The Saeima¹ has adopted and
the President has proclaimed the following Law:

On Private Pension Funds

Chapter I
General Provisions

Section 1. Definitions of Terms

The following terms are used in this Law:

1) [10 November 2005];

2) individual participating contract - a contract concluded between a natural person and a private pension fund regarding the participation of such person in a specified pension scheme;

3) collective participating contract - a contract concluded between an employer and a private pension fund regarding the participation of employees of such employer in a specified pension scheme;

4) manager of funds - a commercial company, which manages the funds accumulated according to a pension scheme;

5) holder of funds - a commercial company, which stores the assets of a private pension fund and carries out other duties laid down in this Law and the contract of the holder of funds;

6) [10 November 2005];

7) [10 November 2005];

8) pension scheme participant - a natural person who herself or himself or for whom an employer or another natural person makes contributions in a private pension fund and who has the right to receive pension benefits in conformity with this Law and a pension scheme;

9) pension benefits capital - monetary means that during a specific period of time in accordance with this Law have been accumulated in favour of a participant of the specified contribution scheme;

10) pensionable age - the age of a pension scheme participant upon reaching of which such participant has the right to receive the pension benefits accumulated in the pension fund in accordance with the procedures prescribed by this Law;

11) related persons - two or several persons if they conform to at least one of features of affiliated undertakings referred to in the Law On Enterprise Income Tax;

12) [20 November 2003];

13) pension scheme - an aggregate of systemised provisions, according to which pension benefits are accumulated in the pension fund, funds are invested and the funds accumulated are disbursed;

14) specified pay-out scheme - a pension scheme, which provides for pay-out of specific pension benefits when a pension scheme participant reaches the pensionable age and in which the coverage of biometrical risks may be provided for;

15) specified contribution plan - a pension scheme, which provides for regular or irregular contributions for a pension scheme participant and in which the coverage of biometrical risks may be provided for or a specific return on investments may be guaranteed;

16) recipient of pension benefits - a person who receives pension benefits after reaching the age specified in the pension scheme;

17) sponsoring employer - a person who is an employer and who makes contributions in private pension funds in favour of the employees thereof, or a self-employed person who makes contributions in his or her own favour;

18) biometrical risks - risks linked to death, disability and longevity;

19) pension benefits - a pension benefits capital accumulated in accordance with the specified contribution plan, or payments or services specified for the beneficiary of pension benefits in accordance with the specified pay-out scheme. Payments may be specified as a payment throughout the life of the beneficiary of pension benefits, or a payment during a specific time period, or a single pay-out;

20) country of residence - a state of the European Union or European Economic Area (hereinafter - Member State), in which the private pension fund has been registered;

21) concerned state - a Member State, which is not a country of residence and in which the private pension fund of the country of residence provides the services thereof;

22) chief actuary - an official of the private pension fund who assesses the liabilities included in pension schemes and the sufficiency of technical reserves created;

23) technical reserves - the potential liabilities of the pension fund, which have been calculated according to the specified contribution schemes of the pension fund with guaranteed profitability, specified pay-out schemes and pension schemes with a planned coverage of biometrical risks;

24) risk capital market - a market, which offers capital for funding of commercial companies in their development stage;

25) analysis of critical situation - an analysis conducted by the pension fund in order to determine and assess the potential impact of different extraordinary, but potentially unfavourable events or changes in market conditions on the investment portfolio of a pension scheme;

26) investment fund - a fund within the meaning of the Law On Investment Companies;

27) alternative investment fund - a fund within the meaning of the Law On Alternative Investment Funds and their Managers.

[10 October 2002; 20 November 2003; 10 November 2005; 28 May 2009; 9 July 2013]

Section 2. Purpose of this Law

This Law prescribes the accumulation of pension benefits both in the specified contribution scheme and specified pay-out scheme, the types of private pension funds, the basis for activities thereof, the types of pension schemes, the rights and duties of pension scheme participants, the management of funds, the competence of holders of funds, as well as State supervision of such activities.

[10 November 2005]

Section 3. Concept of a Private Pension Fund

(1) A private pension fund (hereinafter - pension fund) is a joint stock company registered in the Commercial Register, to which a licence for the activities of a pension fund (hereinafter - licence) has been issued by the Financial and Capital Market Commission in accordance with the procedures laid down in this Law.

(1¹) A pension fund shall, in accordance with this Law and pension schemes, accumulate and invest contributions of monetary means made by pension scheme participants themselves or voluntarily made in their favour in order to ensure pension benefits to such participants.

(2) A pension fund may issue registered stocks only. Stocks of the pension fund may not be issued for public circulation.

(3) A pension fund may only carry out activities provided for in this Law.

(4) The excess of income over expenditure of the pension fund, which offers only a specified contribution scheme without guaranteed profitability or does not provide for the coverage of biometrical risks in such scheme, may not be removed or paid out to stockholders in dividends, and it shall be fully included in individual accounts of pension scheme participants in conformity with the requirements prescribed by this Law.

(5) Only monetary means may be invested in the equity capital of the pension fund, except cases when the pension fund is reorganised by a permission of the Financial and Capital Market Commission.

(6) The pension fund shall not take loans for the fulfilment of liabilities arising from a pension scheme, except loans for the provision of short-term liquidity for a time period up to three months.

[10 October 2002; 10 November 2005; 28 May 2009]

Section 4. Types of Pension Funds

(1) Pension funds may be closed or open.

(2) A closed pension fund may have one or several pension schemes. Only such persons may be pension scheme participants of a closed pension fund who in commencing participation in a pension scheme are employees of one founder (stockholder) or several founders (stockholders) of the pension fund.

(3) An open pension fund is such pension fund, the founders of which are the legal persons referred to in Section 6, Paragraph two of this Law.

(4) An open pension fund may have one or several pension schemes. Any natural person may become a participant in such pension schemes on the basis of a contract in accordance with the procedures prescribed by this Law.

[10 October 2002]

Section 5. Name of the Pension Fund

The name of the fund shall include the expression "pensiju fonds" [pension fund] with a reference whether it is a closed or an open pension fund. Only the pension funds founded in accordance with the procedures prescribed by this Law have the right to use such expression in their name.

Chapter II
Establishment of Pension Funds

Section 6. Founders (Stockholders) of a Pension Fund

(1) Only such persons (employers) who enter into a collective participating contract with a pension fund may be founders of a closed pension fund.

(2) Only the following persons may be the founders (stockholders) of an open pension fund:

1) a bank if the bank has received a licence for the carrying out of activities of a credit institution in a Member State or a Member State of the Organisation for Economic Co-operation and Development;

2) a life insurance company that has received a licence for the carrying out of life insurance in a Member State or a Member State of the Organisation for Economic Co-operation and Development.

(3) A person who wishes to purchase the stocks of a pension fund shall inform the Financial and Capital Market Commission at least one month prior to carrying out the transaction, indicating the number of stocks and the stockholder who will sell stocks. The Financial and Capital Market Commission may, within a month after receipt of information, request additional information or prohibit the carrying out of such transaction.

(4) If after commencing of activities of an open pension fund a stockholder of the pension fund does not conform to the requirements specified in Paragraph two of this Section, the stocks owned by the stockholder shall be alienated in accordance with the procedures prescribed by the Commercial Law. If none of stockholders of an open pension fund no longer conform to the requirements specified in Paragraph two of this Section, the Financial and Capital Market Commission shall determine a time period by which the stocks must be alienated by the stockholders to such person who conforms to the requirements specified in Paragraph two of this Section for a stockholder of an open pension fund, or determine other measures to be performed for the continuation of activities of such pension fund.

[27 August 1998; 1 June 2000; 10 October 2002; 20 November 2003; 18 March 2004; 10 November 2005]

Section 7. Articles of Association of a Pension Fund

(1) Founders of a pension fund shall develop and approve (adopt) the articles of association of the fund in accordance with this Law and the Commercial Law.

(2) Amendments to the articles of association of a pension fund may not deteriorate the state of pension scheme participants or third parties with retroactive effect and may not restrict such rights that have actually been acquired up to the adoption of the relevant amendments to the articles of association.

[10 November 2005]

Section 8. Licensing of a Pension Fund

(1) A licence issued by the Financial and Capital Market Commission shall be necessary for the carrying out of activities of a pension fund. The pension fund is entitled to commence activities only after receipt of such licence at the Financial and Capital Market Commission. The pension fund is entitled to offer a pension scheme, which conforms to the conditions of the licence. The conditions of the licence shall contain the type of the pension scheme and information regarding whether guaranteed profitability may be included therein or the coverage of biometrical risks may be provided for.

(2) The licence shall be issued without a limited term of validity. If the Financial and Capital Market Commission has cancelled the licence for the pension fund, it shall not be renewed.

(3) In order to receive a licence, the pension fund shall submit the following documents to the Financial and Capital Market Commission:

1) an application for the receipt of the licence, in which all the documents appended thereto are indicated;

2) a document certifying payment of the initial capital;

3) a list of stockholders of the pension fund, indicating their firm name, legal address, registration number and place. Legal persons registered in foreign states shall also submit approved copies of registration documents;

4) a notification to be filled in by each member of the council and board of directors of the pension fund, the head of the internal control service of the pension fund, the chief actuary, as well as the person who is authorised to take decisions on behalf of the pension fund. The following information shall be indicated in the notification:

a) the firm name of the pension fund and the office, to which the person is applying;

b) the given name, surname, year and date of birth, personal identity number (if any) and citizenship;

c) education (academic degree);

d) raising of qualification;

e) criminal record;

f) whether the right to perform commercial activities has been suspended;

g) the previous places of employment during the preceding 10 years and a short description of the work duties;

5) a copy of such page of the passport of the persons referred to in Clause 4 of this Paragraph or of another personal identification document, in which the identification data of the person [given name, surname, year and date of birth, personal identity number (if any)] is indicated, and copies of documents certifying education;

6) a description of organisation and management structure, in which duties and authorisations of members of the council (if such has been established) and board of directors are clearly indicated, as well as the tasks and duties of other officials of the pension fund are clearly specified and distributed;

7) a description of the accounting policy, indicating the main principles for organising accounting;

8) a description of the management information system;

9) the provisions for the protection of the information system;

10) a description of the internal control system;

11) a description of the procedure for identification of suspicious financial transactions;

12) an operational plan for the subsequent three years, in which the forecast of the number of pension scheme participants (for each pension scheme), the forecasts of the amount of contributions and pay-outs (for each pension scheme) shall be indicated, indicating individually the forecast of the amount of contributions and pay-outs for the coverage of biometrical risks, the forecast of administrative expenditure of the private pension fund and the sources for covering them;

13) a contract corresponding to the requirements of Section 20, Paragraph nine of this Law with the manager of funds;

14) a contract corresponding to the requirements of Section 21, Paragraph seven of this Law with the holder of funds;

15) a pension scheme developed in accordance with the requirements of Section 9 of this Law. The referred to pension scheme shall be submitted in one of the following forms:

a) in the form of an electronic document in accordance with the laws and regulations regarding development and drawing up of electronic documents;

b) in the form of a printed document (in such case the pension scheme shall also be submitted in electronic form, sending it to the electronic mail address of the Financial and Capital Market Commission);

16) a description of the investment policy developed for each pension scheme according to the requirements of Section 23, Paragraph 10.¹ of this Law;

17) a sample individual participating contract, if direct participation of participants is provided for in the pension scheme of the pension fund by entering into an individual participating contract;

18) a description of the procedures, by which the pension fund shall register and perform record-keeping of individual and collective participating contracts (hereinafter - participating contract). Registration and record-keeping of participating contracts may be carried out only in electronic form, ensuring the third parties with an opportunity of tracing the making of amendments to entries of the register. The pension fund shall be responsible for immediate registration and record-keeping of participating contracts in accordance with the approved procedures. The terms and conditions of a participating contract shall not be in contradiction with the provisions of the pension scheme;

19) in the case referred to in Section 14, Paragraph fourteen of this Law - a description of the policy for the prevention of conflict of interest situations, developed by the pension fund.

(4) If the pension fund wishes to offer a specified pay-out scheme or a specified contribution scheme with guaranteed profitability or to provide the coverage of the biometrical risks in the pension scheme, the following documents shall be submitted in addition to the documents referred to in Paragraph three of this Section:

1) a description of the guaranteed profitability, pension benefits and biometrical risks provided for in the pension scheme;

2) the methodology for the calculation of contributions, indicating separately the calculation of contributions for the coverage of biometrical risks;

3) the methodology for the calculation of technical reserves;

4) the forecast of the amount of technical reserves for the subsequent three years of activities;

5) the forecast of the amount of own funds necessary for activities for the subsequent three years of activities and the procedures for the provision thereof.

(5) The veracity of the information provided in the notification referred to in Paragraph three, Clause 4 of this Section shall be certified with a signature by the person in relation to whom the notification has been prepared, as well as by the chairperson of the board of directors of the pension fund.

(6) The Financial and Capital Market Commission shall examine the application of the pension fund regarding granting of a licence and take a decision not later than within 90 days from the day when all the documents laid down in this Law, which are necessary for taking of the decision and which have been prepared and developed in accordance with the requirements of laws and regulations, are received.

(7) If until taking of the decision on issuance of the relevant licence changes in the information provided to the Financial and Capital Market Commission occur or amendments are made to documents, the pension fund has a duty to provide the new information or a complete text of the relevant documents with the amendments made to the Financial and Capital Market Commission without delay.

(7¹) If a decision on issuance of a licence has been taken, the Financial and Capital Market Commission shall inform the European Insurance and Occupational Pensions Authority thereof.

(8) The Financial and Capital Market Commission shall not issue the licence if:

1) in founding the pension fund, this Law or other laws and regulations governing commercial activities has not been complied with;

2) members of the council or board of directors of the pension fund, the chief actuary, the head of the internal control service carrying out internal control of the pension fund does not conform to the requirements laid down in this Law;

3) the record-keeping and accounting system of the pension fund or the system for arranging of individual accounts of pension scheme participants does not conform to the description provided, the description of the organisational and management structure or the pension fund or the pension scheme of the pension fund submitted for registration;

4) the documents submitted contain false or incomplete information;

5) the planned activities of the pension fund do not conform to the requirements laid down in this Law or other laws and regulations governing commercial activities.

[10 November 2005; 28 May 2009; 22 March 2012; 9 July 2013]

Section 8.¹ Re-registration and Issuance of a Duplicate of the Licence

(1) If the firm name of the pension fund is changed, the Financial and Capital Market Commission shall re-register the licence of the pension fund.

(2) An application of the pension fund regarding re-registration of the licence of the pension fund shall be submitted to the Financial and Capital Market Commission not later than within seven days after changes regarding the firm name have been registered.

(3) The Financial and Capital Market Commission shall re-register the licence not later than within seven days after receipt of the relevant application.

(4) If the licence has been lost, the pension fund shall immediately submit an application to the Financial and Capital Market Commission regarding issuance of a duplicate of the licence.

(5) The Financial and Capital Market Commission shall issue a duplicate of the licence not later than within seven days after receipt of the relevant application.

[10 November 2005]

Section 8.² Changing of the Conditions of a Licence

(1) If the pension fund wishes that conditions are changed in the licence issued thereto, it shall submit a relevant application to the Financial and Capital Market Commission and the documents referred to in Section 8, Paragraph three, Clauses 12, 15, 16 and 17 of this Law updated according to the changes in the conditions of the licence, as well as, if necessary, amendments to contracts with the manager of funds and the holder of funds.

(2) If the pension fund wishes to offer a specified pay-out scheme or a specified contribution scheme with guaranteed profitability or to provide the coverage of the biometrical risks in the pension scheme, in addition to the documents referred to in Paragraph one of this Section it shall submit the documents referred to in Section 8, Paragraph three of this Law to the Financial and Capital Market Commission, as well as information regarding the chief actuary in accordance with Section 8, Paragraph three, Clause 4 of this Law.

(3) The Financial and Capital Market Commission shall, within a month after receipt of all the documents provided for in this Section and prepared and developed in accordance with the requirements of laws and regulations, examine the application of the pension fund.

(4) The Financial and Capital Market Commission may take a decision on not changing the conditions of the licence if:

1) the documents submitted contain false or incomplete information;

2) the record-keeping and accounting system of the pension fund or the system for arranging of individual accounts of pension scheme participants does not conform to the description provided, the description of the organisational and management structure or the pension fund or the pension scheme of the pension fund submitted for registration;

3) the planned activities of the pension fund do not conform to the requirements laid down in this Law or other laws and regulations governing commercial activities;

4) the chief actuary of the pension fund does not conform to the requirements laid down in this Law;

5) a scheme for improvement of the financial situation is implemented in the pension fund;

6) the pension fund has not rectified the violations detected by the Financial and Capital Market Commission within the time period specified thereby.

(5) The State fee for changing the conditions of the licence need not be paid.

[10 November 2005]

Section 8.³ Provision of External Services

(1) The pension fund may delegate activities, which are necessary for the provision of activities of the pension fund, to one or several providers of external services, which on the basis of a written contract with the pension fund undertake the provision or provide external services to the pension fund and which have a corresponding qualification and experience in the provision of the referred to services.

(2) Managing and holding of the funds accumulated according to the provisions of a pension scheme shall be carried out by a manager of funds of the pension scheme and a holder of funds of the pension scheme selected by the pension fund in accordance with the procedures laid down in Sections 20, 21 and 21.¹ of this Law.

(3) Carrying out of an internal audit of the pension fund as an external service may be delegated only to a sworn auditor, a commercial company of sworn auditors or the internal audit service of the parent company of the pension fund, complying with the requirements specified in Section 14, Paragraphs three and six of this Law for the head of the internal control service.

(4) The pension fund shall not delegate:

1) the duties of the administrative bodies of the pension fund;

2) the performance of the aggregate of the functions permitted in the licence of the pension fund in totality.

(5) In order for the pension fund to commence the receipt of external services, it shall develop a relevant policy and procedure for the use of external services, determining:

1) the procedures, by which decisions on the use of external services shall be taken in the pension fund;

2) the procedures for the entering into a contract of external services, the supervision of execution and termination thereof;

3) the persons (officials and employees) and units responsible for co-operation with the provider of external services and supervision of the amount and quality of the external service received, as well as the rights and duties of such persons;

4) the action of the pension fund in case when the provider of external services does not fulfil or is going to be unable to fulfil the provisions of the contract of external service.

(6) The pension fund shall submit the policy and procedure referred to in Paragraph five of this Section to the Financial and Capital Market Commission prior to receipt of external services. The Financial and Capital Market Commission shall, within 30 days after receipt of the referred-to documents, examine and assess their conformity with the requirements of this Law.

(7) If accounting, management or development of information technologies, systems or organising of internal control of the pension fund is delegated, the pension fund shall, in addition to the documents referred to in Paragraph five of this Section, submit an application to the Financial and Capital Market Commission regarding provision of external service and an original or copy of the contract of external service, the authenticity of which has been certified by a person who is entitled to take decisions on behalf of the pension fund. A provider of external services may commence the provision of the service referred to in this Paragraph, if the Financial and Capital Market Commission, within 30 days after sending of the contract of external service, does not send a decision to the pension fund, by which it prohibits that the pension fund receives the relevant external service from the provider of external services. In cases of delegating other external services, the pension fund shall, within five working days after entering into a contract of external service, inform the Financial and Capital Market Commission thereof.

(8) At least the following provisions shall be included in a contract of external service:

1) a description of the external service to be received;

2) precise requirements for the amount and quality of external service;

3) the rights and duties of the pension fund and the provider of external services, including:

a) the right of the pension fund to permanently supervise the quality of the provision of external service;

b) the right of the pension fund to give a provider of external services instructions to be mandatorily executed in issues, which are related to the execution of external service in good faith, good quality, timely manner and corresponding to laws and regulations;

c) the right of the pension fund to request the provider of external services and the duty of the provider of external services to terminate the contract of external service without delay after receipt of a written request;

4) the right of the Financial and Capital Market Commission to get acquainted with the documents referred to in Paragraph ten of this Section and to request other information from the provider of external services, which is related to the provision of external service and is necessary for the performance of the functions of the Financial and Capital Market Commission.

(9) If amendments are made to the documents referred to in this Section, the pension fund shall, within five working days after approval of the relevant amendments, submit them to the Financial and Capital Market Commission for knowledge.

(10) The Financial and Capital Market Commission has the right to conduct an inspection of activities of the provider of external service at the location thereof or at the location of provision of external service, to get acquainted with all documents, document and accounting registers, to make copies, as well as to request information from the provider of external services, which is related to the provision of external service and is necessary for the performance of the functions of the Financial and Capital Market Commission.

(11) The Financial and Capital Market Commission shall prohibit the pension fund to receive the planned external service from the provider of external services if:

1) the requirements of this Law have not been complied with;

2) the receipt of external service may infringe the interests of pension scheme participants;

3) the receipt of external service may cause restrictions to the administrative bodies of the pension fund for the performance of the duties specified for them in laws and regulations, articles of association or other internal laws and regulations of the pension fund;

4) the receipt of external service will preclude or cause restrictions to the Financial and Capital Market Commission in relation to the performance of the functions specified thereto in this Law;

5) the contract of external service does not comply with this Law and does not provide a clear and true idea of the intended co-operation of the pension fund and the provider of external services and the amount and quality of external service.

(11¹) The Financial and Capital Market Commission is entitled to request that the pension fund, which receives external service from a provider of external service, terminates a contract of external service without delay, if the Financial and Capital Market Commission detects than any of the circumstances referred to in Paragraph eleven of this Section has set in.

(12) Receipt of external service shall not release the pension fund from liability for non-fulfilment of the liabilities laid down in this Law or contract of external service.

[28 May 2009; 22 March 2012]

Chapter III
Pension Scheme and Participation Therein

Section 9. Pension Scheme and Amendments Thereto

(1) A pension scheme shall be developed by the relevant pension fund, but the Financial and Capital Market Commission shall register it.

(2) The title of the pension scheme shall contain words "pensiju plāns" [pension scheme]. Only such pension schemes, which have been created and registered in accordance with the procedures laid down in this Law, have the right to include the words "pensiju plāns" [pension scheme] in the title.

(3) Any contribution, accumulation, investment of monetary means in a pension fund or paying-out for the provision of pension benefits may take place only in conformity with the pension scheme registered by the Financial and Capital Market Commission.

(4) The pension fund shall submit documents for registration of a pension scheme concurrently with an application for the receipt of a licence.

(5) If after issuance of a licence the pension fund develops a new pension scheme and wishes to re-register it with the Financial and Capital Market Commission, it shall submit an application to the Financial and Capital Market Commission regarding registration of a pension scheme and the documents referred to in Section 8, Paragraph three, Clauses 15, 16 and 17 of this Law, as well as, if necessary, amendments to contracts with the manager of funds and the holder of funds. The Financial and Capital Market Commission shall examine the documents submitted by the pension fund and take a decision on registration of the pension scheme or refusal to register the pension scheme within 30 days after all the documents laid down in this Law, which are necessary for taking of the decision and which have been prepared and developed in accordance with the requirements of laws and regulations, are received.

(6) The following shall be indicated in a pension scheme:

1) the type, name and legal address of the pension fund;

2) the title of the pension scheme;

3) information regarding the manager of funds and the holder of funds;

4) the criteria and conditions relating to the participants withdrawing from the pension scheme;

5) the procedures for contribution of funds and consequences in cases of violation of such procedures;

6) the provisions for the calculation and record-keeping of individual accounts of the pension scheme participants, contributions made and pension benefits capital accumulated;

7) the provisions of pensionable age;

8) the procedures by which a beneficiary of the pension benefits shall be paid out the pension benefits capital according to the specified contribution plan;

9) other cases when the paying-out of the pension benefits capital shall be carried out, and the procedures by which they shall be paid out in such cases;

10) the investment provisions that will be complied with in the pension scheme, and a description of the risks related to investments and the procedures for income distribution;

11) the procedures for covering the expenses of the pension scheme and provision of information regarding maximum payments to the management of the pension scheme and to the manager of funds, and the amount of remuneration to be paid out to the holder of funds, as well as the procedures by which pension scheme participants shall be informed regarding such pay-outs of the pension scheme;

12) other information necessary to the pension scheme;

13) the procedures, by which a pension scheme participant and a beneficiary of pension benefits will be ensured the information referred to in Section 24 of this Law;

14) for the specified contribution scheme with guaranteed profitability - in addition also a description of guarantees;

15) for the specified pay-out scheme - in addition also the amount and period of paying out the pension benefits, as well as the procedures for paying out of pension benefits;

16) for the pension scheme with the coverage of biometrical risks - in addition also the biometrical risks covered, the amount of and procedures for payments in case of risks setting in.

(7) The pension scheme may provide that a participant thereof upon reaching the age specified in the pension scheme may continue participation in the scheme making an additional agreement with the pension fund regarding the procedures for paying out of the pension benefits. If the pension fund provides for a possibility to receive the pension benefits capital in parts, the pension fund shall submit to the Financial and Capital Market Commission, concurrently with a pension scheme, the methodology for paying out of the pension benefits capital approved by the board of directors of the pension fund.

(8) The pension scheme, the fulfilment of the liabilities of which has been undertaken by the sponsoring employer, may only have one participating contract, which has been entered into with the sponsoring employer, which has guaranteed the fulfilment of such liabilities.

(9) After registration of the pension scheme with the Financial and Capital Market Commission amendments thereto may be made only with a written consent of the Commission.

(10) A written consent of the Financial and Capital Market Commission for amendments to the pension scheme shall not be required, if amendments thereto are made due to the change of officials of the pension fund, the firm name or legal address of the pension fund, the manager of funds or holder of funds of the pension fund. In such case amendments to the pension scheme shall enter into effect on the day following approval thereof, and the pension fund shall, within seven days after approval of amendments, submit them to the Financial and Capital Market Commission.

(11) In order to receive a permit for making amendments to the pension scheme, the pension fund shall submit the following documents to the Financial and Capital Market Commission:

1) an application regarding making of amendments to the pension scheme;

2) a motivated request of the board of directors of the pension fund (a certified copy or an extract) regarding the necessity of amendments to the pension scheme;

3) amendments to the pension scheme (in two copies);

4) the text of the pension scheme containing amendments. The pension fund shall submit a full text of the pension scheme to the Financial and Capital Market Commission in one of the forms referred to in Section 8, Paragraph three, Clause 15 of this Law.

(12) The Financial and Capital Market Commission shall examine an application regarding making of amendments to the pension scheme and take a decision within 30 days after all the documents laid down in this Law, which are necessary for taking of the decision and which have been prepared and developed in accordance with the requirements of laws and regulations, are received.

(13) If amendments to the pension scheme provide for amending the investment provisions of the pension scheme, increasing the administrative costs or the amount of remuneration to be paid to the manager of funds or holder of funds, the pension fund shall determine that amendments to the pension scheme shall enter into effect not earlier than six months (if at least one collective participating contract has been entered into regarding participation in the relevant pension scheme) or not earlier than a month (if only individual participating contracts have been entered into regarding participation in the relevant pension scheme) after a permit of the Financial and Capital Market Commission to make amendments to the pension scheme has been received and the participants of the relevant pension scheme and the beneficiaries of pension benefits have been sent a written notification regarding amendments to the pension scheme.

(14) The pension fund need not comply with the time periods referred to in Paragraph thirteen of this Section, if a certification is submitted to the Financial and Capital Market Commission, together with amendments to the pension scheme, that the committee of the relevant pension scheme (if the pension scheme participants participate in the relevant pension scheme according to a collective participating contract) or the pension scheme participants (if the pension scheme participants participate in the relevant pension scheme according to an individual participating contract) do not object against making of such amendments to the pension scheme.

[10 November 2005; 28 May 2009; 9 July 2013]

Section 9.¹ Public Announcement (Advertising) of Services to be Provided

(1) Any public announcement (advertising) of the activities and services to be provided by a pension fund in any form may take place only according to the pension scheme registered by the Financial and Capital Market Commission. In advertising such specified contribution plan offered by the pension fund, which does not guarantee profitability, profit or specific level of profitability may not be guaranteed in any way. If a reference to the profitability of the pension scheme is included, it shall be necessary to inform that the previous profitability does not guarantee similar profitability in the future.

(2) The following information shall be indicated in an advertisement of a pension scheme (in placing advertisements or announcing the provisions of the pension scheme to the public):

1) the title of the pension scheme;

2) the firm name and legal address of the pension fund;

3) the name and legal address of the manager of funds of the pension scheme;

4) the name and legal address of the holder of funds of the pension scheme;

5) the place where one may get acquainted with the pension scheme and the investment policy thereof.

[10 November 2005]

Section 10. Participation in a Pension Scheme

(1) Pension scheme participants may accumulate pension benefits for themselves only when participating in a specific pension scheme.

(2) Pension scheme participants may participate in a pension scheme both directly and through the intermediation of their employers.

(3) Pension scheme participants shall participate in a pension scheme directly by entering into an individual participating contract with an open pension fund. If in case of individual participation another person makes the contributions in favour of a participant of the pension fund, the individual participating contract shall also include the identification data of the person making the contributions that are provided in conformity with the requirements specified in the laws and regulations governing the prevention of laundering of the proceeds from crime. The board of directors of the pension fund shall submit the provisions of an individual participating contract to the Financial and Capital Market Commission. The pension fund may enter into individual participating contracts in conformity with the provisions submitted to the Financial and Capital Market Commission if the Financial and Capital Market Commission within 10 days from the day of receipt of the provisions of the individual participating contract has not raised reasoned objections regarding non-compliance thereof with the requirements of this Law.

(4) Pension scheme participants shall participate in a pension scheme through the intermediation of their employer if the employer has entered into a collective participating contract with an open or closed pension fund, moreover, a collective participating contract with a closed pension fund may be entered into only in such cases when the relevant employer is also one of the founders (stockholders) of the same closed pension fund. Legal relationships of the employer and employees arising in connection with the implementation of a pension scheme and participation of employees therein shall be regulated by the employment contract or collective work agreement.

(5) [10 November 2005]

(6) If an employer has entered into a collective participating contract with the open or closed pension fund, the employer and employees who participate in the pension scheme shall jointly establish a pension scheme committee with equal representation of the employer and employees. If less than hundred employees of the employer participate in the pension scheme, establishment of the pension scheme committee is not mandatory.

(7) The pension scheme committee shall be a control authority of the pension scheme, which controls the management and execution of the relevant pension scheme according to the provisions of the collective participating contract.

(8) Prior to entering into an individual or collective participating contract the pension fund has a duty to introduce the potential pension scheme participant or employer with the provisions of the pension scheme, specifically explaining the amount of deductions applied to the participant, the conditions for termination of participation and the procedures for paying out of the pension benefits capital.

[27 August 1998; 1 June 2000; 10 October 2002; 20 November 2003; 10 November 2005; 28 May 2009; 22 March 2012]

Section 11. Mandatory Conditions of the Pension Scheme and Participating Contract

(1) Such collective or individual participating contracts are not in force, which deteriorate the situation of pension scheme participants compared with the situation provided for in this Law.

(1¹) If an employer undertakes to guarantee a specific amount of pay-outs for the beneficiaries of pension benefits of a pension scheme, a provision shall be included in the pension scheme and collective participating contract, determining that the employer has a duty to make contributions in favour of its employees in such amount as to ensure the amount of the referred to pay-outs.

(2) If an employer takes a decision to make contributions in a pension scheme in order to ensure pension benefits for its employees, such decision shall be applicable to all employees of the relevant employer according to the profession, work experience and office held, as well as with other objective criteria.

(3) Participation issues of such persons to whom the same objective criteria referred to in Paragraph two of this Section apply shall be settled equally and there shall be no discrimination depending on the origin, material circumstances, race and nationality, sex or relationship to religion.

(4) Upon reaching the pensionable age specified in a pension scheme, a pension scheme participant may act as follows:

1) receive pension benefits according to the provisions of the pension scheme;

2) continue participation in the pension scheme in conformity with the provisions of the pension scheme and the individual participating contract.

(5) The pensionable age specified in the pension scheme may not be less than 55 years, except for persons employed in such special professions the list of which is determined by the Cabinet.

(6) Such pension scheme participant has the right to receive pay-outs according to the provisions of the pension scheme before reaching the pensionable age who has been recognised as a first group invalid for life, or - in case of the death of a pension scheme participant - the person indicated by him or her and heirs in accordance with the procedures laid down in The Civil Law.

(7) [10 November 2005]

(8) A pension scheme participant has the right to transfer the accumulation for pension benefits or a part thereof to another pension scheme.

[10 October 2002; 10 November 2005; 9 July 2013]

Section 12. Guarantees to Pension Scheme Participants

(1) A pension scheme participant without any additional conditions has the right to all the pension benefits capital accumulated in his or her individual account, except the case provided for in Section 13, Paragraph one of this Law when the employer, upon terminating a collective participating contract, has the right to transfer the pension benefits capital of the participant to another pension fund.

(2) Monetary means, financial instruments and other property of pension schemes shall be kept, recorded and managed separately from the funds of the pension fund, holder of funds, as well as manager of funds itself and other funds under the management thereof.

(3) If a pension fund, holder of funds or manager of funds has been declared insolvent or is being liquidated, the funds of pension schemes may not be included in the property of the pension fund, holder of funds or manager of funds - debtor

(4) Monetary funds of the participant of the pension scheme itself or contributed to the pension fund in his or her favour shall be immediately (not later than the following working day after the day when monetary funds were transferred into the account opened for the pension scheme) transferred into an individual account of the pension scheme participant.

(5) The pension benefits capital accumulated in an individual account may not become the property of the manager of funds, holder of funds or employer in any case. Recovery against the pension benefits capital shall be directed only if it has been recognised by a court judgment that the pension scheme participant has caused losses to the third parties by committing a criminally punishable offence.

(6) A pension scheme participant shall be ensured a possibility of continuing participation in the pension scheme, receiving the pension benefits capital and the information to be provided for pension scheme participants laid down in this Law also in cases when the pension scheme participant moves for permanent residence to a Member State or foreign state after he or she has commenced participation in the pension scheme.

[10 November 2005; 28 May 2009]

Section 13. Termination of Participation

(1) If the employer wishes to terminate the collective participating contract in order to participate in another pension fund, he or she must submit a relevant application to the board of directors of the pension fund and the Financial and Capital Market Commission at least one month in advance.

(2) If a pension scheme participant wishes to terminate participation in the pension scheme in order to participate in another pension scheme, he or she shall submit a relevant written application to the board of directors of the pension fund (or also to the relevant employer if the participant participates in the pension scheme on the basis of a collective participating contract) at least one calendar month in advance.

(3) Whenever an application regarding termination of a collective participating contract and transfer of the funds accumulated to another pension fund is submitted by the employer who contributes such funds in the pension fund in favour of his or her employees, such transfer may be made only with the consent of the Financial and Capital Market Commission.

(4) Only the funds accumulated in favour of such employees may be transferred whose written consent has been received by the employer.

[27 August 1998; 1 June 2000; 20 November 2003; 10 November 2005; 28 May 2009; 22 March 2012]

Section 14. Administrative Body of a Pension Fund

(1) The establishment and activities of administrative bodies of a pension fund shall be regulated by the Commercial Law unless prescribed otherwise by this Law. Establishment of the council for a closed pension fund is not mandatory.

(2) The pension fund shall create an efficient internal control system in order to ensure timely identification and management of all risks related to activities of the pension fund, efficient protection of pension schemes, the veracity and timeliness of the information provided to administrative bodies of the pension fund, the compliance with laws, other laws and regulations, regulatory provisions and orders of the Financial and Capital Market Commission, the compliance with the policies and procedures developed by the pension fund, as well as shall ensure permanent supervision of the pension fund, which does not depend on the internal control system of the executive body.

(3) A person who complies with the following requirements may be a member of the board of directors of the pension fund, head of the internal control service, the chief actuary, as well as person who is authorised to take decisions on behalf of the pension fund:

1) he or she has sufficient competence in the field, for which he or she will be responsible, ensuring that the board of directors is created in such a way that the pension fund would be able to carry out the accumulation of pension benefits independently, professionally, in good quality and in accordance with the requirements of laws and regulations;

2) he or she has a 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 suspended the right to perform commercial activities.

(4) The main actuary must have a certification from a professional organisation (association) of actuaries regarding his or her professional conformity for the performance of the duties of the chief actuary. The professional organisation (association) of actuaries must be the member of the International Actuarial Association.

(5) A person who is competent in financial management matters and conforms to the requirements of Paragraph three, Clauses 3 and 4 of this Section may be a member of the council of the pension fund.

(6) A person may not be a member of the council or a member of the board of directors of the pension fund, the head of the internal control services of the pension fund, the chief actuary, as well as he or she may not be authorised to take decisions on behalf of the pension fund in the following cases:

1) he or she has been convicted of intentional bringing of a commercial company to insolvency or bankruptcy (fraudulent bankruptcy) or of committing another intentional criminal offence;

2) he or she has been convicted of committing an intentional criminal offence, however, released from serving of the punishment due to the period of limitation, clemency or amnesty;

3) the criminal case initiated against him or her for committing an intentional criminal offence has been terminated due to the period of limitation or amnesty;

4) he or she has been held criminally liable for committing an intentional criminal offence, however, the criminal matter against him or her has been terminated for reasons other than exoneration.

(7) Any changes, which are related to the composition of the council (if such council has been created) and board of directors of the pension fund, as well as changes in relation to candidates of members of the council and board of directors of the pension fund, the head of the internal control service of the pension fund, the chief actuary and persons who are authorised to take decisions in behalf of the pension fund, shall be in effect, if they have been co-ordinated in advance with the Financial and Capital Market Commission.

(8) In order to co-ordinate the candidates of persons referred to in Paragraph three of this Section, the pension fund shall have to submit the following documents to the Financial and Capital Market Commission:

1) an application, in which the documents appended thereto are indicated;

2) a copy of the decision of the administrative body of the pension fund on appointing of the referred to person in the relevant office;

3) information and documents (they shall be submitted in accordance with the requirements of Section 8, Paragraph three, Clauses 4 and 5 of this Law) regarding persons who are candidates for the relevant offices.

(9) Persons who are candidates for the office of a member of the council or board of directors of the pension fund, the chief actuary, the head of the internal control service shall take up the office, if the Financial and Capital Market Commission has not expressed motivated objections in relation to the conformity of such persons with the requirements of the law within 30 days after receipt of the application and the documents laid down in this Law regarding the appointed persons.

(10) The administrative body of the pension fund has a duty, upon its own initiative or upon the request of the Financial and Capital Market Commission, to remove the persons referred to in Paragraph three of this Section from the office without delay, if they do not conform to the requirements of this Section.

(11) If an administrative deed issued by the Financial and Capital Market Commission regarding removal of the persons referred to in Paragraph six of this Section from the office is appealed, appealing shall not suspend the execution thereof.

(12) Within the meaning of this Law a conflict of interests is a situation when the pension fund and the persons related thereto take decisions on transactions with the funds of the pension fund and concurrently perform the execution of such decisions or the control of execution thereof.

(13) For the prevention of a conflict of interests a member of the council and board of directors of the pension fund, the head of the internal control service of the pension fund, the chief actuary and persons who are authorised to take decisions on behalf of the pension fund shall refrain from taking decision on transactions of the pension fund, in which such persons find or may find themselves in a conflict of interests, as well as notify the council of the pension fund regarding such transactions.

(14) If the pension fund, the manager of funds, the holder of funds, a provider of external services or a sponsoring employer are related persons, the pension fund shall develop a description of the policy for the prevention of conflict of interests situations, which ensures timely identification and management of the potential conflict of interests situations. The description of the policy for the prevention of conflict of interests situations shall include the action of employees for the prevention of conflict of interests situation, including it shall determine:

1) a restricted access to information, which is not necessary for the performance of work duties and which causes or may cause a conflict of interests;

2) a different organisational subordination that ensures mutual independence of the structural units thereof, which perform such activities that cause or may cause a conflict of interests;

3) that the conditions for transactions with persons related to the pension fund are not different from the conditions in relation to similar transactions of the pension fund with persons not related to the pension fund and is not in contradiction with the pension scheme and the interests of the participants thereof.

[10 November 2005; 28 May 2009]

Chapter V
Pension Scheme Committees and Activities Thereof

[10 November 2005]

Chapter VI
Management and Holding of Funds of a Pension Scheme

[10 November 2005]

Section 20. Manager of Funds of a Pension Scheme

[10 November 2005]

(1) Pension scheme assets shall be managed only by the following commercial companies:

1) a credit institution, which is entitled to provide investment services and non-core investment services in Latvia;

2) an insurance stock company which is entitled to engage in life insurance in Latvia;

3) an investment brokerage company which is entitled to provide investment services in Latvia;

4) an investment management company which is entitled to provide management services in Latvia.

(1¹) In addition to that specified in Paragraph one of this Section the functions of a manager of funds of a pension scheme may also be performed by the pension fund, which complies with the requirements specified in Section 22.¹ of this Law in relation to own funds.

(2) Each pension fund shall freely select the manager of funds of the pension scheme in accordance with provisions of this Law.

(3) Provisions for the management of monetary means and other assets shall be provided for in the contract entered into by the board of directors of the pension fund with the manager of funds. The board of directors of the pension fund shall take a decision on entering into such contract. The contract with the manager of funds and any further amendments therein shall be submitted to the Financial and Capital Market Commission within three working days after signing thereof.

(4) The manager of funds of the pension scheme shall ensure implementation of the investment strategy approved in the pension scheme and the compliance with the provisions in relation to the pension scheme investments, settle accounts using monetary means contributed according to the pension scheme, perform transactions with financial instruments and other transactions with the assets of the scheme in conformity with requirements of this Law and the pension schemes registered by the Financial and Capital Market Commission.

(4¹) In managing the funds of a pension scheme, in addition to the requirements laid down in this Law the manager of funds shall comply with the requirements of the laws and regulations governing activities of investment companies in relation to the duties of an investment company in providing administration services, due diligence in the provision of administration services, provision of the best results and execution of transaction orders.

(4²) In applying Paragraph 4.¹ of this Section, a pension scheme shall be equalled to a prospectus of an investment fund or a by-law of a fund administration. The investment policy of the pension scheme and the investment restrictions included therein shall be equalled to the investment policy and investment restrictions specified in a prospectus of an investment fund or a by-law of a fund administration within the meaning of the Law On Investment Companies.

(5) [28 May 2009]

(6) [18 March 2004]

(7) [18 March 2004]

(8) The manager of funds shall be liable for compliance of transactions involving the pension benefits capital accumulated in the pension fund with the requirements of the law and provisions of the pension scheme registered by the Financial and Capital Market Commission.

(9) The minimum information to be indicated in a contract with the manager of funds shall be as follows:

1) the procedures for exchange of information, which ensure the fulfilment of the duties of the manager of funds laid down in this Law and the preparation of operational reports of the pension fund;

2) the duty of the manager of funds to inform the pension fund regarding changes in the status thereof in accordance with the requirements of this Law;

3) the provision that the contract will cease to be in effect only after a contract with a new manager of funds has been entered into;

4) the right of the pension fund to request that the manager of funds, upon the receipt of a written request, terminates a contract regarding management of funds without delay.

(10) The Financial and Capital Market Commission is entitled to request that the pension fund terminates a contract with the manager of funds, if the Financial and Capital Market Commission detects that the manager of funds does not comply with the requirements of this Law or regulatory provisions of the Financial and Capital Market Commission. In the case referred to in this Paragraph the Financial and Capital Market Commission, in taking a decision, is entitled to stipulate conditions to the pension fund for attraction of a new manager of funds.

[1 June 2000; 10 October 2002; 20 November 2003; 18 March 2004; 10 November 2005; 28 May 2009; 22 March 2012]

Section 21. Holder of Funds of the Pension Scheme

[10 November 2005]

(1) A holder of funds in conformity with the provisions of the contract entered into with the board of directors of the pension fund shall accept contributions in accounts of the pension scheme, receive and hold financial instruments, as well as originals of documents in relation to monetary means and other property forming the pension scheme assets, the payment documents regarding the money crediting or debiting for holding the funds of the pension scheme in bank accounts established, fulfil orders relating to the transfers of funds of the pension scheme and financial instruments.

(2) Only the following commercial companies may hold the funds of the pension scheme:

1) a credit institution, which is entitled to provide investment services and non-core investment services in Latvia;

2) an investment brokerage company which is entitled to provide investment services in Latvia.

(3) The board of directors of the pension fund shall take a decision on entering into of a contract with the holder of funds of the pension scheme for safe keeping of monetary means, financial instruments and other property of holders of funds of the pension fund. Such contract and any further amendments thereto shall be submitted to the Financial and Capital Market Commission not later than within three working days after signing thereof.

(4) [28 May 2009]

(5) The holder of funds shall settle accounts using monetary means, receive and transfer financial instruments relating to the transactions performed by the holder of funds.

(6) The holder of funds shall follow whether the manager of funds complies with the requirements of this Law and other laws and regulations in relation to pension scheme investments and the pension scheme registered by the Financial and Capital Market Commission, as well as with the contribution (investment) provisions. If the manager of funds does not comply with the requirements and provisions referred to in the first sentence of this Paragraph, the holder of means shall notify the Financial and Capital Market Commission and the pension fund thereof.

(7) The minimum information to be indicated in a contract with the holder of funds shall be as follows:

1) the procedures for exchange of information, which ensure the fulfilment of the duties and tasks of the holder of funds laid down in this Law, as well as the preparation of operational reports of the pension fund;

2) the duty of the holder of funds to inform the pension fund regarding changes in the status thereof in accordance with the requirements of this Law;

3) the holder of funds has a duty to follow that the activities of the manager of funds with the funds of the relevant pension scheme conform to the requirements of laws and regulations and the provisions of the pension scheme;

4) the control procedure, which has been specified by the holder of funds in relation to orders of the manager of funds with the funds of the pension scheme of the pension fund;

5) the right of the pension fund to request that the holder of funds, upon the receipt of a written request, terminates a contract regarding holding of funds without delay.

(8) The Financial and Capital Market Commission is entitled to request that the pension fund terminates a contract with the holder of funds, if the Financial and Capital Market Commission detects that the holder of funds does not comply with the requirements of this Law or regulatory provisions of the Financial and Capital Market Commission. In the case referred to in this Paragraph the Financial and Capital Market Commission, in taking a decision, is entitled to stipulate conditions to the pension fund for attraction of a new holder of funds.

[27 August 1998; 1 June 2000; 10 October 2002; 20 November 2003; 10 November 2005; 28 May 2009; 22 March 2012]

Section 21.¹ Change of the Manager of Funds or Holder of Funds

(1) If the pension fund decides to change the manager of funds or holder of funds, it shall, within three working days after entering into the new contract, submit the following documents to the Financial and Capital Market Commission in addition to the new contract:

1) a motivated decision of the board of directors of the pension fund regarding the necessity of change of the manager of funds or holder of funds and a calendar plan of change of the manager of funds or holder of funds approved by the board of directors;

2) in case of insolvency or bankruptcy of the manager of funds or holder of funds - also information regarding measures for the protection of the funds of the pension fund.

(2) The pension fund shall, within 30 days after a new contract with the holder of funds has been entered into, submit such documents to the Financial and Capital Market Commission, which certify that the new holder of funds has received the monetary means and other assets accumulated in the relevant pension scheme, as well as documents certifying the ownership rights of the monetary means and other assets. If necessary, the Financial and Capital Market Commission has the right to request an extraordinary report on the activities of the pension fund, which has been prepared in accordance with the laws and regulations governing development of annual reports of private pension funds, and an auditor's opinion.

[10 November 2005]

Section 22. Individual Accounts

(1) The board of directors of the pension fund shall ensure the calculation and record-keeping of the pension benefits capital accumulated to each pension scheme participant regardless of whether such participant participates in the pension scheme on the basis of a collective or individual participating contract. If the pension funds guarantees specific profitability or a specific amount of pay-outs or provides for the coverage of biometrical risks, the board of directors thereof shall ensure separate record-keeping of all contributions and pay-outs, as well as the creation of technical reserves for each pension scheme participant.

(2) All the contributions in the pension fund that are made by the relevant person or that are made in his or her favour, as well as all the income obtained from investments shall be registered in individual accounts, registering separately the contributions for the coverage of biometrical risks.

(3) [10 November 2005]

(4) The auditor of the pension fund shall annually provide an opinion regarding whether individual accounts are maintained in accordance with the requirements of this Law and other laws and regulations, the by-laws of the pension fund and the provisions of the pension scheme and participating contract.

(5) The Financial and Capital Market Commission shall determine the general procedures for the calculation of the pension benefits capital accumulated.

[1 June 2000; 20 November 2003; 10 November 2005]

Section 22.¹ Own Funds

(1) For a pension fund, which offers a specified contribution scheme with guaranteed profitability or a specified pay-out scheme, or provides for the coverage of biometrical risks in the pension scheme, the minimum size of own funds shall be 3 000 000 euros. The requirements of this Section shall not be applicable to a closed pension fund, if the employer has undertaken responsibility for the fulfilment of the liabilities specified in pension schemes of the pension fund.

(2) In order to ensure the stability of the financial activities of the pension fund referred to in Paragraph one of this Section, the own funds according to the requirements of this Section shall be at the continuous disposal thereof. The procedures for the calculation of own funds shall be determined by the Financial and Capital Market Commission.

(3) The pension fund referred to in Paragraph one of this Section shall inform the Financial and Capital Market Commission without delay regarding the reasons for reduction of the own funds, if they have reduced by 10 per cent or more in comparison with the amount indicated in the previous financial report.

(4) In order to assess the financial stability of the pension fund referred to in Paragraph one of this Section, the own funds thereof shall be compared to the norm of solvency. The pension fund shall be deemed to have complied with the requirement of solvency, if the own funds of such fund are equal to the norm of solvency or exceed it.

(5) The norm of solvency is a value calculated in accordance with the procedures specified by the Financial and Capital Market Commission, which may not be less than the minimum size of the own funds.

(6) If the sum of own funds of the pension fund, referred to in Paragraph one of this Section, is less than the calculated norm of solvency, but higher than the minimum size of own funds, the pension fund shall, without delay, inform the Financial and Capital Market Commission thereof and, not later than within 10 days, submit a plan for improvement of the financial situation for co-ordination to the Financial and Capital Market Commission for restoration of the sum of own funds until the calculated norm of solvency.

(7) If the sum of own funds of the pension fund, referred to in Paragraph one of this Section, is less than the minimum size of own funds, the pension fund shall, without delay, inform the Financial and Capital Market Commission thereof and, not later than within 10 days, submit a plan for improvement of the financial situation for co-ordination to the Financial and Capital Market Commission for immediate restoration of the sum of own funds until the amount of the minimum size of own funds.

(7¹) If losses of a pension fund, which offers only the specified contribution scheme without guaranteed profitability or does not provide for the coverage of biometrical risks in such plan, exceed one half of the equity capital of the pension fund, the pension fund shall, without delay, inform the Financial and Capital Market Commission thereof and, not later than within 10 days, submit a plan for improvement of the financial situation for co-ordination to the Financial and Capital Market Commission, indicating the activities to be carried out and the deadlines for the execution thereof.

(8) If in the cases referred to in Paragraphs six and seven of this Section the pension fund refuses to submit a plan for improvement of the financial situation or the carrying out of the measures provided for in the plan does not ensure the restoration of own funds, or the plan submitted is not being implemented, the Financial and Capital Market Commission may take a decision:

1) to prohibit the pension fund to make free use of the assets thereof and to undertake new liabilities;

2) to specify mandatory advance co-ordination of the pay-outs to be performed by the pension fund or parts thereof with the Financial and Capital Market Commission;

3) to cancel the licence issued to the pension fund.

[10 November 2005; 28 May 2009; 12 September 2013]

Section 23. Principles and Provisions for Investment of Pension Scheme Assets

[10 November 2005]

(1) Monetary means and other assets of the pension scheme, which are managed in accordance with the provisions of the particular pension scheme (hereinafter - pension scheme assets) shall be invested in conformity with the investment provisions of the relevant pension scheme by implementing such an investment policy that ensures the increase of accumulated pension benefits capital of the pension scheme participants within a longer period of time. In investing the pension scheme assets, the pension fund shall be as a careful and thorough proprietor and act only in the interests of the pension scheme participants, as well as comply with the prudential principles that ensure reduction of risk, investment safety, quality and liquidity in conformity with the obligations regarding pay-outs of the pension benefits capital of the pension scheme participants.

(1¹) Assets for the coverage of technical reserves shall be invested, taking into account the term structure of the foreseeable costs of the pension benefits.

(2) Pension scheme assets may be invested in investment objects laid down in this Law in compliance with investment restrictions determined.

(3) Pension scheme assets may be invested in:

1) securities issued or guaranteed by the state or local governments or monetary market instruments of the Republic of Latvia or another Member State;

2) securities issued or guaranteed by the Member States of the Organisation for Economic Co-operation and Development or monetary market instruments if the long-term credit rating of the relevant state in foreign currency according to the evaluation of international rating agencies is in the investment category;

3) securities issued or guaranteed by or monetary market instruments of such international financial authorities, the members of which are one or several Member States;

4) stocks or other capital securities if they have been included in the official listing or a listing comparable thereto of a stock exchange (regulated market) registered in a Member State (hereinafter - official listing), as well as in the official listing of a stock exchange - full partner (member) of the International Stock Exchange - registered in the states referred to in Clause 2 of this Paragraph, or they are sold in other regulated and openly accessible financial instrument markets of such states;

5) debt securities of commercial companies if the debt securities are included in official listings of the stock exchanges (regulated markets) referred to in Clause 4 of this Paragraph, or they are sold in other regulated and openly accessible financial instrument markets of the states referred to in Clause 2 of this Paragraph;

6) capital and debt securities of commercial companies if they are not included in the official listing of a stock exchange (regulated market), but it has been provided for in the provisions for issuance of the relevant securities that securities will be included in official listings of the stock exchanges (regulated markets) referred to in Clause 4 of this Paragraph within a year from the day when subscription to such securities have been commenced;

7) term deposits in a credit institution which has received a licence for the activities of a credit institution in a Member State and which has the right to provide financial services in the referred to states;

8) investment funds and alternative investment funds or their equivalent joint investment undertakings, which have been registered in the state referred to in Clause 1 or 2 of this Paragraph and the investors of which are entitled to alienate their investment certificates without restrictions;

9) immovable property registered in states referred to in Clause 1 of this Paragraph. The immovable property acquired for the funds of a pension scheme shall be registered in the Land Register in the name of the pension fund with a note that the immovable property has been purchased for the funds of the specific pension scheme and it may not be alienated or encumbered without a consent of the holder of funds of the pension scheme. The immovable property shall not be included in the property of the pension fund in case of insolvency of the pension fund. If the pension fund is located in the territory of another Member State, the pension fund shall ensure the fulfilment of the requirements referred to in this Paragraph according to the requirements of the laws and regulations of the relevant Member State;

10) derivative financial instruments;

11) risk capital market.

(4) The pension scheme assets shall be invested in compliance with the following investment restrictions:

1) investments in securities issued or guaranteed by one state, local government or international financial authority or monetary market instruments may not exceed 35 per cent of the pension scheme assets. The referred to restriction may be exceeded in relation to State issued securities or monetary market instruments if the pension scheme assets have securities or monetary market instruments from six or more issues of one issuer and the value of securities of each issue and monetary market instruments separately does not exceed 20 per cent of the pension scheme assets;

2) investments in debt securities issued by one commercial company may not exceed 10 per cent of the pension scheme assets;

3) investments in capital securities of one commercial company may not exceed 10 per cent of the pension scheme assets and 10 per cent of the equity capital and number of voting stocks of the relevant issuer;

4) investments in one credit institution may not exceed 20 per cent of the pension scheme assets, but total claims to one credit institution may not exceed 25 per cent of the pension fund assets except claims on the basis on claims against the holder of funds;

5) investments in one investment fund or alternative investment fund may not exceed 10 per cent of the pension scheme assets and 10 per cent of net assets of the relevant fund;

6) investments in one undivided immovable property may not exceed 10 per cent of the pension scheme assets, but total investments in immovable property may not exceed 15 per cent of the pension scheme assets;

7) investments in financial instruments issued by the commercial companies that are in a group of companies with a pension fund may not exceed 5 per cent of total assets of the pension scheme established by the relevant pension fund, and investments may be made only with the intermediation of the regulated market;

7¹) investments in financial instruments issued by the commercial companies that have entered into a collective participating contract with the pension fund may not exceed 5 per cent of the pension scheme assets, the total sum of investments in commercial companies that are in one group of companies with the sponsoring employer may not exceed 10 per cent of the pension scheme assets, and investments may be made only with the intermediation of the regulated market;

8) investments in financial instruments issued by commercial companies in one group of companies may not exceed 25 per cent of the pension scheme assets.

(5) Restrictions referred to in Paragraph four, Clauses 1 and 4 of this Section may be exceeded within 12 months after the first contribution of the pension scheme participant, if the value of the pension scheme assets is less than 142 300 euros.

(5¹) At least 70 per cent of the pension scheme investments shall be made in such investment objects referred to in Paragraph three of this Section, which are included in the official listing of the regulated market of Member States or are sold in the official listing of the stock exchange of the Organisation for Economic Co-operation and Development - full partner (member) of the International Stock Exchange -, or in other regulated and openly accessible financial instrument markets of such states. The restriction of this Paragraph shall not apply to the investment objects referred to in Paragraph three, Clauses 7 and 9 of this Section.

(6) The pension scheme assets may not be used for loans and it is prohibited to grant the monetary means of the pension scheme as loans, as well as to issue as guarantees.

(7) If the pension scheme assets are used in transactions with repurchase or reverse repurchase conditions, obligations resulting from such transactions may not exceed 50 per cent of the pension scheme assets. Such transactions may be carried out only for the provision of short-term liquidity of the pension scheme for a time period up to three months.

(7¹) In investing the pension scheme assets in the risk capital market, requirements for one issuer or transaction partner may not exceed 10 per cent of the pension scheme assets.

(8) Pension scheme assets may be invested in derivative financial instruments in compliance with the following provisions:

1) it has been specified in the investment policy approved by the board of directors of the pension fund;

2) the board of directors of the pension fund has created a corresponding system for the preparation of reports, risk management and control, which ensures continuous, precise and objective evaluation of derivative financial instruments;

3) the relevant investments are made to secure against the risk of specific fluctuations in value of the pension scheme assets, which may occur upon changing of the price of the relevant asset or currency exchange rate, or to ensure an efficient management of the portfolio;

4) the derived financial instruments are included in the official listing of stock exchanges (regulated markets) referred to in Paragraph three, Clause 4 of this Section or the liabilities included in the financial instrument have been undertaken by a credit institution which is entitled to provide financial services in Latvia or another Member States;

5) investments in derived financial instruments issued by one issuer (the total sum of transactions with one partner of transactions) shall not exceed 5 per cent from the pension scheme assets.

(9) The open item of the foreign currencies of the specified contribution pension scheme shall not exceed:

1) in an individual foreign currency- 10 per cent of the pension scheme assets;

2) in total in all foreign currencies - 20 per cent of the pension scheme assets.

(9¹) The Financial and Capital Market Commission shall determine the procedures for the calculation of the open item of foreign currency.

(10) The board of directors of a pension fund has a duty:

1) in accordance with investment provisions of the relevant pension scheme, to prepare and submit to the Financial and Capital Market Commission information regarding the investment policy of the relevant pension scheme;

2) regularly, not less frequently than once every three years, to evaluate the investment policy specified and to submit to the Financial and Capital Market Commission a detailed description of the pension scheme investment policy to be implemented in future;

3) to submit immediately (not later than within three days) information regarding changes in the pension scheme investment policy to the Financial and Capital Market Commission.

(10¹) The principles for investment of the pension scheme assets, the methods for determination of risks related to investments and the risk management system must be determined in the investment policy of the pension scheme. The minimum information to be indicated regarding the investment policy shall be as follows:

1) the objectives and conditions of the investment policy;

2) the strategy for placement of assets (division of long-term assets in main investment categories);

3) the tactics for placement of assets (geographically, according to markets, sectors, transaction partners and foreign currencies);

4) the general policy for individual selection of financial instruments and other investments;

5) quantitative restrictions of investments, compliance with them and control thereof;

6) the limit, upon reaching which holding of the specific type of assets is terminated or restricted;

7) whether it is intended to use the derived financial instruments, to enter into purchase agreements with repurchase or reverse repurchase conditions;

8) if using of derived financial instruments is intended - the general policy for the use of derived financial instruments, the methods for assessment of derived financial instruments and the risk management policy, as well as the economic impact of the use of derived financial instrument on investment portfolio;

9) the division of liability in decision-making;

10) the methods for determination, control and management of risks;

11) the criteria, by which return on investments is assessed;

12) a description of the policy of voting in relation to investments, which allows participation in decision-making regarding investments, also the procedure for decision-making regarding the use of the voting rights;

13) information regarding the holder of funds and the manager of funds, as well as the methods for the assessment of activities thereof;

14) the policy for the prevention of the potential conflict of interests, in which the way of ensuring that the manager of funds invests the pension scheme assets only in the interests of the pension scheme participants will be ensured by the pension fund in case of a potential conflict of interests;

15) if the credit ratings provided by external credit rating bodies (rating agencies) are used for the assessment of investment credit risk - the fact that such credit ratings are not used mechanically and as the only means for the assessment of credit risk.

(10²) The board of directors of the pension fund shall ensure the creation of a corresponding reporting and control system in order to ascertain that the manager of funds manages the funds of the pension scheme in accordance with the policy and procedures specified by the board of directors of the pension fund.

(11) The board of directors of a pension fund shall provide the pension scheme participants and stockholders of the pension scheme with free access to information regarding the investment policy, as well as place the referred to information in the Internet home page of the relevant pension fund if such has been developed, or in the Internet home page of any stockholder of the pension fund if the pension fund does not have its own Internet home page.

(12) [28 May 2009]

(13) The pension fund and the manager of funds are not entitled to manage the immovable property by itself.

(14) The pension fund shall, at least once a year, perform the analysis of critical situation, in which the potential development scenarios shall be assessed and documented. The sensitivity tests and scenario analysis shall be used for the analysis of critical situation. Sensitivity tests shall be performed in order to determine the impact of unfavourable changes of an individual factor on the pension scheme investment portfolio, detecting the cause for such extraordinary, but potentially unfavourable events or changes.

(15) The board of directors of the pension fund shall approve the results of the analysis of critical situation and take a decision on activities to be carried out in case of setting in of the events or changes referred to in the analysis of critical situation. An analysis approved by the board of directors of the pension fund and a decision on activities to be performed shall be submitted to the Financial and Capital Market Commission.

(16) The Financial and Capital Market Commission has the right to determine additional requirements and the procedures, by which an analysis of critical situation shall be carried out, specifying the potential factors and scenarios to be tested.

(17) In addition to that specified in Paragraph fourteen of this Section the Financial and Capital Market Commission has the right to request that the pension fund performs and submits an extraordinary analysis of critical situation to the Financial and Capital Market Commission.

[10 October 2002; 20 November 2003; 18 March 2004; 17 March 2005; 10 November 2005; 28 May 2009; 22 March 2012; 9 July 2013; 12 September 2013]

Section 23.¹ Technical Reserves

(1) A pension fund, which offers a specified contribution plan with guaranteed profitability or a specified pay-out scheme, or provides for the coverage of biometrical risks in the pension scheme, according to such pension schemes shall create technical reserves in sufficient amount in order to be able to fulfil the liabilities specified therein in full extent and to ensure the stability of the activities thereof.

(2) The board of directors of the pension fund referred to in Paragraph one of this Section shall approve the procedures for the creation of technical reserves and shall be responsible for the conformity with the procedures. The pension fund shall submit the procedures for the creation of technical reserves to the Financial and Capital Market Commission within 10 days after approval of such procedures, as well as inform regarding any changes therein within a time period indicated in advance.

(3) Technical reserves shall be created in the same currency, in which the pension fund has undertaken the liabilities according to the pension schemes offered.

(4) Technical reserves must be continuously covered by the coverage of technical reserves in accordance with the requirements of Section 23 of this Law.

(5) The coverage of technical reserves and technical reserves must be co-ordinated according to the types of currencies. The Financial and Capital Market Commission shall determine the permissible deviations for the co-ordination of the coverage of technical reserves and technical reserves according to the types of currencies.

(5¹) If in case of setting in of the potential biometrical risks provided for in the pension scheme the sum of pay-out intended for one pension scheme participant exceeds 0.5 per cent from the own funds of the pension fund, the pension fund shall re-insure such risk according to the requirements of the laws and regulations governing re-insurance activities.

(6) Technical reserves shall be calculated for each pension scheme individually not less than once a year.

(7) The Financial and Capital Market Commission shall issue regulatory provisions regarding methods for the calculation of technical reserves.

(7¹) If the Financial and Capital Market Commission detects that the procedures for the creation of technical reserves developed by the pension fund do not completely ensure the fulfilment of the liabilities specified in the pension scheme and participating contracts, the Financial and Capital Market Commission has the right to request application of a specific method for the calculation of technical reserves in order to ensure an appropriate protection of the rights of the pension scheme participants and beneficiaries of the pension benefits, as well as the fulfilment of the liabilities specified in the pension scheme and participating contracts.

(8) If technical reserves have not been covered by assets corresponding to the requirements of Section 23 of this Law, the pension fund shall, without delay, inform the Financial and Capital Market Commission thereof and, not later than within 10 days after informing of the Financial and Capital Market Commission, submit a plan for improvement of the financial situation thereto. The measures planned by the pension fund for the restoration of the coverage of technical reserves and the time periods for execution thereof shall be indicated in the plan. After co-ordination of the plan with the Financial and Capital Market Commission the pension fund shall provide the pension scheme participants with a possibility of getting acquainted therewith.

(8¹) If the pension fund has gotten involved in cross-border activities and technical reserves are not covered according to the requirements of this Law, the pension fund shall ensure the separation of the liabilities arising from cross-border activities and of the relevant assets.

(9) The pension fund, which offers a specified contribution plan with guaranteed profitability, or provides for the coverage of biometrical risks in the pension scheme or a specified pay-out pension scheme, shall append an actuarial assessment to the annual report, the amount and structure of which shall be determined by the Financial and Capital Market Commission.

[10 November 2005; 28 May 2009]

Section 24. Information to the Provided to the Pension Fund Participants and Beneficiaries of Pension Benefits

(1) The pension fund shall, upon the request of a pension scheme participant or a beneficiary of pension benefits, or an appropriately authorised representative of such persons, issue annual accounts and annual reports of the pension fund and such annual accounts and reports, which are related to the particular pension scheme, if such fund is responsible for more than one pension scheme, as well as a description of the investment policy of the relevant pension scheme.

(2) The pension fund shall, not later than within seven days after a permit of the Financial and Capital Market Commission for making of amendments to the pension scheme has been received, inform the participants of the relevant pension scheme and the beneficiaries of pension benefits thereof in writing, except the cases specified in Section 9, Paragraph ten of this Law when the pension fund shall inform the participants of the relevant pension scheme and the beneficiaries of pension benefits regarding the amendments made within seven days after approval thereof at the board of directors of the pension fund.

(3) Upon the request of a participant, the pension fund shall issue the pension scheme, as well as detailed information containing:

1) the anticipated amount of the costs of pension benefits, if such has been specified;

2) the amount of the costs of pension benefits in case of discontinuing the employment relationship;

3) if the investment risk concerns the participant - information regarding investment opportunities, if any, and regarding the actual investment portfolio, as well as information regarding the level of risk and costs related to investments;

4) the procedures, by which the participant, upon terminating employment legal relationship with the employer, may transfer the savings for pension benefits to another pension fund or pension scheme.

(4) The board of directors of the pension fund shall, at least once a year, send a written report on the relevant accounting period to each participant of the pension scheme and the beneficiary of pension benefits. The following information shall be indicated in the report:

1) the contributions made in favour of the pension scheme participant;

2) the pension benefits disbursed to the participant or the accumulation transferred upon the order of the participant during the accounting period of pension benefits;

3) accumulation for pension benefits;

4) the total sum of deductions applied to the participant, which includes deductions to the pension fund, the manager of funds, the holder of funds, the Financial and Capital Market Commission and other eligible deductions;

5) the given name and surname of such sworn auditor or the firm name of such commercial company of sworn auditors, who or which has examined the financial account of the pension fund;

6) information regarding whether the opinion of the sworn auditor or commercial company of sworn auditors is without comments, with comments or a negative opinion has been provided;

7) information regarding where the pension scheme participant may be acquainted with the annual operational report of the pension fund.

(4¹) In addition to that specified in Paragraphs three and four of this Section the pension fund shall ensure that each month the pension scheme participant has access to information regarding the operational results of the pension scheme. The pension fund may make public the relevant information on the Internet home page thereof or also choose other appropriate information medium or place for making the information public.

(5) The board of directors of the pension fund has a duty to notify the pension scheme participants regarding any changes related to appointing of an auditor, manager of funds or holder of funds, as well as to provide other substantial information regarding activities of the pension fund after provision of the previous report.

(6) Each beneficiary of pension benefits, upon retirement or acquisition of rights to other payments or services, shall receive relevant information regarding them.

[10 November 2005; 28 May 2009]

Chapter VII
Other Provisions

Section 25. Accounting, Registration and Verification of Activities of Pension Funds

(1) Pension funds shall maintain accounting and records in accordance with requirements of the Law, regulatory provisions of the Ministry of Finance and the Financial and Capital Market Commission and within their competence.

(2) The pension fund shall prepare a report in accordance with the regulatory provisions issued by the Financial and Capital Market Commission.

(2¹) The pension fund shall, not later than within 10 days after approval of the report and not later than four months after the end of the accounting period, submit a copy of the annual report and of the report of a sworn auditor or a commercial company of sworn auditors to the territorial office of the State Revenue Service according to the registration place of the pension fund, together with an extract from the minutes of the meeting of stockholders regarding approval of the annual report. The pension fund shall submit the documents referred to in this Paragraph in printed form or in electronic form.

(2²) The State Revenue Service shall, not later than within five working days, hand over the documents referred to in Paragraph 2.¹ of this Section, if they have been submitted in electronic form, or electronic copies of such documents, if they have been submitted in printed form, to the Enterprise Register in electronic form. The Enterprise Register shall ensure public access to the received documents. The procedures for handing over and certification of electronic documents shall be determined by an interdepartamental agreement entered into by the State Revenue Service and the Enterprise Register.

(2³) The Enterprise Register shall, after receipt of the documents referred to in Paragraph 2.² of this Section not later than within five working days, publish a notification in the official gazette Latvijas Vēstnesis that the information referred to in Paragraph 2.¹ of this Section is available in the Enterprise Register.

(2⁴) In addition to that specified in Paragraph 2.¹ of this Section the pension fund itself shall ensure that the annual report is published together with the report of a sworn auditor or a commercial company of sworn auditors not later than four months after the end of the accounting year. The referred to annual report shall be identical to that examined by the sworn auditor or the commercial company of sworn auditors. The pension fund may make the relevant information public on the Internet home page thereof or also choose another corresponding information media or place for making the information public.

(3) A sworn auditor or a commercial company of sworn auditors shall notify in writing the pension fund regarding the results of examination of the annual report. The report shall be prepared in accordance with the Law On Sworn Auditors.

(4) A sworn auditor or a commercial company of sworn auditors shall prepare a report to the management of the pension fund. In the report specific deficiencies shall be indicated, as well as specified issues related to the activities of the pension fund shall be considered. The pension fund shall submit a copy of the report to the Financial and Capital Market Commission not later than within 10 days after approval of the annual report and not later than four months after the end of the accounting year.

(5) For the carrying out of the supervision function the Financial and Capital Market Commission is entitled to request that the pension fund prepares reports on activities of the pension fund and pension schemes registered thereby in accordance with the regulatory provisions issued by the Financial and Capital Market Commission regarding the procedures for the preparation and submission of such reports.

(6) The Financial and Capital Market Commission has a duty to perform an examination of the activities of the pension fund not less frequently than once every three years. The Financial and Capital Market Commission has the right to authorise a sworn auditor or another person for performance of this task.

(7) [10 November 2005]

(8) The Financial and Capital Market Commission is entitled to request information regarding the performed examination of the annual account from the sworn auditor or the commercial company of sworn auditors.

[27 August 1998; 1 June 2000; 10 October 2002; 20 November 2003; 10 November 2005; 22 May 2008; 28 May 2009; 9 July 2013]

Section 26. Insolvency of the Manager of Funds, Holder of Funds or Employer

(1) If the manager of funds or the holder of funds of the pension fund has been recognised insolvent and bankruptcy procedures have been initiated, or the manager of funds or holder of funds has been deprived of the relevant licence, a new manager of funds or holder of funds shall be appointed by a decision of the board of directors of the pension fund and the assets of the fund shall be transferred to the new manager of funds or holder of funds.

(2) If an employer who makes contributions has been recognised insolvent and bankruptcy procedures have been initiated, the pension scheme of employees and the relevant collective participating contract shall be terminated unless the new employer takes over all rights and obligations of the previous employer. The pension scheme participants may continue participation in such pension scheme with the new employer.

(3) If an employer who makes contributions has been recognised as insolvent and bankruptcy proceedings are initiated, a participant may request transfer of the accumulated funds to another pension scheme.

[10 November 2005; 28 May 2009]

Section 27. Reorganisation or Liquidation of a Pension Fund

(1) Reorganisation or liquidation of a pension fund shall take place in accordance with the Commercial Law, conforming to the additional provisions referred to in this Section.

(2) A pension fund shall be reorganised or liquidated only with the permit of the Financial and Capital Market Commission.

(3) In order to receive a permit for reorganisation of pension funds, the pension funds involved in reorganisation process (hereinafter - pension funds to be reorganised) shall submit the following documents to the Financial and Capital Market Commission:

1) an application regarding reorganisation of a pension fund, indicating therein the type of organisation and the documents appended to the application;

2) the draft contract on reorganisation;

3) an opinion of the auditor regarding draft contract on reorganisation;

4) the reorganisation prospectus (prospectuses).

(4) In addition to the information requested in laws and regulations information regarding subsequent activities and procedures of pension schemes of the pension fund to be reorganised, which ensure that lawful interests of the participants of the relevant pension schemes will not be infringed, shall be included.

(5) If as a result of reorganisation of the pension fund new pension funds are created, the documents indicated in Section 8, Paragraph three of this Law shall be submitted to the Financial and Capital Market Commission about them.

(6) If the composition of stockholders changes as a result of reorganisation of the pension fund or in the newly created pension funds, the relevant pension funds shall submit the information and documents referred to in Section 8, Paragraph three, Clause 3 of this Law to the Financial and Capital Market Commission regarding the new stockholders.

(7) If as a result of reorganisation of the pension fund members of the council or board of directors of the pension fund, chief actuary, head of the internal control service of the pension fund are changed, the relevant pension fund shall submit the documents referred to in Section 14, Paragraph eight of this Law to the Financial and Capital Market Commission.

(8) The meeting of stockholders may not take a decision on termination of liquidation of a pension fund until liabilities in relation to the pension scheme participants have been fulfilled completely.

(9) In case of liquidation of a pension fund pension scheme participants have the right to all accumulations for pension benefits in their individual accounts.

(10) The pension benefits capital accumulated in the pension fund to be liquidated shall be transferred to another pension account in accordance with an order of the Financial and Capital Market Commission.

(11) The Financial and Capital Market Commission shall examine an application regarding reorganisation or liquidation of a pension fund and take a decision within 30 days after all the documents laid down in this Law and prepared in accordance with the requirements of laws and regulations have been received.

[10 November 2005]

Section 28. State Supervision of the Activities of Private Pension Funds

(1) The Financial and Capital Market Commission shall supervise the conformity of activities of a pension fund with the requirements of this Law and the provision of information to the pension scheme participants or beneficiaries of pension benefits.

(2) The Financial and Capital Market Commission has a duty to ensure a professional approach and stability in activities of the pension fund, as well as the protection of the lawful interests and rights of participants in the registered pension scheme.

(3) The pension fund shall make deductions for the financing of the Financial and Capital Market Commission in accordance with the procedures and amount specified by the Financial and Capital Market Commission from contributions that have been made by the pension scheme participants in the registered pension schemes or that have been made in favour of such participants. Such deductions shall be included in expenditures of the pension scheme.

(4) The Financial and Capital Market Commission has the right to perform thematic inspections of the activities of the pension fund and to request information and documents regarding activities thereof. The pension fund has a duty to submit to the Financial and Capital Market Commission all the information requested and to present all the documents, and it may not refuse to do so by excusing it as a commercial secret.

(4¹) Upon substantial changes in the situation in the world financial markets the Financial and Capital Market Commission has the right to request that the pension fund assesses the conformity of the current investment policy with changes in financial markets and submits a motivated decision of the board of directors regarding the conformity of the current policy with such changes or the necessary amendments to the investment policy.

(5) The Financial and Capital Market Commission on the basis of the reports submitted and inspections and audits performed shall evaluate the stability of the financial situation of the pension fund and, if necessary, provide instructions in relation to improvement of the situation. The pension fund shall fulfil such instructions within the specified period.

(5¹) The Financial and Capital Market Commission may cancel the licence issued to the pension fund if:

1) the pension fund has not commenced activities within 12 months from the day when the licence was issued;

2) the pension fund does not submit the plan for improvement of the financial situation in the case and within the time period provided for in Section 22.¹, Paragraphs six and seven or Section 23.¹, Paragraph eight;

3) the pension fund does not take measures provided for in the plan for improvement of the financial situation;

4) technical reserves are not completely covered with assets corresponding to the requirements of Section 23 of this Law;

5) the pension fund violates this Law, the Cabinet regulations issued in accordance therewith and the regulatory provisions issued by the Financial and Capital Market Commission or the requirements of other laws and regulations governing commercial activities, or does not comply with the conditions of the licence;

6) the pension fund refuses the licence;

7) the activities of the pension fund have been terminated according to a court adjudication;

8) the pension fund is not able to fulfil the liabilities thereof in relation to pension scheme participants;

9) the pension fund has not rectified the detected violations within the time period specified by the Financial and Capital Market Commission.

(5²) The Financial and Capital Market Commission shall submit information regarding cancellation of a licence to the European Insurance and Occupational Pensions Authority and the interested competent authority of the state involved.

(5³) If the Financial and Capital Market Commission has detected circumstances, which in accordance with Paragraph 5.¹ of this Section allow taking of a decision on cancellation of the licence issued for the activities of the pension fund, it has the right not to cancel the licence, but at first to take a decision on expression of a warning or imposition of a fine in the amount up to four hundred minimum wages, or suspension of the operation of the licence, as well as to specify the time period for rectification of the detected violations. If after expiry of such time period the pension fund has not rectified the violations detected, the Financial and Capital Market Commission shall cancel the licence issued thereto. If a decision on suspension of operation of a licence has been taken, the Financial and Capital Market Commission shall inform the European Insurance and Occupational Pensions Authority thereof.

(5⁴) The time period for suspension of operation of a licence shall not exceed six months. The Financial and Capital Market Commission shall indicate restrictions, which must be complied with by the pension fund until expiry of the term of suspension of operation of the licence. Within the meaning of this Section restrictions may be applicable to:

1) attraction of new participants;

2) accepting of new contributions;

3) amending of, entering into contracts;

4) registration of new pension schemes;

5) investing of paid-in funds;

6) activities with the funds handed over for holding to the holder of funds.

(5⁵) Appealing of an administrative act issued by the Financial and Capital Market Commission regarding cancellation of a licence or suspension of operation thereof shall not suspend the execution of such act.

(6) In order to achieve the tasks provided for the Financial and Capital Market Commission in this Law, other laws or regulations of the Financial and Capital Market Commission, the Financial and Capital Market Commission is entitled to issue regulatory regulations to pension funds and take decisions.

(7) A representative of the Financial and Capital Market Commission is entitled to verify the activities and documents of the pension fund at the main office and branches thereof, and to participate without voting rights at the meetings of administrative authorities of the pension fund.

(8) The Financial and Capital Market Commission has the right to propose the convening of a meeting of the board of directors and council of the pension fund or a meeting of stockholders and to specify the matters to be examined.

(9) The decision of the Financial and Capital Market Commission regarding refusal to issue the licence, termination or cancellation thereof may be appealed in a court within one month from the day of taking of the decision.

(10) An administrative act of the Financial and Capital Market Commission, which has been issued in accordance with this Law, may be appealed to the Administrative District Court. The case shall be reviewed in the composition of three judges. A judgment of the Administrative District Court may be appealed by submitting a cassation complaint.

[27 August 1998; 27 May 1999, 1 June 2000; 10 October 2002; 20 November 2003; 10 November 2005; 23 October 2008; 28 May 2009; 22 March 2012; 9 July 2013]

Section 29. Taxation in relation to Pension Funds

(1) The State shall determine special procedures of tax payment in relation to pension funds, activities thereof, as well as investment income and contributions in pension funds, and personal income tax relief and enterprise income tax relief.

(2) Tax relief and special payment procedures shall be applied only to such licensed pension funds the pension schemes of which have been licensed in conformity with requirements of this Law, and to such pension scheme participants who participate in the licensed pension schemes.

Chapter VII
Cross-border Activities

[10 November 2005]

Section 30. Opening of a Branch

(1) If a pension fund wishes to open a branch in another Member State, it shall submit an application to the Financial and Capital Market Commission, in which the following shall be indicated:

1) the address of the branch in the state involved (address to be used for sending and receipt of information);

2) the organisational structure of the branch;

3) information regarding the head of the branch in accordance with Section 8, Paragraph three, Clause 4 of this Law, allowing to ascertain the conformity of the person with the requirements laid down in this Law;

4) the operational plan for the first three years.

(2) If the pension fund has submitted an application to the Financial and Capital Market Commission in accordance with Paragraph one of this Section, the Financial and Capital Market Commission shall, within three months from the day of receipt of the referred to application, examine and forward it to the competent authorities of the state involved, concurrently notifying the pension fund regarding forwarding of information.

(3) The Financial and Capital Market Commission may take a decision on refusal to opening of a branch in another Member State if it is of opinion that:

1) the documents submitted by the pension fund contain false or incomplete information;

2) the organisational and managerial structure of the branch does not allow ensuring the supervision thereof;

3) the head of the branch does not conform to the requirements laid down in this Law;

4) the plan for improvement of the financial situation is implemented in the pension fund;

5) the violations detected by the Financial and Capital Market Commission have not been rectified within the time period specified thereby.

(4) The Financial and Capital Market Commission shall send a decision on refusal for opening of a branch to the pension fund. It shall indicate the reason for refusal in the decision thereof.

(5) The pension fund is entitled to open a branch in another Member State after it has received a notification of the Financial and Capital Market Commission that information regarding the intent of the pension fund to open a branch has been sent to the competent authorities of the state involved.

Section 31. Accepting of Contributions for the Provision of Pension Benefits from a Sponsoring Employer of Another Member State

(1) The pension fund shall notify the Financial and Capital Market Commission in writing regarding each new intent of accepting contributions for the provision of pension benefits from any sponsoring employer of another Member State.

(2) The pension fund shall include the following information in the notification:

1) the state involved;

2) the firm name of the sponsoring employer;

3) the characterisation of the pension scheme offered to the sponsoring employer of the state involved, regarding which the state involved and the Financial and Capital Market Commission have reached an agreement and in which that referred to in Section 8, Paragraph three of this Law has been described in concise manner, certified translation in the official language of the state involved or in the language, regarding which the state involved and the Financial and Capital Market Commission have agreed upon.

(3) If the pension fund has submitted a notification to the Financial and Capital Market Commission according to Paragraph two of this Section, the Financial and Capital Market Commission shall, within three months from the day of receipt of the referred to notification, examine and forward it to the competent authorities of the state involved, concurrently notifying the pension fund regarding forwarding of information and informing the European Insurance and Occupational Pensions Authority regarding the Member State, in which the pension scheme is planning is accept contributions for the provision of pension benefits.

(4) The Financial and Capital Market Commission shall not forward the information to the competent authorities of the state involved, if it is of an opinion that:

1) the plan for improvement of the financial situation is being implemented in the pension fund;

2) the organisational structure of the pension fund does not allow the provision of supervision corresponding with the laws and regulations of the Republic of Latvia;

3) the pension fund has not rectified the violations detected by the Financial and Capital Market Commission within the time period specified thereby.

(5) If the Financial and Capital Market Commission decides not to forward the information submitted by the pension fund to the competent authorities of the state involved, it shall send the relevant decision to the pension fund without delay, indicating the reason for refusal therein.

(6) The competent authorities of the state involved may, within two months from the day of receipt of the notification of the Financial and Capital Market Commission, inform the Financial and Capital Market Commission regarding conditions, which must be complied with by the pension fund in performing activities in the state involved:

1) regarding the rights of a pension scheme participant arising from participation in the pension scheme on the basis of employment legal relationship;

2) regarding restrictions on investments, if the state involved has specified such;

3) regarding the amount of information to be provided to the pension scheme participants or beneficiaries of pension benefits.

(7) After receipt of the information referred to in Paragraph six of this Section the Financial and Capital Market Commission shall immediately forward it to the pension fund.

(8) The pension fund has the right to commence the accepting of contributions for the provision of pension benefits from the sponsoring employer of the state involved after receipt of the information referred to in Paragraph six of this Section or after expiry of the time period referred to therein.

(9) If information has been received from the competent authority of the state involved regarding changes in conditions, which must be complied with by the pension fund for the performance of activities in the state involved, the Financial and Capital Market Commission shall send them to the pension fund without delay.

[22 March 2012]

Section 32. Receipt of Contributions for the Provision of Pension Benefits from a Sponsoring Employer Registered in Latvia

(1) In order for a pension fund of a Member State to be able to commence accepting of contributions for the provision of pension benefits from a sponsoring employer registered in Latvia, the competent authorities of Latvia must receive a notification from the competent authorities of the country of residence, containing the information referred to in Section 31, Paragraph two of this Law.

(2) The Financial and Capital Market Commission shall, within two months after receipt of a notification, compile and send to the competent authority of the country of residence of the pension fund information regarding data, which must be submitted by the pension fund to the pension scheme participant or beneficiary of pension benefits upon accepting contributions for the provision of pension benefits from a sponsoring employer registered in Latvia.

(3) The pension fund of a Member State has the right to accept contributions for the provision of pension benefits from a sponsoring employer registered in Latvia after receipt of the information referred to in Paragraph two of this Section or after expiry of the time period indicated therein. The pension fund of the Member State must comply with the requirements arising from information of the Financial and Capital Market Commission provided in accordance with Paragraph two of this Section.

(4) If the conditions to be complied with by the pension fund for the performance of activities in Latvia are amended, the Financial and Capital Market Commission shall inform the competent authorities of the country of residence of the pension fund thereof without delay.

Section 33. Supervision of Cross-border Activities

(1) The Financial and Capital Market Commission has the right to carry out inspections in pension funds of another Member State accepting contributions for the provision of pension benefits from a sponsoring employer registered in Latvia.

(2) The Financial and Capital Market Commission shall supervise how the pension fund of another Member State, which accepts contributions for the provision of pension benefits from a sponsoring employer registered in Latvia, complies with the conditions in relation to the provision of information to pension scheme participants.

(3) The Financial and Capital Market Commission has the right to receive the information necessary for carrying out of supervision from pension funds of other Member States and competent authorities.

(4) In carrying out supervision, the Financial and Capital Market Commission shall consult with the competent authority of the country of residence of the pension fund.

(5) If the Financial and Capital Market Commission, in carrying out the supervision of such pension fund of another Member State, which accepts contributions for the provision of pension benefits from a sponsoring employer registered in Latvia, detects violations, it shall inform the competent authority of the country of residence of the pension fund thereof without delay.

(6) If the pension fund of the country of residence has handed funds over to a holder of funds registered in Latvia and the Financial and Capital Market Commission has received a request from the competent authority of the country of residence regarding determination of restrictions for activities involving funds of the pension fund of the country of residence handed over for holding to a holder of funds registered in Latvia, the Financial and Capital Market Commission shall inform the holder of funds regarding the restrictions specified without delay and shall take the necessary measures in order to ensure the execution of the request.

(7) If a pension fund registered in Latvia has handed the funds of a pension scheme over for holding to a holder of funds registered in the country of residence and the Financial and Capital Market Commission has applied the restrictions specified in Section 28, Paragraph 5.⁴ of this Law to the pension fund, the Financial and Capital Market Commission shall send a request to the competent authorities of the country of residence regarding provision of the specified restrictions without delay.

[28 May 2009]

Section 34. Payments of a Pension Fund for Financing of Activities of the Financial and Capital Market Commission

(1) A pension fund shall pay up to 0.4 per cent, including from the contributions made by pension scheme participants and the contributions made in their favour in the quarter in pension schemes licensed by the pension fund, to the Financial and Capital Market Commission for the financing of activities thereof.

(2) The Financial and Capital Market Commission shall issue regulatory provisions regarding the procedures for the calculation of the payments referred to in Paragraph one of this Section and submission of reports.

(3) The payments referred to in Paragraph one of this Section shall be made until the thirtieth date of the month following the quarter.

(4) Late fee shall be calculated for late transfer of the payments referred to in Paragraph one of this Section or transfer in incomplete amount, the amount of the late fee being 0.05 per cent from the unpaid sum for each late day.

(5) The payments referred to in this Section shall be transferred into the account of the Financial and Capital Market Commission at the Bank of Latvia.

[9 July 2013]

Transitional Provisions

1. By 1 July 1998 the management of funds of pension funds may be performed only by:

1) banks that have a licence issued by the Bank of Latvia and a licence issued by the Securities Market Commission for intermediary activity in securities market and that have been permitted by the Bank of Latvia to attract deposits of natural persons;

2) life insurance stock companies that have a licence issued by the State Insurance Supervision Inspection for performing life insurance activities.

2. Investment companies may manage funds of pension funds only after the adoption and coming into force of the law on investment companies. The Law shall come into force concurrently with the Law On Investment Companies.

[11 December 1997]

3. Pension funds, the investment provisions provided for in the established and licensed pension schemes of which do not conform to this Law, by 31 December 2002 shall prepare and submit to the Financial and Capital Market Commission the relevant amendments to the pension scheme for registration.

[10 October 2002; 20 November 2003]

4. By 30 June 2003 pension funds taking into account the interests of pension scheme participants shall perform all the necessary activities to harmonise the location of assets of the pension schemes with investment restrictions provided for in this Law and investment provisions of the pension scheme.

[10 October 2002]

5. The investment companies, which until 30 April 2004 have commenced the management of the funds of pension schemes established by private pension funds, shall, until 31 December 2004, take all the necessary measures in order for them to conform to the requirements laid down in this Law.

[18 March 2004]

6. The Financial and Capital Market Commission shall allow the investment company free use of the safety deposit and own assets, which are held as security for covering the losses caused to the pension fund and the pension scheme participants due to fraud, theft or negligence of employees of the investment company, only after the investment company has complied with one of the following conditions:

1) has met the requirements specified in Paragraph 5 of Transitional Provisions of this Law, and the pension fund, the funds of which are managed by the investment company, has agreed to make relevant amendments to the fund management contract;

2) the investment company has discontinued the management of the private pension fund in accordance with the requirements specified in the laws and regulations regarding activities of private pension funds.

[18 March 2004]

7. The Financial and Capital Market Commission shall allow a credit institution, a brokerage company or an insurance joint stock company free use of the safety deposit and own assets, which are held as security for covering the losses caused to the pension fund and the pension scheme participants due to fraud, theft or negligence of employees of the referred to companies, only after the pension fund, the funds of which are managed by the referred to companies, has agreed to make relevant amendments to the fund management contract.

[18 March 2004]

8. The board of directors of the pension fund shall, in conformity with the interests of the pension scheme participants, perform the necessary activities in order for their pension scheme assets, which have been licensed until 15 January 2005, to conform to the requirements specified in Section 23, Paragraph nine of this Law from 1 April 2005.

[17 March 2005]

9. The Financial and Capital Market Commission shall re-register a licence for pension funds, which have received special authorisations (licences) issued by the Financial and Capital Market Commission for the performance of activities of a pension fund, within a month after coming into force of this Law, indicating therein the right to offer a specified contribution plan without guaranteed profitability and without intended coverage of biometrical risks.

[10 November 2005]

10. The pension fund shall develop an investment policy in accordance with the requirements of Section 23, Paragraph 10.¹ of this Law for a pension scheme, which has been licensed by the Financial and Capital Market Commission, and submit to the Financial and Capital Market Commission within three months after coming into force of the relevant amendments to the Law.

[10 November 2005]

11. Amendments to Section 25, Paragraphs 2.¹, 2.² and 2.³ of this Law shall be applicable to reports submitted to the State Revenue Service on 1 July 2008 or later.

[22 May 2008]

12. If an application regarding an administrative act of the Financial and Capital Market Commission has been submitted to the Administrative District Court by 1 January 2009, a decision on the application submitted shall be taken, as well as the administrative case initiated shall be examined and a court adjudication in this case shall be rendered and appealed in accordance with the provisions of the Administrative Procedure Law.

[23 October 2008]

13. Pension funds, which until the day of coming into force of Section 8.³ of this Law had entered into contracts regarding receipt of external services, shall carry out the necessary measures in order to ensure the receipt of external services within six months after the day of coming into force of Section 8.³ of this Law in accordance with contracts conforming to the requirements laid down in this Law.

[28 May 2009]

14. Amendments to Section 24 of this Law in relation to supplementation thereof with Paragraph 4.¹ shall come into force on 1 January 2010.

[28 May 2009]

15. Pension funds, which until the day of coming into force of amendments made to Section 20, Paragraph nine and Section 21, Paragraph seven of this Law (regarding the minimum of information to be included in contracts) had entered into contracts regarding management of funds and holding of funds, shall carry out the necessary measures in order to ensure that the provisions of such contracts within six months after the day of coming into force of amendments made to Sections 20 and 21 of this Law comply with the requirements laid down in this Law.

[22 March 2012]

16. Section 23, Paragraph 10.¹, Clause 15 of this Law in relation to the use of credit ratings shall come into force on 21 December 2014.

[9 July 2013]

Informative Reference to European Union Directives

[10 November 2005; 22 May 2008; 22 March 2012; 9 July 2013]

This Law contains legal norms arising from:

1) Council Directive 98/49/EC of 29 June 1998 on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community;

2) Directive 2001/107/EC of the European Parliament and of the Council of 21 January 2002 amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) with a view to regulating management companies and simplified prospectuses;

3) Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision;

4) First Council Directive 68/151/EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community;

5) Directive 2003/58/EC of the European Parliament and of the Council of 15 July 2003 amending Council Directive 68/151/EEC, as regards disclosure requirements in respect of certain types of companies;

6) Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority);

7) 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.

This Law has been adopted by the Saeima on 5 June 1997.

For the President,
the Chairperson of the Saeima A.Čepānis

Rīga, 20 June 1997

¹ The Parliament of the Republic of Latvia

Translation © 2014 Valsts valodas centrs (State Language Centre)