
the assessment period.
(9) Within the time period referred to in Paragraph seven of
this Section, Latvijas Banka shall take the decision to prohibit
the person from acquiring or increasing a qualifying holding in
the manager if:
1) the person does not conform to the criteria referred to in
Paragraph seven of this Section;
2) the person does not submit or refuses to submit to Latvijas
Banka the information specified in this Law or the additional
information requested by Latvijas Banka;
3) due to circumstances beyond the control of the person, he
or she is unable to provide the information specified in this Law
or the additional information requested by Latvijas Banka.
(10) Within two working days from taking the decision referred
to in Paragraph nine of this Section, but taking into account the
assessment period referred to in Paragraph seven of this Section,
Latvijas Banka shall send the abovementioned decision to the
person who has been prohibited from acquiring or increasing a
qualifying holding in the manager. If Latvijas Banka fails,
within the time period referred to in Paragraph seven of this
Section, to send to the person a reasoned decision by which it
prohibits this person from acquiring or increasing a qualifying
holding in the manager, it shall be considered that Latvijas
Banka agrees that this person acquires or increases a qualifying
holding in the manager.
(11) The criterion referred to in Paragraph seven, Clause 3 of
this Section shall not be applicable to a legal person if the
shares thereof are admitted on a regulated market in Latvia or in
another Member State, or on a regulated market the operator of
which is a lawful member of the World Federation of Exchanges,
and this legal person provides the information to Latvijas Banka
on its shareholders who have a qualifying holding therein.
(12) If Latvijas Banka has agreed that a person acquires or
increases a qualifying holding in the manager, this person shall
acquire or increase its qualifying holding in the manager not
later than within six months after the date of sending the
written confirmation referred to in Paragraph five of this
Section on receipt of the notification or of the additional
information. If, until expiry of the relevant time period, the
person has failed to acquire or increase a qualifying holding in
the manager, the consent of Latvijas Banka for acquiring or
increasing a qualifying holding in the manager is no longer
effective. Upon receipt of a reasoned request of the person in
writing, Latvijas Banka may decide to extend the abovementioned
time period.
(13) Upon evaluating the notifications referred to in
Paragraphs two and four of this Section, Latvijas Banka shall
consult the supervisory authorities of the relevant Member State,
if a qualifying holding is acquired by an insurer, a reinsurer of
a Member State, a credit institution, an investment management
company, an alternative investment fund manager, an investment
firm registered in a Member State, or a parent company of an
insurer of a Member State, of a reinsurer of a Member State, of a
credit institution, an investment management company, an
alternative investment fund manager, or an investment firm
registered in a Member State, or a person controlling an insurer
of a Member State, a reinsurer of a Member State, a credit
institution, an investment management company, an alternative
investment fund manager, or an investment firm registered in a
Member State and if, as a result of acquiring or increasing the
qualifying holding by the relevant person, the manager becomes a
subsidiary of such person or comes under the control thereof.
(14) Upon evaluating the soundness of financial standing of a
person, the requirements for free capital adequacy shall not be
applicable to credit institutions and insurance companies.
(15) If an influence of a person who has acquired the
qualifying holding over the manager jeopardises or may jeopardise
the financially sound, prudent management of the manager which
complies with the laws and regulations, Latvijas Banka has the
right to request immediate termination of such influence, change
of the composition of the supervisory board or officials of the
manager, or to prohibit the relevant person from exercising all
or part of his or her voting rights.
(16) A person who wishes to terminate the control (decisive
influence) of the parent company over the manager licensed by
Latvijas Banka, to reduce the amount of a qualifying holding in
the manager to less than 20, 33, or 50 per cent, or to terminate
a qualifying holding in the manager, shall notify Latvijas Banka
thereof in writing prior to alienation of the shares (stocks).
The notification shall indicate the amount of the holding which
the person will have in the manager after reduction of the
holding.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" and amendment regarding the replacement of the words
"regulatory provisions" with the word "regulations" shall come
into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 13. Holding Acquired
Indirectly
Upon determining the amount of a holding that a person has
acquired indirectly in the manager, the following voting rights
acquired by the relevant person (hereinafter in this Section -
the particular person) in the manager shall be taken into
account:
1) the voting rights which may be exercised by a third party
with whom the particular person has entered into an agreement,
imposing an obligation on the third party to coordinate the
policy of exercising the voting rights and long-term action in
respect of the manager's management;
2) the voting rights which may be exercised by a third party
according to an agreement that has been entered into with the
particular person and provides for temporary transfer of the
voting rights;
3) the voting rights which arise from the shares (stocks) that
the particular person has received as collateral, if he or she
may exercise the voting rights and has expressed his or her
intention to exercise them;
4) the voting rights which the particular person is entitled
to exercise for an indefinite period of time;
5) the voting rights which may be exercised by a commercial
company controlled by the particular person or which may be
exercised by such commercial company in accordance with the
provisions of Clauses 1, 2, 3, and 4 of this Section;
6) the voting rights which arise from the shares (stocks)
transferred to and held by the particular person and which this
person may exercise at his or her discretion unless that person
has received special instructions;
7) the voting rights which arise from the shares (stocks) held
on behalf of a third party and for the benefit of the particular
person;
8) the voting rights which the particular person may exercise
as a proxy holder when he or she is entitled to exercise the
voting rights at his or her discretion, unless that person has
received special instructions;
9) the voting rights which arise from the shares (stocks) that
the particular person has acquired in any other indirect way.
Section 14. Consequences of Failure
to Give Notice
(1) If a person that is suspected of having acquired a
qualifying holding in the manager fails or refuses to provide the
information referred to in Section 12, Paragraph three of this
Law and his or her holding in total amounts to 10 per cent and
more of the manager's equity capital or number of shares with
voting rights, that person may not exercise the voting rights
attached to all shares which he or she owns. Latvijas Banka shall
immediately notify the respective shareholders (members) and the
manager of this fact.
(2) If a person, in disregard of a prohibition by Latvijas
Banka, acquires or increases a qualifying holding, such person
has no right to exercise all the voting rights of the shares
(stocks) owned thereby, and the decisions of the meeting of
shareholders (members) taken by using the voting rights of these
shares (stocks) shall be null and void from the moment of taking
thereof, and no records in the commercial register and any other
public registers may be requested to be made on the basis of such
decisions.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 15. Requirements for the
Officials of the Manager
(1) A person who conforms to the following requirements may be
an official of the manager:
1) he or she has sufficient competence in the field for which
the person will be responsible;
2) he or she has higher education and corresponding
professional experience of not less than three years;
3) he or she has an impeccable reputation;
4) he or she has not been deprived of the right to perform
commercial activities.
(2) A person who is competent in financial management matters
and conforms to the requirements laid down in Paragraph one,
Clauses 3 and 4 of this Section may be a member of the
supervisory board of the manager.
(3) A person may not be an official in the following
cases:
1) he or she has been punished for committing an intentional
criminal offence (regardless of whether or not the conviction has
been extinguished or set aside);
2) he or she has been held criminally liable for committing an
intentional criminal offence, also where a criminal case against
the person has been terminated for reasons other than
exoneration;
3) he or she has provided false information on himself or
herself by submitting documents to Latvijas Banka in order to
obtain a licence for the activities of the manager or another
activity in the financial market;
4) he or she has carried out obligations of a member of the
executive board or supervisory board in the manager or another
financial institution for which insolvency proceedings of a legal
person have been declared at the time when the relevant person
was carrying out the respective obligations, or he or she has
carried out the obligations of a member of the executive board or
supervisory board in another commercial company and, due to
negligence or deliberately, has led this commercial company to
insolvency.
(4) The manager shall ensure that at least two officials have
competence in the implementation of the investment strategy
selected by a fund under the management thereof. These officials
may manage several funds which are solely under the management of
one manager.
(5) The manager shall ensure that the minimum number of the
executive board members of the manager is three.
(6) The management body of the manager has an obligation, upon
its own initiative or upon request of Latvijas Banka, to
immediately remove any officials of the manager from their
positions if they do not conform to the requirements of this
Law.
(7) Upon assessing the reputation of officials and members of
the supervisory board of the manager, Latvijas Banka shall take
into account the information provided by these persons in the
notification, the references received from the previous places of
employment, and other information on the previous professional
experience of the abovementioned persons.
[23 September 2021 / Amendment to Clause 3 of
Paragraph three regarding the replacement of the words "financial
and capital market" with the words "financial market" and
amendment regarding the replacement of the word "Commission" with
the words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 16. Capital of the
Manager
(1) The initial capital shall consist of one or several
elements referred to in Article 26(1)(a), (b), (c), (d), or (e)
of 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 (hereinafter - Regulation No 575/2013).
(2) The initial capital of an internal manager shall be at
least EUR 300 000.
(3) The minimum initial capital of an external manager shall
be at least EUR 125 000.
(4) If the amount of investment portfolios of the funds under
the management of the manager exceeds EUR 250 million, the
manager shall ensure additional own funds in the amount of 0.02
per cent of the amount by which the value of the resources under
the management exceeds EUR 250 million. The requirements laid
down in this Paragraph shall not apply to the manager the own
funds of which are equal EUR 10 million or more.
(5) Upon determining the conformity of the manager's own funds
with the requirements of this Law, the investment portfolios of
the funds under the management shall be considered the fund
assets managed by the manager, including the fund assets the
management services of which it has delegated in accordance with
the requirements of Section 28 of this Law, but excluding the
fund assets which it has received for management from another
manager.
(6) Own funds is the capital referred to in Article 4(1)(118)
of Regulation No 575/2013, with the manager ensuring that at
least 75 per cent of Tier 1 capital consist of Common Equity Tier
1 capital referred to in Article 50 of Regulation No 575/2013 and
that Tier 2 capital does not exceed one third of Tier 1
capital.
(7) The own funds of the manager may not fall below one of the
following amounts, whichever is larger:
1) the sum total of the minimum initial capital and the
additional own funds calculated in accordance with the
requirements of Paragraph four of this Section;
2) the amount specified in Article 13 of Regulation (EU)
2019/2033 of the European Parliament and of the Council of 27
November 2019 on the prudential requirements of investment firms
and amending Regulations (EU) No 1093/2010, (EU) No 575/2013,
(EU) No 600/2014 and (EU) No 806/2014.
(8) [28 April 2022]
(9) The manager which has received an authorisation of
Latvijas Banka may ensure up to 50 per cent of the additional own
funds referred to in Paragraph four of this Section with a
guarantee of the same amount issued by:
1) a credit institution which has obtained a licence for the
operation of a credit institution in a Member State or in a
member state of the Organisation for Economic Co-operation and
Development which is also in the Group of Ten;
2) an insurance company registered in a Member State or a
branch of an insurer of a third country which has obtained a
licence for the provision of insurance.
(10) For covering the potential professional liability risks
related to activities of the manager, the manager shall comply
with one of the following requirements:
1) ensure additional own funds the amount of which is
sufficient to cover the potential professional liability risks
resulting from professional activity of the manager due to
negligence;
2) arrange professional indemnity insurance in the amount
which is sufficient to cover the potential professional liability
risks resulting from professional activity of the manager due to
negligence.
(11) The manager shall ensure that the resources necessary for
the coverage by own funds and additional own funds are invested
in liquid assets. Unencumbered monies - cash on hand and
short-term deposits in solvent credit institutions, and also
investments in financial instruments if they have a permanent
unlimited market and they may be sold in a short period of time
without significant loss or used as a collateral for obtaining
credits - shall be considered liquid assets.
(12) Regulation No 231/2013 shall determine the risks covered
by additional own funds or professional indemnity insurance, the
amount of additional own funds, and also the requirements for
professional indemnity insurance.
(13) The requirements laid down in Paragraphs ten, eleven, and
twelve of this Section shall be applicable to the manager which
is an investment management company.
(14) The initial capital of a registered manager shall be not
less than EUR 15 000.
(15) [28 April 2022]
[8 October 2015; 20 June 2019; 28 April 2022; 23 September
2021; 13 October 2022 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 17. Provisions for Issuing a
Licence
(1) Latvijas Banka shall take the decision to issue a licence
within three months after receipt of all the documents specified
in this Law which are necessary for taking the decision.
(2) If examination of the documents requires an additional
examination or additional information, Latvijas Banka has the
right to extend the period for examination of the submission by
three months, notifying the manager thereof in writing.
(3) After Latvijas Banka has evaluated the conformity of the
shareholders (members) of the manager with the requirements of
this Law and information included in the documents referred to in
Section 10, Paragraphs seven and eight of this Law, it is
entitled to stipulate the conditions for activities of the
manager in the licence.
(4) Latvijas Banka shall issue the licence within 10 working
days after it has taken the decision to issue the licence.
(5) Latvijas Banka shall take the decision not to issue the
licence if:
1) this Law and other laws and regulations have not been
complied with upon founding the manager;
2) officials of the manager do not conform to the requirements
of this Law;
3) the initial capital and own funds of the manager do not
conform to the requirements of this Law;
4) close links of the manager with third parties endanger or
may endanger the financial soundness thereof or restrict the
right of Latvijas Banka to perform the supervisory functions
specified in this Law;
5) laws of a third country and other laws and regulations
applicable to the persons who have close links with the manager
restrict the right of Latvijas Banka to perform the supervisory
functions specified in this Law;
6) it is impossible to verify the identity, reputation, and
soundness of the financial standing of the persons who have a
qualifying holding in the manager;
7) Latvijas Banka establishes that the financial resources
invested in the capital of the manager have been acquired in
unusual or suspicious financial transactions or the lawfulness of
the acquisition of these financial resources has not been proved
by documentary evidence;
8) the management and registered office of the manager are not
located in Latvia;
9) the prohibition of exercising the voting rights of shares
that belong to the shareholders of the manager with a qualifying
holding has set in and it lasts for more than six months.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 18. Amendments to the
Licence of the Manager
(1) If the manager wishes to supplement the services and
non-core services indicated in a licence issued thereto with the
new ones or wishes to refuse from any of the services and
non-core services indicated in the licence, it shall submit the
following concurrently with a corresponding submission to
Latvijas Banka:
1) a supplement to the operational plan and amendments to the
policies and procedures of the internal control system of the
manager which are necessary to ensure the provision of the
relevant non-core services in accordance with the requirements of
this Law;
2) documents in accordance with the requirements of Section
103 of the Financial Instrument Market Law if the manager wishes
to commence the provision of the services referred to in Section
5, Paragraphs seven and eight of this Law.
(2) Latvijas Banka shall take the decision on amendments to
the licence of the manager within a month after receipt of all
the documents referred to in this Section and prepared and drawn
up in accordance with the requirements laid down in laws and
regulations.
[28 April 2022; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 19. Re-registration and
Reissuance of a Licence
(1) If the firm name of the manager is changed, Latvijas Banka
shall re-register the licence.
(2) The manager shall submit a submission to Latvijas Banka
for the re-registration of the licence within seven working days
after re-registration of the firm name with the Commercial
Register.
(3) Latvijas Banka shall re-register the licence within seven
working days after receipt of the relevant submission.
(4) If the licence has been lost, the manager shall
immediately submit a submission to Latvijas Banka for the
reissuance of the licence.
(5) Latvijas Banka shall issue the licence within seven
working days after receipt of the relevant submission.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 20. Withdrawal of a
Licence
(1) Latvijas Banka has the right, by a reasoned decision, to
withdraw a licence issued to the manager in the following
cases:
1) the manager has provided to Latvijas Banka or publicly
disseminated false information;
2) the capital of the manager does not conform to the
requirements of this Law;
3) the manager systematically violates the provisions of this
Law, directly applicable legal acts of the European Union, and
regulations of Latvijas Banka;
4) the activities of the manager are in contradiction with the
interests of the fund investors;
5) the manager has failed to commence the activities permitted
by this Law within 12 months after receipt of the licence;
6) the activities of the manager have been terminated by a
court ruling;
7) the insolvency proceedings of a legal person have been
declared for the manager;
8) the manager submits a submission to Latvijas Banka for the
withdrawal of the licence;
9) the manager is being reorganised or liquidated;
10) the manager has failed to recommence the activities
permitted by this Law within six months from the suspension of
the regular business.
(2) Latvijas Banka shall notify the manager in writing of the
decision to withdraw the licence within three working days after
taking the decision.
(3) In case the licence is withdrawn for a manager licensed in
Latvia the branch of which operates in a Member State, Latvijas
Banka shall immediately inform the supervisory authority of the
relevant Member State of this fact.
(4) Latvijas Banka shall conduct supervision of the manager
until the day when the manager has fully settled its liabilities
towards the fund investors and other persons.
(5) Latvijas Banka shall, on a quarterly basis, inform the
European Securities and Markets Authority of the licences issued
and withdrawn.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" and amendment regarding the replacement of the words
"regulatory provisions" with the word "regulations" shall come
into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 21. Reorganisation and
Liquidation of the Manager
(1) The manager shall be reorganised and liquidated in
accordance with the Commercial Law. The manager shall inform
Latvijas Banka of taking the decision on reorganisation or
liquidation within 10 days.
(2) The manager may not complete its liquidation before it has
settled its liabilities towards the funds under the management
thereof.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Chapter
III
Operational Rules of the Manager
Section 22. General Requirements for
Activities of the Manager
(1) The manager shall, during the term of operation of the
licence issued thereto, follow and comply with the following
requirements:
1) ensure that the requirements governing the activities of
the manager and of the fund are complied with in accordance with
this Law, directly applicable legal acts of the European Union,
and regulations of Latvijas Banka;
2) upon providing fund management services, act as an honest,
careful, and diligent proprietor and ensure that the services are
provided with due professionalism and diligence in the interests
of the fund and investors thereof without threatening the
stability and integrity of the financial market;
3) take all necessary measures in order to identify and
prevent any conflicts of interest that may arise during the
provision of services and, where they cannot be prevented, ensure
the management thereof by taking into account the interests of
the fund and the investors thereof, and also equal treatment of
the funds managed;
4) ensure equal and fair treatment of the fund investors
without favouring the interests of investors of any fund over the
interests of investors of another fund, unless such differences
in treatment are provided for in the document of incorporation of
the relevant fund or the operational rules of the fund.
(2) Upon organising its activities, the manager shall:
1) ensure human and technological resources which conform to
the scale and nature of the activities, and also develop and
efficiently apply the procedures necessary for the performance of
the activities;
2) ensure that accounting records and administrative
procedures conform to the management services provided thereby,
create such mechanism for the storage, protection, and control of
electronic data which would enable to reconstruct the
transactions made in fund resources by the origin thereof, the
parties involved therein, the nature of the transaction, the time
and place of execution, and also monitor the conformity of fund
investments with the operational rules of the fund and the
requirements of this Law;
3) store source documents of transactions for 10 years and
ensure the fulfilment of the requirements laid down in laws and
regulations in respect of the completion of the source
documents;
4) follow the procedures developed for ensuring of activities
of the manager, including the procedures for executing personal
transactions within the meaning of Regulation No 231/2013 or
transactions for account of the manager and transactions in the
fund investment units.
(3) Regulation No 231/2013 shall determine general principles
for the operational and organisational requirements for the
manager.
(4) If a licensed external manager is authorised to provide
the services referred to in Section 5, Paragraphs seven and eight
of this Law, in addition to the requirements laid down in
Paragraphs one, two, and three of this Section, it shall follow
and comply with the following requirements:
1) upon commencing the provision of services, it shall enter
into a written contract with the client for the provision of
service;
2) prior to entering into a contract for the provision of
service, and also during the entire term of the contract, it
shall ensure that the client has sufficient information enabling
him or her to evaluate the essence of the provided service and
the financial risks related thereto;
3) prior to entering into a contract, inform the client of the
cases of disputes provided for in the contract which will be
resolved in accordance with extrajudicial procedures, and the
procedures for examining such disputes;
4) it shall participate in the investor protection system in
accordance with the laws and regulations governing this
field;
5) it shall follow and comply with other requirements for the
provision of investment services and non-core investment services
which, in accordance with Chapter XII of the Financial Instrument
Market Law and Chapter IV of the Law on Investment Firms, are
determined for investment firms which provide the following
investment services and non-core investment services - portfolio
management, reception and transmission of orders in relation to
one or more financial instruments, investment advice, or holding
of financial instruments;
6) it shall follow and comply with the requirements laid down
in the Law on Investment Firms for investment firms in respect of
delegation of outsourced services;
7) it shall not invest all or part of the client's portfolio
of financial instruments in investment units of the fund managed
by it without prior consent of the client.
[8 October 2015; 28 April 2022; 23 September 2021 /
Amendment regarding the replacement of the word "Commission"
with the words "Latvijas Banka" and amendment regarding the
replacement of the words "regulatory provisions" with the word
"regulations" shall come into force on 1 January 2023, and also
amendment to Clause 1 of Paragraph two shall come into force on 1
January 2024 and shall be included in the wording of the Law as
of 1 January 2024. See Paragraphs 19 and 23 of
Transitional Provisions]
Section 23. Conflict of Interest
(1) The manager shall take all necessary measures in order to
minimise the possibility of a conflict of interest arising
between the following:
1) the manager, the officials, employees thereof, or a person
who controls the manager, and the fund managed by the manager or
the investors thereof;
2) the fund or the investors thereof and another fund or the
investors thereof;
3) two clients of the manager;
4) the fund or the investors thereof and another client of the
manager;
5) the manager and the joint-stock company in the shares of
which the manager invests the fund resources if the registered
office of this joint-stock company is in a Member State and the
shares thereof are admitted on a regulated market of a Member
State.
(2) If the manager uses services of a prime broker on behalf
of the fund, it shall provide for special terms and conditions in
a service contract in respect of the transfer of the fund assets
to be held by the main broker and repeated use of these assets so
that these terms and conditions are not in contradiction with the
document of incorporation of the fund and the operational rules
of the fund. The manager shall inform the custodial bank of the
relevant fund of the contract entered into between the manager
and the prime broker.
(3) Prior to commencing the provision of the management
services to the fund, the manager shall, in accordance with the
procedures laid down in Regulation No 231/2013, inform the fund
investors of the following:
1) activities of the manager which may give rise to other
significant conflicts of interest not referred to in Paragraph
one of this Section;
2) nature and causes of the conflicts of interest if the
ensured measures for the prevention of conflicts of interest are
not sufficient in the opinion of the manager in order to prevent
possible damage to the interests of the investors.
(4) Regulation No 231/2013 shall determine the types of
conflicts of interest and the obligations of the manager relating
to the identification, management, and supervision of conflicts
of interest.
[8 October 2015; 20 June 2019]
Section 24. Remuneration Policy
(1) In respect of such officials or employees whose
professional activity has a material impact on the risk profile
of the manager or fund under the management thereof, and also
such employees who provide the services referred to in Section 5,
Paragraphs seven and eight of this Law, the manager shall ensure
a remuneration policy and practice which conform to and promote
prudent and efficient risk management, and also ensure a
remuneration policy and practice which do not encourage
risk-taking that does not conform to the risk profile of the fund
under the management of the manager and to the operational rules
of the fund.
(2) Latvijas Banka shall determine the requirements for the
remuneration policy and practice in respect of the officials or
employees whose professional activity has a material impact on
the risk profile of the manager or fund under the management
thereof, and in respect of such employees who provide the
services referred to in Section 5, Paragraphs seven and eight of
this Law.
[8 October 2015; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 25. Risk Management
(1) In order to ensure identification, measurement,
management, and supervision of all inherent or potential risks
related to the investment strategy of the fund and the activities
of the fund, the manager shall create a risk management system.
Upon assessing a credit score of the fund assets, the manager
shall not mechanically use the credit ratings provided by the
external credit assessment authorities (rating agencies) referred
to in Regulation (EC) No 1060/2009 of the European Parliament and
of the Council of 16 September 2009 on credit rating agencies,
and also shall not use them as the only measure for evaluating
the credit risk.
(2) The manager shall regularly, but at least once a year,
assess efficiency of the risk management system and take measures
for the rectification of the deficiencies and discrepancies
detected.
(3) The manager shall ensure that the risk control function is
organisationally and functionally separated from the activities
of the manager controlled by it. If the manager intends to
derogate from this requirement, it shall submit a justification
to Latvijas Banka for the fact that the risk control function
ensures efficient risk management, and documents confirming that
the control procedures developed and introduced by the manager to
prevent the existing or potential situations of conflicts of
interest ensure independent risk management.
(4) The manager shall observe due diligence when making
investments on behalf of the fund according to the investment
strategy and objectives described in the operational rules of the
fund, and also the risk profile of the fund, and ensure that the
process of observing due diligence conforms to the nature of the
activities of the fund, has been documented, and is reviewed on a
regular basis.
(5) The manager shall ensure continuous identification,
measurement, management, and supervision of all risks related to
the fund investments and of the combined effects thereof on the
investment portfolio of the fund which also include stress
testing conforming to the nature of the activities of the
fund.
(6) The manager shall ensure that the risk profile of each
fund under the management thereof conforms to the amount of the
fund, the structure of the investment portfolio thereof, the
investment strategy and objectives described in the operational
rules of the fund.
(7) The manager shall determine the maximum amount of leverage
for each fund under the management thereof which the manager is
entitled to assume on behalf of the fund, and also the maximum
amount in which the counterparty is allowed to re-use the
guarantee or collateral obtained in relation to the leverage
transactions, taking into account at least the following criteria
and observations:
1) the type of the fund;
2) the investment strategy of the fund;
3) the sources of the leverage of the fund;
4) the interlinkage or business relationship with other
providers of financial services or counterparties which may cause
systemic risk;
5) the need to restrict the size of exposure with each
counterparty;
6) the extent to which the leverage is collateralised;
7) the asset and liability ratio;
8) the extent and type of activities of the manager on markets
on which it operates on behalf of the fund managed.
(8) Regulation No 231/2013 shall determine the requirements
for risk management.
[8 October 2015; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 26. Liquidity Management
(1) The manager shall create a liquidity management system for
each fund under the management thereof which conforms to the
nature of the activities thereof and develop appropriate
procedures to ensure that the liquidity risk of the fund is
supervised and the liquidity of investments conforms to the
liabilities resulting from activities of the fund.
(2) The manager shall perform stress testing on a regular
basis (also under exceptional circumstances of liquidity) in
order to assess and supervise the liquidity risk of the fund.
(3) The manager shall ensure that the investment strategy,
liquidity profile, and policy for the repurchase of investment
units of each fund under the management thereof are mutually
coordinated.
(4) Paragraphs one, two, and three of this Section shall not
be applicable to the closed-ended funds which do not use the
leverage.
(5) Regulation No 231/2013 shall determine the requirements
for the liquidity management of the fund.
Section 27. Valuation of Fund
Assets
(1) The manager shall ensure that procedures corresponding to
the nature of investments are developed for each fund under the
management thereof and founded in Latvia in order to correctly
and objectively assess the fund assets in accordance with this
Law, the regulations of Latvijas Banka, and the operational rules
of the fund.
(2) If the fund under the management of the manager has not
been founded in Latvia, the manager thereof shall follow the
requirements of the laws and regulations of the place of founding
of the fund or the operational rules of the fund upon assessing
assets and calculating the net asset value of the fund per
investment unit.
(3) Operational rules of the fund shall determine the
procedures for assessing assets and calculating net asset value
of the fund per investment unit.
(4) Net asset value of the fund per investment unit shall
constitute the right to claim attached to one investment unit.
The value of the investment unit shall consist of the fund value
divided by the number of investment units issued, but not
repurchased. If the fund has different classes of investment
units, the value of investment units of each class shall be
calculated individually, taking into account the right attached
to the investment units of this class.
(5) The manager shall ensure that information is disclosed to
investors on the principles for the valuation of fund assets and
the determination of the value of investment units in accordance
with this Law and the operational rules of the fund.
(6) The fund assets shall be assessed and the value of an
investment unit shall be calculated at least once a year.
(7) Assets of an open-ended fund shall be assessed and value
of an investment unit thereof shall be calculated, taking into
account the nature of investments and the time periods for the
issue and repurchase of investment units.
(8) Assets of a closed-ended fund shall be assessed and value
of an investment unit thereof shall be calculated in case of
increasing or reducing the fund capital.
(9) The manager shall inform investors of results of the
valuation of the fund assets and the calculation of the value of
an investment unit according to the procedures laid down in the
operational rules of the fund.
(10) The valuation of the fund assets may be performed by the
following:
1) an external evaluator who has been assigned by the manager
to carry out this function and who is independent from the fund,
the manager, and any other person who has close links with the
fund or the manager;
2) the manager, provided that the following requirements are
complied with:
a) the part responsible for the valuation is functionally
separated from the part which manages fund investments;
b) the remuneration policy and other measures applied
practically prevent the possibility of conflicts of interest and
the employees involved in the valuation are not affected
financially by the valuation results.
(11) The custodial bank of the fund may only valuate the fund
assets if the obligation delegated to the custodial bank as an
external evaluator is functionally and hierarchically separated
from the obligations of the custodial bank and the potential
conflicts of interest are duly supervised, identified, and
managed by informing the fund investors thereof.
(12) The manager may delegate the valuation of assets to an
external evaluator if:
1) the external evaluator is included in the list of
evaluators of material contribution which is maintained by the
Enterprise Register of the Republic of Latvia, or activities of
the external evaluator are governed by the relevant laws and
regulations or the regulations governing professional conduct and
ethics;
2) the external evaluator has provided a professional
guarantee to the manager that he or she has the capacity to
efficiently valuate assets in accordance with the requirements
laid down in this Law;
3) delegation to the external evaluator has been performed in
compliance with the requirements and procedures for delegating
services laid down in Section 28 of this Law.
(13) Latvijas Banka has the right to require the manager to
remove the external evaluator from the carrying out of the
obligation to valuate assets if the provisions specified in
Paragraph twelve of this Section are not complied with.
(14) The external evaluator does not have the right to
delegate valuation of the fund assets further to a third
party.
(15) The manager shall be responsible for ensuring that the
assets are evaluated objectively, with due skill and diligence,
and the fund assets, the net asset value, and the value of an
investment unit are calculated correctly and published also in
cases where the valuation of assets is delegated to an external
evaluator.
(16) The external evaluator has an obligation to cover losses
caused to the manager due to negligence or intentional failure to
comply with obligations by the external evaluator also in cases
where the manager and the external evaluator have agreed under a
contract that the external evaluator is released from liability
for incorrect valuation.
(17) Regulation No 231/2013 shall determine the requirements
for the valuation of the fund assets.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" and amendment regarding the replacement of the words
"regulatory provisions" with the word "regulations" shall come
into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 28. Delegation of Services
and Non-core Services of the Manager
(1) The manager may delegate the provision of services and
non-core services to another person on the basis of a contract,
notifying Latvijas Banka of this fact at least one month in
advance.
(2) Prior to delegating services and non-core services, the
manager shall submit a reasoned submission to Latvijas Banka in
writing regarding the planned delegation and the need for it, an
original or copy of the delegation contract the authenticity of
which has been confirmed by an official of the manager, and also
the document referred to in Paragraph four of this Section,
unless the manager has already submitted it to Latvijas Banka
previously.
(3) Upon selecting a person to whom the provision of
individual services or non-core services will be delegated, the
manager shall take into account the following conditions:
1) the person has an appropriate qualification, experience,
impeccable reputation, and sufficient resources to carry out the
delegated obligations;
2) the management of fund investments or risk management is
only delegated to an investment management company, a credit
institution, an external manager, or an investment firm of a
Member State which has been licensed in the Member State. It
shall be acceptable to delegate services to another person if it
is not possible to delegate them to the persons referred to in
this Clause and Latvijas Banka has received a confirmation from
the supervisory authority of the home Member State of the manager
that this person is suitable for the provision of such
services;
3) the management of fund investments or risk management is
delegated to a person registered in a third country if Latvijas
Banka recognises that this person is subject to equivalent
supervision as the persons referred to in Paragraph three, Clause
2 of this Section, and Latvijas Banka has entered into a
cooperation contract with the relevant supervisory authority of
the third country for the exchange of information in the field of
supervision.
(4) Prior to delegating services and non-core services to
another person, the manager shall develop a delegation procedure
for the relevant services specifying the following therein:
1) the procedures by which the manager shall take decisions to
delegate services or non-core services;
2) the procedures for entering into, supervising the
execution, and terminating a contract for delegation of services
or non-core services;
3) the persons (officials and employees) and the parts that
are responsible for the cooperation with a provider of the
delegated fund management service and for the continuous
monitoring of the scope and quality of the received fund
management service, and also the rights and obligations of these
persons;
4) the procedures for assessing and managing risks related to
the receipt of services or non-core services;
5) the right of the manager to access freely all documents and
information, and also to perform verification of the delegated
person in respect of the performance of the delegated
services;
6) the action of the manager if the service provider fails to
fulfil or will not be able to fulfil the terms and conditions of
the delegation contract.
(5) The manager shall constantly ensure monitoring of the
scope and quality of the service received and, where necessary,
is entitled to immediately terminate the delegation contract if
the execution thereof infringes interests of investors.
(6) The manager shall submit the procedure referred to in
Paragraph four of this Section to Latvijas Banka prior to
delegating services or non-core services to another person.
Latvijas Banka shall examine and evaluate the conformity of the
abovementioned document with the requirements of this Law and
Regulation No 231/2013 within 30 working days after receipt
thereof.
(7) The manager shall submit to Latvijas Banka all amendments
to the documents to be submitted to Latvijas Banka provided for
in this Law if such amendments have been made in respect of the
delegation of services or non-core services.
(8) A service provider may commence the provision of the fund
investment management service to the manager if Latvijas Banka
has not, within 30 working days after receipt of the document
referred to in Paragraph four of this Section, sent to the
manager a decision prohibiting the manager from receiving the
planned fund management service from the relevant service
provider.
(9) If any of the non-core services referred to in Section 5,
Paragraph two of this Law is delegated, the manager shall, within
five working days after entering into a delegation contract,
inform Latvijas Banka of this fact by submitting an original of
the delegation contract or a copy thereof certified in accordance
with the procedures laid down in laws and regulations.
(10) The manager shall include at least the following terms
and conditions in the delegation contract:
1) a description of the fund management service or non-core
service to be received;
2) precise requirements for the scope and quality of the fund
management service to be received;
3) a description of the rights and obligations of the manager
and of the service provider, including the following:
a) the right of the manager to constantly monitor the quality
of provision of the delegated service or non-core service;
b) the right of the manager to give mandatory enforceable
instructions to the service provider in the issues related to
honest, quality, timely fulfilment of the delegated service or
non-core service which conforms to the laws and regulations;
c) the right of the manager to request that the provider of
the service or non-core service immediately terminates the
delegation contract upon receipt of a written request;
4) the right of Latvijas Banka to access the documents
referred to in Paragraph twelve of this Section and to request
other information from the provider of the service or non-core
service related to the delegation of the services and necessary
for the performance of the functions of Latvijas Banka.
(11) Latvijas Banka shall prohibit to delegate services or
non-core services if:
1) delegation of the services or non-core services interferes
with a full-fledged management of the fund by the manager and may
infringe interests of the fund investors;
2) delegation of the services or non-core services interferes
with the supervision of the manager's activities by Latvijas
Banka;
3) the delegation contract does not conform to the
requirements of this Law and does not provide a clear and fair
presentation of the expected cooperation between the manager and
the service provider during the term of the delegation
contract;
4) after delegation of the services the manager no longer
provides any fund management services.
(12) Latvijas Banka has the right to conduct an inspection of
the activities of the provider of the service or non-core service
at the location thereof or at the place for the provision of the
service, to become acquainted with all documents, record keeping
and accounting registers, to make copies thereof, and also to
request that this provider of the service or non-core service
provides information related to the provision of the delegated
fund management service and necessary for the performance of the
functions of Latvijas Banka.
(13) Latvijas Banka is entitled to request that the manager
which has delegated the fund management services to another
person immediately terminates the delegation contract if Latvijas
Banka establishes the following:
1) the manager fails to perform constant monitoring of the
quality of the provision of the delegated fund management service
or performs it irregularly and insufficiently;
2) the manager fails to perform the management of risks
related to the delegated fund management service or performs it
insufficiently and in poor quality;
3) significant deficiencies in activities of the service
provider that threaten or might threaten the fulfilment of the
manager's obligations;
4) any of the circumstances referred to in Paragraph eleven of
this Section.
(14) Delegation of the service or non-core service to another
person shall not release the manager from the responsibility for
the fund management as specified in this Law.
(15) The manager or any other person to whom the fund
investment management service or risk management service has been
delegated may not further delegate the provision thereof to the
custodial bank of the fund or a person delegated by the custodial
bank, and also to any other person whose interests may be in
conflict with the interests of the manager or fund investors.
Such delegation shall be acceptable in exceptional cases if a
person to whom the service is delegated has functionally and
hierarchically separated the performance of the fund investment
management service or risk management service from other services
provided thereby which may give a rise to a conflict of interest,
and has ensured proper control and management of conflicts of
interest, and also informed the fund investors of this fact.
(16) The delegated person may further delegate the services
entrusted thereto if:
1) a written consent of the manager has been received for
further delegation of the service;
2) prior to entering into a delegation contract, the manager
has informed Latvijas Banka of further delegation of the service
and has received the authorisation of Latvijas Banka;
3) the person to whom the service is delegated further
conforms to the requirements referred to in Paragraph three of
this Section.
(17) Any person who delegates the service further to another
person shall ensure that the service is delegated in conformity
with the provisions of Paragraph sixteen of this Section, and
also constantly monitor conformity of the provision of the
delegated service with the requirements of this Law.
(18) Regulation No 231/2013 shall determine the requirements
and regulations for the delegation of the services provided by
the manager.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 29. Examination of
Submissions and Complaints (Disputes)
(1) The manager shall ensure that the procedure for the
examination of submissions and complaints (disputes) of the fund
investors related to the provision of services and non-core
services of the manager is freely accessible at the location of
the manager and on the website of the manager if such has been
created. A registered manager need not comply with the
requirement laid down in the first sentence of this Paragraph if
the procedure for the examination of submissions and complaints
(disputes) has been included in the document of incorporation of
the fund.
(2) Fund investors and potential investors may submit
submissions and complaints regarding the received services or
non-core services free of charge at the place for the provision
of services indicated by the manager.
(3) The manager shall, within 30 days after receipt of a
written submission or complaint (dispute), provide a written
answer regarding the service or non-core service. If due to
objective circumstances it is not possible to comply with this
time period, the manager is entitled to extend it by notifying
the submitter of the submission or complaint (dispute) thereof in
writing.
(4) Fund investors that are considered to be consumers within
the meaning of the Consumer Rights Protection Law are entitled to
submit submissions and complaints to the Consumer Rights
Protection Centre regarding violations of this Law and other laws
and regulations regarding consumer rights protection if they are
related to the provision of services or non-core services of the
manager.
(5) If a fund investor incurs losses due to incorrect
information provided by the manager or due to a failure of the
manager to comply with the requirements of this Law, the fund
investor has the right to claim damages in accordance with the
general procedures laid down in laws.
[20 June 2019]
Chapter
IV
Alternative Investment Fund
Section 30. Founding of the Fund and
Types of Funds
(1) The fund may be founded as an aggregate of assets, a
limited partnership, or a joint-stock company.
(2) The manager may found the fund as an aggregate of assets
approving the document of incorporation and the operational rules
of the fund. The fund founded by the manager (hereinafter in this
Chapter and Chapter V - the fund of the manager) shall not
constitute a legal person within the meaning of this Law.
Founding of the fund as a limited partnership or joint stock
company shall be governed by this Law and the Commercial Law,
unless it is laid down otherwise in this Law.
(3) The fund may be founded as an open-ended or closed-ended
fund. The fund may be founded as a fund with sub-funds.
(4) An open-ended fund shall be a fund the manager of which
has an obligation to perform repurchase of investment units
within a month if so required by the fund investors. The manager
of the open-ended fund shall be released from the obligation to
perform repurchase of investment units if the investment units
are traded on a regulated market and the fund manager takes the
necessary measures in order to ensure that the market price of
the investment units does not significantly differ from the fund
unit value.
(5) A closed-ended fund is a fund the manager of which is
prohibited from repurchasing investment units.
(6) The fund may only commence its activities after the
registration thereof with Latvijas Banka.
(7) The regulations of Latvijas Banka shall determine the
criteria for recognising an undertaking for collective investment
as the fund.
(8) The fund investment strategies have been determined in
Regulation No 231/2013.
(9) The fund property shall consist of the joint property of
investors of the fund or its sub-funds (if the fund has been
founded as the fund with sub-funds) and it shall be kept,
registered, and managed separately from the property of the
external manager, other funds or sub-funds under the management
thereof (if the fund has been founded as the fund with
sub-funds), and also of the custodial bank. The fund property (if
the fund has been founded as the fund with sub-funds) shall
consist of the joint property of sub-funds. Such fund may not
have property that does not fall within any of the sub-funds.
(10) A fund investor has no right to request division of the
fund property. Also a pledgee, a creditor, or an administrator of
the pledged property of an investor does not have such rights in
insolvency proceedings of the investor - legal or natural
person.
(11) The fund property may not be included in the property of
the manager, a custodial bank, or a prime broker as a debtor if
insolvency proceedings of a legal person have been declared for
the manager or the custodial bank, or the prime broker or it is
being liquidated.
(12) Claims against a fund investor in respect of his or her
liabilities may be directed against his or her investment units
but not against the fund property.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" and amendment regarding the replacement of the words
"regulatory provisions" with the word "regulations" shall come
into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 31. Name of the Fund
(1) The name of the fund shall contain the phrase "alternative
investment fund" or the abbreviation thereof "AIF".
(2) The name of the fund shall be clearly and distinctly
different from the names of other funds and investment funds the
investment units or certificates of which are marketed in
Latvia.
(3) [25 October 2018]
[25 October 2018]
Section 32. Document of
Incorporation of the Fund
The document of incorporation of the fund shall be as
follows:
1) for the fund founded by the manager - the fund management
rules;
2) for the fund founded as a joint-stock company - the
articles of association;
3) for the fund founded as a limited partnership - a
partnership contract.
Section 33. Registration of the
Fund
(1) In order to register the fund, a licensed manager shall
submit the documents referred to in Section 10, Paragraph eight
of this Law to Latvijas Banka in one of the following forms:
1) in the form of an electronic document in accordance with
the laws and regulations regarding the development and drawing up
of electronic documents;
2) in the form of a paper document. In such case the documents
shall also be submitted electronically by sending them to the
electronic mail address of Latvijas Banka.
(2) Latvijas Banka shall, within 60 days after receipt of all
documents necessary for the registration of the fund, take the
decision to register the fund.
(3) [20 June 2019]
(4) [20 June 2019]
(5) Latvijas Banka shall take the decision to refuse to
register the fund in the following cases:
1) the own funds of the manager do not conform to the
requirements of this Law;
2) the fund has been founded as a joint-stock company but the
capital thereof does not conform to the requirements of this
Law;
3) the documents submitted for the registration of the fund do
not conform to the requirements of this Law;
4) the manager fails to ensure that at least two officials
have competence in the implementation of the investment strategy
selected by the fund.
(6) Latvijas Banka shall publish a list of the funds and
managers thereof on its website.
[20 June 2019; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 34. Rights of Fund
Investors
(1) The fund investor has the rights provided for in this Law,
the Commercial law, the document of incorporation of the fund,
and the operational rules of the fund, and also the following
additional rights:
1) to alienate its investment units without any restrictions,
unless it is laid down otherwise in laws and regulations or the
operational rules of the fund;
2) in proportion to the number of investment units in
accordance with laws and regulations and the operational rules of
the fund, to participate in the distribution of the income
obtained by using the fund property;
3) in proportion to the number of investment units, to
participate in the distribution of proceeds from the fund
liquidation.
(2) An open-ended fund investor has the right to request that
the manager repurchases its investment units.
(3) A closed-ended fund investor has the right to request
convening of the general meeting of fund investors in the cases
and in accordance with the procedures laid down in this Law.
Section 35. Limitation of Liability
of the Fund Investors
(1) A fund investor shall not be liable for the liabilities of
the manager.
(2) A fund investor shall be liable for claims which may be
directed against the fund property only in the amount of the
value of investment units owned by him or her.
(3) Agreements which are in contradiction with the provisions
of this Section shall be null and void from the moment of
entering into thereof.
Section 36. Investments in Immovable
Property or Capital Shares of a Capital Company
(1) The immovable property acquired with the resources of the
manager's fund shall be registered with the Land Register but the
acquired capital shares of a capital company shall be registered
with the Commercial Register. Corroboration of the abovementioned
immovable property with the Land Register or registration of the
capital shares with the Commercial Register shall be performed on
behalf of the manager with the note that the immovable property
or capital shares have been acquired with the resources of the
specific fund, they may not be alienated or encumbered without
the consent of the custodial bank of the fund, and the immovable
property or capital shares shall not be included in the property
of the manager in the insolvency proceedings of the manager -
legal person.
(2) Loans granted from the resources of the manager's fund
which are intended for investments in immovable property are
secured with secured mortgages in favour of the manager, making
the note that the relevant immovable property is a collateral for
the loan granted from the resources of the specific fund, and it
may not be encumbered and alienated without the consent of the
manager.
(3) If the fund has been founded as a limited partnership or
joint-stock company, the immovable property acquired with the
resources of such fund shall be registered with the Land Register
but the acquired capital shares of a capital company shall be
registered with the Commercial Register. Corroboration of the
abovementioned immovable property with the Land Register or
registration of the capital shares with the Commercial Register
shall be performed on behalf of the fund with the note that this
immovable property or capital shares may not be alienated or
encumbered without the consent of the custodial bank of the
fund.
(4) If immovable property is located in the territory of
another country or a capital company the capital shares of which
are acquired with the fund resources is registered in another
country, the manager shall ensure fulfilment of the requirements
referred to in this Section in accordance with the requirements
of the legal acts of the relevant country.
(5) The consent of the custodial bank referred to in
Paragraphs one and three of this Section to alienation or
encumbrance shall be required if the fund is managed by a
licensed manager. If the fund is managed by a registered manager,
the consent of the custodial bank to alienation or encumbrance
shall be required in the cases provided for in the document of
incorporation or operational rules of the fund.
[8 October 2015]
Section 36.1 Investments
in Securitisation Positions
Fund assets may be invested in securitisation positions in
conformity with the requirements of Regulation (EU) 2017/2402 of
the European Parliament and of the Council of 12 December 2017
laying down a general framework for securitisation and creating a
specific framework for simple, transparent and standardised
securitisation, and amending Directives 2009/65/EC, 2009/138/EC
and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No
648/2012 (hereinafter - Regulation No 2017/2402). If any of the
investments in securitisation positions no longer conforms to the
requirements of Regulation No 2017/2402, the manager shall decide
on the action corresponding to the interests of the fund
investors and, where necessary, take corrective measures for the
prevention of the non-conformity.
[25 October 2018 / Section shall come into force on
1 January 2019. See Paragraph 14 of Transitional
Provisions]
Section 37. General Meeting of
Investors of the Closed-Ended Fund of the Manager
(1) The manager shall convene a general meeting of investors
(hereinafter - the general meeting) upon its own initiative or
upon request of the investors.
(2) The manager shall convene the general meeting in order to
approve the operational rules of the fund, except for the rules
regarding the issue of the first investment units, and also in
cases where it has been requested in writing by investors
representing at least 10 per cent of the fund value. If convening
of the general meeting is requested by the fund investors, the
manager shall convene it within a month after receipt of the
request.
(3) The request shall indicate the reasons for convening of
the general meeting and the agenda thereof. The request shall be
submitted to the manager.
(4) If the manager fails to convene the general meeting within
the specified time period, the fund investors shall submit a
written request to Latvijas Banka which convenes the general
meeting within a month after receipt of the request. In such case
the general meeting shall be convened irrespective of the fund
value represented by the investors - submitters of the written
request.
(5) A licensed manager shall publish the notification
regarding convening of the general meeting in the official
gazette Latvijas Vēstnesis, and also inform
Latvijas Banka thereof. A registered manager shall publish the
notification regarding convening of the general meeting in the
official gazette Latvijas Vēstnesis. If the general
meeting is convened by Latvijas Banka, the notification regarding
convening of the general meeting shall be published by Latvijas
Banka. Expenditures related to the convening of the general
meeting shall be covered from the fond property.
(6) The general meeting has the right to take decisions
binding on the manager in respect of the following:
1) approval of the operational rules of the fund and making
amendments thereto;
2) change of the manager;
3) reorganisation of the fund;
4) liquidation of the fund;
5) disbursement of dividends;
6) any other issues which have been determined by Latvijas
Banka or which are provided for in the operational rules of the
fund.
(7) The general meeting is entitled if investors representing
at least half of the fund value are present.
(8) A decision of the general meeting shall be taken if the
investors representing at least three fourths of the fund value
represented in the general meeting have voted in favour of
it.
(9) Representatives of the manager, authorised persons of
Latvijas Banka, and a sworn auditor or a commercial company of
sworn auditors (hereinafter - the sworn auditor) has the right to
participate in the general meeting without voting rights but in
the capacity of an advisor.
[20 June 2019; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 38. Transfer of the Fund
Management Rights to Another Manager
(1) The fund management rights may be transferred to another
manager in the following cases:
1) the manager forgoes the fund management;
2) the fund selects another manager;
3) Latvijas Banka prohibits an external manager from managing
the fund.
(2) The manager may transfer the fund management rights to
another manager only with the authorisation of Latvijas
Banka.
(3) In order to obtain the authorisation of Latvijas Banka for
the transfer of the fund management rights, the manager shall
submit a reasoned submission to Latvijas Banka, appending the
following documents thereto:
1) a contract for the transfer of the fund management
rights;
2) amendments to the operational rules of the fund and the
document of incorporation of the fund, and also to the custodial
bank agreement which must be made in respect of the change of the
manager.
(4) Latvijas Banka shall, within a month after receipt of all
the documents referred to in this Section, take the decision to
authorise the transfer of the fund management rights to another
manager, provided that the following conditions have been
met:
1) the transfer of the fund management rights does not
infringe the interests of the fund investors;
2) the documents submitted for the transfer of the fund
management rights have been drawn up in accordance with the
requirements of this Law;
3) the manager to whom the fund management rights are
transferred conforms to the requirements brought forward for the
manager laid down in this Law.
(5) A licensed manager that transfers the fund management
rights shall, after receipt of the decision by Latvijas Banka and
in accordance with the procedures specified in the operational
rules or document of incorporation of the fund, immediately
inform all fund investors of the change of the manager, and also
publish a notification in the official gazette Latvijas
Vēstnesis regarding the transfer of the fund to another manager.
A registered manager that transfers the fund management rights
shall, in accordance with the procedures specified in the
operational rules or document of incorporation of the fund,
immediately inform all fund investors of the change of the
manager, and also publish a notification in the official gazette
Latvijas Vēstnesis regarding the transfer of the fund to
another manager. The notification shall indicate the firm name,
registration number, and location of the executive board of the
new manager.
(6) A contract for the transfer of the fund management rights
to another manager shall enter into effect not earlier than one
month after publishing of the notification referred to in
Paragraph five of this Section. Amendments to the operational
rules of the fund, the fund management rules, and the custodial
bank agreement shall enter into effect concurrently with the
contract for the transfer of the fund management rights.
(7) Upon entering into effect of the contract for the transfer
of the fund management rights, all rights and obligations related
to the fund management shall be transferred to the new
manager.
(8) If an external manager fails to ensure the fund management
in accordance with the requirements of this Law, it shall
immediately inform Latvijas Banka and the supervisory authority
of the fund. Latvijas Banka shall require the manager to take all
necessary measures to ensure that the fund management conforms to
the requirements of this Law.
(9) If, despite the measures taken, the external manager fails
to ensure the fund management in accordance with the requirements
of this Law, Latvijas Banka shall require the manager to
terminate the fund management and marketing of investment units
in Latvia and in Member States. Latvijas Banka shall immediately
inform the supervisory authority of a host Member State of the
manager of the prohibition imposed on the external manager to
perform fund management and marketing of investment units.
(10) If Latvijas Banka prohibits the external manager from
performing fund management, the manager shall ensure that the
fund management rights are transferred to another manager within
a month.
[20 June 2019; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 39. Reorganisation of the
Fund
(1) The fund may only be reorganised as a result of a
merger.
(2) It shall not be allowed to merge a closed-ended fund with
an open-ended fund. The funds and sub-funds of the manager under
the management of the same manager may be merged.
(3) Funds founded as limited partnerships or joint stock
companies shall be merged in accordance with the procedures laid
down in the Commercial Law.
(4) Latvijas Banka shall authorise the merger of funds or
sub-funds.
(5) In order to obtain an authorisation by Latvijas Banka for
the merger of funds or sub-funds, the manager shall submit the
following to Latvijas Banka:
1) the decision by the executive board of the manager to merge
funds or sub-funds and the grounds thereof;
2) the document of incorporation of the merged fund of the
manager and the operational rules of the fund;
3) financial statements of funds or sub-funds.
(6) In order to carry out the merger of funds referred to in
Paragraph three of this Section and to obtain an authorisation by
Latvijas Banka, the commercial companies involved in the merger
process shall, prior to submitting an application to the
Commercial Register Office, submit the documents referred to in
Section 347 of the Commercial Law and the operational rules of
the fund to Latvijas Banka.
(7) Latvijas Banka shall examine the submission regarding the
merger of funds or sub-funds and take a decision within 30
working days after receipt of all the documents referred to in
Paragraph five or six of this Section. Upon taking the decision
to authorise the merger of funds or sub-funds, Latvijas Banka
shall concurrently take the decision to register the merged fund
of the manager.
(8) Latvijas Banka shall take the decision not to authorise
the merger of funds or sub-funds if at least one of the following
cases is established:
1) the submitted documents do not conform to the requirements
of this Law;
2) the merger of funds or sub-funds would substantially
infringe the legitimate interests of the investors.
(9) Upon receipt of the authorisation, the manager shall,
according to the procedures laid down in the operational rules of
the fund, inform investors of the merger of funds, indicating
that investors have a possibility to resell the fund investment
units, and also, prior to merging funds, shall perform repurchase
of investment units of the investors who have expressed a wish to
resell the fund investment units to the manager. The procedures
referred to in this Paragraph shall not apply to an open-ended
fund.
(10) The decision by Latvijas Banka to authorise the merger of
funds or sub-funds and to register the merged fund shall enter
into effect after notifying the manager of the decision.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 40. Liquidation of the
Fund
(1) If the fund has been founded as a limited partnership or
joint stock company, termination of operation and liquidation
thereof shall occur in accordance with the procedures laid down
in the Commercial Law, in addition taking into account Paragraphs
three, eight, nine, ten, and nineteen of this Section.
(2) Liquidation of the manager's fund shall be performed by
the manager if:
1) none of the investment units have been marketed within a
year after founding of the fund;
2) the manager has taken the decision to liquidate the
fund;
3) the fund investors have taken the decision to liquidate the
fund;
4) Latvijas Banka has taken the decision to commence
liquidation of the fund.
(3) The manager shall, within 10 working days after taking the
decision to liquidate the fund, inform Latvijas Banka that the
liquidation of the fund has been commenced. Information shall
also include the grounds for the liquidation of the fund.
(4) Latvijas Banka has the right not to authorise liquidation
of the fund if the decision to liquidate the fund has been taken
by the manager and such liquidation does not conform to the
legitimate interests of the investors.
(5) If the manager fails to commence liquidation of the fund
within a month from the day when it was due to be commenced in
accordance with the requirements of this Law, Latvijas Banka has
the right to appoint a fund liquidator. Latvijas Banka shall
appoint a fund liquidator also in the case referred to in
Paragraph two, Clause 4 of this Section. The liquidator appointed
in accordance with the procedures laid down in this Paragraph has
all the rights of the manager in respect of the liquidation of
the fund.
(6) The liquidator shall immediately notify Latvijas Banka of
commencing liquidation of the fund of a licensed manager and
publish a relevant notification in the official gazette
Latvijas Vēstnesis. The liquidator shall
immediately notify of commencing liquidation of the fund of a
registered manager and publish a relevant notification in the
official gazette Latvijas Vēstnesis.
(7) The notification regarding liquidation shall provide
information on the liquidator, indicate the time period and place
for the application of creditors, and also the date of publishing
of the notification. The time period for the application of
creditors may not be less than three months from the day of
publishing of the notification, unless the decision to liquidate
the fund determines a longer time period for the application of
creditors. Creditors shall indicate in their claim the content
of, grounds for, and amount of the claim and append documents
supporting the claim.
(8) It is prohibited in the course of liquidation to perform
the issue and repurchase of fund investment units, and the fund
income distribution provided for in the operational rules of the
fund among the fund investors. The liquidator has the right to
perform activities only related to the liquidation.
(9) After commencement of the liquidation, the liquidator
shall organise and perform sale of the fund property.
(10) The custodial bank or the liquidator shall distribute the
proceeds gained from the sale of the property of the fund to be
liquidated and the monies in the fund (hereinafter - the proceeds
of liquidation), satisfying in the following order:
1) the claims of secured creditors;
2) the claims of such creditors who have applied their claims
within the time period specified in the notification;
3) the claims of the creditors who have applied their claims
after the time period specified in the notification, but before
the distribution of the proceeds of liquidation.
(11) [30 March 2017]
(12) The remaining proceeds of liquidation shall be
distributed among the fund investors in proportion to the number
of the investment units thereof.
(13) The liquidator shall submit a notification for
publication in the official gazette Latvijas Vēstnesis
regarding the distribution of the proceeds of liquidation among
the fund investors, indicating the sum to be paid for one
investment unit, and also the place and time for making the
payments.
(14) All payments to creditors and fund investors shall be
made in cash.
(15) The liquidator shall act in the interests of creditors
and fund investors.
(16) The liquidator shall be fully liable to the fund
investors and third parties in respect of the losses caused in
the course of liquidation if the liquidator intentionally or due
to negligence has violated the law, the operational rules of the
fund, or the document of incorporation of the fund, or has
negligently carried out his or her obligations.
(17) In the course of liquidation the liquidator has the right
to cover liquidation expenditures from the proceeds of
liquidation. The liquidation expenditures do not include
intermediation payments related to the sale of immovable
property. These payments shall be included in the fund
expenditures paid from the fund property and their maximum amount
shall be set out in the fund management rules. The liquidation
expenditures may not exceed two per cent of the proceeds of
liquidation.
(18) The procedures for the liquidation of the fund laid down
in this Section shall be applicable to the liquidation of a
sub-fund.
(19) The liquidator on a monthly basis shall submit to
Latvijas Banka a progress liquidation report. The liquidator
shall, within 10 working days after completion of the
liquidation, submit a notification to Latvijas Banka regarding
the completion of the liquidation and a closing liquidation
report.
[30 March 2017; 20 June 2019; 23 September 2021 /
Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Chapter V
Issue and Marketing of Investment Units
Section 41. General Requirements
(1) Public circulation of fund investment units shall occur in
accordance with the Financial Instrument Market Law, insofar as
it has not been laid down otherwise in this Law. In order to
admit fund investment units on a regulated market, the
operational rules and the management rules of the manager's fund
shall be treated as a prospectus drawn up in accordance with the
requirements of the Financial Instrument Market Law.
(2) Fund investment units may be of various classes with a
different nominal value, related payments, or different rights to
the fund income distribution. Equal rights shall be attached to
the same class of investment units of the same fund.
(3) Upon alienation of an investment unit, the undivided share
of the property of the relevant alienator in the fund shall also
be transferred to the acquirer.
(4) Investment units are issued in a dematerialised form.
(5) Investment units of the manager's fund may be divided. The
document of incorporation or the operational rules of the fund
shall determine the procedures for the rounding up of the number
of investment units after the division thereof.
(6) Investment units may only be marketed to the persons
referred to in Section 9, Paragraphs one and two, and Paragraphs
seven, eight, and nine of this Section of this Law.
(7) A manager licensed in a Member State may market investment
units to professional investors, and also other investors in
Latvia in accordance with the provisions of Paragraphs eight and
nine of this Section.
(8) Investment units of a Member State fund under management
of a manager licensed in a Member State may also be marketed to
an investor that is not a professional investor if this investor
provides a written confirmation that he or she is capable of
independently taking a decision to invest in the relevant fund
and is aware of all risks, including the risk to lose investment
or part thereof resulting from such investment or liabilities
which he or she has assumed, and the minimum amount of the
investor's purchase of investment units in the relevant fund is
EUR 100 000 or more.
(9) If the operational rules of a Member State fund under
management of a manager licensed in a Member State provide for
the use of leverage in the amount of not more than 50 per cent of
the fund net asset value, investment units of this fund may also
be marketed to an investor that is not a professional investor if
this investor provides the confirmation referred to in Paragraph
eight of this Section.
(10) An investment firm or a credit institution registered in
Latvia may perform initial marketing of investment units of a
fund registered in Latvia, or market fund investment units in
Latvia in accordance with the requirements laid down for the
investor in this Section by entering into a marketing contract
with the manager if this manager is authorised to market
investment units of the relevant fund in Latvia.
(11) Upon marketing fund investment units in Latvia and other
Member States to investors that are not professional investors,
the manager, including a manager licensed in a Member State,
shall comply with the requirements of Regulation No
1286/2014.
[8 October 2015; 30 March 2017; 30 September 2021]
Section 42. Requirements for a
Closed-Ended Fund of the Manager
(1) The amount of initial placement of one issue of
closed-ended fund investment units shall be limited, and the time
thereof may not exceed twenty-four months.
(2) After expiry of the time period specified in Paragraph one
of this Section, it shall be considered that the issue of
investment units has occurred in the amount of the investment
units paid.
(3) Investment units are only issued in return for full
payment of the price of such units in cash.
(4) The issue price of a closed-ended fund investment unit
shall constitute the price of an investment unit during the
initial placement, and it shall not change throughout the whole
duration of the issue.
Section 43. Requirements for an
Open-Ended Fund of the Manager
(1) The issue price of an open-ended fund investment unit
shall constitute the sale price of the first investment unit.
(2) The manager may determine commissions on the issue or
repurchase of open-ended fund investment units. Distribution of
the commissions between the manager and the fund shall be
determined in the document of incorporation of the fund or the
operational rules of the fund.
(3) The sale price of an open-ended fund investment unit shall
consist of the sum of the investment fund unit value and the
commissions on the issue of investment units (if any). Money
received for investment units, except for the commissions on the
issue of investment units (if any), shall be immediately
transferred to the fund property. The procedures for determining
and paying the price of an investment unit, and also the
distribution of the commissions between the manager and the fund
shall be determined in the document of incorporation of the fund
or the operational rules of the fund.
(4) The sale price of an open-ended fund investment unit shall
be determined concurrently with the fund unit value, and the
information thereon shall be available in the places specified in
the operational rules of the fund.
(5) The repurchase price of an open-ended fund investment unit
shall constitute the investment unit value reduced by commissions
on the repurchase according to the operational rules of the fund.
If the fund has investment units of different classes, the
repurchase price thereof shall be determined for each class of
investment units individually.
(6) If the manager announces the sale price of open-ended fund
investment units, it also has an obligation to announce the
repurchase price thereof. If the manager announces the repurchase
price of open-ended fund investment units, it also has an
obligation to announce the sale price thereof.
(7) The manager of an open-ended fund has an obligation to
perform repurchase of investment units upon request of a fund
investor by paying the repurchase price to him or her in cash
according to the operational rules of the fund.
(8) Open-ended fund investment units shall be withdrawn from
circulation when the manager receives a repurchase application
from an investor and the investment units owned by the investor
are transferred into the issue account of the fund. After
withdrawal of the investment units from circulation, all rights
of fund investors deriving from them shall cease, except for the
right to claim in the amount of the repurchase price of the
investment units.
(9) The manager may temporarily suspend repurchase of
open-ended fund investment units in the cases and according to
the procedures laid down in the operational rules of the fund.
Suspension of the repurchase may only be provided for in
exceptional cases, if required by circumstances, and suspension
is justifiable, taking into account the interests of the
investors.
(10) The repurchase price shall be paid from the fund property
according to the procedures and within the time period laid down
in the operational rules of the fund.
(11) Investment units shall be repurchased in the order of the
submission of repurchase applications.
(12) In order to ensure compliance with the requirement of
Paragraph seven of this Section, the manager shall create a
liquidity management system which corresponds to the nature of
activities of the fund and develop appropriate procedures.
Section 44. Requirement for the
Redemption of Investment Units of the Manager's Fund
(1) If due to the fault of the manager the information in the
operational rules of the fund and accompanying documents which is
essential for the valuation of investment units is incorrect or
incomplete, a fund investor has the right to request that the
manager redeems his or her investment unit and compensates him or
her for all losses incurred for this reason.
(2) If in the case referred to in Paragraph one of this
Section the fund investor has obtained the investment unit by
using services of an investment service provider, this investment
service provider together with the manager shall be solidarily
liable for the reimbursement of losses to the fund investor. The
investment service provider shall not be liable if he or she was
not, and could not have been, aware that the information was
incorrect or incomplete.
(3) If, when the fund investor has become aware that the
information is incorrect or incomplete, he or she no longer owns
an investment unit, the fund investor has the right to request
that the manager pays the difference by which the sum invested by
him or her exceeds the repurchase price of the investment unit at
the moment of repurchase.
(4) A claim in accordance with the provisions of Paragraphs
one, two, and three of this Section shall be brought within six
months from the day when the fund investor has become aware that
the information was incorrect or incomplete, however, not later
than within three years from the day of purchase of the
investment units.
Section 45. Requirements for the
Fund Founded as a Limited Partnership
(1) The Commercial Law shall govern the procedures for
entering into a partnership contract between members of a limited
partnership and the mutual relationships between members.
(2) In addition to the requirements laid down in the
Commercial Law, the partnership contract shall include
information on the term and objective of activities of the fund,
the general principles for the fund management, and the
procedures by which to act with the fund property, and the
procedures for the reorganisation and liquidation of the
fund.
Section 46. Requirements for the
Fund Founded as a Joint-Stock Company
(1) If an open-ended fund has been founded as a joint-stock
company, the manager thereof has an obligation, not later than
within a month, to perform repurchase of shares upon request of a
shareholder. The equity capital of such fund shall change
depending on the amount of the issue and maturity of shares.
(2) If a closed-ended fund has been founded as a joint-stock
company, the manager thereof is prohibited from repurchasing
shares and shares are redeemed at the end of the term of
activities of the fund or in the cases referred to in the
operational rules of the fund.
(3) The provisions of the Commercial Law regarding the
increase and reduction of the equity capital shall be applicable
to the fund, insofar as it is not laid down otherwise in this
Law.
(4) Upon founding the fund, the equity capital specified in
the articles of association shall be paid fully by the moment the
fund is registered with Latvijas Banka.
(5) The time of issue of shares of an open-ended fund and the
number of shares to be issued shall not be limited, unless the
articles of association of the fund and the operational rules of
the fund provide for the maximum amount of the equity capital of
the fund. If the equity capital is increased, the current
shareholder does not have priority rights to purchase the new
shares. The amount of the equity capital and the number of shares
need not be indicated in the articles of association of the
open-ended fund.
(6) The equity capital of a closed-ended fund may only be
increased on the basis of a decision of a meeting of
shareholders. If the equity capital is increased, only the
current shareholders have the right to subscribe for the new
shares in proportion to the sum of nominal values of the shares
they own. Other investors are entitled to subscribe for the new
shares if the current shareholders have not exercised their
rights within the specified time period and they have such rights
according to the rules regarding the increase of the equity
capital.
(7) The payment for the shares shall not be made in
instalments or with a material contribution. Upon subscribing for
the shares, the payment for them shall be made in full
amount.
(8) The fund may only issue freely transferable shares. The
fund is prohibited from issuing staff, preference shares, and
convertible bonds, and also to acquire its own shares. The fund
may only acquire its own shares if it is managed by an internal
manager.
(9) The resources obtained as a result of increasing the
equity capital shall be transferred by the fund to the manager
for the investment thereof according to the operational rules of
the fund.
(10) Each share with voting rights with the minimum nominal
value shall give the right to one vote in a meeting of
shareholders. If the meeting of shareholders decides on issues
affecting the interests of shareholders of a specific sub-fund of
an open-ended fund, only shareholders of this sub-fund have the
right to vote.
(11) In addition to the requirements laid down in the
Commercial Law, the founders of the fund shall include the
following in the articles of association of the fund:
1) information on the type, term of activities, and objective
of the fund. The time period for activities of a closed-ended
fund may not exceed the time period for activities provided for
in the articles of association;
2) information on the general principles and the procedures
for the fund management;
3) the procedures for taking decisions, in particular
indicating decision-taking competences and procedures for acting
with the fund property;
4) the conditions for increasing and reducing the equity
capital;
5) the procedures for repurchasing shares of the fund and the
conditions and procedures for suspending repurchase of
shares;
6) the procedures for calculating and disbursing
dividends;
7) the procedures for the reorganisation and liquidation of
the fund.
(12) Founders of the fund or the manager shall submit the
articles of association or amendments to the articles of
association to Latvijas Banka for its consent prior to announcing
a notification regarding convening of the meeting of
shareholders. Latvijas Banka shall examine the abovementioned
articles of association or amendments to the articles of
association within 10 working days and give its consent or take
the decision to refuse to give its consent to the articles of
association or amendments thereto.
(13) If, after announcing a notification regarding convening
of the meeting of shareholders, additional issues regarding
amendments to the articles of association which provide for
changes in the information referred to in Paragraph eleven of
this Section are submitted to the authority that convenes the
meeting of shareholders, such additional issues may not be
included in the agenda of the meeting of shareholders which has
already been announced.
(14) In addition to the rights specified in the Commercial
Law, the meeting of shareholders shall take a decision on the
following:
1) the approval of the investment policy, objective, and
strategy;
2) the change of the manager;
3) any other issues which have been provided for in the
operational rules of the fund.
[23 September 2021; 13 October 2022 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Chapter
VI
Custodial Bank
Section 47. Requirements for a
Custodial Bank
(1) A custodial bank of the fund founded in Latvia may be any
credit institution registered in Latvia, a branch of a credit
institution in Latvia registered in a Member State or third
country, an investment firm registered in Latvia, or a branch of
an investment firm in Latvia registered in a Member State or
third country which is entitled to provide investment services
and non-core services, including holding of financial
instruments.
(2) The manager shall ensure that each fund has only one
custodial bank.
(3) Latvijas Banka shall ensure the supervision of a custodial
bank licensed in Latvia. The supervision of the custodial bank of
a third country fund referred to in Paragraph six of this Section
shall be performed by the supervisory authority of the third
country in which the custodial bank has its registered
office.
(4) Upon carrying out the obligations specified in this Law
and Regulation No 231/2013, a custodial bank shall act as an
honest, careful, and diligent proprietor, independently from the
manager, and ensure that services are provided with due
professionalism and diligence in the interests of the fund and
investors thereof.
(5) In order to prevent a conflict of interest among the
custodial bank, the manager, the fund, and the investors thereof,
the manager may not carry out the obligations of the custodial
bank. The prime broker that is a counterparty of the fund may
only carry out the obligations of the custodial bank of the
relevant fund if the obligations of the prime broker are
functionally and hierarchically separated from the obligations of
the custodial bank, the potential conflicts of interest are
controlled according to the internal procedures, and the fund
investors are informed thereof.
(6) A custodial bank of a Member State fund shall carry out
its obligations in the home Member State of the fund. A custodial
bank of a third country fund shall carry out its obligations in
the third country where the relevant fund has been founded, in
the home Member State of the fund manager, or in the reference
Member State of the abovementioned fund manager.
(7) The manager may select any credit institution registered
in a third country or an investment firm registered in a third
country as a custodial bank of the fund which has commenced the
provision of investment services and non-core services, including
holding of financial instruments, provided that the following
conditions are met:
1) the supervisory authority of the Member State in which it
is planned to market investment units of a third country fund and
Latvijas Banka as the supervisory authority of the manager have
entered into a cooperation and information exchange contract with
the supervisory authority of the custodial bank;
2) supervision equivalent to the requirements laid down for
the supervision of a custodial bank in Latvia is performed in the
country where the custodial bank has been founded, and also
equivalent minimum capital requirements are applicable to the
custodial bank;
3) the country where the custodial bank has been founded is
not included in the list compiled by the Financial Action Task
Force as a country or territory which does not cooperate;
4) Member States in which it is planned to market investment
units of a third country fund and Latvia as a home country of the
manager have entered into a contract with the country where the
custodial bank has been founded, the terms and conditions of
which are equivalent to the standards laid down in the
Organisation for Economic Co-operation and Development Model Tax
Convention on Income and on Capital, and ensure exchange of
information in the field of taxes;
5) it is provided for in the custodial bank agreement that the
custodial bank is liable to the fund or the investors thereof for
the compliance with the requirements laid down in Sections 54 and
55 of this Law.
(8) A custodial bank may, in exceptional cases, carry out
obligations for the fund or the manager thereof which may cause a
conflict of interest among the fund, the investors thereof, the
manager, and the custodial bank provided that the custodial bank
has functionally and hierarchically separated its other
obligations from the obligations of the custodial bank, potential
conflicts of interest are controlled according to the internal
procedures, and the fund investors are informed thereof.
(9) A custodial bank may use assets transferred into the
holding thereof if a written consent has been received from the
fund or the manager acting on behalf of the fund.
(10) If obligations of a custodial bank are carried out by an
investment firm, the own funds thereof may not be less than EUR
750 000.
[8 October 2015; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 48. Obligations of a
Custodial Bank
(1) A custodial bank shall have the following obligations:
1) to hold assets of the fund or the manager acting on behalf
of the fund in accordance with this Law, Regulation No 231/2013,
and the custodial bank agreement;
2) to ensure that the issue, sale, repurchase, and redemption
of investment units occur in accordance with this Law, Regulation
No 231/2013, and the operational rules of the fund;
3) to ensure that the value of investment units is calculated
in accordance with this Law, Regulation No 231/2013, and the
operational rules of the fund, and to execute orders of the
manager, unless they are in contradiction with this Law,
Regulation No 231/2013, the custodial bank agreement, and the
document of incorporation or the operational rules of the
fund;
4) to ensure that the payments specified in transactions with
the fund assets are duly made;
5) to ensure that the fund income is utilised in accordance
with the law, Regulation No 231/2013, and the document of
incorporation of the fund or the operational rules of the
fund.
(2) A custodial bank shall, upon request of Latvijas Banka,
provide information which it has received while carrying out
obligations of the custodial bank of the fund. Latvijas Banka
shall request that the supervisory authority of the custodial
bank of a third country fund provides the information necessary
from the custodial bank of a third country fund referred to in
Section 47, Paragraph six of this Law.
(3) A custodial bank has an obligation to bring claims of fund
investors against the manager on its own behalf, if relevant
circumstances so require. This shall not restrict the rights of
the fund investors to bring such claims on their own behalf.
(4) A custodial bank has an obligation to bring a counterclaim
if recovery proceedings are directed against the fund property in
connection with the liabilities thereof.
(5) A custodial bank shall be fully liable to the fund
investors and the manager for any losses which have been caused
if the custodial bank or the person with which the custodial bank
holds financial instruments has intentionally or due to
negligence violated the law or the custodial bank agreement or
has carried out its obligations negligently.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 49. Custodial Bank
Agreement
(1) A custodial bank agreement shall be an agreement which has
been entered into in writing between the fund or the manager
acting on behalf of the fund and the custodial bank and according
to which the custodial bank undertakes to maintain the fund
property and to execute transactions in the fund property, and
also to serve the fund accounts in accordance with this Law,
Regulation No 231/2013, the document of incorporation of the
fund, the operational rules of the fund, this agreement, and
orders of the manager.
(2) In addition to the terms and conditions of an agreement
contained in Regulation No 231/2013, a custodial bank agreement
shall indicate the following:
1) the firm name, registration number, licence number,
registered office, or location of the executive board of the
manager;
2) the firm name, registration number, licence number,
registered office, or location of the executive board of the
custodial bank;
3) the rights and obligations of the parties;
4) the procedures for servicing the fund accounts;
5) the amount of remuneration of the custodial bank and the
procedures for paying thereof;
6) the procedures for covering expenditures of the custodial
bank incurred while executing transactions in the fund property
or servicing the fund accounts;
7) the dispute settlement procedures;
8) other regulations resulting from the document of
incorporation or the operational rules of the fund.
(3) Parties may also include other terms and conditions in the
custodial bank agreement which are not in contradiction with this
Law, Regulation No 231/2013, the document of incorporation of the
fund, and the operational rules of the fund.
Section 50. Termination of a
Custodial Bank Agreement
(1) A custodial bank agreement shall terminate in the
following cases:
1) upon expiry of the time period specified in the
agreement;
2) upon mutual agreement of the parties to the agreement;
3) one party unilaterally withdraws from the agreement, taking
into account the time periods specified in Paragraph two of this
Section;
4) upon occurrence of circumstances as a result of which the
custodial bank no longer conforms to the requirements of the law
and Regulation No 231/2013;
5) the insolvency proceedings of a legal person have been
declared for the custodial bank;
6) upon termination of activities of the custodial bank;
7) upon commencement of the liquidation of the fund;
8) Latvijas Banka gives an order to the manager to change the
custodial bank;
9) in other cases specified in the custodial bank
agreement.
(2) A party which unilaterally withdraws from the agreement
has an obligation to notify the other party thereof three months
in advance, unless the custodial bank agreement provides for a
longer time period.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 51. Order Regarding Change
of the Custodial Bank
(1) Latvijas Banka has the right to give an order to the fund
or the manager acting on behalf of the fund to change the
custodial bank if the custodial bank violates the provisions of
this Law, Regulation No 231/2013, or the custodial bank agreement
or if it is necessary for the protection of legitimate interests
of the fund investors.
(2) In the case specified in Paragraph one of this Section,
the custodian bank agreement shall terminate within the time
period and in accordance with the procedures stipulated by
Latvijas Banka.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 52. Entering into a New
Custodial Bank Agreement
(1) The fund or the manager acting on behalf of the fund shall
ensure that, on the next day after termination of the custodial
bank agreement, a new custodial bank agreement enters into
effect, except for the case where the agreement terminates due to
the liquidation of the fund.
(2) If the fund or the manager acting on behalf of the fund
fails to enter into a new custodial bank agreement within the
time period specified in Paragraph one of this Section, it shall
commence liquidation of the fund.
Section 53. General Requirements for
the Holding of the Fund Assets
(1) A custodial bank shall ensure that all monies of the fund
are entered in one or several cash accounts of the custodial bank
opened on behalf of the manager, on behalf of the custodial bank
acting on behalf of the fund, or on behalf of the fund
itself.
(2) Upon accounting for monies or for financial instruments
held by the custodial bank and belonging to the fund or the
manager acting on behalf of the fund, the custodial bank shall
ensure that:
1) it is possible to separate, at any moment, the monies or
financial instruments belonging to one fund or the manager acting
on behalf of the fund from the monies or financial instruments of
another client of the custodial bank;
2) the accounting is regularly compared to the accounting of
the monies or financial instruments of a third party with which
the custodial bank holds monies or financial instruments of its
clients.
(3) A custodial bank which holds with a third party the monies
or financial instruments belonging to the fund or the manager
acting on behalf of the fund shall ensure that such monies or
financial instruments are identifiable separately from the monies
or financial instruments belonging to the third party or the
custodial bank itself.
(4) A custodial bank shall perform holding and accounting of
other assets if it has ascertained that the fund or the manager
acting on behalf of the fund holds the ownership rights to such
assets. The custodial bank shall constantly perform an inspection
of the abovementioned ownership rights on the basis of the
documents supporting the ownership rights provided by the fund or
the manager acting on behalf of the fund, and also the
information which the custodial bank may obtain from public
registers.
(5) Regulation No 231/2013 shall determine the rights and
obligations additionally imposed upon a custodial bank.
Section 54. Holding of Assets with a
Third Party
(1) A custodial bank may hold with a third party the financial
instruments or other fund assets if there is a justified reason
for this and it does not avoid complying with the requirements of
this Law.
(2) A custodial bank is entitled to hold the monies or
financial instruments of the fund with the following third
parties:
1) the central bank of a Member State if it provides such
service;
2) a credit institution registered in Latvia or a credit
institution registered in a Member State;
3) a credit institution registered in a third country;
4) a commercial company which operates on the financial market
of a third country and which is subject to the supervision of the
provision of investment services and non-core investment services
equivalent to the requirements adopted in Latvia.
(3) Upon attracting a third party for the holding of the
financial instruments of the fund or other fund assets, a
custodial bank shall comply with the following conditions:
1) exercise all due skill, care, and diligence in the
selection of the third party and during the entire period while
the financial instruments or other fund assets are held
therewith, exercise all due skill, care, and diligence in the
periodic review and regular supervision of the third party
carrying out obligations entrusted thereto;
2) regularly ascertain that the third party has an appropriate
organisational structure and sufficient experience in holding
financial instruments or other assets;
3) regularly ascertain that in a country where financial
instruments are held, the third party is subject to the
supervisory requirements governing activities equivalent to those
laid down in Latvia, including the minimum capital requirements,
and to the supervision thereof, and also ascertain that such
party is subject to an annual mandatory audit of a sworn auditor
upon receipt of an opinion on the existence of financial
instruments;
4) regularly ascertain that the third party holds the client
assets of the custodial bank separately from its own assets and
the assets of the custodial bank in such a way that they can be
clearly identified as assets belonging to clients of a particular
custodial bank;
5) the custodial bank is entitled to allow the third party to
use the fund assets transferred into holding of the third party
if the custodial bank has obtained consent from the fund or the
manager acting on behalf of the fund;
6) regularly ascertain that the third party complies with the
requirements brought forward for the custodial bank in Section
47, Paragraphs two, eight, and nine and Section 53, Paragraphs
three and four of this Law.
(4) If the legal acts of a third country provide for separate
holding of financial instruments with a commercial company only
registered in this third country, but there are no such
commercial companies in the relevant third country which would
conform to the requirements referred to in Paragraph three,
Clause 3 of this Section, the custodial bank may hold financial
instruments or other fund assets with such commercial company
until a commercial company corresponding to the requirements
brought forward for a third party in this Section is registered
in a third country.
(5) If a custodial bank holds financial instruments or other
fund assets in the commercial company of a third country referred
to in Paragraph four of this Section, the custodial bank shall
ensure that fund investors are informed of the fact that the
financial instruments or other fund assets are held with a
commercial company of a third country and of the grounds for such
holding, and also of the fact that the custodial bank has
obtained a written consent from the fund or the manager acting on
behalf of the fund for holding financial instruments or other
fund assets with a commercial company of a third country.
(6) A third party may hold financial instruments or other fund
assets with another person if the same requirements are complied
with in relation to such person as those imposed upon the third
party. The holding of financial instruments or other fund assets
with the third parties shall not release the custodial bank from
the liability specified in this Law for the carrying out the
obligations entrusted thereto.
(7) Services provided by the payment and financial instrument
settlement systems referred to in the law On Settlement Finality
in Payment and Financial Instrument Settlement Systems or similar
services provided by the financial instrument settlement systems
of third countries shall not be considered the holding of
financial instruments or other fund assets with a third party
within the meaning of this Section.
[8 October 2015; 23 September 2021 / Amendment to
Paragraph two, Clause 4 regarding the replacement of the words
"financial and capital market" with the words "financial market"
shall come into force on 1 January 2023. See Paragraph 19
of Transitional Provisions]
Section 55. Liability for the Loss
of Financial Instruments
(1) A custodial bank shall be liable to the fund or fund
investors for the loss of financial instruments held by the
custodial bank or third party. Regulation No 231/2013 shall
determine the conditions for considering financial instruments as
lost and the external circumstances under which the custodial
bank is released from liability for the loss of financial
instruments.
(2) In case of the loss of financial instruments, a custodial
bank shall immediately, as soon as possible, replace the lost
financial instruments to the fund or the manager acting on behalf
of the fund with financial instruments of the same category,
other financial instruments equivalent in value and liquidity to
the lost financial instruments, or disburse compensation in cash
corresponding to the value of the lost financial instruments. The
amount of the compensation shall be determined according to the
accounting value of the financial instruments belonging to the
fund on the day when establishing irreversible loss of financial
instruments.
(3) A custodial bank shall not be liable to the fund or fund
investors for the loss of financial instruments held by the
custodial bank or third party if the custodial bank may
demonstrate that the loss has incurred due to external
circumstances which the custodial bank has not been able to
influence by reasonable means and the consequences of which would
have been unavoidable despite the efforts to achieve the opposite
by reasonable means.
(4) A custodial bank shall not be liable to the fund or fund
investors for the loss of financial instruments with a third
party if:
1) all the requirements laid down in Section 54, Paragraph
four of this Law and Regulation No 231/2013 for the holding of
financial instruments with the third party have been complied
with;
2) a contract has been entered into by and between the
custodial bank and the third party under which the third party
assumes full liability for the holding of financial instruments
and the fund or the manager acting on behalf of the fund may, in
case of the loss of financial instruments, bring a claim for
damages against the third party or authorise the custodial bank
to bring such claim on behalf thereof;
3) a contract has been entered into by and between the
custodial bank and the fund or the manager acting on behalf of
the fund under which the custodial bank is released from the
payment of damages in case of the loss of financial instruments,
and the reason for entering into the contract referred to in
Clause 2 of this Paragraph is indicated.
(5) If regulatory framework of a third country provides for
holding of specific financial instruments with a commercial
company of such third country and there are no such commercial
companies in the third country which would conform to the
requirements laid down in Section 54, Paragraph three, Clause 3
of this Law, the custodial bank shall not be liable for the loss
of such financial instruments. The custodial bank shall not be
liable for the loss of financial instruments, provided that it
has also complied with the following additional requirements in
the case referred to in this Section:
1) the document of incorporation of the fund or the
operational rules of the fund provide for release of the
custodial bank from liability;
2) prior to investing the fund investors are informed of the
release of the custodial bank from liability and of the valid
reasons for such release;
3) the fund or the manager acting on behalf of the fund has
given an order to the custodial bank to hold financial
instruments with a commercial company of a third country;
4) a contract has been entered into by and between the
custodial bank and the fund or the manager acting on behalf of
the fund which provides for release of the custodial bank from
liability;
5) a contract has been entered into by and between the
custodial bank and the third party under which full liability for
the holding of financial instruments is transferred to a
commercial company of a third country, and the fund or the
manager acting on behalf of the fund may, in case of the loss of
financial instruments, bring a claim for damages against this
commercial company or authorise the custodial bank to bring such
claim on behalf thereof.
Chapter
VII
Disclosure Requirements
Section 56. Preparation, Review, and
Publication of the Annual Statement of the Fund Founded as an
Aggregate of Assets
(1) An external manager shall maintain accounting records of
an open-ended fund founded in Latvia and prepare the annual
statement of the open-ended fund in accordance with this Law, the
Accounting Law, and the regulations of Latvijas Banka, and also
in accordance with Regulation No 231/2013. Latvijas Banka shall
issue relevant regulations which have been developed on the basis
of the International Accounting Standards and the International
Financial Reporting Standards approved by the European
Commission.
(2) An external manager shall maintain accounting records of a
closed-ended fund founded in Latvia and prepare the annual
statement of the closed-ended fund in accordance with this Law,
the Accounting Law, and the regulations of Latvijas Banka, and
also in accordance with Regulation No 231/2013. Latvijas Banka
shall issue relevant regulations which have been developed on the
basis of Council Directive 86/635/EEC of 8 December 1986 on the
annual accounts and consolidated accounts of banks and other
financial institutions.
(3) An external manager which manages several funds shall
ensure that accounting records of each fund is maintained
separately.
(4) If the fund managed by an external manager and founded in
Latvia has acquired control in a company or issuer not admitted
on a regulated market, the external manager thereof shall also
prepare a consolidated annual statement of such fund. The
regulations of Latvijas Banka shall determine the procedures for
preparing a consolidated annual statement, taking into account
the provisions of Paragraphs one and two of this Section.
(5) An external manager which manages the fund founded in a
Member State or a third country shall ensure that the annual
statement and the consolidated annual statement of such fund are
prepared in accordance with the accounting standards existing in
the country where the fund has been founded.
(6) The annual reporting period of the fund shall coincide
with the reporting year of the external manager.
(7) A management body specified in the articles of association
of an external manager shall approve a sworn auditor which
performs audit of the annual statement and the consolidated
annual statement of the fund.
(8) Audit of the annual statement and the consolidated annual
statement of the fund founded in Latvia shall be performed in
accordance with the Law on Audit Services. The report of a sworn
auditor, including all comments, shall be published together with
the annual statement and the consolidated annual statement.
(9) An external manager which manages the fund founded in a
Member State (except for Latvia) or a third country shall ensure
that audit of the annual statement and the consolidated annual
statement of such fund is performed in accordance with the
accounting standards existing in the country where the fund has
been founded.
(10) Not later than within 10 days after approval of the
annual statement and the consolidated annual statement and not
later than six months after the end of the reporting year, an
external manager shall ensure that the annual statement and the
consolidated annual statement are published for each fund under
the management thereof founded in a Member State and for each
fund the investment units of which are marketed in a Member
State. The annual statement and the consolidated annual statement
shall be published in the Latvian language or the language which
is used in the field of international finance. A translation of
the annual statement and the consolidated annual statement shall
be published within a month after approval of the annual
statement and the consolidated annual statement. An external
manager may publish the relevant information on its website or
select another appropriate information medium or place for making
the information public.
(11) An external manager shall ensure that, not later than six
months after the end of the reporting year, the annual statement
and the consolidated annual statement of each fund under the
management thereof is submitted to Latvijas Banka and the
supervisory authority of the country where the fund has been
founded, unless the fund has been registered with Latvijas
Banka.
(12) If an external manager publishes the annual statement and
the consolidated annual statement of the fund in accordance with
the requirements of the Financial Instrument Market Law, the
information referred to in Paragraph thirteen of this Section
shall be provided to the investors upon their request. The annual
statement and the consolidated annual statement shall be
published not later than four months after the end of the
reporting year.
(13) The annual statement and the consolidated annual
statement of the fund shall include at least the following
information:
1) financial statements;
2) the manager's report on the financial standing and
characteristics of economic activity;
3) all significant changes in the information referred to in
Section 58 of this Law which have occurred over the reporting
year;
4) the sum total of the remuneration awarded to officials and
employees of an external manager during the reporting year,
indicating separately the fixed component and the variable
component of the remuneration and the number of recipients of
such components, and also the sum total of the component of
carried interest awarded by the fund, if such is provided
for;
5) the sum total of the remuneration awarded during the
reporting year to the officials and employees of an external
manager whose professional activities have a material impact on
the risk profile of the fund under the management thereof,
indicating separately the sums of the remuneration awarded to
such officials and employees.
(14) If the fund is managed by a registered manager, it shall
be allowed not to include the information referred to in
Paragraph thirteen, Clauses 3, 4, and 5 of this Section in the
annual statement and the consolidated annual statement of the
fund.
[28 April 2022; 23 September 2021; 13 October 2022 /
Amendment regarding the replacement of the word "Commission"
with the words "Latvijas Banka" shall come into force on 1
January 2023 and amendment to Paragraph ten regarding the
replacement of the words "may publish the relevant information on
its website or select another appropriate information medium or
place for making the information public" with the words "shall
publish the relevant information on its website" shall come into
force on 1 January 2024 and shall be included in the wording of
the Law as of 1 January 2024. See Paragraphs 19 and 23 of
Transitional Provisions]
Section 57. Preparation, Review, and
Publication of the Annual Statement of the Fund Founded as a
Commercial Company
(1) An open-ended fund shall maintain accounting records and
prepare the annual statement and the consolidated annual
statement of the open-ended fund in accordance with this Law, the
Accounting Law, and the regulations of Latvijas Banka, and also
in accordance with Regulation No 231/2013. Latvijas Banka shall
issue relevant regulations which have been developed on the basis
of the International Accounting Standards and the International
Financial Reporting Standards approved by the European
Commission.
(2) A closed-ended fund shall maintain accounting records and
prepare the annual statement and the consolidated annual
statement of the closed-ended fund in accordance with this Law,
the Accounting Law, and the regulations of Latvijas Banka, and
also in accordance with Regulation No 231/2013. Latvijas Banka
shall issue relevant regulations which have been developed on the
basis of Council Directive 86/635/EEC of 8 December 1986 on the
annual accounts and consolidated accounts of banks and other
financial institutions.
(3) A sworn auditor that performs audit of the annual
statement and the consolidated annual statement of the fund shall
be elected in accordance with the Commercial Law.
(4) Audit of the annual statement and the consolidated annual
statement of the fund shall be performed in accordance with the
Law on Audit Services. The report of a sworn auditor, including
all comments, shall be published together with the annual
statement and the consolidated annual statement.
(5) The fund shall, not later than within 10 days after
approval of the annual statement and not later than six months
after the end of the reporting year, submit to the State Revenue
Service a copy of the annual statement and of the report of the
sworn auditor together with an extract from the minutes of the
meeting of shareholders (members) regarding approval of the
annual statement. In addition to the documents specified in the
first sentence of this Paragraph, the fund preparing the
consolidated annual statement shall, not later than within 10
days after approval of the consolidated annual statement and not
later than six months after the end of the reporting year, also
submit a copy of the consolidated annual statement and of the
report of the sworn auditor to the State Revenue Service together
with an extract from the minutes of the meeting of shareholders
(members) regarding approval of the consolidated annual
statement. The fund shall submit the documents referred to in
this Paragraph either in paper form or in electronic form.
(6) The State Revenue Service shall, within five working days,
hand over by electronic means the documents referred to in
Paragraph five of this Section, if they have been submitted in
electronic form, or electronic copies of such documents, if they
have been submitted in paper form, to the Enterprise Register
which ensures that the received documents are publicly available.
The procedures for handing over and certifying electronic
documents shall be determined by an interdepartmental agreement
entered into by and between the State Revenue Service and the
Enterprise Register.
(7) After receipt of the documents referred to in Paragraph
six of this Section, the Enterprise Register shall publish them
on the website of the Enterprise Register.
(8) An open-ended fund shall, not later than six months after
the end of the reporting year, ensure publication of the annual
statement and the consolidated annual statement if such is
prepared. The open-ended fund may publish the relevant
information on its website or select another appropriate
information medium or place for making the information public. A
closed-ended fund shall ensure that the annual statement and the
consolidated annual statement, if such is prepared, are available
to the investors upon their request.
(9) If the annual statement and the consolidated annual
statement of the fund is published in accordance with the
requirements of the Financial Instrument Market Law, the
information referred to in Paragraph ten of this Section shall be
provided to the investors upon their request. The annual
statement and the consolidated annual statement shall be
published not later than four months after the end of the
reporting year.
(10) The annual statement and the consolidated annual
statement of the fund shall include the information referred to
in Section 56, Paragraph thirteen, Clauses 1, 2, and 3 of this
Law, and also at least the following information:
1) the sum total of the remuneration awarded to officials and
employees of the manager during the reporting year, indicating
separately the fixed component and the variable component of the
remuneration and the number of recipients of such components, and
also the sum total of the component of carried interest awarded
by the fund, if such is provided for;
2) the sum total of the remuneration awarded during the
reporting year to the officials and employees of the manager
whose professional activities have a material impact on the risk
profile of the fund under the management thereof, indicating
separately the sum of the remuneration awarded to such officials
and employees.
(11) If the fund is managed by a registered manager, it shall
be allowed not to include the information referred to in
Paragraph ten, Clauses 1 and 2 of this Section and Section 56,
Paragraph thirteen, Clause 3 in the annual statement and the
consolidated annual statement of the fund.
[30 September 2021; 23 September 2021; 28 April 2022; 13
October 2022 / Amendment regarding the replacement of the
word "Commission" with the words "Latvijas Banka" and amendment
regarding the replacement of the words "regulatory provisions"
with the word "regulations" shall come into force on 1 January
2023 and amendment to Paragraph eight regarding the replacement
of the words "may publish the relevant information on its website
or select another appropriate information medium or place for
making the information public" with the words "shall publish the
relevant information on its website" shall come into force on 1
January 2024 and shall be included in the wording of the Law as
of 1 January 2024. See Paragraphs 19 and 23 of
Transitional Provisions]
Section 58. Disclosure to
Investors
(1) The manager shall ensure that, prior to investing, the
operational rules of the fund, the last prepared annual
statement, and the consolidated annual statement, if such is
prepared, the last calculated net asset value of the fund or the
last calculated value of an investment unit, or the market price
is available to a fund investor in respect of each Member State
fund under management of the manager and each fund the investment
units of which it markets in Member States. If the document of
incorporation of the fund (articles of association or partnership
contract) includes operational rules of the fund, it shall not be
necessary for a registered manager to provide investors with an
individual document which includes the operational rules of the
fund.
(2) The operational rules of the fund shall include at least
the following information:
1) a description of the investment objective, investment
policy and strategy of the fund;
2) information on the place of founding, type, and strategy of
the master fund if the fund is a feeder fund, and the place of
founding, type, and strategy of the funds in which the fund
intends to invest if the fund investing is a fund of funds;
3) a description of the types of such assets in which the fund
intends to invest, the types of transactions which the fund may
execute, and all the risks associated with such transactions, and
also all investment restrictions set;
4) a description of the circumstances under which the fund may
use the leverage, the permitted types and sources of the leverage
transactions, the risks associated with the leverage, any
restrictions on the use of the leverage and conditions for a
collateral and re-use of the fund assets, and also the maximum
amount of the leverage which the manager is entitled to use on
behalf of the fund;
5) a description of the procedure for the change of the
investment strategy or the investment policy of the fund;
6) a description of the legal consequences resulting from the
contracts which are related to the fund investments, including
also information on the place for the settlement of disputes and
on the applicable laws and regulations, the recognition and
enforcement of a court ruling in the country where the fund
operates;
7) information on the identity of the manager, the custodial
bank of the fund, the sworn auditor, the external evaluator, if
such has been attracted, and other service providers, a
description of their obligations and the rights of the
investors;
8) a description of the fact how the manager ensures
compliance with the requirements of Section 16, Paragraph ten of
this Law;
9) a description of the fund management service delegated by
the manager, the service of the holding of resources delegated by
a custodial bank of the fund, and also information on the
identity of the delegated service provider and potential
conflicts of interest;
10) a description of the procedure for the valuation of the
fund assets and of the methodology for the determination of the
asset value which also includes methods employed to valuate
illiquid assets or to valuate assets the value of which is
determined with limitations;
11) a description of the management of liquidity risk of an
open-ended fund, including information on the exercise of the
right to repurchase investment units both under normal and
exceptional circumstances, and also the procedures for
repurchasing and taking back the current investment units, the
methods for and frequency of calculation of the sale and
repurchase prices of investment units, and also information on
the fact where and how often theses prices are published;
12) a description of the commissions, charges, and
expenditures related to the issue of investment units, and also
the maximum amounts thereof which are directly or indirectly
covered by investors;
13) a description of ensuring fair treatment of investors. If
an investor is treated differently or he or she has the right to
be treated differently, the description shall explain why and
which categories of investors are treated differently, and also
indicate legal or economic links between such investors and the
fund or the manager, if any;
14) the conditions and procedure for the issue and marketing
of investment units;
15) past performance indicators of the fund;
16) information on the identity of the prime broker and any
significant agreement between the fund and the prime broker
thereof, and also the following:
a) a description of the prevention of potential conflicts of
interest;
b) the conditions contained in the custodial bank agreement,
if such are provided for and refer to the transfer or re-use of
the fund assets;
c) information on any potential transfer of liability to the
prime broker;
17) information on the fact when and how the information
specified in Paragraphs five and six of this Section is disclosed
to investors;
18) information on the fact when and how amendments to the
operational rules of the fund and the last prepared annual
statement as well as the consolidated annual statement, if such
is prepared, will be made available to investors.
(3) Prior to investing in the fund, the manager shall inform
an investor of the cases provided for in the custodial bank
agreement where the custodial bank is released from liability in
accordance with Section 55, Paragraph three of this Law. The
manager shall ensure that all fund investors are immediately
informed of changes in the extent of liability of the custodial
bank.
(4) If the requirements of the Financial Instrument Market Law
for the publication of an issue prospectus are binding upon the
fund, the manager shall, in addition to the respective
requirements, also provide in the prospectus or separate annex
the information referred to in Paragraphs one, two, and three of
this Section.
(5) The manager shall individually provide the following
information to the investors on each Member State fund under
management of the manager and each fund the investment units of
which it markets in a Member Stater:
1) the share of illiquid assets of the fund or of assets the
value of which is determined with limitations and to which
special measures are applied, as referred to in Regulation No
231/2013 and expressed as a percentage;
2) changes in the methods which the manager will apply to
manage liquidity of the fund;
3) the current risk profile of the fund and the description of
the risk management system used to manage the risks of the
manager associated with the activities of the fund.
(6) The manager shall individually, on a periodic basis,
provide the following information to the investors on each Member
State fund under management of the manager which uses the
leverage, and also on each fund the investment units of which the
manager markets in a Member Stater and which uses the
leverage:
1) changes related to the maximum amount of the leverage which
the manager may use on behalf of the fund, and also the right to
re-use the collateral received or the guarantees granted when
engaging in the leverage transactions;
2) the total amount of the leverage which this fund has
assumed.
(7) Regulation No 231/2013 shall determine the disclosure
obligation and periodicity in respect of the information referred
to in Paragraphs five and six of this Section.
[8 October 2015; 20 June 2019]
Section 59. Provision of Information
to Latvijas Banka
(1) A manager registered in Latvia shall, once a year, submit
to Latvijas Banka the information for the compilation of
statistical data and the information referred to in Article
110(1) of Regulation No 231/2013 according to a model template
form included in Annex IV thereof in accordance with the
procedures stipulated by Latvijas Banka.
(2) A manager licensed in Latvia shall provide to Latvijas
Banka the information referred to in Paragraph one of this
Section and the following information on each Member State fund
under the management thereof and each fund the investment units
of which it markets in a Member State:
1) the share of illiquid assets of the fund or of assets the
value of which is determined with limitations and to which
special measures are applied, as referred to in Regulation No
231/2013 and expressed as a percentage;
2) changes in the methods which the manager will apply to
manage liquidity of the fund investments;
3) the risk profile of the fund and the risk management
systems which are used by the fund to manage the market risk,
liquidity risk, counterparty risk, operational risk, and other
risks;
4) the main types of such assets in which the fund has
invested;
5) results of the stress tests performed in accordance with
Section 25, Paragraph five and Section 26, Paragraph two of this
Law.
(3) In order to enable Latvijas Banka to evaluate to what
extent the leverage used by funds under management of the manager
contributes to the build-up of systemic risk in the financial
system, risk of unpredictable development of the market or poses
a threat to long-term growth of economy, a licensed manager shall
provide the following information to Latvijas Banka on each fund
under the management thereof which uses the leverage in a
substantial amount:
1) the total amount of the leverage and the distribution in
the leverage which is related to the following:
a) borrowing of cash or securities;
b) use of derivative financial instruments;
c) re-use of the fund assets to increase the leverage;
2) the identity of the five largest lenders of cash or
securities and the amount of resources borrowed from each of
them.
(4) A third country manager licensed in Latvia shall comply
with the requirements of Paragraph three of this Section in
respect of the Member State funds under the management thereof
and the third country funds the investment units of which it
markets in any of the Member States.
(5) Regulation No 231/2013 shall determine the leverage
transactions, the procedures for calculating the amount of the
leverage, and the criteria for considering the amount of the
leverage as significant, and also the content of the information
to be provided and the periodicity of the submission thereof.
(6) For the purpose of performance of the supervisory
functions of Latvijas Banka, including efficient monitoring of
systemic risk, and also the compilation of statistical data,
Latvijas Banka has the right to request that a registered or
licensed manager also provides the information not referred to in
this Section. Latvijas Banka shall inform the European Securities
and Markets Authority of the fact that additional information is
necessary for efficient monitoring of systemic risk.
(7) Latvijas Banka has the right to request also such
information from the manager the preparation of which is
requested by the European Securities and Markets Authority under
exceptional circumstances and in cases where it is necessary to
ensure stability and integrity of the financial system or to
contribute to long-term growth of economy.
(8) Latvijas Banka shall determine the procedures for
preparing and submitting the information referred to in this
Section.
[20 June 2019; 28 April 2022; 23 September 2021 /
Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Section 60. Use of Information in
Cross-border Supervision of Activities of the Manager
(1) Latvijas Banka shall analyse the information referred to
in Section 59 of this Law in order to determine to what extent
the leverage used by the fund may pose a systemic risk to the
financial system or to long-term growth of economy.
(2) Latvijas Banka shall provide the information referred to
in Section 10, Paragraph eight and Section 59 of this Law to the
supervisory authorities of other Member States, the European
Securities and Markets Authority, and the European Systemic Risk
Board in conformity with the provisions of Section 87 of this
Law. Latvijas Banka shall immediately inform the supervisory
authorities of the relevant Member States of the manager under
the supervision thereof or the fund under management of such
manager which may pose a significant counterparty risk to a
credit institution or other systemically linked financial
institutions in the relevant Member State.
(3) In order to ensure stability and integrity of the
financial system, Latvijas Banka shall, at least 10 working days
prior to taking the decision to impose the restrictions referred
to in Section 81, Paragraph seven, Clauses 13 and 20 of this Law
on the manager, notify the European Securities and Markets
Authority, the European Systemic Risk Board, and the supervisory
authority of the relevant fund of this decision. Latvijas Banka
shall provide information in the notification to the
abovementioned authorities on the restrictions, the grounds for
imposing restrictions, and indicate the date when the
abovementioned restrictions enter into effect. Latvijas Banka
may, under exceptional circumstances, take the decision on entry
into effect of the restrictions prior to the notifying it to the
authorities indicated in the first sentence of this
Paragraph.
(4) Latvijas Banka shall evaluate recommendations of the
European Securities and Markets Authority regarding conformity of
the restrictions imposed on the manager with the specific case.
If the European Securities and Markets Authority agrees with the
expected decision of Latvijas Banka, it shall enter into effect
within the time period stipulated by Latvijas Banka. Latvijas
Banka may take the decision without taking into account the
recommendations of the European Securities and Markets Authority,
however, Latvijas Banka shall give the grounds to the European
Securities and Markets Authority for not taking into account the
recommendations.
(5) Upon imposing the restrictions referred to in Section 81,
Paragraph seven, Clauses 13 and 20 of this Law with regard to
which it is necessary to notify the European Securities and
Markets Authority in accordance with Paragraph three of this
Section, Latvijas Banka shall take into account the requirements
laid down in Regulation No 231/2013 for the assessment of the
risks associated with the impact which the amount of the leverage
has on stability and integrity of the financial system.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 60.1 Disclosure
of the Engagement Policy
(1) If the investment policy of the fund provides for
investing fund resources in shares of such joint-stock company
the registered office of which is in a Member State and the
shares of which are admitted on a regulated market of a Member
State (hereinafter in this Section - the joint-stock company), a
licensed manager shall develop the engagement policy.
(2) Upon developing the engagement policy, the manager shall
envisage how activities of the joint-stock company will be
supervised at least in the following fields:
1) strategy;
2) results and risk of financial and non-financial
activities;
3) capital structure;
4) social impact;
5) environmental impact;
6) corporate governance.
(3) In addition to the information referred to in Paragraph
two of this Section, the manager shall envisage in the engagement
policy how the following will occur:
1) a dialogue with the joint-stock company;
2) exercising of the voting rights and other rights arising
from shares in the joint-stock company, including by providing
for the criteria for determining insignificant votes;
3) cooperation with other shareholders of the joint-stock
company;
4) communication with stakeholders of the joint-stock
company;
5) management of the actual and potential conflicts of
interest in relation to engagement in the management of the
joint-stock company.
(4) The manager shall, each year by 1 August, publish a report
on the implementation of the engagement policy. The report shall
be provided for the period from the day when the engagement
policy was published for the first time or the last report on the
implementation of the engagement policy was published. In
addition the report shall include the following:
1) general information on how the manager is implementing the
voting rights;
2) an explanation of the most significant votes;
3) information on the use of the services of authorised
advisers (within the meaning of Section 1, Paragraph one, Clause
106 of the Financial Instrument Market Law).
(5) In addition to the information referred to in Paragraph
four of this Section, the manager shall publish its votes in the
meetings of shareholders of the joint-stock company. The manager
need not disclose the votes which, according to the engagement
policy, are considered to be insignificant.
(6) The manager need not apply one or several requirements of
this Section. If the manager does not apply any of the
requirements of this Section, it shall provide information on
which requirement is not being applied and the grounds for such
action.
(7) The manager shall ensure that the information referred to
in Paragraphs two, three, four, five, and six of this Section is
publicly available on its website free of charge. If the manager
does not have its website, the information shall be published on
the website of a shareholder of the manager.
[20 June 2019]
Chapter
VIII
Acquisition of a Qualifying Holding or Control in a Capital
Company
Section 61. General Requirements for
the Determination of a Qualifying Holding or Control
(1) The provisions of this Chapter shall be applicable to the
following:
1) the manager that manages one or several funds which,
individually or jointly, on the basis of an agreement, acquire
control in a company not admitted on a regulated market;
2) the managers that, on the basis of an agreement, invest
resources of the funds managed by them in a company which is not
admitted on a regulated market and in which these funds acquire
control.
(2) The provisions of this Chapter shall not be applicable if
the control is acquired in one of the following companies:
1) a company which, according to the information included in
the annual statement or the consolidated annual statement
thereof, conforms to at least two of the following criteria:
a) the average number of employees in the reporting year is
less than 250;
b) the sum total of assets does not exceed EUR 43 million;
c) the annual net turnover does not exceed EUR 50 million;
2) a special purpose vehicle the purpose of which is to
purchase or manage immovable property.
(3) The requirement regarding the provision of a notification
in accordance with the procedures laid down in Section 62 of this
Law shall also be applicable to the managers that manage funds
which acquire a holding without the voting rights in a company
not admitted on a regulated market.
(4) The requirement regarding the provision of a notification
in accordance with the procedures laid down in Paragraphs one,
two, and three of Section 62 and the restrictions on reduction of
assets referred to in Section 65 of this Law shall also be
applicable to the manager the fund managed by which acquires
control in the issuer.
(5) Within the meaning of this Chapter, control shall
constitute the acquisition of more than 50 per cent of the voting
rights in a company not admitted on a regulated market.
(6) Upon determining the amount of the holding acquired by the
fund, the following voting rights acquired by the fund indirectly
shall also be taken into account:
1) the voting rights which the commercial company controlled
by the fund is entitled to exercise;
2) the voting rights which a natural or legal person is
entitled to exercise on his or her behalf but for the benefit of
the fund or a commercial company controlled by it.
(7) Upon determining the amount of the holding acquired by the
fund, all shares (stocks) which give the voting rights shall be
taken into account, including those on the exercising of which a
restriction has been imposed.
(8) Acquisition of control in the issuer shall be determined
in accordance with the provisions of the Financial Instrument
Market Law for the expression of a share buy-back offer.
(9) If the information referred to in Section 63, Paragraph
two of this Law contains a commercial secret of a capital
company, employees have an obligation not to disclose the
information which has come into their disposal and which
constitutes a commercial secret of the employer. The employer has
an obligation to indicate in writing to employees which
information is considered to be a commercial secret.
(10) Upon determining the amount of the holding acquired by
the fund which ensures control in a capital company and the
method for the calculation thereof, the legal acts of the country
in which the registered office of the capital company is located
shall be applied.
Section 62. Notification Regarding
Acquisition of a Qualifying Holding and Control in a Company not
Admitted on a Regulated Market
(1) The manager shall, immediately but not later than within
10 working days from the day since the fund has acquired or
alienated shares (stocks) with the voting rights in a company,
notify Latvijas Banka of the proportion of its shares with the
voting rights in the company if this proportion reaches, exceeds
10, 20, 30, 50, and 75 per cent, or falls below the
abovementioned percentage.
(2) The manager that manages one or several funds which,
individually or jointly, on the basis of an agreement, acquire
control in a company not admitted on a regulated market, and also
managers that, on the basis of an agreement, invest resources of
the funds managed by them in a company which is not admitted on a
regulated market and in which these funds acquire control shall,
immediately but not later than within 10 working days after the
abovementioned fact, notify about it Latvijas Banka, the company,
and the shareholders (members) of the company which may be
ascertained by using the register of shareholders (members) of
the company or public registers.
(3) The notification referred to in Paragraph two of this
Section shall contain the following information:
1) the distribution of the voting rights on the day of
submission of the notification expressed in figures and as a
percentage of the equity capital and of the number of shares
(stocks) with the voting rights after the acquisition or
alienation thereof;
2) the controlled commercial companies through which the fund
has the voting rights;
3) the identity of the fund, even if the fund is not entitled
to exercise the voting rights, and the identity of the natural or
legal person that is entitled to exercise the voting rights on
behalf of the fund;
4) the date on which the proportion of the shares (stocks)
with the voting rights reached, exceeded the proportion of the
voting rights specified in Paragraph one of this Section, or fell
below it.
(4) The executive board of the company shall immediately
inform representatives of employees of the company or, if there
are no such representatives, employees themselves of the fact
that the fund under management of the manger has acquired control
in the company, and shall provide them with the information
referred to in Paragraph three of this Section.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 63. Disclosure of
Information on Acquisition of Control
(1) The manager that manages one or several funds which,
individually or jointly, on the basis of an agreement, acquire
control in a company not admitted on a regulated market or an
issuer, and also managers that, on the basis of an agreement,
invest resources of the funds managed by them in a company which
is not admitted on a regulated market or an issuer and in which
these funds acquire control shall, immediately but not later than
within 10 working days after the abovementioned fact, notify
about it Latvijas Banka, the company, or the issuer and their
shareholders (members) which may be ascertained by using the
register of shareholders (members) of the company or issuer or by
using public registers.
(2) The manager shall provide the following information and
documents in the notification:
1) the registration number, licence number, registered office,
and location of the executive board of the managers referred to
in Paragraph one of this Section;
2) the policy for the prevention and management of conflicts
of interest among the fund, the manager, and the company or the
issuer;
3) the information on the measures the objective of which is
to prevent special advantages in contracts among the manager, the
fund, and the company or the issuer;
4) the external and internal communication policy of the fund
and the company or the issuer and its employees.
(3) The executive board of the company or of the issuer shall
immediately inform representatives of employees of the company or
issuer or, if there are no such representatives, employees
themselves of the fact that the fund under management of the
manger has acquired control in the company or the issuer, and
shall provide them with the information referred to in Paragraph
two of this Section.
(4) Managers that manage the funds which acquire control in a
company not admitted on a regulated market shall, in accordance
with the provisions of Paragraph one of this Section,
immediately, but not later than within 10 working days after the
abovementioned fact, inform the company and the shareholders
(members) thereof which may be ascertained by using the register
of shareholders (members) of the company or by using public
registers of future commercial activities of the company and
safeguarding of jobs, also of all significant changes in the
conditions of employment.
(5) The executive board of the company shall immediately
notify the information referred to in Paragraph two of this
Section to representatives of employees of the company or, if
there are no such representatives, to employees themselves.
(6) Managers that manage the funds which acquire control in a
company not admitted on a regulated market shall, in accordance
with the provisions of Paragraph one of this Section, immediately
but not later than within 10 working days after the
abovementioned fact, notify Latvijas Banka and fund investors of
the amount of the transaction in the acquisition of holding and
the source of financing.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 64. Requirements for the
Preparation of the Annual Statement for the Fund which Has
Acquired Control in a Company not Admitted on a Regulated
Market
(1) The manager that manages one or several funds which,
individually or jointly, on the basis of an agreement, acquire
control in a company not admitted on a regulated market shall
ensure that one of the following requirements is complied
with:
1) the executive board of the company not admitted on a
regulated market makes available the annual statement which has
been prepared in conformity with the requirements laid down in
Paragraph two of this Section to representatives of employees of
the company or, if there are no such representatives, to
employees themselves within a time period in which such annual
statement is prepared in accordance with laws and
regulations;
2) the annual statement and the consolidated annual statement
of the fund which have been prepared in conformity with the
requirements of this Law shall include the additional information
referred to in Paragraph two of this Section on the company not
admitted on a regulated market.
(2) Additional information which is included in the annual
statement and the consolidated annual statement of the company or
the fund shall contain fair representation of the development of
the company, reflecting the standing as at the end date of the
reporting period. The statement shall also indicate the
following:
1) all significant events after the end of the reporting
period;
2) future development plans of the company;
3) information on acquisition of own shares of the
company.
(3) The manager that manages the fund referred to in Paragraph
one of this Section shall, in addition to the requirements of
Paragraph one, comply with one of the following requirements:
1) make all efforts to ensure that the executive board of the
company not admitted on a regulated market makes available the
annual statement of the company to representatives of employees
of the company or, if there are no such representatives, to
employees themselves not later than six months after the end of
the reporting year;
2) make available the annual statement of the company not
admitted on a regulated market to fund investors not later than
six months after the end of the reporting year or on the day when
the annual statement of the company not admitted on a regulated
market is prepared in accordance with the legal acts of the
country where the fund has been founded.
Section 65. Restrictions on the
Reduction of Assets
(1) The manager that manages one or several funds which,
individually or jointly, on the basis of an agreement, acquire
control in a company or issuer not admitted on a regulated
market, taking into account the restrictions referred to in
Paragraph two of this Section, is not entitled, for 24 months,
to:
1) facilitate, support, or instruct to perform distribution,
reduction of equity capital, repurchase of shares (stocks), or
acquisition of the own shares (stocks) of the company;
2) vote at the meeting of shareholders (members) of the
company for distribution, reduction of equity capital, repurchase
of shares, or acquisition of the own shares (stocks) of the
company;
3) allow distribution, reduction of equity capital, repurchase
of shares, or acquisition of the own shares (stocks) of the
company.
(2) The restrictions imposed on the manager in Paragraph one
of this Section shall be applicable to the following
activities:
1) any distribution to shareholders (members) if the own funds
indicated in the annual statement of the company as at the end
date of the last reporting year is less or would become less
after such distribution than the paid equity capital, plus the
reserves which may not be distributed in accordance with the laws
and regulations or the articles of association;
2) distribution of such sum to shareholders (members) the
amount of which exceeds the sum of the profit of the reporting
year and the retained earnings of the previous years, and
reserves, the sum being reduced by uncovered losses of the
previous years and the sum included in the reserve which has been
determined in accordance with the laws and regulations or the
articles of association;
3) any reduction of the own funds below the amount referred to
in Paragraph two, Clause 1 of this Section as a result of the
acquisition of the own shares (stocks) of the company or
acquisition of the shares (stocks) of the company acquired
previously or just recently which is performed by a person on his
or her behalf but for account of the company.
(3) Within the meaning of this Section, the disbursement of
dividends as well as other payments to shareholders (members)
resulting from the rights attached to the shares (stocks) shall
be considered distribution.
(4) The provisions of this Section regarding reduction of
equity capital shall not be applicable to cases where the
subscribed equity capital is reduced in order to cover losses or
to increase the non-distributable reserve if after this activity
the sum in this reserve does not exceed 10 per cent of the
reduced subscribed equity capital.
(5) In respect of the acquisition of the own shares (stocks)
of the company, the company shall take into account the
requirements of the Commercial Law.
Chapter
IX
Rights of Member State Managers to the Management of Member State
Funds and the Marketing of Investment Units
Section 66. Rights of a Manager
Licensed in Latvia to Market Investment Units of a Member State
Fund in Latvia
(1) The provisions of this Section shall be applicable to a
manager licensed in Latvia which wishes to market in Latvia
investment units of the fund which is under the management
thereof and founded in Latvia or investment units of a Member
State fund under the management thereof.
(2) If the fund referred to in Paragraph one of this Section
is a feeder fund, then the investment units thereof may be
marketed provided that also the master fund is a Member State
fund under management of a Member State manager.
(3) In order to commence marketing of investment units of the
fund, the manager shall submit a notification to Latvijas Banka,
appending the following information and documents thereto:
1) the operational programme, indicating information on the
fund the investment units of which it wishes to market;
2) information on the place of founding of the fund;
3) the document of incorporation of the fund;
4) the operational rules of the fund;
5) information on the custodial bank of the fund;
6) information on the place of founding of the master fund if
the fund is a feeder fund;
7) the last prepared annual statement and the consolidated
annual statement, if such is prepared, information on the last
calculated net asset value of the fund or the last calculated
value of an investment unit or market price;
8) the procedures for ensuring marketing of investment units
only for professional investors;
9) the key information document developed in accordance with
the requirements of Chapter II, Section II of Regulation No
1286/2014 if investment units of the fund are to be marketed to
investors that are not professional investors;
10) information on the address which is necessary for Latvijas
Banka to be able to write out an invoice or notify Latvijas Banka
of the payments to be made;
11) information on how taking of the measures referred to in
Section 68, Paragraph four of this Law will be ensured.
(4) Latvijas Banka shall, within 20 working days after receipt
of all the documents prepared in accordance with the requirements
of laws and regulations, take the decision to authorise the
manager to market investment units.
(5) The manager has the right to commence marketing of
investment units on the day following receipt of the decision of
Latvijas Banka. Latvijas Banka shall also communicate the
abovementioned decision to the supervisory authority of the
Member State manager and fund.
(6) Latvijas Banka shall take the decision not to authorise
marketing of investment units of the fund if the fund management
performed by the manager or the manager itself does not conform
to the requirements of this Law.
(7) If amendments are expected to the documents referred to in
Paragraph three of this Section, the manager shall inform
Latvijas Banka thereof at least a month prior to the entry into
effect of these amendments. The manager shall inform Latvijas
Banka of any unplanned amendments immediately after entry into
effect thereof.
(8) If the planned amendments to documents referred to in
Paragraph seven of this Section do not correspond to the fund
management performed by the manager or the manager itself does
not conform to the requirements of this Law, Latvijas Banka shall
take the decision not to authorise making of amendments.
(9) If the planned amendments referred to in Paragraph seven
of this Section have entered into effect, although Latvijas Banka
has not authorised to make amendments to the relevant documents
or the unplanned amendments to documents do not conform to the
fund management performed by the manager, or the manager itself
does not conform to the requirements of this Law, Latvijas Banka
has the right to impose the sanctions and restrictions specified
in this Law.
[8 October 2015; 30 March 2017; 30 September 2021; 23
September 2021 / Amendment regarding the replacement of
the word "the Commission" with the words "Latvijas Banka" shall
come into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 67. Rights of a Manager
Licensed in Latvia to Market Investment Units of a Member State
Fund in Other Member States
(1) The provisions of this Section shall be applicable to a
manager licensed in Latvia which wishes to market in other Member
States investment units of the fund which is under the management
thereof and founded in Latvia or investment units of a Member
State fund under the management thereof.
(2) If the fund referred to in Paragraph one of this Section
is a feeder fund, then the investment units thereof may be
marketed provided that also the master fund is a Member State
fund under management of a Member State manager.
(3) In order to commence marketing of investment units of the
fund, the manager shall submit a notification to Latvijas Banka
appending information thereto on the Member States in which it is
planned to market investment units, and also the documents
referred to in Section 66, Paragraph three of this Law.
(4) Latvijas Banka shall, within 20 working days after receipt
of all documents prepared in accordance with the requirements of
the laws and regulations and submitted by using electronic media,
send a notification and documents to the supervisory authority of
the manager and fund of such Member State in which it is planned
to market investment units of the fund. Latvijas Banka shall
electronically forward the notification if the fund management
performed by the manager and the manager itself conform to the
requirements of this Law. Latvijas Banka shall append a
confirmation to the notification that the manager is authorised
to manage the fund in accordance with the investment strategy
indicated in the description of the activities thereof.
(5) Latvijas Banka shall immediately inform the manager of
sending a notification to the supervisory authorities of the
Member State manager and of the fund.
(6) The manager may commence marketing of investment units of
the fund in another Member State from the day when a notification
of Latvijas Banka has been received.
(7) The manager shall ensure that investment units are only
marketed to professional investors in accordance with the
procedures and under supervision laid down in the legal acts of
the host Member State of the manager.
(8) The notification referred to in Paragraph three and the
confirmation referred to in Paragraph four of this Section shall
be drawn up in the language which is used in the field of
international finance.
(9) The manager shall notify Latvijas Banka in writing of
amendments to the information and documents referred to in
Paragraph three of this Section:
1) at least 30 days prior to making of amendments;
2) without delay if amendments have been unplanned and
Latvijas Banka has not been notified of the making thereof.
(10) The information and documents which have been provided in
accordance with Paragraph nine, Clause 1 of this Section shall be
examined by Latvijas Banka within 15 working days. If it is
established during examination of the information and documents
that, due to the planned amendments, the fund management
performed by the manager or the manager itself will no longer
conform to the requirements of this Law, Latvijas Banka shall
notify the manager thereof and shall inform the supervisory
authority of the host Member State of the manager.
(11) Latvijas Banka shall immediately inform the supervisory
authority of the host Member State of the manager of the
sanctions and supervision measures imposed on the manager due to
the fact that, regardless of receipt of the notification of
Latvijas Banka referred to in Paragraph ten of this Section, such
amendments have been made to the information and documents due to
which the fund management performed by the manager or the manager
itself no longer conforms to the requirements of this Law.
(12) If amendments have been made to the information and
documents referred to in Paragraph three of this Section;
however, they do not affect the conformity of the fund management
performed by the manager or of the manager itself with the
requirements of this Law, Latvijas Banka shall, within 30 days,
inform the supervisory authority of the host Member State of the
manager of the amendments made.
[8 October 2015; 30 September 2021; 23 September 2021 /
Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Section 67.1 Rights of a
Manager Licensed in Latvia to Terminate the Marketing of
Investment Units of a Member State Fund in Other Member
States
(1) A manager which has commenced, in another Member State,
the marketing of investment units of a fund under its management
and founded in Latvia or investment units of a Member State fund
under its management is entitled to discontinue the marketing of
investment units of the fund, including investment certificates
of all or some investment funds, in such Member State, if it
submits a notification to Latvijas Banka in which the information
on the fulfilment of all of the following conditions is
indicated:
1) an offer to repurchase or redeem, free of any charges of
Latvijas Banka, all such investment units of funds (except for
closed-ended funds and European long-term investment funds the
operational provisions of which are governed by Regulation No
2015/760) which are marketed to investors in the relevant Member
State:
a) has been made;
b) has been publicly available for at least 30 working
days;
c) has been addressed, directly or through financial
intermediaries, individually to all investors in the relevant
Member State whose identity is known;
2) a notification regarding the intention to terminate the
marketing of investment units and the taking of the measures
necessary for ensuring marketing is made public, including by
using electronic means of communication;
3) any liabilities arising from a contract with financial
intermediaries or outsourced service providers are modified or
terminated with effect from the date which is considered the day
of terminating the marketing of investment units in order to
prevent either direct or indirect start or continuation of the
marketing of the investment units of the fund after terminating
the marketing of investment units.
(2) From the day when the marketing of investment units is
terminated, the manager is prohibited to directly or indirectly
market investment units of the fund in the Member State regarding
which it has provided a notification in accordance with the
procedures laid down in Paragraph one of this Section.
(3) If the notification submitted by the manager contains the
information indicated in Paragraph one of this Section, Latvijas
Banka shall, within 15 working days, forward the notification to
the supervisory authority of the host Member State of the manager
and to the European Securities and Markets Authority. Latvijas
Banka shall immediately inform the manager of forwarding the
notification.
(4) From the day when the marketing of investment units is
terminated, the manager is prohibited to perform pre-marketing of
investment units of the funds indicated in the notification
referred to in Paragraph one of this Section for 36 months,
including to provide information or to notify of similar
investment strategies or investment objects in the Member State
indicated in the notification.
(5) The manager has the obligation to provide the information
referred to in Section 58 of this Law to Latvijas Banka and the
fund investors in the relevant Member State which shall retain
the investment units of the fund after terminating the marketing
of investment units of the fund. In providing the information,
the manager is entitled to use any electronic means of
communication.
(6) Latvijas Banka shall send information to the supervisory
authority of the relevant Member State on amendments to the
information and documents referred to in Section 66, Paragraph
three, Clauses 1, 2, 3, 4, 5, 6, and 7 of this Law.
[30 September 2021; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 68. Rights of a Manager
Licensed in a Member State to Market Investment Units of a Member
State Fund in Latvia
(1) A manager licensed in a Member State may market investment
units of a Member State fund under the management thereof in
Latvia if Latvijas Banka has received a notification of the
supervisory authority of the manager licensed in the Member State
to which the following documents have been appended:
1) the documents referred to in Section 66, Paragraph three of
this Law;
2) the confirmation referred to in Section 67, Paragraph four
of this Law.
(2) The notification referred to in Paragraph one of this
Section and the confirmation provided for in Paragraph four of
Section 67 shall be submitted in the language which is used in
the field of international finance. The documents referred to in
Section 66, Paragraph three of this Law which are to be submitted
to Latvijas Banka in accordance with Paragraph one of this
Section shall be submitted in the official language or the
language which is used in the field of international finance.
(3) A manager licensed in a Member State may commence
marketing of investment units of the fund in Latvia from the day
a notification of the supervisory authority of the manager
licensed in the Member State is received.
(4) A manager licensed in a Member State which plans to market
investment units of Member State funds in Latvia to such
investors which are not professional investors shall ensure the
necessary measures in order for the following to occur in
Latvia:
1) to accept and process the purchase, repurchase, and
redemption orders relating to investment units and to perform the
settlements related thereto according to the provisions of the
documents of incorporation and operational rules of the fund;
2) to provide investors with information on the submission of
purchase, repurchase, and redemption orders of investment units
and the settlements related thereto;
3) to facilitate the handling of information relating to the
exercise of investors' rights arising from their investment in
the fund in Latvia;
4) to make the copies of the information and documents
referred to in Section 58 of this Law available to investors;
5) to provide the information, including by using electronic
means of communication, to investors on measures which are taken
by the persons referred to in Paragraph seven of this
Section;
6) to perform the function of the contact point, indicating a
person for communication with Latvijas Banka and other competent
authorities.
(5) In order to take the measures referred to in Paragraph
four of this Section, the manager does not have the obligation to
ensure physical presence in Latvia or to delegate the taking of
measures to a third party.
(6) In taking the measures referred to in Paragraph four of
this Section, the Latvian language and another language to the
use of which Latvijas Banka has agreed is used for
communication.
(7) The measures referred to in Paragraph four of this Section
may be taken by:
1) the manager;
2) participants to the financial and capital market the
supervision of which is performed by Latvijas Banka or the
supervisory authority of another Member State, or the
participants to the financial and capital market supervised by
the European Central Bank;
3) the persons referred to in Clauses 1 and 2 of this
Paragraph jointly.
(8) In entering into a contract with the persons referred to
in Paragraph seven, Clause 2 of this Section, the manager shall
include the provisions in the contract specifying which measures
will be taken by the manager itself and which - by the
abovementioned persons, and also a certification that the persons
referred to in Paragraph seven, Clause 2 of this Section will
receive from the manager all the information and documents
necessary to them.
[30 September 2021; 23 September 2021; 13 October 2022
/ Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Section 68.1 Rights of a
Manager Licensed in a Member State to Terminate the Marketing of
Investment Units of a Member State Fund in Latvia
(1) A manager which has commenced the marketing of investment
units of a Member State fund in Latvia is entitled to terminate
the marketing of investment units of the fund, including
investment certificates of all or some investment funds, in
Latvia if Latvijas Banka has received a notification of the
manager forwarded from the supervisory authority of the home
country of the manager in which the information on terminating
the marketing of investment units of the fund and on the
fulfilment of all the following conditions has been
indicated:
1) an offer to repurchase or redeem, free of any charges or
deductions, all such investment units of funds (except for
closed-ended funds and European long-term investment funds the
operational provisions of which are governed by Regulation No
2015/760) which have been obtained by the investor in Latvia:
a) has been made;
b) has been publicly available for at least 30 working
days;
c) has been addressed, directly or through financial
intermediaries, individually to all investors in Latvia whose
identity is known;
2) a notification regarding the intention to terminate the
marketing of investment units and the taking of the measures
necessary for ensuring marketing is made public, including by
using electronic means of communication;
3) any liabilities arising from a contract with financial
intermediaries or outsourced service providers are modified or
terminated with effect from the date which is considered the day
of terminating the marketing of investment units in order to
prevent either direct or indirect start or continuation of the
marketing of the investment units of the fund after terminating
the marketing of investment units.
(2) From the day when the marketing of investment units is
terminated, the manager is prohibited to directly or indirectly
market investment units of the fund in Latvia.
(3) From the day when the marketing of investment units is
terminated, the manager is prohibited to perform pre-marketing of
investment units of the relevant investment fund for 36 months in
Latvia, including to provide information or to notify of
potential investment strategies or investment objects.
(4) The manager has the obligation to provide the information
referred to in Section 58 of this Law to the investors in Latvia
which shall retain the investment units of the fund after
terminating the marketing of investment units. In providing the
information, the manager is entitled to use any electronic means
of communication.
(5) From the day when Latvijas Banka has received the
notification referred to in Paragraph one of this Section of the
manager forwarded by the supervisory authority of the home
country of the manager, Latvijas Banka is not entitled to request
that the manager proves that its activities conform to the
requirements of this Law and the requirements of the regulations
of Latvijas Banka regarding marketing of investment units of the
fund.
[30 September 2021; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" and amendment regarding the replacement of
the words "regulatory provisions" with the word "regulations"
shall come into force on 1 January 2023. See Paragraph 19
of Transitional Provisions]
Section 69. Management of the Fund
Founded in Another Member State or Provision of Services
Performed by a Manager Licensed in Latvia
(1) A manager licensed in Latvia has the right to manage the
fund founded in another Member State or provide the services
referred to in Section 5, Paragraphs seven and eight of this Law
if Latvijas Banka has authorised the manager to implement such
investment strategy of the fund selected by it or has granted an
authorisation for the provision of the services referred to in
Section 5, Paragraphs seven and eight of this Law.
(2) The manager that wishes to manage the fund founded in
another Member State or provide the services referred to in
Section 5, Paragraphs seven and eight of this Law without opening
a branch shall submit a submission as well as the following
documents and information to Latvijas Banka:
1) a description which provides a clear and fair presentation
of the activities planned by the manager in the fund management
and the provision of services;
2) information on the Member State in which the manager
intends to perform fund management or provision of services;
3) an operational programme indicating services which the
manager wishes to provide;
4) information on the fund which the manager wishes to
manage.
(3) The manager that wishes to open a branch in another Member
State shall, in addition to the information and documents
referred to in Paragraph two of this Section, submit the
following:
1) a description of the organisational structure and
organisation of work of the branch;
2) information on address of the place of founding of the fund
where documents regarding the fund are available;
3) the given name, surname, year and date of birth, and
personal identity number (if such has been granted) of the
manager of the branch;
4) address and contact details of the branch.
(4) Latvijas Banka shall examine the submission and documents
and inform the supervisory authority of the relevant Member State
and the relevant manager in writing of its decision within 30
days if the submission and documents have been submitted in the
case referred to in Paragraph two of this Section or within 60
days if the submission and documents have been submitted in the
case referred to in Paragraph three of this Section.
(5) Concurrently with the decision referred to in Paragraph
four of this Section, Latvijas Banka shall send to the
supervisory authority of the relevant host Member State the
information and documents referred to in Paragraphs two and three
of this Section, and also a confirmation that the manager has
received a license in accordance with the procedures laid down in
this Law.
(6) Latvijas Banka shall immediately notify the manager of
informing the supervisory authority of the relevant host Member
State. The manager may commence management of the fund founded in
another Member State from the day when the abovementioned
notification of Latvijas Banka has been received.
(7) The manager shall inform Latvijas Banka in writing of
making amendments to the information specified in Paragraphs two
and three of this Section, and also of the intention to terminate
activities of the branch no later than 30 days prior to making
the amendments or the planned termination of activities of the
branch.
(8) The information and documents which have been provided in
accordance with Paragraph seven of this Section shall be examined
by Latvijas Banka within 15 working days. If it is established
during examination of the information and documents that, due to
the planned amendments, the fund management performed by the
manager or the manager itself will no longer conform to the
requirements of this Law, Latvijas Banka shall notify the manager
thereof.
(9) If, regardless of receipt of the notification of Latvijas
Banka referred to in Paragraph eight of this Section, amendments
to the information and documents referred to in Paragraphs two
and three of this Section have been made and the fund management
performed by the manager or the manager itself no longer conforms
to the requirements of this Law due to them, Latvijas Banka shall
impose the supervision measures referred to in Section 81,
Paragraph seven of this Law and the sanctions referred to in this
Law on the manager. Latvijas Banka shall immediately inform the
supervisory authority of the host Member State of the manager of
the supervision measures and sanctions imposed on the
manager.
(10) The documents referred to in Paragraphs two and three of
this Section shall be submitted to Latvijas Banka in the language
which is used in the field of international finance.
(11) The directly applicable legal acts of the European Union
shall determine the content of the information to be submitted in
accordance with Paragraphs two and three of this Section.
[8 October 2015; 21 June 2018; 30 September 2021; 23
September 2021 / Amendment regarding the replacement of
the word "the Commission" with the words "Latvijas Banka" shall
come into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 70. Management of the Fund
Founded in Latvia which is Performed by a Manager Licensed in a
Member State
(1) A manager licensed in a Member State may manage the fund
founded in Latvia with or without the opening of a branch if
Latvijas Banka has received the decision by the supervisory
authority of the manager licensed in the Member State to
authorise the manager licensed in the Member State to commence
fund management in Latvia with or without the opening of a
branch.
(2) The following documents shall be appended to the decision
referred to in Paragraph one of this Section:
1) the information and documents referred to in Section 69,
Paragraph two or three of this Law;
2) a confirmation that the Member State manager has been
licensed in accordance with the procedures laid down in the legal
acts of the Member State.
(3) A manager licensed in a Member State may commence
management of the fund founded in Latvia from the day Latvijas
Banka has received the relevant notification.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Chapter
IX.1
Pre-marketing
[30 September 2021]
Section 70.1
Pre-marketing Performed in Latvia or Other Member States by a
Manager Licensed in Latvia
(1) A manager licensed in Latvia is entitled to perform
pre-marketing in Latvia or in other Member States, except for
cases when the information to be provided to potential
professional investors is:
1) such information which may be used by the investor in order
to undertake the liability to acquire investment units of a
specific fund;
[30 September 2021]
2) application forms for the purchase of investment
certificates or similar documents, including draft documents;
3) documents of incorporation, prospectus, or offering
documents of a not-yet-established fund.
(2) It is prohibited to include information which may be used
by the investor for taking of the decision of making investments
in a draft prospectus or an offer with which the potential
investor is being familiarised. It shall be indicated in a draft
prospectus or an offer that:
1) it does not constitute an offer or an invitation to
subscribe for investment shares of the fund;
2) the information presented therein should not be relied upon
because it is incomplete and may be subject to change.
(3) Prior to commencing pre-marketing, a manager licensed in
Latvia does not have the obligation to notify Latvijas Banka of
the content of pre-marketing materials or their addressees or
fulfil any other conditions which are not referred to in this
Chapter.
[30 September 2021; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 70.2 Course of
Pre-marketing
(1) A manager licensed in Latvia shall ensure that it is not
possible for investors in Latvia or in other Member States to
acquire investment units of the fund in pre-marketing and that
investors contacted as part of pre-marketing can only acquire
investment units of the relevant fund if investment units of the
fund are being marketed in accordance with the procedures laid
down in Sections 66 and 67 of this Law.
(2) If, within 18 months after a fund manager licensed in
Latvia has begun pre-marketing, professional investors subscribe
to investment units of the fund for such fund which is indicated
in the information provided during pre-marketing, or to
investment units of the fund for such fund which has been
established as a result of the pre-marketing, it shall be
considered to be marketing in relation to which the requirements
of Section 66, Paragraph three and Section 67, Paragraph three of
this Law regarding the submission of a notification to Latvijas
Banka should be conformed to.
(3) A manager licensed in Latvia shall, within fifteen days
from the day when it has commenced pre-marketing, submit
information to Latvijas Banka in paper form or by electronic
means on the Member States in which pre-marketing is taking place
or has taken place (indicating the relevant time periods) and a
short description of pre-marketing, including information on the
offered investment strategies, including a list of the fund and
its sub-funds in relation to which pre-marketing is taking place
or took place. Latvijas Banka shall immediately inform the
supervisory authority of the relevant Member State in which the
manager engages or has engaged in pre-marketing.
(4) If a manager licensed in a Member State engages or has
engaged in pre-marketing of investment units of the fund of the
Member State in Latvia, Latvijas Banka may request the
supervisory authority of the manager licensed in the Member State
to provide information on pre-marketing which is taking place or
has taken place in Latvia.
[30 September 2021; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" shall come into force on 1 January
2023. See Paragraph 19 of Transitional Provisions]
Section 70.3
Pre-marketing Performed by Third Parties
Only such third party is entitled to perform pre-marketing on
behalf of a manager licensed in Latvia which is an investment
firm licensed in a Member State, a credit institution, an
investment management company, a fund manager, or the tied agent
within the meaning of the Financial Instrument Market Law. The
provisions laid down in Sections 70.1 and
70.2 of this Law shall apply to the third party
engaged in pre-marketing.
[30 September 2021]
Section 70.4
Documentation of Pre-marketing
A manager licensed in Latvia shall ensure that pre-marketing
is adequately documented.
[30 September 2021]
Chapter X
Operating Conditions for a Third Country Fund
Section 71. Management of a Third
Country Fund
(1) A manager licensed in Latvia may manage a third country
fund the investment units of which are not marketed in Member
States in conformity with the following conditions:
1) in respect of the management of the third country fund, the
manager complies with the requirements of this Law, except for
the requirements of Chapter VI and Section 56;
2) a cooperation agreement has been entered into by and
between Latvijas Banka and the supervisory authority of the
country where the fund has been founded for the exchange of
information and the implementation of supervisory functions.
(2) The directly applicable legal acts of the European Union
shall determine the content of the provisions for the exchange of
information and the implementation of supervisory functions to be
included in the cooperation agreement referred to in Paragraph
one, Clause 2 of this Section.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 72. Rights of a Manager
Licensed in Latvia to Market Investment Units of a Third Country
Fund in Member States
(1) A manager licensed in Latvia, if it conforms to all
requirements of this Law, except for the requirements laid down
for the manager in Chapter IX, may market in Latvia and other
Member States the investment units of a third country fund under
the management thereof or of a Member State feeder fund the
master fund of which is not a Member State fund under management
of a Member State manager.
(2) In addition to Paragraph one of this Section, the
following conditions shall be applicable to the supervisory
authority of a third country fund and the country where the fund
has been founded:
1) Latvijas Banka and the supervisory authority of the third
country fund have entered into a cooperation agreement for the
exchange of information and the implementation of supervisory
functions in accordance with the directly applicable legal acts
of the European Union;
2) the country where the fund has been founded has not been
included in the list compiled by the Financial Action Task Force
as a country and territory which do not cooperate;
3) the country where the fund has been founded has entered
into a contract the terms and conditions of which are equivalent
to the standards laid down in the Organisation for Economic
Co-operation and Development Model Tax Convention on Income and
on Capital, and also multilateral agreements in the field of
taxes with Latvia and other Member States in which it is planned
to market investment units of the third country fund.
(3) If a manager licensed in Latvia wishes to market in Latvia
the investment units of the funds referred to in Paragraph one of
this Section, it shall submit a notification to Latvijas Banka to
which the documents referred to in Section 66, Paragraph three of
this Law are appended.
(4) Latvijas Banka shall, within 20 working days after receipt
of all the documents prepared and submitted in accordance with
the requirements of laws and regulations, inform the manager and
the European Securities and Markets Authority of an authorisation
to market in Latvia the investment units of the fund indicated in
the notification.
(5) The manager may commence marketing of investment units
from the day when it has received an authorisation of Latvijas
Banka.
(6) Latvijas Banka shall take the decision not to authorise
the marketing of investment units of the fund indicated in the
notification in Latvia if the fund management performed by the
manager or activities of the manager itself do not conform to the
requirements of this Law.
(7) If a manager licensed in Latvia wishes to market the
investment units of the funds referred to in Paragraph one of
this Section in other Member States, except for Latvia, it shall
submit a notification to Latvijas Banka to which information on
the Member States is appended in which it is planned to market
investment units, and also the documents referred to in Section
66, Paragraph three of this Law prepared in the language which is
used in the field of international finance.
(8) Latvijas Banka shall, within 20 working days after receipt
of all the documents prepared in accordance with the requirements
of laws and regulations and submitted by using electronic media,
send these documents to the supervisory authority of the Member
State in which the manager wishes to market investment units.
Latvijas Banka shall electronically forward the notification to
the supervisory authority of the Member State if the fund
management performed by the manager and the manager itself
conform to the requirements of this Law. Latvijas Banka shall
append a confirmation to the notification that the manager is
authorised to manage the fund in accordance with the investment
strategy indicated in the description of the activities
thereof.
(9) The notification referred to in Paragraph three and the
confirmation referred to in Paragraph eight of this Section shall
be drawn up in the language which is used in the field of
international finance.
(10) Latvijas Banka shall immediately inform the manager as
well as the European Securities and Markets Authority of sending
of the notification to the supervisory authority of a Member
State.
(11) The manager may commence marketing of investment units of
the fund in a host Member State from the day when a notification
has been received. The manager shall ensure that investment units
are only marketed to professional investors in accordance with
the procedures laid down in the legal acts of a host Member State
of the manager and marketing of such investment units is
supervised by the supervisory authority of the host Member
State.
(12) If amendments are expected to the information referred to
in Paragraphs three and seven of this Section, they shall be
communicated and examined in accordance with the procedures laid
down in Section 66, Paragraphs seven, eight, and nine of this
Law.
(13) Latvijas Banka shall inform the supervisory authority of
a host state of the manager of any amendments to the information
and documents referred to in Paragraphs three and seven of this
Section, and also of any amendments the entry into effect of
which has not been coordinated with Latvijas Banka but which do
not affect the fund management activities of the manager.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 73. Rights of a Manager
Licensed in a Member State to Market Investment Units of a Third
Country Fund in Latvia
(1) A manager licensed in a Member State may market in Latvia
the investment units of a third country fund or investment units
of a third country fund under the management thereof or of a
Member State feeder fund the master fund of which is not a Member
State fund under management of a Member State manager if Latvijas
Banka has received a notification of the supervisory authority of
the manager licensed in the Member State to which the following
documents have been appended:
1) the documents referred to in Section 66, Paragraph three of
this Law;
2) the confirmation referred to in Section 72, Paragraph eight
of this Law drawn up by the supervisory authority of the manager
licensed in the Member State.
(2) The notification and the confirmation referred to in
Paragraph one of this Section shall be submitted in the language
which is used in the field of international finance. The
documents referred to in Paragraph one, Clause 1 of this Section
shall be submitted to Latvijas Banka in the official language or
the language which is used in the field of international
finance.
(3) A manager licensed in a Member State may commence
marketing of investment units of the fund in Latvia from the day
when Latvijas Banka has received a relevant notification.
(4) If Latvijas Banka as the supervisory authority of a host
Member State of a manager licensed in a Member State considers
that the relevant supervisory authority of a home Member State of
the manager and the supervisory authority of a third country fund
have not entered into such cooperation agreement for the exchange
of information and the implementation of supervisory functions as
specified in Section 72, Paragraph two, Clause 1 of this Law, and
also the supervisory authority of the home Member State of the
manager has failed to comply with the condition of Section 72,
Paragraph two, Clause 2 of this Law, Latvijas Banka may appeal to
the European Securities and Markets Authority for obtaining an
opinion thereof.
(5) In the case referred to in Paragraph four of this Section,
Latvijas Banka shall only authorise the manager to commence
marketing of investment units of the fund in Latvia after receipt
of the opinion of the European Securities and Markets Authority
that the relevant supervisory authority of a home Member State of
the manager and the supervisory authority of a third country fund
have entered into such cooperation agreement for the exchange of
information and the implementation of supervisory functions as
specified in Section 72, Paragraph two, Clause 1 of this Law and
that the supervisory authority of the home Member State of the
manager has complied with the condition specified in Section 72,
Paragraph two, Clause 2 of this Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Chapter
XI
Granting of a License to a Third Country Manager
Section 74. Provisions for the Issue
of a License to a Third Country Manager
(1) If a third country manager intends to manage a Member
State fund or to market investment units of such fund in Member
States in accordance with Sections 78 and 79 of this Law, it
shall obtain a licence from the supervisory authority of a
reference Member State for the activities of an alternative
investment fund manager in accordance with the procedures laid
down in this Chapter.
(2) A third country manager is entitled to receive the license
referred to in Paragraph one of this Section, if it complies with
all requirements of this Law, except for the requirements of
Section 17, Paragraph five, Clause 8 and Chapter IX.
(3) A third country manager may depart from individual
requirements of this Law applicable thereto if it submits to
Latvijas Banka the grounds for and the confirmation that:
1) compliance with the provisions of this Law is not
compatible with the requirements of the legal acts of the country
of the founding thereof which the manager follows in its
activities or marketing of investment units of a third country
fund under the management thereof in Member States;
2) the laws and regulations applicable to the activities of a
third country manager or third country fund provide for
equivalent regulatory objective and ensure such protection of
fund investors which is equivalent to the legal acts of Member
States;
3) a third country manager or third country fund complies in
its activities with the laws and regulations equivalent to the
legal acts of Member States referred to in Clause 2 of this
Paragraph.
(4) A third country manager that wishes to receive a licence
for the activities of an alternative investment fund manager
shall have a legal representative the place of founding of which
is a reference Member State. The legal representative shall
ensure that it has sufficient resources and experience to comply
with the requirements laid down for the legal representative in
this Law.
(5) The legal representative referred to in Paragraph four of
this Section shall be a point of contact of a third country
manager in Member States. The exchange of information specified
in this Law among Latvijas Banka, the supervisory authorities of
other Member States, and the manager, and also Member State
investors and manager of a third country fund shall occur through
the legal representative.
(6) The legal representative and a third country manager shall
be jointly responsible for the compliance with the provisions of
this Law in the management of a third country fund or marketing
of investment units of a third country fund under the management
thereof.
(7) Latvijas Banka shall take the decision to issue a licence
on the basis of the documents submitted in accordance with the
provisions of Chapter II of this Law. Additionally, a third
country manager shall, together with the documents referred to in
Section 10 of this Law, submit the following to Latvijas
Banka:
1) the grounds for selecting Latvia as a reference Member
State and the strategy for marketing investment units of the
fund;
2) a list of the provisions of this Law the compliance with
which is not compatible with the requirements of the legal acts
of a third country which the third country manager follows in its
activities or marketing of investment units of a third country
fund under the management thereof in Member States, a
confirmation that the legal acts applicable to the third country
manager or third country fund provide for equivalent regulatory
objective and ensure such protection of fund investors which is
equivalent to the legal acts of Member States. The abovementioned
confirmation shall be based on a legal opinion on the compliance
of the regulatory objective of the legal acts of the third
country and the existence of a protection framework equivalent to
the legal acts of Member States of the fund investors;
3) the firm name and registered office of a legal person
authorised by a third country manager or the given name, surname,
and contact address of an authorised natural person.
(8) The information to be submitted in accordance with Section
10, Paragraph eight of this Law shall only refer to a fund
founded in a Member State which a third country manager wishes to
manage and to the fund under management of a third country
manager the investment units of which a third country manager
intends to market.
(9) The conditions referred to in Section 72, Paragraph two of
this Law shall be applicable to the supervisory authority of a
third country manager and to the country where it has been
founded.
(10) In addition to the cases of refusal to issue a licence
referred to in Section 17, Paragraph five of this Law, Latvijas
Banka shall take the decision not to issue a licence to a third
country manager if laws and other legislation of a third country,
and also powers of the supervisory authority of a third country
restrict the right of Latvijas Banka to perform the supervisory
functions specified in this Law.
(11) Latvijas Banka shall immediately inform the European
Securities and Markets Authority of the fact that it has examined
a submission for the receipt of a licence, and also of the
licences issued and withdrawn. If Latvijas Banka has taken the
decision not to issue a licence to a third country manager, it
shall inform the European Securities and Markets Authority of
this third country manager and the reasons for refusal.
(12) If, within two years after receiving a licence, a third
country manager fails to perform activities according to the
strategy for marketing investment units of the fund submitted to
Latvijas Banka, has provided false information on the strategy
for marketing, or changes the strategy for marketing without
informing Latvijas Banka of determination of a new reference
Member State in accordance with the procedures laid down in the
law, Latvijas Banka shall require the third country manager to
determine another reference Member State in accordance with the
requirements of Section 77 of this Law.
(13) If, within two years after receiving a licence, a third
country manager changes the strategy for marketing investment
units of the fund and the reference Member State respectively, it
shall submit a submission to Latvijas Banka which is examined
thereby in accordance with the procedures laid down in Section 77
of this Law.
(14) If a third country manager fails to comply with the
requirements of Paragraph twelve of this Section, Latvijas Banka
shall withdraw the licence issued to the third country
manager.
(15) Disputes between Latvijas Banka and a third country
manager shall be examined in accordance with the laws and
regulations of Latvia. Disputes between a third country manager
or fund and investors of the relevant fund shall be examined in
accordance with the legal acts of the relevant Member State.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 75. Determination of a
Reference Member State
(1) If a third country manager intends to manage one or
several Member State funds the place of founding of which is
Latvia and does not intend to market the investment units thereof
in Member States in accordance with Sections 78 and 79 of this
Law, then the reference Member State of the manager shall be
Latvia and Latvijas Banka shall be responsible for the issue of a
licence for the activities of an alternative investment fund
manager and for the supervision thereof.
(2) If a third country manager intends to manage several
Member State funds the place of founding of which is in different
Member States, including Latvia, and does not intend to market
investment units of these funds in Member States in accordance
with Sections 78 and 79 of this Law, then one of the following
Member States shall be considered a reference Member State:
1) the Member State in which most funds have been founded;
2) the Member State in which the largest amount of fund assets
is managed.
(3) If a third country manager intends to market investment
units of the fund founded in Latvia only in one Member State,
then Latvia or the Member State in which it is intended to market
investment units of the fund shall be considered the reference
Member State.
(4) If a third country manager intend to market investment
units of only one third country fund in Latvia, then Latvia shall
be considered the reference Member State.
(5) If a third country manager intends to market investment
units of only one fund founded in Latvia in several Member
States, then Latvia or the Member State in which the manager
intends to develop active marketing of investment units shall be
considered the reference Member State.
(6) If a third country manager intends to market investment
units of only one third country fund in several Member States,
including Latvia, then one of these Member States shall be
considered the reference Member State, as chosen by the
manager.
(7) If a third country manager intends to market investment
units of several Member State funds in Member States, including
Latvia, then one of the following Member States shall be
considered the reference Member State:
1) Latvia if it is the Member State where all these funds have
been founded, or a Member State in which it is intended to market
investment units that form the majority of value of the
funds;
2) the Member State in which it is intended to market
investment units that form the majority of value of the funds if
Latvia is not the only country where all the funds have been
founded.
(8) In the case referred to in Paragraphs two, three, five,
and six and Paragraph seven, Clause 1 of this Section, a third
country manager that intends to only manage Member State funds or
to market investment units of the fund under the management
thereof in Member States in accordance with Sections 78 and 79 of
this Law shall submit a submission for the determination of a
reference Member State to all the supervisory authorities the
countries of which the manager considers as possible reference
Member States, including Latvia. The third country manager shall
provide information in the submission on all the countries which
it considers as possible reference Member States, and also give
grounds for its selection.
(9) The supervisory authorities shall, within a month after
receipt of the submission, take the decision to determine a
reference Member State and immediately inform a third country
manager thereof.
(10) If a third country manager is not informed of the
decision of the supervisory authorities within seven days after
taking of the decision or if the decision has not been taken, the
third country manager shall select a reference Member State,
taking into account the criteria referred to in Paragraphs two,
three, five, and six and Paragraph seven, Clause 1 of this
Section.
(11) A third country manager shall, upon request of the
supervisory authority, submit the strategy for marketing
investment units of the fund which justifies the intention of the
third country manger to develop active marketing of investment
units in the particular Member State.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 76. Determination of Latvia
as a Reference Member State
(1) If a third country manager that, in accordance with
Sections 78 and 79 of this Law, intends to only manage a Member
State fund or to market investment units of the funds under the
management thereof in Member States determines Latvia as a
reference Member State, it shall submit a submission to Latvijas
Banka asking to issue a license for the activities of an
alternative investment fund manager.
(2) After receipt of the submission referred to in Paragraph
one of this Section, Latvijas Banka shall evaluate whether the
reference Member State of the third country manager has been
determined in accordance with the requirements of Section 75 of
this Law. If the reference Member State has not been determined
in accordance with the requirements of Section 75 of this Law,
Latvijas Banka shall, within a month after the day it has
received the submission, take the decision not to issue a
licence. If the reference Member State has been determined in
accordance with the requirements of Section 75 of this Law,
Latvijas Banka shall notify the European Securities and Markets
Authority of the received submission and request an assessment in
respect of the determination of an appropriate reference Member
State. Latvijas Banka shall indicate in its notification to the
European Securities and Markets Authority the grounds for the
selection of the reference Member State provided by the third
country manager and append information on the strategy for
marketing investment units of the funds of the third country
manager.
(3) The European Securities and Markets Authority shall,
within a month after it has received the notification of Latvijas
Banka, provide an assessment to Latvijas Banka in respect of the
compliance of the selection of the reference Member State with
the requirements of Section 75 of this Law.
(4) A time period by which the decision to issue a licence
referred to in Section 17, Paragraph one of this Law is taken
shall be suspended whilst the European Securities and Markets
Authority examines the notification of Latvijas Banka.
(5) If Latvijas Banka takes the decision to issue a licence to
a third country manager, contrary to the assessment of the
European Securities and Markets Authority, it shall inform the
European Securities and Markets Authority of its decision,
indicating the grounds for taking it. The European Securities and
Markets Authority may publish the grounds provided by Latvijas
Banka, informing Latvijas Banka thereof in advance.
(6) If Latvijas Banka takes the decision to issue a licence to
a third country manager that intends to market investment units
of the fund under the management thereof in other Member States,
except for Latvia, contrary to the assessment of the European
Securities and Markets Authority, Latvijas Banka shall inform the
supervisory authorities of the relevant Member States as well as
the supervisory authority of the home country of the fund of its
decision, indicating the grounds for taking it. If any of the
supervisory authorities disagrees with the decision of the third
country manager on determination of the reference Member State,
it is entitled to appeal to the European Securities and Markets
Authority for the settlement of disputes.
(7) The directly applicable legal acts of the European Union
shall determine the procedures for selecting a reference Member
State.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 77. Change of a Reference
Member State
(1) If a third country manager changes the strategy for
marketing investment units of the funds within two years after
the first determination of a reference Member State and such
change of the strategy affects the first selection of the
reference Member State, the third country manager shall, prior to
changing the strategy, immediately submit a submission to
Latvijas Banka for the change of the reference Member State. The
new strategy for marketing investment units of the funds,
information on the new reference Member State, and also
information on the legal representative of the third country
manager in the new reference Member State shall be appended to
the submission.
(2) After receipt of the submission referred to in Paragraph
one of this Section, Latvijas Banka shall evaluate whether the
reference Member State of the third country manager has been
determined in accordance with the requirements of Section 75 of
this Law. Latvijas Banka shall notify the European Securities and
Markets Authority of the received submission and request an
assessment in respect of the determination of the relevant
reference Member State. Latvijas Banka shall indicate in its
notification to the European Securities and Markets Authority the
grounds for the selection of the reference Member State provided
by the third country manager and append information on the
strategy for marketing investment units of the funds of the third
country manager.
(3) The European Securities and Markets Authority shall,
within a month after it has received the notification of Latvijas
Banka, provide an assessment to Latvijas Banka in respect of the
compliance of the selection of the reference Member State with
the requirements of Section 75 of this Law.
(4) Latvijas Banka shall take the decision to determine a
reference Member State and immediately inform the third country
manager, its legal representative, and the European Securities
and Markets Authority thereof.
(5) Latvijas Banka shall send the decision to change a
reference Member State, the decision to grant a licence, and also
copies of documents contained in the supervision file of the
third country manager to the supervisory authority of the new
reference Member State.
(6) If Latvijas Banka takes the decision referred to in
Paragraph four of this Section, contrary to the assessment of the
European Securities and Markets Authority, further exchange of
information on the decision taken shall occur in accordance with
the procedures laid down in Section 76, Paragraphs five and six
of this Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 78. Rights of a Third
Country Manager Licensed in Latvia to Market Investment Units of
a Member State Fund
(1) If a third country manager licensed in Latvia wishes to
market in Latvia the investment units of the Member State fund
under the management thereof, it shall submit a notification to
Latvijas Banka appending the documents referred to in Section 66,
Paragraph three of this Law. The notification shall be examined
in accordance with the procedures laid down in Section 66 of this
Law.
(2) If a third country manager licensed in Latvia wishes to
market the investment units of the Member State fund in another
Member State, it shall submit a notification to Latvijas Banka,
appending the documents referred to in Section 67, Paragraph
three of this Law. The notification shall be examined in
accordance with the procedures laid down in Section 67 of this
Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 79. Rights of a Third
Country Manager Licensed in Latvia to Market Investment Units of
a Third Country Fund in Member States
(1) A third country manager licensed in Latvia shall ensure
that it complies with all the requirements of this Law laid down
for a Member State manager, and also the conditions referred to
in Section 72, Paragraph two of this Law shall be additionally
applicable to Latvijas Banka and the country where the third
country fund has been founded.
(2) If a third country manager licensed in Latvia wishes to
market in Latvia the investment units of the Member State fund
under the management thereof, it shall submit a notification to
Latvijas Banka appending the documents referred to in Section 66,
Paragraph three of this Law. The notification shall be examined
in accordance with the procedures laid down in Section 66 of this
Law.
(3) If a third country manager licensed in Latvia wishes to
market the investment units of the third country fund under the
management thereof in another Member State, it shall submit a
notification to Latvijas Banka, appending the documents referred
to in Section 67, Paragraph three of this Law which have been
prepared in the language which is used in the field of
international finance. The notification shall be examined in
accordance with the procedures laid down in Section 67 of this
Law.
(4) A third country manager licensed in a Member State may
market investment units of the third country fund in Latvia in
accordance with Section 68 of this Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 80. Management of the Fund
Founded in Another Member State which is Performed by a Third
Country Manager Licensed in Latvia
(1) A third country manager licensed in Latvia may manage the
fund founded in another Member State directly or through a branch
if Latvijas Banka has authorised the manager to implement such
investment strategy of the fund selected by it.
(2) A third country manager shall submit a submission and
other documents in accordance with the requirements of Section 69
of this Law to Latvijas Banka and Latvijas Banka shall examine
them in accordance with the procedures laid down in the
abovementioned Section.
(3) Latvijas Banka shall inform the European Securities and
Markets Authority of the decision taken to authorise the third
country manager licensed in Latvia to manage the fund founded in
another Member State.
(4) A third country manager licensed in another Member State
may manage the fund founded in Latvia directly or through a
branch in accordance with the procedures laid down in Section 70
of this Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Chapter
XII
Supervision and Rights and Obligations of Latvijas Banka
[23 September 2021 /
Amendment regarding the replacement of the word "the
Commission" with the words "Latvijas Banka" shall come into force
on 1 January 2023. See Paragraph 19 of Transitional
Provisions]
Section 81. General Provisions for
the Supervision
(1) Latvijas Banka shall be responsible for the supervision of
the manager licensed by it, for the supervision of the manager
that founds and manages a European venture capital fund in
accordance with Regulation No 345/2013 or a European social
entrepreneurship fund in accordance with Regulation No 346/2013,
and for the supervision of a custodial bank in accordance with
this Law and the directly applicable legal acts of the European
Union. Latvijas Banka shall also be responsible for the
supervision of marketing in Latvia of investment units of a
Member State fund or a third country fund under management of a
licensed manager.
(2) The purpose of supervision shall be to ensure that the
founding and activities of managers conform to this Law and other
laws and regulations issued in accordance with this Law, to
restrict the rights of persons who carry out the activities
governed by this Law without an appropriate authorisation, and to
ensure orderly functioning of the fund market if activities of
one or several funds in the market of one financial instrument
may pose a threat to the orderly functioning of that market.
(3) Latvijas Banka, its employees and proxy holders shall not
be liable for losses caused to the manager, fund, or third
parties, moreover, Latvijas Banka, its employees and proxy
holders may not be held liable for the acts which they have
performed legally, precisely, justifiably, and in good faith,
upon properly performing the supervisory functions in accordance
with the procedures laid down in this Law and other laws and
regulations.
(4) An administrative act of Latvijas Banka which has been
issued in accordance with this Law may be appealed to the
District Administrative Court. The Court shall examine the case
as the court of first instance. The case shall be examined in the
composition of three judges. A judgement of the Administrative
Regional Court may be appealed by submitting a cassation
complaint.
(5) Contesting and appeal of an administrative act issued by
Latvijas Banka shall not suspend the operation thereof if the
administrative act issued by Latvijas Banka is a decision
providing for the following:
1) to restrict activities of the manager or custodial
bank;
2) to prohibit an official of the manager from carrying out
his or her obligations;
3) to prohibit acquiring or increasing a qualifying holding in
the manager;
4) to prohibit the exercising of the voting rights;
5) to prohibit the delegation of fund management services or
non-core services;
6) to prohibit the transfer of the rights to manage the fund
to another manager;
7) to withdraw a licence issued to the manager for the
activities of an alternative investment fund manager;
8) to cancel the registration of the manager;
9) to remove such manager from the register of European
venture capital funds which wishes to use the designation
"European venture capital fund" in accordance with Regulation No
345/2013;
10) to remove such register from the register of European
social entrepreneurship funds which wishes to use the designation
"European social entrepreneurship fund" in accordance with
Regulation No 346/2013;
11) to commence liquidation of the fund;
12) to prohibit the marketing of investment units.
(6) Latvijas Banka has the right to publish information on
measures and sanctions taken against the manager, its officials,
shareholders (stockholders), and a custodial bank in respect of
violations of laws and regulations, except for the case where
disclosure of such information may lead to serious disturbances
on the financial market, be detrimental to the interests of the
investors, or cause disproportionate damage to the persons
involved.
(7) In order to ensure supervision of activities of the
manager, Latvijas Banka is entitled to:
1) arrive at the custodial bank of the manager to carry out an
inspection (also without prior notice);
2) become acquainted freely with all documents and information
which refer to activities of the manager and fund management;
3) temporarily withdraw documents by drawing up a statement
thereon if during inspection any violations are established in
the activities of the manager, the custodial bank, or the
fund;
4) make extracts from documents, request copies of documents
prepared at the expense of the manager, certified copies of or
extracts from the documents;
5) request information from any person on the activities
thereof on the financial market if Latvijas Banka has grounds to
believe that the abovementioned person is related to a potential
violation of the laws and regulations governing the financial
market or might have information at its disposal necessary for
the clarification of circumstances of a violation;
6) request and receive in writing the information on
activities of the manager and the fund from the manager, the
custodial bank, a commercial register institution, a sworn
auditor of the manager or the fund, officials of the manager, but
in the case of liquidation proceedings of the manager or
insolvency proceedings of a legal person - also from liquidators
or administrators;
7) request in writing that the persons referred to in Clause 6
of this Section present the documents at their disposal regarding
the manager and the fund;
8) if there are grounds to believe that a person is related to
a potential violation of the laws and regulations governing
activities of an alternative investment fund manager or might
have information at its disposal necessary for the clarification
of circumstances of a violation which is required for Latvijas
Banka to supervise compliance with the requirements of this Law,
request that this person:
a) provides documents and information at his or her disposal,
including such that contains a commercial secret;
b) arrives at Latvijas Banka and provides information at his
or her disposal in person;
9) set reasonable periods of time within which the person
referred to in Clause 8 of this Section provides the requested
information or arrives at Latvijas Banka to give
explanations;
10) to request and receive from financial market participants
printouts of telephone conversations and data traffic records of
other type;
11) request that any person terminates his or her activities
which are in contradiction with the requirements of this Law;
12) request that assets of the manager and the fund are frozen
or restrict the right to act with them;
13) restrict the right of the manager to provide management
services;
14) where necessary for the protection of interests of the
investors or public, request that the issue, sale, repurchase,
and redemption of investment units are suspended;
15) submit information to law enforcement authorities on
activities on the financial market which are in contradiction
with the requirements of this Law;
16) withdraw the licence issued to the manager;
17) cancel the registration of the manager;
18) take the decision to commence liquidation of the fund;
19) give an order to the manager to change the custodial
bank;
20) impose limits on the amount of the leverage;
21) prohibit the marketing of investment units;
22) prohibit the manager from managing the fund according to a
specific investment strategy selected by the fund;
23) request that the manager draws up reports necessary for
the performance of the supervisory functions, and determine the
procedures for drawing up and submitting such reports;
24) take the necessary legal measures in order to ensure that
the manager and the custodial bank continue to comply with the
requirements of this Law, the directly applicable legal acts of
the European Union, and the regulations of Latvijas Banka.
(71) Latvijas Banka is entitled, in accordance with
Article 24 of Regulation No 1286/2014, to impose the following
supervision measures for the violations of the Regulation:
1) to prohibit the marketing of the fund investment units;
2) to impose an obligation to suspend the marketing of the
fund investment units;
3) to prohibit the provision of a key information document
which does not conform to the requirements laid down in Article
6, 7, 8, or 10 of Regulation No 1286/2014, and is entitled to
give an order to publish a new key information document
conforming to this Regulation;
4) to impose an obligation upon the manager or a person
marketing fund investment certificates or providing advice on the
acquisition of fund investment units to inform an investor who is
not a professional investor and whose rights and interests have
been infringed of the sanction or supervision measure imposed on
the manager or the person marketing fund investment certificates
or providing advice on the acquisition of fund investment units,
of the fact where the investor may submit a complaint or appeal
in order to initiate extrajudicial settlement of disputes, and
also of his or her rights to bring a claim to the court.
(8) Taking into account the cross-border nature of activities
of the manager, in order to ensure uniform application of the
supervisory practices in all Member States, Latvijas Banka has
the right to specify other requirements governing activities of
the manager and the fund in the fields arising from the
guidelines and recommendations adopted by the European Securities
and Markets Authority in the supervision of activities of the
managers and funds.
(9) Latvijas Banka shall carry out supervision of a registered
manager that neither founds nor manages a European venture
capital fund in accordance with Regulation No 345/2013 or a
European social entrepreneurship fund in accordance with
Regulation No 346/2013 in relation to the carrying out of
obligations which include registration of the manager and
provision of information to Latvijas Banka, and also fulfilment
of the requirements of Regulation No 1286/2014.
[8 October 2015; 25 October 2018; 20 June 2019; 23
September 2021; 28 April 2022 / Amendment to the
introductory part of Paragraph five regarding the replacement of
the words "legal appeal" with the words "contesting and appeal",
to Paragraph seven, Clause 6 regarding the deletion of the words
"Latvijas Banka", and to Paragraph seven, Clauses 5, 10, and 15
regarding the replacement of the words "financial and capital
market" with the words "financial market", amendment regarding
the replacement of the word "the Commission" with the words
"Latvijas Banka", and amendment regarding the replacement of the
words "regulatory provisions" with the word "regulations" shall
come into force on 1 January 2023. See Paragraph 19 of
Transitional Provisions]
Section 82. Payments to Latvijas
Banka
(1) The manger shall pay to Latvijas Banka:
1) a licenced manager - EUR 4000 a year and additional 0.0025
to 0.0125 per cent of the average amount of assets per quarter of
the funds under the management thereof;
2) a registered manager - EUR 900 a year;
3) a licensed external manager that is authorised to provide
the investment services referred to in Section 5, Paragraphs
seven and eight of this Law - up to one per cent of the gross
revenues from the services provided by the manager per quarter,
but not less than EUR 711 a year;
4) a registered manager that manages a European venture
capital fund or European social entrepreneurship fund, in
addition to the payment referred to in Paragraph one, Clause 2 of
this Section - EUR 1900 a year.
(2) In addition to the payments referred to in Paragraph one
of this Section, a licensed manager shall pay the following to
Latvijas Banka:
1) for examination of the documents submitted for the
registration of the fund - EUR 1422;
2) for examination of amendments to the operational rules or
the document of incorporation of the fund submitted for
registration - EUR 426.
(3) A registered manager shall pay to Latvijas Banka EUR 250
for examination of the documents submitted for the registration
of the manager.
(4) A branch of a manager licensed in a Member State which is
registered in Latvia shall pay the following to Latvijas
Banka:
1) up to one per cent of the gross revenues from the fund
management services provided by the branch in Latvia per quarter,
but not less than EUR 2134 a year;
2) up to one per cent of the gross revenues from the
investment services referred to in Section 5, Paragraphs seven
and eight of this Law and provided by the branch per quarter, but
not less than EUR 711 a year.
(5) A Member State (except for Latvia) fund manager shall pay
to Latvijas Banka a single fee in the amount of EUR 1209 for the
supervision in Latvia of marketing of investment units of each
Member State fund or third country fund under the management
thereof.
[23 September 2021; 28 April 2022; 13 October 2022 /
The new wording of Section and amendments to Paragraph one,
Clause 1 shall come into force on 1 January 2023. See
Paragraphs 19 and 24 of Transitional Provisions]
Section 83. Restrictions on the
Rights to Act with the Assets of the Manager and of the Fund
(1) If the provisions of the laws and regulations, the
document of incorporation of the fund, the custodial bank
agreement, or the operational rules of the fund have been
violated, Latvijas Banka has the right to obtain information from
credit institutions and investment firms on the cash flow and the
balance of accounts of the manager or of the fund and to
temporarily restrict the rights of the manager to act with the
assets of the manager or the fund.
(2) The decision of Latvijas Banka on determining the
restrictions referred to in Paragraph one of this Section shall
be implemented immediately after receipt thereof.
(3) During validity of the decision, payments from the
accounts to which the decision of Latvijas Banka to restrict the
rights of the manager applies shall only be made under
authorisation of Latvijas Banka.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 84. Right of Latvijas Banka
to Request Convening a Meeting of Management Bodies
(1) Latvijas Banka has the right to request convening of a
meeting of the fund investors (shareholders or members), a
meeting of the executive board or supervisory board, a meeting of
the executive board or supervisory board of the manager, or a
meeting of shareholders, and to specify the agenda thereof in
advance.
(2) A representative of Latvijas Banka may participate in the
meeting of the fund investors (shareholders or members), the
meeting of the executive board or supervisory board, the meeting
of the executive board or supervisory board of the manager, or
the meeting of shareholders referred to in Paragraph one of this
Section, and this representative has the right to express his or
her opinion and submit proposals.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 85. Restricted Access
Information
(1) The information on a manager, its clients, funds and their
investors, the activities of a manager and funds and the
transactions of clients of the manager and investors of the funds
which has not been previously published in accordance with the
procedures laid down by law or the disclosure of which is not
determined by other laws, or on disclosure of which a decision
has not been taken by Latvijas Banka, the information received in
accordance with the procedures laid down in this Section from the
competent authorities and persons of the Member States and
foreign countries, and also the information obtained during
inspections from the institutional units established by the
Member States for the needs of supervision of the manager shall
be considered restricted access information and shall be
disclosed to the third parties only in the form of a report or a
summary so that it would not be possible to identify any
particular manager or its client, fund and its investor. Such
information on a manager, its clients, funds and their investors,
the activities of a manager and funds and the transactions of
clients of the manager and investors of the funds shall have the
status of restricted access information also if insolvency
proceedings or liquidation have been initiated for the manager or
its client, or an investor of the fund, or the manager or its
client (legal person), or an investor of the fund (legal person)
has been liquidated.
(2) A prohibition to disclose restricted access information
shall not apply to the information:
1) which is related to court proceedings in a civil case if
the insolvency proceedings of the manager have been declared or
the liquidation of the manager or fund has been commenced and
such information is not on the third parties which are involved
in the activities for the improvement of the financial situation
of the manager;
2) which has been provided by Latvijas Banka to the person
directing the proceedings in a criminal case on the basis of the
relevant request;
3) on a potential criminal offence established by Latvijas
Banka in the activities of the manager whereof it shall inform
law enforcement institutions;
4) on persons who are responsible for uncovering the
violations of laws and regulations and the investigation in the
field of commercial activity if the following conditions are
met:
a) the provision of information is necessary for uncovering
and investigating the violations of the laws and regulations
governing commercial activity;
b) a certification has been provided that the information will
be available only to such persons who are involved in the
execution of the task and that the requirements for the
protection of information are binding on them;
c) if Latvijas Banka has obtained the necessary information
from the competent authority of financial market participants of
another country, it shall only be disclosed if a consent of the
authority which provided the information has been received.
(3) The provisions of Paragraph one of this Section do not
prohibit Latvijas Banka from exchanging restricted access
information with the supervisory authorities of the financial
market participants of another Member State and the European
Central Bank, the European Banking Authority, the European
Securities and Markets Authority, the European Insurance and
Occupational Pensions Authority, and the European Systemic Risk
Board, retaining the status of restricted access information for
the information provided, and also from disclosing (publishing on
its website) the results of stress tests carried out by Latvijas
Banka.
(4) Latvijas Banka is entitled to use the information received
in accordance with Paragraphs three, seven, eight, and nine of
this Section only for the performance of its functions:
1) in order to verify the conformity with the laws and
regulations governing the founding of a manager and the operation
of a manager and a custodial bank;
2) in order to apply the administrative measures and sanctions
specified in the law;
3) during court proceedings wherein the administrative acts
issued by Latvijas Banka or its actual actions are being
appealed.
(5) Latvijas Banka is entitled to request information from a
manager on the basis of a request of the supervisory authority of
managers or funds of another Member State and a request of such
supervisory authority of foreign managers or funds with which an
information exchange contract has been entered into. The
supervisory authorities of managers or funds of another country
are entitled to disclose such information only with a written
consent of Latvijas Banka and it shall be permitted to use such
information only for the purpose for which it was requested.
(6) Latvijas Banka is entitled to enter into information
exchange contracts with the supervisory authorities of foreign
managers or funds or the authorities of the relevant foreign
country the functions of which are considered equivalent to the
functions of the authorities referred to in Paragraphs seven,
eight, and nine of this Section if the legal acts of the relevant
foreign country provide for the protection of restricted access
information equivalent to this Section and the requirements which
are in force in Latvia in the field of personal data protection
have been conformed to. Such information shall only be used to
supervise the financial market participants or to perform the
functions specified in the law for the relevant authorities.
(7) The provisions of Paragraphs one and four of this Section
do not prohibit Latvijas Banka to exchange restricted access
information with the following, while retaining the status of
restricted access information:
1) the supervisory authorities of managers or funds of another
Member State and the ministries of finance of such countries;
2) the authorities which are entrusted with the obligation to
supervise the financial market or the financial market
participants;
3) the authorities of the Member States, including the
collegial authorities established by the Member States and the
institutional units which have been entrusted with the obligation
to maintain the stability of the financial system in Member
States and which determine and implement the macro-supervision
policy;
4) the authorities of the Member States which are responsible
for the reorganisation of the financial market participants,
including the collegial authorities established by the Member
States and the institutional units, and also the State
authorities the objective of which is to protect the stability of
the financial system;
5) the competent authorities which are involved in insolvency,
liquidation, and other similar procedures specified in legal acts
of Member States of managers, funds, or persons involved in the
provision of management services;
6) the persons who are responsible for the mandatory audits of
financial statements of managers or funds;
7) the authorities of a Member State which manage investment
and deposit compensation schemes if such information is necessary
for the performance of their functions;
8) the authorities or persons which or who are responsible for
the detection and investigation of violations of the laws and
regulations in the field of commercial activity;
9) the authorities which are responsible for the supervision
of financial market participants in the field of the prevention
of money laundering and terrorism and proliferation financing,
and the authorities similar to the Financial Intelligence
Service.
(8) The provisions of this Section do not prohibit Latvijas
Banka from exchanging restricted access information with the
central banks of the Member States and other authorities of the
Member States which are responsible for monitoring the payment
systems if the provision of such information is necessary for the
performance of the functions specified for them in the law, and
also with the European Systemic Risk Board.
(9) The provisions of this Section do not prohibit Latvijas
Banka from providing restricted access information to the
regulated market operator, the central securities depository, or
institutions which ensure clearing and settlements for
transactions in financial instruments in a Member State if the
provision of such information is necessary for ensuring the
relevant action of the abovementioned institutions, if the
settlement or clearing system participants do not fulfil their
liabilities or there are grounds for considering that they would
not fulfil their liabilities.
(10) The information which has been received by Latvijas Banka
in accordance with Paragraphs three and six of this Section from
a Member State or the supervisory authority of foreign managers
or funds for the performance of the supervisory functions may be
disclosed to the third parties which require such information for
the performance of the functions specified for them in the law
only upon a prior written consent of the supervisory authority of
the relevant Member State or foreign country and only for the
purposes for which the relevant supervisory authority has agreed
to disclose such information. The information which has been
received by the supervisory authorities of the Member State or a
foreign country in accordance with Paragraphs three and six of
this Section from Latvijas Banka for the performance of the
supervisory functions may be disclosed to the third parties which
require such information for the performance of the functions
specified in the law only upon a prior written consent of
Latvijas Banka and only for the purposes for which Latvijas Banka
has agreed to disclose such information.
(11) If an emergency situation, unfavourable events or state
arise when unfavourable development is observed in financial
markets which may significantly endanger adequate operation,
liquidity, and integrity of the financial market and the
stability of the financial system or its part in the European
Union or any of the Member States, Latvijas Banka shall
immediately provide information to the central banks of the
Member States and to the European Systemic Risk Board upon a
relevant request if such information is necessary for these
authorities for the performance of the functions specified in the
law (including for the implementation of the monetary policy and
for ensuring liquidity related thereto, for the monitoring of
payment, clearing and settlement systems and for ensuring the
stability of the financial system).
(12) The provisions of this Section do not prohibit Latvijas
Banka from providing restricted access information to the
following international authorities in accordance with the
procedures laid down in Paragraph fourteen of this Section:
1) the International Monetary Fund and the World Bank - for
the performance of assessments intended for the programme for the
evaluation of the financial sector;
2) the Bank for International Settlements - for the
performance of quantitative impact studies;
3) the Financial Stability Board - for the performance of its
functions.
(13) Latvijas Banka shall provide restricted access
information to the authorities referred to in Paragraph twelve of
this Section in conformity with the provisions laid down in
Paragraph fourteen of this Section if a reasoned request has been
received and the following conditions are met:
1) the request is sufficiently justified, taking into account
the particular tasks carried out by the requesting authority in
accordance with the legal acts governing its operation;
2) the request is sufficiently accurate in relation to the
content and amount of the requested information and the means for
disclosure thereof;
3) a certification has been provided that the requested
information is necessary for the performance of particular tasks
of the requesting authority and that it does not exceed the scope
of functions assigned to such authority in the laws and
regulations governing its operation;
4) a certification has been provided that the information will
be available only to such persons who are involved in the
execution of the relevant task and that the requirements for the
protection of information are binding on them.
(14) The authorities referred to in Paragraph twelve of this
Section may become acquainted with restricted access information
only in person in the premises of Latvijas Banka.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 86. Responsibility for the
Supervision of the Manager
(1) Latvijas Banka shall be responsible for the supervision of
a manager licensed in Latvia and a third country manager licensed
in Latvia, irrespective of whether the manager manages funds or
markets investment units of the fund in Latvia or another Member
State. Latvijas Banka shall be responsible for the supervision of
a manager licensed in a Member State in respect of the compliance
with the requirements laid down in Section 22, Paragraph one and
Section 23 of this Law which provides fund management services in
Latvia through a branch.
(2) The supervisory authority of a Member State is entitled,
upon its own initiative or upon request of Latvijas Banka, to
verify compliance with the requirements laid down in Section 22,
Paragraph one and Section 23 of this Law in a branch of a manager
licensed in Latvia which operates in the territory of the
relevant Member State.
(3) Latvijas Banka is entitled, upon its own initiative or
upon request of the supervisory authority of a relevant Member
State, to verify compliance with the requirements laid down in
Section 22, Paragraph one and Section 23 of this Law in a branch
of a manager licensed in a Member State which operates in
Latvia.
(4) Latvijas Banka is entitled to request from a manager
licensed in a Member State which provides fund management
services in Latvia through a branch or without opening a branch
all the information on activities of the manager which is
necessary for Latvijas Banka to ensure supervision of the
compliance with the requirements laid down in Section 22,
Paragraph one and Section 23 of this Law.
(5) If Latvijas Banka establishes that a manager licensed in a
Member State which provides fund management services in Latvia
through a branch or without opening a branch violates the
requirements laid down in Section 22, Paragraph one or Section 23
of this Law, or which markets investment units of a Member State
fund violates the requirements laid down in Section 82,
Paragraphs four and six of this Law, it shall request that the
relevant manager rectifies the established violations, and shall
inform the supervisory authority of the relevant Member State of
such violations.
(6) If in the cases referred to in Paragraphs four and five of
this Section a manager licensed in a Member State fails to
provide information or fails to follow instructions of Latvijas
Banka, Latvijas Banka shall inform the supervisory authority of
the relevant Member State of the violations established and ask
to take the necessary measures in order to ensure that the
manager rectifies them or provides the information requested by
Latvijas Banka. The supervisory authority of the Member State
shall inform Latvijas Banka of the measures taken, and also
provide Latvijas Banka with the information requested by Latvijas
Banka and received from the supervisory authority of a relevant
third country which is necessary for the supervision of the
manager.
(7) If, irrespective of the measures taken by the supervisory
authority of a relevant Member State and Latvijas Banka, a
manager licensed in a Member State continues violating this Law,
the regulations issued by Latvijas Banka, and the directly
applicable legal acts of the European Union, Latvijas Banka may,
upon informing the supervisory authority of the Member State,
take the measures provided for in this Law to ensure supervision
in order to prevent future violations committed by the relevant
manager, or impose the sanctions and restrictions provided for in
this Law. Latvijas Banka has the right to prohibit the relevant
manager from managing the fund in Latvia in the future.
(8) If Latvijas Banka has information at its disposal that the
manager violates the requirements of legal acts of the European
Union in relation to fund management services the supervision of
compliance with which is within the competence of the supervisory
authority of a Member State, Latvijas Banka shall inform the
supervisory authority of the relevant Member State thereof.
(9) If Latvijas Banka receives information from another
supervisory authority of a Member State that a manager licensed
in Latvia violates the requirements of the laws and regulations
in relation to fund management services the supervision of
compliance with which is within the competence of Latvijas Banka,
Latvijas Banka shall, according to its competence, carry out the
necessary activities in order to rectify the violations
established and inform the relevant supervisory authority of the
Member State which has submitted the information of such
activities.
(10) If, irrespective of the measures specified in Paragraph
nine of this Section and taken by the supervisory authority of a
home Member State of the manager, a manager licensed in a Member
State continues its activities by violating the legitimate
interests of the Latvian investors and jeopardising the stability
and integrity of the Latvian financial market, Latvijas Banka has
the right, upon informing the supervisory authority of the home
Member State of the manager, to take the measures provided for in
this Law to ensure supervision in order to protect the legitimate
interests of the investors and the stability and integrity of the
Latvian financial market. Latvijas Banka has the right to
prohibit the relevant manager from marketing investment units of
the fund in Latvia in the future.
(11) Latvijas Banka is entitled to apply the supervisory
activities referred to in Paragraphs nine and ten of this Section
also if it disagrees with the decision of a reference Member
State to issue to a third country manager a licence for the
activities of an alternative investment fund manager.
(12) If Latvijas Banka which is the supervisory authority of a
reference Member State for a third country manager licensed in
Latvia establishes violations of the laws and regulations in the
activities of such third country manager, it shall inform the
European Securities and Markets Authority thereof by means of a
reasoned notification.
(13) If Latvijas Banka disagrees with the measures and
decisions of the supervisory authority of a Member State referred
to in this Section, it has the right to appeal to the European
Securities and Markets Authority.
(14) If due to activities performed by the manager proper
operation and integrity of the financial market of the European
Union or stability of the financial system or part thereof may be
jeopardised, and also if Latvijas Banka has already taken all the
necessary measures in order to prevent the threats related to the
activities of the manager but they have not been properly
prevented, Latvijas Banka shall, on the basis of a request of the
European Securities and Markets Authority, take one of the
following decisions:
1) prohibit a third country manager licensed in Latvia from
marketing investment units of the fund under the management
thereof if it has failed to comply with the requirements of
Chapter XI, including those of Sections 78 and 79 of this Law, or
a manager licensed in Latvia from marketing investment units of
the third country fund under the management thereof if it has
failed to comply with the requirements of Section 72 of this
Law;
2) impose fund management restrictions on a third country
manager if excessive risk concentration has been established in a
particular segment of the market at cross-border level;
3) impose fund management restrictions on a third country
manager if the activities performed by it may pose a counterparty
risk to a credit institution or other systemically relevant
financial institutions.
(15) The type of restrictions and duration thereof which may
not exceed three months shall be indicated in the decision to
impose restrictions on the activities. The European Securities
and Markets Authority shall, once every three months, evaluate
the impact of the fund management restrictions imposed on a third
country manager on the operation, integrity, and stability of the
financial market of the European Union, and Latvijas Banka shall,
upon request of the European Securities and Markets Authority,
decide on the need to extend the duration of the fund management
restrictions.
(16) Latvijas Banka is entitled to take the decision to extend
the duration of the fund management restrictions imposed on the
manager if the threats to proper operation and integrity of the
financial market or stability of the financial system or part
thereof are still present, the manager continues managing the
fund in a Member State with a more favourable market surveillance
framework, or activities of the fund continue having a
detrimental effect on the efficiency of the financial markets by
reducing liquidity thereof, or creating considerable uncertainty
for the financial market operators in respect of the market
situation.
[8 October 2015; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" and amendment regarding the replacement of
the words "regulatory provisions" with the word "regulations"
shall come into force on 1 January 2023. See Paragraph 19
of Transitional Provisions]
Section 86.1 Reporting on
Potential and Actual Violations of Legal Acts
(1) Any person may report to Latvijas Banka on potential and
actual violations of this Law, the regulations of Latvijas Banka
issued on the basis of this Law, and Regulation No 1286/2014.
(2) Latvijas Banka shall create and maintain an efficient and
credible reporting system which includes at least the following
elements:
1) the procedures for receiving reports on the violations and
for taking further action;
2) in accordance with the laws and regulations regarding
personal data protection, the protection of personal data of such
person who reports on the violation, and also the protection of
such natural person who is suspected of committing the
violation;
3) the provisions for ensuring confidentiality of such person
who reports on the violation, except for the case where such
disclosure is provided for in legal acts.
(3) The procedures for reporting on potential and actual
violations of this Law, the regulations of Latvijas Banka issued
on the basis of this Law, and Regulation No 1286/2014 and for
processing the reports received by Latvijas Banka shall be
determined in the regulations of Latvijas Banka.
(4) Reporting which, in accordance with Paragraph one of this
Section, is performed by a person on the violations of this Law,
the regulations of Latvijas Banka issued on the basis of this
Law, and Regulation No 1286/2014 that have been committed at his
or her place of employment shall not be considered a breach of
the prohibition to disclose information specified in the contract
and any law or regulation, and the person shall not be liable for
such reporting. The person reporting on the violations of this
Law, the regulations of Latvijas Banka issued on the basis of
this Law, and Regulation No 1286/2014 that have been committed at
his or her place of employment shall not be subject to
discriminatory or other inequitable treatment.
(5) The manager that manages an alternative investment fund
the investment units of which may also be marketed to such
investor which is not a professional investor shall develop an
internal procedure, stipulating the procedures by which employees
report to it on violations of Regulation No 1286/2014 in the
manager.
[25 October 2018; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" and amendment regarding the replacement of
the words "regulatory provisions" with the word "regulations"
shall come into force on 1 January 2023. See Paragraph 19
of Transitional Provisions]
Chapter
XIII
Exchange of Information
Section 87. Cooperation in the Field
of Exchange of Information
(1) Latvijas Banka shall be responsible for the cooperation
with the supervisory authorities of Member States, the European
Securities and Markets Authority, and the European Systemic Risk
Board in order to ensure immediate exchange of information on
provision and supervision of management services of a manager
licensed in Latvia in the territory of all Member States.
(2) Latvijas Banka shall, on the basis of a reasoned request,
provide the supervisory authorities of Member States or the
European Securities and Markets Authority with the information on
a manager licensed in Latvia which provides management services
in the relevant Member State or which has close links with any
manager licensed or to be licensed in a Member State, a member of
the supervisory board or executive board thereof, or an owner
(beneficial owner) thereof. Latvijas Banka has the right to
indicate that the abovementioned information may be disclosed to
the third parties which require it for the fulfilment of the
functions specified in the law only upon a written consent of
Latvijas Banka.
(3) Latvijas Banka shall send to the supervisory authority of
a host Member State of a relevant manager a copy of the agreement
which Latvijas Banka, a third country manager, and the
supervisory authority of the fund have entered into for
cooperation in the field of the implementation of exchange of
information and supervisory functions, and also send information
on the relevant manager which has been received from the
supervisory authority of the third country manager according to
the abovementioned cooperation agreement. Latvijas Banka also has
the right to provide information on activities of the third
country manager in Latvia, taking into account the provisions
referred to in Section 86, Paragraphs seven, eight, and nine of
this Law.
(4) If Latvijas Banka considers that the cooperation agreement
received from the supervisory authority of a host Member State of
the relevant manager and referred to in Paragraph three of this
Section does not conform to the technical standards adopted by
the European Securities and Markets Authority regarding
cooperation principles for the supervisory authorities, Latvijas
Banka has the right to appeal to the European Securities and
Markets Authority asking to evaluate this agreement.
(5) If Latvijas Banka has information at its disposal that the
manager who is not under the supervision thereof performs
activities which are in contradiction with the legal acts of the
European Union in the field of activities of alternative
investment fund managers, Latvijas Banka shall inform the
European Securities and Markets Authority and the supervisory
authorities of the home Member State and the host Member State of
the manager thereof. The supervisory authorities of the home
Member State and the host Member State of the manager shall take
all necessary supervision measures and inform the European
Securities and Markets Authority and Latvijas Banka of the
results thereof.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 88. Transfer and Storage of
Personal Data
(1) Latvijas Banka shall send information containing personal
data to the supervisory authorities of other Member States or
third country, taking into account the personal data protection
requirements.
(2) Latvijas Banka shall provide the necessary information
referred to in Paragraph one of this Section to the supervisory
authorities of the relevant Member States, the European Systemic
Risk Board, and the European Securities and Markets Authority if
it is necessary to supervise the impact of activities of one or
several managers in order to ensure the stability of systemically
relevant financial institutions and the functioning of such
markets on which the abovementioned manager or managers operate.
The directly applicable legal acts of the European Union shall
determine the content of the information to be provided.
(3) Latvijas Banka shall store the information referred to in
Paragraph one of this Section for one year.
(4) After having evaluated a request sent by the supervisory
authority of a third country, Latvijas Banka shall provide this
supervisory authority with the requested information (personal
data or data analysis), if such request is legally grounded, the
data protection requirements have been complied with in respect
of the transfer of personal data to authorities of third
countries, and also information (personal data or data analysis)
is requested in order to prevent the potential negative impact of
the risks associated with activities of the managers on the
financial system. Latvijas Banka shall indicate in its response
that the supervisory authority of a third country may disclose
the relevant information to another supervisory authority in
another third country for the performance of the necessary
functions specified in the law of the relevant third country only
with a prior written consent of Latvijas Banka and only for the
purposes indicated in the written consent of Latvijas Banka.
(5) Latvijas Banka shall only send to the supervisory
authority of a third country the information received from the
supervisory authority of a Member State and referred to in
Paragraph one of this Section if the relevant supervisory
authority of the Member State has agreed in writing that the
abovementioned information may be disclosed to the supervisory
authorities of third countries which require it for the
performance of the functions specified in the law, and only for
the purposes specified in the written consent of the supervisory
authority of the relevant Member State.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Section 89. Cooperation in Carrying
out Supervision
(1) Latvijas Banka has the right, upon its own initiative or
upon request of the supervisory authority of a home Member State
of the manager, to carry out inspections in a branch of a manager
licensed in another Member State which operates in Latvia. The
supervisory authority of the home Member State of the manager's
branch has the right to carry out the inspection of the manger in
Latvia by itself or authorise another person to carry out such
inspection, notifying Latvijas Banka thereof in advance.
(2) Prior to carrying out an inspection in a branch of a
manager licensed in Latvia which provides fund management
services in the territory of another Member State, Latvijas Banka
shall inform the supervisory authority of the relevant Member
State thereof.
(3) If Latvijas Banka carries out an inspection in a Latvian
branch of the manager in another Member State upon request of the
supervisory authority of the Member State, the abovementioned
supervisory authority of the Member State has the right to
participate in this inspection, taking into account the
instructions of Latvijas Banka.
(4) If an inspection in a Latvian branch of a manager licensed
in another Member State is carried out by the supervisory
authority of the relevant Member State, Latvijas Banka has the
right to participate in this inspection.
(5) Latvijas Banka has the right to refuse in a reasoned
decision the request of the supervisory authority of another
Member State to carry out an inspection in the territory of
Latvia, and also to refuse the request for participation of legal
representatives of the supervisory authority of another Member
State in the inspection if:
1) such inspection or participation of legal representatives
of the supervisory authority of another Member State therein
would adversely affect the State sovereignty, security, or policy
of Latvia;
2) legal proceedings regarding the same violation and against
the same persons have already been initiated in Latvia;
3) a court judgement regarding the same violation and the same
persons has already entered into effect.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Chapter
XIV
Sanctions
Section 90. Liability
(1) Latvijas Banka has the right to impose a sanction on a
licensed manager and a custodial bank - to impose a fine in the
amount from EUR 14 200 to EUR 142 300 for the following
violations:
1) for the failure to provide the documents and information
provided for in this Law, the regulations of Latvijas Banka
issued on the basis of this Law, and the directly applicable
legal acts of the European Union, and also for the failure to
submit amendments made to the submitted documents and information
in accordance with the procedures laid down in laws and
regulations and within the time periods stipulated by Latvijas
Banka;
2) for the provision of false information to Latvijas Banka or
public dissemination of such information;
3) for the violations of the provisions for the registration
and storage of the fund property;
4) for the violations of the provisions for the issue,
repurchase, and redemption of investment units;
5) for the violations of the procedures for liquidating the
manager or the fund;
6) for the failure to ensure access to the information
intended for the fund investors which is provided for in this
Law, except for the information which is ensured in accordance
with Regulation No 1286/2014.
(11) Latvijas Banka has the right to impose a
sanction on a registered manager - to impose a fine in the amount
from EUR 14 200 to EUR 142 300 for the following violations:
1) for the failure to provide the information provided for in
this Law, the regulations of Latvijas Banka issued on the basis
of this Law, and the directly applicable legal acts of the
European Union;
2) for the provision of false information to Latvijas Banka or
public dissemination of such information.
(2) For the management of alternative investment funds without
receiving a licence of Latvijas Banka or registration of the
manager, Latvijas Banka has the right to impose a sanction - to
impose a fine in the amount from EUR 14 200 to EUR 142 300.
(3) For the marketing of fund investment units without an
authorisation of Latvijas Banka or for the violations of the
provisions for the marketing of investment units, Latvijas Banka
has the right to impose a sanction - to impose a fine in the
amount from EUR 1400 to EUR 14 200.
(4) For the marketing of investment units to a person who is
not an investor within the meaning of this Law, Latvijas Banka
has the right to impose a sanction on the marketer of investment
units - to impose a fine in the amount from EUR 1400 to EUR 14
200.
(5) For the violations of the laws and regulations in the
field of the prevention of money laundering and terrorism and
proliferation financing, Latvijas Banka shall apply the sanctions
specified in the Law on the Prevention of Money Laundering and
Terrorism and Proliferation Financing.
(6) Latvijas Banka has the right to impose a sanction on a
person - to impose a fine in the amount from EUR 14 200 to EUR
142 300, if the person has acquired or increased a qualifying
holding in the manager prior to submitting to Latvijas Banka the
notification referred to in Section 12, Paragraph two or four of
this Law or during the examination thereof.
(7) If a person fails to provide information to Latvijas Banka
or fails to arrive at Latvijas Banka and submit information in
person upon request of Latvijas Banka referred to in Section 81,
Paragraph seven, Clause 8 of this Law, Latvijas Banka has the
right to impose sanctions on such person - to issue a warning or
to impose a fine in the amount of up to EUR 14 200.
(8) For the violations of Regulation No 345/2013, Regulation
No 346/2013, and Regulation No 2017/1131, Latvijas Banka has the
right to impose sanctions - to issue a warning to the manager or
to impose a fine in the amount from EUR 14 200 to EUR 142 300 -
and to specify a time period during which the manager rectifies
the violation established.
(9) For the failure to comply with any other requirements of
this Law, Latvijas Banka has the right to impose sanctions on a
person who has failed to fulfil his or her obligation - to issue
a warning or to impose a fine in the amount of up to EUR 14
200.
(10) Latvijas Banka is entitled, in accordance with Article 24
of Regulation No 1286/2014, to impose the following sanctions for
the violations of the Regulation:
1) to issue a warning indicating the person responsible for
the violation and the nature of the violation;
2) to impose a fine on a legal person in the amount of up to
EUR 5 million or up to three per cent of the total annual
turnover of the legal person on the basis of the last audited
annual statement. If the legal person is a parent company or a
subsidiary company of a parent company which prepares a
consolidated annual statement in accordance with the Law on the
Annual Financial Statements and Consolidated Financial Statements
or a consolidated annual statement in accordance with the
requirements of the relevant legal acts of a home Member State,
the relevant total annual turnover shall be consist of the total
annual turnover or income of appropriate type in accordance with
the relevant legal acts of the home Member State in the field of
accounting, on the basis of the last audited consolidated annual
statement;
3) to impose a fine of up to EUR 700 000 on the natural person
who is responsible for the violation;
4) as an alternative to that laid down in Clause 2 or 3 of
this Paragraph to impose a fine of up to double amount of the
income gained or potential losses avoided as a result of the
violation.
[19 September 2013; 30 March 2017; 26 October 2017; 25
October 2018; 20 June 2019; 23 September 2021 / Amendment
regarding the replacement of the word "the Commission" with the
words "Latvijas Banka" and amendment regarding the replacement of
the words "regulatory provisions" with the word "regulations"
shall come into force on 1 January 2023. See Paragraph 19
of Transitional Provisions]
Section 90.1 Publishing
of Sanctions and Supervision Measures
(1) Latvijas Banka shall post on its website the information
on the sanctions referred to in Section 90, Paragraph ten of this
Law and the supervision measures referred to in Section 81,
Paragraph 7.1 of this Law which have been imposed on
persons for the violations of Regulation No 1286/2014 in
accordance with Article 29 of the abovementioned Regulation,
indicating information on the person and the violation committed
thereby, and also the information on contesting of the
administrative act issued by Latvijas Banka and the ruling
rendered.
(2) The information referred to in Paragraph one of this
Section and posted on the website of Latvijas Banka shall be
available for five years from the day of the posting thereof.
(3) Latvijas Banka shall inform the European Securities and
Markets Authority of the sanctions and supervision measures
applied in accordance with Article 29 of Regulation No
1286/2014.
[30 March 2017; 23 September 2021 / Amendment
regarding the replacement of the word "Commission" with the words
"Latvijas Banka" shall come into force on 1 January 2023 and
amendment regarding the replacement of the words "internet
website" with the word "website" shall come into force on 1
January 2024 and shall be included in the wording of the Law as
of 1 January 2024. See Paragraphs 19 and 23 of
Transitional Provisions]
Section 91. Collection of a Fine
(1) A fine collected for violations regarding which it has
been imposed in accordance with the provisions of Section 90 of
this Law shall be transferred into the State budget.
(2) A person shall pay the fine imposed by Latvijas Banka not
later than within a month from the day when the decision of
Latvijas Banka to impose a fine has entered into effect.
(3) A bailiff shall conduct compulsory enforcement of the
decision of Latvijas Banka not enforced voluntarily in accordance
with the procedures laid down in the Civil Procedure Law.
[23 September 2021 / Amendment regarding the
replacement of the word "the Commission" with the words "Latvijas
Banka" shall come into force on 1 January 2023. See
Paragraph 19 of Transitional Provisions]
Transitional
Provisions
1. Section 16, Paragraph one of this Law regarding the
determination of the initial capital shall come into force on 1
January 2014. Until 31 December 2013 the term "initial capital"
used in this Law shall mean the capital consisting of the
following:
a) the paid-up equity capital which is reduced by the value of
cumulative preference shares;
b) the share or stock issue premium;
c) the reserves (except for revaluation reserves);
d) the profit or loss brought forward from previous years;
e) the profit of the current year of operation if there is a
sworn auditor's report on the existence of the profit and it has
been calculated considering all the necessary provisions for
reduction in the asset value, estimated tax payments and
dividends, and the Commission has agreed to the inclusion of the
profit of the current year of operation in the initial
capital.
2. Section 16, Paragraph six of this Law regarding the
determination of own funds and laying down the procedures for the
calculation thereof shall come into force on 1 January 2014.
Until 31 December 2013 the term "own funds" used in this Law
shall mean the elements of capital, reserves, and liabilities
reflected in the financial statements audited by the manager
which are freely available to the manager for covering potential,
but not yet identified, losses related to the operational risks
of the manager, and the procedures for the calculation thereof
shall be determined by the Commission.
3. Commercial companies which, on the day of coming into force
of this Law, perform the activities specified in Section 5 of
this Law shall, within a year from the day of coming into force
of this Law, terminate such activities, conduct liquidation,
register with the Commission, or receive a licence for the
activities of an alternative investment fund manager.
4. The requirements of Chapter IX of this Law shall not be
applicable to the marketing of fund investment units and the fund
management if a public offer prospectus of the fund investment
units has been prepared in accordance with the Financial
Instrument Market Law and registered by the day of coming into
force of this Law. The abovementioned requirements shall not be
applicable while the prospectus is still valid.
5. The directly applicable legal acts of the European Union
shall determine a time period for the coming into force of
Sections 72, 73 and Chapter XI of this Law.
[8 October 2015]
6. An investor who does not conform to the characteristics
referred to in Section 9, Paragraphs one and two and Section 41,
Paragraphs seven, eight, and nine of this Law but who has, by the
day of coming into force of this Law, invested in a closed-ended
fund founded in accordance with the law On Investment Management
Companies or invested or assumed obligations to invest in the
fund which may be recognised as an alternative investment fund
within the meaning of this Law and which has not been founded in
accordance with the law On Investment Management Companies, may
alienate or, without increasing the amount of holding, maintain
its investment share in the relevant fund until expiry of the
activities of the fund provided for in the document of
incorporation of the fund, the prospectus, or the operational
rules of the fund on the day of coming into force of this
Law.
7. Commercial companies the closed-ended funds under
management of which have been founded in accordance with the law
On Investment Management Companies as on the day of coming into
force of this Law shall, within a year from the day of coming
into force of this Law, conduct liquidation or registration of
the funds in accordance with this Law.
8. Commercial companies the funds under management of which
may be recognised as alternative investment funds within the
meaning of this Law and have not been founded in accordance with
the law On Investment Management Companies shall, within a year
from the day of coming into force of this Law, submit an
application for the registration of the fund to the
Commission.
9. Closed-ended investment funds which have been founded in
accordance with the law On Investment Management Companies and
for which accounting records are maintained and financial
statements are prepared in accordance with the law On Investment
Management Companies as on the day of coming into force of this
Law shall be subject to the principles for maintaining accounting
records and preparing financial statements specified in the law
On Investment Management Companies until expiry of activities of
the fund.
[8 October 2015]
10. After coming into force of this Law, the commercial
companies referred to in Paragraphs 7 and 8 of these Transitional
Provisions shall only market investment units of the funds
referred to in these Paragraphs to the investors referred to in
Section 41, Paragraphs seven, eight, and nine of this Law.
11. The managers referred to in Paragraphs 7 and 8 of these
Transitional Provisions shall make payments for examination of
the documents submitted for registration of the fund referred to
in these Paragraphs or for examination of the amendments to the
operational rules of the fund or the document of incorporation of
the fund submitted for registration if such documents have been
submitted to the Commission not within a year from the day of
coming into force of this Law but later.
12. Commercial companies which manage closed-ended funds
founded in accordance with the law On Investment Management
Companies and intend to make amendments to the articles of
association or prospectuses of management of the relevant funds
after coming into force of this Law shall develop and submit to
the Commission the fund management documents in accordance with
the requirements of Section 10, Paragraph eight of this Law.
13. Until the day of introduction of euro specified in Section
3, Paragraph one of the Law on the Procedure for Introduction of
Euro, the monetary amounts referred to in this Law which have
been expressed in euro shall be considered equivalent to the
amounts in lats recalculated according to the rate set by the
Bank of Latvia.
14. Section 36.1 of this Law shall come into force
on 1 January 2019.
[25 October 2018]
15. A licensed manager shall, by 1 November 2019, develop and
publish an engagement policy if, on the day of the coming into
force of Section 60.1 of this Law, the investment
policy of the fund under management of the licensed manager
provides for investing resources of the fund in the shares of
such joint stock company the registered office of which is in a
Member State and the shares of which are admitted on the
regulated market of a Member State.
[20 June 2019]
16. A licensed manager shall publish the report referred to in
Section 60.1, Paragraph four of this Law on the
implementation of the engagement policy and the information
referred to in Paragraph five starting from 2020.
[20 June 2019]
17. Amendments to Section 59, Paragraph one of this Law
regarding the new wording of the Paragraph shall come into force
on 1 January 2020.
[20 June 2019]
18. The fund of a registered manager the rules of operation of
which provide for the use of leverage or the repurchase of
investment shares within five years from the day when the first
investment is made in the fund registered with the Commission
until the day when amendments to Section 7, Paragraph one of this
Law regarding the new wording of the Paragraph and to Section 9,
Paragraph two, and the investment shares of which are marketed
within a year after registration with the Commission shall
continue operating until expiry of activities of the fund. The
registered manager that manages the fund referred to in the first
sentence of this Paragraph shall continue operating as a
registered manager.
[20 June 2019]
19. Amendments to this Law regarding the replacement of the
word "the Commission" with the words "Latvijas Banka" throughout
the Law, except for the name "European Commission" and
Transitional Provisions, the replacement of the word "regulatory
provisions" throughout the Law with the word "regulations", the
replacement of the words "financial and capital market" with the
words "financial market" in Paragraph three, Clause 3 of Section
15, Paragraph two, Clause 4 of Section 54, and Paragraph seven,
Clauses 5, 10, and 15 of Section 81, amendment regarding the
rewording of Paragraph two of Section 6, amendments to Paragraph
five and Paragraph six, Clause 6 of Section 81, and also
amendment regarding the rewording of Section 82 shall come into
force concurrently with the Law on Latvijas Banka.
[23 September 2021]
20. The regulatory provisions of the Financial and Capital
Market Commission issued on the basis of this Law until the day
of coming into force of the Law on Latvijas Banka shall be
applicable until the day when the relevant regulations of
Latvijas Banka come into force, but not longer than until 31
December 2024.
[23 September 2021]
21. The Enterprise Register shall, not later than within five
working days, publish a notification regarding the documents
referred to in Section 57, Paragraph six of this Law which have
been received until the day when amendments to Section 57,
Paragraph seven of this Law come into force in the official
gazette Latvijas Vēstnesis that the relevant annual
statements or consolidated annual statements, report of a sworn
auditor, and copies of the documents appended thereto are
available electronically in the Enterprise Register.
[30 September 2021]
22. Section 5, Paragraph eleven of this Law and amendment
regarding the new wording of Paragraph six of Section 16 shall
come into force concurrently with the amendments to the Private
Pension Fund Law which refer to the registration and distribution
of a pan-European Personal Pension Product in the Republic of
Latvia.
[13 October 2022]
23. Amendments to Section 8, Paragraph six, Section 9,
Paragraph five, Section 22, Paragraph two, Clause 1, Section 29,
Paragraph one, Section 56, Paragraph ten, Section 57, Paragraph
eight of this Law, the new wording of Paragraph seven of Section
60.1, and amendments to Paragraphs one and two of
Section 90.1 shall come into force on 1 January
2024.
[13 October 2022 / The abovementioned amendments
shall be included in the wording of the Law as of 1 January
2024.]
24. Amendment regarding the new wording of Section 82,
Paragraph one, Clause 1 of this Law shall come into force on 1
January 2023.
[13 October 2022]
Informative
Reference to European Union Directives
[8 October 2015; 20 June 2019;
30 September 2021]
The Law contains norms arising from:
1) Directive 2011/61/EU of the European Parliament and of the
Council of 8 June 2011 on Alternative Investment Fund Managers
and amending Directives 2003/41/EC and 2009/65/EC and Regulations
(EC) No 1060/2009 and (EU) No 1095/2010;
2) Directive 2013/14/EU of the European Parliament and of the
Council of 21 May 2013 amending Directive 2003/41/EC on the
activities and supervision of institutions for occupational
retirement provision, Directive 2009/65/EC on the coordination of
laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities
(UCITS) and Directive 2011/61/EU on Alternative Investment Funds
Managers in respect of over-reliance on credit ratings;
3) Directive 2014/65/EU of the European Parliament and of the
Council of 15 May 2014 on markets in financial instruments and
amending Directive 2002/92/EC and Directive 2011/61/EU (Text with
EEA relevance);
4) Directive (EU) 2017/828 of the European Parliament and of
the Council of 17 May 2017 amending Directive 2007/36/EC as
regards the encouragement of long-term shareholder
engagement;
5) Directive (EU) 2019/1160 of the European Parliament and of
the Council of 20 June 2019 amending Directives 2009/65/EC and
2011/61/EU with regard to cross-border distribution of collective
investment undertakings.
The Law has been adopted by the Saeima on 9 July
2013.
President A. Bērziņš
Rīga, 24 July 2013
1The Parliament of the Republic of
Latvia
Translation © 2023 Valsts valodas centrs (State
Language Centre)