Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
1 June 2000 [shall come
into force from 4 July 2000];
24 October 2002 [shall come into force from 27 November
2002];
18 March 2004 [shall come into force from 1 May
2004];
8 March 2007 [shall come into force from 10 April
2007];
29 May 2008 [shall come into force from 1 July
2008];
19 June 2008 [shall come into force from 23 July
2008];
23 October 2008 [shall come into force from 1 January
2009];
11 March 2010 [shall come into force from 14 April
2010];
13 October 2011 [shall come into force from 16 November
2011];
9 July 2013 [shall come into force from 7 August
2013].
If a whole or part of a
section has been amended, the date of the amending law
appears in square brackets at the end of the section. If
a whole section, paragraph or clause has been deleted,
the date of the deletion appears in square brackets
beside the deleted section, paragraph or clause.
|
The Saeima1 has adopted
and the President has proclaimed the following Law:
On Investment Management
Companies
[18 March
2004]
Chapter I
General Provisions
Section 1. Terms Used in this
Law
The following terms are used in this Law:
1) fund investor - a person, who owns an investment
certificate of the investment fund;
2) fund property - assets the aggregate of which forms
an investment fund;
3) investment certificate - a transferable security
certifying participation of a fund investor in an investment fund
or in a sub-fund and the rights arising from such
participation;
4) investment fund (hereinafter also - fund) -
aggregate of assets formed by investments made in return for
investment certificates, as well as assets obtained in
transactions with investment fund property;
5) investment object - transferable securities, money
market instruments, deposit in a credit institution and other
financial instruments, which in accordance with the provisions of
this Law, an investment management company is entitled to
purchase for the fund property;
6) company officials - members of the board of
directors of an investment management company, investment fund
managers, as well as other persons who are authorised to issue
orders in respect of the fund property or to dispose of them on
behalf of this company;
7) stakeholders of the company - council members,
officials, shareholders of an investment company who own 10 and
more per cent of the voting shares of the company, as well as
spouses, parents or children of all natural persons referred to
in this Clause;
8) risk spreading principle - reduction of the
financial losses risk by dividing the investment fund property
into investment objects and observing transaction restrictions,
as well as preserving the possibility to gain the largest
expected income;
9) custodian bank - a person who keeps the fund assets,
performs registration thereof, transactions with fund resources
and other duties determined by this Law and the custodian bank
agreement;
10) stakeholders of the custodian bank - members
of the council and board of directors, shareholders of a
custodian bank who own 10 and more per cent of the voting shares
of the custodian bank, as well as spouses, parents or children of
all natural persons referred to in this Clause;
11) transferable securities - capital securities
(shares and other capital securities which certify participation
in the issuer's capital); bonds and other debt securities; other
securities, the alienation rights of which are not restricted and
with the attaching rights to acquire the transferrable securities
referred to by means of subscription or exchange;
12) money market instruments - liquid debt liabilities,
which may be precisely assessed at any time and which are
normally traded on the money market;
13) financial instruments - an agreement, which
concurrently creates financial assets for one person, but
financial liabilities or capital securities for another
person;
14) financial derivative instruments - financial
instruments the value of which changes depending on the fixed
interest rate, price of securities, foreign exchange rate, price
and rate index, credit rating or changes of similar variable
value and under influence of which one or several financial
risks, characteristic to the primary financial instrument which
is at the basis of the financial derivative instrument, are
transferred between the persons involved in the transaction. In
order to acquire a financial derivative instrument no primary
investment is required or a small primary investment is required
if compared with other agreements which in a similar manner
depend on the changes of market conditions, moreover, settlements
connected with the performance of the agreement take place in the
future;
15) management services -management of investment
funds, management of the assets of the State funded pension
schemes and the assets of the pension plans established by
private pension funds;
16) home state of the management company - country in
which the investment management company is registered (in which
the management company has its registered office);
17) host state of the management company - country
within the territory of which a management company has a branch
or within the territory of which the management company provides
management services;
18) control - control of a person over the commercial
company, if:
a) such person has a decisive influence on the basis of a
contract on the participation or the group of companies in
accordance with regulatory enactments regulating groups of
companies;
b) the relationship analogous to the relationship referred to
in Sub-clause "a" of this Clause exists between the person and
the commercial company;
19) parent company - the commercial company which is
controlling another commercial company;
20) subsidiary - the commercial company which is under
control of another commercial company;
21) close links - mutual connection of two or more
persons:
a) in the form of a participation - direct participation,
comprising 20 per cent and more of the voting rights and the
equity capital, or the control over the voting rights or the
equity capital of such volume,
b) in the form of control;
c) with one and the same person in the form of control;
22) sub-fund - separated part of the investment fund
property, which is comprised of the investments made against the
investment certificates, as well as the assets obtained in
transactions with this property and on the basis of the rights to
this property;
23) [9 July 2013];
24) Group of Ten - countries that have agreed to
participate in the General Arrangements to Borrow with the
International Monetary Fund;
25) qualifying holding - a holding acquired directly or
indirectly by a person or several persons acting in concerted
action on the basis of the agreement, which comprises 10 per cent
and more of the equity capital or the number of voting shares of
a commercial company or which makes it possible to exercise a
significant influence over the determination of the financial and
operational policy of the commercial company;
26) critical situation analysis - analysis which is
carried out by the investment management company in order to
identify and assess the potential influence of various
extraordinary, but potential influence of possibly adverse events
or changes of market conditions to the investment plan portfolio
of assets of the state funded pension scheme;
27) cross-border fund management- management service
which is provided by the company to such investment fund, the
home state of which is not the home state of the company managing
the fund;
28) Member State - a European Union Member State or a
State of the European Economic Area;
29) home state of the fund - the country, where the
fund is registered;
30) host state of the fund - the country, which is not
the home state of the fund, but in the territory of which the
public circulation of the investment certificates of this fund is
allowed;
31) branch - territorially or otherwise separated
structural unit of the investment management company, which has
no legal personality and which provides the management services,
which this investment management company is entitled to provide
in compliance with the license issued to the competent authority
of the Member State;
32) fund merger - the aggregate of the legal actions,
as a result whereof:
a) the merging fund - one or several funds or a sub-fund - is
merged to the receiving company - other existing fund or a
sub-fund. The merging fund transfers all of its assets and
liabilities to the receiving fund and ceases to exist without
liquidation procedure. The investors of the merging fund in
exchange to investment certificates of the merging fund receive
the investment certificates of the merging fund and a cash
payment, which does not exceed 10 per cent of the net asset value
of those investment certificates;
b) the merging fund - one or several funds or a sub-fund,
which, by ceasing to exist without the liquidation procedure,
transfer all of their assets and liabilities to the receiving
fund - newly founded fund or a sub-fund. The investors of the
merging fund in exchange of their investment certificates receive
the investment certificates of the receiving fund and a cash
payment, which does not exceed 10 per cent of the net asset value
of those investment certificates;
c) the merging fund - one or several funds or a sub-fund,
which continues to exist untill the liabilities have been
discharged, transfers all of its assets to the receiving fund -
the sub-fund of the same fund, newly founded fund or another
existing fund or the sub-fund thereof;
33) cross-border merger of funds - the merger of such
funds:
a) at least two of which are registered in different Member
States;
b) which are registered in one Member State and which are
merged into one newly founded fund, registered in another Member
State;
34) domestic merger of funds - merger of two or
more investment funds registered in Latvia;
35) durable medium - any instrument that enables an
investor to store information addressed personally to him/her so,
as to ensure the availability and use of information in an
unchanged form for the period of time necessary to provide that
information;
36) transactions of master and feeder structures
- mutual structure transactions of the master and feeder fund,
performed between two investment funds, as a result whereof the
feeder fund invests at least 85 per cent of its assets into the
master fund;
37) feeder fund - the investment fund or the sub-fund
thereof, which has received the permit for performance of master
and feeder structure transaction and which, notwithstanding the
limitations of the investments into investment funds determined
by this Law, is entitled to invest at least 85 per cent of its
assets into another investment fund or sub-fund;
38) master fund - the investment fund or the sub-fund
thereof, the investor of which is another investment fund, who
has invested at least 85 per cent of its assets into this fund or
the sub-fund;
39) a person associated to the company- an
official of the company, employee of the company, as well as
another natural person, involved in the provision of those
management services which are provided by the company, and the
actions whereof are controlled by the company, or a natural
person, who is directly involved in the provision of a delegated
service to a company, which provides the management services;
40) client - investment fund, alternative investment
fund, investment plan of the assets of the state funded pension
schemes, pension plan established by the private pension funds
receiving the management services provided by the investment
management company, or a person receiving the investment services
provided by the investment management company, referred to in
Section 5, Paragraphs two and three of this Law.
[1 June 2000; 24 October 2002; 18
March 2004; 8 March 2007; 19 June 2008; 11 March 2010; 13 October
2011; 9 July 2013]
Section 2. Purpose of this Law
The purpose of this Law is to prescribe the legal status of
investment management companies and investment funds, rights,
obligations and responsibility thereof, procedure for foundation
and operating principles thereof, to regulate requirements for
investment fund management and performance of investments, as
well as the supervision of compliance with regulatory
requirements.
[9 July 2013]
Section 3. Activities Regulated by
the Law
(1) This Law regulates the procedures for public attraction of
monetary assets in Latvia and for performance of collective
investment thereof on behalf of the attractor.
(2) Investment of monetary assets acquired in accordance with
the procedures provided for in Paragraph one of this Section
shall only be permitted in the investment objects determined by
this Law.
(3) The activities referred to in Paragraph one of this
Section may only be performed by:
1) a commercial company registered in Latvia, which in
accordance with the procedures determined in this Law has
received the licence for provision of management services;
2) an investment management company licensed in the Member
State in accordance with the procedure determined in Section 77
of this Law.
[1 June 2000; 18 March 2004; 13
October 2011]
Chapter II
Investment Management Company
[18 March
2004]
Section 4. Taking Up of a Business
of Investment Management Company
(1) An investment management company in Latvia shall be
established in the form of a joint stock company. An investment
management company (hereinafter - company) shall operate in
accordance with this Law, the Commercial Law and other regulatory
enactments and articles of association thereof.
(11) The company shall be considered to be the
financial and capital market participant within the meaning of
the Law on the Financial and Capital Market Commission, and it
shall be subject to the norms of the Law on the Financial and
Capital Market Commission.
(2) A company shall have registered shares only.
(3) A company is entitled to commence provision of management
services only after the Financial and Capital Market Commission
(hereinafter - the Commission) in accordance with the procedure
determined by this Law has issued the licence thereto for the
provision of the management services (hereinafter - licence).
(4) The licence shall specify those management services, which
the company is entitled to provide in compliance with Section 5
of this Law.
(5) The Commission shall issue the licence for unlimited time
period.
(6) The Commission shall ensure that the regulatory enactments
regulating the activities of the company and of the investment
fund are available on the Internet homepage thereof.
[13 October 2011]
Section 5. Types of Activities of
the Company
(1) The core activity of a company shall be the management of
the investment funds and the management of the assets of the
State funded pension scheme. The activity of the company in
respect of managing the assets of the State funded pension scheme
shall be regulated also by the Law on State Funded Pensions.
Management of investment funds shall include the following
services:
1) managing the fund investments;
2) administrative management of the fund, comprised of the
following activities:
a) arrangement of legal affairs and accounting of the
fund;
b) provision of information upon request of the fund investors
or other clients of the company;
c) determination of the fund value and the price of investment
certificates;
d) supervision of compliance with requirements regulating the
operation of the fund;
e) fund income distribution;
f) issuance and repurchase of insurance certificates;
g) settlement of payment for contractual liabilities;
h) maintenance of accounting of transactions related to fund
assets;
i) maintenance of the register of holders of the fund
investment certificates;
3) marketing of the fund (advertising, distribution of
investment certificates, market research and other similar
services).
(2) In addition to the management of investment funds, a
company may carry out individual management of the financial
instrument portfolio of the investor in accordance with
authorisation of the investor, if such portfolio is comprised of
one or several financial instruments referred to in Section 3,
Paragraph two of the Law on the Financial and Capital Market
Commission.
(3) A company, which in accordance with the procedure
determined in this Law has been issued a licence for the
provision of the services referred to in Paragraph two of this
Section, may provide advice concerning investments into financial
instruments referred to in Section 3, Paragraph two of the Law on
the Financial and Capital Market Commission and perform the
custody and administration of investment certificates of the
investment funds.
(4) A company may not provide solely the services referred to
in Paragraph two of this Section, as well as the non-core
services referred to in Paragraph three of this Section, if in
accordance with this Law it is not entitled to provide the
services referred to in Paragraph two of this Section.
(5) In addition to the activities referred to in the first
sentence of Paragraph one of this Section, a company may carry
out the management of the assets of the pension plans established
by private pension funds in accordance with the Law on Private
Pension Funds and the management of alternative investment funds
in accordance with the Law on Alternative Investment Funds and
Managers Thereof.
(6) A company shall not be entitled to provide management
services in a Member State in accordance with the procedure
determined in Section 76 of this Law, if it has chosen solely the
management of the assets of the State funded pension scheme as
its core activity.
(7) A company shall not be entitled to provide services not
referred to in this Section.
[19 June 2008; 11 March 2010; 13
October 2011; 9 July 2003]
Section 6. Location and Firm Name of
a Company
(1) The board of directors of a company (seat of a company)
registered in Latvia shall be located in Latvia.
(2) The firm name of a company shall contain a word
combination "ieguldījumu pārvaldes sabiedrība" [investment
management company] or its abbreviation "IPS".
(3) Commercial companies, which do not perform the activity
provided for in this Law, may not use in their firm name any
additions, which are directly or indirectly indicative of a
company.
Section 7. Requirements to the
Shareholders of a Company
(1) A shareholder of a company may be only a person:
1) whose identity can be verified;
2) who is of good repute;
3) whose financial standing is sound and it can be documentary
proved.
(2) When assessing the repute and the financial standing of a
person, the Commission shall verify the identity and criminal
record of the persons referred to in Paragraph one of this
Section, and the documents on their financial standing that allow
to ascertain free capital adequacy in the amount of investments
made in the capital of a company, as well as whether the invested
assets have not been obtained as a result of unusual or
suspicious transactions.
(3) A natural person and the shareholders and owners (actual
beneficiaries) of a legal person, to whom the restrictions
determined in Section 9, Paragraph three, Clauses 1, 2, 3 and 5
of this Law may apply, may not be the shareholders of a
company.
(4) The Commission has the right to verify the identity of a
company's shareholders but, where the shareholders of a company
are legal persons, information about their shareholders and
owners (actual beneficiaries) until information is obtained
regarding the owners (actual beneficiaries) who are natural
persons. The referred to persons have an obligation to provide
such information to the Commission if it is not available on the
public registers from which the Commission is entitled to receive
such information.
[11 March 2010]
Section 71. Acquisition,
Reduction and Termination of a Qualifying Holding
(1) A person who meets the requirements determined for the
shareholders of a company, as well as ensures the fulfilment of
the criteria determined in Paragraph seven of this Section, may
acquire a qualifying holding in a company.
(2) A person who intends to acquire a qualifying holding in a
company shall notify the Commission thereof in writing in
advance. The notification shall indicate the volume of the
holding to be acquired as a percentage of the equity capital or
number of voting shares of a company. The notification shall be
appended by information provided for in the statutory regulations
of the Commission that is necessary to assess the person's
compliance with the criteria determined in Paragraph seven of
this Section. The list of information to be appended to the
notification shall be published on the Internet homepage of the
Commission.
(3) The Commission has the right to request information
regarding the persons who intend to acquire a qualifying holding
(the persons having acquired a qualifying holding or suspected of
acquiring a qualifying holding), including regarding the owners
(actual beneficiaries) of legal (registered) persons who are
natural persons in order to assess the compliance of such persons
with the criteria determined in Paragraph seven of this
Section.
(4) If a person intends to increase qualifying holding
thereof, reaching or exceeding 20, 33 or 50 per cent of the
company's equity capital or number of voting shares, or if a
company becomes a subsidiary of such person, the relevant person
shall notify the Commission thereof in writing in advance. The
notification shall indicate the amount of the holding to be
acquired as a percentage of the company's equity capital or
number of voting shares. The notification shall be appended by
information provided for in the statutory regulations of the
Commission, necessary to assess the person's compliance with the
criteria determined in Paragraph seven of this Section. The list
of information to be appended to the notification shall be
published on the Internet homepage of the Commission.
(5) Within two working days after the day of receipt of the
notification referred to in Paragraph two or four of this Section
or within two working days after receiving the additional
information requested by the Commission, the Commission shall
notify the person in writing regarding receipt of the
notification or of additional information and regarding the final
date of the assessment period.
(6) During the assessment period determined in Paragraph seven
of this Section, but not later than on the fiftieth working day
of the assessment period, the Commission has the right to request
additional information regarding the persons referred to in this
Section in order to assess compliance of such persons with the
criteria determined in Paragraph seven of this Section.
(7) Not later than within 60 working days from the day when
the information referred to in Paragraph five of this Section
regarding receipt of the notification has been sent to the
person, the Commission shall assess the free capital adequacy of
a person, soundness and financial feasibility of the planned
acquisition of a holding in order to ensure sound and prudent
management of the company in which the holding is planned to be
acquired and consider the possible influence of such person on
the management and activities of the company, as well as the
following criteria:
1) the good repute of the person and compliance with the
requirements determined for the shareholders of a company;
2) the good repute and the experience of the person who, as a
result of the planned acquisition of a holding, will manage the
activities of the company;
3) the financial soundness of the person, in particular in
relation to the type of the economic activity pursued or intended
in the company in which the holding is planned to be
acquired;
4) whether the company will be able to comply and will in
future comply with the regulatory requirements determined in this
Law and in other regulatory enactments and whether the group of
its commercial companies, within the composition of which the
company will join, has a structure that does not restrict the
Commission's possibilities to exercise the supervisory functions
vested to it by law, to ensure an efficient exchange of
information among competent authorities of a company and to
determine the allocation of supervisory responsibilities among
the competent authorities of a company;
5) whether there are reasonable suspicions that, in connection
with the planned acquisition of a holding, money laundering or
terrorist financing has been committed or it is attempted to
commit such activities or that the planned acquisition of a
holding could increase such risk.
(8) When requesting additional information referred to in
Paragraph six of this Section, the Commission has the right to
interrupt the assessment period once until the day when such
information is received, but not more than for 20 working days.
The Commission has the right to extend the interruption of the
assessment period for up to 30 working days, if a person who
intends to acquire, has acquired, intended to increase or has
increased a qualifying holding thereof in a company is not
subject to the supervision of the activities of insurance
companies, reinsurance companies, credit institutions, investment
management companies, managers of alternative investment funds or
investment brokerage firms, or if the place of domicile
(registration) of such person is not in a Member State. If the
Commission has interrupted assessment period of 60 working days,
the period of interruption shall not be included in the
assessment period.
(9) Within the time period referred to in Paragraph seven of
this Section, the Commission shall take a decision on prohibiting
the person from acquiring or increasing a qualifying holding in a
company, if:
1) a person fails to meet the criteria determined in Paragraph
seven of this Section;
2) a person fails or refuses to provide to the Commission
information determined in this Law or additional information
requested by the Commission;
3) due to conditions beyond its control, a person cannot
provide information determined in this Law or additional
information requested by the Commission.
(10) Within two working days from the taking of a decision
referred to in Paragraph nine of this Section, but not exceeding
the assessment period referred to in Paragraph seven of this
Section, the Commission shall send that decision to the person
who has been prohibited from acquiring or increasing a qualifying
holding in a company.
(11) If the Commission, within the time period referred to in
Paragraph seven of this Section, fails to send to the person a
motivated decision, by which it prohibits the person from
acquiring or increasing a qualifying holding in a company, the
Commission shall be deemed to have agreed that the person
acquires or increases a qualifying holding in a company.
(12) The provisions of Clause 3 of Paragraph seven of this
Section shall not apply to a legal person if the shares thereof
are listed on the regulated market in Latvia or in another Member
State or on the regulated market of a market maker, who is a
lawful member of the International Federation of Bourses, and
that legal person provides to the Commission information
regarding shareholders thereof having a qualifying holding
therein.
(13) If the Commission has agreed that a person acquires or
increases a qualifying holding in a company, such person shall
acquire or increase the qualifying holding in the company not
later than within six months after the date of sending of a
written confirmation referred to in Paragraph five of this
Section on receipt of the notification or of the additional
information. If, till the expiry of this time period, the person
fails to acquire or increase a qualifying holding in a company,
the Commission's consent for acquiring or increasing a qualifying
holding in the company is no longer effective. Upon receipt of a
motivated written request from the person, the Commission may
decide on extension of the referred to time period.
(14) When assessing the notifications referred to in Paragraph
two and four of this Section, the Commission shall consult the
competent authorities of the relevant Member State, if a
qualifying holding is acquired by an insurer, a reinsurer of a
Member State, a credit institution, an investment management
company, an alternative investment fund manager, an investment
brokerage firm registered in a Member State, or a parent company
of an insurer of a Member State, of a reinsurer of a Member
State, of a credit institution, an alternative investment fund
manager, an investment management company or an investment
brokerage firm registered in a Member State or a person
controlling an insurer of a Member State, a reinsurer of a Member
State, a credit institution, an alternative investment fund
manager, an investment management company or an investment
brokerage firm registered in a Member State and if, as a result
of acquiring or increasing the qualifying holding by the relevant
person, the company becomes a subsidiary of such person or comes
under the control thereof.
(15) When assessing the soundness of financial standing of a
person, the requirements of a free capital adequacy shall not be
applicable to the credit institutions and insurance
companies.
(16) If an influence of a person who has acquired the
qualifying holding over the company jeopardizes or might
jeopardize the financially sound, prudent and with regulatory
enactments compliant management of a company, the Commission has
the right to request immediate termination of such influence,
change of the composition of the council or officials of the
company, or to prohibit the relevant person from exercising all
or part of his or her voting rights.
(17) A person who intends to terminate the control (decisive
influence) of the parent company over a company licensed by the
Commission, to reduce the amount of a qualifying holding in the
company to less than 20, 33 or 50 per cent or to terminate a
qualifying holding in the company, shall notify the Commission
thereof in writing prior to alienation of the shares. The
notification shall indicate the amount of the holding what the
person will have in the company after the reduction of the
holding.
[11 March 2010; 13 October 2011; 9
July 2013]
Section 72. Indirectly
Acquired Holding
When determining the amount of a holding that a person has
indirectly acquired in a company, the following voting rights
acquired by the relevant person (hereinafter - the particular
person) in a company shall be taken into account:
1) the voting rights that may be exercised by a third party
with whom the particular person has signed an agreement, imposing
an obligation on the third party to coordinate the policy of
exercising the voting rights and long-term action policy in
relation to the company's management;
2) the voting rights that may be exercised by a third party in
accordance with an agreement signed with the particular person
and establishing a temporary transfer of the relevant voting
rights;
3) the voting rights arising from the shares received as a
collateral by the particular person, provided that he or she may
exercise the voting rights and has expressed the intent to
exercise them;
4) the voting rights that the particular person is entitled to
exercise for unlimited time period;
5) the voting rights that may be exercised by a commercial
company controlled by the particular person or that may be
exercised by such commercial company in accordance with the
provisions of Clauses 1, 2, 3 and 4 of this Section;
6) the voting rights arising from the shares transferred into
the holding of the particular person and that may be exercised by
the particular person at his or her discretion, unless that
person has received specific instructions;
7) the voting rights arising from the shares held on behalf of
a third party and in favour of the particular person;
8) the voting rights that the particular person may exercise
in the capacity of a proxy holder when he or she is entitled to
exercise the voting rights at his or her discretion, unless that
person has received specific instructions;
9) the voting rights arising from the shares that the
particular person has acquired in any other indirect way.
[13 October 2011]
Section 73. Consequences
of Non-Reporting
(1) If a person that is suspected of having acquired a
qualifying holding in a company does not provide or refuses to
provide information referred to in Section 71,
Paragraph three of this Law and his or her holding in total
amounts to 10 per cent and more of the company's equity capital
or number of voting shares, it may not exercise the voting rights
attached to all shares he/she owns. The Commission shall
immediately notify the respective shareholders and the company to
this effect.
(2) If a person disregards the Commission's prohibition and
acquires or increases a qualifying holding, it shall not be
entitled to exercise voting rights attached to all shares he/she
owns, and the decisions of the shareholders meeting that have
been adopted by using the voting rights of those shares shall be
invalid as of the moment of adoption thereof and making of
entries in the commercial register or other public registers may
not be requested by reference to those decisions.
[13 October 2011]
Section 8. Capital of a Company
(1) The minimum initial capital of a company shall be EUR
125,000.
(2) Initial capital shall be comprised of:
1) paid up share capital (equity capital), reduced by the
value of the cumulative preference shares;
2) share issue premium;
3) reserves (except for revaluation reserves);
4) retained earnings or losses from previous years;
5) profit of the current operating year, if there is a report
of the sworn auditor or commercial company of sworn auditors
(hereinafter - sworn auditor) on the presence of the profit and
it is calculated taking into account all the necessary provisions
for asset impairment, expected tax payments and dividends, and
the Commission has agreed to inclusion of the profit of the
current operating year into initial capital.
(3) If the amount of assets under management of the company
exceeds EUR 250,000,000, the company shall ensure an additional
own funds in the amount of 0.02 per cent of the amount by which
the value of the assets under management exceeds EUR 250,000,000.
The requirements stated in this Paragraph shall not apply to a
company whose own funds are equal EUR 10,000,000 or more.
(4) [9 July 2003];
(5) When determining the compliance of a company's own funds
with the requirements of this Law, the following shall be
regarded as assets under management:
1) assets of investment funds and alternative investment funds
under management of the company, including assets which it has
transferred for managing to another company, but excluding assets
which it has received for managing from another company, provided
that the referred to funds are not established as legal
persons;
2) assets of investment funds and alternative investment funds
managed by the company, provided that the referred to investment
funds are established as legal persons;
3) assets of the pension plans established by private pension
funds and of investment plans of the State funded pension scheme
managed by the company.
(6) The own capital of a company may at no time fall below one
of the following amounts, whichever is larger:
1) sum total of the minimum initial capital and the additional
own capital calculated in accordance with the requirements of
Paragraph three of this Section;
2) 25 per cent of total fixed costs of the previous full
reporting year (costs that remain relatively unchanged
irrespective of the volume of the company's commercial
activity).
(7) Upon receipt of the Commission's authorisation, the
company may ensure up to 50 per cent of the additional own
capital referred to in Paragraph three of this Section with a
guarantee of the same amount issued by:
1) a credit institution that has obtained a licence for the
operation of a credit institution in a Member State or in a
member state of the Organisation for Economic Co-operation and
Development which is also in the Group of Ten;
2) an insurance company registered in a Member State or a
branch of an insurer of a non-Member State that has obtained a
licence for the provision of insurance.
(8) If a company provides the services referred to in Section
5, Paragraphs two and three of this Law, it shall follow and
comply with the capital requirements and the consolidated
supervision requirements determined for investment brokerage
firms. These requirements do not apply to managing the assets of
the State funded pension schemes in accordance with the Law on
State Funded Pensions and to managing assets of the pension plans
established by private pension funds in accordance with the Law
on Private Pension Funds.
(9) The procedure for calculation of own funds of a company
shall be established by the Commission.
(10) The amounts determined in this Law in euro shall be
considered as equivalent to the amounts in lats recalculated in
accordance with the currency exchange rate determined by the Bank
of Latvia.
[8 March 2007; 19 June 2008; 13 October 2011; 9 July
2013 (New wording of Paragraphs two and nine shall come
into force on 1 January 2014 and is included in the wording of
the Law as on 1 January 2014. See Paragraphs 34 and 35 of the
Transitional Provisions)]
Section 9. Requirements for Council
Members and Officials of a Company
(1) A person meeting the following requirements may be an
official of a company:
1) he or she has sufficient competence in the field for which
the referred to person will be responsible;
2) he or she has higher education and appropriate professional
experience of at least three years;
3) he or she is of good repute; or
4) he or she has not been deprived of the right to engage in
commercial activity.
(2) A person who is competent in financial management matters
and meets the requirements determined in Clauses 3 and 4 of
Paragraph one of this Section may become a council member of a
company.
(3) A person may not become a council member and be an
official of a company in the following cases:
1) he or she is convicted for commiting of an intentional
crime;
2) he or she has been convicted for committing of an
intentional crime (also, where the person has been released from
serving the sentence due to prescription, clemency or
amnesty);
3) he or she has been held criminally liable for committing of
an intentional crime (also, where the criminal matter against the
person has been terminated but the person has not been
rehabilitated);
4) he or she has provided false information regarding himself
or herself by submitting documents to the Commission in order to
obtain a licence for operation of a company or another activity
in the financial and capital market;
5) he or she has performed duties of a member of the board of
directors or council of a company or of another financial
institution that has been declared insolvent at the time the
relevant person was performing the referred to duties, or he or
she has performed duties of a member of the board of directors or
the council of another company and, due to negligence or
deliberately, has led the company to insolvency or bankruptcy
subject to criminal liability.
(4) When assessing the repute of a company's officials and
council members, the Commission shall consider the information
provided by these persons, references received from previous
employers and other information regarding the previous
professional experience of the referred to persons.
Section 10. Documents and
Information to Be Submitted for Receipt of a Licence
(1) In order to receive a licence, a company shall submit to
the Commission a submission for the receipt of the licence. The
submission shall be accompanied by documents on the registration
of the company, shareholders, council members and officials,
procedures and policies developed for ensuring the functioning of
the company's internal control system, as well as other documents
referred to in this Section.
(2) The following documents shall be submitted to the
Commission regarding the company and shareholders thereof:
1) document confirming the payment of the initial capital;
2) list of the shareholders of the company and the following
information regarding the shareholders:
a) regarding natural persons - a copy of the page of the
passport or another identity document on which personal
identification data [given name, surname, year and date of birth,
personal identity number (if any)] are specified,
b) regarding legal persons - firm name, registered office,
registration number and place. Legal persons registered abroad
shall also submit the copies of registration documents,
c) documents confirming the existence and origin of financial
assets of the company's shareholders (having a qualifying holding
in the company), for them to be able to make contributions in the
company's capital;
d) information regarding the owners of the company's
shareholders (having a qualifying holding in the company) (till
the natural person, regarding whom information shall be provided
in compliance with Sub-clause a) of this Clause).
(3) The following documents and information shall be submitted
to the Commission regarding the company's council members and
officials:
1) notification to be filled in by each council member and
each official. The notification shall include the following
information:
a) firm name of the company and the office the person stands
for as a candidate,
b) given name, surname, year and date of birth, personal
identity number (if any) and citizenship,
c) education (academic degree),
d) raise of qualification;
e) whether he or she has ever had any criminal record;
f) whether he or she has ever been deprived of the right to
engage in commercial activity,
g) previous workplaces over the last 10 years and short
description of job duties;
2) copy of the page of passport or another identity document
on which personal identification data [given name, surname, year
and date of birth, identity number (if any)] are specified;
and
3) copies of documents confirming education.
(4) The authenticity of information provided for in the
notification referred to in Paragraph three, Clause 1 of this
Section shall be confirmed by a signature of a person, of whom
the notification has been prepared, and the chairperson of the
board of directors of the company.
(5) A list of stakeholders shall be submitted to the
Commission. The list shall include the given name and surname of
each person, personal identity number, education, offices held by
him or her over the last five years and the provisions of a
contract concluded between the company and the relevant person
applicable to the job description. A legal person shall indicate
the firm name, registration number and members of the management
bodies thereof, as well as submit the annual account for the last
year to the Commission.
(6) The following documents shall be submitted to the
Commission regarding the company's internal control system:
1) a description of the organisational chart with clearly
stated duties and authorities of the council and officials, as
well as precisely determined and allocated tasks of the company's
structural units and responsibilities of heads of the structural
units. If the company is planning to establish a branch, a
description of the organisational chart of branches and the
duties of branch managers shall be submitted to the
Commission;
2) a description of the management information system;
3) key principles of accounting policy and organisation of
accounting records;
4) a description of policies and procedures for the material
operational risk management;
5) information system protection regulations, as well as
regulations for the protection of a register for investment
certificates of the fund and a database for the accounting of
other financial instruments under management of a company;
6) a description of the internal audit system, as well as
regulations for the verification of transactions effected by the
company and its employees on their own account and the compliance
thereof with the requirements for the prevention of conflicts of
interest;
7) a description of identification procedures for unusual and
suspicious financial transactions;
8) a description of the procedures for the examination of
submissions and complaints (disputes) of fund investors regarding
the provision of management services by the company;
9) policy for the prevention of conflicts of interest; and
10) transaction execution policy.
(7) The operational plan developed for at least three next
years of operation and approved by the shareholders meeting of
the company shall be submitted to the Commission on the planned
operation of the company, reflecting in detail the company's
operational strategy (indicating also the none-core services
which the company intends to provide in addition to the core
activity), and the financial forecasts including draft report
disclosing the financial standing as at the end of the year for
at least three next years of operation, draft financial
performance report for at least three next years of operation,
draft capital adequacy calculation and the forecasted amount of
annual fixed costs, a description of market research and any
other information that provides a clear and fair presentation of
the operations planned by the company.
(8) The Commission has the right to request the company to
update the submitted documents and information.
(9) If, by the time a decision is taken regarding the issuing
of a licence, any amendments are made to the information or
documents submitted to the Commission, the company is obliged to,
without delay, submit to the Commission the new information or
the full text of relevant documents including amendments made
thereto.
(10) The Commission shall consult with competent authorities
of Member States prior to issuing a licence to a company, if the
company is:
1) a subsidiary of a company, an investment brokerage firm, a
credit institution or an insurance company licensed in a Member
State;
2) a subsidiary of a company the subsidiary of which is a
company, an investment brokerage firm, a credit institution or an
insurance company licensed in a Member State; or
3) a company controlled by a person who simultaneously
controls another company, investment brokerage firm, credit
institution or insurance company licensed in a Member State.
[11 March 2010; 13 October
2011]
Section 11. Provisions for Issuing a
Licence
(1) The Commission shall take a decision on issuance of the
licence within three months after the receipt of all the
documents specified by this Law necessary for the taking of the
decision, prepared and drawn up in compliance with the
requirements determined by the regulatory enactments.
(2) The Commission shall issue a licence within 10 days as of
the day the decision to issue a licence has been taken.
(3) The Commission shall not issue a licence, if:
1) when establishing the company, this Law and other
regulatory enactments have not been complied with;
2) council members and officials of the company do not meet
the requirements determined by this Law;
3) the company's capital does not meet the requirements
determined by this Law;
4) close links of the company with third parties endanger or
may endanger financial soundness thereof or restrict the right of
the Commission to perform supervisory functions determined in
this Law;
5) foreign laws and other regulatory enactments pertaining to
persons who have close links with the company restrict the
Commission's right to perform the supervisory functions
determined in this Law;
6) it is impossible to ascertain the identity, repute and
soundness of the financial standing of persons having a
qualifying holding in the company;
7) the Commission determines that the financial assets
invested in the company's capital have been obtained in unusual
or suspicious financial transactions or the legal origin of these
financial assets does not have any documentary proof.
(4) If the Commission takes a decision on refusal to issue a
licence, a submission for the receipt of a licence may be
submitted repeatedly after the prevention of deficiencies
indicated in the refusal.
(5) The Commission shall notify the European Securities and
Markets Authority regarding issuing a licence.
[11 March 2010; 13 October
2011]
Section 12. Change of Management
Services Specified in a Licence
(1) If a company wishes to supplement the management services
specified in a licence issued thereto with the new ones or wishes
to refuse from any of the management services specified in the
licence, it shall submit a corresponding submission to the
Commission.
(2) If the company wishes to commence the provision of a new
management service, concurrently with a submission it shall
submit to the Commission:
1) supplements to an operational plan;
2) amendments to descriptions of the internal control system
required to ensure the provision of the service in compliance
with the requirements of this Law.
(3) The Commission shall take a decision on the change of the
management services specified in the company's licence within 15
days after the receipt of all the documents referred to in this
Law, prepared and drawn up in compliance with requirements
determined in the regulatory enactments.
(4) No State fee shall be paid for the change of the
management services specified in the licence.
Section 13. General Provisions of
Operation of a Company
(1) A company shall, during the term of validity of the
licence issued thereto, comply with and fulfil the following
requirements:
1) ensure that the requirements governing the operation of the
company would be complied with in accordance with this Law and
the regulations issued by the Commission;
2) ensure establishment and functioning of a comprehensive and
efficient internal control system, corresponding to the nature,
volume and complexity of the management services thereof, by
including the following key elements in this system:
a) organisational chart commensurate to the size of the
company and operational risks thereof, with clearly stated duties
and allocation of powers of the council and officials of the
company in respect of carrying out and controlling the company's
business, and precisely determined and allocated tasks of the
company's structural units and the duties of the managers of
structural units,
b) the system for identifying, managing, monitoring and
reporting risks existing in and potential to the company's
activities,
c) internal control procedures;
3) ensure in its operation the compliance with the rules,
policies and procedures developed for the functioning of the
internal control system, including the procedure determined by
the company for the performance of personal transactions or
transactions in financial instruments at the company's expense,
as well as the procedure for execution of applications for buying
and repurchasing of investment certificates;
4) ensure the accounting records commensurate to the provided
management services, as well as the establishment of such
mechanism for storage, protection and control of electronic data
in order it would be possible to reconstruct the transactions
made with fund assets according to the origin thereof, parties
involved therein, transaction essence, time and place of
execution, as well as in order to monitor the compliance of fund
investments with the fund prospectus, management rules and the
requirements of this Law;
5) ensure the archiving of source documents of transactions
for 10 years, as well as compliance with other requirements
determined by the regulatory enactments with respect to
completion and storage of source documents;
6) ensure that an efficient policy for prevention of conflicts
of interest of the company is established, implemented and
followed. The company shall take all necessary measures in order
to identify and prevent any conflicts of interest that may arise
during the provision of services and, when they cannot be
prevented, ensure equal treatment of the funds under the
management thereof;
7) ensure that the financial instruments and monetary assets
of the company itself and of its clients are held, recorded and
accounted separately;
8) ensure that an efficient procedure for the examination of
submissions and complaints (disputes) of fund investors is
established, implemented and followed in accordance with which
the submissions and complaints (disputes) of investors and
potential investors are registered and examined, and the
information regarding measures which are taken in respect to
these complaints (disputes) is registered;
(11) A company that maintains a register of the
holders of investment certificates shall be responsible for any
loss arising to fund investors and to third parties where the
company has failed to comply with the obligations determined in
the regulatory enactments for maintaining the register of the
holders of investment certificates.
(12) A company that manages a fund established in
another Member State or distributes investment fund certificates
in another Member State shall, in addition to the requirements of
Paragraph one of this Section, develop and comply with a
procedure for ensuring the availability of information upon a
request of the competent authority of the home state of the fund.
In this procedure the company shall determined the contact person
fulfilment responsible for the requests for information referred
to in this Paragraph.
(13) A company shall ensure that key investor
information of the respective fund is provided free of charge to
investors before acquisition of investment certificates
irrespective of whether the investment certificates are offered
to be acquired or advice concerning investment in this fund is
provided by the company itself or any other legal person or
natural person authorised by the company to perform such
activities. The company shall be responsible for compliance with
the requirements of this Paragraph.
(2) If a company provides the investment services referred to
in Section 5, Paragraphs two and three of this Law, in addition
to the requirements determined in Paragraph one of this Section,
it shall comply with and fulfil the following requirements:
1) [13 October 2011];
2) prior to commencement of the service provision, it shall
enter into a written contract with the client regarding the
provision of service;
3) prior to entering into a contract for the provision of
service, as well as during the entire term of the contract, it
shall ensure that the client has sufficient information enabling
him or her to assess the essence of the provided service and the
financial risks related thereto;
4) prior to entering into a contract, inform the client
regarding the types of disputes provided for in the contract,
that will be resolved in accordance with extrajudicial
procedures, and the procedure for examination of such
disputes;
5) it shall participate in the investor protection system in
compliance with the regulatory enactments regulating this
field;
6) it shall follow and comply with other requirements which in
accordance with Chapter XII of the Financial Instruments Market
Law are determined for investment brokerage firms that perform
individual management of investors' financial instruments in
accordance with the authorisation of investors, provide
investment advice concerning financial instruments and perform
holding of financial instruments;
7) it shall follow and comply with the requirements determined
in the Financial Instruments Market Law for investment brokerage
firms in respect of delegation of outsourcing services.
(3) A company shall, insofar as it is necessary for the
ensuring and protection of the client's interests and in
compliance with the nature and volume of the service provided to
the client, request from a client information regarding:
1) the client's experience and knowledge regarding
transactions to be concluded during the provision of
services;
2) the objectives the client intends to achieve by the
relevant transactions;
3) the financial standing of the client.
(4) If a client refuses to provide information referred to in
Paragraph three of this Section, as well as does not inform
regarding the changes in information provided to the company, the
company shall not be liable to the client for the consequences
arising from the fact that the company does have such information
at the disposal thereof.
(5) [13 October 2011];
(6) When performing activities related to fund management,
also, when exercising the voting rights of the shares (capital
shares) belonging to the fund property, a company shall not
require the consent of fund investors.
(7) A company has a duty to bring the claims of fund investors
against the custodian bank or third parties on its own behalf, if
it is arising from the relevant circumstances. However it shall
not restrict the right of fund investors to bring such claims on
their own behalf.
(8) A company shall be liable for the losses caused to fund
investors by company officials or authorised persons as a result
of violating the provisions of this Law, the fund prospectus or
the fund management rules, by abusing the powers conferred on
them or negligently performing their duties.
(9) A company has a duty to inform the Commission in writing
regarding any amendments to the lists of stakeholders of the
company and the custodian bank, as well as regarding any
amendments and supplements to the documents and information
submitted to the Commission within 10 days from the date of
introduction of amendments.
(10) Within 30 days of the receipt of the submission and the
documents specified in this Law regarding council members and
officials of the company, the Commission shall has the right not
to allow these persons to commence the fulfilment of their
duties, if the referred to persons fail to comply or the
Commission cannot verify their compliance with the requirements
of this Law.
(11) A company that manages the assets of the State funded
pension scheme shall draw up the critical situation analysis of
investment plans at least once a year to determine and assess the
potential impact of various extraordinary, but potentially
adverse events or changes in market conditions on the investment
plan portfolio, by analysing and recording the possible
development scenarios. For the critical situation analysis
sensitivity tests and scenario analysis shall be used.
Sensitivity tests shall be carried out to determine the effect of
the adverse changes caused by a separate factor on the investment
plan portfolio. Scenario analysis shall be carried out to
determine the effect of the adverse changes caused by several
factors on the investment plan portfolio by detecting the cause
of those extraordinary, but potentially adverse events or
changes.
(12) The board of directors of the company shall approve the
results of the critical situation analysis and take a decision
regarding the activities to be performed in case of occurrence of
the events or the changes referred to in the critical situation
analysis. The critical situation analysis approved by the board
of directors and the decision regarding the activities to be
taken shall be submitted to the Commission.
(13) The Commission has the right to determine additional
requirements and procedure for carrying out the critical
situation analysis, establishing potential factors and scenarios
to be tested.
(14) In addition to the requirements determined in Paragraph
eleven of this Section, the Commission has the right to request
that the company carries out extraordinary critical situation
analysis and submits it to the Commission.
(15) The requirements for establishing the internal control
system of the company shall be determined by the Commission.
[8 March 2007; 19 June 2008; 11
March 2010; 13 October 2011]
Section 131 . Obligations of a Company
when Providing Management Services
(1) When providing management services, a company shall have
an obligation to act as an honest, careful and diligent manager
and to ensure that the respective services are provided with due
professionalism and diligence in the interests of fund investors
and recipients of management services, and do not threaten the
financial market stability.
(2) In the interests of fund investors and recipients of
management services the company shall ensure:
1) use of clear, accurate and transparent valuation techniques
of financial instruments in order to prove that the value of
portfolios under the management thereof has been appropriately
measured;
2) that no unjustified costs are charged to fund investors and
recipients of management services.
(3) The company shall ensure equal and fair treatment of
investors of the funds under the management thereof without
favouring the interests of any fund investor or any group of fund
investors over others.
(4) The company shall develop and follow the procedure for
prevention of wilful misconduct that may affect the financial
market stability in order to avoid a situation when, as a result
of activities performed in the interests of individual fund
investors, other fund investors are unfairly treated or stability
and integrity of the financial market are threatened.
(5) In relation to the management or administrative management
of an investment fund, managing investment of investment plans of
the State funded pension schemes or managing investments of
pension plans established by private pension funds, the company
is prohibited from paying or accepting an inducement as well as
providing or accepting any other type of a benefit other than the
payments:
1) paid or received by the recipient of a management service
or a person acting on its behalf or other type of a benefit that
is provided or received by the recipient of a management service
or a person acting on its behalf;
2) paid or received by a third party or a person acting on
behalf of a third party or the benefit that is provided or
received by the third party or a person acting on its behalf,
if:
a) the existence, nature and amount or, where the amount
cannot be established, the method for calculating the payment or
the benefit is explained to the recipient of the management
service before the provision of the respective service in a
comprehensive, accurate and understandable manner. That
information may be provided as a summary, but a fund investor is
entitled to receive also detailed information,
b) the intent of performance of the payment or provision of
other benefit is to enhance the quality of the respective service
and this intent does not affect the obligation of the company to
act in the interests of clients;
3) which ensure the provision of the respective service or are
necessary for the provision of such service, including custody
costs of financial instruments, payment and trading venue costs,
administrative fees or legal fees, if such payments in terms of
their nature cannot contradict the company's obligation to act
honestly, fairly and professionally in the interests of
clients.
[13 October 2011]
Section 132 . Due Diligence during the
Provision of Management Services
(1) The company shall select and manage investments with due
diligence not only in the interests of the recipients of
management services, but also in order to ensure that stability
and integrity of the financial market are not threatened.
(2) The company shall ensure that:
1) the chairman of the board of directors thereof and at least
one more member of the board of directors, as well as the fund
manager are persons competent in the investment issues;
2) investments are made only in those financial instruments
the essence of which is clear to the company's officials and the
information necessary for the risk assessment thereof is
available to them.
(3) The company shall develop and document the procedure for
execution and control of transactions in order to ensure that the
investment decisions taken on behalf of the recipients of
investment management services are assessed and executed with due
diligence and in accordance with the investment objective
indicated in the fund prospectus, investment policy and
investment limits.
(4) The company shall take decisions with due diligence
regarding delegating the risk management function or terminating
the receipt of the delegated service. To this effect the company
shall develop and comply with the procedure for the assessment
and verification of a person to whom the risk management function
will be delegated, competence and capacity of such person to
manage the fund risks trustworthily, professionally and
efficiently, as well as an on-going procedure for assessment of
performance of that person.
[13 October 2011]
Section 133. Ensuring of
the Best Results
(1) When fulfilling the decision of execution of transactions
within the scope of managing the investment portfolios, the
company shall take all necessary measures to ensure best possible
results to the recipients of management services, considering the
transaction price, costs, speed of execution, likelihood of
execution and settlement, size and nature of transaction or any
other considerations related to the execution of a transaction
order.
(2) When assessing the importance of the factors referred to
in Paragraph one of this Section for the execution of transaction
orders, the following criteria shall also be considered:
1) the investment objective, investment policy and risks
determined in the fund prospectus or the management rules;
2) type of the order;
3) type of the financial instrument forming the object of
order;
4) possible place of execution of the transaction order (a
regulated market, multilateral trading facility, systematic
internaliser, market maker or other liquidity provider). The
company shall develop and implement the transaction execution
policy, setting out the procedure for assessment of the referred
to criteria and the factors referred to in Paragraph one of this
Section in order to ensure the best possible results to the
recipients of management services.
(3) The requirements of Paragraphs one and two of this Section
shall also be applied to the execution of transaction orders
transferred for execution to a person entitled to provide
investment services in compliance with the requirements of the
Financial Instruments Market Law (hereinafter in this Section - a
person).
(4) In its transaction execution policy the company, for each
type of financial instruments, shall indicate a person to whom
transaction orders may be transferred for execution. The company
shall be entitled to enter into agreement with that person
regarding the execution of transactions provided that all
requirements of this Section are met.
(5) To be able to detect deficiencies and prevent the detected
deficiencies, the company shall regularly assess the transaction
execution policy and the efficiency of procedures related
thereto, in particular the quality of the execution of orders
placed for execution to another person on behalf of the
recipients of management services. The company shall review the
transaction execution policy on an annual basis or in case, when
there are significant changes that affect the company's ability
to ensure the best possible result to the recipients of
management services also in the future.
(6) A company, which plans to provide management services for
a fund registered in another Member State and established as a
commercial company, has an obligation to obtain the fund's
consent for the developed transaction execution policy prior to
commencing the provision of management services.
(7) The company shall publish the transaction execution policy
on the Internet homepage thereof , as well as information
regarding material changes introduced to the policy.
(8) The company has an obligation to prove that the
transaction orders executed on behalf of a recipient of
management services, including the transaction orders transferred
to another person for execution, comply with the execution
policy.
[13 October 2011]
Section 134 . Provisions
for Execution of Transaction Orders
(1) The company shall develop procedures and implement the
necessary measures in order to ensure instant, fair and prompt
execution of those transaction orders involving the assets of the
recipients of management services. Acting on behalf of the
recipients of management services, the company shall ensure the
fulfilment of the following requirements:
1) orders executed on behalf of the recipients of management
services are promptly and accurately recorded;
2) comparable orders of the recipients of management services
are executed instantly in accordance with the sequence of
submission thereof, unless the specifics of the order or market
conditions make them unenforceable in such manner or the
interests of the referred to persons require other action;
3) financial instruments or monetary assets received as a
result of transaction are immediately and fully credited to the
financial instrument account or the monetary asset account of the
recipient of the management services.
(2) The company, as well as the persons related thereto may
not misuse information at the disposal thereof regarding pending
orders of the recipients of management services.
(3) The company has the right to consolidate the transaction
order on behalf of the client with the transaction order on
behalf of the company itself or on behalf of another client only,
if it has developed and it implements order consolidation and
allocation policy. Order consolidation and division policy may be
incorporated in the transaction execution policy and it shall
provide:
1) to consolidate the orders only, if it is unlikely that the
order consolidation might harm the interests of the clients the
orders of which are consolidated;
2) fair allocation of consolidated orders and an explanation
on how the volume and the price of orders affect the allocation
and execution of orders;
3) the procedure for allocation of transactions related to the
consolidated order, if the consolidated order is executed
partially;
4) the procedure that ensures fulfilment of the requirements
of Paragraphs four and five of this Section in respect of
allocation or reallocation of the orders on behalf of the
recipients of management services or other clients and orders on
transactions on behalf of the company itself.
(4) If the company has consolidated the orders on transactions
on its own behalf with one or more orders on behalf of the
clients, it shall allocate or reallocate the respective
transaction without prejudice to the clients' interests.
(5) If the company consolidates the order on behalf of the
client with the order on transaction on its own behalf and the
consolidated order is executed partially, the company shall
allocate the respective orders in the order of priority - first
for the benefit of the client and then - for the company. If the
company can reasonably prove that without such consolidation it
could not have executed the order under such advantageous terms
or could not have executed the order at all, it may apply the
proportional income distribution in respect of the transaction on
its own behalf.
[13 October 2011]
Section 135. Examination
of Submissions and Complaints (Disputes)
(1) The company shall ensure that the procedure for
examination of submissions and complaints (disputes) of fund
investors regarding management services provided by the company
is freely available at its location and accessible in an
electronic form on the Internet homepage of the company, if
any.
(2) Fund investors and potential investors may file submission
and complaints regarding the received management services free of
charge at the location of provision of services specified by the
company.
(3) The company shall provide an answer in writing within 30
days of receipt of a written submission or a complaint (dispute)
regarding a management service. If due to objective circumstances
it is not possible to meet this deadline, the company is entitled
to extend it by notifying the submitter of the submission or
complaint (dispute) thereof in writing.
(4) A company, that provides management services in another
Member State or distributes investment certificates of the
investment fund registered in Latvia in another Member State,
shall ensure the translation of the procedure for examination of
submissions and complaints (disputes) regarding provision of
management services of the company and examination of the
respective submissions and complaints (disputes) in the language
determined by the host state of the company and of the fund.
(5) Fund investors considered as consumers, within the meaning
of the Consumer Rights Protection Law, are entitled to submit to
the Consumer Rights Protection Centre submissions and complaints
regarding violations of this Law and requirements of other
regulatory enactments of consumer rights protection, if they are
related to the provision of management services.
(6) If a fund investor incurs losses due to incorrect
information provided by the company or due to a failure of the
company to fulfil the requirements of this Law, the fund investor
has the right to claim compensation of losses in accordance with
general procedures determined by laws.
[13 October 2011; 9July 2013]
Section 14. Conflict of
Interests
(1) A company shall ensure such internal control system that
reduces to a minimum the possibility of a conflict of interest
between:
1) the company and clients thereof;
2) funds under the management of the company;
3) clients of the company;
4) clients of the company and the funds under the management
of the company;
5) alternative investment funds or fund investors and
investment funds under the management of the company or
investment fund investors.
(2) To identify types of conflicts of interest that may arise
in provision of management services and performance of activities
that might harm the fund's interests, the company shall take into
account situations when the company or the person related
thereto, or a person (directly or indirectly) controlling the
company:
1) could obtain profit or avoid financial losses at the
expense of the fund;
2) is interested in the outcome of a service provided to the
fund or to another client or of a transaction carried out on
behalf of the fund, and it is contrary to the interests of the
fund;
3) has a financial or other interest in acting for the benefit
of another client or a group of clients rather than in the fund's
interests;
4) carries out the same activities in the interests of the
fund and of the client or of a group of clients other than the
fund;
5) receives or will receive an inducement from a person other
than the fund for the management services provided to the fund
that will be in the form of monies, goods or services other than
standard fee or commission for that service.
(3) When identifying the types of conflicts of interest, the
company shall take into account the following:
1) interests of the company, including interests arising from
its belonging to a group or from the performance of services and
activities, and the interests of clients and the company's duty
towards the fund;
2) interests of two or more funds under the management of the
company.
(4) In order to ensure that the requirements of Paragraph one
of this Section are fulfilled, the company shall develop the
policy for prevention of conflicts of interest that is
commensurate to its size and organisational chart, as well as
nature, scope and complexity of transactions thereof. Where a
company is a member of a group of commercial companies, the
policy for prevention conflicts of interest shall also provide
for the prevention of such conflicts of interest that may arise
due to the activities or the structure of another commercial
company in the group.
(5) In its policy for prevention of conflicts of interest the
company shall:
1) identify the circumstances that give rise or might give
rise to a conflict of interests, create material threat or harm
to the fund or interests of one or several clients in relation to
the management services provided by the company or a third party
on the company's behalf;
2) determine the procedures and measures necessary for the
prevention of conflicts of interest.
(6) When determining the procedures and measures for
prevention of conflicts of interest, the company shall ensure
that they are commensurate with the size of the company itself or
with the size and professional activities of the group to which
the company belongs, as well as the materiality of harm to the
interests of clients.
(7) For the purposes of fulfilling the requirements determined
in Paragraph five, Clause 2 of this Section, the company in
compliance with its structure and types of services provided,
shall provide:
1) efficient procedures for preventing or controlling
information exchange between those persons associated to the
company who are involved in the provision of management services
and the activities of which involve a risk of a conflict of
interest, where such information exchange may harm the interests
of one or several clients;
2) separate supervision of the persons associated to the
company, the principal duties of which are providing management
services on behalf of clients or providing management services to
clients or to fund investors, the interests of which may be into
conflict or who otherwise represent different interests that may
come into conflict, including with the interests of the
company;
3) prevent any direct link between the remuneration or income
gained by the persons associated to the company, the activities
of which are related to the provision of different management
services, where the conflict of interest may arise in relation to
the activities carried out while providing management
services;
4) measures to prevent or limit inappropriate influence of
third parties on management services and which are carried out by
a person associated to the company;
5) measures to prevent or control simultaneous or sequential
involvement of persons associated to the company in various
activities related to the process of providing management
services where such involvement may impair the management of
conflicts of interest;
6) other additional procedures and measures which are
necessary and appropriate in order to prevent a conflict of
interest, if the organisational or administrative measures
determined by the company for the management of conflicts of
interest in accordance with the requirements of this Section are
insufficient.
(8) The company shall store and update, on a continuous basis,
information regarding the activities of investment fund
management, which it has performed itself or which were performed
on its behalf and which have given rise to or, if these
activities are on-going, may give rise to a conflict of interest
that materially harms the interests of one or several funds or
other clients.
(9) The persons involved in the provision of management
services shall inform the board of directors of the company
regarding any events, when the organisational or administrative
measures determined by the company for the management of
conflicts of interest in accordance with the requirements of this
Section are insufficient to ensure, with due confidence, that the
risk of harm to the interests of the fund or the holders of its
investment certificates will be prevented. After the board of
directors is informed regarding the event referred to in this
Paragraph, it shall take appropriate decisions that are necessary
to ensure the protection of interests of the fund and the holders
of its investment certificates.
(10) The company shall inform investors regarding the events
referred to in Paragraph nine of this Section and the decision
taken, by means of any appropriate durable medium.
(11) The company shall ensure that one and the same employee
of the company carries out only one of the following duties:
1) management of financial instruments owned by the company
and the execution or transferring for execution of the tasks
related thereto;
2) individual management of the fund investments and of the
financial instruments of clients and the execution or
transferring for execution of the tasks related thereto;
3) registration of transactions in financial instruments.
(12) The company has an obligation to develop the procedure
for exercising voting rights arising from the financial
instruments in the fund investment portfolio. The referred to
procedure shall determine the activities necessary in order
to:
1) supervise and ensure the exercising of voting rights that
shall only be in accordance with objectives and policy of the
relevant fund investments;
2) prevent or manage all conflicts of interest arising from
the exercising of voting rights.
(13) The company shall publish a brief summary of the
procedure referred to in Paragraph twelve of this Section on the
Internet homepage thereof and upon request it shall inform the
fund investors free of charge regarding any activities carried
out on the basis of that procedure.
(14) A company has no right to invest own assets in another
company, as well as to acquire the investment certificates of a
fund managed thereby.
(15) The restrictions determined in Paragraph fourteen of this
Section in respect of acquisition of investment certificates of a
fund managed by the company shall not be applicable to cases,
where the company takes over the management of a fund established
by another company. In such case, within six months of the date
of completion of the takeover, the company shall take relevant
measures to ensure compliance of further activities thereof with
the provisions of Paragraph fourteen of this Section.
(16) If a company manages individual financial instrument
portfolios of clients, including assets of pension plans
established by private pension funds, it shall not invest assets
of this portfolio in the funds managed thereby, unless such
authorisation has been expressly granted by an agreement entered
into with the client for the provision of such service.
[13 October 2011; 9 July 2013]
Section 141 . Restrictions of Execution
of Personal Transactions
(1) A personal transaction is a trade transaction in financial
instruments that is performed by a person associated to the
company or on behalf of such person, provided that at least one
of the following conditions is effective:
1) the transaction has been performed outside the scope of job
duties or professional activity of the person associated to the
company;
2) the transaction has been performed by means of assets owned
by a person associated to the company;
3) the transaction has been performed by means of assets owned
by the spouse, a child, a step-child (a child of the spouse that
is not the child of that person) or another relative of a person
associated to the company, who has shared the household with the
referred to person at least one year before performance of the
transaction;
4) the transaction has been performed by means of assets owned
by another person, who has a direct or indirect material interest
in the outcome of the transaction, other than the fee for
execution of the transaction.
(2) Persons associated to the company may not:
1) perform a personal transaction on the basis of such
internal information in compliance with the Financial Instruments
Market Law that is available to the person, when performing job
duties or professional activity in the company, and perform a
personal transaction by using or disclosing information
containing transaction secret, or perform a personal transaction
that is contrary to the requirements determined for the company
by this Law;
2) advise a third party to perform such transaction in
financial instruments, which in respect of a person advising the
transaction, would qualify as a personal transaction which is
subject to restrictions referred to in Clause 1 of this Paragraph
or Section 1272, Paragraph three, Clauses 1 and 2 of
the Financial Instruments Market Law, or that gives rise to
abusing information available to it regarding pending orders of a
client, except where a transaction has been advised by performing
job duties or professional activity;
3) disclose information to a third party or express an
opinion, where the person disclosing information knows or ought
to have known that as a result of the disclosing of information
the third party will make or is likely to make or advise another
person to make a transaction in financial instruments that would
qualify as a personal transaction to the person disclosing
information and to which the restrictions referred to in Clause 1
of this Paragraph or Section 1272, Paragraph three,
Clauses 1 and 2 of the Financial Instruments Market Law apply or
that would otherwise give rise to abusing information available
to it regarding pending orders of a client, except where
information has been disclosed or opinion has been expressed by
performing job duties or professional activity. When applying
reference Section 1272, Paragraph three, Clauses 1 and
2 of the Financial Instruments Market Law, the reference to the
persons specified in Section 101, Paragraph 31 of the
Financial Instruments Market Law shall be understood as a
reference to the persons associated to the company determined by
this Law.
(3) Persons associated to the company shall notify the company
of the personal transactions performed thereby.
(4) A company shall ensure that persons associated to the
company are notified of the duty determined in this Section to
inform the company regarding personal transactions made and of
the restrictions determined for making personal transactions.
(5) A company has the right to determine that a person
associated to the company must obtain the permission issued by
the company for making personal transactions.
(6) A company shall monitor the compliance of persons
associated to the company with the requirements of this
Section.
(7) A company shall establish and maintain a register in which
information regarding the transactions made by persons associated
to the company on the basis of information either provided by the
relevant persons or discovered during supervision. Where the
company delegates the provision of any management service, the
outsourcing contract shall contain the procedure for maintaining
the register of personal transactions of persons associated to
the company and the procedure whereby the company may receive
information from the provider of the delegated service regarding
personal transactions made by these persons.
(8) If a company has determined that a permission is necessary
for the performance of personal transactions, it shall store
information regarding the permissions issued for the performance
of personal transactions or refusals to issue the permission.
(9) The provisions of this Section shall not apply, if:
1) a personal transaction has been made within the scope of
individual management of the financial instruments portfolio of
investor and there has been no prior communication in connection
with the transaction between the portfolio manager and the person
associated to a company or other person on behalf of which the
transaction has been made;
2) a personal transaction has been made with investment
certificates and the person associated to the company or other
person on behalf of which the transaction has been made is not
involved in the fund management.
[13 October 2011; 9 July 2013]
Section 15. Delegation of Fund
Management Services
(1) On the basis of a contract, a company may delegate the
rights to provide separate services related to the fund
management (hereinafter - fund management services) to another
person having the appropriate qualification and experience in the
provision of referred to services.
(11) If a company which manages an investment fund
registered in another Member State wishes to delegate any fund
management service, upon receipt of the relevant submission from
the company, the Commission shall immediately inform thereof the
competent authority of the home state of the fund.
(2) A company may delegate the right to manage fund
investments only to another company or to the provider of
management services that has received a licence in another Member
State.
(3) The right to manage fund investments may not be delegated
to a company that is simultaneously a stakeholder of the
custodian bank, stakeholder of the company or any other person
the interests of which might prejudice the interests of the
company or fund investors.
(4) Prior to delegating fund management services to another
person, a company shall develop the relevant policy and procedure
for delegating services that determine:
1) the procedure for taking of decisions on delegation of the
services by the company;
2) the procedure for conclusion, supervision of fulfilment and
termination of the contract on delegating fund management
services (hereinafter - delegation contract);
3) the persons (officials and employees) and the structural
units that are responsible for the cooperation with the provider
of the delegated fund management service (hereinafter - a service
provider) and for the monitoring the volume and the quality of
the received fund management service and also rights and
responsibilities of these persons;
4) the procedure for assessment and management of risks
related to receipt of fund management services;
5) the conduct of the company, if a service provider does not
fulfil or will not be able to fulfil the provisions of the
delegation contract.
(5) A company shall submit to the Commission the policy and
the procedure referred to in Paragraph four of this Section,
before delegating the fund management services to another person.
The Commission shall review and assess the compliance of the
referred to documents with the requirements of this Law within 30
days of their receipt.
(6) If the management of the fund investments is delegated, a
company shall submit to the Commission a motivated submission
regarding the necessity to delegate the service and the original
of the delegation contract or a copy thereof, the authenticity
whereof is certified by a company's official, as well as the
document referred to in Paragraph four of this Section, unless
the company have already provided it to the Commission
before.
(7) The company shall submit to the Commission all amendments
to the documents to be submitted to the Commission in accordance
with this Law, if any are introduced in relation to the
delegation of fund management services.
(8) A service provider may start providing the fund investment
management services to the company, if the Commission, within 30
days of receipt of the documents referred to in Paragraphs four
and six of this Section, has not sent to the company a decision,
prohibiting the company from receiving the planned fund
investment management service from the relevant service
provider.
(9) In case of delegation of administrative management or
marketing services of the fund, the company shall inform the
Commission thereof within five working days from the entering
into the delegation contract, and submit to the Commission the
original of the delegation contract or a copy thereof, the
authenticity whereof is certified by a company's official.
(10) The company shall include at least the following
provisions in the delegation contract:
1) description of the fund management service to be
received;
2) exact requirements of the volume and quality of the fund
management service to be received;
3) rights and obligations of the company and of the service
provider, including:
a) the company's rights to monitor, on a regular basis, the
quality of the provision of the delegated fund management
service,
b) the company's rights to give to the service provider
mandatory enforceable instructions in the issues related to
honest, quality, timely and complying with regulatory enactments
fulfilment of the delegated fund management service,
c) the company's rights to request from the service provider
to immediately terminate the delegation contract upon receipt of
a written request;
4) the rights of the Commission to get familiar with the
documents referred to in Paragraph thirteen of this Section and
to request other information from the service provider related to
the delegation of the fund management services and necessary for
the performance of the functions of the Commission.
(11) The Commission prohibits to delegate the fund management
services, if:
1) delegation of the fund management service interferes with a
full-fledged management of the fund by the company and may
infringe upon the interests of the fund investors;
2) delegation of the fund management service interferes with
the supervision of the company's activities by the
Commission;
3) delegation contract does not comply with the requirements
determined by this Law and does not provide clear and fair
presentation of the expected cooperation between the company and
the service provider during the term of the delegation
contract;
4) the fund prospectus does not mention the service, which the
company intends to delegate to another person;
5) after delegation of the services, the company no longer
provides any of the services included in the fund management.
(12) The company shall ensure that, not later than 10 days
before another person starts providing the delegated fund
management service, the fund investors are informed thereof in
accordance with the procedure determined in the fund rules or the
fund prospectus. In the notification to the fund investors, the
company shall indicate the type of the delegated fund management
service and information regarding the service provider referred
to in Section 57, Paragraph three, Clause 22 of this Law.
(13) The Commission has the right to carry inspection of the
activities of the service provider at the location thereof or at
the place of provision of the service, get familiar with all
documents, record keeping and accounting registers, make copies
thereof and request that the service provider submits information
related to the provision of the delegated fund management service
and necessary for the performance of the functions of the
Commission.
(14) The Commission is entitled to request that the company
which has delegated the fund management services to another
person to immediately terminate the effective delegation
contract, if it detects that:
1) the company does not perform the on-going supervision of
the quality of the provision of the delegated fund management
service, or performs irregularly and insufficiently;
2) the company does not perform the management of risks
pertaining the delegated fund management service, or performs it
irregularly and in poor quality;
3) there are material deficiencies in the activity of the
service provider that threaten or might threaten the fulfilment
of the company's obligations;
4) any of the circumstances referred to in Paragraph eleven of
this Section has occurred.
(15) The delegation of a management service to another person
shall not release the company from the responsibility for the
fund management as determined in this Law.
[8 March 2007; 11 March 2010; 13
October 2011; 9 July 2013]
Section 16. Transfer of the Fund
Management Rights to another Company
(1) A company may transfer the management of fund established
by it to another company upon authorisation of the Commission
only.
(2) In order to receive authorisation from the Commission for
the transfer of the fund management, the company shall submit to
the Commission a motivated submission. The submission shall be
accompanied by the following documents:
1) a fund transfer contract;
2) amendments to the fund prospectus, key investor information
and the fund rules, as well as amendments to the custodian bank
agreement, that are necessary to be introduced due to the change
of the company.
(3) The Commission shall, within one month after the receipt
of all the documents referred to in this Section, take a decision
on authorisation to transfer the fund management to another
company, if the following conditions have been met:
1) transfer of the fund management does not infringe upon the
interests of fund investors;
2) documents submitted for the transfer of the fund management
have been prepared in compliance with the requirements determined
by this Law;
3) company to which the fund management has been transferred,
meets the requirements determined in this Law for the capital of
the company.
(4) The company transferring the fund management, after the
receipt of the Commission's decision, in accordance with the
procedure determined by the fund rules, shall without delay
inform all fund investors regarding the change of the company, as
well as shall publish in the official gazette Latvijas
Vēstnesis [the official gazette if the government of Latvia]
and in at least one daily newspaper an announcement regarding the
transfer of the fund management to another company. The
announcement shall include the firm name, registration number and
the location of the board of directors of the relevant
company.
(5) The contract regarding the transfer of the fund management
to another company shall come into effect no earlier than one
month after publishing the announcement referred to in Paragraph
four of this Section. Amendments to the fund prospectus, key
investor information, the fund rules and the custodian bank
agreement shall come into effect concurrently with the contract
for the transfer of the fund management.
(6) Upon coming into effect of the contract for the transfer
of the fund management, all rights and liabilities related to the
investment fund shall devolve to the new company.
(7) If the company wishes to transfer the fund management
rights to a company licensed in another Member State, the
company, to which it is planned to transfer these fund management
rights, shall comply with the provisions of Section
771 of this Law in addition to the provisions
contained in this Section.
[8 March 2007; 13 October 2011; 9
July 2013]
Section 17. Transfer of the Fund
Management Rights to a Custodian Bank
(1) In case of expiry of the rights of a company to manage a
fund, the rights to manage the fund shall devolve to the
custodian bank of this fund, except as the case specified in
Section 16 of this Law.
(2) The custodian bank shall without delay submit for
publication in the official gazette Latvijas Vēstnesis and
at least one daily newspaper an announcement regarding the
transfer of the fund management rights. The announcement shall
indicate:
1) the firm name of the company under the management of which
the relevant fund was;
2) the name of the investment fund; and
3) the firm name and location of the board of directors of the
custodian bank.
(3) A company, the fund management rights of which have
expired otherwise than by the transfer of the fund management
rights to another company, shall without delay transfer to the
custodian bank all documents related to the fund management.
(4) A custodian bank, to which the investment fund management
rights have been transferred, shall have all the rights of the
company, except for the right to issue fund investment
certificates under the management thereof and to perform
repurchase of the certificates.
(5) Within three months from the day of transfer of the fund
management rights, the custodian bank shall transfer the fund
management rights to another company. The Commission may extend
this time period up to six months.
(6) The fund management rights shall be transferred to another
company only upon consent of the Commission.
(7) If the custodian bank fails to transfer the fund
management rights to another company within the time periods
determined in Paragraph five of this Section, the custodian bank
shall perform the liquidation of the fund.
[9 July 2013]
Section 18. Expiry of the Fund
Management Rights
The rights of a company to manage an investment fund shall
expire:
1) upon transfer of the fund management rights to another
company;
2) upon cancellation of the licence;
3) [9 July 2013];
4) upon completion of the fund liquidation, if performed by
the company itself;
5) upon the moment when the Commission appoints a fund
liquidator in accordance with the provisions of Section 35,
Paragraph six of this Law.
[9 July 2013]
Section 19. Reorganisation and
Liquidation of a Company
(1) A company may be reorganised or liquidated only upon
authorisation of the Commission. When assessing the
reorganisation process of the company, the Commission, in order
to ensure protection of interests of investors, in addition to
the obligations referred to in the Commercial Law, may impose on
the company an obligation to fulfil particular reorganisation
conditions.
(2) A company shall be reorganised or liquidated in accordance
with the Commercial Law.
(3) [19 June 2008].
(4) [19 June 2008].
(5) [19 June 2008].
(6) A company may not complete the liquidation thereof prior
to the expiry of its rights to manage all investment funds under
the management thereof and the settlement of all liabilities to
its other clients.
[19 June 2008]
Chapter III
Investment Fund
Section 20. Legal Status of an
Investment Fund and Property Thereof
(1) An investment fund is an open-ended fund aimed at uniting
the publicly attracted monetary assets for investing in the
investment objects determined in this Law complying with the risk
spreading principle and investment limits determined in this Law,
and where the company managing such fund shall have an
obligation, upon request of fund investors, to repurchase the
investment certificates not later than within one month. An
investment fund is not a legal person.
(2) The fund property is the joint property of investors of
the fund or its sub-funds (if the fund has been established as
the fund with sub-funds) and it shall be kept, registered and
managed separately from the property of the company, of other
funds or sub-funds under its management (if the fund has been
established as the fund with sub-funds), as well as of the
custodian bank. The fund property (if the fund has been
established as the fund with sub-funds) is the joint property of
sub-funds. Such fund may not have property that does not fall
within any of the sub-funds.
(3) A fund investor has no right to request division of the
fund. The pledgee of the pledged property of the investor,
creditor or administrator of the insolvency procedure of the
investor shall not have such rights, either.
(4) The fund property may not be included in the property of
the company or custodian bank as the property of the debtor, if
the company or the custodian bank has been declared insolvent or
is under liquidation.
(5) Claims against a fund investor in respect of his or her
liabilities may be directed against his or her investment
certificates but not against the fund property.
[8 March 200; 9 July 2013]
Section 21. Types of Funds
[9 July 2013]
Section 22. Establishment of a
Fund
(1) A company shall establish a fund, by approving a fund
prospectus, key investor information and the fund rules and
entering into a custodian bank agreement.
(2) The decision regarding the approval of the fund
prospectus, key investor information and the fund rules shall be
taken by the management body specified in the articles of
association of the company.
(3) A company may commence the issue of investment
certificates and the fund management only after registration of
the fund with the Commission.
(4) An investment fund may be established as a fund with
sub-funds.
(5) The fund prospectus can specify different investment
policy, payment terms for management services and currency of
payment for each sub-fund.
(6) The requirements determined in this Law in respect of an
investment fund and restrictions in respect of an investment fund
with sub-funds shall apply to each sub-fund separately.
(7) If a company intends to register an investment fund the
name of which contains words "naudas tirgus fonds" [money market
fund], it shall develop the operational rules of the fund in
compliance with the requirements of statutory regulations of the
Commission.
(8) The Commission shall examine a submission of a company
licensed in another Member State for establishing an investment
fund in line with the procedure set forth in Section
771 of this Law.
[9 July 2013]
Section 23. Registration of a
Fund
(1) In order to register a fund, a company shall submit a
submission to the Commission. The submission shall be appended
by:
1) the fund prospectus (two original counterparts);
11) key investor information (two original
counterparts);
2) the fund rules (two original counterparts);
3) the custodian bank agreement; and
4) a list of employees of the custodian bank, who will be
responsible for the performance of functions of the custodian
bank (indicating the employee's given name, surname, personal
identity number and work experience within the last three
years).
(2) The company shall submit the documents referred to in
Paragraph one of this Section to the Commission in one of the
following ways:
1) in an electronic form in compliance with regulatory
enactments on development and drafting of electronic
documents;
2) in a paper form (in such case the documents are submitted
also in an electronic form, sending them to the electronic mail
address of the Commission).
(3) The Commission shall, within 60 days after the receipt of
all the documents which have been prepared in compliance with the
requirements of regulatory enactments, take a decision on
registration of the fund.
(4) The Commission shall not register a fund in following
cases:
1) the company's own funds do not meet the requirements set
out in this Law;
2) documents submitted for the registration of the fund do not
meet the requirements determined in this Law;
3) employees of the custodian bank, who will be responsible
for the fulfilment of obligations of the custodian bank lack the
appropriate experience to ensure qualified fulfilment of
obligations of the custodian bank; or
4) the fund rules or the fund prospectus provides that
investment certificates may not be publicly traded in Latvia;
5) the company does not have a valid licence for the provision
of management services.
[24 October 2002; 18 March 2004; 8
March 2007; 13 October 2011; 9 July 2013]
Section 24. Name of a Fund
(1) The name of a fund shall include the word combination
"ieguldījumu fonds" or "investīciju fonds" [investment fund] or
its abbreviation "IF". These word combinations and the
abbreviation may not be included in the firm names of
merchants.
(2) The name of a fund must differ significantly from the
names of other funds, whose investment certificates or securities
comparable thereto are distributed in Latvia.
[24 October 2002]
Section 25. Rights of Fund
Investors
(1) A fund investor shall have the following rights:
1) to transfer his or her investment certificates without
restriction, unless otherwise provided for in the law;
2) in proportion to the number of investment certificates in
accordance with the law and fund prospectus, to participate in
allocation of income obtained in transactions with the fund
property; and
3) in proportion to the number of investment certificates, to
participate in the allocation of proceeds from fund
liquidation.
(2) A fund investor has the right to request that the company
repurchases his or her investment certificates.
(3) [9 July 2013].
(4) Other rights of fund investors shall be determined by law
and the fund prospectus.
[9 July 2013]
Section 26. Limitation of Liability
of Fund Investors
(1) A fund investor shall not be liable for the liabilities of
the company.
(2) A fund investor shall be liable for claims, which may be
directed against the fund property, only in the amount of the
fund shares owned by him or her.
(3) Agreements which are in conflict with the provisions of
this Section shall be null and void from the moment of entering
into thereof.
Section 27. General Meeting of
Closed-Ended Fund Investors
[9 July 2013]
Section 28. Fund Management
Rules
(1) The fund management rules (hereinafter - rules) shall
determine the procedure for fund management and investment
limits.
(2) The rules shall be freely accessible to all fund investors
upon their request.
(3) The rules shall specify:
1) the name of the fund;
2) the firm name, registration number, registered office and
licence number of the company;
3) the general principles and procedures of fund management,
in particular, indicating decision-taking competences and
procedure for dealing with the fund property;
31) fund investment limits;
4) procedures for servicing of fund investors, in particular,
indicating the procedure for:
a) the issue of the fund prospectus and key investor
information,
b) [24 October 2002],
c) [24 October 2002],
d) provision of information in respect of those changes in the
allocation of income obtained in the transactions with the fund
property which affect the fund operation, and similar events,
e) performance of the issue, repurchase and redemption of
investment certificates;
5) principles for calculation of the fund value, sale and
repurchase prices of investment certificates, as well as fund
income. If the fund has different categories of investment
certificates, indication shall be provided about the rights
attached to each category of investment certificates and the
procedure for exchange of investment certificates of one category
to investment certificates of another category, where such option
is provided;
6) procedure for fund liquidation;
7) procedure for performance of the transfer of fund
management rights and property to the custodian bank or other
persons;
8) procedure for performance of collaboration of the company
with the custodian bank in respect of fund management;
9) [9 July 2013];
10) a list of the payment types within the competence of the
fund and procedure for calculation thereof;
11) procedure for giving public announcements and publicly
available information; and
12) procedure for amending the rules.
(4) The rules may also include other provisions which are not
contrary to the law or regulations of the Commission.
(5) If the rules are amended, the company shall submit to the
Commission a submission for the registration of the amendments to
the rules. The submission shall be accompanied by:
1) a decision taken by the management body of the relevant
company to approve the amendments to the rules;
2) the amendments to the rules and the text of the rules
incorporating the amendments. The amendments to the rules and the
text of the rules shall be submitted to the Commission in one of
the ways referred to in Section 23, Paragraph two of this
Law.
3) [11 March 2010].
(6) The Commission shall review submitted amendments and,
within a period of 15 working days, register amendments if they
meet the requirements of this Law and are not contrary to the
legitimate interests of fund investors.
(7) Amendments to the rules shall come into effect no earlier
than 10 days after registration thereof with the Commission or
within any other time period determined by the Commission which
may not exceed three months as from the date of registration of
the amendments and is determined, taking into account the
contents of amendments to the rules and interests of the fund
investors.
(8) If a company wishes to amend the information which is
provided in accordance with Paragraph three, Clause 2 of this
Section, the company shall introduce the corresponding amendments
to the rules without prior registration thereof with the
Commission and shall submit to the Commission the full text of
the rules in accordance with Paragraph three, Clause 2 of this
Section. The amendments to the rules shall take effect after
approval thereof by the management body of the company.
[24 October 2002, 18 March 2004; 8
March 2007; 19 June 2008; 11 March 2010; 13 October 2011; 9 July
2013]
Section 29. Fund Manager
(1) The board of directors of a company shall appoint a
manager to each investment fund (hereinafter - fund manager), who
shall deal with the property of the managed fund in accordance
with the articles of association of the company and the fund
management rules.
(2) The fund manager may work only in one investment
company.
(3) The fund manager may manage several funds under the
management of one company.
Section 30. Fund Value and Fund
Share Value
(1) The fund value (hereinafter also - net value of fund
assets) is the difference between the value of assets and the
value of liabilities of the fund. The sub-fund value is the
difference between the value of assets and the value of
liabilities of the sub-fund.
(2) A fund share is the claim right attached to one investment
certificate in compliance with the fund share value. If the fund
has different categories of investment certificates, the claim
rights attached to an investment certificate shall be determined
separately for each category in compliance with the provisions of
the fund prospectus or the fund management rules.
(3) The fund share value is the fund value divided by the
number of investment certificates issued, but not repurchased.
The sub-fund share value is the sub-fund value divided by the
number of investment certificates issued, but not repurchased. If
the fund has different categories of investment certificates, the
value of investment certificates of each category shall be
calculated, taking into account the rights attached to the
investment certificates of the respective category.
(4) The company shall establish the fund share value on a
daily basis.
(5) [9 July 2013].
[8 March 2007; 9 July 2013]
Section 31. Remuneration to a
Company, Custodian Bank and Third Parties
(1) Remuneration to a company, custodian bank and third
parties, as well as any other payments, covered by the investment
fund, shall be paid from the fund property in conformity with the
provisions of the fund prospectus.
(2) If the assets of investment funds are invested in
investment funds managed by the company itself or by another
company to which management service has been delegated or having
close links with the company or a qualifying holding in the
company, none of those companies shall have a right to receive a
commission and a compensation for transactions related to
investing fund property in the investment certificates of such
funds or their repurchase.
(3) The commercial companies shall be considered as belonging
to one group, if the financial statements of such commercial
companies are subject to consolidation in accordance with
internationally recognised accounting standards.
[8 March 2007; 13 October 2011; 9
July 2013]
Section 32. Transactions with Fund
Property
A company shall perform transactions with the fund property in
accordance with this Law, the fund prospectus and the fund
management rules.
Section 33. Transaction
Restrictions
(1) A company does not have the right to undertake liabilities
at the expense of fund property if such liabilities do not
directly relate to the fund.
(2) A company may not perform transactions with the fund
property without compensation.
(3) Claims against the company and claims included in the fund
property shall not be subject to set-off.
(4) The fund property may not be pledged or otherwise
encumbered with rights in rem, except if:
1) it serves as a collateral when receiving loans in
accordance with the procedures specified in Paragraphs nine and
ten of this Section;
2) sales transactions with repurchase (repo) are performed at
the expense of the fund property; or
3) it serves as a collateral when performing transactions with
financial derivative instruments referred to in Section 65 of
this Law.
(5) The company may not, by direct agreement, transfer the
fund property in favour of:
1) the company managing such fund and its stakeholders;
2) [24 October 2002]; or
3) other funds managed by the same company.
(6) The company may not, by direct agreement, purchase
property from persons referred to in Paragraph five of this
Section at the expense of the fund.
(61) The restrictions on transactions with
stakeholders of the company, referred to in Paragraph five,
Clause 1 and in Paragraph six of this Section, shall not apply to
transactions with the stakeholders of the company that are credit
institutions registered in Latvia or in another Member State.
(7) The fund property may be used for the acquisition of the
securities issued by any person referred to in Paragraph five,
Clause 1 of this Section only through the mediation of the
regulated market.
(8) The following activities may not be performed at the
expense of the fund:
1) to fulfil the liabilities of the company, which have
occurred on its behalf and at its expense;
2) to issue securities, except for investment
certificates;
3) to undertake liabilities arising from surety agreements;
or
4) to grant loans. The referred to prohibition shall not apply
to asset reverse repurchase transactions (reverse repo) that may
be performed provided that the restrictions referred to in this
Law are complied with.
(9) The company may take loans at the expense of the fund if
such loans are taken for a period up to three months and the
total amount thereof does not exceed 10 per cent of the fund
value.
(10) [9 July 2013].
(11) The company may not take loans at the expense of an
open-ended fund from persons referred to in Paragraph five of
this Section, except for interest-free loans from the company and
loans from the custodian bank at an interest rate which does not
exceed the average credit interest rate of the financial market
at the moment of taking the loan.
(12) The company may not sell financial instruments at the
expense of the fund or undertake liabilities for selling
financial instruments, if these financial instruments are not the
fund property at the time of entering into the transaction.
(13) The company may not purchase property at the expense of
the fund for a price above the market price or to transfer the
fund property for a price below the market price.
(14) Shareholders of a company having a qualifying holding in
the company may make investments in the investment fund
established by the company, if, by the shareholder investing
assets in the fund or withdrawing from the fund, the legitimate
interests of other fund investors are not infringed.
(15) If a shareholder of a company having a qualifying holding
in the company has invested assets in conformity with the
provisions of Paragraph fourteen of this Section, the statements
of the fund shall provide information regarding the volume of
such investments.
(16) When managing a fund and receiving collateral in
accordance with the concluded financial collateral contracts,
receiving guarantees, performing repurchase transactions of
assets as well as when lending securities or making other
transactions in transferable securities and money market
instruments, the company shall ascertain whether these
transactions ensure an efficient management of the fund
investment portfolio.
(17) An efficient management of the fund investment portfolio
is ensured, if transactions referred to in Paragraph sixteen of
this Section meet the following criteria:
1) the use thereof is feasible and economically
beneficial;
2) the use thereof is intended for achieving at least one of
the following aims:
a) risk spreading,
b) cost reduction,
c) increase of the fund net value or income in accordance with
the fund investment risk profile and the investment limits
referred to in Section 66 of this Law;
3) the risks pertaining thereto are adequately integrated into
the fund risk management process.
[1 June 2000; 24 October 2002; 18
March 2004; 8 March 2007; 19 June 2008; 11 March 2010; 13 October
2011; 9 July 2013]
Section 34. Reorganisation of a
Fund
(1) Division of a fund shall not be permitted.
(2) Investment funds and sub-funds may be merged as determined
in Section 1, Clause 32 of this Law, in the form of both domestic
merger and the cross-border merger.
(3) [9 July 2013].
(4) The Commission shall authorise the domestic and the
cross-border merger of funds or sub-funds, if the merging fund
involved in the cross-border merger has been registered in
Latvia.
(5) According to the merger of investment funds determined in
Section 1, Clause 32, Sub-clause "a" of this Law:
1) all assets and liabilities of the merging fund shall be
transferred to the receiving fund or the custodian bank of the
receiving fund;
2) investors of the merging fund shall become the investors of
the receiving fund and, if the terms of the merger provide so,
they shall be entitled to a cash payment not exceeding 10 per
cent of the net asset value of the investment certificates of the
merging fund owned thereby;
3) upon the moment when the merger comes into force, the
merging fund shall be deemed as liquidated.
(6) According to the merger of investment funds determined in
Section 1, Clause 32, Sub-clause "b" of this Law:
1) all assets and liabilities of the merging fund shall be
transferred to the newly established receiving fund or to the
custodian bank of the receiving fund;
2) investors of the merging fund shall become the investors of
the newly established receiving fund and, if the terms of the
merger provide so, they has the right to a cash payment not
exceeding 10 per cent of the net asset value of the investment
certificates of the merging fund owned thereby ;
3) upon the moment when the merger comes into force, the
merging fund shall be deemed as liquidated.
(7) According to the merger of investment funds determined in
Section 1, Clause 32, Sub-clause "c" of this Law:
1) net assets of the merging fund shall be transferred to the
receiving fund or to the custodian bank of the receiving
fund;
2) investors of the merging fund shall become the investors of
the receiving fund;
3) the merging fund shall continue to exist until the
liabilities will have been discharged in full.
(8) The management company of the receiving fund shall develop
the procedure that includes the procedure whereby the custodian
bank of a fund is notified of a completed transfer of assets and,
where applicable, liabilities.
(9) Six months after the receipt of an authorisation for a
merger the receiving fund may exceed the investment limits
determined in Section 66 of this Law, except those referred to in
Paragraphs seven and thirteen thereof.
(10) Investors of the funds involved in the fund merger
process has the right to request repurchase of their investment
certificates without any charge other than the charge retained by
the funds to cover costs for reducing or selling of investment
or, where possible, to convert them into the investment
certificates of another fund that has a similar investment policy
and is managed by the same company or another company that has
close links with the company or a qualifying holding in the
company. These rights shall take effect when the investors of the
merging fund and of the receiving fund are informed regarding the
proposed merger in accordance with Section 34.1,
Paragraph four or Section 342, Paragraph nine of this
Law and they shall cease to exist five business days before the
date for calculating the exchange ratio referred to in Section
341, Paragraph sixteen of this Law.
(11) During the fund merger, the Commission has the right, for
the purposes of protection of legitimate interests of the
investors, to require or allow the company to carry out temporary
suspension of the sale, repurchase or redemption of the
investment certificates of funds. If the Commission has taken the
decision referred to in this Paragraph, it shall not release the
company from an obligation to ensure compliance with the
requirements of Paragraph ten of this Section, whereas during the
validity of the decision it is entitled not to comply with the
requirements determined in Section 54, Paragraph one of this
Law.
(12) The companies involved in the merger shall ensure that
all costs associated with the merger are covered from own funds
of the companies.
[13 October 2011; 9 July 2013]
Section 341. Domestic
Merger of Funds
(1) To receive the authorisation from the Commission for a
merger of funds or sub-funds, the company managing the merging
fund shall submit to the Commission the following documents:
1) the common draft terms of the proposed merger, approved by
the management companies of the merging funds and of the
receiving funds;
2) statement by the custodian bank of the merging fund and of
the receiving fund, confirming that information regarding the
fund referred to in Paragraph seven, Clauses 1, 6 and 7 of this
Section complies with the requirements of this Law, the
respective fund prospectus and the management rules;
3) information that the merging fund and the receiving fund
intend to provide to investors thereof regarding the proposed
merger;
4) amendments to the custodian bank agreement, if needed.
(2) The companies involved in the merger shall ensure that
information prepared for investors of the merging fund and of the
receiving fund that is specified in Paragraph one, Clause 3 of
this Section gives a fair presentation of the merger in order the
investors could assess the impact of the merger on their
investment and take a decision regarding the exercise of the
rights provided for investors as determined in Section 34,
Paragraph ten of this Law.
(3) Information specified in Paragraph one, Clause 3 of this
Section shall contain the following:
1) description and basis of the proposed merger;
2) the potential impact of the proposed merger on investors of
both the merging fund and the receiving fund, including material
differences in respect of investment policy and strategy, costs,
expected outcome, drawing up of periodic reports and potential
performance, and, where taxes or fees applicable to investors
change, information regarding the procedures for further
application of taxes or fees;
3) rights granted to investors in relation to the proposed
merger, including the rights to obtain additional information,
the right to obtain a copy of the opinion referred to in
Paragraph nine of this Section, and the right to request the
repurchase or, in compliance with Section 34, Paragraph ten of
this Law, the conversion of their investment certificates without
a charge and the date by which that right may be exercised;
4) the essential aspects of the merger procedure and the day
of coming into effect of the planned merger of funds;
5) key investor information of the receiving fund.
(4) Information shall be provided to the investors of the
merging fund and of the receiving fund after the Commission has
authorised the proposed merger in accordance with Paragraph
twelve of this Section. Information shall be provided at least 30
calendar days before the last day when the investors may exercise
their rights determined in Section 34, Paragraph ten of this Law
to request repurchase of their investment certificates of funds
or sub-funds or, where appropriate, convert them into other
investment certificates without a charge.
(5) If the Commission detects that information prepared for
investors fails to comply with the requirements of this Law, the
fund prospectus or the management rules, the Commission may
request in writing that such information is adjusted.
(6) If investment certificates of the merging fund or of the
receiving fund are distributed in another Member State, the fund
management company shall prepare information referred to in
Paragraph one, Clause 3 of this Section also in the official
language of the host state of the fund or in the language
accepted by the competent authority of that state. A person who
is entitled to take decisions on behalf of the merging fund shall
certify the compliance of the information specified in the
translation with the information specified in the documents drawn
up in the original language.
(7) The common draft terms of the merger shall include the
following information:
1) the type of merger and of the funds involved;
2) the description and rationale for the proposed merger;
3) the expected impact of the proposed merger on the investors
of both the merging fund and the receiving fund;
4) the criteria adopted for valuation of the assets and, where
appropriate, the liabilities on the date for calculating the
exchange ratio, and which are determined in compliance with the
procedure referred to in Paragraph sixteen of this Section;
5) the calculation method of the exchange ratio of investment
certificates;
6) the day when the coming into effect of the merger is
intended;
7) the rules applicable, respectively, to the transfer of
assets and the exchange of investment certificates;
8) if the merger is in accordance with Section 1, Clause 32,
Sub-clauses "b" and "c" of this Law, draft of fund prospectus of
the newly established fund, fund management rules and key
investor information.
(8) The information not specified in Paragraph seven of this
Section may additionally be included in the common draft terms of
the merger.
(9) The companies involved in the merger shall authorise one
of the custodian banks of the fund or auditors to prepare an
opinion regarding:
1) the criteria adopted for valuation of the assets and, where
appropriate, the liabilities on the date for calculating the
exchange ratio in accordance with Paragraph sixteen of this
Section;
2) the amount of cash payment per one investment
certificate;
3) the calculation method of the exchange ratio as well as the
actual exchange ratio determined at the date for calculating the
referred to ratio in accordance with Paragraph sixteen of this
Section.
(10) The opinion referred to in Paragraph nine of this Section
shall be submitted to the Commission and, upon request and free
of charge, it shall also be provided to investors of the merging
fund and of the receiving fund.
(11) The Commission has the right to request that the company
adjusts the documents and information referred to in Paragraph
one of this Section that have been submitted to the Commission.
The Commission shall request that referred to additional
information be submitted to it within 10 working days after
receipt of the documents referred to in Paragraph one of this
Section.
(12) The Commission shall take a decision regarding
authorisation or prohibition to merge funds within 20 working
days after the receipt of all documents referred to in Paragraphs
one, nine and eleven of this Section that have been prepared and
drafted in compliance with the requirements of the regulatory
enactments. When taking a decision to authorise the merger of
funds in accordance with Section 1, Clause 32, Sub-clause "b" or
"c" of this Law the Commission shall simultaneously take a
decision regarding the registration of the newly established
fund.
(13) The Commission shall take a decision to authorise the
fund merger provided that the following conditions are met:
1) submitted documents meet the requirements of this Law;
2) fund merger does not infringe upon the legitimate interests
of investors of the funds to be merged;
3) the receiving fund is allowed to distribute its investment
certificates in the home state of the merging fund and also in
all Member States in which the merging fund has received an
appropriate authorisation for the distribution of investment
certificates;
4) information that the merging fund and the receiving fund
intend to provide to their investors regarding the proposed
merger meets the requirements of this Law, the fund prospectus
and the fund management rules.
(14) The Commission's decision to authorise the merger of
funds or sub-funds and register a newly established fund shall
take effect on the fortieth calendar day after notifying the
company of the decision. After the effective date of this
decision, the merger may not be declared null and void.
(15) After receiving the authorisation of the Commission the
company shall send the information referred to in Paragraph one,
Clause 3 of this Section regarding the proposed merger to
investors of the funds or sub-funds in accordance with the
procedure determined in the fund prospectuses, and before
commencing the merger of funds or sub-funds it shall also
repurchase investment certificates from those investors who have
requested to repurchase their investment certificates of the fund
or of the sub-fund.
(16) On the day when the decision referred to in Paragraph
fourteen of this Section takes effect the exchange ratio shall be
calculated for exchange of investment certificates of the merging
fund into investment certificates of the receiving fund and,
where the terms of the merger provide for a cash payment, the day
for determining the relevant net asset value for cash payments
shall be specified.
(17) The Commission shall determine detailed content, format
and manner of providing information to the investors of the
merging fund and of the receiving fund.
[13 October 2011; 9 July 2013]
Section 342. Cross-border
Merger of Funds
(1) In order to perform a cross-border merger of funds, the
applicable type of fund merger shall be the one allowed by the
regulatory enactments of the home state of the merging fund. In
the cross-border merger of funds the company shall comply with
the procedure determined in Sections 34 and 341 of
this Law, unless it is contrary to the provisions of this
Section.
(2) If the merging fund involved in a cross-border merger has
been registered in Latvia, the management company of the merging
fund, before commencing the merger, shall submit to the
Commission the documents referred to in Section 341,
Clause 1 of this Law and also the most recent version of the
receiving fund's prospectus, fund management rules or a document
equivalent to fund management rules and key investor
information.
(3) The documents referred to in Section 341,
Paragraph one of this Law and in Paragraph two of this Section
shall be submitted to the Commission in both the Latvian language
and in the official language of the home state of the receiving
fund or in the language accepted by the respective competent
authority.
(4) When all documents referred to in Section 341,
Paragraph one of this Law and in Paragraph two of this Section,
drafted in accordance with the requirements of this Law, have
been submitted to the Commission, the Commission shall
immediately send copies of those documents to the competent
authority of the home state of the receiving fund.
(5) If the competent authority of the home state of the
receiving fund requests to adjust the investor information of the
receiving fund, the Commission shall take a decision regarding
the fund merger only after the submitted documents have been
adjusted in compliance with the instructions of the competent
authority of the home state of the receiving fund.
(6) If the receiving fund involved in a cross-border merger
has been registered in Latvia, the Commission may request, within
15 working days after the receipt of the documents from the
competent authority of the home state of the merging fund, that
the company managing the receiving fund adjusts investor
information. In such case the Commission shall inform thereof the
competent authority of the home state of the merging fund and
within 20 working days after receiving the adjusted information
it shall send it to the competent authority of the home state of
the merging fund.
(7) In case of a cross-border merger of funds, the Commission,
in taking the decision referred to in Section 341,
Paragraph twelve of this Law, it shall take into account the
information provided by the competent authority of the home state
of the receiving fund regarding the compliance of investor
information of the receiving fund with the requirements of the
regulatory enactments of that country. If within 20 working days
after the day when the Commission, in compliance with Paragraph
four of this Section, has sent copies of documents to the
competent authority of the home state of the receiving fund, the
Commission has not received any instruction regarding the need to
adjust key investor information of the receiving fund, the
Commission may take a decision to authorise or prohibit the fund
merger.
(8) The Commission shall inform the competent authority of the
home state of the receiving fund of its decision to authorise or
prohibit the fund merger.
(9) In case of a cross-border merger of funds, information
regarding the proposed merger referred to in Section
341, Paragraph one, Clause 3 of this Law shall be
provided to investors of the merging fund and of the receiving
fund after the competent authority of the home state of the
merging fund has authorised the proposed merger.
(10) In case of a cross-border merger of funds, a copy of the
opinion referred to in Section 341, Paragraph nine of
this Law shall be provided upon request and free of charge to the
competent authorities of the funds involved in the merger. In
such case the opinion shall also be prepared in the language
accepted by the competent authority of the relevant country.
(11) The day when the decision on authorization of the merger
takes effect shall be determined in compliance with the
requirements of regulatory enactments of the home state of the
receiving fund. Where the receiving fund has been registered in
Latvia, the decision shall take effect on the fortieth calendar
day after the competent authority of the home state of the
merging fund has notified the Commission of its decision.
[13 October 2011; 9 July 2013]
Section 35. Liquidation of a
Fund
(1) Liquidation of a fund shall be performed by a liquidator.
The liquidator may be a company, custodian bank or a person
appointed by the Commission.
(2) The company shall perform the liquidation of a fund
if:
1) on the next day after the termination of the custodian bank
agreement, a new custodian bank agreement has not come into
effect;
2) within a year after the establishment of the fund no
investment certificates have been released into circulation;
or
3) the company has taken a decision to liquidate the
investment fund;
4) the Commission has taken a decision to initiate liquidation
of the investment fund.
(3) [8 March 2007].
(4) [9 July 2013].
(5) The custodian bank shall perform the liquidation of the
fund if it does not transfer the fund management to the
investment company within the time period specified in Section
17, Paragraph seven of this Law.
(6) If the company or the custodian bank fails to commence
liquidation of the fund within a month from the day when such
liquidation was due to be commenced in compliance with the
requirements of this Law, the Commission shall have the right to
appoint a fund liquidator. The Commission shall appoint a
liquidator also in case referred to in Paragraph two, Clause 4 of
this Section. A liquidator appointed in accordance with the
procedure determined in this Paragraph shall have all rights
conferred upon the company in respect of the liquidation of the
fund.
(7) During liquidation, it is prohibited to perform the issue
and repurchase of investment certificates, as well as allocation
of fund income provided for in the fund prospectus between fund
investors. The liquidator has the right to perform activities
connected with the liquidation only.
(8) The liquidator shall act in the interests of creditors and
fund investors.
(9) The liquidator shall be fully liable to fund investors and
third parties in respect of the losses caused during the
liquidation if the liquidator intentionally or due to negligence
has violated the law or the fund management rules or has
negligently performed his or her duties.
[1 June 2000; 8 March 2007, 13
October 2011; 9 July 2013]
Section 351. Liquidation
of a Fund on the Basis of a Decision of a Company
(1) To liquidate a fund on the basis of the decision taken by
the company, the company shall receive an authorisation from the
Commission before initiating the liquidation of the fund.
(2) To receive an authorisation to commence liquidation of a
fund, the company shall submit to the Commission a decision of
the board of directors indicating the reason for liquidation of
the fund within 20 days after the taking of the decision.
(3) Within 30 days after the receipt of the documents referred
to in Paragraph two of this Section, the Commission shall take a
decision regarding authorisation to commence the liquidation of a
fund or a refusal to issue authorisation.
(4) The Commission shall not authorise the commencement of the
liquidation of the fund, if such liquidation does not comply with
the legitimate interests of investors.
[8 March 2007; 9 July 2013]
Section 36. Announcement Regarding
Fund Liquidation
(1) The liquidator shall immediately notify the Commission of
the commencement of liquidation of the fund and publish a
relevant announcement in the official gazette Latvijas
Vēstnesis.
(2) The announcement regarding liquidation shall include
information regarding the liquidator, indicate the time period
and place for application of creditors' claims. The time period
for application of creditors may not be shorter than three months
from the day the announcement was published.
[9 July 2013]
Section 37. Sale of Fund Property
and Satisfaction of Claims
(1) After commencement of the liquidation the liquidator shall
organise and perform sale of the fund property, except for the
monetary assets in the fund.
(2) The custodian bank or the liquidator shall allocate the
proceeds gained from the selling of the property of the fund to
be liquidated and the monetary assets in the fund (hereinafter -
proceeds of liquidation) in the following sequence:
1) claims of secured creditors;
2) claims of the creditors who have applied their claims
within the time period specified in the announcement; and
3) claims of the creditors who have applied their claims after
the time period specified in the announcement, but before the
allocation of the proceeds of liquidation.
(3) If the proceeds of liquidation are not sufficient to
satisfy the claims referred to in Paragraph two of this Section,
the unsatisfied claims shall be satisfied from the property of
the investment company, except for the claims which have arisen
after the expiry of the management rights of such company.
(4) If the proceeds of liquidation are not sufficient to
satisfy the claims, referred to in Paragraph two of this Section,
which have arisen during the period when the management rights
were exercised by the custodian bank, the claims shall be
satisfied by the custodian bank.
(5) The remaining proceeds of liquidation shall be allocated
among the fund investors in proportion to the number of their
investment certificates.
(6) The custodian bank or the liquidator shall submit for
publishing in the official gazette Latvijas Vēstnesis an
announcement regarding the allocation of the proceeds of
liquidation among the fund investors, indicating the sum to be
paid for one certificate, as well as the place and time for
making the payments.
(7) All payments to creditors and fund investors shall be made
in cash.
[9 July 2013]
Section 38. Fund Liquidation
Expenses
(1) During liquidation, the liquidator has the right to cover
liquidation expenses from the proceeds of liquidation. The
liquidation expenses shall not include intermediation payments
related to selling of the real estate. These payments shall be
included in the fund expenses paid from the fund property and
their maximum amount shall be set out in the fund management
rules.
(2) Liquidation expenses may not exceed two per cent of the
proceeds of liquidation.
[19 June 2008]
Section 381. Liquidation
of a Sub-Fund
(1) The liquidation of a sub-fund shall be subject to the
procedure for liquidation of the fund determined in this
Chapter.
(2) After the completion of the liquidation of a sub-fund the
company shall make the respective amendments to the fund
management rules and to the fund prospectus.
[8 March 2007]
Section 39. Liquidation Reports
(1) The liquidator on a monthly basis shall submit to the
Commission a progress liquidation report.
(2) Within 10 days after the completion of liquidation, the
liquidator shall submit to the Commission a notification
regarding the completion of liquidation and the closing report of
liquidation.
[1 June 2000; 18 March 2004]
Chapter IV
Custodian Bank
Section 40. General Provisions Set
for a Custodian Bank
(1) The company shall perform transactions with the fund
property through a custodian bank.
(2) A custodian bank may be a credit institution registered in
Latvia that has started providing investment services and
non-core services, including holding of financial instruments, or
a Latvian branch of a credit institution registered in a Member
State, provided that the referred to credit institution is
entitled to provide investment services and non-core services,
including holding of financial instruments.
(3) The custodian bank, in performing the duties determined by
the law, shall operate independently of the company and solely in
the interests of investors.
(4) The custodian bank may invest its assets in the investment
certificates of a fund, whose custodian bank it is, only if the
custodian bank is a shareholder of the company managing the fund
with a qualifying holding and the provisions of Section 33,
Paragraphs fourteen and fifteen of this Law have been met.
(5) Upon a change of the custodian bank, the new custodian
bank, if necessary, shall within six months from the day of
coming into effect of the custodian bank agreement take measures
so that the operation thereof conforms to the provisions of
Paragraph four of this Section.
[1 June 2000; 18 March 2004; 19
June 2008; 13 October 2011]
Section 41. Keeping of Fund Property
in the Custodian Bank
(1) The company shall open a separate account in the custodian
bank for each fund under management thereof. The name of the fund
and the registration number allocated by the Commission shall be
regarded as fund identification data, when opening an account
with the custodian bank.
(2) Income from the fund property and income from the issue of
investment certificates shall be transferred into the account of
the relevant fund held in the custodian bank.
(3) The custodian bank may perform payments from the account
of the fund only on the basis of an order by the company in
accordance with the law, the fund prospectus, the fund management
rules and the custodian bank agreement.
[18 March 2004]
Section 42. Duties of a Custodian
Bank
(1) A custodian bank shall have the following duties:
1) to keep the fund property in accordance with the law and
the custodian bank agreement;
2) to follow that the issue, sale and repurchase of investment
certificates takes place on behalf of the company and in
accordance with the law, the fund prospectus and the fund
management rules;
3) to follow that the fund value is calculated in accordance
with the law, the regulations of the Commission, the fund
prospectus and the fund management rules;
4) to fulfil orders of the company if they are not contrary to
the law, the regulations of the Commission, the fund prospectus,
the fund management rules and the custodian bank agreement;
5) to ensure that the fund income is allocated in accordance
with the law, the fund prospectus and the fund management rules;
and
6) to follow that the payments specified in transactions with
the fund property are duly made;
7) in case of a merger of investment funds, to certify that
information referred to in Section 341, Paragraph
seven, Clauses 1, 6 and 7 of this Law in respect of a fund whose
custodian bank it is complies with the requirements of this Law,
the respective fund prospectus and the fund management rules;
8) upon the request of the Commission, to provide information
received by the custodian bank while performing the functions of
a custodian bank of a fund.
(2) [1 June 2000].
(3) The custodian bank has a duty to bring claims of fund
investors against the company on its own behalf, if required
under relevant circumstances. This provision shall not restrict
the rights of fund investors to bring such claims on behalf
thereof.
(4) The custodian bank has a duty to bring a counterclaim, if
recovery proceedings are directed against the fund property in
connection with liabilities thereof.
[1 June 2000; 13 October 2011]
Section 43. Transfer of the Duties
of a Custodian Bank
(1) The custodian bank has the right to transfer by an
agreement the keeping of the fund property and the maintenance of
the fund account to third parties, if it is provided for in the
custodian bank agreement.
(2) If the custodian bank fully or partially transfers
functions thereof to a third party, such agreement shall be in
effect if it has been approved by the company and the
Commission.
(3) The transfer of the custodian bank's duties to third
parties shall not release the custodian bank from the liability
provided for in the law and the custodian bank agreement.
Section 44. Remuneration to the
Custodian Bank
(1) The custodian bank has the right to remuneration for
provision of services determined in the custodian bank
agreement.
(2) Remuneration of the custodian bank shall be covered from
the fund property on the basis of an order by the company in
accordance with the custodian bank agreement.
Section 45. Reporting Obligation
The custodian bank shall be obliged to immediately report to
the Commission and the company's council the actions by the
company known to the custodian bank, which are in conflict with
the law, the fund prospectus, the fund management rules or the
custodian bank agreement.
Section 46. Liability of the
Custodian Bank
(1) The custodian bank shall be fully liable to fund
investors, company and third parties for losses which have been
caused if the custodian bank has violated the law or the
custodian bank agreement intentionally or through negligence or
has performed its duties negligently.
(2) If the custodian bank has given its authorisation to a
transaction which does not conform to the provisions of this Law
or has failed to submit a complaint regarding violation of the
provisions of this Law, the custodian bank and the company shall
be jointly liable for the losses caused to the fund.
Section 47.Custodian Bank
Agreement
(1) A custodian bank agreement is an agreement concluded in
writing between the company and the custodian bank in accordance
with which the custodian bank undertakes to keep the fund
property and perform transactions with the fund property and
maintenance of the fund accounts in accordance with the law, this
agreement and company orders.
(2) The custodian bank agreement shall include:
1) the firm name, registration number, licence number,
registered office and the location of the board of directors of
the company;
2) the firm name, registration number, licence number,
registered office and location of the board of directors of the
custodian bank;
3) the name of the fund;
4) rights and obligations of the parties;
5) procedure for maintenance of the fund accounts;
6) the amount and manner of payment of custodian bank
remuneration;
7) the procedures for covering expenses of the custodian bank
incurred while carrying out transactions with the fund property
or maintenance of the fund accounts;
8) the procedure under which the custodian bank transfers fund
accounts, documents and other affairs to third parties;
9) the liability for failure to fulfil or duly fulfil the
agreement;
10) the term of the agreement;
11) the procedure for amending provisions of the
agreement;
12) the conditions and procedure for early termination of the
agreement;
13) the procedure for dispute resolution; and
14) other provisions arising from the fund prospectus.
(3) The parties may also include other provisions in the
custodian bank agreement, which are not in conflict with the law,
the fund prospectus and the fund management rules.
(4) If a company licensed in a Member State wishes to manage
or to establish a fund in Latvia, in addition to the custodian
bank agreement specified in this Section, the company and the
custodian bank shall also sign an agreement governing information
exchange between the company and the custodian bank necessary to
enable the custodian bank to perform its functions determined in
this Law.
(5) The Commission shall issue statutory regulations in which
the content of the agreement referred to in Paragraph four of
this Section is determined.
[24 October 2002; 13 October
2011]
Section 48.Termination of Custodian
Bank Agreement
(1) Custodian bank agreements shall terminate in the following
cases:
1) upon the expiry of the time period specified in the
agreement;
2) upon mutual agreement of the parties to the agreement;
3) one party unilaterally withdraws from the agreement taking
into account the time periods determined in Paragraph two of this
Section;
4) upon occurrence of circumstances, as a result whereof the
custodian bank no longer meets the requirements of the law;
5) the custodian bank is declared insolvent;
6) upon dissolution of the custodian bank;
7) fund liquidation has been commenced;
8) the Commission orders the company to change the custodian
bank; or
9) in other cases specified in the custodian bank
agreement.
(2) The party, unilaterally withdrawing from the agreement,
has a duty to notify the other person thereof three months in
advance, unless the custodian bank agreement provides for a
longer time period.
(3) The custodian bank agreement shall not terminate upon the
transfer of the fund management rights to the custodian bank.
Section 49. Order Regarding Change
of the Custodian Bank
(1) The Commission has the right to give an order to the
company to change the custodian bank if the custodian bank
violates the provisions of this Law or the custodian bank
agreement or if it is necessary for the protection of the
interests of fund investors.
(2) In cases specified in Paragraph one of this Section the
custodian bank agreement shall terminate within the time period
and in accordance with the procedures specified by the
Commission.
[24 October 2002]
Section 50. Entering into a New
Custodian Bank Agreement
(1) The company shall ensure that on the next day after
termination of the custodian bank agreement a new custodian bank
agreement comes into effect, except for the cases when the
agreement terminates due to fund liquidation.
(2) If the company fails to enter into a new custodian bank
agreement within the time period determined in Paragraph one of
this Section, it shall commence fund liquidation.
[1 June 2000]
Chapter V
Issue and Circulation of Investment certificates
Section 51. Investment
certificates
(1) Public circulation of investment certificates shall take
place in accordance with the Financial Instruments Market Law,
insofar as not determined otherwise by this Law.
(2) Investment certificates may be of various categories with
a different nominal value, related payments or different rights
regarding the allocation of the fund income. The rights and
liabilities attached to investment certificates shall cover all
fund property. Equal rights shall be attached to the same
category of investment certificates of the same fund.
(3) Upon alienation of an investment certificate the undivided
shares of the relevant alienator in the fund shall also be
transferred to the acquirer.
(4) Investment certificates shall be issued in a
dematerialised form.
(5) Investment certificates shall be regarded as publicly
traded securities also in cases if they are not listed on a
regulated market.
(6) [9 July 2013].
(7) In order to include investment certificates in a regulated
market, the fund prospectus and the fund management rules shall
be equivalent to a prospectus prepared in compliance with the
Financial Instruments Market Law.
(8) Investment certificates shall be divisible. The fund
prospectus shall determine the procedure for rounding up of the
number of investment certificates after the division thereof.
[18 March 2004; 8 March 2007; 9
July 2013]
Section 52. Issue of Investment
Certificates
(1) The number and the period of issue of the investment
certificates of an investment fund, except of a structured fund
referred to in Article 36 of the Commission Regulation (EU) No
583
/2010 implementing Directive 2009/65/EC of the European
Parliament and of the Council as regards key investor information
and conditions to be met when providing key investor information
or the prospectus in a durable medium other than paper or by
means of a website (hereinafter - European Commission Regulation
No 583/2010), may not be restricted.
(2) [9 July 2013].
(3) [9 July 2013].
(4) Investment certificates shall be issued only in return to
full payment of the price of such certificates in cash in
accordance with the provisions of the fund prospectus. The cash
received for investment certificates, except for the issue
commissions, shall be immediately transferred to the fund.
(5) If investment certificates have been released into
circulation, but the value of the relevant investment
certificates is not transferred to the fund, the company shall
invest the missing amount in the fund from its own property.
[8 March 2007; 13 October 2011; 9
July 2013]
Section 53. Price of Investment
certificates
(1) The issue price of an investment shall be the sale price
of the first investment certificate.
(2) [9 July 2013].
(3) The issue price of an investment certificate shall be
determined by the company in accordance with the provisions of
the fund prospectus.
(4) The sale price of and investment certificate shall be the
sum of the investment fund share value and the issuing
commissions.
(5) Issuing commissions shall be the remuneration to the
company for the issue of investment certificates.
(6) Repurchase commissions shall be the remuneration to the
company for repurchase of investment certificates.
(7) The sale price of an investment certificate shall be
determined concurrently with the fund share value and the
information thereof must be available in the places specified in
the fund prospectus.
(8) The repurchase price of an investment certificate is the
investment fund share value that shall be reduced by the
commissions for repurchase in accordance with the fund
prospectus. Where the fund has different categories of investment
certificates, the repurchase price of investment certificates
shall be established separately for each category.
(9) If the company announces the sale price of investment
certificates it also has a duty to announce the repurchase price
and vice versa.
[8 March 2007; 9 July 2013]
Section 54. Repurchase of Investment
Certificates
(1) The company managing a fund has a duty to perform
repurchase of investment certificates at the request of fund
investors by paying to them the repurchase price in cash in
accordance with the provisions of the fund prospectus.
(2) Investment certificates shall be withdrawn from
circulation when the company receives a repurchase application
from an investor and the investor transfers the investment
certificate into the issue account of the fund. After withdrawal
from circulation, all rights of fund investors arising from the
investment certificate shall expire, except for the claim right
in the amount of the repurchase price of the investment
certificate.
(3) The company may temporarily suspend the repurchase of
investment certificates of the fund in the cases and in
accordance with the procedures determined in the fund prospectus.
Suspension of the repurchase may be provided for only in
exceptional cases, if required by circumstances, and suspension
is justifiable, taking into account the interests of the
investors.
(4) The repurchase price shall be paid from the fund property,
in accordance with the procedures and within the time period
determined in the fund prospectus.
(5) Investment certificates shall be repurchased in the
sequence of submission of repurchase claims.
(6) The company managing the fund shall be released from the
obligation to perform repurchase of investment certificates, if
the investment certificates are traded on a regulated market and
the company managing the fund takes the necessary measures in
order to ensure that the market price of the investment
certificates does not significantly differ from the fund share
value.
[1 June 2000; 9 July 2013]
Section 541. Notice
Regarding Execution of Purchase and Repurchase Application of
Investment Certificates of Investment Fund
(1) The company shall, via durable medium, send to fund
investors a notice confirming the execution of application not
later than on the next working day following the execution of
application or, where the company receives the confirmation from
a third party, not later than on the next working day following
the receipt of the confirmation from the third party.
(2) Paragraph one of this Section shall not apply, if the
notice of the company contains the same information as the
confirmation, to be immediately sent to fund investor by the
third party.
(3) The notice referred to in Paragraph one of this Section
shall contain the following information:
1) company identification data;
2) identification data of the fund investor (given name,
surname or firm name);
3) date and time of receipt of application and the payment
method;
4) date of execution;
5) fund identification data;
6) the type of the application - purchase, repurchase or
redemption;
7) number of investment certificates;
8) value the investment certificate at the moment of purchase,
repurchase or redemption thereof;
9) date of valuation of the investment certificate;
10) gross value of the application, including issuing
commissions, or net value excluding repurchase commissions;
11) sum total of commissions or other charges related to the
transaction and, if the fund investor so requests, an itemised
breakdown of charges collected.
(4) If the company executes applications of a fund investor
periodically, it shall comply with the requirements of Paragraph
three of this Section or at least once every six months it shall
provide to the fund investor information determined Paragraph
three of this Section regarding executed transactions.
(5) Upon the fund investor's request, the company shall have a
duty to provide the information regarding the status of execution
of the application of the fund investor.
[13 October 2011; 9 July 2013]
Section 55. Claim for Redemption of
Investment Certificates
(1) If due to the fault of the company the information in the
fund prospectus and the documents attached thereto which are
significant to the assessment of investment certificates are
incorrect or incomplete, a fund investor has the right to request
that the company redeems his or her investment certificate and
compensates him or her for all losses caused due to this
reason.
(2) If in case referred to in Paragraph one of this Section
the fund investor has obtained the investment certificate from a
person who is engaged in intermediary activity on the securities
market, such person together with the company shall be jointly
liable for the payment of damages to the fund investor. Such
person shall not be liable if he or she proves that he or she has
not known and could not know that the information was incorrect
or incomplete.
(3) If at the moment when the fund investor has learned that
the information is incorrect or incomplete he or she is no longer
the fund investor, he has the right to request that the company
pays the difference by which the sum invested by him or her
exceeds the repurchase price of the investment certificate at the
moment of repurchase.
(4) The claim in accordance with the provisions of Paragraphs
one, two and three of this Section may be brought within six
months from the day when the fund investor learned that the
information was incorrect or incomplete, however, not later than
within three years from the day when the investment certificate
was acquired.
Section 56. Fund Prospectus, Key
Investor Information and Amendments Thereto
(1) The issue of investment certificates may not be commenced
without a fund prospectus approved by the company. The company
shall also develop key investor information in which the
information referred to in Section 571 of this Law is
specified.
(2) The fund prospectus shall include information necessary
for investors so that they could take a reasoned decision
regarding the investment offered and the potential risk that may
be incurred by such investment.
(21) Key investor information shall present, in a
concise form, the most significant performance indicators of the
relevant fund. The company shall ensure that key investor
information is fair, clear and not misleading and is consistent
with the information referred to in the fund prospectus.
(3) The fund prospectus shall include the information referred
to in Section 57 of this Law. The fund prospectus need not repeat
the information which is included in the fund management rules of
the relevant fund and which is equal to the information referred
to in Section 57 of this Law.
(4) The fund prospectus and key investor information shall
come into effect upon the registration of the fund with the
Commission.
(5) If the company intends to make amendments to information
which is provided in compliance with Section 57, Paragraph three,
Clauses 1, 2, 3, 4, 5, 7, 8, 9, 101, 11, 12, 13, 14,
15, 16 and 23 of this Law, prior to making the relevant
amendments, the company shall submit to the Commission:
1) a decision of the management body of the relevant company
regarding approval of the amendments to the fund prospectus;
2) the amendments to the fund prospectus and the text of the
fund prospectus, incorporating the amendments. The amendments to
the fund prospectus and the text of the fund prospectus shall be
submitted to the Commission in one of the ways referred to in
Section 23, Paragraph two of this Law.
(6) The Commission shall review the submitted amendments to
the fund prospectus and, within 15 working days, register
amendments, if they meet the requirements of this Law and are not
in conflict with the legitimate interests of the investors.
(7) If it is necessary to make amendments to the fund
prospectus, taking into account changes in the company's capital,
the composition of the council or officials or any other changes
in the operation of the company or the fund, which in compliance
with this Law shall be coordinated with the Commission, the
company shall, after the coordination of these changes with the
Commission, make relevant amendments to the fund prospectus
without prior registration thereof with the Commission and, in
compliance with Paragraph five, Clause 2 of this Section, submit
to the Commission the full text of the fund prospectus.
(8) After registration of the amendments to the fund
prospectus with the Commission, the company shall, in accordance
with the procedure specified in the fund management rules,
without delay, inform the fund investors regarding the amendments
to the fund prospectus and coming into effect thereof.
(9) The amendments to the fund prospectus referred to in
Paragraph five of this Section shall come into effect not earlier
than 10 days after registration thereof with the Commission or
within another time period determined by the Commission that
shall not exceed three months after the registration date of the
amendments and is determined in view of the contents of the
amendments to the fund prospectus and the interests of fund
investors.
(10) The amendments to the fund prospectus referred to in
Paragraph seven of this Section shall come into effect after
their approval by the management body of the company.
(11) The provisions for amending the fund prospectus referred
to in this Section shall apply to the amendments to key investor
information, taking into account the requirements of European
Commission Regulation No 583/2010.
[18 March 2004; 8 March 2007, 19
June 2008, 11 March 2010, 13 October 201; 9 July 2013]
Section 57. Content of the Fund Prospectus
(1) The fund prospectus shall have a title page. The title
page shall include the following information:
1) the type and name of the fund, as well as an indication of
the country of establishment (registration) of the fund;
2) the firm name and registered office of the company of the
fund;
3) the firm name of the custodian bank of the fund;
4) the firm name of the distributor of investment certificates
and the addresses of the places of distribution;
5) the given name and surname of the sworn auditor or the firm
name of the commercial company of sworn auditors of the fund;
6) the date of establishing the fund and the term of operation
(if any);
7) the note on the fund registration with the Commission;
8) the note on the amendments made to the fund prospectus and
the date of coming into effect thereof;
9) the address of the place where the fund prospectus, key
investor information, the fund management rules (if they are not
attached to the prospectus), annual and half-yearly accounts of
the fund, as well as information about the fund value and the
sale and repurchase price of investment certificates may be
received.
(2) The fund prospectus shall include the table of contents
and explanations of the terms and abbreviations used.
(3) The fund prospectus shall include at least the following
information, in the sequence given in this Paragraph:
1) fund investment objective, including the financial
objective (for example, capital growth or return on investments),
the investment policy (for example, types of investment objects,
specialisation in specific geographical regions or industrial
sectors), as well as information specified in Section 65 of this
Law;
11) an announcement for attention of fund investors
to the following operational features of the fund:
a) it is planned to invest the majority of fund assets in
investment objects other than transferable securities or money
market instruments,
b) the fund intends to carry out the replication of the
capital or debt security index,
c) fund net asset value is highly volatile;
2) description of the fund risk profile and analysis of the
investment-related risk;
3) fund investment limits and a description of the investment
practice or techniques applied to the fund management and the
principles and procedure for borrowings to be made at the expense
of the fund;
4) brief explanation of the rights of fund investors provided
for in this Law and a short description of the rights attached to
investment certificates;
5) characteristics of a typical investor (investor for whom
the fund is intended);
6) information on tax and fee payments applicable to fund
investors and procedures for performance thereof;
7) the maximum amount of the commissions charged for the sale
and repurchase of investment certificates (as a percentage of the
fund share value);
8) the maximum amount of the remuneration to be paid from the
fund property to the company, custodian bank and other persons
referred to in the fund prospectus (both the total amount and the
amount of remuneration to be paid to each person separately) and
the procedure for calculation and payment thereof. The maximum
remuneration amount shall be indicated as a percentage of the
average value of fund net assets;
9) other possible expenses and payments, as well as the
procedure for covering thereof. Payments that are to be made by
fund investors individually and those effected from the fund
assets shall be indicated separately;
10) information regarding the fund auditor - the given name,
surname and certificate number or firm name, registration number
and licence number of a commercial company of sworn auditors;
101) categories, nominal value, related payments
and rights to allocation of the fund income of the fund
investment certificates;
11) procedure for sale, repurchase and redemption of
investment certificates as well the procedure for rounding up the
number of shares of investment certificate after the division of
investment certificates;
12) circumstances under which repurchase and redemption of
investment certificates may be suspended;
13) methods and frequency of calculation of the sale and
repurchase price of investment certificates, as well as data on
where and how often these prices are made public;
14) principles and provisions for determining the fund
value;
15) provisions for the calculation of the fund income, its use
and allocation among fund investors;
16) the beginning and end of the reporting year of the
fund;
17) the firm name, registration date and number, registered
office and, if the company has established a branch, address of
location thereof;
18) the amount of registered and paid-up capital of the
company;
19) the given name, surname of the company's council members
and officials and office held, as well as duties thereof outside
the company if they are of any importance to the company's
operation;
20) the names of other funds managed by the company;
21) the firm name, registration date and number, the
registered office and address of location of the custodian
bank;
22) the given name, surname or firm name, registration number
and address of location of the consultant and other service
providers, if the company has entered into a contract on
provision of relevant services within the fund management and in
accordance with this contract remuneration to the service
provider is paid from the fund assets. A short description of
basic activities of the provider of the relevant service and
those provisions of the service provision contract, which are
important for fund investors;
23) if the company plans to transfer any of the fund
management services to a third party, an indication of these
services and a description of the procedure for the transfer of
services;
24) characteristics of the previous activities of the fund and
a comparative table listing financial indicators for the three
preceding years (prepared in compliance with the regulations for
fund reports). This information shall be followed by a note that
these indicators do not determine (influence) further operations
of the fund. The referred to information may be included in, or
appended to, the fund prospectus;
25) the manner and procedure for receiving annual and
half-yearly account of the fund.
(4) [13 October 2011].
(5) [9 July 2013].
(6) [9 July 2013].
(7) The provisions of the fund prospectus shall become binding
on mutual relationship of the company and the investor as soon as
the investor in accordance with the procedure determined in the
fund prospectus and the fund management rules has obtained the
investment certificates of the relevant fund.
[18 March 2004; 8 March 2007; 19
June 2008; 11 March 2010; 13 October 2011; 9 July 2013]
Section 571. Content of
Key Investor Information
(1) Key investor information shall be prepared in a possibly
simple form understandable to fund investors, so that they can
understand the key aspects of the investment and take a reasoned
decision regarding the offered investment.
(2) Key investor information shall include at least the
following information important to the fund operation:
1) identification data of the fund;
2) fund investment objective and a short description of its
investment policy;
3) past performance indicators or performance indicator
scenarios;
4) charges associated with the fund operation;
5) a description of the fund risk profile that includes
guidelines and warnings in respect of the risks associated with
investments in the relevant fund.
(3) Information referred to in Paragraph two of this Section
shall be prepared without any references to other documents.
(4) Key investor information shall clearly indicate the
address of the location where additional information may be
received and where, upon request of investors, the fund
prospectus, a copy of the annual and half-yearly accounts are
provided free of charge, and it shall also specify the languages
in which these documents have been prepared.
(5) Key investor information shall be prepared in a concise
form and non-technical language. It shall be prepared in a
uniform format to facilitate comparison with key investor
information of other funds and funds and presented in a way that
would be easily comprehensible to private clients.
(6) Key investor information shall be used without alterations
or supplements, except translation thereof, in all Member States
where investment certificates of the relevant fund are
distributed.
(7) Key investor information shall become binding on
relationship between the company and an investor as soon as the
investor has obtained investment certificates of the relevant
fund in accordance with procedure determined by the fund
prospectus and the management rules, except the case when such
information is false, inaccurate, misleading or inconsistent with
the fund prospectus. The referred to information shall be
explicitly indicated in key investor information.
(8) Information referred to in Paragraph two of this Section
shall be updated regularly, taking into account the requirements
of European Commission Regulation No 583/2010.
(9) Detailed format and content of key investor information
shall be determined in accordance with European Commission
Regulation No 583/2010.
(10) The Commission shall determine the procedure for
preparation of key investor information.
[13 October 2011]
Section 58. Availability of the Fund
Prospectus and Key Investor Information
(1) A company has a duty to ensure that the fund prospectus
and key investor information is provided free of charge to all
stakeholders.
(2) To ensure the fulfilment of requirements of Paragraph one
of this Section, the company shall place the fund prospectus and
key investor information on the Internet homepage thereof or use
a durable medium, taking into account the requirements of
European Commission Regulation No 583/2010.
(3) Upon request of investors, a copy in a paper form of the
fund prospectus and key investor information shall be provided to
them free of charge.
(4) If amendments are made to the fund prospectus or to key
investor information, the company shall, after coming into effect
thereof, immediately ensure that the full text of the fund
prospectus indicating the amendments and the date of coming into
effect thereof and the latest version of key investor information
are available on the Internet homepage thereof.
[13 October 2011]
Section 59. Advertising of Fund
Issue
(1) In advertising of the fund issue by placing advertisements
or publicly announcing the regulations of the issue, it is
mandatory to indicate the following:
1) the name of the fund;
2) the firm name, registered office and location of the
executive body of the company managing the fund;
3) the firm name, registered office and location of the
custodian bank;
4) the starting date of distribution of investment
certificates;
5) the issue or sale price of investment certificates;
6) the place of receipt of the fund prospectus and key
investor information by specifying the languages in which such
documents are available; and
7) that profit is not guaranteed.
(2) Information indicated in the advertisement regarding an
opportunity to acquire investment certificates of the relevant
fund shall be fair, clear and not misleading, as well as
consistent with the fund prospectus and key investor
information.
(3) If the fund investment policy provides to invest the
majority of fund assets in investment objects other than
transferable securities or money market instruments, or if the
fund intends to carry out the replication of composition of the
index of capital or debt securities, or the fund net asset value
is highly volatile, the advertisement of the fund issue shall
include the statement drawing the attention of the potential
investors to the features of the fund investment policy referred
to in this Paragraph.
[24 October 2002; 13 October
2011]
Section 60. Public Circulation of
Investment Certificates of Foreign Open-ended Funds
[13 October 2011]
Chapter VI
Fund Investments
[24 October
2002]
Section 61. Fund Investment
Objects
(1) Fund assets may be invested in transferable securities,
money market instruments, deposited in credit institutions and
invested in other financial instruments referred to in this Law,
taking into account the investment limits determined by this
Law.
(2) [9 July 2013].
(3) Fund assets may not be invested in precious metals and
financial derivative instruments the underlying assets of which
are precious metals or commodities.
(4) Fund assets may be kept in liquid assets (including in
cash) in the amount required for the fund operation.
(5) When making investments at the expense of the fund, the
company has a duty to invest only in the investment objects
provided for in the fund prospectus, observe the investment
limits determined therein, obtain sufficiently comprehensive
information regarding the potential or acquired investment
objects, as well as to constantly monitor and analyse the
financial standing of those persons into whose financial
instruments the fund assets are or will be invested.
(6) The Commission in statutory regulations thereof shall
determine requirements for the investment objects of investment
funds, transactions, funds of certain type of activity, as well
as requirements for disclosure of information.
[18 March 2004; 8 March 2007; 19
June 2008; 11 March 2010; 9 July 2013]
Section 62. Investments in
Transferable Securities and Money Market Instruments
(1) Fund assets may be invested in transferable securities and
money market instruments which meet at least one of the following
conditions:
1) they are traded on the regulated market in a Member State
or on another trading venue of the Member State referred to in
Article 2 (8) of the Commission Regulation (EC) No 1287/2006 of
10 August 2006 implementing Directive 2004/39/EC of the European
Parliament and of the Council as regards recordkeeping
obligations for investment firms, transaction reporting, market
transparency, admission of financial instruments to trading, and
defined terms for the purposes of that Directive (hereinafter -
European Commission Regulation No 1287/2006);
2) they are quoted on official listing of a stock exchange or
traded on other trading venues abroad referred to in Article 2
(8) of the European Commission Regulation No 1287/2006 and the
choice of the stock exchange or of the trading venue is provided
for in the fund prospectus;
3) they are not quoted on official listing of stock exchanges
or are not traded on trading venues but it is intended in the
provisions for the issue of these securities or money market
instruments, that they will be quoted on official listing of the
stock exchanges or on the regulated market referred to in of
Paragraph one, Clauses 1 and 2 of this Section and the quoting of
these securities or money market instruments shall take place
within one year from the day when subscription to these
securities or money market instruments is commenced.
(2) Fund assets may be invested in money market instruments
that are not traded on the regulated markets provided that they
are freely transferable (there are no conditions restricting the
transaction) and at least one of the following conditions is
present:
1) they have been issued or guaranteed by a Member State or a
local government of a Member State, another state or, in case of
a federal state - one of the members of the federation or an
international financial institution if one or several Member
States are members thereof;
2) they have been issued or guaranteed by the central bank of
a Member State, the European Central Bank or the European
Investment Bank;
3) they have been issued by a commercial company the
securities of which are traded in accordance with the procedure
determined in Paragraph one, Clauses 1 and 2 of this Section;
4) they have been issued or guaranteed by a credit institution
registered in a Member State and supervised by a competent
authority of financial services in compliance with the
requirements determined in the European Union or by an issuer,
whose operation is subject to requirements at least as strict as
those determined in the European Union and that meets at least
one of the following requirements:
a) it is registered in a Member State of the Organisation for
Economic Co-operation and Development, that is also the country
of the Group of Ten,
b) it has been assigned the investment grade rating,
c) a comprehensive analysis of the legal regulation of the
issuer's operation evidences that the requirements regulating the
issuer's activities are as strict as those determined in the
European Union;
5) they have been issued by a commercial company the amount of
capital and reserves of which is equivalent to 10 million Euro in
lats according to the exchange rate determined by the Bank of
Latvia or to a larger amount and which prepares and publishes
audited annual account in compliance with the requirements for
preparation and publishing of annual accounts that are equivalent
to the requirements determined in the European Union. Such
commercial company is in one group with one or several commercial
companies the shares which are traded on the regulated market and
which is intended to attract monetary funds to the group, or such
commercial company is a body established for a special purpose,
which is specialised in debt securitisation and which has entered
into an agreement for the provision of liquidity with a bank that
complies with the requirements set out for credit institutions in
Clause 4 of this Paragraph. Investor protection shall be applied
to investments in such money market instruments which is equal to
the protection referred to in Clauses 1, 2, 3 and 4 of this
Paragraph.
[19 June 2008; 13 October 2011]
Section 63. Deposits in Credit
Institutions
(1) Fund assets may be deposited in a credit institution that
has obtained a licence for the operation of a credit institution
in Latvia, in another Member State or in a Member State of the
Organisation for Economic Co-operation and Development that is a
member of the Group of Ten.
(2) Deposits in credit institutions may be made if they are
repayable upon request or they can be withdrawn prior to the end
of the time period and the time period thereof does not exceed 12
months.
[18 March 2004; 19 June 2008]
Section 64. Investments in
Investment Certificates (Shares) of the Fund
(1) Fund assets may be invested in investment certificates or
shares of an investment fund registered in a Member State or of a
collective investment undertaking comparable thereto, the the
regulation of the activity of which is analogous to the
requirements of this Law.
(2) Fund assets may be invested in investment certificates or
shares of a foreign investment fund or of a collective investment
undertaking comparable thereto, provided that the investment fund
or the collective investment undertaking comparable thereto meets
the following requirements:
1) it is registered in a foreign country the legal framework
of which provides for the supervision of such undertakings that
is similar to the supervision determined in this Law and the
competent authority of the relevant foreign country cooperates
with the Commission;
2) the requirements governing its operations, including the
protection of investors, investment and transaction limits, are
analogous to the provisions of this Law regarding the operation
of investment funds;
3) it prepares and makes public half-yearly and annual
accounts to enable the assessment of its assets, liabilities,
income and performance during the reporting period.
(3) Fund assets may be invested in the certificates (shares)
of the funds and collective investment undertakings referred to
in Paragraphs one and two of this Section, if the prospectus, the
fund management rules or an equivalent document of the fund or
collective investment undertaking [the investment certificates
(shares) whereof are to be acquired] provides that investments in
other funds or collective investment undertakings may not exceed
10 per cent of the assets of the fund or collective investment
undertaking.
(4) If the fund assets will predominantly be invested in the
funds or collective investment undertakings referred to in this
Section, the fund prospectus shall include information regarding
the maximum fund management costs which may be withheld from the
fund itself and from those funds or collective investment
undertakings in which such fund makes investments.
(5) If it is intended to invest the assets of a fund
(sub-fund) in the funds (sub-funds) that are managed by companies
of one group, the prospectus shall specify these funds
(sub-funds) and the total maximum amount intended for investment
therein.
[18 March 2004; 8 March 2007; 19
June 2008; 13 October 2011; 9 July 2013]
Section 65. Transactions in
Financial Derivative Instruments
(1) Fund assets may be invested in financial derivative
instruments that are traded on the markets referred to in Section
62, Paragraph one of this Law or that are not admitted to trading
on the regulated market and that concurrently meet the following
requirements:
1) their underlying asset is comprised of financial
instruments referred to in Section 62, 63 and 64 of this Law,
financial indices, interest rates, exchange rates or currencies,
in which fund asset investments are planned to be made in
accordance with the fund prospectus or the fund management
rules;
2) the counterparty to a transaction in financial derivative
instrument not admitted to trading on the regulated market is a
credit institution that meets the requirements of Section 63,
Paragraph one of this Law or an investment brokerage firm, the
amount of capital and reserves of which is equivalent to 10
million Euro in lats according to the exchange rate determined by
the Bank of Latvia or to a larger amount and that is registered
in a Member State or in a Member State of the Organisation for
Economic Co-operation and Development that is a member of the
Group of Ten and whose operation is supervised by the competent
authority of financial services;
3) a reliable and verifiable valuation of the financial
derivative instrument not admitted to trading on the regulated
market takes place on a daily basis, and the financial derivative
instrument may be sold or liquidated at its fair value at any
time at the initiative of the company or a transaction may be
made in that financial instrument as a result of which the
position is closed (offsetting claims or liabilities in respect
of the financial instrument).
(2) If it is intended to perform transactions in financial
derivative instruments at the expense of the fund, the fund
prospectus shall explicitly specify whether such transactions
will be performed to limit the risk or to gain profit, as well as
the possible effect of financial derivative instruments on the
global exposure of the investment portfolio of the relevant
fund.
(3) The company shall implement such risk management policy
which ensures the possibility for it to identify and manage the
risks related to financial derivative instruments and the effect
of these financial derivative instruments on the global exposure
of the fund investment portfolio at any time.
(4) The company shall develop and follow the assessment policy
of the financial derivative instruments which ensures accurate
and independent assessment of the financial derivative
instruments not admitted to trading on the regulated market,
taking into account the nature and complexity of the financial
derivative instruments. The Commission shall determined the
requirements for assessing financial derivative instruments not
admitted to trading on the regulated market.
(5) If the fund prospectus provides for performance of
transactions in financial derivative instruments, before
commencement of such transaction the company shall prepare and
submit to the Commission a report describing the risk management
policy and the assessment procedure for financial derivative
instruments as well as providing true and fair presentation of
the types of financial derivative instruments used, the risks
arising therefrom, quantitative restrictions and methods to be
used to measure and limit the risk of the relevant financial
derivative instrument.
(6) The company shall update information included in the
report submitted to the Commission in compliance with the
requirements of Paragraph 5 of this Section, taking into account
the complexity and scale of transactions performed during the
reporting period, and shall submit the report to the Commission
together with the annual account.
[18 March 2004; 8 March 2007; 19
June 2008; 13 October 2011]
Section 66. Investment Limits
(1) Fund investments, except the fund investments referred to
in Paragraphs two and four of this Section, in transferable
securities or money market instruments of a single issuer may not
exceed five per cent of the fund assets. The limit referred to
may be raised to 10 per cent of the fund assets, but in such case
the total value of investments exceeding five per cent may not
exceed 40 per cent of the fund assets.
(11) Without prejudice to the investment limits
determined in Section 67 of this Law, the limits referred to in
Paragraph one of this Section in respect of an investment in
transferable securities of a single issuer may be increased to 20
per cent of the fund assets, if, in accordance with the fund
prospectus or with the fund management rules, the fund investment
policy is aimed at replicating the composition of such certain
capital or debt securities index that is recognised by the
Commission, pursuant to the following requirements:
1) composition of the index is sufficiently diversified;
2) index represents an adequate benchmark for the market to
which it refers;
3) index has been appropriately published in accordance with
the procedure determined by regulatory enactments.
(12) The limits determined in Paragraph
11 of this Section in respect of an investment in
transferable securities of a single issuer may be increased to 35
per cent of the fund assets, if this is justified by exceptional
market conditions especially on the regulated markets where
certain transferable securities or money market instruments are
highly dominant. The higher limit determined in this Paragraph
shall be applied only to transferable securities of a single
issuer.
(2) Fund investments in transferable securities or money
market instruments of a single issuer may be increased to 35 per
cent of the fund assets if the transferable securities or money
market instruments are issued or guaranteed by a Member State, a
foreign country, a local government of a Member State or an
international institution, if one or several Member States are
members thereof.
(3) The limit specified in Paragraph two of this Section may
be exceeded if the following conditions are concurrently
fulfilled:
1) the excess is provided for in the fund management
rules;
2) the fund owns transferable securities or money market
instruments from six or more issues and the value of transferable
securities or money market instruments of each issue separately
does not exceed 30 per cent of the fund assets; and
3) to draw the attention of fund investors, the fund
prospectus or advertising materials shall specify persons, in the
issued or guaranteed transferable securities or money market
instruments of which the fund intends to invest or has invested
more than 35 per cent of the fund assets.
(4) Fund investments in transferable securities of a single
issuer may be increased to 25 per cent of the fund assets if they
are debt securities issued by a credit institution registered in
Member State, with the liabilities attached to them providing for
investing of the obtained funds in the property items, which
during the entire circulation period of debt securities fully
ensure the liabilities attaching thereto and such liabilities
shall be fulfilled on a priority basis in case of insolvency of
the issuer of such securities.
(5) If the value of fund investments in the debt securities of
a single issuer referred to in Paragraph four of this Section
exceeds five per cent of fund assets, the total fund investment
value that exceeds five per cent shall not exceed 80 per cent of
the fund assets.
(6) Fund deposits in a single credit institution may not
exceed 20 per cent of the fund assets. The referred to limit
shall not apply to claims on demand against a custodian bank.
(7) Global exposure arising from transactions in financial
derivative instruments, including financial derivative
instruments embedded in transferable securities or in money
market instruments, shall not exceed the net asset value of the
fund. When calculating the global exposure, the value of the
underlying assets of the financial derivative instrument, the
counterparty risk, the future market movements and the time
available to close the relevant position shall be taken into
account. The Commission shall be entitled to determine stricter
limits in respect of the amount of the global exposure, if
operation of an efficient internal control system is not ensured
in respect of managing the risk related to financial derivative
instruments.
(71) Global exposure shall also include risk
comprised of reinvesting of the assets obtained as a result of
transactions referred to in Section 33, Paragraph sixteen of this
Law, including repurchase (repo) transactions of assets, or
lending of the transferable securities.
(72) The company shall calculate the global
exposure of the fund at least on a daily basis.
(8) The amount of risk transactions in transactions in
financial derivative instruments not admitted to trading on the
regulated market may not exceed with each counterparty:
1) 10 per cent of the fund assets if the counterparty is a
credit institution that meets the requirements Section 63,
Paragraph one of this Law;
2) five per cent of the fund assets in case the counterparty
is an investment brokerage firm that meets requirements Section
65, Paragraph one, Clause 2 of this Law.
(81) The Commission shall establish the procedure
for calculation of the amount of transactions of global exposure
and of the risk determined in Paragraph eight of this
Section.
(9) If in accordance with the fund prospectus the performance
of transactions in financial derivative instruments is intended
for the purpose of gaining profit, the limits determined by this
Section shall apply to the underlying asset of the financial
derivative instrument.
(10) Fund investments in investment certificates (shares) of a
single fund or a collective investment undertaking comparable
thereto may not exceed 10 per cent of the fund assets. The total
investments of a fund in the investment certificates (shares) of
collective investment undertakings referred to in Section 64,
Paragraph two of this Law may not exceed 30 per cent of the fund
assets.
(11) Without prejudice to the investment limits determined
separately in Paragraphs one, six, seven and eight of this
Section, the total fund investments in transferable securities
and money market instruments, fund deposits and transactions in
financial derivative instruments, the issuer or guarantor,
investment attractor or transaction counterparty of which is one
and the same person, may not exceed 20 per cent of the fund
assets. In applying the investment limits determined by this
Section, commercial companies belonging to one group shall be
considered as one person.
(12) The investment limits determined separately in Paragraphs
one, two, four, five, six, and eight of this Section may not be
combined and thus the total investments of a fund in transferable
securities and money market instruments, fund deposits and
transactions in financial derivative instruments whose issuer or
guarantor, investment attractor or counterparty in a transaction
is one and the same person, may not exceed 35 per cent of the
fund assets.
(13) Without prejudice to the provisions of Section 62 of this
Law regarding the fund investments in transferable securities and
money market instruments, up to 10 per cent of the investment
fund assets may be invested in transferable securities and money
market instruments which do not meet the requirements determined
in Section 62 of this Law.
(14) [9 July 2013].
[18 March 2004; 8 March 2007; 19
June 2008; 11 March 2010; 13 October 2011; 9 July 2013]
Section 67. Investment Limits in
Respect of a Single Issuer
(1) Fund investments in separate investment objects may not
exceed the following criteria:
1) 10 per cent of the nominal value of the non-voting shares
of a single issuer;
2) 10 per cent of the total amount of debt securities issued
by a single issuer;
3) 25 per cent of the number of investment certificates
(shares) of a single fund or collective investment undertaking;
and
4) 10 per cent of the total value of money market instruments
issued by a single issuer.
(2) Investments of assets of the funds managed by the company
shall not either in total or for each fund separately directly or
indirectly exceed 10 per cent of any of the following
indicators:
1) equity capital of a single issuer;
2) total amount of voting rights of a single issuer.
(3) [9 July 2013].
[8 March 2007; 9 July 2013]
Section 68. Investments in Real
Estate
[9 July 2013]
Section 69. Exceeding Investment
Limits
(1) Exceeding the investment limits determined by this Law
shall not revoke the validity of the relevant transaction, but
the company shall be liable to fund investors and third parties
for losses caused due to such action, except for cases specified
in Paragraphs two, four, five and six of this Section.
(2) Exceeding the investment limits specified in Section 66,
except in Paragraphs seven and thirteen thereof, as well as in
Section 67 of this Law shall be allowed within a period of six
months after the registration of a fund with the Commission.
(3) Paragraph 2 of this Section shall not apply to funds the
value of which exceeds 500 000 lats.
(4) Exceeding the investment limits determined by this Law may
be allowed if it has been caused by exercising the subscription
rights attached to the transferable securities or money market
instruments belonging to the fund property or other circumstances
which the company was unable to predict. In order to prevent the
exceeding of investment limits, the company shall without delay
perform trading operations in conformity with the risk mitigation
principle and the interests of fund investors.
(5) At the moment when investment is made it may be allowed to
exceed the investment limits specified in Section 67, Paragraph
one, Clauses 2, 3 and 4 of this Law if at that moment it is
impossible to determine or calculate the quantity or value of all
issued securities with attaching debt liabilities, or the value
or number of the investment certificates (shares) issued or in
circulation.
(6) A company has a duty to notify the Commission of exceeding
the investment limits, as well as of the measures for prevention
thereof without delay.
Section 70. Provisions for
Transaction in Derivate Securities
[24 October 2002]
Section 71. Exceeding Investment
Limits
[24 October 2002]
Chapter
VI1
Transactions between Master and Feeder
Structures
[13 October
2011]
Section 711. Scope
(1) Investment funds are entitled to perform transactions
between master and feeder structures. A feeder fund up to 15 per
cent of its assets not invested in a master fund may invest:
1) in assets in accordance with Section 61, Paragraph four of
this Law;
2) in transactions in financial derivative instruments
provided they are made for hedging purposes in accordance with
the requirements of Paragraph one of Section 65 and of Paragraph
sixteen of Section 33 of this Law and in view of the investment
limits set out in Paragraph seven of Section 66 of this Law.
(2) To ensure compliance with the requirements of Section 66,
Paragraph seven of this Law the feeder fund shall calculate its
global exposure deriving from transactions in financial
derivative instruments by combining it with the global exposure
of the master fund. Global exposure of the master fund shall be
determined in proportion to the investment by the feeder fund in
the master fund, using the actual global exposure of the master
fund or the potential maximum global exposure of the master fund
as determined in fund management rules or fund prospectus of the
master fund. In future, the feeder fund shall use the chosen
method for calculation of global exposure.
(3) The master fund shall comply with the following
requirements:
1) at least one investor of that fund is a feeder fund;
2) the fund itself is not a feeder fund;
3) the fund is not an investor in the feeder fund.
(4) The following exceptions shall apply to the master
fund:
1) if at least two feeder funds are investors in the master
fund, the master fund may not raise additional capital from other
investors;
2) if the master fund does not market investment certificates
in another Member State but it has one or several feeder funds in
that Member State, the master fund may not ensure compliance with
the requirements of Sections 772 and 773 of
this Law.
(5) The feeder fund has a duty to monitor compliance of the
master fund's operations with the procedure determined in the
fund prospectus and fund management rules of the master fund.
When fulfilling the referred to obligation, the feeder fund has
the right to rely upon information and documents received from
the master fund or - where applicable - from the management
company, the custodian bank and the auditor of the master fund,
unless there is a motivated reason to doubt their accuracy. For
the purposes of this Chapter, an auditor of the fund is the
auditor specified in the fund prospectus or fund management rules
or a document equivalent thereto.
(6) If the management company of the feeder fund or any other
person acting on behalf of the feeder fund or of the management
company receives commissions or other payment in relation to an
investment in investment certificates of the master fund, such
sum or payment shall be credited to the assets of the feeder
fund.
(7) The master fund shall immediately notify the Commission of
any feeder fund that makes investments in its investment
certificates. If a feeder fund is established in another Member
State, the Commission shall immediately notify the competent
authority of the home state of the feeder fund of that
investment.
(8) The master fund shall not charge commissions from the
feeder fund in respect of issuing or repurchasing of investment
certificates.
(9) The master fund shall ensure that all information it
provides in accordance with this Law or the Commission's
regulations, the fund management rules or the prospectus is
available to the management company, the competent authority, the
custodian bank and the auditor of the feeder fund.
(10) If the master fund and the feeder fund are registered in
Latvia, the Commission shall immediately notify the feeder fund
of any decisions taken and violations of the requirements of this
Chapter detected in the activity of the master fund and of the
management company, the custodian bank or the auditor of the
master fund.
(11) If the master fund and the feeder fund are established in
different Member States, the Commission shall immediately inform
the competent authority of the home state of the feeder fund
regarding all decisions taken and violations of the requirements
of this Law or of other regulatory enactments detected relating
to the activity of the master fund registered in Latvia and of
the management company, the custodian bank or the auditor of the
master fund. The Commission shall immediately inform the feeder
fund registered in Latvia of any information it has received from
the competent authority of the home state of the master fund.
[9 July 2013]
Section 712. Receiving
the Authorisation for Transactions between Master-Feeder
Structures
(1) Transaction between master-feeder structures may be made
only after receiving an authorisation from the competent
authority of the home state of the feeder fund and the agreement
or the rules referred to in Section 713, Paragraph one
and Section 714, Paragraphs one and seven of this Law
have taken effect.
(2) If the home state of the feeder fund is Latvia, before
making a transaction between master-feeder structures the feeder
fund shall receive an authorisation from the Commission for
making the transaction. The Commission shall issue an
authorisation, if the feeder fund, its custodian bank and
auditor, as well as the master fund comply with all requirements
of this Chapter. To receive the authorisation, the management
company of the feeder fund shall submit the following documents
to the Commission:
1) the fund management rules of the feeder fund and of the
master fund;
2) the prospectus and key investor information of the feeder
fund and of the master fund;
3) the agreement or rules referred to in Section
713, Paragraph one of this Law regarding the terms of
business of the feeder fund and of the master fund;
4) when an existing fund is converted into a feeder fund -
information to be provided to investors of the feeder fund
referred to in Section 716, Paragraph one of this
Law;
5) if the master fund and the feeder fund have different
custodian banks, the information sharing agreement between the
custodian banks referred to in Section 714, Paragraph
one of this Law;
6) If the master fund and the feeder fund have different
auditors, information sharing agreement between the auditors
referred to in Section 714 , Paragraph seven of this
Law.
(3) If the home state of the master fund is not Latvia, the
management company of the feeder fund, in addition to the
documents referred to in Paragraph two of this Section, shall
also submit to the Commission the attestation by the competent
authority of the home state of the master fund that the master
fund is an open-ended investment fund or a sub-fund of the fund
that complies with the requirements Section 711,
Paragraph three, Clauses 2 and 3 of this Law. The company shall
submit referred to statement in the Latvian language or in
another language accepted by the Commission.
(4) Within 15 working days after the receipt of the documents
referred to in Paragraphs two and three of this Section, the
Commission shall notify in writing the management company of the
feeder fund regarding an authorisation or a prohibition for an
investment by the feeder fund in the master fund.
Section 713.
Master-Feeder Structure Transaction Rules
(1) Before performing transactions between master-feeder
structures, the funds involved shall enter into an agreement
governing the terms of business of the feeder fund and of the
master fund. This agreement shall be provided to fund investors
upon their request and free of charge. Where the funds involved
have the same management company, the company shall not enter
into the agreement but develops internal rules to ensure
compliance with the requirements of this Section.
(2) The Commission shall lay down the content of the agreement
and of the internal rules referred to in Paragraph one of this
Section.
(3) If the feeder fund and the master fund are registered in
Latvia, the agreement referred to in Paragraph one of this
Section, shall be made in compliance with the requirements of
Latvian regulatory enactments and the court of Latvia shall be
determined as the institution for dispute resolution.
(4) If the feeder fund and the master fund are established
(registered) in different Member States, the agreement referred
to in Paragraph one of this Section shall contain a provision
regarding the choice of applicable law stating that this
agreement is subject to the regulatory enactments of the home
state of the feeder fund or of the master fund and that both
parties agree to the jurisdiction of the court of the country
whose law is applicable to the agreement.
(5) The master fund and the feeder fund shall ensure that the
timing for calculating and publishing their net assets is agreed
to avoid differences that might be caused by different time zones
in different countries.
(6) If the management company of the master fund takes a
decision to temporarily suspend repurchasing of investment
certificates, all feeder funds of that master fund, disregarding
the provisions of Section 54, Paragraph three of this Law, shall
be entitled to suspend repurchasing of their investment
certificates for the same time as the master fund.
(7) If the master fund is liquidated, the feeder fund shall
also be liquidated, except in cases when the Commission takes a
decision to authorize the feeder fund which it has
registered:
1) to invest at least 85 per cent of the feeder fund's assets
in investment certificates of another master fund;
2) to convert into a fund other than a feeder fund.
(8) The master fund shall be liquidated not earlier than three
months after it has informed all of its investors and the
competent authorities of the home countries of its feeder funds
regarding the decision to liquidate the fund.
(9) In order to receive the authorisation referred to in
Paragraph seven of this Section, the management company of the
feeder fund shall, not later than two months after the day when
the master fund has notified it regarding the commencement of the
intended liquidation, submit to the Commission a submission and
documents with contents as determined by the Commission. In case
of liquidation, the feeder fund shall submit to the Commission
the submission and a document referred to in Section
351 of this Law, taking into account the time periods
determined in this Paragraph.
(10) If the master fund informs the feeder fund of the
commencement of the intended liquidation more than five months
before the day of actual commencement, the documents referred to
in Paragraph nine of this Section shall be submitted to the
Commission not later than three months before the commencement of
liquidation. The management company of the feeder fund shall
notify fund investors of the intended liquidation of the fund as
soon as possible.
(11) If the master fund is merged with another fund or, in
compliance with the regulatory enactments of its home state,
divided into two or more funds, the feeder fund shall be
liquidated except in cases when the Commission takes a decision
to authorize the feeder fund which it has registered:
1) to continue its operation as a feeder fund of the same
master fund or of another master fund resulting from the merger
or the division of the master fund;
2) to invest at least 85 per cent of its assets in another
master fund that is not resulting from the merger or the
division;
3) to convert into a fund other than a feeder fund.
(12) In order to receive the authorisation referred to in
Paragraph eleven of this Section or to commence liquidation of
the feeder fund, the management company of the feeder fund shall,
not later than one month after the day when it has received the
information from the master fund regarding the intended merger or
division, shall submit to the Commission the submission and
documents with contents as determined by the Commission.
(13) The merger of the master fund shall take effect not
earlier than 60 days after the master fund has provided to its
investors and the competent authorities of the home countries of
its feeder funds information referred to in Section
341 of this Law or an equivalent information.
(14) If the competent authority of the home state of the
feeder fund has not granted an authorisation for the feeder fund
to continue its operation as a feeder fund of the master fund or
as a feeder fund of another fund resulting from the merger or
division of the master fund, the master fund shall ensure that
the feeder fund may repurchase all its investment certificates
from the master fund before the merger or the division of the
master fund takes effect.
(15) Where the master fund has notified the feeder fund,
submitting information referred to in Section 341 of
this Law or equivalent information more than four months before
the effective day of the merger or the division, the documents
referred to in Paragraph twelve of this Section shall be
submitted to the Commission not later than three months before
the relevant day. The management company of the feeder fund shall
notify fund investors and the master fund of the intended
liquidation of the fund as soon as possible.
(16) Within 15 working days after the receipt of all documents
referred to in Paragraphs nine and twelve of this Section, the
Commission shall inform the management company of the feeder fund
in writing regarding authorisation or prohibition for the feeder
fund to perform the activities referred to in Paragraphs seven or
eleven of this Section. After receiving the Commission's
decision, the management company of the feeder fund shall inform
the master fund thereof.
Section 714. Information
Sharing Agreement
(1) If the master fund and the feeder fund have different
custodian banks, these banks shall enter into an information
sharing agreement. The Commission shall determine the content of
the agreement.
(2) If the feeder fund and the master fund have entered into
an agreement in accordance with Section 713, Paragraph
one of this Law, the agreement referred to in Paragraph one of
this Section shall provide that the regulatory enactments of the
Member State that were applied to the fund agreement shall also
apply to the agreement of the custodian banks and both custodian
banks agree to the jurisdiction of the courts of that
country.
(3) If the agreement between the feeder fund and the master
fund is replaced by internal rules, the agreement referred to in
Paragraph one of this Section shall provide that the regulatory
enactments that apply to the information sharing agreement
between both custodian banks shall be either of the Member State
in which the feeder fund is established or, if the Member State
are different, of the Member State in which the master fund is
established, and that both custodian banks agree to the
jurisdiction of the courts of the Member State whose regulatory
enactments are applicable to the information sharing agreement of
custodian banks.
(4) If the custodian bank of the master fund and of the feeder
fund complies with the requirements determined in this Chapter,
sharing of the relevant information shall not be regarded as a
violation of the provisions in respect of disclosure of
information or data protection that are binding on the bank in
accordance with the contract or regulatory enactments, and the
custodian bank or any other person acting on behalf thereof shall
not be held liable.
(5) The management company of the feeder fund shall be
responsible for the provision of all information regarding the
master fund to the custodian bank of the feeder fund that it
needs to perform the duties thereof.
(6) The custodian bank of the master fund has a duty to
immediately notify the competent authority of the home state of
the master fund, the management company and the custodian bank of
the feeder fund of all violations in the activity of the master
fund that the custodian bank detects while performing its
functions that are contrary to the regulatory enactments, the
fund prospectus, the fund management rules or the agreement of
the custodian bank, including:
1) errors in the net asset value calculation of the master
fund;
2) errors in transactions undertaken by the feeder fund in
respect of acquiring investment certificates from the master
fund, subscribing to investment certificates or requests to
redeem or repurchase them;
3) errors related to the payments made by the master fund to
fund investors, to the capitalisation of income or to the
calculation of any related tax to be withheld;
4) non-compliance with the investment objectives, violations
of investment policy or strategy described in the fund management
rules, the fund prospectus or key investor information of the
master fund;
5) violations of investment and borrowing limit specified in
the national regulatory enactments or in the fund management
rules, the fund prospectus or key investor information.
(7) If the master fund and the feeder fund have different
auditors, they shall enter into an information sharing agreement
in order to ensure the performance of the duties thereof.
(8) The agreement referred to in Paragraph seven of this
Section shall contain a provision that, in the audit statement of
the feeder fund, the auditor of the feeder fund shall take into
account the audit statement of the master fund. If the reporting
year of the feeder fund and of the master fund differs, the
auditor of the master fund shall prepare the audit statement on
the last day of the reporting year of the feeder fund. The
auditor of the feeder fund has a duty to notify regarding all
violations specified in the audit statement of the master fund
and of the impact thereof on the feeder fund.
(9) Disclosure of information and provision of the documents
referred to in this Chapter shall not be regarded as a violation
of any laws, regulatory enactments, rules or agreements and shall
not cause the civil liability to the auditor of the fund.
(10) If the feeder fund and the master fund have concluded an
agreement in accordance with Section 713, Paragraph
one of this Law, the agreement referred to in Paragraph seven of
this Section shall provide that the regulatory enactments of the
Member State that were applied to the conditions of the fund
agreement shall also be applied to the agreement of the auditors,
and auditors of both funds agree to the jurisdiction of the
courts of that country.
(11) If the agreement between the feeder fund and the master
fund is replaced by internal rules, it shall be provide for in
the conditions of the agreement referred to in Paragraph seven of
this Section that the regulatory enactments that apply to the
information sharing agreement between the auditors of both funds
shall be either of the Member State in which the feeder fund is
established (registered) or of the Member State in which the
master fund is established (registered), and that the auditors of
both funds agree to the jurisdiction of the courts of the Member
State the regulatory enactments of which are applicable to the
information sharing agreement of the auditors of both funds.
Section 715. Information
to be Provided by the Feeder Fund
(1) In addition to information provided to in Section 57 of
this Law, the prospectus of the feeder fund shall also contain
the following information:
1) a declaration that the fund is a feeder of to a particular
master fund and permanently invests 85 per cent or more of its
assets in the investment certificates of the master fund;
2) the investment objective and policy, including the risk
profile and date on whether the performance results of the feeder
fund and of the master fund are identical or to what extent and
for which reasons they differ, including a description of
investment conditions determined in Paragraph one of Section
711 of this Law;
3) a brief description of the master fund including
information regarding organisation thereof, investment objectives
and policy, risk profile and an indication of how the updated
prospectus of the master fund may be obtained;
4) a brief description of the agreement entered into in
accordance with Paragraph one of Section 713 regarding
the terms of business of the feeder fund and the master fund;
5) information on how the fund investors may obtain complete
information regarding the master fund and regarding the agreement
entered into between the feeder fund and the master fund in
accordance with Section 713, Paragraph one of this
Law;
6) remuneration and payments made by the feeder fund in
respect of its investments in investment certificates of the
master fund, as well as aggregate charges of the feeder fund and
the master fund;
7) payments of taxes and fees applicable to the feeder fund
where it invests its assets in the master fund.
(2) In addition to information referred to in Section 75 of
this Law, the financial statements of the feeder fund shall
include information about commissions retained and paid and other
charges made by the feeder fund and the master fund. The annual
and half-yearly accounts of the feeder fund shall also indicate
where copies of the master fund's annual and half-yearly accounts
are available.
(3) In addition to the requirements of Section 23, Paragraph
one, Section 56, Paragraph five and Section 75, Paragraphs four
and five of this Law, the feeder fund registered in Latvia shall
send to the Commission the prospectus and key investor
information of the master fund, amendments thereto and also
annual and half-yearly reports.
(4) In all public announcements the feeder fund shall disclose
that it permanently invests 85 per cent or more of its assets in
investment certificates of the master fund.
(5) The management company of the feeder fund, upon request of
fund investors, shall provide them with a paper copy of the
prospectus, annual and half-yearly reports of the master fund
free of charge.
Section 716. Conversion
of a Fund into a Feeder Fund and Change of the Master Fund
(1) Before converting a fund into a feeder fund, the
management company of that fund shall provide fund investors with
the following information:
1) a statement that the Commission has authorised investments
by the feeder fund in investment certificates of the respective
master fund;
2) key investor information to investors of the feeder fund
and of the master fund. Key investor information of the feeder
fund shall be updated in compliance with the intended activity of
the fund;
3) the date on which the feeder fund will start to invest in
the master fund or, if it has already invested therein, the date
on which the investment will exceed the limit determined in
Section 66, Paragraph ten of this Law;
4) a statement that fund investors have the right within 30
calendar days to request repurchase of their investment
certificates without any charge except the costs related to sales
of fund assets. That right arises when the feeder fund has
provided its investors with the information referred to in this
Clause.
(2) Information referred to in Paragraph one of this Section
shall be provided not later than 30 calendar days before the day
specified in Paragraph one, Clause 3 of this Section. The
Commission shall determine the procedure for provision of
information referred to in Paragraph one of this Section.
(3) If, under procedure set forth in Section 772 of
this Law, investment certificates of the feeder fund are
distributed in another Member State, the management company of
the fund shall provide information referred to in Paragraph one
of this Section in the official language of the host state of the
feeder fund or in one of its official languages or in the
language approved by the competent authority of the host state of
the feeder fund. The management company of the feeder fund shall
be responsible for producing the translation and it shall certify
that the translation faithfully reflects the contents of the
original documents.
(4) The feeder fund shall not be entitled to invest in
investment certificates of the master fund in excess of the limit
referred to in Section 66, Paragraph ten of this Law before the
expiry of the time period determined in Paragraph two of this
Section.
Chapter VII
Reports
Section 72. General Provisions
Regarding Fund Reports
(1) The company shall maintain accounting of the fund and
prepare annual and half-yearly accounts of the fund in accordance
with this Law, the Law on Accounting and the regulations of the
Commission.
(2) If it is necessary for performance of supervisory
functions, the Commission has the right, to request other fund
accounts, determining the procedure for preparation and
submission of such accounts.
[24 October 2002; 19 June 2008]
Section 73. Fund Accounting Records
and Preparation of Accounts
(1) Accounting records of a fund shall be maintained by the
company or its authorised person.
(2) Accounting records of each fund shall be maintained
separately.
(3) The reporting period of a fund shall normally be one year
and it must coincide with the reporting year of the company.
(4) The company shall prepare annual and half-yearly accounts
of a fund, the content, the amount of information to be included
therein and the time periods for the publishing thereof shall be
determined by this Law and the Commission regulations.
(5) Annual and half-yearly accounts of a fund shall be
approved by the board of directors of the company.
(6) Annual and half-yearly accounts of a fund shall be
publicly available to all persons interested in fund
operations.
(7) Fund investors have the right to request and to receive
free of charge the annual and half-yearly account of the
fund.
(8) Not later than one month from the approval of the annual
account of the fund and not later than four months after the end
of the reporting year the company shall in accordance with the
procedures specified by the Commission publish the annual account
of the fund, as well as ensure that all persons interested in
fund operations have a possibility to become acquainted with it.
For this purpose the company shall insert the annual account of
the fund on the Internet homepage thereof, if any, or provide
such information in accordance with different procedure provided
for in the fund management rules of the relevant fund.
(9) Not later than two months after the end of the reporting
period the company shall ensure that all persons interested in
fund operations have a possibility to become acquainted with the
half-yearly account of the fund. For this purpose the company
shall insert the half-yearly account of the fund on the Internet
homepage thereof, if any, or provide such information in
accordance with different procedure provided for in the fund
management rules of the relevant fund.
(10) In providing cross-border management of funds in another
Member State, the company shall develop accounting policy and
accounting procedures in compliance with the requirements
applicable in that Member State to enable, on the basis of
accounting records, accurate measurement of the fund net asset
value and calculation of the price of investment certificate or
of the fund share value, applied to ensure sale and repurchase of
the investment certificates.
[24 October 2002; 13 October
2011]
Section 74. Examination of Annual
Accounts of a Fund
(1) The annual account of a fund shall be examined by a person
entitled to provide audit services in accordance with the
law.
(2) The fund auditor shall be approved by a managing body
provided for in the articles of association of the company.
(3) The task of the fund auditor is to examine whether the
annual account of the fund prepared by the company conforms to
the regulatory enactments and the fund prospectus, whether
financial statements included in the annual account give a true
and fair presentation of the financial standing and performance
results of the fund and whether the report of the company and
custodian bank meets the requirements of regulatory enactments
and regulations of the Commission.
[24 October 2002; 18 March
2004]
Section 75. Information to be
Included in Annual Account of a Fund
(1) The annual account of a fund as an aggregate shall consist
of financial statements, investment management company statement,
a statement of responsibility of the board of directors of the
investment management company and a statement of the custodian
bank.
(2) The annual account of the fund shall be accompanied by a
fund auditor's report.
(3) The composition of a half-yearly account of a fund shall
be determined by the Commission. Half-yearly accounts of the fund
shall not be subject to compulsory audit by the fund auditor.
(4) The company shall submit the annual account of the fund
under the management thereof and the fund auditor's report to the
Commission within 10 days from the approval of the annual
account, but not later than four months after the end of the
reporting period.
(5) The company shall submit the half-yearly account of the
fund under the management thereof to the Commission within 30
days after the end of the reporting period.
[24 October 2002; 18 March 2004; 8
March 2007]
Section 751.General
Provisions Regarding Company Accounts
(1) The company shall maintain accounting records and prepare
the annual account in accordance with the Law on Accounting, this
Law and statutory regulations of the Commission.
(2) The company shall prepare the annual account for each
reporting year, including financial statements, company's
management report and a statement of management's
responsibility.
(3) The Commission shall establish the procedure for
preparation of the annual account and the consolidated annual
accounts in compliance with the regulatory enactments regarding
accounting and international financial reporting standards.
(4) If it is necessary for performance of supervisory
functions, the Commission has the right to request that the
company prepares other accounts and shall determine the procedure
for preparing and submitting such accounts.
[18 March 2004; 8 March 2007; 29
May 2008; 19 June 2008; 11 March 2010]
Section 752. Preparation,
Audit and Publication of a Company Annual Account
(1) The annual account shall give a true and fair presentation
of the assets and liabilities, financial standing, performance
results and cash flow of the company. If the annual account
prepared in compliance with the requirements of this Law does not
give a true and fair presentation of the company, the notes to
the annual account shall include additional information.
(2) The annual account shall be audited by a sworn auditor or
a commercial company of sworn auditors (hereinafter - sworn
auditor). The company shall, within 10 days after the receipt of
the sworn auditor's statement addressed to its board of
directors, but not later than three months after the end of the
reporting year, submit to the Commission a copy of such
statement.
(3) The shareholders' meeting shall be entitled to approve the
annual account after the receipt of the sworn auditor's
report.
(4) [29 May 2008].
(41) Not later than within 10 days after the
approval of the annual account and not later than within three
months after the end of the reporting year, the company shall
submit to the State Revenue Service a copy of the annual account
and of the sworn auditor's statement together with an extract
from the minutes of the shareholders' meeting about the approval
of annual account. Not later than within 10 days after the
approval of the consolidated annual account and not later than
within seven months after the end of the reporting year, a
company preparing the consolidated annual account shall also
submit to the State Revenue Service a copy of the consolidated
annual account and of the sworn auditor's report in addition to
the documents specified in the first sentence of this Paragraph
together with an extract from the minutes of the shareholders'
meeting regarding approval of the consolidated annual account. A
company shall submit the documents referred to in this Paragraph
either in a paper form or in an electronic form.
(42) The documents referred to in Paragraph
four1 of this Section, if submitted in an electronic
form, or electronic copies of those documents, if submitted in a
paper form, shall be transferred by the State Revenue Service to
the Enterprise Register in an electronic form not later than
within five working days. The Enterprise Register shall ensure
that the received documents are available to the public. The
procedure for transfer and certification of electronic documents
shall be determined in an inter-institutional agreement entered
into between the State Revenue Service and the Enterprise
Register.
(43) Upon receipt of the documents referred to in
Paragraph 42 of this Section, not later than within
five working days the Enterprise Register shall publish in the
official gazette Latvijas Vēstnesis an announcement that
the information referred to in Paragraph 41 of this
Section is available at the Enterprise Register.
(5) A company subject to requirements for capital adequacy in
accordance with this Law both individually and at the level of
the consolidated group shall, in addition to the conditions
determined in Paragraph 41 of this Section, itself
ensure that its annual account together with the sworn auditor's
report are disclosed to the public not later than on May 1 of the
year following the reporting year, but the consolidated annual
account together with the sworn auditor's report - not later than
within seven months after the end of the reporting year. The
referred to annual account and the consolidated annual account
shall be identical with the documents audited by the sworn
auditor. The company may post the relevant information on the
Internet homepage thereof or choose another medium or location
suitable for making that information available to public.
(6) [29 May 2008]
[18 March 2004; 8 March 2007; 29
May 2008; 11 March 2010; 13 October 2011; 9 July 2013]
Section 753. Accounts of
Sub-Funds
In respect of funds with sub-funds, the fund accounts referred
to in this Chapter shall be prepared separately for each
sub-fund. In the annual and half-yearly accounts of a sub-fund,
the company may also use the currency determined for the relevant
sub-fund.
[8 March 2007; 19 June 2008]
Chapter VIII
Freedom to Provide Management Service
[18 March
2004]
Section 76. Rights of a Company
Licensed in Latvia to Provide Management Services in a Member
State
(1) A company licensed in Latvia is entitled to provide in a
Member State only those management services the provision of
which is allowed in Latvia.
(2) A company licensed in Latvia is entitled to commence the
provision of management services in a Member State in accordance
with the procedure determined in this Section by opening a branch
or without opening a branch.
(3) If a company wishes to commence the provision of
management services in any Member State, it shall lodge a
submission to the Commission. In the submission it shall specify
the Member State where it intends to provide management services
and the manner in which it is is intended to provide management
services - by opening a branch or without opening a branch.
Together with the submission the company shall lodge the
developed operational programme indicating the following
therein:
1) the management services the company intends to provide in
the Member State;
2) description of risk management procedure of the
company;
3) description of the procedure developed by the company for
examination of submissions and complaints (disputes) of fund
investors regarding the provision of management services by the
company and of the measures to be taken;
4) description of the procedure developed by the company for
ensuring availability of information upon request by the
competent authority of the home state of the fund.
(4) A company, which intends to commence the provision of
management services in any Member State by opening a branch,
shall include in its submission the address of the branch and the
information specified in Section 10, Paragraph three of this Law
regarding the branch manager. In the operational programme
attached to the submission the company shall additionally specify
the organisational chart, giving a true and fair presentation of
the intended operations of the branch, services to be provided,
and appropriate work organisation.
(5) The Commission shall examine a submission for the
commencement of provision of services by a company in a Member
State and shall inform the competent authority of the relevant
Member State and the relevant company regarding decision thereof
in writing within 30 days after the receipt of all the documents
prepared in compliance with the requirements of regulatory
enactments.
(6) Together with the decision referred to in Paragraph five
of this Section the Commission shall send to the competent
authority of the relevant Member State information and documents
referred to in Paragraphs three and four of this Section,
information regarding the investor protection scheme effective in
Latvia and the maximum amounts of compensations, and, if the
company wishes to provide fund management services in the Member
State, also a description of the scope of the licence granted to
the company. If amendments are made to the information referred
to in this Paragraph, the Commission shall inform the competent
authority of the host state of the company thereof.
(7) The company shall inform in writing the Commission and the
competent authority of the host state of the company regarding
amendments to the information determined in Paragraphs three and
four of this Section, as well as regarding intention to dissolve
the branch no later than 30 days prior to implementing the
amendments or the planned dissolution of the branch.
(8) The Commission shall examine the documents determined in
Paragraph seven of this Section and inform the competent
authority of the host state of the company and the company
regarding its decision in writing within 30 days of the receipt
of the documents.
(9) When providing services in a Member State by opening a
branch, the company shall comply with the rules of operation of a
company applicable in the host state of the company.
(10) When providing services in a Member State without opening
a branch, the company shall comply with the requirements of
Sections 13.1, 13.2, 13.3,
13.4, 14, 14.1 and 54.1 of this
Law and the requirements for establishing an efficient internal
control system.
(11) A company that provides management services on a
cross-border basis to a fund registered in another Member State,
either by opening a branch or without opening a branch, shall
comply with the requirements of this Law and regulations of the
Commission in respect of arranging the business of a company,
including delegation rules, risk management procedures,
provisions for supervision of compliance with the requirements
regulating the operation of a company, as well as preparation and
submission of accounts and reports and internal control system
rules developed by the company.
(12) The company that carries out the activities referred to
in Paragraph eleven of this Section shall submit to the
Commission, upon its request, copies of the annual and
half-yearly accounts of the fund to which it provides management
services on a cross-border basis, as well as the prospectus of
that fund and any further amendments thereto.
[8 March 2007; 13 October 2011]
Section 77. Rights of a Company Licensed in a Member
State to Provide Management Services in Latvia
(1) A company licensed in a Member State is entitled to
provide in Latvia only those management services for the
provision of which the company has received a licence in its home
state by opening a branch in Latvia or without opening a
branch.
(2) A branch of a company licensed in a Member State may
commence its operations in Latvia only after:
1) the Commission has received notification from the competent
authority of the home state of the company, including:
a) confirmation that the relevant company has a valid licence
for the provision of management services in the home state of the
company. If the company wishes to provide fund management
services, it shall also append a description regarding the scope
of the licence granted to the company and the limits determined
in the licence in respect of types of funds it is entitled to
manage,
b) the operational programme indicating those management
services that the company intends to provide in Latvia and a
description of risk management procedures. The operational
programme shall also include the procedure for examination of
applications and complaints (disputes) of fund investors as
developed by the company and the measures to be taken, as well as
a description of the procedures for ensuring availability of
information to the competent authority of the home state of the
fund upon its request,
c) the address and organisational chart of the branch,
d) the given name, surname, citizenship, personal identity
number (if any) or the year and date of birth of the branch
manager,
e) information regarding the system of investor protection,
the participant of which the relevant company is,
f) written confirmation by the competent authority of the home
state of the company that the referred to authority, prior to
commencing internal audits, will duly inform the Commission
regarding the audits at the company's branches in Latvia and will
enable the representatives of the Commission to participate in
such audits and, upon completion of the audit, will without delay
submit a report to the Commission on the findings of the
audit;
2) the Commission has informed the competent authority of the
home state of the company that it is ready to commence the
supervision of the company's branch or 60 days have elapsed since
the date of receipt by the Commission of the notification
referred to in Clause 1 of this Paragraph from the competent
authority of the home state of the company.
(3) A company licensed in a Member State is entitled to
commence the provision of management services in Latvia without
opening a branch, if the Commission has received notification
from the competent authority of the home state of the company
including the information referred to in Paragraph two, Clause 1,
Sub-clauses "a", "b" and "e" of this Section.
(4) If a company licensed in a Member State has commenced the
provision of management services in Latvia in accordance with the
procedure determined by this Section, it has a duty to notify the
Commission regarding any changes planned in the information
provided in accordance with Paragraph two, Clause 1, Sub-clauses
"a", "b" and "e" of this Section at least 30 days prior to
implementing the relevant changes.
(5) A company licensed in a Member State that has commenced
the provision of management services in Latvia in accordance with
the procedure determined by this Section shall prepare and submit
to the Commission in accordance with the procedure determined by
the Commission information required for the performance of
supervisory functions of the Commission and aggregation of
statistical data and accounts on the company's operations in
Latvia.
(6) [13 October 2011].
(7) A branch of a company that is licensed in a Member State
shall ensure that the annual account of the company of that
Member State is published not later than within seven months
after the end of the reporting year. At least the account
disclosing the financial standing at the end of the reporting
period and the report regarding the financial performance during
the reporting period, as well as the opinion of the sworn auditor
shall be translated into Latvian. The branch of the company of
the Member State may make the respective information available to
the public on the Internet homepage thereof or choose another
durable medium for making it available to the public.
(8) A branch in Latvia of a company licensed in a Member State
that manages the assets of the State funded pension scheme in
compliance with the requirements of the Law on State Funded
Pensions shall comply with the requirements determined in Section
13, Paragraphs eleven, twelve, thirteen and fourteen of this Law
in respect of performing critical situation analysis of
investment plans.
(9) A branch of a company licensed in a Member State shall
comply with the requirements of Sections 13.1,
13.2, 13.3, 13.4, 14,
14.1 and 54.1 of this Law, as well as the
requirements for establishing an efficient internal control
system. In performing the supervision of compliance with the
requirements referred to in this Paragraph, the Commission shall
cooperate and consult with the competent authorities of Member
States.
[8 March 2007; 29 May 2008; 11
March 2010; 13 October 2011]
Section 771. Cross-Border
Management of an Investment Fund Registered in Latvia
(1) A company licensed in a Member State that has commenced
providing management services in Latvia in accordance with the
procedure determined in Section 77 of this Law by opening a
branch or without opening a branch shall be entitled to manage
investment funds registered in Latvia in compliance with the
procedure referred to in this Section.
(2) In performing the cross-border management of the funds
referred to in Paragraph one of this Section, a company licensed
in a Member State shall comply with the following:
1) the requirements of the regulatory enactments of the home
state of the company in respect of arranging the business of a
company, including delegation rules, risk management procedures,
provisions for supervision of compliance with the requirements
for the operation of a company, as well as preparation and
submission of accounts and internal control system rules
developed by the company;
2) the requirements of this Law and regulations of the
Commission in respect of activities of an investment fund;
and
3) the fund management rules and the fund prospectus of the
fund in respect of which the authorisation is sought.
(3) The requirements referred to in Paragraph two, Clause 2 of
this Section shall refer to the following:
1) establishment and registration of a fund;
2) issue, sale, repurchase and redemption of investment
certificates;
3) investment policy and limits, also for the calculation of
global exposure and liabilities;
4) limits in respect of borrowing, loans and transactions in
financial instruments, if they are not the fund property upon the
moment of performance of the transaction;
5) valuation of assets and accounting of the fund;
6) calculation of the issue or the repurchase price of
investment certificates and errors in the calculation of net
asset value and compensation to investors related thereto;
7) allocation or reinvestment of income;
8) disclosure and reporting requirements regarding the fund,
including requirements for the prospectus, the fund management
rules and key investor information, as well as periodic
reports;
9) measures related to the marketing of investment
certificates;
10) relationship with fund investors;
11) reorganisation of the fund;
12) liquidation of the fund;
13) maintaining a register of the holders of investment
certificates;
14) fee for the registration and supervision of the fund;
and
15) exercising the voting rights of the holders of investment
certificates and other rights related to Clauses 1, 2, 3, 4, 5,
6, 7, 8, 9, 10, 11, 12 and 13 of this Paragraph.
(4) A company licensed in a Member State shall be responsible
for ensuring that its operations comply with the requirements of
this Section and for taking and implementation of organisational
decisions.
(5) If a company licensed in a Member State wishes to manage a
fund registered in Latvia, it shall lodge to the Commission a
submission regarding the fund management. It shall also submit
the following:
1) a written agreement with the custodian bank that complies
with the requirements of Section 47, Paragraphs four and five of
this Law;
2) information regarding procedure for delegation of the fund
management rights in respect of managing fund investments and
administration of the fund.
(6) If a company licensed in a Member State already manages an
investment fund registered in Latvia, it is not necessary to
repeatedly submit the documents, which are at the disposal of the
Commission. The company shall include information referred to in
this Paragraph in the submission regarding the fund
management.
(7) When the Commission assesses the documents referred to in
Paragraph five of this Section and takes into account information
specified in the description referred to in Section 77, Paragraph
two, Clause 1, Sub-clause "a" of this Law, it shall, if
necessary, request that the competent authority of the home state
of the respective company provides an opinion whether the type of
the fund, in respect of which an authorisation is sought,
complies with the scope of the authorisation granted to the
company.
(8) The Commission may reject the submission by a company
licensed in a Member States where:
1) the company fails to meet those requirements of this
Section, the supervision of compliance whereof falls under the
competence of the Commission;
2) the company has not received the authorisation of the
competent authority of its home state to manage the type of the
fund, in respect of which an authorisation is sought;
3) the company has failed to submit the documents referred to
in Paragraph five of this Section.
(9) Before rejecting the submission the Commission shall
consult with the competent authority of the home state of the
company.
(10) A company licensed in a Member State, in carrying out the
activity referred to in Paragraph one of this Section, shall
ensure in respect of a fund registered in Latvia that:
1) the management company or the custodian bank is not changed
without the authorisation of the Commission,
2) amendments to the fund prospectus and the fund management
rules are not made without the authorisation of the
Commission;
3) the Commission is informed regarding all amendments to the
documents referred to in Paragraph five of this Section.
[13 October 2011; 9 July 2013]
Section 772. Marketing of
Investment Certificates of Investment Funds Registered in Latvia
in a Member State
(1) A company, who wishes to start marketing the investment
certificates of an investment fund registered in Latvia in a
Member State, before commencement of the referred to activity,
shall submit to the Commission the notification filled out in
compliance with Annex 1 of the Commission Regulation (EU) No
584/2010 of 1 July 2010 implementing Directive 2009/65/EC of the
European Parliament and of the Council as regards the form and
content of the standard notification letter and UCITS
attestation, the use of electronic communication between
competent authorities for the purpose of notification, and
procedures for on-the-spot verifications and investigations and
the exchange of information between competent authorities
(hereinafter - European Commission Regulation No 584/2010). The
notification shall be filled out in the language accepted by the
Commission and it shall be submitted to the Commission by means
of electronic data carriers.
(2) The notification referred to in Paragraph one of this
Section shall include information regarding the procedure for
marketing of the investment certificates as determined in the
Member State where the company intends to market investment
certificates, including information regarding the categories of
investment certificates, if any.
(3) If a company managing a fund registered in Latvia wishes
in the respective Member State only to market the investment
certificates of the investment fund under the management thereof
without opening a branch and without providing any other service
referred to in Section 5 of this Law in the respective Member
State, the company shall include the reference in the
notification that the marketing of the fund investment
certificates is carried out by the company managing the
respective fund.
(4) The company shall append the following documents of the
fund to the notification referred to in Paragraph one of this
Section:
1) the fund management rules;
2) the fund prospectus;
3) key investor information;
4) the latest audited and approved annual account, as well as
half-yearly report if it has been approved after the approval of
the annual account.
(5) The company shall ensure the translation of the documents
referred in Paragraph four of this Section in compliance with the
requirements of the regulatory enactments of the Member State in
which the company intends to start distribution of fund
investment certificates.
(6) The Commission shall verify whether the company has
submitted all the documents referred to in Paragraphs one and
four of this Section and whether they have been prepared in
compliance with the requirements of the regulatory
enactments.
(7) Within 10 working days after the receipt of the documents
referred to in Paragraphs one and four of this Section and that
have been duly drawn up, the Commission shall send them in an
electronic form to the competent authority of the Member State
where the company intends to start distribution of the fund
investment certificates. In addition the Commission shall send to
the competent authority of the relevant Member State the
attestation of the registration of a fund prepared in compliance
with Annex II of the European Commission Regulation No
584/2010.
(8) After sending the documents referred to in Paragraph seven
of this Section, the Commission shall notify the company thereof.
The company is entitled to start marketing of the fund investment
certificates in the relevant Member State as of the day when the
Commission has notified the company of sending the documents
referred to in Paragraph seven of this Section.
(9) [9 July 2013].
(10) The fund management company shall ensure that the
documents referred to in Paragraph four of this Section and
amendments thereto, as well as the translation of these documents
in compliance with the requirements of Paragraph five of this
Section are available on the Internet homepage thereof.
(11) The fund management company shall notify the competent
authority of the host state of the fund regarding:
1) any amendments to the documents referred to in Paragraph
four of this Section;
2) any intended amendments to procedure for marketing the
investment certificates or in information included in the
notification referred to in Paragraph one of this Section. The
company shall send that information to the competent authority of
the host state of the fund before introducing the amendments.
(12) If the company wishes to change the procedure for
marketing the investment certificates and amend information
included in the notification referred to in Paragraph one of this
Section, it shall send a notification in writing to the competent
authority of the host state of the fund regarding the intended
amendments before introducing such amendments.
[13 October 2011; 9 July 2013]
Section 773. Marketing of
Investment Certificates of Investment Funds Registered in a
Member State in Latvia
(1) Investment certificates of investment funds registered in
a Member State or securities comparable to such investment
certificates (hereinafter - Member State fund certificates) may
be marketed in Latvia only by the following commercial
companies:
1) credit institutions entitled to provide investment services
in Latvia;
2) investment management companies entitled to provide
management services in Latvia or companies licensed in a Member
State who wish to market in Latvia investment certificates of
investment funds under the management thereof;
3) investment brokerage firms entitled to provide investment
services in Latvia.
(2) The commercial companies referred to in Paragraph one of
this Section shall ensure marketing, repurchase and redemption of
the Member State fund certificates, as well as the settlement
related thereto in Latvia.
(3) A company licensed in a Member State that wishes to market
in Latvia investment certificates of investment funds under the
management thereof without opening a branch, and without
providing any other service referred to in Section 5 of this Law,
shall comply only with procedure determined in this Section.
(4) Marketing in Latvia of the Member State fund certificates
may be started as of the day when the following documents drawn
up in compliance with the procedure determined in this Section
have been submitted to the Commission:
1) attestation by the competent authority of the home state of
the fund regarding the registration of the fund that complies
with Annex 2 of the European Commission Regulation No
584/2010;
2) notification by the fund management company that complies
with Annex 1 of the European Commission Regulation No 584/2010
and includes information regarding procedure for marketing in
Latvia the investment certificates of the relevant fund;
3) the fund management rules or a document equivalent thereto,
the fund prospectus, key investor information and the latest
audited and approved annual account of the fund, as well as the
half-yearly account if it has been approved after the approval of
the annual account.
(5) The documents referred to in Paragraph four, Clauses 1 and
2 of this Section shall be submitted to the Commission in the
language accepted by the Commission.
(6) The documents referred to in Paragraph four, Clause 3 of
this Section shall be submitted to the Commission taking into
account the following requirements:
1) key investor information prepared in a foreign language
shall be accompanied by its translation into the Latvian
language;
2) the fund prospectus, the fund management rules or a
document equivalent thereto and other documents to be submitted
to the Commission that have been prepared in a foreign language
shall be accompanied by their translation into the Latvian
language or another language accepted by the Commission.
(7) A person who is entitled to take decision on behalf of the
fund shall certify the compliance of the translation with the
information contained in the documents prepared in the original
language. The requirements of Paragraph six of this Section shall
also apply to amendments of the relevant documents.
(8) The Commission shall register and keep all notifications
submitted by competent authorities of Member States.
(9) In marketing investment certificates of the fund in
Latvia, the fund management company shall comply with and meet
the following requirements:
1) it shall ensure that investors in Latvia have the same
access to information and documents as in the home state of the
fund;
2) it shall ensure that investors in Latvia are notified, in a
timely manner, regarding changes in the operation of the fund and
of the company, amendments to the fund prospectus, key investor
information and the fund management rules taking into account the
procedure determined in the fund management rules or a document
equivalent thereto;
3) it shall ensure that, upon request of investors, they are
provided free of charge with a copy in a paper form of the fund
prospectus, key investor information, the fund management rules
or a document equivalent thereto, the fund's annual and
half-yearly reports;
4) it shall ensure that investors in Latvia can access the
procedure for examination of submissions and complaints
(disputes) of investors, as developed by the company, and they
can submit complaints regarding the services provided by the
company in the Latvian language;
5) it shall ensure that the Commission is notified, in a
timely manner, regarding amendments to key investor information,
the fund prospectus, the fund management rules or a document
equivalent thereto, specifying where the referred to documents
are available in electronic form;
6) it shall comply with the requirements of regulatory
enactments of the home state of the fund regarding publishing
procedure for issuing, purchase, repurchase and redemption of
investment certificates;
7) it shall ensure that the documents referred to in Paragraph
four, Clause 3 of this Section and any amendments thereto, as
well as translations of such documents are available in an
electronic from on the Internet homepage of the person marketing
investment certificates, the fund management company or the fund
itself;
8) it shall ensure that the content of the fund's documents
that are not translated into the Latvian language is explained to
investors.
(10) If the company wishes to change the procedure for
marketing of the investment certificates or amend information
referred to in the notification letter specified in Paragraph
four, Clause 2 of this Section, it shall, before making any
amendments, notify the Commission in writing regarding the
relevant changes.
(11) If the company wishes to discontinue marketing of the
investment certificates in Latvia or the fund is liquidated, the
company shall inform the Commission of the planned activity and
shall ensure that, before the termination of activity of the fund
or the liquidation of the fund, liabilities to investors in
Latvia are met in accordance with the fund prospectus and the
fund management rules or a document equivalent thereto.
(12) The Commission may suspend marketing of the fund
investment certificates in Latvia in any of the following
cases:
1) the Commission receives a notification from the competent
authority of the home state of the fund that the licence of the
fund management company is cancelled or its validity is
suspended;
2) the Commission receives a notification from the competent
authority of the home state of the fund regarding restricting or
suspending the operations of the fund;
3) the fund, its management company or the person marketing
the fund investment certificates violates the provisions of the
fund prospectus or the fund management rules or a document
equivalent thereto;
4) the fund, its management company or the person marketing
the fund investment certificates violates the requirements of the
regulatory enactments of Latvia, including the requirements or
the regulatory enactments for the protection of investor
interests.
(13) The Commission shall ensure that information regarding
the requirements of the regulatory enactments for the protection
of investor interests is disclosed on the Internet homepage
thereof as these requirements shall be followed when marketing
fund investment certificates of a Member State in Latvia.
[13 October 2011; 9 July 2013]
Section 774. Marketing of
Investment Certificates of Other Investment Funds in Latvia
[9 July 2013]
Chapter IX
Supervision
[18 March
2004]
Section 78. General Provisions of
Supervision
(1) The Commission shall be responsible for the supervision of
companies licensed and funds registered thereby, as well as shall
also supervise the operation of the custodian bank in accordance
with this Law, the Credit Institutions Law, the Law on the
Financial and Capital Market Commission and regulatory enactments
regulating the financial instruments market.
(2) The purpose of supervision is to ensure the compliance of
the establishment and operation of funds and companies with this
Law and other regulatory enactments issued in accordance with
this Law, and to protect the interests of investors.
(3) The Commission shall issue administrative acts in cases
provided for in by this Law. The procedure for the issuing of
administrative acts by the Commission shall be determined by
relevant regulatory enactments.
(4) An administrative act issued by the Financial and Capital
Market Commission in accordance with this Law may be appealed to
the Administrative Regional Court. The Court shall adjudicate the
case as the court of first instance. The case shall be
adjudicated in the panel of three judges. The judgment of the
Administrative Regional Court may be appealed, by filing a
cassation complaint.
(5) Appeal of the administrative act issued by the Commission
in court shall not suspend the execution thereof, if the
administrative act issued by the Commission is a decision
regarding the following:
1) to restrict the operation of the company or of the
custodian bank;
2) to prohibit the company's official from performing his or
her duties;
3) to prohibit from acquiring or increasing a qualifying
holding in the company;
4) to prohibit from exercising voting rights;
5) to prohibit from delegating fund management services;
6) to prohibit from transferring to another company the rights
to manage the fund;
7) to cancel the licence issued to the company for the
provision of management services;
8) to commence liquidation of an investment fund.
(6) In order to ensure supervision of the provision of
management services, the Commission shall be entitled, within its
competence and directly or in cooperation with other institutions
in compliance with the procedure determined by laws and in
addition to the rights determined in the Law on the Financial and
Capital Market Commission and other rights determined in this
Law:
1) to request from any person information regarding its
operation in the financial and capital market and to summon the
relevant person to the Commission to provide information on
site;
2) to request and receive from financial market participants
printouts of telephone conversations and data traffic records of
other type;
3) to request cessation of any practice that is contrary to
the requirements of this Law;
4) to request freezing of assets of the company and the funds
or to restrict the rights to use these assets;
5) to restrict the company's rights to provide management
services;
6) if necessary for the protection of investor interests, to
request suspending of issuing, sale, repurchase and redemption of
investment certificates;
7) to submit to law enforcement authorities information
regarding activities on the financial and capital market that are
contrary to the requirements of this Law;
8) to cancel the licence issued to the company or to the
custodian bank, and to adopt a decision to commence liquidation
of the fund;
9) to take the necessary legal measures in order to ensure
that the company and the custodian bank continue to comply with
the requirements of this Law and the regulations of the
Commission.
[23 October 2008; 11 March 2010; 13
October 2011]
Section 781. Funding to
Ensure of the Supervisory Functions of the Commission
(1) The company shall pay to the Commission for the
supervision of its operation in the following amount and in
accordance with following procedure:
1) up to 0.033 per cent of the average amount of assets of the
investment funds under the management thereof in a quarter, but
not less than 2 500 lats a year;
2) if the company provides the investment service referred to
in Section 5, Paragraph two or three of this Law, up to one per
cent of the gross income of the company from the services
provided in a quarter, but not less than 500 lats a year.
(2) A company licensed in another Member State who has
registered an investment fund in Latvia shall pay to the
Commission for the supervision of the investment fund registered
in Latvia up to 0.013 per cent of the average amount of assets of
such investment funds in a quarter, but not less than 1 000 lats
a year.
(3) In addition to payments referred to in Paragraphs one and
two of this Section, the company and a company licensed in a
Member State shall pay to the Commission the following:
1) 1 000 lats for examination of documentation submitted for
the registration of an investment fund;
2) 300 lats for review of amendments to the fund prospectus or
fund management rules of an investment fund submitted for the
registration.
(4) A branch of a company licensed in a Member State that is
registered in Latvia shall pay to the Commission for the
supervision of the branch in accordance with the following
procedure:
1) up to one per cent of the gross income from the fund
management services provided by the branch in Latvia in a
quarter, but not less than 1500 lats a year;
2) up to one per cent of the gross income from investment
services referred to in Section 5, Paragraphs two and three of
this Law provided by the branch in a quarter, but not less than
500 lats a year.
(5) The Commission shall issue regulations regarding procedure
for calculation of the payments referred to in Paragraphs one,
two, four and eleven of this Section and submission of
accounts.
(6) The payments referred to in Paragraphs one, two, four and
eleven of this Section shall be made by the thirtieth day of the
month following the quarter.
(7) The company and the company licensed in a Member State
shall submit to the Commission the documents evidencing the
payment referred to in Paragraph three of this Section together
with the documents submitted for the registration of the fund or
for the registration of amendments to the investment fund
prospectus or the fund management rules.
(8) For a delayed remittance of payments referred to in this
Section or incomplete remittance thereof a fine for late payment
in the amount of 0.05 per cent of the outstanding amount shall be
calculated for each delayed payment day.
(9) The payments referred to in this Section shall be
transferred into the account of the Commission with the Bank of
Latvia.
(10) The payment referred to in Paragraph three, Clause 2 of
this Section shall not be applied to amendments made in
compliance with Section 28, Paragraph eight and Section 56,
Paragraph seven of this Law.
(11) If an investment management company performs management
of investment funds and alternative investment funds, it shall
pay to the Commission up to 0.033 per cent of average amount of
assets of investment funds and alternative investment funds under
the management thereof in a quarter, but not less than 2 500 lats
a year.
[13 October 2008; 9 July 2013]
Section 79. Internal Audit of a
Company
(1) The Commission shall be entitled to perform an internal
audit in a company.
(2) A company has a duty to permit persons authorised by the
Commission, who perform the internal audit of the company, to
freely review all the documents and information related to the
operation of the company and management of the fund.
(3) The Commission has the right to perform an internal audit
of the custodian bank in respect of the operations related to the
fund.
(4) If during the audit the person performing the audit
detects violations in the operations of the company, he or she
has the right to temporarily withdraw the relevant documents, by
drawing up a statement thereon.
(5) The person performing the audit has the right to make
extracts from documents, request copies of documents at the
expense of the company, certified copies of or extracts from the
documents.
(6) The Commission shall draw up a report on the audit results
and acquaint the board of directors of the company therewith.
(7) If the company disagrees with the report drawn up by the
Commission on the audit results, it shall be entitled to submit a
complaint to the Board of the Commission. The Board of the
Commission shall be entitled to determine that a new audit shall
be carried out or take a decision on amending the report on audit
results, or reject the complaint.
[13 October 2011]
Section 80. Right of the Commission
to Obtain Information
The Commission has the following rights:
1) to request and receive in writing information regarding the
operation of the company and the fund from the company, the
custodian bank, the Bank of Latvia, a commercial register
institution, officials of the company, and, in case of bankruptcy
of the company, also from liquidators or administrators; and
2) to request in writing that the persons referred to in
Clause 1 of this Section present the documents at their disposal
regarding the company and the fund.
Section 81. Right of the Commission to Request
Convening a Meeting of Management Bodies
The Commission has the rights:
1) to request convening a meeting of the board of directors,
the council of the company or a shareholders' meeting, indicating
the agenda in advance; and
2) to send its representative who has the right to express his
or her opinion and submit proposals to a meeting of the board of
directors or the council of the company or a shareholders'
meeting convened in accordance with Clause 1 of this Section.
[9 July 2013]
Section 82. Restrictions of the
Rights to Dispose of the Company and Fund Assets
(1) If the provisions of the regulatory enactments, the fund
management rules, the fund prospectus or the custodian bank
agreement are violated, the Commission has the right to obtain
information from credit institutions and investment brokerage
firms regarding the cash flow and the balance of accounts of the
company or of the fund (sub-funds) and to temporarily restrict
the rights of the company to dispose of the assets of the company
or the fund (sub-funds).
(2) The Commission's decision on determining restrictions
referred to in Paragraph one of this Section shall be implemented
immediately after the receipt thereof.
(3) During the validity of the decision, payments from the
accounts to which the Commission's decision to restrict the
rights of the company applies may be made only upon authorisation
of the Commission.
[13 October 2011]
Section 83. Re-registration of a
Licence and Issue of a Duplicate
(1) If the firm name of a company is being changed, the
Commission shall re-register the company licence.
(2) The company shall submit to the Commission a submission
for the re-registration of the licence not later than within
seven days after the re-registration of the firm name in the
commercial register.
(3) The Commission shall re-register the licence not later
than within seven days after the receipt of the relevant
submission.
(4) If the licence is lost, the company shall without delay
submit to the Commission a submission for the receipt of a
duplicate licence.
(5) The Commission shall issue a duplicate licence not later
than within seven days after the receipt of a relevant
submission.
Section 84. Cancellation of a
Licence
(1) The Commission may, by motivated decision, cancel a
licence issued to a company in the following cases:
1) the company has provided to the Commission or publicly
disseminated false information;
2) the company has not submitted amendments to the documents
submitted to the Commission;
3) the company, its shareholders, council members and
officials do not meet the requirements of this law;
4) the capital of the company does not meet the requirements
of this Law;
5) the company fails to meet the requirements of this Law and
other regulatory enactments, or systematically violates the
provisions of the fund prospectus or the fund management
rules;
6) the operation of the company is contrary to the interests
of fund investors;
7) the company, within 12 months after receipt of the licence,
has not commenced the operation permitted by this Law;
8) the operation of the company has been terminated by a court
adjudication;
9) the company is declared insolvent;
10) the company files a submission for the cancellation of the
licence; or
11) the company is reorganised or liquidated.
(2) If the Commission detects the violations referred to in
Paragraph one, Clauses 1, 2, 3, 4, 5, 6 or 7 of this Section, it
shall warn the company in writing of its violations and impose
the fine provided for in Section 87 of this Law and determines
the time period within which the company must prevent the
detected violation. After expiry of the relevant time period, the
company has a duty to submit to the Commission a report on the
measures taken and their results.
(3) If the company has not eliminated the violations detected
by the Commission within the determined time period, the
Commission shall take a decision regarding cancellation of the
licence issued to the company.
(4) The Commission shall notify the company in writing of the
decision regarding cancellation of the licence or issuance of a
warning to the company, or imposition of a fine and determining a
time period for elimination of violations within three days as
from the date of adoption of the decision.
(5) The Commission shall without delay inform regarding
cancellation of the licence of a company licensed in Latvia, the
branch of which operates in a Member State or which provides
management services in a Member State without opening a branch,
the competent authority of the relevant Member State. If a
company licensed in Latvia manages an investment fund registered
in a Member State, the Commission shall send information referred
to in this Paragraph also to the competent authority of the home
state of that fund.
(6) The Commission shall conduct the supervision of the
company until the full settlement of the liabilities of the
company towards fund investors and other clients.
(7) The Commission shall notify the European Securities and
Markets Authority of cancellation of the licence issued to a
company.
[11 March 2010; 13 October
2011]
Section 85. Supervision of a Company
Licensed in Latvia Providing Management Services in a Member
State
(1) Prior to performance of an internal audit of a branch of a
company licensed in Latvia providing management services in the
territory of a Member State, the Commission shall inform the
competent authority of the relevant Member State.
(2) The competent authority of a Member State, upon its own
initiative or at the Commission's request, is entitled to conduct
an internal audit of a company licensed in Latvia that operates
in the territory of the relevant Member State.
(3) The Commission shall supervise compliance with the
requirements referred to in Section 76, Paragraphs ten and eleven
of this Law.
(4) The Commission shall supervise compliance of the company's
operations with the requirements of regulatory enactments to
enable the company that provides fund management services in
another Member State to ensure compliance with the requirements
of the regulatory enactments regarding the structure and
activities of the fund managed thereby.
[13 October 2011]
Section 86. Supervision of a Company
Licensed in a Member State and Providing Management Services in
Latvia
(1) The Commission shall supervise whether a branch of a
company licensed in a Member State that operates in Latvia
complies with the requirements of Section 77, Paragraph nine of
this Law. The Commission has the right to inspect the measures
taken by the referred to branch to ensure compliance with these
requirements.
(2) The Commission shall supervise whether the activities of a
company which is licensed in another Member State and which, in
compliance with the provisions of this Law, has started providing
cross-border management services of a fund registered in Latvia,
comply with the requirements of Section 771, Paragraph
two, Clauses 2 and 3 of this Law.
(3) If the Commission discovers that a company which is
licensed in a Member State and which in compliance with the
provisions of this Law has opened a branch or has commenced the
provision of management services in Latvia, fails to comply with
or violates this Law and the regulatory enactments issued in
accordance with this Law, it shall request that the relevant
company prevents the detected violations and shall notify the
competent authority of the home state of the company thereof.
(4) If, in the case referred to in Paragraph three of this
Section, the company licensed in a Member State does not comply
with instructions of the Commission, the Commission shall notify
the competent authority of the home state of the company of the
detected violations and request that the company takes the
necessary measures to ensure prevention of the detected
violations as well as that the Commission be informed of the
measures taken by the competent authority of the home state of
the company.
(5) If, despite the measures referred to in Paragraphs three
and four of this Section, the company licensed in a Member State
continues to violate this Law and the regulatory enactments
issued in accordance with this Law, the Commission, after
informing the competent authority of the home state of the
company, may take measures provided for in this Law for ensuring
supervision in order to prevent the relevant company from further
violations or may apply penalties provided for in this Law. The
Commission has the right to prohibit the relevant company from
performing any operations in Latvia henceforth, including
management of the investment fund registered in Latvia, assets of
the state funded pension scheme and assets of the pension plans
established by the private pension funds. The Commission has such
rights also if the competent authority of the home state of the
company cannot take measures referred to in Paragraph four of
this Section due to objective reasons or the implementation of
such measures in Latvia is impossible.
(6) The requirements specified in Paragraphs three, four and
five of this Section shall not prevent the Commission from taking
measures to prevent violations of the regulatory enactments of
Latvia in the field of protection of the legitimate interests of
investors. Within the framework of such measures, the Commission
is entitled to prohibit the relevant company from continuing the
provision of management services in Latvia until the violations
are prevented.
(7) If the Commission exercises the rights referred to in
Paragraphs three, four and five of this Section and takes
measures that provide for imposing a penalty to a company
licensed in a Member State or for restricting its operation in
Latvia, the Commission shall justify the necessity for such
measures and immediately inform the relevant company and the
competent authority of the home state of the company thereof. The
company has the right to appeal the decisions taken by the
Commission in accordance with the procedure determined by the
regulatory enactments of Latvia.
(8) In extraordinary circumstances, notwithstanding the
procedures determined in Paragraphs three, four and five of this
Section, the Commission has the right to immediately take
precautionary measures against the company or the investment fund
in order to protect the legitimate interests of investors and
other recipients of management services. The Commission shall
immediately inform the European Commission, the European
Securities and Markets Authority and the competent authority of
the home state of the company regarding taking such measures.
(9) The Commission, upon its own initiative or upon request of
the competent authority of the home state of the company, has the
right to carry out internal audits of a branch of a company
registered in another Member State that operates in Latvia. The
competent authority of the home state of the company has the
right to carry out the internal audits of the company's branch in
Latvia by itself or it may authorise another person to carry out
such audit by notifying the Commission thereof in advance.
(10) The Commission has the right by a justified decision to
refuse for a competent authority of another Member State to carry
out internal audit in the territory of Latvia upon the request by
the competent authority of such Member State, as well as to
refuse participation of authorised representatives of the
competent authority of another Member State in the audit, if:
1) such audit or participation of the authorised
representatives of a competent authority of another Member State
in the audit would adversely affect the sovereignty, security or
policy of the state of Latvia;
2) legal proceedings have already been commenced in Latvia in
respect of the same violation and against the same persons;
3) a court judgment in respect of the same violation and the
same persons has already been taken.
(11) If the Commission carries out an audit of a Latvian
branch of a company registered in another Member State upon
request of the competent authority of such Member State, the
referred to competent authority has the right to participate in
the audit, taking into account the instructions of the the
Commission.
(12) If in a branch of a company registered in another Member
State, which operates in Latvia, an audit is carried out by the
competent authority of the relevant Member State, the Commission
has the right to participate in the audit.
(13) By notifying the Commission in advance, the competent
authority of the home state of the company may itself or through
the authorised person verify information referred to in Section
88, Paragraph three of this Law in a branch of a company
registered in such Member State which operates in Latvia. This
provision shall not restrict the Commission's rights to carry out
internal audits compliance with procedure determined in this
Section in a branch of a company registered in another Member
State which operates in Latvia.
(14) The Commission shall prohibit a branch of a company
registered in another Member State which operates in Latvia or a
company registered in another Member State that provides
management services in Latvia without opening a branch from
continuing the provision of management services in Latvia, if the
Commission has received a notification from the competent
authority of the home state regarding restricting or cancelling
the licence issued to that company. Such measures may include
decisions whereby the relevant company is prohibited from
carrying out any further activity in Latvia.
(15) If the Commission considers that the measures referred to
in Paragraph four of this Section taken by the competent
authority of the home state to ensure that the relevant company
prevents the detected violations are not commensurate with the
violations, the Commission shall inform the European Securities
and Markets Authority thereof.
(16) Exchange of information for the purposes of this Section
shall be undertaken by the Commission taking into account the
requirements of European Commission Regulation No 584/2010.
[13 October 2011]
Section 87. Liability
(1) The Commission has the right to impose a fine on the
company and the custodian bank in the amount up to 400 minimum
monthly salaries for the following violations:
1) for failure to submit to the Commission the documents and
information provided for in this Law and Commission regulations
issued on the basis of this Law, as well as amendments made to
the submitted documents and information within the time periods
determined by the Commission;
2) for the submission of false information to the Commission
or public dissemination of such information;
3) for the activities violating the provisions of this Law in
respect of publishing of information;
4) for violation of the provisions of registration and storage
and fund property;
5) for violation of provisions of issue, repurchase and
redemption of investment certificates;
6) for making payments from the fund property not provided for
in the fund prospectus;
7) for violation of the company or fund liquidation
procedures;
8) for non-reporting, in case of detection of violations of
the provisions of this Law, the fund prospectus or the fund
management rules;
9) for failure to ensure the possibility provided for in the
law to become acquainted with the fund prospectus, key investor
information and the fund management rules and annual and
half-yearly accounts;
10) for exceeding investment limits, except for the cases when
such exceeding is permissible in accordance with this Law;
11) for violations of requirements of this Law and of the
European Commission Regulation No 583/2010 regarding preparation
of key investor information.
(11) The Commission has the right to impose a fine
of up to 10 000 lats on a person, if that person has acquired or
increased a qualifying holding before submitting to the
Commission the notification referred to in Section 71,
Paragraph two or four of this Law or during the examination of
that notification.
(12) For activities resulting in a violation of the
requirements of regulatory enactments on prevention of money
laundering and terrorism financing the Commission shall impose on
the company a fine of 5 000 to 100 000 lats.
(2) The payment of the fine shall not release from other
liability determined by the law.
[8 March 2007; 13 October 2011]
Chapter X
Exchange of Information
[18 March
2004]
Section 88. Cooperation of the
Commission with Competent Authorities of Member States and Other
States
(1) The Commission shall be responsible for cooperation with
competent authorities of Member States in order to ensure the
supervision of provision of management services in the whole
territory of Member States.
(2) Based on a relevant motivated request, the Commission
shall provide to competent authorities of Member States
information regarding companies licensed in Latvia that provide
management services in the territory of the relevant Member State
and that have close links with any company licensed or to be
licensed in the Member State, or with a member of its council or
board of directors, or its owner. The Commission has the right to
indicate that the relevant information may be disclosed to third
parties that need it for the performance the functions determined
by law only upon a prior written approval of the Commission.
(3) The Commission shall notify the competent authority of the
relevant Member State regarding the following activities it has
taken:
1) any sanctions or restrictions on operation it has applied
to a company licensed in Latvia that provides management services
in that Member State. If a company licensed in Latvia manages an
investment fund registered in another Member State, the
Commission shall send the information referred to in this Clause
also to the competent authority of the home state of the
fund;
2) any sanctions and restrictions on operation, including
suspending the issuing, repurchase or redemption of the
investment certificates, it has applied to an investment fund
registered in Latvia the investment certificates of which are
marketed in the territory of that Member State. If an investment
fund registered in Latvia is managed by a company registered in
another Member State, the Commission shall send the information
referred to in this Clause also to the competent authority of the
home state of that company;
3) any sanctions or restrictions on operation it has applied
in compliance with Section 86, Paragraph five of this Law to such
company licensed in a Member State that, in compliance with the
provisions of this Law, has opened a branch or started providing
management services in Latvia.
(4) In order to perform supervisory functions the Commission
may, upon entering into a cooperation agreement, exchange
information with competent authorities of other Member States, if
the provisions of Section 89 of this Law have been complied
with.
(5) If at the disposal of the Commission is information that a
commercial company which is not subject to its supervision
carries out activities in another Member State that are contrary
to the regulatory enactments of the European Union in the field
of management services, the Commission shall notify the competent
authority of the relevant Member State thereof.
(6) If at the disposal of the Commission is information that
an investment fund registered in a Member State which is not
subject to its supervision and investment certificates of which
are marketed in Latvia, operates not taking into account the
requirements determined in the European Union for the activities
of investment funds, the Commission shall notify the competent
authority of the relevant Member State thereof.
(7) If, despite the measures determined in Paragraph six of
this Section taken by the competent authority of the home state
of the fund, an investment fund registered in a Member State
continues its operation, infringing upon the legitimate interests
of Latvian investors, the Commission, after notifying the
competent authority of the home state of the fund, has the
right:
1) to take measures provided for in this Law to protect the
interests of investors in Latvia, including to suspend marketing
of investment certificates in Latvia;
2) to inform the European Securities and Markets Authority
regarding the violation.
(8) If the Commission receives information referred to in
Paragraph five or six of this Section from a competent authority
of another Member State, the Commission, within its competence,
shall perform the necessary actions to prevent the detected
violations and inform the respective competent authority which
have submitted such information.
(9) Exchange of information for the purposes referred to in
this Section shall be carried out in accordance with the
requirements of European Commission Regulation No 584/2010.
[13 October 2011; 9July 2013]
Section 89. Restricted Access Information
(1) Information received by the Commission from competent
authorities of Member States or foreign states for the purpose of
performing supervisory functions shall be deemed to be restricted
access information.
(2) The information determined in Paragraph one of this
Section may be disclosed to third parties who require such
information for performing the functions specified by law only
upon prior written authorisation of the competent authority of
the relevant Member State or the foreign state and only for the
purposes to which the relevant competent authority has agreed to
disclose such information.
(3) The Commission is entitled to use restricted access
information received from the competent authority of a Member
State or a foreign state in the following cases:
1) to verify the information provided by the company in order
to obtain a licence;
2) to ascertain the compliance of the custodian bank or the
company with the requirements of regulatory enactments;
3) to apply sanctions determined in this Law;
4) in legal proceedings on appeal of the administrative acts
issued or actual actions performed by the Commission.
(4) The restrictions determined in Paragraphs two and three of
this Section shall not prevent the Commission from providing
restricted access information to:
1) authorities in charge of the State supervision of credit
institutions, companies, investment funds or collective
investment undertakings comparable to investment funds, insurance
companies, other financial institutions and the financial
market;
2) persons responsible for the liquidation or insolvency
procedures of companies, investment funds or collective
investment undertakings comparable to investment funds or persons
involved in providing management services;
3) persons who in accordance with the authorisation granted by
the competent authority conduct internal inspection or audit of
companies, investment funds or collective investment undertakings
comparable to investment funds, credit institutions, insurance
companies and other financial institutions;
4) institutions managing the compensation schemes for
investors and depositors, if the relevant authorities require
such information for performance of their functions;
5) the European Securities and Markets Authority, the European
Banking Authority, the European Insurance and Occupational
Pensions Authority and the European Systemic Risk Board.
(5) The provisions of this Section shall not prevent the
Commission from providing restricted access information to the
Bank of Latvia or central banks of Member States or other
institutions responsible for monitoring the payment system, if
the referred to authorities require such information for
performance of the functions specified by the law.
(6) The provisions of this Section shall not prevent the
Commission from providing restricted access information to the
regulated market maker, the Latvian Central Depository or
institutions which ensure clearing and settlements for
transactions in financial instruments in a Member State, provided
it considers that the provision of such information is required
for ensuring the relevant action of referred to institutions if
settlement or clearing system participants do not fulfil their
liabilities or there are grounds for considering that they would
not fulfil their liabilities.
[13 October 2011; 9July 2013]
Section 90. Cooperation of the
Commission with the European Commission and the European
Securities and Markets Authority
(1) The Commission shall notify the European Commission
regarding:
1) issuing of a licence for provision of management services
to a company that is a subsidiary of a company registered in a
foreign state;
2) cases when after an acquisition of a qualifying holding a
company that is registered in Latvia becomes a subsidiary of a
company registered in a foreign state;
3) such categories of issuers and debt securities issued by
them, which meet the requirements of Section 66, Paragraph four
of this Law. This information shall be accompanied by a report
certifying the status of the liabilities attached to debt
securities;
4) activities carried out in compliance with Section 88,
Paragraph seven, Clause 1 of this Law;
5) activities carried out in compliance with Sections 77 and
771 and Section 86, Paragraph five of this Law and
after which a company licensed in a Member State is denied the
commencement of provision of management or other services or
prohibited from further provision of management services in
Latvia.
(11) The Commission shall send information referred
to in Paragraph one, Clauses 3, 4 and 5 of this Section also to
the European Securities and Markets Authority.
(2) In the case referred to in Paragraph one, Clause 1 of this
Section, the Commission shall also send to the European
Commission information regarding the structure of the group in
which the company in included.
(3) The Commission shall inform the European Commission and
the European Securities and Markets Authority of difficulties of
general nature faced by a company which has received a licence
for providing management services when providing management
services or when commencing to provide management services in
foreign countries.
(4) The Commission may inform the European Securities and
Markets Authority regarding cases when a competent authority of
another Member State does not provide information upon a
justified request by the Commission or fails to provide
information within appropriate (reasonable) time period, or when
it refuses the Commission's request to carry out internal audit
in the territory of that Member State or refuses participation of
the authorised representative of the Commission in internal audit
or fails to respond to such request within appropriate
(reasonable) time period.
[19 June 2008; 13 October 2011]
Transitional Provisions
1. Until the day when a special law regulating the issues
related to reorganisation of undertakings comes into force within
the meaning of this law the term:
1) "merger" is defined as a reorganisation process of an
undertaking (company) during which the merging undertaking
(company) is merged to another already existing undertaking
(company). As a result of the merger, the merging undertaking
(company) shall cease to exist without liquidation
procedures;
2) "consolidation" is defined as a reorganisation process of
an undertaking (company) during which the undertaking (company)
becomes consolidated with another undertaking (company), setting
up a new undertaking (company). As a result of consolidation, the
consolidated undertakings (companies) which have fully become
part of the new undertaking (company) shall cease to exist
without liquidation procedures;
3) "division" is defined as a reorganisation process of an
undertaking (company) during which the dividing undertaking
(company) transfers its property to the receiving undertaking
(company) through splitting up or divestiture. The receiving
undertaking (company) may be either an already existing
undertaking (company) or an undertaking (company) to be newly
established:
a) in the case of splitting up, the dividing undertaking
(company) ceases to exist and transfers all of its property to
receiving undertakings (companies), and
b) in the case of divestiture, the dividing undertaking
(company) transfers part of its property to one receiving
undertaking (company) or more receiving undertakings (companies)
but the dividing company itself continues to exist.
2. Public joint stock companies which at the moment of coming
into force of this Law are performing the activities determined
in Section 3 of this Law shall terminate such activity, shall
liquidate themselves, shall transform themselves into a private
joint stock company or reorganise themselves in accordance with
the procedures determined in this Paragraph. Such reorganisation
shall meet the following provisions:
1) a public joint stock company (hereinafter - merging
undertaking) may reorganise itself only by being merged to an
investment company (hereinafter - receiving undertaking) which on
the basis of the assets or a part thereof of the merging
undertaking shall create a closed-ended fund;
2) merging shall take place on the basis of an agreement;
3) the agreement shall provide that the parties upon entering
into the agreement approve the fund prospectus and the fund
management rules which shall be attached to the draft
agreement;
4) the agreement shall be entered into by the executive bodies
of both companies after the draft agreement has been approved in
the general meetings of both companies by the majority provided
for by the articles of association of the relevant company for
taking of a decision regarding reorganisation of such
company;
5) the agreement, the fund prospectus and the fund management
rules shall come into effect after their approval by the
Commission but not earlier than three months after an
announcement regarding the merger and establishment of a
closed-ended fund is published in the newspaper Latvijas
Vēstnesis unless the agreement provides for a later time
period for coming into effect;
6) if the Commission, motivating its decision, does not
approve the agreement, the fund prospectus and the fund
management rules, the parties to the agreement shall convene a
repeated general meeting to amend the agreement, the fund
prospectus or the fund management rules; the amended documents
shall be submitted to the Commission for approval;
7) upon coming into effect of the agreement all rights and
liabilities of the merging undertaking shall be transferred to
the receiving undertaking;
8) coming into effect of the agreement shall constitute the
basis for exclusion of the merging undertaking from the
Enterprise Register of the Republic of Latvia;
9) the custodian bank agreement shall be approved by the
Commission;
10) after coming into effect of the agreement, the receiving
company shall establish a closed-end fund, separating the assets
of the merging undertaking or a part thereof, which on the day of
establishment of the fund shall become the property of the fund
in accordance with the agreement;
11) the receiving company shall inform the Commission
regarding the establishment of a fund, at the same time
submitting a report on the investment structure of the fund on
the day of establishment of the fund;
12) the Commission shall register the fund without the issue
of an issuing authorisation, if it has registered the fund
prospectus, the fund management rules and the custodian bank
agreement;
13) the receiving company may dispose of the property of the
established fund after its registration;
14) all shareholders of the merging undertaking shall have the
shares of the merging undertaking owned by them proportionally
exchanged for fund investment certificates; and
15) the receiving undertaking shall within six months after
coming into effect of the fund prospectus take the necessary
actions in compliance with the provisions of this Law in order to
achieve the compliance of the fund with the provisions of this
Law and the fund prospectus.
3. Reorganisation of public joint stock companies provided for
in transitional provisions of this Law shall not be subject to
imposition of taxes and fees determined in Latvia.
[18 March 2004]
4. If fund investments do not meet the provisions of this Law
and the fund prospectus, the company established prior to the day
of coming into force of this Law shall be prohibited from
performing new issues.
5. Persons who are not referred to in Paragraphs 2 and 6 of
the Transitional Provisions of this Law and who upon coming into
force of this Law are performing the activity regulated by this
Law shall terminate such activity or adjust it to this Law.
[24 October 2002]
6. Public joint stock companies which have received licences
for the operation of a collective investment company shall
register such licences and the licences of the established funds
with the Commission within three months as from coming into force
of this Law. In such case the licences shall remain valid.
7. Within six months after the registration with the
Commission, the companies referred to in Paragraph 6 of these
Transitional Provisions shall:
1) acquire the legal status conforming to the requirements of
this Law, set up the management structure and the equity capital;
and
2) in compliance with the provisions of this Law and the Law
on Privatisation Certificates make the relevant amendments to the
structure of investments acquired at the expense of fund
investors and provisions of the fund prospectus, as well as draft
other documents.
8. In accordance with Paragraph 7 of these Transitional
Provisions the amendments made to the fund prospectus shall come
into effect also without consent of fund investors three months
after the day when such amendments were published in the
newspaper Latvijas Vēstnesis.
9. Each fund investor, irrespective of the initial provisions
of the agreement (prospectus), may, within three months as from
the publishing of the amendments to the agreement (prospectus) in
the newspaper Latvijas Vēstnesis, request that the
companies referred to in Clause 6 of these Transitional
Provisions repay his or her investment. Claims regarding
repayment shall be satisfied in compliance with the initial
provisions of the agreement (prospectus).
10. If the agreement initially entered into by the company
referred to in Clause 6 of these Transitional Provisions provides
for liability of investors regarding liabilities and transactions
of the company performed at the joint expense of fund investors
or recovery of the relevant claims from the property acquired at
the joint expense of fund investors, such claims shall remain
valid.
11. After coming into force of this Law, the name of the
company determined in Section 9 of this Law shall be permitted to
be used only by those investment companies which have been set up
or re-registered in accordance with this Law.
12. [1 June 2000]
13. Within three months from the proclamation of this Law the
Commission shall approve and publish procedures for licensing of
investment companies and funds. If the Commission has not
approved such procedures the relevant Cabinet Regulations shall
be applied.
14. Until the moment of coming into force of relevant
regulatory enactments the monetary resources in the fund shall be
kept in the custodian bank in compliance with the acts issued by
the Bank of Latvia regarding the trust operations.
15. Amendments to Section 6, Paragraph three, Section 40,
Paragraph two, Section 76, Paragraph one and Section 77,
Paragraph two (in respect of the change of the name of the
Securities Market Commission) shall come into force on 1 July
2001.
[1 June 2000]
16. Until 1 January 2004 transactions with financial
derivative instruments at the expense of the fund may only be
made in order to secure oneself against the risk which occurs due
to fluctuations in the value of fund assets.
[24 October 2002; 18 March
2004]
17. Investment companies which have obtained a licence for
operation of the investment company until 30 April 2004
(inclusive) shall re-register the license with the Commission by
31 December 2004. A submission for re-registration shall specify
the management services the company intends to provide. The
submission shall be accompanied by the documents specified in
Section 10, Paragraph five of this Law or amendments thereto, if
such documents have been already submitted to the Commission in
accordance with other regulatory enactments and the amendments
are to be introduced taking into account future activities
planned by the company. When re-registering the licence in the
case referred to in this Paragraph, no State fee shall be
paid.
[18 March 2004]
18. If an investment company managing the assets of pension
plans established by private pension funds intends to continue
the management of the referred to assets after 30 April 2004, it
shall, when submitting documents for re-registration of the
licence, indicate individual management of investor financial
instruments as one of its management services.
[18 March 2004]
19. If an investment company managing the assets of the State
funded pension scheme intends to continue the management of the
referred to assets after 30 April 2004, it shall, by 31 December
2004, take measures necessary to ensure the compliance of the
company and its operations with the requirements of this Law and
the Law on State Funded Pensions.
[18 March 2004]
20. Investment companies which have commenced the management
of open-ended investment funds until 30 April 2004 (inclusive),
shall, by 31 December 2004, prepare and submit to the Commission
simplified prospectus of the open-ended investment funds under
the management thereof. Investment companies may offer the
simplified fund prospectus to fund investors if the Commission
has not raised objections as to its compliance with the
requirements of this Law within 20 days after the receipt of this
document.
[18 March 2004]
21. Investment companies which have commenced the management
of investment funds until 30 April 2004 (inclusive) and plan to
make amendments to the prospectus of the fund under the
management thereof after the referred to date, since the
information provided for in the prospectus has changed, shall
develop and submit to the Commission the new wording of the
prospectus prepared in compliance with the provisions of Section
57 of this Law regarding the full version of an investment fund
prospectus.
[18 March 2004]
22. Until the day when relevant amendments to the regulatory
enactments regulating the securities market come into force, the
term "investment brokerage firm" used in this Law shall be read
as the term "a brokerage firm", while the term "investment
services" - as the term "intermediary activity".
[18 March 2004]
23. By 1 May 2004, the Commission shall develop and approve
the samples of all submissions and notifications determined in
this Law, publish them in the newspaper Latvijas
Vēstnesis, as well as insert them on the Internet homepage of
the Commission.
[18 March 2004]
24. Investment companies shall prepare the annual account for
the year 2004 in accordance with the requirements of the Law on
Annual Accounts of Undertakings.
[18 March 2004]
25. Section 13, Paragraph two, Clause 6 of this Law shall come
into force from 1 November 2007.
[18 March 2004]
26. Amendments to Section 752 of this Law shall
apply to accounts submitted to the State Revenue Service on 1
July 2008 or on a later date.
[29 May 2008]
27. Section 33, Paragraphs sixteen and seventeen, Section 61,
Paragraph six, Section 62, Paragraph two and Section 65,
Paragraph one of this Law shall come into force in the new
wording form 23 July 2008.
[19 June 2008]
28. If an application regarding an administrative act of the
Financial and Capital Market Commission is filed to the
Administrative Regional Court by 1 January 2009, the decision
regarding the application filed shall be taken, the initiated
administrative case shall be adjudicated and the judgment in the
case shall be taken and appealed in accordance with the
provisions of the Administrative Procedure Law.
[23 October 2008]
29. Companies that have entered into agreements for delegating
fund management services, by the day when amendments to Section
15 of this Law (in respect of expressing Paragraphs four, five,
six, seven, eight and nine in new wording and supplementing
Section with Paragraphs ten, eleven, twelve, thirteen, fourteen
and fifteen) come into force, shall take the necessary measures
to ensure that as from 1 October 2010 receiving of the delegated
fund management service shall be provided in accordance with the
agreements and the procedures that comply with the requirements
of this Law.
[11 March 2010]
30. As of 1 July 2012, the requirements of this Law shall
apply to key investor information in respect of open-ended
investment funds registered before 15 November 2011.
[13 October 2011]
31. Section 781 of this Law shall come into force
from 1 January 2012.
[13 October 2011]
32. Not later than two months after amendments to Sections 13,
13.1, 13.2, 13.3,
13.4, 13.5 and 14 of this Law come into
force, an investment management company shall submit to the
Commission a written confirmation that the internal control
system of the company complies with the requirements of this
Law.
[13 October 2011]
33. A company, which has registered closed-ended investment
funds in compliance with the provisions of this Law, as of the
day of coming into force of the Law on Alternative Investment
Funds and Managers Thereof shall comply with the requirements
determined in the referred to Law in respect of the managers of
alternative investment funds and the requirements in respect of
conversion a closed-ended investment fund into an alternative
investment fund.
[9 July 2013]
34. Amendments to Section 8, Paragraph two of this Law in
respect of setting up an initial capital shall come into force
from 1 January 2014. Until 31 December 2013 the term "initial
capital" shall be capital comprised of:
1) paid-up equity capital which is reduced by the value of
cumulative preference shares;
2) stock or share issue premium;
3) reserves (except revaluation reserves);
4) retained profit or loss of previous years;
5) profit of the current year of operation, if there is a
sworn auditor's statement of the existence of the profit and it
is calculated considering all the necessary provisions for asset
impairment, estimated tax payments and dividends and the
Commission has agreed to the inclusion of the profit of the
current year of operation in the initial capital.
[9 July 2013]
35. Amendment to Section 8, Paragraph nine of this Law in
respect of establishing own funds and procedures for calculation
thereof shall come into force from 1 January 2014. Until 31
December 2013 the term "own capital" used in this Law shall be
the elements of capital, reserves and liabilities disclosed in
the financial statements audited by a manager, which are freely
available to a manager for covering potential losses related to
operational risks, but not yet identified, the procedure for
calculation of which shall be determined by the Commission.
[9 July 2013 (The referred to
amendment is included in the wording of the Law as on 1 January
2014)]
Informative Reference to European
Union Directives
[8 March 2007;
29 May 2008; 19 June 2008; 13 October 2011]
This Law contains legal norms arising from:
1) Council Directive 85/611/EEC of 20 December 1985 on the
coordination of laws, regulations and administrative provisions
relating to undertakings for collective investment in
transferable securities (UCITS);
2) Council Directive of 88/220/EEC of 22 March 1988 amending,
as regards the investment policies of certain UCITS, Directive
85/611/EEC on the coordination of laws, regulations and
administrative provisions relating to undertakings for collective
investments in transferable securities (UCITS);
3) European Parliament and Council Directive 95/26/EC of 29
June 1995 amending Directives 77/780/EEC and 89/646/EEC in the
field of credit institutions, Directives 73/239/EEC and 92/49/EEC
in the field of non-life insurance, Directives 79/267/EEC and
92/96/EEC in the field of life assurance, Directive 93/22/EEC in
the field of investment firms and Directive 85/611/EEC in the
field of undertakings for collective investment in transferable
securities (UCITS), with a view to reinforcing prudential
supervision;
4) Directive 2000/64/EC of the European Parliament and of the
Council of 7 November 2000 amending Council Directives
85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC as regards
exchange of information with third countries;
5) 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;
6) Directive 2001/108/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 regard to investments of
UCITS;
7) Directive 2004/109/EC of the European Parliament and of the
Council of 15 December 2004 on the harmonisation of transparency
requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market and
amending Directive 2001/34/EC;
8) 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 Section
58 of the Treaty, with a view to making such safeguards
equivalent throughout the Community;
9) Directive 2003/58/EC of the European Parliament and of the
Council of 15 July 2003 amending Council Directive 68/151/EC, as
regards disclosure requirements in respect of certain types of
companies;
10) Commission Directive 2007/16/EC of 19 March 2007
implementing Council Directive 85/611/EEC on the coordination of
laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities
(UCITS) as regards the clarification of certain definitions;
11) Directive 2009/65/EC of the European Parliament and of the
Council of 13 July 2009 on the coordination of laws, regulations
and administrative provisions relating to undertakings for
collective investment in transferable securities (UCITS);
12) Commission Directive 2010/44/EU of 1 July 2010
implementing Directive 2009/65/EC of the European Parliament and
of the Council as regards certain provisions concerning fund
mergers, master-feeder structures and notification procedure;
13) Commission Directive 2010/43/EU of 1 July 2010
implementing Directive 2009/65/EC of the European Parliament and
of the Council as regards organisational requirements, conflicts
of interest, conduct of business, risk management and content of
the agreement between a depository and a management company;
14) 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).
This Law shall come into force on 1 July 1998.
This Law has been adopted by the Saeima on 18 December
1997.
President G. Ulmanis
Riga, 30 December 1997
1 The Parliament of the Republic of
Latvia
Translation © 2013 Valsts valodas centrs (State
Language Centre)
