Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
14 April 2005 [shall come
into force on 13 May 2005];
9 June 2005 [shall come into force on 12 July
2005];
15 June 2006 [shall come into force on 13 July
2006];
29 March 2007 [shall come into force on 1 May
2007];
4 October 2007 [shall come into force on 8 November
2007];
22 May 2008 [shall come into force on 25 June
2008];
29 May 2008 [shall come into force on 1 July 2008];
23 October 2008 [shall come into force on 1 January
2009];
26 February 2009 [shall come into force on 25 March
2009];
15 October 2009 [shall come into force on 1 January
2010];
13 January 2011 [shall come into force on 11 February
2011];
22 March 2012 [shall come into force on 25 April
2012];
14 June 2012 [shall come into force on 10 July
2012];
8 November 2012 [shall come into force on 1 December
2012];
9 July 2013 [shall come into force on 7 August
2013];
19 September 2013 [shall come into force on 1 January
2014];
24 April 2014 [shall come into force on 28 May
2014];
11 June 2015 [shall come into force on 14 July
2015];
29 October 2015 [shall come into force on 1 January
2016];
4 February 2016 [shall come into force on 29 February
2016];
26 May 2016 [shall come into force on 29 June
2016];
15 December 2016 [shall come into force on 1 January
2017];
14 September 2017 [shall come into force on 17 October
2017];
21 September 2017 [shall come into force on 4 October
2017];
26 October 2017 [shall come into force on 9 November
2017];
21 June 2018 [shall come into force on 18 July
2018];
28 February 2019 [shall come into force on 28 March
2019];
20 June 2019 [shall come into force on 16 July
2019];
12 December 2019 [shall come into force on 6 January
2020];
17 June 2020 [shall come into force on 3 July
2020];
29 April 2021 [shall come into force on 19 May
2021];
27 May 2021 [shall come into force on 23 June 2021].
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:
Financial
Instrument Market Law
Division
A
General Provisions
Section 1. Terms Used in this
Law
(1) The following terms are used in this Law:
1) category - financial instruments of the same type
strengthening rights of the same type with uniform rules for the
exercising of such rights;
2) investment brokerage company - a capital company
that provides investment services on a regular and professional
basis;
3) Member State - a European Union Member State or a
country of the European Economic Area;
4) home Member State - a Member State in accordance
with the requirements of Section 3.1 of this Law;
5) supervisory authority of a Member State - an
authority to which a Member State has delegated the supervisory
function of the provision of investment services, irrespective of
whether this authority has been established on the basis of a law
or the performance of such function has been delegated thereto by
a State administration institution, if the relevant Member State
has notified the European Commission of such authority and its
rights and obligations;
6) regulated market - a multilateral system which is
operated or managed by a regulated market operator and which,
according to the rules of a multilateral system in conformity
with equivalent conditions, brings together or facilitates the
bringing together of multiple third-party buying and selling
interests in financial instruments in a way that results in
entering into a transaction in respect of the financial
instruments admitted to trading under the rules of a multilateral
system, and which is authorised and functions regularly in
accordance with Division D, Chapter I of this Law;
7) regulated market operator - a capital company that
organises or manages a regulated market;
8) official list - such regulated market for which the
regulated market operator has determined the highest requirements
compared to other regulated markets organised thereby and the
activities of which are performed in accordance with the minimum
requirements laid down in this Law;
9) public circulation - entering into transactions with
financial instruments admitted to trading on a regulated
market;
10) issuer - a person whose transferable securities are
admitted to trading on a regulated market, and also a person on
whose behalf transferable securities or other financial
instruments are issued or intended to be issued for admission to
trading on a regulated market. In relation to the depository
receipts to be admitted to trading on a regulated market the
issuer of such securities shall be deemed an issuer the rights to
which have been corroborated in the depository receipt regardless
of whether such securities are or are not admitted to trading on
a regulated market;
11) initial placement - an offer of securities to the
public made by an issuer or a person authorised thereby to
acquire transferable securities or other financial instruments
and the first placement thereof;
12) [12 December 2019];
13) prospectus - a document that includes detailed
information on the issuer and any transferable securities issued
thereby regarding which the offeror wishes to make an offer of
securities to the public or which the person asking admission of
transferable securities on a regulated market wishes to admit on
the regulated market;
14) target company - a joint stock company the shares
of which are in public circulation and for the shares of which a
buy-back offer has been made;
15) offeror - a person or a group of persons which
makes a mandatory or voluntary share buy-back offer or performs
the final share buy-back or which has an obligation to make a
mandatory share buy-back offer;
16) central securities depository - a capital company
within the meaning of Article 2(1)(1) of Regulation (EU) No
909/2014 of the European Parliament and of the Council of 23 July
2014 on improving securities settlement in the European Union and
on central securities depositories and amending Directives
98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012
(hereinafter - Regulation No 909/2014);
17) central securities depository participant - a
participant within the meaning of Section 1, Paragraph one,
Clause 6 of the law On the Settlement Finality in Payment and
Financial Instrument Settlement Systems;
18) financial instrument market participants - credit
institutions providing investment services or ancillary
investment services, investment brokerage companies, issuers,
investors, companies entitled under the law to administer
collective investment undertakings, regulated market operators,
central securities depositories, data reporting services
providers, foreign investment brokerage companies providing
investment services or ancillary investment services, and other
persons performing activities governed by this Law;
19) qualifying holding - a holding acquired directly or
indirectly by one or several persons which are acting in concert
on the basis of an agreement and representing 10 per cent and
more of the share capital or of the voting rights of shares or
stocks of a commercial company or making it possible to exercise
a significant influence over the management of the financial and
operational policy of the commercial company;
20) control - a person has control over a commercial
company, if:
a) this person has decisive influence in the commercial
company on the basis of participation;
b) this person has decisive influence in the commercial
company on the basis of a group of companies agreement;
c) other relationships between this person and the commercial
company exist - analogous to the relationships referred to in
Sub-clause "a" or "b" of this Clause;
21) major holding - a holding acquired directly or
indirectly, which comprises five and more per cent of the voting
capital of the issuer;
22) European Union parent investment brokerage company
- an investment brokerage company which is a European Union
parent institution within the meaning of Article 4(1)(29) of
Regulation (EU) No 575/2013 of the European Parliament and of the
Council of 26 June 2013 on prudential requirements for credit
institutions and investment firms and amending Regulation (EU) No
648/2012 (hereinafter - Regulation No 575/2013);
23) parent investment brokerage company in the Republic of
Latvia - an investment brokerage company registered in the
Republic of Latvia which has a subsidiary - an investment
brokerage company, other financial institution or credit
institution - or which has a holding in an investment brokerage
company, other financial institution or credit institution, but
which itself is not a subsidiary of another licensed investment
brokerage company or a credit institution registered in the
Republic of Latvia or a subsidiary of the financial holding
company registered in the Republic of Latvia;
24) parent financial holding company in the Republic of
Latvia - a financial holding company registered in the
Republic of Latvia which is not a subsidiary of and investment
brokerage company or a credit institution registered in the
Republic of Latvia or a subsidiary of another financial holding
company registered in the Republic of Latvia;
25) close links - a mutual link of two or more
persons:
a) by participation - a person owns directly or by way of
control 20 per cent or more of the voting rights in a commercial
company or a person directly or by way of control has acquired a
holding which comprises 20 per cent or more of the share capital
of the commercial company;
b) by control;
c) if they are linked with one and the same person by a
relationship of control;
26) initial capital - capital which is constituted by
one or several elements conforming to the requirements of
Regulation No 575/2013 for elements of Common Equity Tier 1:
a) shares, and also other capital instruments and premium
accounts thereof;
b) profit or loss brought forward from previous years;
c) accumulated other income indicated in the total income
statement;
d) other reserves;
e) profit of the current year;
27) initial register - a list which contains persons
who own financial instruments issued by one or several issuers
(hereinafter also - the owners of financial instruments) and who
have acquired the financial instruments as a result of initial
placement or, after putting of the financial instruments into
public circulation, have not moved accounting of financial
instruments owned thereby from the initial register to the
financial instrument account owned thereby;
28) [12 December 2019];
29) depositary receipts - transferable securities which
are negotiable on the capital market and which represent
ownership of the securities of a non-domiciled issuer while being
able to be admitted to trading on a regulated market and traded
independently of the securities of the non-domiciled issuer;
30) transferable securities - securities which are
negotiable on the capital market, except for instruments of
payment, such as:
a) capital securities;
b) debt securities;
c) other securities giving the right to acquire or alienate
transferable securities or giving rise to a cash settlement
determined by reference to transferable securities, currencies,
interest rates or yields, commodities or other indices or
measures;
31) [12 December 2019];
32) [12 December 2019];
33) [12 December 2019];
34) [12 December 2019];
35) host Member State - the state which is not the home
Member State and where an offer of securities to the public is
made or admission of the transferable securities on a regulated
market is sought, or the state where an investment brokerage
company or credit institution has a branch or it provides
investment services or ancillary investment services, or the
state where the regulated market operator carries out
corresponding measures in order to promote access by market
participants existing in such state to trading in its system from
distance, when different from the home Member State;
36) qualified investors - investors which are specified
as such in Section 124.1, Paragraph two of this Law or
meet the requirements and criteria referred to in Paragraph two
or five of this Section, and also persons who in accordance with
the provisions of Section 124.2 of this Law have been
recognised as eligible counterparties;
37) [12 December 2019];
38) foreign country - a country which is not a Member
State of the European Union or of the European Economic Area;
39) competent authority - an authority to which a
Member State has delegated the function to supervise the
procedures for drawing up, registering, and distributing
prospects and which carries out the duties related to
international cooperation with competent authorities of other
Member States;
40) affiliated company - holding in an undertaking
where group undertakings, directly or indirectly (via
subsidiaries), own 20 or more per cent of the voting rights of
shares (stocks) or holding which gives the right to exercise
significant influence, but not to control the taking of the
decisions related to the financial and operating policy;
41) buy-back offer - an offer publicly expressed by the
offeror which is not an offer expressed by the target company
itself to other shareholders of the target company to acquire all
shares or part of shares from them in accordance with the
procedures laid down in Division D, Chapter V of this Law;
42) persons acting in concert - offeror and persons who
cooperate with the offeror or a target company according to the
agreement in order to obtain control in the target company or
destroy successful offer;
43) debt securities - bonds or other forms of
transferable securitised debts, and also depositary receipts in
relation to such securities;
44) controlled commercial company - a commercial
company which meets at least one of the following conditions:
a) a person has majority of voting rights in a commercial
company;
b) a person has the right to directly or indirectly elect or
revoke majority of the members of the board or council, and such
person concurrently is a shareholder (member) of the commercial
company;
c) a shareholder (member) of a commercial company is a person
who solely controls majority of the voting rights of shareholders
or members according to the agreement which such person has
entered into with other shareholders or members of the relevant
commercial company;
d) a person has control over a commercial company and such
person actually uses or may use it;
45) regulated information - all types of information
which is disclosed by an issuer or a person who has requested
admission of transferable securities to trading on a regulated
market in accordance with the requirements laid down in Sections
3.1, 54, Division D, Chapters III, IV of this Law and
Articles 7 and 19 of Regulation (EU) No 596/2014 of the European
Parliament and of the Council of 16 April 2014 on market abuse
(market abuse regulation) and repealing Directive 2003/6/EC of
the European Parliament and of the Council and Commission
Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (hereinafter -
Regulation No 596/2014);
46) electronic means - electronic equipment for data
processing, storage, and transmission, by using cables, radio
waves, optical technologies, or other electromagnetic means;
47) market maker - a person who continuously ensures
trade (liquidity) of one or several financial instrument assets
during a trade day, by purchasing and selling financial
instruments within the limits of price specified by itself and at
its own funds;
48) trade day - a day or time period during the
relevant day when, in accordance with the provisions of a
regulated market operator, it is possible to perform transactions
with financial instruments in the relevant regulated market;
49) multilateral trading facility (hereinafter also -
the MT facility) - a system operated by an investment brokerage
company, a credit institution, or a regulated market operator and
that, in conformity with equivalent conditions, brings together
third party instructions for buying and selling financial
instruments in a way that results in a contract;
50) operator of a multilateral trading facility - an
investment brokerage company, a credit institution, or a
regulated market operator that ensures the operation of the MT
facility in accordance with the rules of the system;
51) tied agent - a natural or legal person who, on
behalf of one investment brokerage company or credit institution,
advertises or otherwise promotes the use of investment services
or ancillary investment services to clients or prospective
clients, provided by the investment brokerage company or credit
institution, receives and transmits instructions or orders from
the clients in respect of investment services or financial
instruments, places financial instruments or provides investment
advice to clients or prospective clients in respect of the
abovementioned financial instruments or services;
52) responsible person of the tied agent - a
self-employed person, a member of the executive body of the tied
agent, or other person who in conformity with the competence is
responsible for the professional activity of the tied agent on
the management level of the tied agent;
53) systematic internaliser - an investment brokerage
company or credit institution which, ion an organised, frequent
systematic and substantial basis, deals on own account when
executing client orders outside a regulated market, an MT
facility, or an organised trading facility without operating a
multilateral system. The frequent and systematic basis of the
systematic internaliser shall be measured by the number of
over-the-counter trades in the financial instruments carried out
by the investment brokerage company or credit institution on own
account when executing client orders. The substantial basis shall
be measured either by the size of the over-the-counter trading
carried out by the investment brokerage company or credit
institution in relation to the total trading of the investment
brokerage company or credit institution in a specific financial
instrument or by the size of the over-the-counter trading carried
out by the investment brokerage company or credit institution in
relation to the total trading in the European Union in a specific
financial instrument;
54) limit order - an order to acquire or sell certain
amount of financial instruments for a specially determined price
or for a better price;
55) investment advice - the provision of a personal
recommendation to a client, either upon its request or at the
initiative of the investment brokerage company or credit
institution, in respect of one or more transactions relating to
financial instruments;
56) execution of orders on behalf of clients - acting
to conclude agreements to buy or sell one or more financial
instruments on behalf of clients and includes the conclusion of
agreements to sell financial instruments issued by an investment
brokerage company or a credit institution at the moment of their
issuance;
57) dealing on own account - trading against
proprietary capital (funds) resulting in the conclusion of
transactions in one or more financial instruments;
58) portfolio management - managing portfolios in
accordance with mandates given by clients on a discretionary
client-by-client basis where such portfolios include one or more
financial instruments;
59) client - any natural or legal person to whom an
investment brokerage company or credit institution provides
investment services or ancillary investment services;
60) professional client - a client who has the relevant
experience, knowledge, and competence in order to take
independently investment decision and duly assess the risks
undertaken by him or her;
61) retail client - a client other than professional
client;
62) financial analyst - an employee of an investment
brokerage company or credit institution who develops investment
research content;
63) corporate governance - a set of measures for the
achievement of objectives of the activities of a commercial
company and control of the activities of a commercial company,
and also assessment and management of the risks related to
activities of a commercial company;
64) record date - a date of such working day after
which there are five more working days until the meeting of
shareholders and at the end of which shareholders of the relevant
joint stock company and the number of shares owned by them are
registered for participation in the relevant meeting of
shareholders, or a date stipulated by an issuer or offerer on
which the rights to benefits to be obtained as a result of
corporate actions of financial instruments are specified;
65) free capital - the value of assets belonging to a
person which is reduced by the value of liabilities of such
person and by the value of those assets which are regarded as
long-term investments;
66) [12 December 2019];
67) [12 December 2019];
68) holding of financial instruments - the holding and
administration of financial instruments on behalf of clients,
including holding of the funds necessary for ensuring the
transactions to be made with financial instruments and provision
of other services related to holding or administration of
financial instruments, except for maintaining securities accounts
at the top tier level;
69) formal understanding - a contract which is binding
in accordance with that laid down in laws and regulations and
provides for the right to the person to obtain the shares with
voting rights of the issuer in the joint stock company on the day
of exercising the rights arising from financial instruments;
70) long position in financial instruments - financial
instruments which belong to a person, or financial instruments
which give the right to or impose a duty on the person to acquire
financial instruments;
71) short position in financial instruments -
liabilities of a person which must be carried out in financial
instruments, or financial instruments which give the right to or
impose a duty on the person to dispose of financial
instruments;
72) corporate action of financial instruments - any
fact or circumstance affecting the nominal value of financial
instruments or other characteristics, and also action of an
issuer upon carrying out of liabilities against a person who has
the right to benefits as a result of corporate action events
(disbursement of dividends, disbursement of interest, division of
issue, joining of issue, and other similar facts or
circumstances);
73) small and medium-sized enterprises growth market -
a multilateral trading facility to which the status of a small
and medium-sized enterprises growth market has been granted in
accordance with Section 133.11 of this Law;
74) energy derivative contracts - options, futures,
swaps, and any other derivative contracts referred to in Section
3, Paragraph two, Clause 6 of this Law and relating to coal or
oil that are traded on an organised trading facility and must be
physically settled;
75) multilateral system - a system or facility in which
multiple third-party buying and selling trading interests in
financial instruments are able to interact in the system;
76) organised trading facility (hereinafter also - the
OT facility) - a multilateral system which is not a regulated
market or a multilateral trading facility and in which multiple
third-party buying and selling interests in bonds, structured
finance products, emission allowances, or derivatives are able to
interact in the system in a way that results in a
transaction;
77) trading venue - a regulated market, a multilateral
trading facility, or an organised trading facility;
78) liquid market - a market for a financial instrument
or a category of financial instruments where there always is a
market participant who is ready and willing to sell and who has
been assessed in accordance with the following criteria, taking
into consideration the specific market structures of the
particular financial instrument or of the particular category of
financial instruments:
a) the average frequency and size of transactions over a range
of market conditions, having regard to the nature and life cycle
of products within the category of the financial instrument;
b) the number and type of market participants, including the
ratio of market participants to traded instruments in a
particular product;
c) the average size of spreads between buying and selling
interests, where available;
79) group - a parent undertaking and all its
subsidiaries;
80) matched principal trading - a transaction where the
facilitator interposes itself between the buyer and the seller to
the transaction in such a way that it is never exposed to market
risk throughout the execution of the transaction, with both sides
executed simultaneously, and where the transaction is concluded
at a price where the facilitator makes no profit or loss, other
than a previously disclosed commission, fee or charge for the
transaction;
81) algorithmic trading - trading in financial
instruments where a computer algorithm automatically determines
individual parameters of orders, including - whether to initiate
the order, the timing, price, or quantity of the order or how to
manage the order after its submission, with limited or no human
intervention, and does not include any system that is only used
for the purpose of routing orders to one or more trading venues
or for the processing of orders involving no determination of any
trading parameters or for the confirmation of orders or the
post-trade processing of executed transactions;
82) high-frequency algorithmic trading technique - an
algorithmic trading technique characterised by:
a) infrastructure intended to minimise network and other types
of latencies, including at least one of the following facilities
for algorithmic order entry: co-location at the same data centre
of the algorithmic trading system of a client and the transaction
processing system, proximity hosting of the algorithmic trading
system of a client and the transaction processing system at
different data centres which are interconnected with a connection
that is fast and with low delay, or the systems are
interconnected with high-speed direct electronic access;
b) system-determination of order initiation, generation,
routing or execution without human intervention for individual
trades or orders;
c) high message intraday rates which constitute orders, quotes
or cancellations;
83) direct electronic access - an opportunity for a
person to electronically transmit orders relating to a financial
instrument directly to the trading venue, using trading code of
the member, participant, or client of the trading venue and using
the infrastructure of the member, participant, or client or any
connecting system of the member, participant, or client (direct
market access) or without using such infrastructure (sponsored
access);
84) cross-selling practice - the offering of an
investment service together with another service or product as
part of a package or one or several products or services is as a
condition for another product or agreement or a package
thereof;
85) structured deposit - a deposit as defined in
Section 1, Paragraph one, Clause 1 of the Investment Guarantee
Law and which is fully repayable at maturity on terms under which
any interest or a premium is calculated according to a formula
involving factors such as:
a) an index or combination of indices, except for variable
rate deposits whose return is directly linked to an interest rate
index, including Euribor or Libor;
b) a financial instrument or combination of financial
instruments;
c) a commodity or combination of commodities or other physical
or non-physical non-fungible assets;
d) a foreign exchange rate or combination of foreign exchange
rates;
86) exchange-traded fund - a fund at least one unit or
share category of which is traded throughout the day on at least
one trading venue and with at least one market operator which
implements measures to ensure that the price of its units or
shares on the trading venue does not significantly vary from its
net asset value and, where applicable, from its indicative net
asset value;
87) certificates - securities as defined in Article
2(1)(27) of Regulation (EU) No 600/2014 of the European
Parliament and of the Council of 15 May 2014 on markets in
financial instruments and amending Regulation (EU) No 648/2012
(hereinafter - Regulation No 600/2014);
88) structured finance products - securities as defined
in Article 2(1)(28) of Regulation No 600/2014;
89) derivatives - derivatives as defined in Clause 30,
Sub-clause c" of this Paragraph and Section 3, Paragraph two,
Clauses 4, 5, 6, 7, 8, 9, and 10 of this Law;
90) commodity derivatives - commodity derivatives as
defined:
a) in Clause 30, Sub-clause c" of this Paragraph and are
related to the commodity or the base asset referred to in Section
3, Paragraph two, Clause 10 of this Law;
b) in Section 3, Paragraph two, Clauses 5, 6, 7, and 10 of
this Law;
91) central counterparty - a person as defined in
Article 2(1) of Regulation (EU) No 648/2012 of the European
Parliament and of the Council of 4 July 2012 on OTC derivatives,
central counterparties and trade repositories (hereinafter -
Regulation No 648/2012);
92) approved publication arrangement - a person
authorised in accordance with this Law to provide the service of
publishing trade reports on behalf of investment brokerage
companies and credit institutions in accordance with Articles 20
and 21 of Regulation No 600/2014;
93) consolidated tape provider (hereinafter also - the
CT provider) - a person authorised in accordance with this Law to
provide the service of collecting trade reports for financial
instruments listed in Articles 6, 7, 10, 12, 13, 20, and 21 of
Regulation No 600/2014 from regulated markets, MT facilities, OT
facilities and approved publication arrangements and
consolidating them into a continuous electronic live (hereinafter
- real time) data stream providing price and volume data per
financial instrument;
94) approved reporting mechanism - a person authorised
in accordance with this Law to provide reports on transaction
details to the Financial and Capital Market Commission and the
European Securities and Markets Authority on behalf of investment
brokerage companies and credit institutions;
95) third-country firm - a firm that would be a credit
institution providing investment services or performing
investment activities or an investment brokerage company if its
head office of such firm were located within the European
Union;
96) wholesale energy products - wholesale energy
products as defined Article 2(4) of Regulation (EU) No 1227/2011
of the European Parliament and of the Council of 25 October 2011
on wholesale energy market integrity and transparency
(hereinafter - Regulation No 1227/2011);
97) agricultural commodity derivatives - derivative
contracts relating to products listed in Article 1 of, and Annex
I, Parts I, II, III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII,
XIV, XV, XVI, XVII, XVIII, XIX, XX and Part XXIV/1 to Regulation
(EU) No 1308/2013 of the European Parliament and of the Council
of 17 December 2013 establishing a common organisation of the
markets in agricultural products and repealing Council
Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001
and (EC) No 1234/2007 (hereinafter - Regulation No
1308/2013);
98) sovereign issuer - any of the following issuers
that issue debt instruments:
a) the European Union;
b) a Member State, including a government department, an
agency, or a special purpose vehicle of the relevant Member
State;
c) in the case of a federal Member State - a member of the
federation;
d) a special purpose vehicle for several Member States;
e) an international financial institution established by two
or more Member States which has the purpose of mobilising funding
and providing financial assistance to the benefit of its members
that are experiencing or threatened by severe financing
problems;
f) the European Investment Bank;
99) sovereign debt - a debt instrument issued by a
sovereign issuer;
100) durable medium - any instrument which enables a
client to store information addressed personally to that client
in a way accessible for future reference and for a period of time
adequate for the purposes of the information and allows the
unchanged reproduction of the information stored;
101) data reporting services provider - an approved
reporting arrangement, a CT provider, or an approved reporting
mechanism;
102) money market instruments - financial instruments
which are normally dealt in on the money market: treasury bills,
certificates of deposit, and commercial papers, except for
instruments of payment;
103) senior management - those persons (employees)
whose position provides them with an opportunity to significantly
affect the progress of the operation of the institution, however,
who are not members of the council or board;
104) branch of a credit institution - a territorially
or otherwise separated structural unit of an investment brokerage
company or credit institution which does not have the status of a
legal person and which acts in the name of the investment
brokerage company or credit institution. All structural units
which have been established in one Member State by an investment
brokerage company or credit institution located in another Member
State shall be considered as one branch;
105) securities financing transaction - a transaction
as defined in Article 3(11) of Regulation (EU) 2015/2365 of the
European Parliament and of the Council of 25 November 2015 on
transparency of securities financing transactions and of reuse
and amending Regulation (EU) No 648/2012 (hereinafter -
Regulation No 2015/2365);
106) proxy advisor - a legal person that, within the
scope of its economic activity, performs research and provides
advices and recommendations in relation to exercising of the
voting rights in a joint stock company registered in a Member
State the stock of which have been admitted to trading on a
regulated market of the Member State.
(2) The following terms conform to the terms used in
Regulation No 575/2013:
1) parent undertaking - to the term "parent
undertaking" within the meaning of Article 4(1)(15) of Regulation
No 575/2013;
2) subsidiary - to the term "subsidiary" within the
meaning of Article 4(1)(16) of Regulation No 575/2013;
3) mixed holding company - to the term "mixed activity
holding company" within the meaning of Article 4(1)(22) of
Regulation No 75/2013.
(3) In addition to the terms referred to in Paragraphs one and
two of this Section within the meaning of Regulation No 575/2013
and Regulation (EU) 2017/1129 of the European Parliament and of
the Council of 14 June 2017 on the prospectus to be published
when securities are offered to the public or admitted to trading
on a regulated market, and repealing Directive 2003/71/EC
(hereinafter - Regulation No 2017/1129) the following terms are
used:
1) financial institution - a financial institution
within the meaning of Article 4(1)(26) of Regulation No
575/2013;
2) mixed holding company - a financial holding company
within the meaning of Article 4(1)(20) of Regulation No
575/2013;
3) parent financial holding company in a Member State -
a parent financial holding company in a Member State within the
meaning of Article 4(1)(30) of Regulation No 575/2013;
4) European Union parent financial holding company - a
European Union parent financial holding company within the
meaning of Article 4(1)(31) of Regulation No 575/2013;
5) own funds - own funds within the meaning of Article
4(1)(118) of Regulation No 575/2013;
6) equity securities - securities of own funds within
the meaning of Article 2(b) of Regulation No 2017/1129;
7) offer of securities to the public - an offer of
securities to the public within the meaning of Article 2(d) of
Regulation No 2017/1129;
8) offeror - an offeror within the meaning of Article
2(i) of Regulation No 2017/1129.
(4) The term "related party" used in this Law conforms to the
term used in IAS 24 "Related party disclosures" referred to in
Annex to Commission Regulation (EC) No 1126/2008 of 3 November
2008 adopting certain international accounting standards in
accordance with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council.
(5) Upon applying the legal norms of this Law which include
the terms referred to in Paragraph one of this Section,
Commission Delegated Regulation (EU) 2017/565 of 25 April 2016
supplementing Directive 2014/65/EU of the European Parliament and
of the Council as regards organisational requirements and
operating conditions for investment firms and defined terms for
the purposes of that Directive (hereinafter - Regulation No
2017/565) and Commission Delegated Regulation (EU) 2017/2294 of
28 August 2017 amending Delegated Regulation (EU) 2017/565 as
regards the specification of the definition of systematic
internalisers for the purposes of Directive 2014/65/EU shall be
conformed to.
[21 June 2018; 20 June 2019; 12 December 2019]
Section 2. Purpose of this Law
The purpose of this Law is to ensure the functioning of the
financial instrument market by facilitating:
1) protection of the interests of investors;
2) the stability and reliability of the financial instrument
market;
3) accessibility of information and equal opportunities for
all participants of the financial instrument market.
Section 3. Application of this
Law
(1) This Law governs the procedures for making an offer of
securities to the public of financial instruments, for the public
circulation of financial instruments, for the provision of
investment services and ancillary investment services, for the
provision of data reporting services, and the procedures for the
licensing, activity, and supervision of financial instrument
market participants, the procedures for the cooperation of
competent authorities, prescribes the rights and obligations of
financial instrument market participants and persons referred to
in Section 4.1, Paragraphs three and four of this Law,
and also the liability for failure to comply with the
requirements provided for in this Law.
(11) The Financial and Capital Market Commission
shall be regarded the competent authority within the meaning of
the following directly applicable legal acts of the European
Union:
1) Commission Regulation (EC) No 2273/2003 of 22 December 2003
implementing Directive 2003/6/EC of the European Parliament and
of the Council as regards exemptions for buy-back programmes and
stabilisation of financial instruments (hereinafter - European
Commission Regulation No 2273/2003);
2) Commission Regulation (EC) No 809/2004 of 29 April 2004
implementing Directive 2003/71/EC of the European Parliament and
of the Council as regards information contained in prospectuses
as well as the format, incorporation by reference and publication
of such prospectuses and dissemination of advertisements
(hereinafter - European Commission Regulation No 809/2004);
3) 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 record-keeping 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);
4) Regulation (EC) No 1060/2009 of the European Parliament and
of the Council of 16 September 2009 on credit rating agencies
(hereinafter - Regulation No 1060/2009);
5) Regulation (EU) No 236/2012 of the European Parliament and
of the Council of 14 March 2012 on short selling and certain
aspects of credit default swaps (hereinafter - Regulation No
236/2012);
6) Regulation No 648/2012;
7) Regulation No 575/2013;
8) Regulation No 596/2014;
9) Regulation No 909/2014;
10) Regulation (EU) No 537/2014 of the European Parliament and
of the Council of 16 April 2014 on specific requirements
regarding statutory audit of public-interest entities and
repealing Commission Decision 2005/909/EC (hereinafter -
Regulation No 537/2014) in the cases specified in Section
37.5 of the Audit Services Law;
11) Regulation (EU) No 1286/2014 of the European Parliament
and of the Council of 26 November 2014 on key information
documents for packaged retail and insurance-based investment
products (PRIIPs) (hereinafter - Regulation No 1286/2014);
12) Regulation No 2015/2365;
13) Regulation No 600/2014;
14) Regulation (EU) 2016/1011 of the European Parliament and
of the Council of 8 June 2016 on indices used as benchmarks in
financial instruments and financial contracts or to measure the
performance of investment funds and amending Directives
2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014
(hereinafter - Regulation No 2016/1011);
15) Regulation No 2017/1129.
(2) This Law shall apply to the following financial
instruments which are as follows within the meaning of this
Law:
1) transferable securities;
2) money market instruments;
3) certificates (units) of investment funds and alternative
investment funds and other transferable securities which certify
holding in such funds or in equivalent collective investment
undertakings;
4) options, futures, swaps, forward rate agreements and any
other derivative contracts relating to securities, currencies,
interest rates or yields, emission allowances or other
derivatives instruments, financial indices or financial measures
which may be settled physically or in cash;
5) options, futures, swaps, forward rate agreements and any
other derivative contracts relating to commodities that must be
settled in cash or may be settled in cash at the option of one of
the parties otherwise than by reason of termination of a contract
due to failure to fulfil the liabilities or other termination of
contractual relationships;
6) options, futures, swaps, and any other derivative contracts
in accordance with Regulation No 2017/565 relating to commodities
that can be physically settled provided that they are traded on a
regulated market, the MT facility, or the OT facility, except for
wholesale energy products which are traded on the OT facility and
which may be settled in physically;
7) options, futures, swaps, forwards and any other derivative
contracts in accordance with Regulation No 2017/565 relating to
commodities, that can be physically settled not otherwise
mentioned in Clause 6 of this Paragraph and not being for
commercial purposes, which have the characteristics of other
derivative financial instruments;
8) derivative instruments for the transfer of credit risk;
9) financial contracts for differences;
10) options, futures, swaps, forward rate agreements and any
other derivative contracts in accordance with Regulation No
2017/565 relating to climatic variables, freight rates, inflation
rates, or other official economic statistics that must be settled
in cash or may be settled in cash at the option of one of the
parties otherwise than by reason of termination of a contract due
to failure to fulfil the liabilities or other termination of
contractual relationships, and also any other derivative
contracts relating to assets, rights, obligations, indices, and
measures not otherwise mentioned in this Paragraph, which have
the characteristics of other derivative financial instruments, if
these instruments are traded on a regulated market, the MT
facility, or the OT facility;
11) emission allowances consisting of emission units
recognised for compliance with the requirements laid down in the
field of emission allowance trading (Emissions Trading
Scheme).
(3) [13 January 2011]
(4) This Law shall apply to investment services and activities
(hereinafter - the investment services) which are as follows
within the meaning of this Law:
1) reception and transmission of orders in relation to one or
more financial instruments;
2) execution of orders on behalf of clients;
3) dealing on own account;
4) portfolio management;
5) investment advice;
6) underwriting of financial instruments or placing of
financial instruments on a firm commitment basis;
7) placing of financial instruments without a firm commitment
basis;
8) organising of an MT facility;
9) operating of the OT facility.
(5) This Law shall apply to ancillary investment services
which are as follows within the meaning of this Law:
1) the holding of financial instruments;
2) the granting of credits or loans to an investor for
performing transactions in financial instruments where the
commercial company granting the credit or loan is involved in the
transaction in financial instruments;
3) the provision of advice regarding capital structure,
industrial strategy and related matters, and also the provision
of advice and services regarding mergers of commercial companies
and the acquisition of undertakings;
4) foreign exchange services provided that they are related to
the provision of investment services;
5) the provision of investment research, financial analysis,
or other general recommendation in relation to transactions with
financial instruments;
6) the provision of services related to the initial allocation
of financial instruments;
7) the provision of investment services and ancillary
investment services referred to in relation to the base asset of
the derivatives referred to in Paragraph two, Clauses 5, 6, 7,
and 10 of this Section, if it is related to the provision of
investment services or ancillary investment services.
(51) Holding of positions of non-trading portfolio
financial instruments in order to invest own funds of a credit
institution or a brokerage company shall not be considered the
execution of transactions involving financial instruments at the
cost of the credit institution or brokerage company.
(52) This Law shall apply to data reporting
services which are as follows within the meaning of this Law:
1) operating an approved publishing arrangement;
2) operating a CT provider;
3) operating an approved reporting mechanism.
(6) This Law shall not restrict the rights of consumers
specified in other laws.
(7) [12 December 2019]
(8) The requirements of Section 54 and Division D, Chapters
III and IV of this Law shall not apply to investment fund units
and opened alternative investment funds or securities equivalent
thereto which certify holding in such funds or in equivalent
collective investment undertakings.
(9) The requirements of Section 54, Paragraphs three, eight,
and nine of this Law shall not apply to transferable securities
which are admitted to trading on a regulated market and which
have been issued by a Member State or by a local government,
institution or agency of a Member State.
(10) The requirements of Section 54, Paragraphs one, two, and
nine of this Law shall not apply to shares issued by central
banks of the Member States which are admitted to trading on a
regulated market, if a decision to admit the shares on the
regulated market is taken by 20 January 2005 and such exception
is intended by the legal acts of the relevant Member State
governing the procedures for issuing of the shares of central
banks.
(11) [11 June 2015]
(12) Section 103.2, Section 124, Paragraph one,
Clauses 4, 9, 13, 14, 15, 16, and 17 and Paragraph two, Clauses 1
and 6, Section 124.2, Section 126, Paragraph one,
Section 126.2, Paragraphs one, 1.1, ten,
eleven, twelve, sixteen, and seventeen, Section 127, Paragraphs
one, seven, 7.1, 7.2, and eleven, Section
128 and Section 128.1, Paragraphs one, 1.1,
three, four, 4.1, eight, nine, and ten, Section
137.1, Section 138, Section 148, Paragraphs eight and
8.1, Section 150, Paragraphs one, two, three, four,
nine, and ten of this Law shall also be applied to investment
brokerage companies and credit institutions which sell structured
deposits or consult clients on them.
(13) The requirements laid down in Sections 125.1,
125.2, 125.3, 129, 129.1,
129.2, 131.1, 133.16,
133.17, 133.18, 133.19, and
133.20 of this Law in relation to the protection of
financial instruments and funds of clients shall also be applied
to:
1) investment management companies and managers of alternative
investment funds;
2) credit institutions which do not provide investment
services or ancillary investment services, however, offer
structured deposits.
(14) The requirements laid down in Section 132.1,
Paragraphs one, two, three, four, five, six, seven, eight, nine,
ten, eleven, twelve, thirteen, and fourteen of this Law shall be
also be applied to the persons referred to in Section 101,
Paragraph seven, Clauses 1, 5, 12, 15, and 16 of this Law who are
members or participants of a regulated market or the MT
facility.
(15) The multilateral system of financial instruments shall
operate either as the MT facility or OT facility, or a regulated
market in accordance with the provisions of this Law.
(16) In cases when an issuer expresses an offer of securities
to the public for transferable securities issued thereby, the
expressing of the offer of securities to the public shall not be
considered an investment service within the meaning of this Law
and the provisions of Division F of this Law shall not apply to
it if all of the following provisions are fulfilled
concurrently:
1) the issuer has the characteristics of a small or
medium-sized enterprise;
2) the total payment calculated for transferable securities in
36 months does not exceed EUR 3 000 000;
3) the issuer expresses not more than two offers of securities
to the public in a period of 36 months;
4) the offer is expressed for capital or debt securities.
[9 June 2005; 15 June 2006; 29 March 2007; 4 October 2007;
26 February 2009; 13 January 2011; 22 March 2012; 8 November
2012; 9 July 2013; 19 September 2013; 24 April 2014; 11 June
2015; 26 May 2016; 15 December 2016; 21 September 2017; 14
September 2017; 21 June 2018; 20 June 2019; 12 December
2019]
Section 3.1 Determination
of a Home Member State
(1) For investment brokerage companies a home Member State is
a Member State where the investment brokerage company is
registered and has obtained a licence for provision of investment
services.
(2) [12 December 2019]
(21) The sample form to be used for notices on the
home Member State shall be approved by the Financial and Capital
Market Commission.
(3) [12 December 2019]
(4) In respect to share issuers and issuers of such debt
securities the denomination per unit of debt securities of which
is less than EUR 1000 and the obligation of which is to provide
regulated information, the home Member State is:
1) a Member State where the issuer has its registered office,
if it is registered in the Member State;
2) a Member State which has been chosen by the issuer as the
home Member State from such Member States on regulated markets of
which transferable securities of the issuer are admitted to
trading, if the issuer is registered in a foreign country. An
issuer registered in a foreign country has the right to change
the home Member State in accordance with Paragraph four, Clause 3
of this Section, informing the competent supervisory authorities
thereof in accordance with Paragraph 7.1 of this
Section without delay;
3) a Member State on the regulated market of which
transferable securities of the issuer are admitted to trading or
in which the registered office of the issuer is located, if
transferable securities of the issuer are excluded from the
regulated market in the home Member State initially chosen by the
issuer which was specified in accordance with Clause 2 of this
Paragraph or Paragraph six of this Section, but which are still
included in other Member States in the regulated market.
(5) Paragraph four of this Section shall be applied also to
such issuer the debt securities of which are issued in a currency
other than euro, if the denomination per unit of debt security on
the day of issue is less than the equivalent of EUR 1000 in the
relevant currency and it is not equal to EUR 1000 and the
obligation of which is to provide regulated information.
(6) If Paragraph four of this Section does not apply to the
issuer, the home Member State of the issuer at the choice thereof
is the Member State where it has its registered office or in one
of those Member States where transferable securities of the
issuer are admitted to trading on regulated markets.
(7) The issuer referred to in Paragraph six of this Section
may choose only one home Member State and may not change it for
three years, unless transferable securities of such issuer are
excluded from the regulated market in such Member State or,
within the abovementioned three years, specification of a Member
State may not be attributed to the issuer in accordance with
Paragraph four of this Section.
(71) The issuer shall, without delay, notify
information on his home Member State of choice in accordance with
the procedures for distributing and access to the regulated
information laid down in Section 64.2 of this Law:
1) to the Financial and Capital Market Commission, if it is
the competent authority of the home Member State of the issuer
and the registered office of the issuer is in Latvia, and to the
competent authorities of host Member States;
2) to the Financial and Capital Market Commission, if the
registered office of the issuer is in Latvia, to the competent
authority of the home Member State, and to the competent
authorities of host Member States.
(72) If the issuer that determines a home Member
State in accordance with Paragraph four, Clause 2 of this Section
or Paragraph six of this Section, does not notify the relevant
competent authorities of the choice of the home Member State
within three months since its transferable securities have been
admitted to trading on a regulated market for the first time, the
Member State in which transferable securities of the issuer are
admitted to trading on a regulated market, shall be deemed the
home Member State of such issuer. If transferable securities of
the issuer are admitted to trading on a regulated market in
several Member States, then all the abovementioned Member States
shall be deemed the home Member State until the day when the
issuer chooses one home Member State from them and notifies the
competent authorities thereof without delay.
(73) The issuer whose transferable securities are
admitted to trading on a regulated market, whose home Member
State is determined in accordance with Paragraph four, Clause 2
of this Section or Paragraph six of this Section, and who has
informed the competent authorities of his home Member State of
choice by 27 November 2015, need not inform the competent
authorities in accordance with Paragraph 7.1 of this
Section, unless he chooses another home Member State by 27
November 2015.
(8) In respect of a regulated market, a home Member State is a
Member State in which the regulated market has been registered
or, if in accordance with the legal acts of the relevant Member
State it does not have a registered office, - a Member State in
which the head office of the regulated market is located.
(9) In respect of an approved publishing arrangement, the home
Member State of CT providers or approved reporting mechanisms
shall be:
1) if an approved publishing arrangement, CT provider, or
approved publishing mechanism is a natural person - the Member
State in which its head office is located;
2) if an approved publishing arrangement, CT provider, or
approved publishing mechanism is a legal person - the Member
State in which its registered office is located;
3) if an approved publishing arrangement, CT provider, or
approved publishing mechanism does not have a registered office
in accordance with the legal acts of its country - the Member
State in which its head office is located.
[9 June 2005; 15 June 2006; 29 March 2007; 4 October 2007;
13 January 2011; 22 March 2012; 19 September 2013; 26 May 2016;
21 September 2017; 21 June 2018; 12 December 2019]
Section 3.2 Recognition
of a Person as Qualified Investor
[22 March 2012]
Section 3.3 Determination
of Additional Requirements for an Issuer for whom the Republic of
Latvia is not a Home Member State
For the issuer for whom the Republic of Latvia is not a home
Member State, more stringent requirements may not be determined
for the content of regulated information than the requirements
laid down in the legal acts of the home Member State of the
issuer.
[29 March 2007; 21 September 2017]
Section 3.4 Law
Applicable to Financial Instruments
(1) The law of such country shall be applied to points of law
in relation to financial instruments to be transferred to an
account or register of financial instruments by an entry (record)
in which the operator of the relevant account or register of
financial instruments has been registered. A reference to the law
of the relevant country shall mean the application of such legal
norms of the country which are not rules of international private
law.
(2) If the operator of the account or register of financial
instruments has a branch in another country with the
intermediation of which the account of financial instruments is
being maintained, the relevant branch shall be considered as the
operator of the account or register of financial instruments
within the meaning of Paragraph one of this Section.
(3) If financial instruments are kept with the intermediation
of several operators of the accounts or registers of financial
instruments, the law applicable to points of law in relation to
such financial instruments shall be determined individually for
each account or register of financial instruments in which such
financial instruments have been recorded.
(4) Within the meaning of this Section, a credit institution,
an investment brokerage company, and another person who provides
services of operating the account or register of financial
instruments and keeping of financial instruments, and also the
central securities depository shall be considered the operator of
the account or register of financial instruments.
(5) Within the meaning of this Law, a person on whose behalf
an account of financial instruments has been opened shall be
considered the holder of the account of financial
instruments.
(6) The procedures referred to in Paragraph one of this
Section shall be applied to the following points of law:
1) legal status and belonging of financial instruments;
2) acquisition and alienation of financial instruments, and
also validity of acquisition and alienation;
3) the rights of the alienor or acquirer to dividends or other
income in case of buy-back, maturity of financial instruments or
in another case;
4) mutual priority of the rights of several persons to
financial instruments, including ascertaining of good faith of
the acquirer of financial instruments;
5) obligations of the operator of the account or register of
financial instruments against a person who is not the holder of
the account of financial instruments and who concurrently with
the holder of the account of financial instruments or another
person is requesting to recognise his or her rights to the
financial instruments recorded on the account of financial
instruments;
6) the provisions for the use of the security (except for a
financial security);
7) the rights to financial instruments if liquidation,
insolvency, reorganisation proceedings of the operator of the
account or register of financial instruments or proceedings
similar thereto in accordance with the law of the relevant
country have been initiated.
[14 September 2017]
Section 4. Issue and Disputation of
Administrative Acts
(1) In the cases specified in this Law the Financial and
Capital Market Commission (hereinafter - the Commission) shall
issue administrative acts. The laws and regulations governing the
issue of administrative acts shall determine the procedures by
which the Commission shall issue administrative acts.
(2) An administrative act of the Commission which has been
issued in accordance with this Law may be appealed to the
Administrative District Court. The court shall adjudicate the
matter as the court of first instance. The case shall be reviewed
in the composition of three judges. A judgement of the
Administrative District Court may be appealed by submitting a
cassation complaint.
(3) If documents are re-examined in the Commission, the
Commission shall not indicate deficiencies or inaccuracies in
information which it has already been examined and where no
deficiencies or inaccuracies have been noted in a previous
examination of the documents, except for cases where new
information is provided in relation to such information.
(4) An appeal to a court of the administrative acts issued by
the Commission shall not suspend the execution of such
administrative acts if the administrative act issued by the
Commission is a decision to:
1) restrict the right of an investment brokerage company or a
credit institution to provide investment services or to hold
financial instruments;
2) cancel licences issued to an investment brokerage company
for the provision of investment services and ancillary investment
services;
3) cancel a licence for organising a regulated market;
4) suspend or prohibit trading in financial instruments;
41) exclude transferable securities from the
regulated market;
5) request that any influence is immediately terminated of
persons having acquired a qualifying holding in a regulated
market operator or an investment brokerage company;
51) limit the rights of the central securities
depository to provide services;
52) cancel the permit issued to the central
securities depository;
53) request that the influence of persons who have
acquired control in the central securities depository is
discontinued without delay;
6) request the recall of the board or council or of a member
of the board or council of the regulated market operator, the
central securities depository, or an investment brokerage
company;
7) prohibit to exercise the voting rights to a person who has
acquired qualifying holding in a regulated market operator or an
investment brokerage company, violating the norms of this
Law;
71) prohibit to exercise the voting rights to a
person who has acquired control in the central securities
depository;
8) impose an obligation upon an investment brokerage company
to maintain the same own funds requirements as exceeds the
minimum own funds requirements laid down in Article 92 of
Regulation No 575/2013;
9) impose an obligation upon an investment brokerage company
to review procedures in order to strengthen measures introduced
thereby for implementation of the requirements of Section
123.1 and Section 124, Paragraph one, Clause 11 of
this Law;
10) request an investment brokerage company to apply special
provision policy or policy for the recognition of assets in
relation to own funds;
11) determine a temporary prohibition for a member of the
board or council of an investment brokerage company and the
central securities depository or for another natural person
responsible for the violation to fulfil the obligations imposed
on him or her in the investment brokerage company or central
securities depository;
12) request that the investment brokerage company or the
person responsible for the violation immediately discontinues the
activities referred to in Section 148, Paragraph fifteen of this
Law;
121) request that the central securities depository
or the person responsible for the violation immediately
discontinues the violation referred to in Article 63(1) of
Regulation No 909/2014;
13) present a public notification which indicates the natural
or legal person responsible for the violation and the essence of
the violation.
(5) When taking a decision to impose sanctions on persons that
have violated the laws and regulations governing financial and
capital market, the Commission shall take into consideration any
potential systemic consequences of the violation.
[29 March 2007; 29 May 2008; 23 October 2008; 22 March
2012; 24 April 2014; 26 May 2016; 14 September 2017]
Section 4.1 Right to
Request Information and Obligation to Provide It
(1) The Commission, when supervising fulfilment of the
requirements of this Law, has the right to request information
and documents from the financial instrument market participants
on the activities thereof.
(2) The financial instrument market participants shall submit
the requested information within the time periods stipulated by
the Commission. The fulfilment of the abovementioned requirements
may not be refused, including by excusing it as a commercial
secret.
(3) The Commission has the right, when supervising fulfilment
of the requirements of this Law, to request any person, if there
are grounds for considering that he or she is related to possible
violation of the requirements of laws or regulations or
information necessary for finding out circumstances of the
violation could be at the disposal thereof:
1) to provide documents and information at the disposal of
such person, including such containing a commercial secret;
2) to arrive at the Commission and provide information at the
disposal of such person in presence.
(4) The Commission has the right to request information from
any person on the beneficial owners thereof, until information on
natural persons is acquired, if there are grounds for considering
that information necessary for the Commission in order to
supervise the fulfilment of the requirements of this Law could be
at the disposal of such persons. In order to identify the
abovementioned natural persons, the relevant persons have an
obligation to submit the requested information to the Commission,
if such information is not available for the Commission in public
registers. Natural persons shall provide information on
themselves or indicate who else is regarded as a beneficial
owner.
(5) The Commission shall determine reasonable time periods for
the persons referred to in Paragraphs three and four of this
Section within which they shall submit the requested information
or arrive for the provision of information at the Commission in
presence. If the persons referred to in Paragraphs three and four
of this Section cannot submit the requested information or arrive
for the provision of information at the Commission in presence
due to objective reasons within the time period stipulated by the
Commission, they shall notify the Commission thereof in writing,
indicating such reasons and the date when information will be
submitted or the person will arrive for provision of information
at the Commission.
[22 March 2012; 8 November 2012]
Section 4.2 Right to
Issue Regulatory Provisions Governing the Financial Instrument
Market
Taking into account the transboundary nature of activities of
the European financial supervisory system, in order to ensure a
single, efficient, and constructive practice of supervision in
Member States and uniform and consistent application of the
directly applicable legal acts of the European Union, the
Commission has the right to lay down the requirements governing
the financial instrument market in the fields arising from the
decisions, guidelines, and recommendations adopted by the
European Securities and Markets Authority, the European Central
Bank, or the European Banking Authority.
[26 May 2016; 21 June 2018]
Section 5. Legal Guarantees
The Commission, employees and authorised persons thereof shall
not be liable for losses caused to financial instrument market
participants or to third parties, and they may not be held liable
for the acts they have performed legally, precisely, justifiably
and in good faith, properly performing the supervisory functions
in accordance with the procedures laid down in this Law and other
laws and regulations.
Section 6. Liability
[9 June 2005]
Division
B
Qualifying Holding
Section 7. Rights to Acquire a
Qualifying Holding
(1) Only a person or several persons operating on the basis of
an agreement in a coordinated manner (hereinafter in this
Division - the person) complying with the requirements laid down
in this Law for shareholders or members of a regulated market
operator or an investment brokerage company and ensuring meeting
the criteria laid down in Section 10, Paragraph one of this Law
is entitled to acquire a direct or indirect qualifying holding in
a regulated market operator and an investment brokerage
company.
(2) The Commission has the right to request the information on
the persons who apply for a qualifying holding (the actual
acquirers of the qualifying holding or persons suspected of
having acquired such a holding), including the owners of legal
(registered) persons (beneficial owners) who are natural persons
in order to assess the conformity of such persons with the
criteria laid down in Section 10, Paragraph one of this Law.
(3) The Commission has the right to identify founders
(shareholders or members) and owners (beneficial owners) of legal
(registered) persons who apply for a qualifying holding (the
actual acquirers of the qualifying holding or persons suspected
of having acquired such a holding) until information is acquired
on the owners (beneficial owners) - natural persons. In order to
identify such persons, the abovementioned legal persons have an
obligation to provide information to the Commission requested
thereby if such information is not available on the public
registers from which the Commission is entitled to receive such
information.
(4) If persons who are suspected of acquiring a qualifying
holding in a regulated market operator or an investment brokerage
company fail to provide or refuse to provide the information
referred to in Paragraph two or three of this Section and holding
thereof in total represents 10 per cent and more of the share
capital or of the voting rights of shares or stocks of the
regulated market operator or an investment brokerage company,
such shareholders or members may not exercise the voting rights
of all shares belonging to them. The Commission shall, without
delay, notify such fact to the relevant shareholders or members
and the regulated market operator or the investment brokerage
company.
(5) Investment funds and alternative investment funds and
foundations equivalent thereto are not entitled to obtain a
qualifying holding in a regulated market operator and an
investment brokerage company.
[26 February 2009; 9 July 2013; 14 September 2017; 21 June
2018]
Section 8. Holding Acquired
Indirectly
In determining the amount of holdings acquired by a person
indirectly, the following acquired voting rights of such person
(hereinafter - the specific person) shall be taken into
account:
1) voting rights which may be exercised by a third party with
whom the specific person has entered into an agreement, imposing
as obligation to coordinate the exercising of the voting rights
and action policy in long-term in relation to the management of
the specific issuer;
2) voting rights which may be exercised by a third party in
accordance with an agreement that has been entered into with the
specific person and provides for temporary transfer of the voting
rights;
3) voting rights which arise from shares which the specific
person has received as security, if he or she may exercise the
voting rights and has expressed his or her intention to exercise
them;
4) voting rights which may be exercised by the specific person
for an unlimited period of time;
5) voting rights which may be exercised by a commercial
company controlled by the specific person or which may be
exercised by such commercial company in accordance with the
provisions of Clauses 1, 2, 3, and 4 of this Section;
6) voting rights which arise from shares transferred to and
held by the specific person and which the person may exercise
upon his or her own initiative, if special instructions have not
been received;
7) voting rights which arise from shares held in the name of
third parties and for the benefit of the specific person;
8) voting rights which may be exercised by the specific person
as an authorised person, when he or she is entitled to exercise
the voting rights upon his or her own initiative if special
instructions have not been received.
[29 March 2007]
Section 9. Obligation to Notify in
Event of Acquisition and Increase of a Qualifying Holding
(1) Any person, if he or she proposes to acquire a qualifying
holding in a regulated market operator or an investment brokerage
company, shall notify the Commission thereof in writing in
advance. The amount of the qualifying holdings to be acquired as
a percentage of the share capital of the relevant capital company
or the number of the shares with voting rights or stocks shall be
indicated in the notification, and information provided for in
the regulatory provisions of the Commission which is necessary in
order to assess the conformity of the person with the criteria
laid down in Section 10, Paragraph one of this Law shall be
appended thereto. The list of information to be appended to the
notification shall be published on the website of the
Commission.
(2) If a person wishes to increase the qualifying holding so
that it would reach or exceed 20, 33, or 50 per cent of the share
capital or number of shares with voting rights (stocks) in the
regulated market operator or an investment brokerage company, or
if the relevant capital company becomes a subsidiary of this
person, such person shall notify the Commission in writing
thereof in advance. The amount of the qualifying holdings to be
acquired as a percentage of the share capital of the relevant
capital company or the number of the shares with voting rights or
stocks shall be indicated in the notification, and information
provided for in the regulatory provisions of the Commission which
is necessary in order to assess the conformity of the person with
the criteria laid down in Section 10, Paragraph one of this Law
shall be appended thereto. The list of information to be appended
to the notification shall be published on the website of the
Commission.
(3) The Commission shall, within two working days from the day
when the notification referred to in Paragraph one or two of this
Section was received, or within two working days after receipt,
in writing, of the additional information requested by the
Commission, inform the person of receipt of the notification or
additional information and the deadline for the assessment
period.
(4) The Commission, during the assessment period specified in
Section 10, Paragraph one of this Law but not later than on the
50th working day of the assessment period, has the right to
request additional information on the persons referred to in this
Section in order to assess the compliance of such persons with
the criteria laid down in Section 10, Paragraph one of this
Law.
[26 February 2009; 14 September 2017]
Section 10. Rights and Obligations
of the Commission
(1) The Commission shall, not later than within 60 working
days, when the information referred to in Section 9, Paragraph
three of this Law on receipt of the notification is sent to a
person, assess the adequacy of free capital of the person in the
amount of all shares or stocks of a regulated market operator or
an investment brokerage company to be acquired, the financial
stability and financial substantiation for the acquiring of
planned holding in order to ensure sustainable and careful
management of a regulated market operator or an investment
brokerage company where it is planned to acquire the holding, and
also possible influence of a person on the management and
activity of the regulated market operator or the investment
brokerage company. During the assessment process the Commission
shall also take into account the following criteria:
1) the impeccable reputation and conformity of the person with
the requirements laid down for the shareholders or members of a
regulated market operator or an investment brokerage company;
2) the impeccable reputation and professional experience of
such person who, as a result of the acquisition of the planned
holding, will administer the activities of the regulated market
operator or the investment brokerage company;
21) conformity of the knowledge and professional
experience of the council, if such has been established, board
and senior management which, as a result of the acquisition of
the planned holding, will administer the activities of the
investment brokerage company with the requirements of this Law,
and also impeccable reputation;
3) financial stability of the person, in particular in
relation to the type of the performed or planned economic
activity in a regulated market operator or an investment
brokerage company where the acquisition of the holding is
planned;
4) whether a regulated market operator or an investment
brokerage company will be able to meet the regulatory
requirements laid down in this Law and in other laws and
regulations, and whether the structure of such group of
undertakings where a regulated market operator or an investment
brokerage company is going to be incorporated, is not restricting
the possibilities of the Commission to perform the supervisory
functions thereof laid down in the law, to ensure effective
exchange of information between the supervisory authorities, and
to determine the allocation of the supervisory powers between the
supervisory authorities;
5) there are no reasonable doubts that, in relation to the
planned acquisition of the holding, laundering of the proceeds
from crime and terrorist financing has been carried out or
attempts to carry out such activities have been made, or that the
planned acquisition of the holding could increase such a
risk.
(11) Upon determining whether the criteria referred
to in Paragraph one of this Section have been met, the Commission
need not take into account such voting shares or capital shares
which may be held by investment brokerage companies or credit
institutions because they have signed up for the issued financial
instruments or their offer, providing the service referred to in
Section 3, Paragraph four, Clause 6 of this Law, provided that
the voting rights are not implemented or otherwise exercised in
order to become involved in the management of the issuer that,
within one year after acquisition of holding, the investment
brokerage company or credit institution alienates such voting
shares or capital shares.
(12) If the Commission has suspended the assessment
period in accordance with Paragraphs two and 2.1 of
this Section, such suspension time shall not be included in the
assessment period.
(2) When requesting the additional information referred to in
Section 9, Paragraph four of this Law, the Commission has the
right to suspend 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 abovementioned
time for the suspension of assessment period for up to 30 working
days, if the person who wishes to acquire, has acquired, wishes
to increase or has increased the qualifying holding thereof in a
regulated market operator or an investment brokerage company is
not subject to the supervision of activities of investment
brokerage companies, credit institutions, insurance companies,
reinsurance companies, managers of alternative investment funds
or investment management companies, or the place of residence
(registration) of the person is located in a foreign country.
(21) If a person who wishes to acquire a qualifying
holding is concurrently being assessed in another Member State in
accordance with provisions similar to Section 111.1 of
this Law in relation to granting a permit, the Commission has the
right to suspend the assessment period until the day when the
relevant authority exercising the consolidated supervision
completes the assessment.
(3) The Commission shall take a decision within the time
period specified in Paragraph one of this Section by which it
prohibits a person to acquire or increase a qualifying holding in
a regulated market operator or an investment brokerage company,
if:
1) the person does not conform to the criteria laid down in
Paragraph one of this Section;
2) the person does not submit or refuses to submit to the
Commission the information laid down in this Law or the
additional information requested by the Commission;
3) due to circumstances beyond the control of the person, he
or she is unable to provide the information laid down in this Law
or the additional information requested by the Commission.
(4) The Commission shall, within two working days without
exceeding the assessment period specified in Paragraph one of
this Section, after taking the decision specified in Paragraph
three of this Section, send it to the person who is prohibited to
acquire or increase the qualifying holding thereof in a regulated
market operator or an investment brokerage company.
(5) If the Commission does not send a decision to a person
within the time period referred to in Paragraph one of this
Section by which it prohibits such person to acquire or increase
qualifying holding in a regulated market operator or an
investment brokerage company, it shall be regarded that it agrees
with acquiring or increasing of qualifying holding by the person
in the regulated market operator or the investment brokerage
company.
(6) The provisions of Paragraph three, Clause 3 of this
Section shall not be applicable to a legal (registered) person if
the shares thereof are listed in any regulated market of a Member
State or in the regulated market registered in a Member State of
Organisation for Economic Co-operation and Development, and such
legal (registered) person submits information to the Commission
on the shareholders thereof who own a qualifying holding
therein.
(7) If the Commission has agreed that a person acquires or
increases a qualifying holding in a regulated market operator or
an investment brokerage company, such person shall acquire or
increase the qualifying holding thereof in the regulated market
operator or the investment brokerage company within six months
from the day when the information referred to in Paragraph three
of this Section on receipt of the notification or additional
information referred to in Section 9, Paragraph three of this Law
is sent. If until the end of the abovementioned time period the
person has not acquired or increased a qualifying holding in the
regulated market operator or the investment brokerage company,
the consent of the Commission for the acquiring or increasing of
the qualifying holding thereof in the regulated market operator
or the investment brokerage company loses its effect. Upon a
motivated request of the person in writing, the Commission has
the right to decide on extending the abovementioned time
period.
(8) When assessing the notifications referred to in Section 9,
Paragraphs one and two of this Law, the Commission shall consult
with supervisory authorities of the relevant Member State if the
acquirer of a qualifying holding in an investment brokerage
company is the investment brokerage company, credit institution,
alternative investment fund manager, investment management
company, insurance company or reinsurance company registered in
another Member State, a parent undertaking of the investment
brokerage company, credit institution, alternative investment
fund manager, investment management company, insurance company or
reinsurance company registered in another Member State, or a
person who controls an investment brokerage company, credit
institution, alternative investment fund manager, investment
management company, insurance company or reinsurance company
registered in another Member State, and if, upon acquiring or
increasing the qualifying holding by the relevant person, the
investment brokerage company becomes a subsidiary of such person
or comes under its control.
(81) The Commission shall indicate in its
assessment every opinion expressed by the supervisory authority
of the responsible Member State on the potential acquirer of a
holding referred to in Paragraph eight of this Section or an
objection against it.
(9) If the influence of persons who have acquired a qualifying
holding in a regulated market operator or an investment brokerage
company endangers or could endanger the sound and prudent
administration and activities thereof in conformity with the laws
and regulations, the Commission shall require that such influence
be terminated without delay, and also, if necessary, that the
board or council, or a member of the board or council of the
relevant capital company be recalled or prohibit such persons who
have acquired the qualifying holding from exercising the voting
rights in all of the shares or stocks owned thereby.
(10) Appeal of the administrative acts issued by the
Commission referred to in Paragraphs three and nine of this
Section shall not suspend the execution thereof.
(11) Sample forms and templates for the submission of the
information specified in Section 9 of this Law, and also the
advisory procedures of the supervisory authorities of Member
States referred to in Paragraph eight of this Section shall be
governed by Commission Implementing Regulation (EU) 2017/1944 of
13 June 2017 laying down implementing technical standards with
regard to standard forms, templates and procedures for the
consultation process between relevant competent authorities in
relation to the notification of a proposed acquisition of a
qualifying holding in an investment firm in accordance with
Directives 2004/39/EC and 2014/65/EU of the European Parliament
and of the Council.
(12) If the Commission has received notifications regarding
acquisition or increasing of a qualifying holding in the central
securities depository, in the same regulated market operator or
investment brokerage company from two or more potential acquirers
of a holding, such notifications shall be examined in a
non-discriminatory manner.
[26 February 2009; 15 October 2009; 9 July 2013; 24 April
2014; 14 September 2017; 21 June 2018; 20 June 2019; 12 December
2019; 29 April 2021]
Section 11. Obligation to Notify in
Event of Reduction and Termination of a Qualifying Holding
(1) If a person proposes to terminate a qualifying holding in
a regulated market operator or an investment brokerage company,
it shall notify the Commission of such decision in writing in
advance. The person shall specify in the notification the share
capital shares of the relevant capital company or the proportion
of shares with voting rights (stocks) remaining therewith.
(2) If a person wishes to reduce the qualifying holding so
that it falls below 20, 33, or 50 per cent of the share capital
or number of shares with voting rights (stocks) in the regulated
market operator or an investment brokerage company, or if the
relevant capital company ceases to be a subsidiary of this
person, such person shall notify the Commission in writing of
such decision in advance.
[14 September 2017]
Section 12. Obligations of a Capital
Company
(1) A regulated market operator and an investment brokerage
company shall, without delay, notify the Commission in writing of
any acquisition, increase, or reduction of a qualifying holding
by any person, upon such becoming known. The notification shall
specify the proportion of the holding in the share capital or the
number of shares with voting rights (stocks) held, or information
on the termination of a qualifying holding by the relevant
person.
(2) A regulated market operator and an investment brokerage
company shall, by 31 January each year, submit a list of those
shareholders (members) to the Commission which on 31 December of
the previous year have had a qualifying holding in the relevant
capital company, by indicating the information on shareholders
(members) and mutually related groups of shareholders (members)
and amount of holding as percentage of the share capital or
number of shares with voting rights (stocks) of the relevant
capital company.
[9 June 2005; 14 September 2017]
Section 13. Consequences of Failure
to Give Notice
(1) If a person has failed to comply with the requirements
laid down in Section 9 of this Law, the Commission shall apply
restrictions on the rights referred to in Section 7, Paragraph
four of this Law.
(2) If a person, in disregard of a prohibition by the
Commission, acquires or increases a qualifying holding, such
person has no right to exercise all the voting rights of the
shares (stocks) owned thereby, but the decisions of the meeting
of shareholders (members) taken through the exercise of the
voting rights in these shares (stocks) shall be null and void
from the moment of the taking thereof, and no records in the
commercial register and any other public registers may be
requested to be made on the basis of such decisions.
[9 June 2005]
Division
C
Making an Offer of Securities to the Public
[9 June 2005]
Section 14. Permit to Make an Offer
of Securities to the Public
(1) [12 December 2019];
(2) In order to receive a permit to make an offer of
securities to the public, the issuer or person making offer shall
submit a submission to the Commission appended by:
1) two originals of the prospectus and the text of the
prospectus in electronic form;
2) a decision of the person making an offer on issue of the
relevant transferable securities and offer of securities to the
public, if the person making an offer is a legal person.
(3) The submission shall specify the following:
1) the registration number, place and institution, firm name,
registered office, telephone number, and also e-mail address (if
any) of the issuer;
2) the class, category, total amount of transferable
securities and the denomination of one transferable security;
3) the expected starting date of sale or distribution;
4) countries where the issuer or person making an offer wishes
to offer transferable securities to the public.
(4) [12 December 2019]
(5) [12 December 2019]
(6) [12 December 2019]
(7) The Commission shall take a decision on refusal to issue a
permit, if the information included in the documents
submitted:
1) fails to comply with the requirements of other law and
regulations;
2) indicates that the issue does not conform to the
requirements of laws and regulations;
3) indicates that issue may infringe the interests of
investors.
(8) A decision on refusal to issue a permit shall be issued to
the issuer or person making an offer who has submitted a
submission to the Commission regarding permission to make an
offer of securities to the public.
(9) [12 December 2019]
(10) [12 December 2019]
(11) The procedures for the preparation, approval, publishing,
and distribution of prospectuses shall be determined by
Regulation No 2017/1129.
(12) If an offer of securities to the public is to be made
only in Latvia, the prospectus shall be prepared in the official
language.
(13) The base prospectus shall be registered with the
Commission in accordance with the requirements of this
Section.
[15 June 2006; 22 March 2102; 26 May 2016; 12 December
2019]
Section 15. Obligation of Publishing
of an Issuing Prospectus
[12 December 2019]
Section 16. Derogations from the
Obligation to Prepare an Issue Prospectus
[12 December 2019]
Section 16.1 Exemption
from the Obligation to Prepare a Prospectus
If an offer of securities to the public is expressed for
transferable securities for which the total calculated payment in
the European Union in a period of 12 months is from EUR 1 000 000
to 8 000 000 and notification in accordance with Article 25 of
Regulation No 2017/1129 is not requested, the offeror need not
prepare the prospectus referred to in Regulation No 2017/1129. In
such case the offeror shall prepare and publish an offer document
in accordance with the regulatory provisions of the
Commission.
[12 December 2019]
Section 17. Contents of a
Prospectus
(1) [12 December 2019]
(2) [12 December 2019]
(3) [12 December 2019]
(4) Detailed information to be included in the prospectus and
content of the prospectus shall be determined by the directly
applicable legal acts of the European Union regarding the content
of the prospectus.
(5) [12 December 2019]
(6) [12 December 2019]
(7) [12 December 2019]
(8) If the issuer or offeror has taken the decision to perform
an initial placement of transferable securities through a
regulated market operator or to submit a submission regarding the
admission of the relevant transferable securities on the
regulated market immediately after completion of the initial
placement, it shall prepare one prospectus, taking into
consideration the requirements of this Law, Regulation No
2017/1129, and other directly applicable legal acts of the
European Union in relation to the content of the prospectus.
(9) [26 May 2016]
[4 October 2007; 22 March 2012; 8 November 2012; 26 May
2016; 20 June 2019; 12 December 2019]
Section 17.1 Content of a
Base Prospectus
[12 December 2019]
Section 17.2
Incorporation of Information by Reference
[12 December 2019]
Section 17.3 Issue
Prospectus Consisting of Separate Documents
[12 December 2019]
Section 18. Supplements to an Issue
Prospectus
[12 December 2019]
Section 19. Derogation from the
Obligation to Include Specific Information in an Issue
Prospectus
[12 December 2019]
Section 20. Approval of a Prospectus
and Responsibility for the Information Included Therein
(1) A prospectus shall be approved by the meeting of
shareholders (members) of the issuer or by an authorised
administrative body or its official.
(2) An administrative body of the issuer, a person making an
offer, and a guarantor (if any) shall be responsible for the
content of the issue prospectus.
(3) The given name, surname, and position of responsible
persons or the name, registered office, and registration number
of legal persons responsible for the veracity of the information
included in such prospectus shall be indicated in the prospectus.
The prospectus shall also include a notification by such person
stating that, according to the information available to this
person, the information included in the prospectus conforms to
actual circumstances, and also that no facts have been concealed
which may affect the meaning of the information included in the
prospectus.
(4) If a person is not responsible for all of the information
included in a prospectus, the prospectus shall specify the part
for which the relevant person is responsible.
(5) By bringing an action in court in accordance with general
procedures, an investor may request compensation for losses from
the persons specified in the prospectus who are responsible for
the veracity of the information included in the prospectus, if he
or she has suffered losses due to false or incomplete information
having been included in the prospectus.
(6) An investor may not request compensation for losses from
the responsible persons indicated in the prospectus, if he or she
has made his or her choice only on the basis of a summary note or
translation thereof, except for cases when the summary note is
misleading or in contradiction with other parts of the prospectus
or if it together with other parts of the prospectus does not
provide key information which allows for the investor to decide
on acquisition of securities.
[22 March 2012; 12 December 2019]
Section 20.1 Validity of
an Issue Prospectus, a Base Prospectus, and a Registration
Document
[12 December 2019]
Section 21. Procedures for the
Publication of an Issue Prospectus
[12 December 2019]
Section 22. Procedures for the
Mutual Recognition and Notification of Issue Prospectuses
[12 December 2019]
Section 22.1 Use of
Languages
[12 December 2019]
Section 23. Recognition of an Issue
Prospectus Drawn up by an Issuer Registered in Foreign
Countries
[12 December 2019]
Section 24. Advertising of an Offer
of Securities to the Public
[12 December 2019]
Section 24.1 Rights of
the Commission
(1) In order to ensure compliance with the provisions of this
Chapter, in addition to the rights laid down in the Finance and
Capital Market Commission Law and in this Law, the Commission has
the following rights:
1) to justifiably require an issuer or offeror to include
supplementary information in the prospectus, if necessary for
investor protection;
2) to justifiably require an issuer or person making an offer
and persons that control them or are controlled by them, in order
for the information and documents necessary for the performance
of the functions of the Commission are provided;
3) to justifiably require auditors and managers of an issuer
or offeror, and also also financial intermediaries commissioned
to carry out the offer of securities to the public in order for
the information and documents necessary for the performance of
the functions of the Commission are provided;
4) to suspend an offer of securities to the public of any
issuer or offeror for a period of up to 10 working days, if the
Commission has lawful basis to consider that the requirements of
Division C of this Law are or would be infringed;
5) to prohibit or suspend advertisements for a time period up
to 10 working days, if the Commission has the basis to consider
that the requirements of Division C of this Law have been
infringed;
6) to prohibit an offer of securities to the public, if the
Commission establishes that the requirements of Division C of
this Law have been infringed, or the Commission has the basis to
consider that they would be infringed;
7) to make public the fact that an issuer is failing to comply
with its obligations and liabilities;
8) to suspend examination of the prospectus submitted for
approval or to suspend or restrict the offer of securities to the
public, if the Commission is exercising the powers to impose a
prohibition or restriction in conformity with Article 42 of
Regulation No 600/2014 until revocation of such prohibition or
restriction;
9) to refuse to approve any prospectus for a period of up to
five years which has been approved by a particular issuer or
offeror, if the abovementioned issuer or offeror has repeatedly
and significantly violated the provisions of this Law and
Regulation No 2017/1129.
(2) [12 December 2019]
(3) [12 December 2019]
(4) The Commission has the right to make public the
information on the measures implemented and sanctions adopted
against an issuer or offeror for the violation of the
requirements of Division C of this Law, except when disclosure of
such information may cause serious disorders in the financial
market or cause incommensurate damage to the persons
involved.
[22 March 2012; 12 December 2019]
Division
D
Public Circulation of Financial Instruments
Chapter I
Activities of a Regulated Market Operator
Section 25. Regulated Market
Operator
(1) A regulated market operator shall act in accordance with
the Law, the regulatory provisions of the Commission, and also
his or her own articles of association and regulations.
(2) Only a regulated market operator has the right to use a
combination of the words "regulētā tirgus organizētājs"
[regulated market operator] or "fondu birža" [stock
exchange] in the firm name.
(3) A regulated market operator may organise one or several
regulated markets. A regulated market operator also has the right
to operate multilateral trading facility.
(4) The Commission shall establish and conduct a list of all
regulated markets organised by its licensed regulated market
operators and send this list and any changes in the list to the
European Securities and Markets Authority and the supervisory
authorities of the Member States. Only regulated markets
conforming to the requirements of this Law shall be included by
the Commission in the list.
(5) If a regulated market operator fails to comply with the
requirements of this Law or the regulated market does not conform
to the provisions of this Law, the Commission shall exclude the
relevant regulated market from the list of regulated markets and
notify the European Securities and Markets Authority and the
supervisory authorities of the Member States thereof.
[4 October 2007; 22 March 2012; 21 June 2018]
Section 26. Minimum Paid up Share
Capital by a Regulated Market Operator
(1) The minimum paid up share capital by a regulated market
operator shall be at least EUR 730 000.
(2) Own funds of a regulated market operator may not be less
than the minimum paid up share capital.
[19 September 2013; 21 June 2018]
Section 27. Rights and Obligations
of a Regulated Market Operator
(1) A regulated market operator in conformity with the law,
the regulatory provisions of the Commission, and also his own
articles of association and regulations shall organise a
regulated market and provide services related to the public
circulation of financial instruments.
(2) A regulated market operator shall be an organisation open
and accessible to all members of the financial instrument market,
which shall ensure the openness of each regulated market operated
thereby and activity conforming to the principles of sound
management.
(21) A regulated market operator shall carry out
the necessary measures in order to:
1) identify and manage the possible conflict of interest
between interests of the regulated market operator or its
shareholders and an obligation to ensure stable performance of
the regulated market, and also in order to prevent adverse effect
of such conflict of interest on performance of the regulated
market or interests of its members or participants, especially if
such conflict of interest can endanger the rights of the
regulated market operator to perform the market supervision
function;
2) identify risks to which he is subjected to, and to manage
such risks correspondingly, introducing efficient measures for
the mitigation of such risks;
3) ensure due control of technical operation of the system,
including to develop action plan for malfunction risk control of
the system in case of an emergency situation;
31) introduce transparent and binding provisions
and procedures which provide for fair and arranged trade and
determine objective criteria for efficient enforcement of
orders;
4) ensure efficient and timely completion of transactions
performed in its systems;
5) ensure sufficient financial resources at the moment of
granting a licence and henceforth in order to promote
corresponding activity of a regulated market, taking into account
the type and scope of such transactions which have been entered
into in a market, and the scope and level of such risks to which
it is subjected;
6) facilitate access of members or participants of a regulated
market operator to information which, in accordance with this Law
and directly applicable legal acts of the European Union, is
published by issuers whose transferable securities are admitted
to trading on a regulated market.
(3) A regulated market operator shall ensure:
1) the fair and open inclusion of financial instruments in a
regulated market and the process of trading, and also equal
treatment for all persons of the same status;
2) the supervision of issuers of the financial instruments
included on regulated markets in relation to disclosing of
information in accordance with the requirements of this Law and
the directly applicable legal acts of the European Union;
3) the concentration of supply and demand of financial
instruments admitted to trading on regulated markets for the
setting of prices for financial instruments;
4) the security of entering into transactions;
5) the dissemination of consistent information which would
make it possible for the value of financial instruments admitted
to trading on regulated markets to be determined;
6) the organisation of payments related to transactions
performed and the security of account operations.
(4) A regulated market operator shall organise one regulated
market wherein such financial instruments are admitted for which
no quantitative requirements (such as minimum paid up share
capital, number of shareholders, amount of capitalisation,
profitability or the proportion of shares in public circulation)
are imposed on issuers thereof for inclusion in such regulated
market, but all requirements specified in this Law in relation to
the openness of information are binding.
(5) A regulated market operator has the right to organise a
guarantee fund from the contributions of members or participants
thereof in order to ensure the execution of transactions entered
into in a regulated market.
(6) A regulated market operator shall keep funds of a
guarantee fund owned by members or participants of a regulated
market operator separately from its own funds. The regulated
market operator shall keep the funds of a guarantee fund in the
account of the central bank of a Member State or foreign country,
if it is providing such service, or in a credit institution,
informing the relevant institution that the funds in the account
are the funds of the guarantee fund.
(7) Funds of a Guarantee Fund may not be used for satisfaction
of creditors' claims of a regulated market operator. This
requirement shall also apply to the cases when the regulated
market operator has been declared insolvent in accordance with
the procedures laid down in law.
(8) A regulated market operator, in conformity with the
procedures laid down in Division F.1of this Law, has
the right to delegate the provision of the following services
(hereinafter - the outsourced services) to one or several
persons:
1) conducting of accounting;
2) management or development of information technologies or
systems;
3) organising internal control;
4) other activities (the outsourced service) necessary for
ensuring the operation of the regulated market operator and
provision of services related to public circulation of financial
instruments.
(9) A regulated market operator may delegate the obligations
of an internal audit service as the outsourced service only to a
sworn auditor or a commercial company of sworn auditors.
(10) A regulated market operator may not:
1) delegate the obligations of its administrative bodies which
are specified in accordance with the laws and regulations or the
articles or association;
2) to transfer completely the performance of the set of
functions granted in a licence for organising of the regulated
market to providers of outsourced services.
(11) A regulated market operator shall place the list of those
shareholders or members on its website which have a qualifying
holding in the capital of the regulated market operator, and
shall update such list on a regular basis.
(12) A regulated market operator shall, within first three
working days of each calendar year, publish a calendar for
trading days of financial instruments of the relevant calendar
year on its website.
(13) A regulated market operator may not execute an order of a
client by performing a transaction on its own behalf or engage in
matched principal trading in any of regulated markets which are
operated thereby.
(14) More detailed requirements for the application of this
Section are determined by Commission Delegated Regulation (EU)
2017/568 of 24 May 2016 supplementing Directive 2014/65/EU of the
European Parliament and of the Council with regard to regulatory
technical standards for the admission of financial instruments to
trading on regulated markets.
(15) If a regulated market is a legal person which is managed
or operated by a regulated market operator which itself is not a
regulated market, the division of obligations specified in this
Law between these subjects shall be determined by the Commission
on a case-by-case basis.
[9 June 2005; 4 October 2007; 22 May 2008; 14 September
2017; 21 June 2018; 20 June 2019]
Section 28. Regulations of a
Regulated Market Operator
(1) Regulations of a regulated market operator are documents
laying down the requirements that must be complied with by the
members or participants thereof and issuers whose financial
instruments are admitted to trading on any of the regulated
markets organised by the regulated market operator.
(11) A regulated market operator shall introduce,
implement, and maintain transparent and non-discriminatory
regulations which are based on objective criteria and by which
access to the regulated market or participation therein is
governed.
(2) A regulated market operator shall prepare draft
regulations and submit them to the Commission. The Commission
shall evaluate the conformity of the draft regulations (including
amendments to the regulations where required) with the
requirements of laws, other regulatory enactments and successful
fulfilment of the obligations of the regulated market operator
and, within 30 days from the date of the submitting the draft,
prepare an opinion thereon. If the opinion does not contain
objections, the regulated market operator is entitled to decide
as to the approval of the regulations.
(3) A regulated market operator shall place the regulations
and amendments to such regulations on its website immediately
after approval thereof by the board of the regulated market
operator. The regulations of a regulated market operator and
amendments to such regulations shall enter into effect on the day
following their publication on the website of the regulated
market operator, unless another time period for entering into
effect has been specified in the regulations. The regulated
market operator shall, without delay, inform the Commission of
approval of the regulations.
(4) The regulations of a regulated market operator which bring
forward the requirements for activities of regulated markets
included in the list of regulated markets drawn up by the
Commission, after approval, shall be sent by the Commission to
the European Commission and the supervisory authorities of the
Member States.
(5) A regulated market operator shall govern in the
regulations:
1) the procedures by which financial instruments are admitted
to trading on a regulated market or removed therefrom;
2) the structure and management of the regulated market;
3) the obligations of issuers of financial instruments
admitted to trading on a regulated market and the procedures for
the supervision of issuers;
4) the procedures for the trade in and quotation of financial
instruments;
5) the procedures for clearing and settling accounts of
financial instruments and money transactions;
6) the procedures for the admission and exclusion of members
or participants of a regulated market operator, the rights and
obligations of members or participants, and also the procedures
for suspending the status of the member or participant and
professional requirements for employees of the company in the
status of a member or participant performing transactions on the
regulated market;
7) the procedures for identifying and preventing transactions
which are performing using inside information and market
manipulation;
8) the procedures for operating the Guarantee Fund;
9) other relations related to the activities of the regulated
market and the public circulation of financial instruments.
(6) [21 June 2018]
[9 June 2005; 15 June 2006; 4 October 2007; 24 April 2014;
21 June 2018]
Section 29. Licence to Operate a
Regulated Market
(1) A regulated market operator is entitled to commence
activities only after receipt of a licence from the
Commission.
(2) A licence for operating a regulated market (hereinafter in
this Chapter - the licence) shall be issued for an indefinite
time period.
(3) The licence shall be issued to a capital company
registered in the Republic of Latvia:
1) of which the minimum paid up share capital, and also own
funds conform to the requirements of Section 26 of this Law;
2) of which the organisational structure and regulations for
operation ensure the protection of the interests of investors and
the successful performance of the obligations referred to in
Section 27 of this Law;
3) members of the board and council of which meet the
requirements of this Law;
4) in which the shareholders (members) possessing a qualifying
holding comply with the requirements of this Law.
[21 June 2018]
Section 30. Documents to be
Submitted for Receiving the Licence
(1) In order to receive the licence, a regulated market
operator shall submit to the Commission a submission which shall
be accompanied by:
1) documents containing information on members of the board
and council of the regulated market operator:
a) a notification containing the information referred to in
Paragraph two of this Section;
b) a copy of the page of the passport or other personal
identification document determined by law which specifies data
identifying a person [given name, surname, citizenship, personal
identity number (if any) or year and date of birth];
c) copies of documents certifying education;
2) information on shareholders (members) possessing a
qualifying holding in the regulated market operator:
a) for natural persons - a copy of the page of a passport or
other personal identification document specified by law which
indicates data identifying a person [given name, surname,
citizenship, personal identity number (if any) or year and date
of birth];
b) for legal persons - the firm name, registered office,
registration number and place. Legal persons registered in
foreign countries and other Member States shall also submit
copies of registration documents;
3) a description of the organisational structure of the
regulated market operator which clearly sets out the rights,
obligations, and authorisation of the council and board, and also
lays down and assigns precisely the tasks of constituent bodies
of the regulated market operator, and obligations and
authorisation of the heads and members of the board of such
constituent bodies;
4) a description of the main principles of the accounting
policies and accounting organisation;
5) a description of the management information system;
6) regulations for the protection of the information
system;
7) a description of the internal audit system;
8) the procedures for the identification of unusual and
suspicious financial transactions;
9) a business plan for at least the next three years of
operation which reflects in detail the strategy, financial
forecasts (balance sheet, profit and loss account of the
regulated market operator), market research plans, and other
information considered essential by the regulated market operator
and which provides additional information for the acquisition of
a true and fair view of the planned activities;
10) the draft regulations referred to in Section 28 of this
Law regarding each regulated market the market operator is
planning to organise.
(2) The notification referred to in Paragraph one, Clause 1,
Sub-clause "a" of this Section shall be completed by each member
of the board and council of a regulated market operator. The
notification shall specify the following information:
1) the firm name of the regulated market operator;
2) the given name, surname, citizenship, personal identity
number (if any) or year and date of birth;
3) the position;
4) citizenship;
5) education (academic degree);
6) information on advanced vocational training;
7) whether the relevant person has ever been convicted;
8) whether the relevant person has been the head of a
commercial company which has been declared insolvent;
9) whether the relevant person has been deprived of the right
to perform any commercial activities;
10) previous working places within 10 years and a description
of the duties of employment.
(3) The Commission has the right to request the capital
company to clarify the documents and information submitted.
(4) If, pending a decision on the issue of a licence, changes
in the information indicated in Paragraph one of this Section
occur or amendments to the documents are made, the capital
company has a duty to submit without delay to the Commission the
new information or the full text of the relevant documents with
the amendments made.
(5) After receipt of a licence a regulated market operator
shall submit any amendments to the documents submitted for the
receipt of the licence to the Commission not later than within
seven days after the date of adopting the amendments or after the
date the relevant information became known to him or her.
(6) The Commission has the right to refuse to approve the
amendments to the documents, if the anticipated changes threaten
financially stable, prudent activity of the regulated market
operator, conforming to the laws and regulations.
[4 October 2007; 21 June 2018]
Section 31. Requirements for Members
of the Board and Council of a Regulated Market Operator
(1) Such person may be a member of the board and council of a
regulated market operator:
1) who is sufficiently competent in the field for which he or
she will be responsible;
2) who has the required education and not less than three
years of relevant work experience in a commercial company,
organisation, or institution;
3) who has an impeccable reputation;
4) who has not been deprived of the right to perform
commercial activities.
(2) Such person may not be a member of the board and council
of the regulated market operator:
1) who has been convicted of committing an intentional
criminal offence (including for bankruptcy in bad faith);
2) who has been convicted of committing an intentional
criminal offence, even if he or she has been released from
serving the sentence because of the limitation period, clemency,
or amnesty;
3) against whom a criminal matter for the committing of an
intentional criminal offence has been discontinued because of the
expiry of the limitation period or amnesty;
4) who has been charged for a crime, but the criminal
proceedings against whom have been terminated for reasons other
than exoneration;
5) who has knowingly provided false information to the
Commission on himself or herself by submitting documents to
obtain a licence for the performance of any activities in the
finance and capital market.
(3) If a person already performs the obligations of a member
of the administrative body for other regulated market operator
which has received a licence to organise a regulated market in
accordance with the procedures of this Law or legal act of the
Member State, it shall be regarded as complying with the
requirements of Paragraph one of this Section.
(4) The Commission shall determine the requirements for
members of the board and council of a regulated market operator
in relation to their functions in the field of the internal
control system.
[4 October 2007; 21 June 2018]
Section 31.1 Provisions
Regarding the Total Number of Positions of a Member of the Board
and Council to be Held by a Member the Board and Council of a
Regulated Market Operator
(1) Upon determining the number of positions of a member of
the council or board that a member of the council or the board of
a regulated market operator may simultaneously hold, individual
circumstances, and also the type, scope, and complexity of the
operation of the regulated market operator shall be
considered.
(2) A member of the board and council of a regulated market
operator which is important in terms of its size, internal
organisation and the nature, scope, and complexity of activities,
may, except for the cases when he or she is authorised to
represent the Republic of Latvia, simultaneously hold no more
than:
1) one position of a member of the board and two positions of
a member of the council;
2) four positions of a member of the council.
(3) Within the meaning of this Section one position of a
member of the board or council is considered to be those
positions of a member of the board or council:
1) within the framework of one consolidation group;
2) in companies (including those that are not financial
institutions) in which a regulated market operator has a
qualifying holding.
(4) The Commission may permit a member of the board or council
of a regulated market organiser to additionally hold one position
of a member of the council.
(5) The Commission shall regularly provide the European
Securities and Markets Authority with information on the permits
referred to in Paragraph four of this Section.
(6) Within the meaning of this Section positions of a member
of the board or council in associations, foundations, and other
organisations whose activities are not aimed at generating profit
shall not be considered a position of a member of the board or
council.
[21 June 2008]
Section 32. Procedures for the
Granting of a Licence
(1) The Commission shall examine the submission of a capital
company for obtaining a licence and, within three months, take a
decision after the documents prepared and drawn up in accordance
with all the requirements of laws and regulations laid down in
this Law have been received.
(2) The Commission shall not issue a licence, if:
1) while establishing a regulated market operator, the laws
and other laws and regulations have not been complied with;
2) the documents submitted by a regulated market operator
contain false information;
3) the members of the board and council of a regulated market
operator do not conform to the requirements included in this Law
and the regulatory provisions of the Commission, and also if the
Commission has not been able to ascertain to a satisfactory
extent that members of the board and council of a regulated
market operator have impeccable reputation, sufficient knowledge,
skills, and experience and that they dedicate sufficient amount
of time for the fulfilment of the duties, or if there is an
objective and arguable reason to assume that the board and
council of a regulated market operator may endanger its
efficient, correct, and prudent management, and also the
integrity of market;
4) it is impossible to verify the identity, reputation, or
adequacy of free capital of the persons who have a qualifying
holding in a regulated market operator;
5) the information included in the documents submitted
indicates that a regulated market operator will not be able to
ensure the fulfilment of the obligations specified in Section 27,
Paragraphs two, three, and four of this Law;
6) the information included in the documents submitted
indicates that the regulated market which is planned to be
organised by a regulated market operator does not conform to the
requirements of this Law;
7) the Commission detects that the financial resources
invested in the share capital of a regulated market operator or
which are intended to be used in commercial activity of a
regulated market operator have been acquired through unusual or
suspicious financial transactions or the lawfulness of the
acquisition of these financial resources has not been proven by
documentary evidence;
8) the activities of a regulated market operator are not
economically substantiated.
(3) The Commission shall consult the supervisory authority of
the relevant Member State before issuing a licence to such
regulated market operator:
1) which is a subsidiary of a credit institution or insurance
company licensed in a Member State;
2) which is a subsidiary of such a parent undertaking another
subsidiary of which is a credit institution or insurance company
licensed in a Member State;
3) which is controlled by a person who also controls another
credit institution or insurance company licensed in a Member
State.
(4) The Commission shall, before issuing a licence, and also
during the course of supervision of a regulated market operator,
request and assess information from the supervisory authority of
the relevant Member State on suitability of shareholders of the
regulated market operator and reputation and experience of
members of the board or council, if such persons are involved in
the management of other commercial companies of such group in
which the relevant regulated market operator will be
included.
(5) The sample forms, templates, and procedures necessary for
exchange of information referred to in Paragraphs three and four
of this Section shall be provided for by Commission Implementing
Regulation (EU) 2017/981 of 7 June 2017 laying down implementing
technical standards with regard to standard forms, templates and
procedures for the consultation of other competent authorities
prior to granting an authorisation in accordance with Directive
2014/65/EU of the European Parliament and of the Council
(hereinafter - Regulation No 2017/981).
[13 January 2011; 21 June 2018; 20 June 2019]
Section 33. Re-registration of a
Licence
(1) The Commission shall re-register a licence if the firm
name of a regulated market operator is changed.
(2) A regulated market operator shall submit to the Commission
a submission for the re-registration of a licence not later than
within five working days after re-registration of the firm
name.
(3) The Commission shall re-register a licence not later than
within five working days after receipt of the submission.
(4) [21 June 2018]
(5) [21 June 2018]
[21 June 2018]
Section 34. Procedures for
Cancellation of the Licence
(1) The Commission shall cancel a licence issued to a capital
company for operating a regulated market, if:
1) it is detected that the regulated market operator has
provided false information in order to receive the licence;
2) the regulated market operator systematically fails to
comply with the requirements of this Law, Regulation No 600/2014,
and other laws and regulations;
3) the regulated market operator has failed to rectify the
violations of laws and regulations detected by the Commission
within the time period stipulated by the Commission;
4) the regulated market operator has initiated liquidation
proceedings;
5) the bankruptcy procedure of the regulated market operator
has been initiated in accordance with the procedures laid down in
law;
6) the regulated market operator has submitted a written
submission for the cancellation of the licence;
7) the regulated market operator has not commenced activities
within 12 months from the day when the licence was issued;
8) the regulated market operator has not performed the
activity indicated in the licence for more than six months;
9) it is detected that the regulated market operator fails to
comply with the requirements laid down in this Law for the
receipt of a licence;
10) it is detected that the prohibition to exercise the voting
right of shares belonging to shareholders of the regulated market
operator with a qualifying holding has set it and it lasts for
more than six months.
(2) The Commission shall inform the European Securities and
Market Authority that a licence to operate a regulated market has
been cancelled.
[4 October 2007; 13 January 2011; 22 March 2012; 21 June
2018]
Section 35. Obligations of
Administrative Bodies of a Regulated Market Operator
(1) The board of a regulated market operator shall:
1) decide on inclusion of financial instruments in any of the
regulated markets organised by the regulated market operator or
the exclusion therefrom;
2) decide on suspension of trade in financial instruments;
3) decide on admission and exclusion of members or
participants of the regulated market operator, and also on
suspension of the status of a member or participant of the
regulated market operator;
4) approve the regulations of the regulated market operator
and ensure conformity with the requirements referred to
therein;
5) ensure that the information to be published by the
regulated market operator in accordance with this Law, other laws
and regulations, and the regulations of the regulated market
operator is published in a timely manner.
(2) If the the board cannot be convened due to objective
reasons, a specially delegated member of the board is entitled to
decide on suspension of trade in financial instruments and
suspension of activities of members or participants of a
regulated market operator.
(3) [15 June 2006]
(4) The relevant administrative body of a regulated market
operator has an obligation, upon its own initiative or upon
request of the Commission, to recall members of the board or
council from the office without delay if they do not conform to
the requirements of this Law.
(5) A regulated market operator may delegate the obligations
of the board specified in Paragraph one, Clauses 1, 2, and 3 of
this Section to a committee of independent experts approved by
the council of the regulated market operator, the activity of
which is governed by the by-laws approved by the council of the
market operator.
[15 June 2006; 29 September 2007; 21 June 2018]
Section 35.1 Systems
Resilience, Circuit Breakers and Electronic Trading
(1) A regulated market operator shall introduce effective
facilities and procedures and develop arrangements to ensure that
its trading facilities are resilient, have sufficient capacity to
deal with peak order and message volumes, are able to ensure
orderly trading under conditions of market stress, are fully
tested to ensure meeting of such conditions and they have
effective business continuity arrangements to ensure continuity
of its services if there is any unforeseen failure of its trading
facilities.
(2) A regulated market operator shall ensure that it has:
1) written agreements with all investment brokerage companies
and credit institutions pursuing a market making strategy on the
regulated market;
2) schemes to ensure that a sufficient number of investment
brokerage companies or credit institutions with which agreements
have been concluded for the performance of the functions of the
market maker on the regulated market operated thereby which
require them to post firm quotes at competitive prices with the
result of providing liquidity to the market on a regular and
predictable basis, if such a requirement is appropriate to the
nature and scale of the trading on the relevant regulated
market.
(3) At least the following information shall be indicated in
the agreements referred to in Paragraph two of this Section:
1) the obligations of the market maker in relation to the
provision of liquidity and, where applicable, any other
obligation arising from participation in the scheme referred to
in Paragraph two, Clause 2 of this Section;
2) any remuneration, rebate, or any other incentives offered
by the regulated market to the market maker so as to provide
liquidity to the market on a regular and predictable basis and,
where applicable, any other rights accruing to the market maker
as a result of participation in the scheme referred to in
Paragraph two, Clause 2 of this Section.
(4) A regulated market operator shall monitor and enforce
compliance by the market maker with the requirements of the
agreements referred to in Paragraph two, Clause 1 of this
Section.
(5) A regulated market operator shall inform the Commission of
the content of the agreements referred to in Paragraph two of
this Section and shall, upon request, submit all the information
necessary to the Commission to enable the Commission to satisfy
itself of compliance by the regulated market operator with that
specified in Paragraph four of this Section.
(6) A regulated market operator shall establish effective
internal control systems, procedures, and arrangements to reject
such orders on the regulated market operated thereby which exceed
the pre-determined volume and price thresholds stipulated by the
regulated market operator or which are clearly erroneous.
(7) A regulated market operator shall ensure that it is able
to temporarily halt or constrain trading if there is a
significant price movement in a financial instrument on the
regulated market operated thereby or a related market during a
short period and, in exceptional cases, to be able to cancel,
vary, or correct any transaction concluded on the regulated
market operated thereby. The regulated market operator shall
ensure that the parameters for halting trading are appropriately
calibrated in a way which takes into account the liquidity of
different asset classes and sub-classes, the nature of the market
model and types of users and they are sufficient to avoid
significant disruptions to the orderliness of trading.
(8) A regulated market operator shall notify the Commission of
the parameters for halting trading stipulated thereby and shall
inform the Commission in a consistent and comparable manner of
any material changes in such parameters. The Commission shall
notify the European Securities and Markets Authority of the
abovementioned parameters and changes therein. The regulated
market operator which is material in terms of liquidity in that
financial instrument shall ensure that the necessary systems and
procedures have been established for it in order to inform the
Commission of halting of trading so that the Commission could
coordinate a market-wide response and determine whether it is
appropriate to halt trading on other trading venues on which the
relevant financial instrument is traded until trading resumes on
the original market.
(9) A regulated market operator shall introduce effective
internal control systems, procedures, and arrangements, including
requiring members or participants of the operated regulated
market to carry out appropriate testing of algorithms,
concurrently providing environments to promote and facilitate
testing of the abovementioned algorithms in order to ensure that
algorithmic trading facilities cannot create or contribute to
disorderly trading conditions on the market and to manage any
disorderly trading conditions which do arise from such
algorithmic trading facilities, including facilities to limit the
ratio of unexecuted orders to transactions that may be entered
into the facility by a member or participant, to be able to slow
down the flow of orders if there is a risk of its facility
capacity being reached and to limit and enforce the minimum tick
size that may be executed on the market.
(10) A regulated market operator that permits direct
electronic access to the regulated market operated thereby shall
have in place effective internal control systems, procedures, and
measures to ensure that such service may be provided to its
clients only by such members or participants of the regulated
market which are investment brokerage companies or credit
institutions which have the right to provide investment services
in a Member State and that criteria are set in relation to the
suitability of such person to whom such direct electronic access
may be offered, and that a member or participant of the regulated
market retains responsibility for orders and transactions which
have been submitted or concluded by using such service. The
regulated market operator shall also determine appropriate
standards regarding risk controls and thresholds on trading
through such access, and also is able to distinguish and to stop
orders or trading by a person using direct electronic access
separately from other orders or trading by the member or
participant. The regulated market operator shall introduce
corresponding measures to suspend or terminate the rights of the
particular member or participant to offer direct electronic
access for clients to the regulated market, if the provisions of
this Paragraph are not conformed to.
(11) A regulated market operator shall ensure that its rules
on co-location services are transparent, fair, and
non-discriminatory.
(12) A regulated market operator shall ensure that its service
fees including execution fees, ancillary fees and any rebates are
transparent, fair, and non-discriminatory and that they do not
create incentives to place, modify, or cancel orders or to
execute transactions in a way which contributes to disorderly
trading conditions or market abuse. The regulated market operator
shall grant rebates for the maintenance of market in relation to
individual shares or to a basket of shares. The regulated market
operator may adjust the amount of its fees for cancelled orders
according to the length of time for which the order was
maintained on the trading facility and to calibrate the fees to
each financial instrument to which they apply. The regulated
market operator may impose a higher fee for placing orders that
are subsequently cancelled than orders which are executed and to
impose a higher fee on members or participants placing a high
ratio of cancelled orders to executed orders, and also on those
members or participants operating a high-frequency algorithmic
trading technique in order to reflect the additional burden on
system capacity.
(13) A regulated market operator shall be able to identify, by
means of flagging from members or participants, orders generated
by algorithmic trading, the different algorithms used for the
creation of orders, and the relevant persons initiating those
orders. The abovementioned information shall be submitted by the
regulated market operator to the Commission upon the request
thereof.
(14) Upon request by the Commission, a regulated market
operator the home Member State of which is the Republic of Latvia
shall make available to the Commission data relating to the order
submitted on the regulated market (the order register or book) or
give the Commission access to such data so that it is able to
monitor trading.
(15) More detailed requirements for the application of this
Section shall be determined by the following directly applicable
legal acts of the European Union:
1) Commission Delegated Regulation (EU) 2017/584 of 14 July
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council with regard to regulatory technical
standards specifying organisational requirements of trading
venues (hereinafter - Regulation No 2017/584);
2) Commission Delegated Regulation (EU) 2017/578 of 13 June
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council on markets in financial instruments
with regard to regulatory technical standards specifying the
requirements on market making agreements and schemes (hereinafter
- Regulation No 2017/578);
3) Commission Delegated Regulation (EU) 2017/566 of 18 May
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council on markets in financial instruments
with regard to regulatory technical standards for the ratio of
unexecuted orders to transactions in order to prevent disorderly
trading conditions;
4) Commission Delegated Regulation (EU) 2017/573 of 6 June
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council on markets in financial instruments
with regard to regulatory technical standards on requirements to
ensure fair and non-discriminatory co-location services and fee
structures (hereinafter - Regulation No 2017/573);
5) Commission Delegated Regulation (EU) 2017/570 of 26 May
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council on markets in financial instruments
with regard to regulatory technical standards for the
determination of a material market in terms of liquidity in
relation to notifications of a temporary halt in trading.
[21 June 2018; 20 June 2019]
Section 35.2 Tick Size of
Financial Instruments
(1) A regulated market operator shall determine tick size
regimes in the regulated markets operated thereby in relation to
shares, depositary receipts, exchange‐traded funds, certificates,
and other similar financial instruments which are specified in
Commission Delegated Regulation (EU) 2017/588 of 14 July 2016
supplementing Directive 2014/65/EU of the European Parliament and
of the Council with regard to regulatory technical standards on
the tick size regime for shares, depositary receipts and
exchange-traded funds (hereinafter - Regulation No 2017/588).
(2) Tick size regimes which are referred to in Paragraph one
of this Section shall be determined:
1) to reflect the liquidity profile of one financial
instrument in different markets and the average bid-ask spread,
taking into account the desirability of enabling reasonably
stable prices without unduly constraining further narrowing of
spreads;
2) adapting the tick size for each financial instrument
appropriately.
(3) Regulation No 2017/588 shall determine more detailed
requirements for the application of this Section.
(4) A regulated market operator may pool large-scale orders
within the meaning of Article 4 of Regulation No 600/2014 for a
price which conforms to the buying and selling mid-price at the
pooling moment by derogation from the requirement laid down in
this Section regarding application of tick size regimes.
[21 June 2018; 20 June 2019; 17 June 2020]
Section 35.3
Synchronisation of Clocks
(1) Trading venues and their members or participants shall
synchronise their clocks which they use to record the date and
time of any reportable event that has occurred at the trading
venue.
(2) The level of accuracy to which clocks are to be
synchronised in accordance with international standards shall be
determined by Commission Delegated Regulation (EU) 2017/574 of 7
June 2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council with regard to regulatory technical
standards for the level of accuracy of business clocks.
[21 June 2018; 20 June 2019]
Section 36. Members or Participants
of a Regulated Market Operator
(1) A member or participant of a regulated market operator
shall be a person who is entitled to perform transactions on the
regulated markets operated by the regulated market operator. The
regulated market operator shall ensure that a member or
participant of the regulated market operator has a possibility to
become a member or participant of the regulated market operator
with direct access or remote access.
(2) Such investment brokerage company may become a member or
participant of a regulated market operator to which the
Commission has issued a licence to provide investment services,
or a credit institution to which the Commission has issued a
licence to operate a credit institution and which has commenced
the provision of investment services in accordance with the
procedures laid down in this Law.
(3) An investment brokerage company or a credit institution of
another Member State may become a member or participant of a
regulated market operator, which in its country of registration
has obtained a licence for the provision of investment
services.
(4) An investment brokerage company or credit institution
registered in another Member State may become a member or
participant of a regulated market operator:
1) with direct access, by opening a branch;
2) with remote access without opening a branch if transactions
may be performed from a distance on the markets regulated by the
regulated market operator.
(5) A company registered in a foreign country which is
providing investment services may become a member or participant
of a regulated market operator only after it has been registered
with the Commission in accordance with the procedures laid down
in this Law.
(6) Before the investment brokerage company referred to in
Paragraphs three and five of this Section becomes a member or
participant of a regulated market operator, the regulated market
operator shall verify that it fulfils and complies with the
capital adequacy requirements laid down in this Law.
(7) A regulated market operator is entitled to grant the
status of a member or participant also to a person other than
referred to in Paragraphs two and three of this Section but who
according to the criteria approved by the regulated market
operator is appropriate and conforming, who has sufficient level
of skills and competence in respect of trading on the regulated
market and who has sufficient resources and organisational
structure in order to perform the obligations of the member or
participant of the regulated market operator and to guarantee due
settlements for transactions.
(8) A regulated market operator shall ensure equal rights for
all members or participants of the regulated market operator.
Members or participants of the regulated market operator, upon
entering into mutual transactions on the regulated market, need
not conform to the requirements referred to in Sections 126,
126.1, 126.2, 128, 128.1,
128.2, and 128.3 of this Law. Members or
participants of the regulated market operator shall apply the
requirements of Sections of this Law referred to in the second
sentence of this Paragraph in relation to their clients if, upon
acting on behalf of clients, their orders on the regulated market
are executed.
(9) A regulated market operator shall submit the list of
members or participants of the regulated market operator to the
Commission and, without delay, inform the Commission of
amendments and supplements made in the list.
(10) A regulated market operator shall intend the right for
members or participants of the market operator to choose other
settlement system other than offered by the regulated market
operator for entering into transactions on the regulated
market.
(11) The right referred to in Paragraph ten of this Section
shall apply to cases when:
1) there is such link or mechanism between the financial
instrument settlement system offered by the regulated market
operator and selected settlement system, which ensures effective
and economic settlements;
2) technical conditions for the settlements of the transaction
which is entered into on the regulated market, using the
settlement system other than offered by the regulated market
operator, ensures due operation of the financial market.
[9 June 2005; 4 October 2007; 21 June 2108]
Section 37. Provision and Storing of
Information on Transactions with Financial Instruments Admitted
to Trading on Regulated Markets
[4 October 2007]
Section 38. Disclosure of
Information on Transactions with Financial Instruments
[21 June 2018]
Section 39. Right of a Regulated
Market Operator to Conduct Supervision
(1) A regulated market operator shall supervise the activities
of each regulated market organised thereby in accordance with the
procedures governed by this Law and the regulations of the
regulated market operator.
(2) A regulated market operator shall supervise the pricing of
financial instruments in regulated markets organised thereby, and
also trading procedures in order to identify violations of the
regulations of the regulated market operator, non-conforming
trading circumstances or action which is prohibited in accordance
with Regulation No 596/2014, or disruptions to a system in
relation to a financial instrument, and other violations of this
Law and other laws and regulations.
(3) A regulated market operator is entitled to request and
receive from its members or participants any information and
documents necessary in order to decide on the conformity thereof
with the status of a member or participant in the regulated
market operator.
(4) [15 October 2009]
(5) A regulated market operator shall supervise the conformity
of activities of issuers of financial instruments admitted to
trading on regulated markets organised thereby with the
requirements of the regulations governing activities on the
regulated market approved by the regulated market operator.
(6) [15 October 2009]
(7) A regulated market operator shall, without delay, inform
the Commission of any violations of this Law, other laws and
regulations, and regulations of the regulated market operator,
non-conforming trading circumstances or action which is
prohibited in accordance with Regulation No 596/2014, or
disruptions to a system in relation to a financial instrument
detected by the regulated market operator, and also of any
decisions taken in connection with these violations.
(71) The Commission shall notify the information
which has been received in accordance with Paragraph seven of
this Section to the European Securities and Markets Authority and
the competent authorities of other Member States. The Commission
shall notify the European Securities and Markets Authority and
the competent authorities of other Member States of action which
is prohibited in accordance with Regulation No 596/2014, if it
has ascertained that such action has been performed or is being
performed.
(72) Regulation No 2017/565 shall determine the
circumstances in which the requirement for the provision of
information referred to in Paragraphs seven and 7.1 of
this Section is applicable.
(73) A regulated market organiser shall provide the
information necessary to the Commission or the relevant law
enforcement institutions for the ascertaining of all such facts
and circumstances which are related to potential violations of
Regulation No 596/2014.
(8) A regulated market operator is entitled to request and
members or participants of the regulated market operator have an
obligation to provide information requested thereby after receipt
of such request regarding the clients of members or participants
of the regulated market operator (natural persons and legal
persons), their financial instrument accounts and money accounts
related to settlements of financial instruments and transactions
performed with financial instruments admitted to trading on a
regulated market, if such information is necessary for the
regulated market operator in order to ensure the performance of
the supervisory functions granted for the prevention of the use
of inside information and market manipulation. The regulated
market operator is entitled to use the submitted information only
for the purpose for which it was requested.
(9) Members of the council, board of a regulated market
operator and employees thereof shall be held criminally liable in
accordance with the procedures laid down in the law for
intentional or non-intentional disclosure of information obtained
in accordance with the procedures of Paragraph eight of this
Section.
[9 June 2005; 29 March 2007; 15 October 2009; 21 June
2018]
Section 39.1 Activity of
a Regulated Market Operator in the Republic of Latvia which is
Licensed in Another Member State
(1) A regulated market operator registered in another Member
State which has received a licence to organise a regulated market
is entitled to carry out activity in the Republic of Latvia in
order to promote access by investment brokerage companies and
credit institutions registered in the Republic of Latvia to this
regulated market.
(2) A regulated market operator registered in another Member
State is entitled to commence the activity referred to in
Paragraph one of this Section in the Republic of Latvia after the
Commission has received the relevant notification from the
supervisory authority of the home Member State of the regulated
market operator.
(3) The Commission is entitled to request identifying data
from the supervisory authority of the home Member State of the
regulated market operator on that investment brokerage company
and credit institution or other person registered in the Republic
of Latvia, which are members or participants of the regulated
market operator licensed in such country.
(4) [21 June 2018]
[4 October 2007; 21 June 2018]
Section 39.2 Activity of
a Regulated Market Operator in Another Member State which is
Licensed in the Republic of Latvia
(1) A regulated market operator registered in the Republic of
Latvia which has received a licence to organise a regulated
market is entitled to carry out activity in another Member State
in order to promote access by investment brokerage companies and
credit institutions registered in such Member State to this
regulated market.
(2) A regulated market operator registered in the Republic of
Latvia who wishes to commence activity in any of the Member
States shall submit a submission to the Commission where he or
she shall indicate such Member State.
(3) The Commission shall examine the submission regarding
commencement of activity in another Member State within 30 days
from the day of receipt of the submission and inform the
regulated market operator and the supervisory authority of the
relevant Member State of its decision. The regulated market
operator may commence activity when the Commission has informed
the supervisory authority of the relevant Member State.
(4) The Commission, upon request of the supervisory authority
of the relevant Member State, shall send identification data
regarding such investment brokerage company and credit
institution or another person which are registered in this Member
State and which are members or participants of a regulated market
operator licensed in the Republic of Latvia.
(5) In order to ensure settlements regarding transactions on
the regulated market, the regulated market operator has the right
to enter into an agreement regarding access to clearing centre,
central transaction intermediary, or settlement system in another
Member State. The Commission may restrict entering into such
agreements only in case when it can prove that these measures
hinder due operation of the regulated market. The Commission
shall take into account system control and supervision carried
out by other control or supervisory authorities of clearing and
settlement systems.[4 October 2007; 21 June 2018]
[4 October 2007; 21 June 2018]
Section 39.3 Cooperation
with Central Counterparties in Relation to the Clearing and
Settlement Procedures
(1) In order to ensure settlements for transactions on the
regulated market regardless of that specified in Title III, IV,
or V of Regulation No 648/2012, the regulated market operator has
the right to enter into agreements for access to clearing centre,
central counterparty, or settlement system in another Member
State.
(2) Regardless of that specified in Title III, IV, or V of
Regulation No 648/2012, the Commission may restrict entering into
such agreements only if it proves that such measures are
hindering proper functioning of the regulated market, taking into
account the conditions of Section 133.12, Paragraph
two of this Law in relation to settlement systems. The Commission
shall take into account system control and supervision carried
out by other control or supervisory authorities of clearing and
settlement systems.
[21 June 2008]
Section 40. Supervision of a
Regulated Market Operator
(1) A regulated market operator shall provide the Commission
(upon its request) with information from the trading facility
thereof, with information submitted by members or participants of
the regulated market operator and issuers of financial
instruments admitted to trading on a regulated market, and also
with any other information required for the Commission for the
purposes of supervision.
(2) The Commission has the right to inspect the activity of a
regulated market operator, including to perform internal controls
of a regulated market operator. The Commission has the right to
become acquainted with all documents, account books, and
databases of a regulated market operator, and also to take
statements therefrom, make true copies (copies).
(3) A regulated market operator shall, upon a motivated
written request of the Commission, submit to the Commission true
copies (copies) of documents or other information related to the
activities of the regulated market operator.
(4) The Commission has the right to participate in meetings of
shareholders (members) of a regulated market operator, to propose
the convening of sessions of the administrative bodies of the
regulated market operator, and to determine the matters to be
discussed therein, and also to participate in these meetings
without voting rights.
(5) The Commission has the right to revoke in full or in part
the decisions of the administrative bodies of a regulated market
operator which are related to the fulfilment of the obligations
specified in Section 27 of this Law, or the appointment of
members of the board or council of a regulated market operator if
such decisions do not conform to the laws, other regulatory
enactments, or articles of association, regulations, or internal
acts of the regulated market operator, or which may substantially
affect the financial condition of the regulated market
operator.
(6) The Commission shall be responsible for cooperation with
the supervisory authorities of other Member States in order to
ensure supervision of the regulated market operators.
[4 October 2007; 21 June 2018]
Section 40.1 Supervision
of a Regulated Market Operator Licensed in Another Member
State
(1) If a regulated market operator registered in another
Member State which operates in the Republic of Latvia undertakes
activities which are in contradiction with the applicable laws
and regulations of the Republic of Latvia governing financial
instrument market, the Commission shall, without delay, inform
the supervisory authority of the home Member State thereof and
ask to remedy the established violations, and also inform it of
the implemented measures.
(2) If a regulated market operator registered in another
Member State which operates in the Republic of Latvia continues
activities which are in contradiction with the applicable laws
and regulations of the Republic of Latvia governing financial
instrument market, or if the measures implemented by the
supervisory authority of the Member State turn out ineffective,
the Commission shall inform the supervisory authority of the home
Member State and implement measures to remedy such violations.
Within the scope of such activities the Commission is entitled to
prohibit the relevant regulated market operator from continuing
activities in the Republic of Latvia until such violations are
rectified. The Commission shall inform the European Commission
and the European Securities and Markets Authority of the measures
carried out in accordance with the requirements of Section 147 of
this Law.
(3) The Commission is entitled to address a request to the
European Securities and Markets Authority to examine the
violation of a market operator registered in another Member
State.
(4) The Commission shall inform the relevant regulated market
operator of the measures implemented in Paragraph two of this
Section or the prohibition imposed.
[4 October 2007; 22 March 2012; 21 June 2018]
Chapter
II
Admission of Financial Instruments to Trading on Regulated
Markets
[9 June 2005]
Section 41. General Requirements for
Admission of Financial Instruments to Trading on Regulated
Markets
(1) Financial instruments the disposal of which is not
restricted may be admitted to trading on regulated markets.
(2) [26 May 2016]
(3) In order for transferable securities to be admitted to
trading on a regulated market, the issuer or a person asking the
admission of the transferable securities to trading on a
regulated market shall append a prospectus to the submission
which is prepared in accordance with the requirements of this
Law, Regulation No 2017/1129, and other directly applicable legal
acts of the European Union, and also registered with the
Commission.
(4) [12 December 2019]
(5) The requirements for admission of other financial
instruments to trading on a regulated market shall be determined
by the relevant regulated market operator. The requirements in
relation to admission of derivatives and commodity derivatives to
trading on a regulated market shall be such to ensure that the
provisions of an agreement on derivative allow precise
determination of the price and effective settlement
conditions.
(6) The decision to admit a financial instrument to trading on
regulated markets shall be taken by the board of the regulated
market operator, on the basis of the submission of the issuer or
the person requesting the admission of the transferable
securities to trading on a regulated market.
(7) A transferable security which is admitted to trading on
one regulated market may be admitted to trading on other
regulated market without a consent by the issuer. The operator of
that regulated market in which the transferable security is
admitted without a consent by the issuer shall inform the issuer
thereof. In such case the issuer is exempted from the obligation
to provide information in accordance with the requirements of
Division D, Chapters II and III of this Law to such regulated
market operator on the regulated market of which the transferable
security is admitted without a consent by the issuer.
(8) If a transferable security which is admitted to trading on
a regulated market is being traded without a consent by the
issuer in a multilateral trading facility, the issuer is exempted
from the obligation to disclose information in the multilateral
trading facility, if the system operator has determined the
requirements for disclosure of information.
(9) If admission of transferable securities on the regulated
market is requested in Latvia, the prospectus shall be prepared
in the official language.
(10) The procedures for the preparation, approval, publishing,
and distribution of prospectuses shall be determined by
Regulation No 2017/1129.
(11) After the decision to admit transferable securities to
trading on the regulated market has been taken, the regulated
market operator shall, without delay, post the decision and the
text of the prospectus on its website.
[4 October 2007; 26 May 2016; 21 June 2018; 12 December
2019]
Section 42. Requirements for
Inclusion of Shares and Transferable Securities Equivalent
Thereto which Ensure Holding in the Capital of a Commercial
Company on the Official List
(1) Shares and transferable securities equivalent thereto
which ensure holding in the capital of a commercial company
(hereinafter - the shares) shall be included on the official
list, if:
1) forecast market capitalisation of the shares to be included
therein on the day when a regulated market operator takes the
decision to include the shares on the official list is at least
EUR 1 000 000. If forecasting of market capitalisation of the
shares to be included on the official list is impossible, the
inclusion of shares in this list shall be permissible, provided
that the share capital paid by the joint stock company and
reserves (including profit or loss) within the time period of the
last reporting year amounts to at least EUR 1 000 000;
2) the joint stock company has made accessible to the public
its annual statements for at least the last three reporting
years;
3) the submission for all shares of the relevant category has
been submitted for inclusion on the official list.
(2) If inclusion on the official list of the regulated market
takes place after the offer of securities to the public, trading
in the relevant shares may be commenced only after the end date
of the initial placement.
(3) If the public share offering does not take place with the
intermediation of the regulated market, the shares may be
included on the official list only if at least 25 per cent of the
subscribed capital share represented by the shares of the
relevant category are applied for inclusion on this list.
(4) If the public share offering takes place with the
intermediation of the regulated market operator, the shares may
be included on the official list if at least 25 per cent of the
subscribed capital share represented by the shares of the
relevant category are applied for inclusion on the list, or if
the regulated market operator has grounds to believe that the
market of such shares will operate with sufficient activity after
their inclusion on the official list even at a lower relative
percentage.
(5) The regulated market operator has the right to specify
additional requirements and stricter criteria for the inclusion
of the shares on the official list.
[15 June 2006; 13 January 2011; 19 September 2013; 21 June
2018]
Section 43. Requirements for
Inclusion of Bonds and Other Debt Securities on the Official
List
(1) Bonds and other debt securities may be included on the
official list if the total amount of the loan is not less than
EUR 200 000. This requirement shall not be applied in the case of
an ongoing issue, if the amount of the loan has not been
determined.
(2) The regulated market operator may take the decision to
include debt securities which do not conform to the requirements
of Paragraph one of this Section on the official list after it is
convinced that trade in the relevant debt securities will be
sufficiently active.
(3) Convertible or interchangeable bonds, and also any debt
securities with additional rights to obtain shares may be
included on the official list only if the shares related to the
abovementioned bonds or securities have been included on the
official list of the same or another regulated market
operator.
(4) Debt securities may be included on the official list, if
the submission regarding inclusion thereof is related to all debt
securities of the relevant issue. It is allowed not to apply this
requirement in respect of the debt securities issued by the
Republic of Latvia.
(5) If inclusion on the official list is performed on the
basis of an offer of securities to the public, trading in the
relevant debt securities may be commenced only after the final
day of the initial placement. This rule shall not be applied in
case of an issue of covered bonds and in tap issues if the final
day of the initial placement is not fixed.
(6) The regulated market operator has the right to specify
additional requirements and more stringent criteria for the
inclusion of bonds and other debt securities on the official
list.
[15 June 2006; 13 January 2011; 19 September 2013; 21 June
2018; 27 May 2021]
Section 44. Content of a
Prospectus
[12 December 2019]
Section 44.1 Preparation
and Registration of a Base Prospectus
(1) [12 December 2019]
(2) The base prospectus shall be registered with the
Commission in accordance with the requirements of Section 48 of
this Law.
(3) [12 December 2019]
(4) [12 December 2019]
[11 June 2015; 12 December 2019]
Section 44.2
Incorporation of Information by Reference
[12 December 2019]
Section 44.3 Prospectus
Consisting of Separate Documents
[12 December 2019]
Section 45. Supplements to a
Prospectus
[12 December 2019]
Section 46. Liability for
Information Included in a Prospectus
(1) A prospectus shall be approved by the meeting of
shareholders (members) of the issuer or by an authorised
administrative body or its official.
(2) The administrative body of the issuer or a person asking
for the admission of the transferable securities on the regulated
market and a guarantor (if any) shall be responsible for the
content of the prospectus.
(3) The given name, surname, and position of persons
responsible for veracity of the information included in the
prospectus or the name, registered office, and registration
number of legal persons shall be indicated in the prospectus. The
prospectus shall also include a notification by such person
stating that, according to the information available to this
person, the information included in the prospectus conforms to
actual circumstances, and also that no facts have been concealed
which may affect the meaning of the information included in the
prospectus.
(4) If a person is not responsible for all of the information
included in a prospectus, the prospectus shall specify the part
for which the relevant person is responsible.
(5) By bringing an action to a court according to general
procedures, the investor may claim for damages from the persons
indicated in the prospectus who are responsible for veracity of
the information included therein, provided that the issuer has
incurred losses due to false or incomplete information having
been included in the prospectus.
(6) An investor may not request compensation for losses from
the persons indicated in the prospectus, if he or she has made
his or her choice on the basis of a summary note or translation
thereof, except for the case when the summary note is misleading,
in contradiction with other parts of the issue prospectus or
together with other parts of the issue prospectus does not
provide key information which allows for the investor to decide
on acquisition of securities.
[22 March 2012]
Section 47. Derogations from the
Obligation of Preparing a Prospectus
[12 December 2019]
Section 48. Registration of a
Prospectus
(1) The Commission shall register a prospectus. In order to
register a prospectus, an issuer or a person asking for the
admission of transferable securities to trading on the regulated
market shall submit a submission to the Commission to which the
following shall be appended:
1) two originals of the prospectus and the text of the
prospectus in electronic form;
2) the decision of an administrative body authorised by the
issuer to admit the relevant transferable securities to trading
on the regulated market;
3) [22 March 2012].
(11) [26 May 2016]
(2) The submission shall specify:
1) the registration number, place and institution, firm name,
registered office, telephone number, and also e-mail address (if
any) of the issuer;
2) the class, category, and total amount of transferable
securities to be admitted for trading on the regulated market and
the denomination of one transferable security;
3) the firm name, registered office, telephone number, and
also e-mail address (if any) and the name of the regulated market
in which the issuer or a person asking for admission of
transferable securities to trading on a regulated market wishes
to admit transferable securities;
4) countries where transferable securities will be admitted to
trading on a regulated market.
(3) [12 December 2019]
(4) [12 December 2019]
(5) [12 December 2019]
(6) The decision to register a prospectus or to refuse to
register it shall be issued to the issuer or to a person who is
asking for the admission of transferable securities to trading on
the regulated market and has submitted a submission to the
Commission regarding registration of the prospectus.
(7) [12 December 2019]
[4 October 2007; 22 March 2012; 26 May 2016; 21 June 2018;
12 December 2019]
Section 48.1 Validity of
a Prospectus, Base Prospectus, and Registration Document
[12 December 2019]
Section 49. Procedures for the
Mutual Recognition and Notification of a Prospectus
[12 December 2019]
Section 49.1 Use of
Languages
[12 December 2019]
Section 49.2 Recognition
of Prospectuses Prepared by Issuers Registered in Foreign
Countries
[12 December 2019]
Section 50. Examination of a
Submission Regarding Admission of Financial Instruments to
Trading on a Regulated Market
(1) An issuer or a person asking the admission of transferable
securities to trading on a regulated market shall submit a
submission to the relevant regulated market operator regarding
admission of financial instruments to trading on a regulated
market not later than three months after registration of the
prospectus with the Commission.
(2) The regulated market operator shall take the decision to
admit the financial instruments to trading on a regulated market
within 10 days from the day on which the issuer or a person
asking the admission of transferable securities to trading on the
regulated market submits a submission. Within the abovementioned
time period, the regulated market operator has the right to
require from the issuer or a person asking the admission of the
transferable securities to trading on a regulated market
additional information in conformity with the provisions
regarding activities of the relevant regulated market. In such
case the 10-day time period shall be calculated from the day on
which the additional information is submitted to the regulated
market operator.
(3) The regulated market operator shall take the decision to
include the transferable securities of an issuer registered in a
Member State to trading on a regulated market only after the
prospectus has been registered with the Commission or the
regulated market operator has received a certification of the
supervisory authority of the relevant Member State or regulated
market operator regarding registration of the prospectus.
(4) The decision of the regulated market operator to refuse to
admit the financial instruments to trading on a regulated market
may be appealed to the Commission within 30 days from the date of
receipt of the decision.
(5) A regulated market operator shall provide the following
information in the decision to admit a financial instrument
(except for investment fund units or alternative investment
funds) to trading on a regulated market:
1) the date on which a prospectus is registered with the
Commission (if in accordance with the law an issuer or a person
asking admission of transferable securities to trading on a
regulated market has an obligation to draw up a prospectus);
2) the firm name and registered office of the issuer;
3) the place of registration and number of the issuer;
4) the class, category, denomination of financial instruments
and amount of issue.
(6) The following information shall be provided in the
decision to admit an investment fund units or alternative
investment funds to trading on a regulated market:
1) the date on which the investment fund or alternative
investment fund is registered with the Commission;
2) the type and name of the investment fund or alternative
investment fund;
3) the firm name and registered office of the company managing
investment funds or of the manager of alternative investment
funds;
4) the number of investment fund units issued by the
investment fund or alternative investment fund, the value of the
share of the investment fund (for opened funds), or the
denomination (for a closed fund) on the day of taking of the
decision.
(7) The decision to admit transferable securities of an issuer
registered in another Member State to trading on a regulated
market shall, in addition, specify the firm name, registered
office, telephone number, and address of the website of the
responsible institution or the regulated market operator which
has taken the decision to register the prospectus.
(8) The regulated market operator shall, without delay, send
the decision to admit financial instruments to trading on a
regulated market to the issuer or person asking for the admission
of transferable securities to trading on a regulated market, and
the central securities depository which ensures settlement for
the transactions concluded on the regulated market.
[9 July 2013; 26 May 2016; 14 September 2017; 21 June
2018]
Section 51. Procedures for the
Distribution of a Prospectus
[12 December 2019]
Section 52. Advertising of
Transferable Securities to be Admitted to Trading on a Regulated
Market
[12 December 2019]
Section 53. Commencement of Trade in
Financial Instruments
(1) Trade in transferable securities in a regulated market may
be commenced not sooner than three days following the placing of
the prospectus on the website of the relevant regulated market
operator.
(2) Trade in financial instruments in a regulated market may
be commenced only following the entry thereof in the accounts of
the central securities depository.
(3) [14 September 2017]
[14 September 2017; 21 June 2018]
Section 54. Obligations of a Capital
Company Transferable Securities of which are Admitted to Trading
on a Regulated Market
(1) The administrative bodies of a capital company shall
ensure equal treatment of all persons possessing transferable
securities of the same class and category.
(11) Paragraphs two, 2.1, six, ten,
eleven, twelve, and thirteen of this Section shall apply to a
capital company shares of which are admitted to trading on a
regulated market.
(12) Sections 54.2, 54.3,
54.4, 54.5, and 54.6 of this Law
shall apply to a joint stock company the shares of which are
admitted to trading on a regulated market, and to its
shareholders.
(2) In order for shareholders to exercise their rights, the
board of the joint stock company shall ensure that all
information is available to shareholders of such company and the
data provided are true. The board of the joint stock company
shall ensure at least the following information on:
1) place, time, and agenda of the meeting of shareholders, the
total number of shares with voting rights, and the right of
shareholders to participate in the meeting of shareholders. The
board of the joint stock company shall provide to shareholders a
form of the power of attorney together with a notification on
convening the meeting of shareholders;
2) granting and payment of dividends;
3) issue of new shares, including information on the
procedures for granting of shares, subscribing for these shares,
conversion of shares, and also for waiving these shares, if the
provisions of issue provide for the possibilities of exercising
the pre-emptive rights;
4) the selected depository or an institution comparable
thereto through the intermediation of which persons owning the
shares may exercise their rights;
5) any changes in rights included in the different categories
of shares of such company, including derivative financial
instruments which ensure access to the issuer's shares. The
information referred to in this Clause shall be provided
immediately.
(21) A notification regarding convening of a
meeting of shareholders shall be distributed not later than on
the thirtieth day before the day of the meeting.
(22) In order to take a decision to increase share
capital, the meeting of the shareholders of the credit
institution or investment brokerage company may decide by
majority of votes of two thirds of the present shareholders that
a notification regarding convening of a meeting of the
shareholders is distributed later than within the time limit
indicated in Paragraph 2.1 of this Section, or may
decide on amendments to the articles of association providing for
that a notification regarding convening of a meeting of
shareholders is distributed later than indicated within the time
limit of Paragraph 2.1 of this Section, if
concurrently the following conditions exist:
1) the relevant meeting of shareholders takes place not
earlier than on the tenth calendar day after convening
thereof;
2) early intervention measures indicated in the Law on
Recovery and Resolution of Credit Institutions and Investment
Brokerage Companies are carried out or an authorised person is
appointed for a credit institution or investment brokerage
company;
3) increase of share capital is necessary in order for
resolution conditions not to set in.
(3) In order for persons who own debt securities to be able to
exercise their rights, the board of the capital company debt
securities of which are admitted to trading on a regulated
market, shall ensure that all information is available in the
home Member State of the company and the data provided are true.
The board of the capital company shall provide at least the
following information on:
1) the place, time, and agenda of the meeting of those persons
who own debt securities, and on the rights of such persons to
participate in the meeting. The board of the capital company
shall provide to each person who owns debt securities and who is
entitled to vote in the meeting of such persons a form of the
power of attorney (in printed form or, if possible, in electronic
form) together with a notification on the meeting, and also
ensure that the form of the power of attorney is available also
after the notification on the meeting is provided;
2) payments of interest;
3) any issue of new debt securities, including information on
the procedures for subscribing for the newly issued debt
securities, and also the procedures for waiving these securities,
if the provisions of the issue provide for the possibilities of
exercising the pre-emptive rights;
4) provisions regarding the conversion and exchange, and also
repayment of debt securities;
5) the selected depository or institution comparable thereto
through which persons owning debt securities may exercise their
rights;
6) any changes in rights included in the different categories
of debt securities of such capital company, including changes in
the provisions which can indirectly affect the abovementioned
rights, especially those arising from the changes in loan
provisions or interest rates.
(4) A regulated market operator is entitled to determine
additional requirements to be taken into account by a capital
company the transferable securities of which are admitted on the
official list of a regulated market operator or in other market
regulated by the regulated market operator, taking into account
the requirements of Section 3.3 of this Law.
(5) The board of a capital company shall distribute the
information specified in Paragraphs two, 2.1 and three
of this Section in accordance with the requirements of Section
64.2 of this Law. The board of the capital company the
shares of which are admitted to trading on a regulated market is
exempted from the obligation specified in the Commercial Law to
publish a notification on convening the meeting of shareholders
in accordance with the procedures laid down in the Commercial
Law.
(6) At least 14 days before the meeting of shareholders the
board of the capital company or the person who, in accordance
with the law, is entitled to convene and who convenes the
meeting, shall in accordance with the procedures laid down in
Section 64.2 of this Law send draft decisions to be
taken in the agenda issues of the meeting of shareholders,
including draft decisions submitted by shareholders, to the
official centralised storage system of regulated information
(hereinafter - the official storage system).
(7) The capital company debt securities of which are admitted
to trading on a regulated market shall, without delay, disclose
the information on issue of new debt securities and guarantees or
securities related thereto. The requirements of this Paragraph
shall not apply to a body governed by public law the member of
which is at least one Member State.
(8) A capital company may send the information referred to in
Paragraphs two and three of this Section to shareholders or
persons owning debt securities, by using electronic means, if a
decision thereon is taken at the meeting of shareholders and the
following requirements are met:
1) such electronic means are used, which may be used by
shareholders or persons who have indirectly obtained holding in
the capital company, or persons owning debt securities,
regardless of their country of registration or place of
residence;
2) the procedures are laid down by which a capital company
shall ensure that information is received by shareholders or
persons who are entitled to exercise the voting rights, or by
persons owning debt securities;
3) a written request is sent to shareholders or persons who
have indirectly obtained holding in the capital company, who have
the right to obtain, dispose of or exercise voting rights, and to
persons owning debt securities, in order to receive a consent of
such persons in respect of the use of electronic means for
sending of information. If the capital company does not receive
refusal within 30 days, it is regarded that the abovementioned
persons have agreed. A consent does not prohibit a shareholder to
request at any time that information is sent in writing;
4) expenses of sending information through electronic means
are shared equally by all persons owning transferable securities
of one class and category.
(9) In cases when only such persons owning transferable
securities the denomination of one unit of which is at least EUR
100 000, or, if the value of transferable securities is expressed
in another currency, other than euro, the denomination of one
unit of which is an equivalent of EUR 100 000, are invited to the
meeting, the issuer has the right to select any Member State as
the place of the meeting provided that all the necessary
information is available in the Member State to persons owning
debt securities.
(91) The provisions of Paragraph nine of this
Section regarding selection of the place of the meeting of
shareholders shall apply also to those persons owning
transferable securities the denomination of one unit of which is
at least EUR 50 000, or, if the value of debt securities is
expressed in another currency, other than euro, the denomination
of one unit of which is an equivalent of at least EUR 50 000, and
such securities are admitted to trading on a regulated market in
the European Union before 31 December 2010 until the day when
such securities are deleted. Such provisions shall be in effect,
if all the necessary information is available in the Member State
selected by the issuer to persons owning the abovementioned debt
securities.
(10) The following shall be provided in a notification
distributed in accordance with the procedures laid down in
Section 64.2 of this Law regarding convening of a
meeting of shareholders in addition to the information laid down
in the Commercial Law:
1) the procedures that must be taken into account by
shareholders in order to participate and vote at the meeting of
shareholders, including information on:
a) the rights of shareholders to include the issues in the
agenda of the meeting of shareholders, to submit a draft decision
for consideration and to ask questions regarding the issues of
the agenda of the meeting of shareholders, and also the time
period for exercising the rights specified in the laws and
regulations. Only the time period for exercising the rights of
shareholders may be indicated in the notification regarding
convening of a meeting of shareholders, if more detailed
information on such rights is available on the website indicated
by the joint stock company a reference to which is given in the
notification,
b) the procedures for voting on the basis of the power of
attorney, especially - regarding forms to be used for voting and
the procedures by which a shareholder, taking into account the
Electronic Documents Law, may submit an electronic notification
to the joint stock company regarding appointing of his or her
representative, if documenting of appointing of a representative,
using electronic means, is laid down in the articles of
association of the capital company,
c) the procedures for voting via mail or by using electronic
means, if such types of voting are provided for in the articles
of association of the joint stock company;
2) the record date and explanation that only persons who on
the record date are shareholders, are entitled to participate in
the meeting of shareholders;
3) the place and type in which shareholders may receive the
documents referred to in Paragraph eleven, Clauses 3 and 4 of
this Section;
4) the address where the information referred to in Paragraph
eleven of this Section is available on the website.
(11) Within the time periods specified in the law, within 30
days before the meeting of shareholders and on the day of the
meeting of shareholders on the website of the joint stock company
which is indicated in the notification regarding convening of a
meeting of shareholders, access to at least the following shall
be ensured for shareholders:
1) information on a notification regarding convening of a
meeting of shareholders;
2) information on the total number of shares of the joint
stock company and the total number of shares with voting rights
on the day of distributing the notification. If the share capital
of the company consists of shares of several categories, then
information on the number of the shares of each category shall
also be indicated;
3) draft decisions at the disposal of the company or
explanations of the body convening meeting of shareholders
regarding those issues of the agenda of the meeting in which
taking of decisions is not intended;
4) forms used in order to vote on the basis of a power of
attorney. If it is not possible to post a form on the website due
to technical reasons, the joint stock company shall indicate the
way in which the shareholder may obtain it. The joint stock
company shall ensure that forms are available free of charge to
any shareholder requesting them.
(12) The joint stock company shall, immediately after the
meeting of the shareholders in accordance with the procedures
laid down in Section 64.2 of this Law, distribute
information on the decisions taken at the meeting of
shareholders.
(13) Within 14 days after the meeting of shareholders, the
joint stock company shall post information on the website
indicated in the notification regarding convening of a meeting of
shareholders regarding the voting results to such extent which
certifies that each decision is taken with the required majority
of votes. Upon request of a shareholder the company shall also
provide information comprised in the results of voting on the
total number of participating shares with voting rights, the
number of votes given for each decision in conformity with the
number of shares with voting rights and a part of the voting
share capital represented in the meeting of shareholders by votes
given, and also the number of votes given "for" and "against"
regarding each decision on the indicated website.
[29 March 2007; 22 May 2008; 26 February 2009; 15 October
2009; 13 January 2011; 22 March 2012; 9 July 2013; 19 September
2013; 11 June 2015; 26 May 2016; 15 December 2016; 21 September
2017; 14 September 2017; 21 June 2018; 20 June 2019]
Section 54.1 Audit
Committee
[15 December 2016]
Section 54.2 Procedures
for Submitting Draft Decisions on Issues Included in the Agenda
of the Meeting of Shareholders and Proposed Additional Issues
(1) Shareholders, within seven days from the day when a
notification regarding convening of a meeting of shareholders has
been distributed, have the right to submit draft decisions on the
issues included in the agenda of the meeting of shareholders.
Shareholders have the right to submit draft decisions on the
issues included in the agenda of the meeting of shareholders
during the meeting, if all draft decisions submitted to the
meeting of shareholders in accordance with the procedures laid
down in this Section have been examined and rejected.
(2) Shareholders proposing inclusion of additional issues in
the agenda of the meeting of shareholders have an obligation to
submit draft decisions to the body convening the meeting of
shareholders on issues the inclusion of which in the agenda of
the meeting is proposed thereby or an explanation regarding those
issues on which decisions are not intended to be taken.
(3) A joint stock company shall, immediately after receipt of
the draft decisions referred to in Paragraphs one and two of this
Section, post them on the website which is indicated in the
notification regarding convening of the meeting of shareholders,
and in the official storage system. If it is not intended to take
a draft decision on the additional issue of the agenda proposed
by shareholders, information on additional issue of the agenda
included in the agenda of the meeting of shareholders and
explanation regarding inclusion thereof in the agenda shall be
posted on the website which is indicated in the notification
regarding convening of the meeting of shareholders, and in the
official storage system.
[15 October 2009]
Section 54.3
Participation of a Shareholder in a Meeting of Shareholders
(1) Such shareholders have the right to participate in a
meeting of shareholders who own shares on the record date.
(2) The procedures by which a joint stock company shall find
out shareholders who own shares on the record date for drawing up
of the list of shareholders shall be determined by the central
securities depository.
(3) A joint stock company may provide for the following rights
for shareholders in the articles of association:
1) to participate and vote in the meeting of shareholders by
using electronic means;
2) to vote via mail regarding the issues included in the
agenda of the meeting of shareholders by sending their vote to
the joint stock company before the meeting of shareholders.
(4) If a joint stock company has provided for the rights
referred to in Paragraph three of this Section, it shall
determine the requirements for identification of shareholders and
the procedures for exercising such rights by shareholders in the
articles of association.
(5) If a possibility to vote via mail before the relevant
meeting regarding the issues included in the agenda of the
meeting of shareholders is intended in the articles of
association of the joint stock company:
1) a shareholder may vote via mail starting from the
thirteenth day before the meeting of shareholders;
2) a meeting of shareholders is entitled to take a decision
only on those issues of the agenda which have been announced in
accordance with the procedures laid down in Section
64.2 of this Law;
3) a shareholder shall be included in the list of shareholders
which in accordance with the Commercial Law is drawn up by the
board before opening the meeting of shareholders if voting of the
shareholder is received not later than on the day before the
intended meeting of shareholders.
[15 October 2009; 14 September 2017]
Section 54.4 Appointing
and Revoking of Representatives of Shareholders by Using
Electronic Means
(1) A joint stock company may determine in the articles of
association that shareholders have the right to draw up powers of
attorney for their representatives, submit them to the joint
stock company, and also to revoke representatives by using
electronic means.
(2) If the articles of association provide for the rights for
shareholders referred to in Paragraph one of this Section, the
joint stock company shall ensure that:
1) the procedures for drawing up a power of attorney by
shareholders as an electronic document in accordance with the
requirements of the Electronic Documents Law and submitting it
electronically are laid down in the articles of association;
2) handling of electronic documents is introduced in
accordance with the requirements of the Electronic Documents
Law;
3) the joint stock company may check that secure electronic
signature is used in accordance with the requirements of the
Electronic Documents Law;
4) the date and time when the power of attorney is signed and
submitted to the joint stock company may be precisely
identified.
[15 October 2009]
Section 54.5 Procedures
for Settlement of Disputes
Disputes among shareholders and joint stock company related to
submission and inclusion of draft decisions in the agenda of the
meeting of shareholders, appointing of representatives of the
shareholders, participation and voting of the shareholders or
representatives thereof in the meeting of shareholders, shall be
settled in accordance with the procedures laid down in the
Commercial Law.
[15 October 2009]
Section 54.6 Special
Provisions for Drafting of Documents for Electing Members of the
Council and Board
(1) If a shareholder or a group of shareholders submits a
proposal regarding one or several candidates for the member of
the council nominated thereby, the joint stock company shall
register the proposals received from the shareholder or group of
shareholders, indicating information on the shareholder or
shareholders who submit the proposal, and information on each
candidate for the member of the council nominated. The proposal
received should be registered regardless of whether this
information has been received in a written or oral form, and
regardless of how many days before the meeting of shareholders
taking place it has been received.
(2) If members of the council of a joint stock company are
elected in the meeting of shareholders, the joint stock company
has a duty to ensure that at least the following information is
indicated in the minutes of the meeting of shareholders:
1) information which identifies each shareholder or the
shareholder in the group of shareholders who has nominated the
particular candidate for the member of the council. The
abovementioned information shall also be indicated in the case if
the candidate for the member of the council nominated by the
relevant shareholder or group of shareholders is not elected in
the council of the joint stock company;
2) information on the vote given by each shareholder "for" or
"against" electing of the member of the council;
3) information on the number of votes given for each candidate
for the member of the council and on shareholders who voted for
the relevant candidate, indicating also the number of votes given
by each shareholder for each candidate for the member of the
council.
(3) If members of the board of the joint stock company are
elected in the meeting of the council of the joint stock company,
the joint stock company has an obligation to ensure that in
addition to the requirements laid down in the Commercial Law at
least the following information is indicated in the minutes of
the meeting of the council of the joint stock company:
1) information which identifies each member of the council who
has nominated the particular candidate for the member of the
board. The abovementioned information shall also be indicated in
the case if the candidate for the member of the board nominated
by the relevant member of the council is not elected in the board
of the joint stock company;
2) information on the vote given by each member of the council
"for" or "against" electing the members of the board;
3) information on the number of votes given for each candidate
for the member of the board, indicating members of the council
who voted for the relevant candidate.
[26 May 2016]
Section 55. Suspension of Trade in
Financial Instruments and Removal Thereof from a Regulated
Market
(1) A regulated market operator has the right to suspend trade
in financial instruments or to remove financial instruments from
a regulated market, except for cases where such suspension or
removal would be likely to cause significant damage to the
investors' interests or the orderly functioning of the market, if
the issuer does not fulfil the requirements of the laws and
regulations governing the financial instrument market regarding
disclosing of the minimum information or the requirements of the
provisions issued by the regulated market operator in accordance
with Section 28 of this Law, or also the condition of the issuer
has reached a point where it endangers the interests of
investors.
(11) If a regulated market operator takes a
decision to suspend trade in a financial instrument or to remove
a financial instrument from a regulated market, it shall
concurrently also decide on suspension of trade in or removal
from a regulated market of such derivatives referred to in
Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referenced to that financial instrument where necessary to
support the achievement of the objectives of the suspension or
removal of the abovementioned financial instrument.
(2) A complaint may be submitted regarding the decision of a
regulated market operator to suspend trade in financial
instruments or to remove financial instruments from a regulated
market to the Commission within 30 days from the date of receipt
of the decision.
(3) If the meeting of shareholders of the joint stock company
takes a decision to remove the shares issued thereby from a
regulated market, the shares shall be removed from a regulated
market in accordance with the procedures and within the time
limits laid down in Section 77 of this Law.
(4) Financial instruments may be removed from a regulated
market on the basis of a submission which is received from an
issuer or person asking for the admission of transferable
securities on a regulated market. The decision to remove shares
from a regulated market shall be taken by a meeting of
shareholders of the issuer.
(5) A regulated market operator shall, without delay, publish
a decision to suspend trade in a financial instrument or to
remove any financial instrument related thereto from a regulated
market and inform the Commission of taking of such decision.
(51) If trade in a financial instrument and any
derivative related thereto is suspended or they are removed from
a regulated market, the Commission shall request suspension of
trade in financial instruments or removal from a trading venue
also in other regulated markets, MT facilities, OT facilities,
and systematic internalisers in the Republic of Latvia where the
same financial instruments and the derivatives referred to in
Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referenced are being traded, if the suspension or removal
is due to suspected market abuse, a take-over bid, or the
non-disclosure of inside information on the issuer or financial
instrument infringing Articles 7 and 17 of Regulation (EU) No
596/2014, except for the case where such suspension or removal
could cause significant damage to the investors' interests or the
orderly functioning of the market.
(52) If, in accordance with that specified in this
Section, the Commission has received information on the decision
of a regulated market organiser to suspend trade in a financial
instrument or to remove it from the regulated market thereof or
if the Commission itself has taken such decision, it shall
publish the decision and inform the European Securities and
Markets Authority and the supervisory authorities of other Member
States. If, in accordance with Paragraph 5.1 of this
Section, the Commission has taken the decision not to request
that trade is suspended or a financial instrument or the
derivative which is referred to in Section 3, Paragraph two,
Clauses 4, 5, 6, 7, 8, 9, and 10 of this Law and which is related
to or is referenced to the abovementioned financial instrument is
removed from a trading venue, it shall send information to the
European Securities and Markets Authority and the supervisory
authorities of other Member States and append a relevant
explanation.
(53) If the Commission has received information
from the supervisory authority of another Member State on
suspension of trade in a financial instrument or removal thereof
from a regulated market, the Commission shall request suspension
of trade in financial instruments or removal from a trading venue
also in other regulated markets, MT facilities, OT facilities,
and systematic internalisers in the Republic of Latvia where the
same financial instruments and the derivatives referred to in
Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referenced are being traded, if the suspension or removal
is due to suspected market abuse, a take-over bid, or the
non-disclosure of inside information on the issuer or financial
instrument infringing Articles 7 and 17 of Regulation (EU) No
596/2014, except for the case where such suspension or removal
could cause significant damage to the investors' interests or the
orderly functioning of the market.
(54) More detailed requirements for the application
of this Section shall be determined by Commission Delegated
Regulation (EU) 2017/569 of 24 May 2016 supplementing Directive
2014/65/EU of the European Parliament and of the Council with
regard to regulatory technical standards for the suspension and
removal of financial instruments from trading (hereinafter -
Regulation No 2017/569), Commission Implementing Regulation (EU)
2017/1005 of 15 June 2017 laying down implementing technical
standards with regard to the format and timing of the
communications and the publication of the suspension and removal
of financial instruments pursuant to Directive 2014/65/EU of the
European Parliament and of the Council on markets in financial
instruments (hereinafter - Regulation No 2017/1005), and
Regulation No 2017/565.
(6) If shares of a joint stock company or debt securities of a
capital company are removed from a regulated market due to the
fault of the regulated market issuer because the issuer has not
fulfilled the provisions of this Law or of the regulated market
operator, the disputes related to the decision to remove shares
or debt securities from a regulated market between shareholders
and the joint stock company or between persons to whom debt
securities belong and the capital company shall be settled in
accordance with the procedures laid down in laws and
regulations.
[26 May 2016; 21 September 2017; 21 June 2018; 20 June
2019]
Section 55.1 Rights of
the Commission
(1) In order to ensure compliance with the provisions of this
Chapter, in addition to the rights laid down in the Finance and
Capital Market Commission Law and in this Law, the Commission has
the following rights:
1) to require persons asking for admission of transferable
securities to trading on a regulated market to include
supplementary information in the prospectus, if necessary for
investor protection;
2) to require persons asking for admission of transferable
securities to trading on a regulated market and the persons that
control them or are controlled by them, to provide information
and documents necessary for the performance of the functions of
the Commission;
3) to require from those persons asking for admission of
transferable securities to trading on a regulated market,
auditors and managers, and also financial intermediaries
commissioned to ask for admission of transferable securities to
trading on a regulated market, to provide information and
documents necessary for the performance of the functions of the
Commission;
4) to suspend commencement of trading in transferable
securities or trading thereof for a period of up to 10 working
days, if the Commission has lawful basis to consider that the
requirements of Division D, Chapter II of this Law are or may be
infringed;
5) to prohibit or suspend advertisements on the trading of
shares for a period of up to 10 working days, if the Commission
has the basis to consider that the requirements of Division D,
Chapter II of this Law have been infringed;
6) to prohibit an offer of securities to the public if the
Commission establishes that the requirements of Division D,
Chapter II of this Law are infringed, or if the Commission has
the basis to consider that they may be infringed;
7) to suspend or to ask the relevant regulated markets to
suspend trading on a regulated market for a period of up to 10
working days, if the Commission has lawful basis to consider that
the requirements of Division D, Chapter II of this Law are or may
be infringed;
8) to prohibit trading on a regulated market if the Commission
establishes that the requirements of Division D, Chapter II of
this Law have been infringed;
9) to make public the fact that an issuer is failing to
perform its obligations;
10) to suspend examination of the prospectus submitted for
registration or to suspend or restrict the permit to trade on a
regulated market, if the Commission is exercising the powers to
impose a prohibition or restriction in conformity with Article 42
of Regulation No 600/2014 until revocation of such prohibition or
restriction;
11) to refuse to register, for a time period of up to five
years, a prospectus which has been prepared by the particular
person requesting to admit transferable securities to trading on
a regulated market, if the abovementioned person has repeatedly
violated the provisions of this Law and Regulation No
2017/1129.
(2) After the transferable securities have been admitted to
trading on a regulated market, the Commission has the right
to:
1) require the issuer to disclose all the substantial
information which may have an impact on assessment of securities
admitted to trading on a regulated market and thus to ensure
investor protection or smooth operation of the market;
2) remove or request the relevant regulated market operator to
remove the transferable securities from a regulated market if the
situation of the issuer is such that trading would be detrimental
to the interests of investors;
3) perform supervision in order to ensure that issuers whose
transferable securities are admitted to trading on a regulated
market comply with the obligations provided for in laws and
regulations, that equivalent information is provided to all
investors and equivalent treatment is granted by the issuer to
all holders of securities who are in the same position, in all
Member States where the offer of securities to the public is made
or the transferable securities are admitted to trading on a
regulated market;
4) carry out inspections to verify conformity with the
requirements of Division D, Chapter II of this Law, and also,
where necessary in accordance with the requirements of the laws
and regulations, apply to the relevant judicial authority or
cooperate with other authorities.
(3) [12 December 2019]
(4) [12 December 2019]
(5) The Commission has the right to publish the information on
the measures implemented and sanctions adopted against an issuer
or person asking for admission of transferable securities to
trading on a regulated market regarding violations of the
requirements of the laws and regulations, except for the cases
when disclosure of such information may cause serious disorders
in the financial market or cause incommensurate damage to the
persons involved.
[22 March 2012; 26 May 2016; 12 December 2019]
Chapter
II.1
Audit Committee
[15 December 2016]
Section 55.2 General
Requirements for the Audit Committee
(1) A capital company the transferable securities of which are
admitted to trading on a regulated market (hereinafter in this
Chapter - the capital company) shall establish an audit
committee. The audit committee shall operate in accordance with
the requirements laid down in this Law and Regulation No
537/2014.
(2) The capital company shall ensure the financial and other
resources necessary for the operation of the audit committee, and
also the information requested by such committee which is
necessary thereto for the performance of its tasks.
[15 December 2016]
Section 55.3 Tasks of the
Audit Committee
(1) The audit committee has the following tasks:
1) to supervise the annual statement of the capital company
and, if the capital company is preparing a consolidated annual
statement - the preparation process of the consolidated annual
statement, and to provide proposals to the council of the capital
company, but if there is no council in the capital company - to
its meeting of shareholders (members) for ensuring the
credibility and objectivity of the annual statement and
consolidated annual statement;
2) to supervise the efficiency of operation of the internal
control, risk management, and internal audit system of the
capital company insofar as it applies to ensuring the credibility
and objectivity of annual statements and consolidated annual
statements, and to provide proposals for eliminating deficiencies
of the relevant system;
3) to supervise the course of audit (check) of the annual
statement of the capital company and, if the capital company is
preparing a consolidated annual statement - of the consolidated
annual statement. In order to supervise the course of the audit
(check) referred to in this Paragraph, the audit committee shall
take into account the conclusions drawn in the check (inspection)
of conformity with the quality control requirements of audit
services performed by the Ministry of Finance (as the competent
authority in accordance with the Audit Services Law) and
published on the website of the Ministry of Finance regarding
quality of professional activities of the sworn auditor or
commercial company of sworn auditors appointed by the capital
company (hereinafter also - the sworn auditor);
4) to check and supervise whether the sworn auditor appointed
by the capital company, prior to commencing the audit (check) of
the annual statement of the capital company and, if the capital
company is preparing a consolidated annual statement - prior to
commencing the audit (check) of the consolidated annual
statement, and during it complies with the requirements for
independence and objectivity laid down in the Audit Services Law,
with the provisions of Article 6 of Regulation No 537/2014
regarding preparation for the performance of the abovementioned
audit (check) and assessment of threats to independence, and the
prohibitions of the provision of non-audit services specified in
Article 5 of this Regulation;
5) to inform the council of the capital company, but if there
is no council in the capital company - its meeting of
shareholders (members), of the conclusions drawn by the sworn
auditor in the audit (check) of the annual statement of the
capital company and if the capital company is preparing a
consolidated annual statement - in the audit (check) of the
consolidated annual statement, and to provide an opinion on how
this audit (check) has promoted the credibility and objectivity
of the annual statement and consolidated annual statement
prepared by the capital company, and also to inform of the
significance of the audit committee in this process;
6) to ensure the selection process of candidates for sworn
auditors in the capital company in accordance with Article 16 of
Regulation No 537/2014 and to recommend to the meeting of
shareholders (members) of the capital company a candidate for a
sworn auditor for the provision of audit services, except for
cases when in accordance with Article 16(8) of the abovementioned
Regulation the meeting of shareholders (members) of the capital
company has established another structure the task of which is to
provide a recommendation to the meeting of shareholders (members)
of the capital company for selecting the sworn auditor of the
capital company.
(2) The audit committee shall perform also the tasks specified
for the audit committee in Regulation No 537/2014.
[15 December 2016]
Section 55.4 Rights of
the Audit Committee
(1) In addition to the rights specified in Regulation No
537/2014 the audit committee has the following rights:
1) to request and receive information and documents from the
board of the capital company and the sworn auditor, and also from
the internal audit service, the auditor for the performance of
internal audit, or the controller of the capital company (if any)
which are necessary so that the audit committee could perform the
tasks specified in this Law and Regulation No 537/2014;
2) to participate in meetings of shareholders (members) of the
capital company;
3) to provide an opinion and reports to the meeting of
shareholders (members) and the council (if such has been
established) on the issues within the competence of the audit
committee.
(2) The institutions, units, and persons referred to in
Paragraph one, Clause 1 of this Section have an obligation to
provide information to the audit committee or its members which
is necessary for the performance of the tasks of such committee,
if the particular information requested by the audit committee is
related to the performance of the tasks of such committee.
(3) The audit committee shall independently take decisions in
relation to the tasks specified thereto in Section
55.3 of this Law and in Regulation No 537/2014.
[15 December 2016]
Section 55.5 Additional
Tasks of the Audit Committee and Action of Administrative Bodies
of the Capital Company in Relation to the Annual Report of the
Audit Committee
(1) In addition to the tasks specified in Section
55.3 of this Law the audit committee shall also
perform the following tasks:
1) not less than once a year shall provide a written report to
the council of the capital company, but if there is no council in
the capital company - to its meeting of shareholders (members),
on its activities and the carrying out of the tasks specified for
such committee (hereinafter - the annual report of the audit
committee);
2) notify the council of the capital company, but if there is
no council in the capital company - its meeting of shareholders
(members), of the deficiencies and violations detected (if any)
in the preparation and audit (check) process of the annual
statement and consolidated annual statement of the capital
company, and also in efficiency of the internal control, risk
management, and internal audit system in relation to ensuring the
quality of such reports;
3) without delay notify the capital company, if it is detected
that qualification or professional experience of the sworn
auditor is not sufficient for the performance of an audit (check)
of good quality or that the sworn auditor has not complied with
the requirements for independence laid down in the Audit Services
Law.
(2) If the capital company has a council, it shall also
include its evaluation on activities of the audit committee in
its report to the meeting of shareholders (members) of the
capital company which is prepared by the council in accordance
with Section 175 of the Commercial Law, and also append the
annual report of the audit committee to this report.
(3) If the capital company does not have a council, the annual
report of the audit committee shall be examined at such meeting
of shareholders (members) in the agenda of which approval of such
annual statement and consolidated annual statement (if such is
prepared) of the capital company is planned regarding which the
annual report of the audit committee is submitted.
(4) The council of the capital company, but if the capital
company does not have a council - its meeting of shareholders
(members) has an obligation, as an honest and diligent master, to
evaluate the annual report of the audit committee and to take a
decision on further action.
[15 December 2016]
Section 55.6 Composition
and Structure of the Audit Committee
(1) The audit committee is a collegial body which is elected
in a meeting of shareholders (members) of the capital company and
which consists of at least three members from which at least one
person is the member of the council (if such has been
established) of the capital company and others are other members
elected to the meeting of shareholders (members) of the capital
company.
(2) The audit committee shall be objective and independent in
its activities and decision-making. A member of the audit
committee shall perform his obligations in good faith and shall
not endanger the independence of the audit committee.
(3) The majority of members of the audit committee shall be
independent. A member of the audit committee is independent, if
none of the following circumstances apply to him or her:
1) participation (exceeding 20 per cent of capital shares or
shares with voting rights) in a capital company or the commercial
company controlled thereby (in a subsidiary);
2) employment relationships with the capital company currently
exist or have existed within the last three years;
3) marriage, kinship, or affinity up to the second degree with
a member of the board or shareholder (member) of the capital
company whose participation in the capital company is not less
than 20 per cent;
4) other personal or financial interest which could endanger
his independence and which are recognised as such by the meeting
of shareholders (members) of the capital company.
(4) Only a natural person with capacity to act who has an
impeccable reputation and has not been revoked the right to
conduct commercial activity may be a member of the audit
committee. A person has an impeccable reputation, if none of the
following circumstances apply to him:
1) the person has been recognised guilty of committing an
intentional criminal offence with such court judgment or
prosecutor's penal order which has entered into effect and has
been become indisputable (regardless of setting aside or
extinguishing the criminal record);
2) the person has been held criminally liable for committing
an intentional criminal offence, however, a decision has been
taken to terminate the criminal proceedings for reasons other
than exoneration.
(5) The following persons may not be a member of the audit
committee:
1) a member of the board of the capital company, a sworn
auditor which provides audit services to the capital company or
has provided such service thereto within the last three years
prior to applying for the position of a member of the audit
committee, a procuration holder of the capital company, or a
franchisee;
2) a member of the board of the controlled commercial company
(subsidiary) of the capital company or another person who has the
right to represent this controlled commercial company
(subsidiary).
(6) The member of the audit committee may not assign the
performance of his obligations to another person.
(7) The majority of members of the audit committee shall have
knowledge in the field of operation of the capital company. At
least one member of the audit committee shall have higher
education in the field of economy, management, or finances and
not less than three years of corresponding professional
experience in preparation of an annual statement and consolidated
annual statement or performance of audit (check) of such
statements, or also the relevant member of the audit committee is
a sworn auditor.
(8) Additional restrictions may be intended in the articles of
association of the capital company for a member of the audit
committee.
[15 December 2016]
Section 55.7 Election and
Removal of Members of the Audit Committee
(1) The audit committee is elected at a meeting of
shareholders (members) of a capital company for a time period not
exceeding three years. A shorter time period for the operation
(term of office) of the audit committee may be determined in the
articles of association of the capital company.
(2) A person who has applied for the position of a member of
the audit committee shall certify in writing his consent to
holding the position of a member of the audit committee and
indicate that none of the restrictive circumstances referred to
in Section 55.6, Paragraphs four and five of this Law
and the restrictive circumstances additionally specified in the
articles of association of the capital company (if any) which
would preclude the person from holding the position of a member
of the audit committee, exist in relation to such person. A
candidate for the position of a member of the audit committee
which is nominated as the independent member of the audit
committee, shall additionally certify in writing that none of the
circumstances referred to in Section 55.6, Paragraph
three of this Law apply to him.
(3) A shareholder of a capital company or a group of
shareholders which holds not less than five per cent of the
voting capital, has the right to nominate one candidate for the
position of a member of the audit committee. Each candidate
nominated for the position of a member of the audit committee
shall be included in the election list of members of the audit
committee.
(4) Voting shall take place for all the candidates for members
of the audit committee included in the list in one voting, and
all shareholders (members) shall vote at the same time. A
shareholder (member) of the capital company has the right to give
all his votes for one or several candidates for members of the
audit committee included in the list in any proportion in whole
numbers.
(5) Such persons shall be deemed as elected to the audit
committee who have obtained the highest number of votes, taking
into account the maximum number of members of the audit committee
specified in the articles association of the capital company. If
two or several candidates for members of the audit committee
receive the same number of votes and therefore it is not possible
to determine which of them is deemed to be elected, the issue
shall be re-examined at the same meeting of shareholders
(members) and decided by a repeat voting of the meeting of
shareholders (members) for each of the candidates who are still
the candidates for the position of a member of the audit
committee. Such candidate shall be deemed elected who receives
the highest number of votes in the repeat voting.
(6) A member of the audit committee may removed from the
position at any time by a decision of the meeting of shareholders
(members) of the capital company.
(7) A member of the audit committee may leave the position of
the member of the audit committee at any time, notifying the
capital company thereof in writing.
(8) A member of the audit committee shall inform the capital
company of the circumstances which preclude him from continuing
to hold the position of a member of the audit committee or which
endanger his independence, in writing not later than within three
days after finding out about such circumstances. If after receipt
of the written information referred to in the first sentence of
this Paragraph the capital company establishes that the audit
committee does not conform to the requirements of Section
55.6, Paragraph three of this Law anymore, then the
capital company shall ensure that, within three months from the
day when it established the non-conformity of the audit committee
with the requirements of Section 55.6, Paragraph three
of this Law, a meeting of shareholders (members) is convened in
order to take a decision on the necessary changes in the
composition of the audit committee.
(9) If a member of the audit committee leaves the position or
is removed from the position prior to expiry of the operation
(term of office) of the audit committee, the capital company
shall ensure that, within three months from the day when a notice
was received that a member of the audit committee is leaving the
position or from the day from which he is removed from the
position, a meeting of shareholders (members) is convened for the
shareholders (members) of the capital company to decide on
election of a new member of the audit committee and to ensure the
corresponding number of members in the audit committee. Election
of a new member of the audit committee shall take place by
re-electing the whole audit committee. The term of operation
(term of office) of the re-elected audit committee shall start on
the day of its re-election.
(10) A member of the audit committee (except for a member of
the council elected to the audit committee) may not be in
employment relationships with the capital company. Remuneration
for a member of the audit committee shall be determined by a
meeting of shareholders (members) of the capital company.
(11) A capital company transferable securities of which are
admitted to trading on a regulated market for the first time
shall elect the audit committee at the next meeting of
shareholders (members) which takes places after admission of
transferable securities to trading on a regulated market, unless
an audit committee or a structure equivalent thereto which
conforms to the requirements laid down in this Law for the audit
committee, has already been created for it in accordance with the
requirements of this Law on the day when its transferable
securities are admitted to trading on a regulated market.
[15 December 2016]
Section 55.8 Management
and Meetings of the Audit Committee
(1) The work of the audit committee shall be managed by its
chairperson who is elected by members of the audit committee from
amongst them.
(2) During absence the chairperson of the audit committee
shall be substituted by another member of the audit committee
upon a written instruction drawn up by the former.
(3) Meetings of the audit committee shall take place not less
than three times a year.
(4) Each member of the audit committee, and also the council
of the capital company (if such has been established) and the
meeting of shareholders (members) of the capital company have the
right to request that a meeting of the audit committee is
convened, justifying the necessity and purpose for convening the
meeting.
[15 December 2016]
Section 55.9 Liability of
a Member of the Audit Committee
(1) If a member of the audit committee is acting illegally,
violates his authorisation or does not comply with legal acts,
articles of association of the capital company or decisions of
the meeting of shareholders (members), or acts in bad faith or in
negligence, he shall be liable for the losses thus caused to the
capital company and other persons.
(2) The capital company may bring a claim against members of
the audit committee in conformity with the procedures laid down
in the Commercial Law in relation to bringing of claims of a
company.
[15 December 2016]
Section 55.10
Requirements for Non-disclosure of Information
(1) A member of the audit committee is prohibited from
disclosing information to the third parties which has been
entrusted or has become known to him in performing the official
duties of the position of a member of the audit committee,
including a commercial secret. A member of the audit committee is
responsible for illegal disclosure of any such information,
including commercial secret which has been received during
performance of his duties and has not been disclosed to the
public.
(2) Upon leaving the position of a member of the audit
committee, a member of the audit committee has an obligation to
transfer all documents (within the meaning of the Law on Legal
Force of Documents) at the disposal of the capital company which
have been transferred at his disposal or which have been prepared
by himself in performing the duties of a member of the audit
committee, and also the information transferred at his disposal
and kept in relation to performance of the abovementioned
obligations (also the one kept in computer or electronic data
carriers). The capital company has an obligation to transfer the
documents and information received from the member of the audit
committee to the audit committee, ensuring invariability of the
content of such documents and information from the time of their
receipt until the time when they are transferred to the audit
committee.
(3) The prohibition referred to in Paragraph one of this
Section shall also apply to a member of the audit committee after
he has left the position of a member of the audit committee.
[15 December 2016]
Section 55.11 Special
Provisions in Relation to the Operation of the Audit
Committee
(1) In a capital company which conforms to the criteria of a
small and medium-sized enterprise, the tasks of the audit
committee may be performed by the council of the capital company
(if such has been established).
(11) Within the meaning of this Section, a small
and medium-sized merchant is a capital company which, according
to its last available annual statement or consolidated annual
statement, conforms to at least two of the following
criteria:
1) the average number of employees in the financial year is
less than 250;
2) the total sum of the balance sheet (as on the end date of
the reporting period of the statement on financial position) does
not exceed EUR 43 000 000;
3) annual net turnover does not exceed EUR 50 000 000.
(2) A decision on performance of the functions of the audit
committee by the council of the capital company shall be taken in
a meeting of shareholders (members) of the capital company. In
order to transfer the performance of the functions of the audit
committee to the council of the capital company, consent of all
members of the council to perform also the tasks of the audit
committee is necessary.
(21) The capital company in which, in accordance
with Paragraph one of this Section, the performance of the
functions of the audit committee is entrusted to the council of
the capital company need not apply the term of office of the
audit committee referred to in Section 55.7 of this
Law, entrusting the performance of the functions of the audit
committee to the council of the capital company for the whole
term of office of the council.
(3) If the council of the capital company is re-elected in
such capital company in which the tasks of the audit committee
are performed by the council of the capital company, the meeting
of shareholders (members) shall, concurrently with the election
of the council, decide on the issue whether the tasks of the
audit committee may be entrusted to the newly-elected council. In
such the consent of all members of the newly-elected council to
perform also the tasks of the audit committee is necessary. The
information referred to in this Section on consent which has been
received from each member of the council shall be recorded in the
protocol of the meeting of shareholders (members) of the capital
company.
(31) If election of a member of the council takes
place in the capital company in accordance with the procedures
laid down in Section 296, Paragraph eleven of the Commercial Law,
consent of the newly-elected member of the council to carry out
the tasks of the audit committee shall be required. The
information referred to in this Section on consent which has been
received from the newly-elected member of the council shall be
recorded in the protocol of the meeting of shareholders (members)
of the capital company.
(4) A capital company has the right not the establish an audit
committee, if:
1) it manages an investment fund which is operating in
accordance with the Law on Investment Companies, or an
alternative investment fund which is operating in accordance with
the Law on Alternative Investment Funds and Their Managers;
2) its sole commercial activity is the issue of such
assets-based securities which are specified in Article 2(5) of
Commission Regulation No 809/2004. In such case the capital
company shall publish information on its website that an audit
committee is not established. If the capital company decides that
it is not necessary to transfer the performance of the tasks of
the audit committee to the supervisory body of the capital
company, then the capital company shall also publish information
about it on its website;
3) it is registered in the Republic of Latvia and is operating
in accordance with the laws and regulations of the Republic of
Latvia and if a body similar to an audit committee has already
been established for it which conforms to the requirements of
this Law laid down for the audit committee. In such case the
capital company shall inform the Financial and Capital Market
Commission in writing of which institution performs the tasks
referred to in Paragraph 55.3 of this Law and
regarding its personnel;
4) it is a subsidiary of a group of companies (consolidation
group) which is controlled by the parent undertaking, and the
body created at the level of the group of companies
(consolidation group) ensures conformity with the requirements
referred to in Sections 55.2, 55.3, Section
55.4, Paragraph three, Section 55.6,
Paragraphs one, two, three, five, and seven, Section
55.7, Paragraph two, Section 55.8,
Paragraph one, and Section 55.11, Paragraph one, and
also in Articles 11(1) and (2) and 16(5) of Regulation No
537/2014 for the performance of the tasks of the audit committee.
Any subsidiary of a subsidiary of a group of companies
(consolidation group) shall be deemed as the subsidiary of the
parent undertaking of that group of companies (consolidation
group).
[15 December 2016; 21 June 2018; 12 December 2019]
Chapter
III
Information to be Provided on a Regular Basis
[29 March 2007]
Section 56. Annual Statement
(1) An annual statement shall consist of:
1) audited financial statements;
2) a management report which is prepared in accordance with
the requirements of the legal acts of the home Member State;
3) statement on the management's responsibility indicating
that on the basis of information at the disposal of the board of
the capital company financial statements have been drawn up in
accordance with the requirements of the applicable laws and
regulations and give true and fair view of the assets,
liabilities, financial position, and profit or loss of the
capital company and consolidation group, and that the management
report includes fair overview of the development and operating
results of the commercial activities of the capital company and
consolidation group. Key risks of the activity of the capital
company and consolidation group and uncertainties faced thereby
shall also be described therein;
4) corporate governance statement, if the capital company
draws up such statement as a separate part of the annual
statement;
5) non-financial statement, if in accordance with the
requirements of Section 56.3 of this Law the capital
company has an obligation to prepare such statement and it
prepares such statement as a separate document;
6) remuneration report.
(2) If the capital company the transferable securities of
which are admitted to trading on a regulated market, prepares a
consolidated annual statement, it shall prepare consolidated
financial statements in accordance with Regulation (EC) No
1606/2002 of the European Parliament and of the Council of 19
July 2002 on the application of international accounting
standards (hereinafter - Regulation No 1606/2002), but financial
statements - in accordance with the requirements of the legal
acts of the home Member State unless the capital company has
chosen to prepare its financial statements in accordance with
Regulation No 1606/2002.
(3) If transferable securities of the capital company are
admitted on the official list in the Republic of Latvia or debt
securities of the capital company are admitted to trading on a
regulated market, it shall prepare its financial statements in
accordance with Regulation No 1606/2002.
(4) If the capital company need not prepare a consolidated
annual statement and its transferable securities are not admitted
on the official list in the Republic of Latvia, it shall prepare
its annual statement in accordance with the requirements of the
legal acts of the home Member State and provisions of the
relevant regulated market operator, unless the capital company
has chosen to prepare its financial statements in accordance with
Regulation No 1606/2002.
(5) The capital company shall distribute an annual statement
and consolidated annual statement together with an opinion of the
sworn auditor in accordance with the procedures laid down in
Section 64.2 of this Law within four months after the
end of the reporting period, but not later than on the next
working day after the auditor's report on the statement is
provided.
(6) If the annual statement approved by the meeting of
shareholders (members) of the capital company differs from the
annual statement submitted in accordance with the requirements of
Paragraph five of this Section, the capital company shall submit
the approved annual statement on the next day following approval
of the statement in a meeting of shareholders (members).
[22 May 2008; 26 February 2009; 26 May 2016; 15 December
2016; 20 June 2019]
Section 56.1 Information
to be Included Additionally in an Annual Statement
(1) Capital companies the shares of which are admitted to
trading on a regulated market shall additionally indicate the
following in the annual statement:
1) capital structure, categories of shares, the rights and
obligations arising from each category of shares and percentage
thereof from the equity capital, indicating separately the number
of those shares which are not admitted on regulated markets;
2) information on restrictions for disposal of shares or
necessity to receive a consent of the capital company or other
shareholders for disposal of shares;
3) persons which have major holding acquired directly or
indirectly in the capital company, and also a percentage of the
holding of such persons;
4) shareholders having specific control rights and description
of such rights;
5) the manner in which the voting rights arising from shares
of employees will be exercised, if the employees themselves do
not exercise them;
6) restrictions of voting rights in the cases when maximum
amount of voting rights is determined regardless of the number of
owned shares with voting rights, and also the rights of
shareholders to a part of profit which is not related to a
percentage of shares proportionally owned thereby, and other
similar restrictions;
7) agreement of shareholders which are known to the capital
company and which may cause restrictions for transfer of the
shares or voting rights owned by the shareholders to other
persons, and also conditions which provide for prior approval of
such transfer;
8) provisions governing election of members of the board,
changes in the composition of the board, and amending the
articles of association;
9) authorisation of the members of the board, including
authorisation to issue or buy back shares;
10) all other material agreements and contracts entered into
by a target company and in which it is intended that in case of
change of the control type they enter into effect, the validity
of which has expired or which are amended, and consequences of
entering into effect, termination, or amending thereof. If
disclosure of such information could seriously harm the
commercial company, the Commission is entitled, upon request of
the company, not to disclose the abovementioned information;
11) all agreements between a capital company and members of
the board thereof which provide for compensation in cases when
they resign from their position, they are dismissed without any
justified reason or they are dismissed after a share buy-back
offer is made.
(2) The board shall also provide a report on the information
referred to in Paragraph one of this Section in a regular meeting
of shareholders.
[22 March 2012]
Section 56.2 Corporate
Governance Statement
(1) The capital company the transferable securities of which
are admitted to trading on a regulated market shall draw up a
corporate governance statement.
(2) In order to provide sufficiently clear, accurate, and
comprehensive information in a corporate governance statement on
the way of governing the capital company, on application of
corporate governance recommendations, and indicators
characterising the capital company, including capital structure
and persons to whom shares belong, the capital company the shares
of which are admitted to trading on a regulated market, shall
include the following information in the abovementioned
statement:
1) reference to recommendations of corporate governance which
are applied by the capital company, or substantial information on
corporate governance practice which is additionally applied to
the abovementioned recommendations;
2) information on where recommendations applied by the capital
company or information on the practice referred to in Clause 1 of
this Paragraph is available to the public;
3) if the capital company does not apply individual principles
included in the corporate governance recommendations - regarding
the non-applied principles, and justification for such action,
providing a sufficiently clear, accurate, and comprehensive
explanation regarding:
a) the reason for non-application in relation to each
particular principle which is not applied, the potential
consequences, and the way in which decision not to apply such
principle is taken;
b) when it is planned to commence the application of the
particular principle, if the decision referred to in Sub-clause
"a" of this Clause applies to a limited period of time;
c) in what way the measure which has been carried out at the
location of application of the particular principle (if any),
achieves the objective of this principle or of corporate
governance recommendations (in which this principle is included),
or promotes good corporate governance in the capital company;
4) if the capital company does not apply corporate governance
recommendations - justifications for such action;
5) information on key elements of internal control and risk
management system of the capital company which are applied in
preparation of financial statements;
6) the information specified in Section 56.1,
Paragraph one, Clauses 3, 4, 6, 8, and 9 of this Law;
7) the administrative body, and also composition and
description of activities of its committees;
8) if the capital company implements policy in relation to
diversity of the composition of members of governance bodies of
the capital company (versatility policy) - a description
regarding objectives of such policy, implementation measures and
results in the reporting year.
(21) Paragraph two, Clause 8 of this Section shall
not apply to the capital company referred to in Paragraph two of
this Section which does not exceed two of the following criteria
in the first reporting year when it has become an issuer within
the meaning of this Law, two years in succession (both in the
current and previous reporting year):
1) average number of employees - 250;
2) sum total of assets on the balance sheet date - EUR 20 000
000;
3) annual net turnover - EUR 40 000 000.
(3) A capital company the transferable securities of which are
admitted to trading on a regulated market, except for a capital
company the shares of which are admitted to trading on a
regulated market, shall include the following in a corporate
governance statement:
1) information on key elements of internal control and risk
management system of the capital company which are applied in
preparation of financial statements;
2) [22 March 2012].
(4) The capital companies referred to in Paragraph three of
this Section shall take into account the requirements of
Paragraph two of this Section if they have shares which are
traded in a multilateral trading facility.
(5) If a capital company the transferable securities of which
are admitted to trading on a regulated market, has already
provided information referred to in Paragraph two, Clauses 3, 4,
5, and 7, Paragraph three of this Section and Section
56.1, Paragraph one, Clauses 3, 4, 6, 8, and 9 of this
Law in the annual statement or other document available to the
public, it may include a reference in a corporate governance
statement, indicating where such information is available to the
public.
(6) A capital company the transferable securities of which are
admitted to trading on a regulated market shall include a
corporate governance statement in a management report or prepare
it as a separate part of the annual statement, and publish it
together with a management report or indicate its website address
in the management report where a corporate governance statement
is available to the public in electronic form.
(7) A sworn auditor shall check whether a corporate governance
statement has been prepared, and also the information specified
in Paragraph two, Clauses 5 and 8, Paragraph three of this
Section and Section 56.1, Paragraph one, Clauses 3, 4,
6, 8, and 9 of this Law and, in accordance with the Audit
Services Law, provide an opinion of a sworn auditor on whether
the requirements laid down in Paragraph two, Clauses 5 and 8,
Paragraph three of this Section and Section 56.1,
Paragraph one, Clauses 3, 4, 6, 8, and 9 of this Law have been
met.
(8) If a capital company the transferable securities of which
are admitted to trading on a regulated market prepares an annual
statement and consolidated annual statement, it shall prepare one
corporate governance statement and include it in one of these
accounts in accordance with the requirements of Paragraph six of
this Section. In addition to the information referred to in
Paragraph two of this Section it shall provide information on key
elements of the internal control and risk management system of
the commercial companies involved in consolidation which are
applied in preparing consolidated financial statements, in the
corporate governance statement.
[22 May 2008; 22 March 2012; 29 October 2015; 15 December
2016 / See Paragraph 58 of Transitional Provisions]
Section 56.3
Non-financial Statement
(1) A capital company the transferable securities of which are
admitted to trading on a regulated market, if the average number
of employees exceeds 500 and the sum total of assets on the
balance sheet date exceeds EUR 20 000 000, or the annual net
turnover exceeds EUR 40 000 000 in the first reporting year of
the capital company when it has become an issuer within the
meaning of this Law, but starting from the second reporting year
when it has become an issuer within the meaning of this Law - two
years in succession (both in the current and previous reporting
year), has an obligation to include a non-financial statement in
the management report referred to in Section 56 of this Law.
(2) Insofar as it is necessary to understand the development,
performance results and financial position of the capital company
referred to in Paragraph one of this Section, and also the impact
of its commercial activity on the environment, social aspects,
and aspects related to employees, conformity with the human
rights, measures for preventing corruption and bribery
(hereinafter - the fields of corporate social responsibility), at
least the following information shall be provided in a
non-financial statement:
1) a short description of the model of commercial activity of
the capital company which includes general information on the
main types of economic activity and geographic markets,
cooperation partners, clients, the most important resources to be
used, flow of expenses and income, and other information
characterising the commercial activity of the capital
company;
2) a description regarding policies of the capital company
which are implemented thereby in relation to the fields of
corporate social responsibility, including a description on what
procedures have been introduced in the capital company in order
to ensure sufficient attention to the implementation process of
such policies;
3) information on the implementation results of the policies
referred to in Clause 2 of this Paragraph;
4) information on the main risks related to the fields of
corporate social responsibility which are characteristic to
transactions of the capital company and, when it is of the
essence and commensurate, also information on the risks which
arise from the legal transactions concluded within the scope of
the commercial activity of the capital company or are related to
the goods manufactured or services provided thereby and which may
cause negative consequences in the fields of corporate social
responsibility, and also on management of such risks by the
capital company;
5) main non-financial indicators which are characteristic to
the particular capital company and sector in which it is
operating.
(3) Also references to the sums indicated in the financial
statement and additional explanations regarding them shall be
included in the non-financial statement, if the sum indicated in
the financial statement is related to any of the fields of
corporate social responsibility of the capital company.
(4) In order to provide information on the fields of corporate
social responsibility, the capital company referred to in
Paragraph one of this Section may use the guidelines or
recommendations included in the legal acts of the Republic of
Latvia or European Union, or the documents issued by the United
Nations Organisation, the Organisation for Economic Co-operation
and Development, the International Labour Organisation, the
International Organisation for Standardisation, or other
international organisation (hereinafter - the guidelines or
recommendations included in the documents issued by Latvia,
European Union or other international organisations). It shall be
indicated in the management report which guidelines or
recommendations included in the documents issued by Latvia,
European Union, or other international organisations are used by
the capital company.
(5) If the capital company referred to in Paragraph one of
this Section does not implement policy in relation to one or
several fields of corporate social responsibility, a clear and
substantiated justification shall be provided in the
non-financial statement as to why it is not being carried
out.
(6) As an exception the capital company referred to in
Paragraph one of this Section need not provide information on
corporate actions setting in of which is anticipated within the
nearest year, or on issues under negotiations, if both of the
following conditions are met:
1) the board of the capital company provides an explanation in
the written report to the meeting of shareholders (members) of
the capital company on the circumstances due to which provision
of the abovementioned information would seriously harm commercial
activities of such capital company;
2) non-provision of the abovementioned information does not
constitute an obstacle for getting a clear understanding of the
development, performance results, financial position of the
capital company and the impact of its commercial activity on the
fields of corporate social responsibility.
(7) The capital company referred to in Paragraph one of this
Section shall be exempted from the obligation to include a
non-financial statement in the management report, if it prepares
the non-financial statement as an individual document in which
information is provided in accordance with the requirements laid
down for a non-financial statement in this Section, and publishes
it together with the management report as a component of the
annual statement.
(8) If the capital company referred to in Paragraph one of
this Section has included the non-financial statement in the
management report or has prepared it as the individual document
referred to in Paragraph seven of this Section, it shall be
exempted from the obligation specified in the laws and
regulations governing preparation of annual statements in
relation to provision and analysis of specific non-financial
indicators in the management report.
(9) The capital company referred to in Paragraph one of this
Section which is a subsidiary of a group of companies
(consolidation group) shall be exempted from the obligation to
prepare a non-financial statement if the information to be
provided in this statement has been included in the consolidation
management report of the parent undertaking or the separate
document which has been prepared by taking into account the
provisions of this Section, and if the consolidated management
report or separate document has been published in accordance with
the procedures laid down in Section 64.2 of this
Law.
(10) A sworn auditor shall check whether a non-financial
statement has been prepared and also whether the non-financial
statement has been included in the management report or the
separate document referred to in Paragraph seven of this Section,
but in the case referred to in Paragraph nine of this Section -
whether the information to be provided in the non-financial
statement of the subsidiary of the group of companies
(consolidation group) exempted from the preparation of the
non-financial statement is included in the consolidated
management report of the parent undertaking of the group of
companies (consolidation group) or the separate document which
has been prepared by taking into account the provisions of this
Section.
[15 December 2016]
Section 56.4 Consolidated
Non-financial Statement
(1) A capital company the transferable securities of which are
admitted to trading on a regulated market and which is the parent
undertaking of such group of companies (consolidation group) for
which the average number of employees exceeds 500 and the sum
total of assets on the balance sheet date in consolidation
exceeds EUR 20 000 000, or the annual net turnover in
consolidation exceeds EUR 40 000 000 in the first reporting year
of the capital company when it has become an issuer within the
meaning of this Law, but starting from the second reporting year
when it has become an issuer within the meaning of this Law - two
years in succession (both in the current and previous reporting
year), has an obligation to include a consolidated non-financial
statement in the consolidated management report.
(2) Insofar as it is necessary in order to understand the
development, performance results, and financial position of the
abovementioned group of companies (consolidation group), and also
the impact of its commercial activity on the fields of corporate
social responsibility, information on the group of companies
(consolidation group) at large shall be provided in the
consolidated non-financial statement, applying the provisions of
Section 56.3, Paragraphs two and four of this Law
accordingly.
(3) If the group of companies (consolidation group) referred
to in Paragraph one of this Section does not implement policy in
relation to one or several fields of corporate social
responsibility, a clear and substantiated justification shall be
provided in the consolidated non-financial statement as to why it
is not being carried out.
(4) Also references to the sums indicated in the consolidated
financial statement and additional explanations regarding them
shall be included in the consolidated non-financial statement, if
the sum indicated in the consolidated financial statement is
related to any of the fields of corporate social responsibility
of the group of companies (consolidation group).
(5) As an exception the parent undertaking of the group of
companies (consolidation group) referred to in Paragraph one of
this Section need not provide information on corporate actions
setting in of which is anticipated within the nearest year, or on
issues under negotiations which apply to the fields of corporate
social responsibility, if both of the following conditions are
met:
1) the board of the parent undertaking provides an explanation
in the written report to the meeting of shareholders (members) of
the parent undertaking on the circumstances due to which
provision of the abovementioned information would seriously harm
commercial activities of such group of companies (consolidation
group);
2) non-provision of the abovementioned information does not
constitute an obstacle for getting a clear understanding of the
development, performance results, financial position of the group
of companies (consolidation group) and the impact of its
commercial activity on the fields of corporate social
responsibility.
(6) The parent undertaking of the group of companies
(consolidation group) referred to in Paragraph one of this
Section shall be exempted from the obligation to include a
consolidated non-financial statement in the consolidated
management report, if it prepares the statement as an individual
document in which information is provided in accordance with the
requirements laid down for a consolidated non-financial statement
in Paragraphs two, three, four, and five of this Section, and
publishes it together with the management report as a component
of the consolidated annual statement.
(7) If the parent undertaking of the group of companies
(consolidation group) referred to in Paragraph one of this
Section has included the consolidated non-financial statement in
the consolidated management report or has prepared it as the
individual document referred to in Paragraph six of this Section,
it shall be exempted from the obligation specified in the laws
and regulations governing preparation of an annual statement and
consolidated annual statement in relation to provision and
analysis of specific non-financial indicators in the management
report and consolidated management report.
(8) The parent undertaking of the group of companies
(consolidation group) referred to in Paragraph one of this
Section which is a subsidiary of another group of companies
(another consolidation group) shall be exempted from the
obligation to prepare a consolidated non-financial statement if
the information to be provided therein (both on the
abovementioned parent undertaking and its subsidiaries) is
included in the consolidated management report of this another
group of companies (another consolidation group) or in the
consolidated non-financial statement prepared in the form of a
separate document which has been prepared by taking into account
the provisions of this Section, and if such consolidated
management report or the consolidated non-financial statement
prepared in the form of a separate document has been published in
accordance with the procedures laid down in Section
64.2 of this Law.
(9) A sworn auditor shall check whether a consolidated
non-financial statement has been prepared, and also whether such
statement has been included in the consolidated management report
or the individual document referred to in Paragraph six of this
Section, but in the case referred to in Paragraph eight of this
Section - whether the information to be provided in a
consolidated non-financial statement of the parent undertaking of
the group of companies (consolidation group) exempted from the
preparation of a consolidated non-financial statement is included
in the consolidated management report of the parent undertaking
of another group of companies (another consolidation group) or
the individual document which has been prepared, taking into
account the provisions of this Section.
[15 December 2016]
Section 56.5 Person
Responsible for Preparation and Distribution of the Annual
Statement and Consolidated Annual Statement
The board of a capital company shall be responsible for the
preparation of an annual statement and, if the capital company
has an obligation to prepare a consolidated annual statement, of
a consolidated annual statement in accordance with the
requirements of this Law, and also the procedures laid down in
this Law for the distribution of such statements.
[15 December 2016]
Section 57. Accounts of Interim
Periods
(1) A capital company transferable securities of which are
admitted to trading on a regulated market, shall prepare an
account of interim periods on the first six months of the
reporting year and shall distribute it in accordance with the
procedures laid down in Section 64.2 of this Law.
(2) A capital company shall distribute the account of interim
periods referred to in Paragraph one of this Section not later
than two months after the end of the relevant reporting
period.
(3) The account of interim periods referred to in Paragraph
one of this Section regarding the first six months of the
reporting period shall consist of:
1) at least the abbreviated financial statements;
2) the management report of interim periods in which the
following information is provided:
a) on essential corporate actions in the relevant reporting
period and their impact on financial statements, and also
describe the main risks and indicate such unclear circumstances
for the next six months of the reporting period which might
become current for the capital company and which might affect its
financial position and financial performance results;
b) the capital company the shares of which are admitted to
trading on a regulated market and to which Paragraph nine of this
Section applies - on the most important transactions performed
thereby in the reporting period with the affiliated persons, and
also on any changes in essential conditions of the transaction in
relation to transactions with affiliated persons which were
indicated in the previous annual statement;
c) the capital company the shares of which are admitted to
trading on a regulated market and to which Paragraph nine of this
Section does not apply - on its transactions with the affiliated
persons in accordance with the requirements of the legal acts of
the home Member State;
3) the statement of the management's responsibility indicating
that on the basis of information at the disposal of the board of
the capital company the financial accounts have been prepared in
accordance with the requirements of the applicable laws and
regulations and give true and fair view of the assets,
liabilities, financial position, and profit or loss of the
capital company and consolidation group and that true information
is included in the management report for interim periods.
(4) Upon preparing financial statements regarding the first
six months of the reporting year, the same principles for
recognition and evaluation of items shall be conformed to which
were used in preparing the annual statement, indicating them in
the annex accordingly, unless it has already been indicated in
the statement of the management's responsibility. If the
accounting methods used are changed, a corresponding explanation
shall be provided in annex to the statement. Information which
ensures comparability of the account of interim periods with the
data of the relevant period of the previous reporting year, and
also sufficient information and explanations shall be provided in
annex to the account of interim periods, so that the user of the
financial statement could get a true and fair view regarding all
material changes in respect of the balance sheet and profit or
loss account items and development tendency of the capital
company.
(5) Each item of the balance sheet of the account of interim
periods regarding the first six months of the reporting year
shall be compared at least to the data at the end of the previous
reporting year. Each item of the profit or loss statement,
statement of changes in the equity, and the cash flow statement
shall be compared at least to the data of the previous reporting
year regarding the same period regarding which the information to
be distributed has been prepared.
(6) A capital company which, in accordance with Section 56,
Paragraph two or three of this Law, prepares or, in accordance
with Section 56, Paragraph two or four, has chosen to prepare
financial statements according to Regulation No 1606/2002, shall
prepare the financial statements regarding the first six months
of the reporting year in accordance with the international
accounting standards which apply to financial statements of
interim periods and which have been adopted according to
Regulation No 1606/2002.
(7) If a capital company to which the requirements of Section
56, Paragraph four of this Law apply and which, in accordance
with that laid down in Section 56, Paragraph four, has not made
the choice to prepare its financial statements according to
Regulation No 1606/2002, its financial statements regarding the
first six months of the reporting year shall consist of at least
the condensed balance sheet, condensed profit or loss statement,
condensed cash flow statement, condensed statement of changes in
equity, and annex. The items and subtotals which were included in
the annual statement of the previous year of the capital company
shall be indicated in the condensed balance sheet and condensed
profit or loss statement. (2) The balance sheet, profit or loss
account, cash flow statement, and statement of changes in equity
items which have no figures (amounts), shall be set out only if
there is a corresponding item with a figure (amount) in the
comparative data. Additional items shall be included if, without
indicating them, the account of interim periods would provide
misleading view regarding assets, liabilities, financial
position, and profit or loss of the capital company.
(8) Information as to whether the account of interim periods
regarding the first six months of the reporting year has or has
not been audited (checked) by a sworn auditor shall be clearly
indicated on the front page of the information to be distributed.
If the account of interim periods has been audited (checked) by a
sworn auditor, such account shall be distributed together with
the relevant report of the sworn auditor.
(9) A capital company shall prepare an account of interim
periods regarding the first six months of the reporting year in a
consolidated form, if it has had an obligation to prepare a
consolidated annual statement regarding the previous reporting
year and such obligation was also in effect on the date as
regards to which the account of interim periods is being
prepared.
[26 May 2016 / See Paragraph 54 of Transitional
Provisions]
Section 57.1
Information
[22 March 2012]
Section 57.2 Financial
Information on the First Three and Nine Months of the Reporting
Year
(1) A capital company the shares of which are admitted to
trading on a regulated market, shall prepare financial
information on the first three and nine months and distribute it
in accordance with the procedures laid down in Section
64.2 of this Law.
(2) A capital company shall distribute the financial
information referred to in Paragraph one of this Section not
later than two months after the end of such period regarding
which the relevant information must be distributed.
(3) Upon preparing financial information on the first three
and nine months of the reporting year, the same principles for
recognition and evaluation of items shall be conformed to which
were used in preparing the annual statement, and it shall be
indicated in the statement of the management's responsibility
accordingly.
(4) The financial information referred to in Paragraph one of
this Section on the first three and nine months of the reporting
year shall consist of the condensed balance sheet, condensed
profit or loss statement, condensed cash flow statement,
condensed statement of changes in equity, and statement of the
management's responsibility. Such items and subtotals shall be
included in the condensed balance sheet, condensed profit or loss
statement, condensed cash flow statement, and condensed statement
of changes in equity which were included in the last annual
statement.
(5) If the capital company prepares the financial information
using the principles for recognition and evaluation of items of
the international accounting standards approved by Regulation No
1606/2002, its financial information on the first three and nine
months of the reporting year shall consist of the condensed
balance sheet, condensed profit or loss statement, condensed cash
flow statement, condensed statement of changes in equity, and
statement of the management's responsibility. Such items and
subtotals shall be included in the condensed statement on
financial position, condensed statement on comprehensive income,
condensed cash flow statement, and condensed statement of changes
in equity which were included in the last annual statement.
(6) The statement on the management's responsibility referred
to in Paragraph four or five of this Section shall indicate that
on the basis of information at the disposal of the board of the
capital company the financial information has been prepared in
accordance with the requirements of the laws and regulations in
force and give true and fair view of the assets, liabilities,
financial position, and profit or loss of the capital company and
consolidation group.
(7) Upon distributing the financial information on the first
three and nine months of the reporting year, a management report
of interim periods shall be appended thereto (indicating in the
statement of the management's responsibility that true
information has been included in the management report), if at
least one of the following conditions sets in:
1) since distribution of the last management report the
information provided therein has significantly changed;
2) the accounting methods used have been changed. Changing of
the accounting methods shall be explained in the management
report accordingly.
(8) Each item of the balance sheet of the financial
information on the first three and nine months of the reporting
year shall be compared at least to the data at the end of the
previous reporting year. Each item of the profit or loss
statement, cash flow statement, and statement of changes in
equity shall be compared at least to the data of the previous
reporting year regarding the same period regarding which the
information to be distributed has been prepared.
(9) A capital company which prepares the financial information
on the first three and nine months of the reporting year using
the principles for recognition and evaluation of items of the
international accounting standards referred to in Paragraph five
of this Section, shall compare each item of the statement on
financial position to at least the data at the end of the
previous reporting year and shall compare each item of the
comprehensive income statement, cash flow statement, and
statement of changes in equity at least to the data of the
previous reporting year regarding the same period regarding which
the information to be distributed has been prepared.
(10) Information as to whether the financial information on
the first three and nine months of the reporting year has or has
not been audited (checked) by a sworn auditor shall be clearly
indicated on the front page of the information to be distributed.
If the financial information on the first three and nine months
of the reporting year has been audited (checked) by a sworn
auditor, such information shall be distributed together with the
relevant report of the sworn auditor.
(11) A capital company shall prepare the financial information
on the first three and nine months of the reporting year in a
consolidated form, if it has had an obligation to prepare a
consolidated annual statement regarding the previous reporting
year and such duty was also in effect on the date as regards to
which the financial information on the first three and nine
months of the reporting year is being prepared.
[26 May 2016 / See Paragraph 54 of Transitional
Provisions]
Section 57.3 Statement on
Payments to Administration Institutions
(1) A capital company the transferable securities of which are
admitted to trading on a regulated market and which is operating
in logging of primeval forests or is engaged in exploration,
search, discovery, development, and extraction of mineral
resources, oil, natural gas, and other minerals in accordance
with the statistical classification of economic activities as
defined in Annex I, Section A, Division 02, Group 02.2 or Annex
I, Section B, Divisions 05, 06, 07, and 08 of Regulation (EC) No
1893/2006 of the European Parliament and of the Council of 20
December 2006 establishing the statistical classification of
economic activities NACE Revision 2 and amending Council
Regulation (EEC) No 3037/90 as well as certain EC Regulations on
specific statistical domains, shall prepare a statement on
payments to administration institutions in accordance with the
requirements of the law On Statements by Commercial Companies
Engaged in Mining or Logging of Primeval Forests on Payments to
Administration Institutions. A statement on payments to
administration institutions shall be provided in a consolidated
form.
(2) The commercial company shall distribute the statement
referred to in Paragraph one of this Section in accordance with
the procedures laid down in Section 64.2 of this Law
not later than six months after the end of each financial year,
and it shall be available to the public for at least 10
years.
[26 May 2016]
Section 58. Exemptions
The requirements of Sections 56, 57, and 57.2 of
this Law shall not apply to:
1) transferable securities issued by a Member State, local
government, its institution or agency, such organisation which is
a subject governed by international public law and in which one
or several Member States are members, by the European Financial
Stability Facility which has been established according to a
European Financial Stability Facility Framework Agreement, by any
other institution which has been established in order to preserve
the financial stability of the European Monetary Union, providing
temporary financial aid to the Member States in which euro is the
national currency, and also by the European Central Bank and
central banks of Member States;
2) issuers that have issued only debt securities which are
admitted to trading on a regulated market and the denomination of
one unit of debt security of which is not less than EUR 100 000,
or, if the debt securities are issued in currency other than
euro, the denomination of one unit of debt security on the day of
issue is not less than an equivalent of EUR 100 000;
3) issuers that have issued only debt securities the
denomination of one unit of a debt security of which is at least
EUR 50 000, or, if the debt securities are issued in currency
other than euro, the denomination of one unit of a debt security
of which on the day of issue is at least an equivalent of EUR 50
000, and securities of which have been admitted to trading on a
regulated market in the European Union before 31 December 2010,
until the day when such securities are deleted.
[13 January 2011; 22 March 2012; 19 September 2013; 26 May
2016]
Section 59. Significant Events
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 59.1 Closing and
Discovery of Atypical Transaction and Transaction of Significant
Amount with the Affiliated Party
(1) The provisions of this Section shall apply to a capital
company the shares of which are admitted to trading on a
regulated market.
(2) Within the meaning of this Section an atypical transaction
is a transaction of a capital company which has not been
concluded within the scope of commercial activity normally
performed by the capital company or does not conform to the
normal market conditions.
(3) An atypical transaction with the affiliated party shall be
concluded in accordance with the procedures laid down in the
Commercial Law for the conclusion of a transaction with the
affiliated party.
(4) Before concluding an atypical transaction with the
affiliated party, the board shall provide the following
information on the transaction to the audit committee (if such
has been established):
1) information on the affiliated party (for a natural person -
the given name, surname; for a legal person - the name,
registration number, and country of registration);
2) the justification for the necessity of the transaction;
3) the provisions of the transaction;
4) an assessment regarding the impact of the transaction on
commercial activity of the capital company and the financial
performance results;
5) an assessment regarding the impact of the transaction on
shareholders of the capital company which are not considered
affiliated parties in relation to the abovementioned
transaction.
(5) The council of a capital company may request an opinion of
the audit committee (if such has been established) or invite an
independent expert for the provision of an opinion of experts on
the intended atypical transaction with the affiliated party. Upon
deciding on inviting of an audit committee or an independent
expert, the interested member of the council of the capital
company (within the meaning of the Commercial Law) shall not have
voting rights, and it shall be recorded in the minutes of the
council meeting. The costs of attracting an expert shall be
covered from the funds of the capital company.
(6) The capital company shall draw up internal procedure
according to which it detects whether the transaction with the
affiliated party is or is not atypical. The capital company
shall, at least once a year, assess whether its atypical
transactions concluded with the affiliated parties have been
identified and the procedures for the conclusion and discovery of
such transactions have been conformed to. The capital company
shall ensure that the abovementioned assessment is not performed
by members of its board or council or other employees thereof
with whom or with whose affiliated parties the transactions to be
assessed have been concluded.
(7) Within the meaning of this Section a transaction of
significant amount is a transaction of a capital company the
amount of money paid or to be received as a result, the value of
acquired or alienated assets, or the liabilities of the capital
that have arisen as a result of of the transaction or may arise
in the future of which are at least 10 per cent from the share
capital or at least 10 per cent from the own funds of the capital
according to the last audited annual statement or consolidated
annual statement (if such is being prepared) - depending on the
lowest of indicators, but not less than EUR 35 000. More strict
criteria according to which a transaction is to be considered a
transaction of significant amount may be specified in the
articles of association of the capital company or in the decision
of the council.
(8) Within the meaning of this Section several transactions
which have been concluded by the capital company within a period
of 12 months with the same affiliated party or in the interests
of the same affiliated party and the total value of which
conforms to that specified in Paragraph seven of this Section
shall also be considered a transaction of significant amount.
(9) Before concluding a transaction of significant amount with
the affiliated party, the board shall provide the information
referred to in Paragraph four of this Section on the transaction
to the audit committee (if such has been established).
(10) The capital company shall, without delay in accordance
with the procedures laid down in Section 64.2 of this
Law, distribute the information on a transaction of significant
amount with the affiliated party after conclusion of the
transaction or after setting in of such circumstances when the
criteria specified in Paragraph seven or eight of this Section
are achieved. The capital company shall distribute the
information on a atypical transaction with the affiliated party
prior to conclusion of the transaction, but not later than on the
day when a consent in accordance with the procedures laid down in
the Commercial Law (in the council or in a meeting of
stockholders) has been given to the transaction of the affiliated
parties. The capital company shall provide at least information
on:
1) the affiliated party (for a natural person - the given
name, surname; for a legal person - the name, registration
number, and country of registration);
2) the type of relationships between the capital company and
the affiliated party;
3) the day (date) of concluding the transaction, the amount of
money to be received or paid in the transaction, the value of the
acquired or alienated assets, or on the liabilities of the
capital company which have occurred as a result of the
transaction or may occur in the future, and also on the payment
provisions and the schedule of payments (if any), including on
the amount of money intended to be received or paid in the
subsequent periods, in the time period for execution of the
transaction of liabilities, and also the interest to be received
or paid (if such are intended);
4) the impact of the transaction on commercial activity of the
capital company and the financial performance results;
5) the impact of the transaction on shareholders of the
capital company which are not considered affiliated parties in
relation to the abovementioned transaction;
6) whether an opinion of the audit committee or a statement of
an independent expert (if such was requested) has been
received.
(11) In addition to the information referred to in Paragraph
ten of this Section, the capital company has an obligation also
to provide other information on the transaction, if it is of
significance to or may significantly impact the financial state
of the capital company or the possibilities of determining
commercial activity of specific type or if its discovery may
significantly impact the evaluation of shares of the capital
company admitted to trading on a regulated market, thus ensuring
the protection of investors or impeccable operation of the
market.
(12) The capital company shall ensure that it receives
information from a subsidiary on transactions between the
affiliated party of the capital company and the subsidiary if
such transaction is concurrently atypical and of significant
amount. The capital company shall distribute information on such
transactions in accordance with the procedures laid down in
Section 64.2 of this Law. The capital company shall
provide the information referred to in Paragraphs ten and eleven
of this Section by additionally indicating information on the
impact of the transaction on the commercial activity and
financial performance results of the subsidiary and on
shareholders (members) of the subsidiary.
[21 September 2017; 20 June 2019]
Chapter
III1
Remuneration Policy and Report
[20 June 2019]
Section 59.2 Scope of
this Chapter
The requirements of this Chapter shall apply to a capital
company the shares of which are admitted to trading on a
regulated market (hereinafter in this Chapter - the capital
company).
[20 June 2019]
Section 59.3 Remuneration
Policy
(1) The capital company shall draw up the remuneration policy
of the board and council (hereinafter - the remuneration policy),
approve it in a meeting of shareholders and publish it. The
capital company shall ensure that the remuneration for members of
the board and council is specified according to the remuneration
policy approved in a meeting of shareholders.
(2) The board of the capital company shall draw up the
remuneration policy and submit it for approval to the meeting of
shareholders of the capital company not less than once in four
years after approval of the previous remuneration policy. If
amendments are made to the remuneration policy, they shall be
approved in a meeting of shareholders and it shall be considered
that the remuneration policy in the new wording has been approved
by approval of amendments.
(3) The remuneration policy contains at least the following
information:
1) a description of the permitted components of the variable
and invariable remuneration (inter alia, all bonuses and
other benefits of any kind) and their relative (percentage) share
from the total remuneration;
2) an explanation how the remuneration policy and the
particular components of remuneration included therein will
promote the implementation, long-term interests, and
sustainability of the strategy of the capital company;
3) an explanation how the conditions for remuneration and
employment of employees of the capital company have been taken
into account in the drawing up of the remuneration policy;
4) the criteria for the granting of the variable remuneration
(if such is intended), the criteria of performance results of the
capital company to be used for the determination thereof, the
methods for the determination of the enforcement of such
criteria, the time periods for suspending the disbursement of the
variable remuneration, and information on the possibility of the
capital company to reclaim the variable remuneration;
5) the most important conditions of a remuneration related to
granting of shares (if such is intended), including the time
periods for granting the rights and the rights to keep the shares
after the granting thereof;
6) the term of office of the members of the board and council
and the applicable time periods for withdrawal, the main
characteristics in relation to supplementary pension or
accelerated retirement plans, the conditions related to
termination of contracts, and payments to members of the board
and council;
7) the conditions for the determination, review, and
application of the remuneration policy;
8) the measures which are intended in order to avoid conflict
of interest or to prevent them;
9) the role of the remuneration committee or other body of the
capital company (if such is intended) in determination, review,
and application of the remuneration policy;
10) a description and explanation regarding substantial
changes made in the remuneration policy and how voting of the
meeting of shareholders and opinions of shareholders on the
remuneration policy and remuneration reports which have been
examined in a meeting of shareholders after voting of the
previous meeting of shareholders on the remuneration policy has
been taken into account in the new remuneration policy.
(4) The capital company shall ensure that the remuneration
policy approved by the meeting of shareholders (full text in the
new wording) together with the date of voting by the meeting of
shareholders and the voting results after the meeting of
shareholders are published on the website of the capital company
where it is available to the public free of charge for at least
as long as it is applicable. At least information on the total
number of participating shares with voting rights, the number of
votes in conformity with the number of shares with voting rights
and a part of the voting share capital represented in the meeting
of shareholders by votes given, and also the number of votes
given "for" and "against" regarding approval of the remuneration
policy shall be included in the voting results.
(5) Until approval of a new remuneration policy in a meeting
of shareholders, the capital company shall pay remuneration to
members of the board and council according to the previous
remuneration policy or, if there is none, according to the
current practice of the capital company. If the meeting of
shareholders does not approve the remuneration policy drawn up by
the board, the board shall submit a reviewed remuneration policy
together with an explanation of the changes made therein in the
next meeting of shareholders for approval.
(6) In an exceptional case, the capital company may apply a
temporary derogation from the remuneration policy, if the
procedures for the application of the derogation and the
components of the remuneration policy for which the derogation is
possible are provided for therein. Only ensuring of the long-term
interests, sustainability of the capital company or its
insolvency may be considered as an exceptional case.
[20 June 2019]
Section 59.4 Remuneration
Report
(1) The board of the capital company shall prepare a clear and
comprehensible annual report on the remuneration which has been
granted or disbursed in the previous financial year or which is
due for the previous financial year to each current and former
member of the board and council (hereinafter - the remuneration
report). The remuneration report includes identifying information
on each member of the board and council (at least given name,
surname, and position), and also at least the following
information on remuneration of each member of the board and
council:
1) the total remuneration divided according to the components
of the remuneration and the relative (percentage) share of the
invariable and variable remuneration;
2) an explanation as to why the total remuneration conforms to
the remuneration policy, how it promotes long-term performance
results of the capital company, and how the criteria of the
performance results of the capital company were applied in
determination of the remuneration;
3) the changes which have occurred within the last five
financial years in a comparable way in relation to the
remuneration of the board and council, the performance results of
the capital company, and the average remuneration of full-time
employees of an equivalent unit of the capital company (except
for members of the board and of council);
4) the remuneration received from another company which is
part of the same group of companies within the meaning of the Law
on the Annual Financial Statements and Consolidated Financial
Statements;
5) the number of the granted and offered shares and share
options and the main conditions for the use of options, inter
alia, the price and date of their use, and the changes
therein (if any have occurred);
6) information on cases when the variable part of the
remuneration has been reclaimed;
7) the applied temporary derogations, inter alia, an
explanation of the nature of the exceptional case and a reference
to specific components of the remuneration policy to which a
temporary derogation has been applied.
(2) If any of the requirements referred to in Paragraph one of
this Section is not applied in the capital company or does not
apply thereto, it shall be unequivocally indicated in the
remuneration report.
(3) Personal data of specific categories of members of the
board and the council within the meaning of Article 9(1) of
Regulation (EU) 2016/679 of the European Parliament and of the
Council of 27 April 2016 on the protection of natural persons
with regard to the processing of personal data and on the free
movement of such data, and repealing Directive 95/46/EC (General
Data Protection Regulation) and personal data which apply to the
marital status of members of the board and the council shall not
be included in the remuneration report. In such case the
components of the remuneration which are related to the marital
status shall be included in the remuneration report, indicating
only the amount of the remuneration granted and without
indicating the justification for granting.
(4) The board of the capital company shall prepare the
remuneration report as an individual component of the annual
statement and submit it to the meeting of shareholders for
examination together with other components of the annual
statement. The board shall explain in the remuneration report how
the voting of the meeting of shareholders and the opinions of
shareholders on the previous remuneration report have been taken
into account.
(5) If the capital company prepares an annual statement and a
consolidated annual statement, it shall prepare one remuneration
report in accordance with the requirements of this Section.
(6) The capital company shall ensure that the remuneration
report is published immediately after the meeting of shareholders
on the website of the capital company where it is available to
the public free of charge for 10 years after the day of
publishing. The capital company may make the information included
in the remuneration report available for a longer period of time
if it excludes personal data from such report.
(7) A sworn auditor shall check whether the remuneration
report has been prepared and, in accordance with the Law on Audit
Services, provide an opinion of a sworn auditor as to whether the
information referred to in this Section has been included in the
remuneration report and whether significant non-conformities in
relation to the financial information indicated in the annual
statement have been detected in the remuneration report.
(8) The capital company which commences trading in shares on a
regulated market shall draw up the remuneration report for the
financial year which starts after the day when shares have been
admitted to trading on a regulated market. In such case the
comparison of the changes referred to in Paragraph one, Clause 3
of this Section shall be provided for at least a period of the
last five financial years which starts after the day when shares
have been admitted to trading on a regulated market.
[20 June 2019]
Section 59.5 Liability
for the Fulfilment of the Requirements of this Chapter
(1) The capital company or the relevant officials shall be
liable for the violations in relation to the remuneration policy
and the remuneration report according to civil legal
procedures.
(2) If the remuneration policy or the remuneration report has
not been published in accordance with the procedures laid down in
Sections 59.3 and 59.4 of this Law,
liability in accordance with Section 148 of this Law shall set in
for the capital company.
[20 June 2019]
Chapter
III.2
Requirements for Shareholder
Identification, for Ensuring the Rights of Shareholders, and for
Transparency of the Activity of Proxy Advisors
[20 June 2019]
Section 59.6 Scope of
this Chapter
(1) The requirements of this Chapter shall apply to a capital
company the registered office of which is in the Republic of
Latvia and the shares of which are admitted to trading on a
regulated market of a Member State (hereinafter in this Chapter -
the capital company), and also to the operator of the account of
financial instruments which is providing the capital company
shareholder services.
(2) Within the meaning of this Chapter the central securities
depository, a credit institution, an investment brokerage
company, and also another person who is providing services of
operation of the account of financial instruments and capital
company shareholder services regardless of its registered office
or location of the head office.
(3) If shares of the capital company are held with the
intermediation of several operators of the account of financial
instruments, the operator of the account of financial
instruments, if it has a contract with another operator of the
account of financial instruments the registered office or
location of the head office of which is not in the Member State,
shall include provision in the contract which ensure the
enforcement of the provisions of this Chapter.
(4) The enforcement of the provisions of this Chapter shall be
supervised by the Commission.
[20 June 2019 / Section shall come into force on 1
September 2020. See Paragraph 67 of Transitional
Provisions]
Section 59.7 Shareholder
Identification
(1) The capital company may request the information referred
to in Table 2, Section C of Commission Implementing Regulation
(EU) 2018/1212 of 3 September 2018 laying down minimum
requirements implementing the provisions of Directive 2007/36/EC
of the European Parliament and of the Council as regards
shareholder identification, the transmission of information and
the facilitation of the exercise of shareholders rights
(hereinafter in this Chapter - the Implementing Regulation) on
its shareholder from the operator of the account of financial
instruments. The capital company may authorise another person for
exercising of the rights referred to in this Chapter.
(2) The capital company may request that the central
securities depository in which shares of the capital company have
been initially recorded aggregates information on shareholders of
the capital company.
(3) If shares of the capital company are held with the
intermediation of several operators of the account of financial
instruments, the operator of the account of financial instruments
shall, after receipt of a request of the capital company, hand
over the request to the subsequent operator of the account of
financial instruments without delay. The operator of the account
of financial instruments who has information on the shareholder
at its disposal shall hand it over to the capital company without
delay. The capital company may request information on the
shareholder from any operator of the account of financial
instruments who has such information at its disposal.
(4) In order for the capital company to be able to contact a
shareholder for the purpose of facilitating the exercise of its
rights, the capital company and the operator of the account of
financial instruments have the right to store the information
obtained in accordance with the procedures laid down in this
Section on the shareholder for not more than 12 months after the
capital company or the operator of the account of financial
instruments have become aware of losing the status of a
shareholder.
(5) The shareholder may request that the operator of the
account of financial instruments corrects incorrect information
on the shareholder. If information on the shareholder is
maintained by the capital company, the shareholder (with or
without the intermediation of the operator of the account of
financial instruments) may request that the capital company
corrects incorrect information on the shareholder.
(6) Provision of information on a shareholder of the capital
company in accordance with the procedures laid down in this
Chapter shall not be considered a violation of the prohibition of
disclosure of information specified in the contract or law.
[20 June 2019 / Section shall come into force on 1
September 2020. See Paragraph 67 of Transitional
Provisions]
Section 59.8 Transmission
of Information
(1) The capital company shall, in a timely manner in
conformity with the requirements laid down in the Implementing
Regulation, transmit information to the operator of the account
of financial instruments which is necessary for exercising the
rights of the shareholder. The operator of the account of
financial instruments shall forward such information to a
shareholder of the capital company in accordance with the
procedures laid down in the Implementing Regulation.
(2) If the information referred to in Paragraph one of this
Section is available on the website of the capital company, the
operator of the account of financial instruments shall, after
receipt of the request of the capital company, transmit a
notification to the shareholder of the capital company with an
accurate reference where information is available on the website
of the capital company.
(3) The capital company itself may send the information or
notification referred to in Paragraphs one and two of this
Section to the shareholder, if it is allowed by the contract
entered into with the central securities depository in which
shares of the capital company were initially recorded.
(4) The operator of the account of financial instruments
shall, without delay, transmit the information received from the
shareholder which is related to exercising of the right of the
shareholder to the capital company.
(5) If shares of the capital company are held with the
intermediation of several operators of the account of financial
instruments, the operator of the account of financial instruments
shall, without delay, transfer the information which is necessary
for exercising the rights of the shareholder to the subsequent
operator of the account of financial instruments, unless it
cannot transmit such information directly to the shareholder or
capital company accordingly.
[20 June 2019 / Section shall come into force on 1
September 2020. See Paragraph 67 of Transitional
Provisions]
Section 59.9 Facilitation
of the Exercise of Shareholders Rights
(1) The operator of the account of financial instruments shall
facilitate the participation of a shareholder in a meeting of
shareholders and the exercise of other rights arising from shares
or also, upon direct assignment from the shareholder, implement
itself the rights arising from shares.
(2) If voting in a meeting of shareholders takes place by
using electronic means, the capital company shall send a
confirmation regarding receipt of the vote cast to the person who
has voted in the meeting of shareholders.
(3) The shareholder may request a confirmation that the votes
cast by him or her have been registered in accordance with the
procedures laid down in the law. The shareholder may exercise
such rights within a month from the day when the meeting of
shareholders took place.
(4) If the operator of the account of financial instruments
receives the confirmation referred to in Paragraphs two and three
of this Section from the capital company, it shall, in accordance
with the procedures laid down in the Implementing Regulation,
transmit such confirmation to the shareholder without delay. If
shares of the capital company are held with the intermediation of
several operators of the account of financial instruments, the
operator of the account of financial instruments shall, without
delay, transfer the received information to the subsequent
operator of the account of financial instruments, unless it
cannot transmit such information directly to the shareholder.
[20 June 2019 / Section shall come into force on 1
September 2020. See Paragraph 67 of Transitional
Provisions]
Section 59.10 Payment for
Services of the Operator of the Account of Financial
Instruments
(1) The operator of the account of financial instruments shall
publish information on any payment which is applied thereby to a
shareholder, capital company, or another operator of the account
of financial instruments for the services referred to in Sections
59.7, 59.8, and 59.9 of this
Law.
(2) Any payment for services shall be non-discriminatory and
commensurate as regards the actual costs of the provision
thereof.
[20 June 2019 / Section shall come into force on 1
September 2020. See Paragraph 67 of Transitional
Provisions]
Section 59.11
Transparency of the Activity of the Proxy Advisor
(1) A proxy advisor shall publish information on the code
applicable in the conduct thereof (hereinafter - the code of
conduct).
(2) If the proxy advisor does not apply the code of conduct,
it shall provide a justification for such action. If the proxy
advisor does not apply one or more recommendations of the code of
conduct, it shall provide information as to which recommendation
is not being applied, a justification for such action, and
information on alternative measures.
(3) The information referred to in Paragraphs one and two of
this Section shall be made publicly available, free of charge, on
the website of the proxy advisor and shall be updated on an
annual basis.
(4) The proxy advisor shall publicly disclose on an annual
basis at least the following information in relation to the
preparation of their research, advice given, and recommendations
in relation to the exercise of the voting rights:
1) the essential features of the methodologies and models
applied;
2) the main information sources used;
3) the procedures put in place to ensure quality of the
research, advice, and recommendations in relation to the exercise
of the voting rights;
4) the procedures put in place to ensure qualifications of the
staff involved;
5) the impact of issues related to a regulated market of the
particular Member State and the laws applicable thereto on
conducting of research and provision of advice and
recommendations in relation to the exercise of the voting
rights;
6) the impact of the specific issues related to the joint
stock company regarding which research is conducted and advice
and recommendations in relation to the exercise of the voting
rights are provided on the conducting of research and provision
of advice and recommendations in relation to the exercise of the
voting rights;
7) the most essential features of the voting policy applicable
to each market in which the proxy advisor is conducting research
and providing advice and recommendations in relation to the
exercise of the voting rights in a joint stock company;
8) information on communication with the joint stock company
regarding which research is conducted and advice and
recommendations in relation to voting are provided;
9) information on communication with the interested parties of
such joint stock company regarding whom research is conducted and
advice and recommendations in relation to voting are
provided;
10) the policy regarding the prevention and management of
potential conflict of interest.
(5) The information referred to in Paragraph four of this
Section shall be made publicly available by the proxy advisor,
free of charge, on the website of the proxy advisor for at least
three years from the date of publication of the information.
(6) The proxy advisor shall identify and disclose without
delay to its clients a conflict of interest that may influence
the conducting of research and the provision of advice or voting
recommendations. The proxy advisor shall disclose without delay
the actions that have been undertaken to eliminate and manage a
conflict of interest.
(7) The execution of the provision of this Section shall be
supervised by the Commission if the registered office of the
proxy advisor is in the Republic of Latvia. The Commission shall
supervise the execution of the provisions of this Section if the
registered office of the proxy advisor is not in a Member State,
but the location of the head office of the proxy advisor is in
the Republic of Latvia. The Commission shall supervise the
execution of the provisions of this Section if the registered
office or the location of the head office of the proxy advisor is
not in a Member State, but a branch of the proxy advisor has been
registered in the Republic of Latvia.
[20 June 2019]
Chapter
IV
Acquisition of a Major Holding
[29 March 2007]
Section 60. Scope of this
Chapter
(1) The provisions of this Chapter regarding the obligation to
notify and the consequences of non-notification shall apply to
the following persons:
1) who obtain or dispose of the shares with voting rights in
such joint stock company the shares of which are admitted to
trading on a regulated market in the Republic of Latvia;
2) who obtain or dispose of depository receipts which have
been issued for the shares referred to in Paragraph one, Clause 1
of this Section;
3) who obtain or dispose of financial instruments which on the
day of exercising the rights arising from such financial
instruments give the person the right, according to an official
agreement, to obtain the shares with voting rights of the issuer
in such joint stock company the shares of which are admitted to
trading on the regulated market of the Republic of Latvia;
4) who obtain or dispose of financial instruments the
reference of which is a share basket (an aggregate of different
shares) or an index in which such shares are included which are
admitted to trading on the regulated market of the Republic of
Latvia.
(2) If depository receipts have been issued for the shares of
such joint stock company the shares of which are admitted to
trading on a regulated market, the obligation to notify shall
apply to the acquirer of depository receipts and not to the
issuer thereof.
(3) The requirements of this Section shall also apply to
persons who are entitled to obtain, acquire, or exercise voting
rights in one or several cases referred to in Section 8 of this
Law.
(4) The requirements of this Chapter shall also apply to the
persons to whom the financial instruments referred to in
Paragraph one, Clause 3 of this Section belong, provided that
they have unlimited rights to obtain the relevant shares
according to the official agreement within the specified period
of time or the right of choice to obtain or not obtain them at
their preference.
(5) The financial instruments referred to in Paragraph one,
Clause 3 of this Section are also such financial instruments in
relation to which the conditions referred to in Paragraph four of
this Section do not exist, but which are related to the shares
with voting rights of the issuer whose transferable securities
have been admitted to trading on a regulated market, or voting
rights to be potentially obtained the economic impact of which is
similar, regardless of whether such financial instruments grant
or do not grant the right to perform the settlement of accounts
in financial instruments.
(6) The list of the financial instruments referred to in
Paragraph one, Clause 3 of this Section shall be determined by
the regulatory provisions of the Commission.
(7) The requirements of this Chapter shall also be applied if
the joint stock company the shares of which have been admitted to
trading on a regulated market in the Republic of Latvia, has been
registered in a foreign country.
[26 May 2016]
Section 61. Obligation to Notify
Taking into Account the Proportion of Voting Rights
(1) A person shall notify of the proportion of his or her
voting rights when as a result of acquiring, disposing of shares,
increasing or decreasing equity or any other events it reaches,
exceeds or becomes less than 5, 10, 15, 20, 25, 30, 50, or 75 per
cent.
(2) If the Republic of Latvia is the home Member State for a
joint stock company, a person shall also notify of the proportion
of his or her voting rights when as a result of acquiring,
disposing of shares, increasing or decreasing equity or any other
events it reaches, exceeds or becomes less than 90 or 95 per
cent.
[26 May 2016]
Section 61.1 Calculation
of the Proportion of Voting Rights
(1) When calculating the proportion of voting rights, all
shares with voting rights shall be taken into account also if the
exercising of voting rights is suspended.
(2) Information on all shares with voting rights shall be
indicated in information on the proportion of voting rights,
indicating shares of each category separately.
(3) Upon calculating the proportion of voting rights, a person
shall sum up all voting rights which arise from the shares with
voting rights issued by one issuer, depository receipts issued
thereto, the financial instruments referred to in Section 60,
Paragraph one, Clause 4 of this Law, if the rights arising from
the financial instruments referred to in Section 60, Paragraph
one, Clause 3 of this Law are to be exercised.
(4) Upon determining the amount of an indirectly acquired
holding of a person, the voting rights specified in Section 8 of
this Law shall also be taken into account.
(5) Upon calculating the proportion of voting rights, the
amount of directly and indirectly acquired holding and the amount
of holding to be acquired directly and indirectly shall be summed
up, if the rights arising from the financial instruments referred
to in Section 60, Paragraph one, Clause 3 of this Law are to be
exercised.
(6) The proportion of the voting rights of the financial
instruments referred to in Section 60, Paragraph one, Clause 3 of
this Law shall be calculated, taking into account to a full
extent the principal shares to be obtained from exercising the
rights arising from financial instruments. If it is intended to
perform the settlement of accounts for financial instruments only
in cash, the proportion of voting rights shall be calculated with
delta correction, multiplying the amount conditioned by the
principal shares by delta coefficient of financial instruments.
The person shall sum up all financial instruments which are
related to the same issuer, and shall include information in the
notification on all such financial instruments. Upon calculating
the total amount of all principal shares, the person shall take
into account only the long positions of financial instruments,
without performing the clearing of long and short positions of
the same issuers.
(7) The methods for determination of the delta coefficient
referred to in Paragraph six of this Section and the methods for
calculating the proportion of voting rights for financial
instruments the reference of which is a share basket or index,
shall be determined by Commission Delegated Regulation (EU)
2015/761 of 17 December 2014 supplementing Directive 2004/109/EC
of the European Parliament and of the Council with regard to
certain regulatory technical standards on major holdings
(hereinafter - Regulation No 2015/761).
(8) Within the meaning of this Chapter the principal shares
are shares with voting rights issued by an issuer whose shares
have been admitted to trading on a regulated market, which may be
obtained by the acquirer of the financial instruments referred to
in Section 60, Paragraph one, Clause 3 of this Law according to
an official agreement.
(9) In order to simplify the calculation of voting rights of
shares, a joint stock company shall, on the last date of each
calendar month, if increase or decrease in the number of shares
with voting rights or equity has arisen during such month, update
information on the total number of shares with voting rights and
equity, distributing it in accordance with the procedures laid
down in Section 64.2 of this Law.
[26 May 2016; 20 June 2019]
Section 61.2 Notification
Procedures and Content of a Notification
(1) A person shall notify a joint stock company and
concurrently also the Commission by submitting a relevant
notification (hereinafter in this Chapter - the notification)
when the proportion of its voting rights as a result of
acquisition, disposing of shares, increasing or decreasing of
equity or any other events, exceeds or becomes less than the
proportion of voting rights specified in Section 61, Paragraph
one or two of this Law.
(2) If the notification is provided in accordance with the
requirements of Section 60, Paragraph one, Clause 4 of this Law
and the base asset of the financial instrument includes shares
issued by several joint stock companies (share basket or index),
the notification shall be provided to each relevant joint stock
company and concurrently also to the Commission.
(3) The notification shall include information on:
1) distribution of voting rights on the day of submission of
the notification expressed in figures, as a percentage of the
share capital and of the number of shares with voting rights
according to their acquisition or disposal;
2) commercial companies in which the person has control and
with the intermediation of which the shareholder holds voting
rights;
3) day on which the proportion of voting rights specified in
Section 61, Paragraph one or two of this Law was reached or
exceeded, or decreased;
4) identity of a shareholder, even if the shareholder is not
entitled to exercise the voting rights in accordance with the
provisions of Section 8 of this Law, and identity of the natural
or legal person which is entitled to exercise the voting rights
on behalf of the shareholder.
(4) The person shall indicate separately in the notification
the proportion of voting rights which arises for him or her from
the shares, depository receipts issued thereto, the financial
instruments referred to in Section 60, Paragraph one, Clause 4 of
this Law and the benefits, if the rights arising from the
financial instruments referred to in Section 60, Paragraph one,
Clause 3 of this Law are to be exercised.
(5) The person shall indicate separately in the notification
the financial instruments referred to in Section 60, Paragraph
one, Clause 3 of this Law, separating such financial instruments
which grant the right to perform settlement of accounts in cash,
from such financial instruments which grant the right to obtain
or alienate financial instruments in performing settlement of
accounts with financial instruments.
(6) If the notification was already provided in case of
acquiring the financial instruments referred to in Section 60,
Paragraph one, Clause 3 of this Law, the person shall repeatedly
submit the notification, if he or she has acquired principal
shares in such quantity that as a result of acquisition the
proportion of voting rights of such person in equity of one
issuer reaches or exceeds the proportion of voting rights
specified in Section 61, Paragraph one or two of this Law.
(7) A form approved by the regulatory provisions of the
Commission shall be used for the notification.
[26 May 2016]
Section 61.3 Notification
Term and Distribution of a Notification
(1) A notification must be submitted to a joint stock company
and concurrently also to the Commission without delay, however,
not later than within four trading days after the day when the
person:
1) finds out about acquiring of voting rights or disposal
thereof, or a possibility to exercise them or, by taking into
consideration the circumstances, he or she should have found out
thereon regardless of the day on which acquiring or disposal of
voting rights, or the possibility of exercising of voting rights
enters into effect. Within the meaning of this Clause, it shall
be regarded that a person finds out regarding acquiring,
disposing of voting rights or a possibility to exercise them not
later than within two trading days after the transaction day;
2) is informed of such event as a result of which the
proportion of voting rights of the person reaches, exceeds or
becomes less than the proportion of voting rights specified in
Section 61, Paragraph one or two of this Law.
(2) In order to determine the trading days referred to in
Paragraphs one and three of this Section and Section
61.4 of this Law, a trading day calendar of the home
Member State of the issuer shall be used which has been published
by the relevant regulated market operator on its website. The
Commission shall publish on its website the trading day calendar
of each regulated market operator whose home Member State is the
Republic of Latvia.
(3) The joint stock company shall, not later than within one
trading day from the day of receipt of the notification referred
to in this Section, distribute it in accordance with the
procedures laid down in Section 64.2 of this Law.
[26 May 2016]
Section 61.4 Notification
of a Joint Stock Company Regarding Acquisition or Disposing of
its Shares
If the issuer of shares admitted to trading on a regulated
market acquires or disposes of his or her shares, depository
receipts issued thereto, or the financial instruments referred to
in Section 60, Paragraph one, Clauses 3 and 4 of this Law himself
or herself or by intermediation of another person who is acting
on behalf of, but in the interests of the issuer, such issuer
shall distribute information on the acquired or disposed of
proportion of own shares as soon as possible, however, not later
than within four trading days, counting from the next day after
the day of acquiring or disposing, if such proportion reaches,
exceeds, or becomes smaller than five or ten per cent of the
total number of shares with voting rights.
[26 May 2016]
Section 61.5 Requirements
for Notification in Case of Indirect Holding
(1) Each shareholder or each person who has indirectly
acquired holding in accordance with Section 8 of this Law, shall
notify of the proportion of indirectly acquired holding when it
reaches, exceeds, or becomes smaller than that laid down in
Section 61, Paragraph one or two of this Law, if the proportion
of voting rights of each abovementioned person reaches, exceeds,
or becomes smaller than that laid down in Section 61, Paragraph
one or two of this Law.
(2) All persons who have entered into an agreement shall
provide a joint notification regarding the case referred to in
Section 8, Clause 1 of this Law.
(3) In the case specified in Section 8, Clause 8 of this Law,
if the shareholder issues a power of attorney regarding
representation in one meeting of shareholders, one notification
shall be provided on the day of issue of the power of attorney.
It shall also be indicated in the notification on how voting
rights will be distributed after the authorised person will not
be entitled to exercise the voting rights at his or her
preference anymore.
(4) In the case laid down in Section 8, Clause 8 of this Law,
if the authorised person has received one or several powers of
attorney for representation in one meeting of shareholders, one
notification shall be provided on the day of issue of the power
of attorney. It shall also also be indicated in the notification
on how voting rights will be distributed after the authorised
person will not be entitled to exercise the voting rights at his
or her preference anymore.
(5) If the obligation to notify refers to several persons, one
joint notification may be submitted. Provision of a joint
notification shall not release such persons from responsibility
in relation to a notification who have a duty to provide such
notification.
[26 May 2016]
Section 61.6 Notification
Procedures when Holding is Acquired by an Investment Management
Company, Investment Brokerage Company and Their Parent
Undertaking
(1) When calculating the proportion of shares with voting
rights referred to in Section 61, Paragraph one or two of this
Law, the parent undertaking of an investment management company
shall not sum up shares owned thereby with the shares managed by
a subsidiary investment management company in accordance with the
requirements of the laws and regulations, unless the subsidiary
investment management company exercises voting rights
independently from the parent undertaking of the investment
management company.
(2) The exception referred to in Paragraphs one and four of
this Section shall also apply to depository receipt issued for
shares and to the financial instruments referred to in Section
60, Paragraph one, Clauses 3 and 4 of this Law.
(3) Paragraph one of this Section shall not be applied, if the
parent undertaking of an investment management company or another
commercial company controlled thereby has made investments in the
same shares in which funds of investment funds managed by the
subsidiary investment management company are invested, and the
subsidiary investment management company is not entitled, at its
preference, to exercise the voting rights which are conferred by
these shares, it may exercise such voting rights only in
accordance with direct or indirect instructions given by the
parent undertaking of an investment management company or another
commercial company controlled by the parent undertaking. Within
the meaning of this Section, direct instruction is any
instruction given by the parent undertaking of an investment
management company or commercial company controlled thereby and
which specifies how the voting rights are to exercised by the
subsidiary investment management company or investment brokerage
company in the particular case. Within the meaning of this
Section, an indirect instruction is any general or particular
instruction given by the parent undertaking of an investment
management company or investment brokerage company or a
commercial company controlled thereby that limits the discretion
of the subsidiary investment management company or investment
brokerage company in relation to the exercise of the voting
rights in order to serve specific business interests of the
parent undertaking of the investment management company or
investment brokerage company or a commercial company controlled
thereby.
(4) When calculating the proportion of shares with voting
rights referred to in Section 61, Paragraph one or two of this
Law, the parent undertaking of an investment brokerage company
shall not sum up the shares owned thereby with the shares which
are individually managed by a subsidiary investment brokerage
company according to the authorisation of the investor within the
meaning of Section 3, Paragraph four, Clause 4 of this Law,
provided that the subsidiary investment brokerage company:
1) has received the licence for the provision of the
investment service specified in Section 3, Paragraph four, Clause
4 of this Law;
2) may exercise the voting rights arising from such shares
only according to instructions by a person not related to the
investment brokerage company provided in writing or
electronically, or it ensures that investment portfolio
individual management services are carried out regardless of all
other services in accordance with the conditions conforming to
that provided for in the Law on Investment Management Companies,
applying relevant mechanisms;
3) exercises its voting rights regardless of the parent
undertaking of the investment brokerage company.
(5) Paragraph four of this Section shall not be applied, if
the parent undertaking of an investment brokerage company or a
commercial company controlled thereby has made investments in the
shares which are managed by its subsidiary investment brokerage
company, and a subsidiary investment brokerage company is not
entitled, at its preference, to exercise the voting rights
arising from the shares of managed thereby, from depository
receipt issued thereto, and it may exercise such voting rights
only according to direct or indirect instructions given by the
parent undertaking of the investment brokerage company or another
commercial company controlled by the parent undertaking of the
investment brokerage company.
(6) Paragraphs one and four of this Section shall be applied
in cases when a parent undertaking of the investment management
company or a parent undertaking of the investment brokerage
company (hereinafter in this Section both together or each
individually - the parent undertaking) conforms to the following
conditions:
1) it may not influence exercise of the voting rights arising
from the shares owned by its subsidiary investment management
company or subsidiary investment brokerage company (hereinafter
in this Section both together or each individually - the
subsidiary) and depository receipts issued thereto with direct or
indirect instructions or in any other way;
2) a subsidiary may freely and independently from the parent
undertaking exercise the voting rights which arise from the
shares under its management and depository receipt issued
thereto.
(7) If the parent undertaking wishes to apply the exception
provided for in Paragraphs one and four of this Section, it
shall, without delay, send the following information to the
competent authority of the home Member State:
1) a list of subsidiaries, indicating the supervisory
authorities of each subsidiary or indicating that there are no
such supervisory authority. When providing such information, it
is not necessary to indicate the relevant issuers;
2) a certification that the parent undertaking has fulfilled
the conditions referred to in Paragraph six of this Section in
respect of each subsidiary thereof.
(8) The parent undertaking shall update the list referred to
in Paragraph seven, Clause 1 of this Section and notify the
competent authority of the home Member State of the issuer
thereon.
(9) If the parent undertaking wishes to apply the requirements
of Paragraphs one and four of this Section only for the financial
instruments referred to in Section 60, Paragraph one, Clause 3 of
this Law, it shall send the list referred to in Paragraph seven,
Clause 1 of this Section to the competent authority of the home
Member State of the issuer.
(10) Upon request of the Commission the parent undertaking has
an obligation to prove that:
1) the organisational structure of the parent undertaking and
subsidiary is such that the subsidiary can exercise the voting
rights arising from the shares under its management independently
from the parent undertaking;
2) the persons who take decisions to exercise the voting
rights are acting independently;
3) if the parent undertaking is a client of the subsidiary or
it manages the same financial instruments as managed by the
subsidiary, a written agreement has been entered into between the
parent undertaking and subsidiary that both parties shall act
independently in respect of exercising the voting rights at
meetings of shareholders.
(11) Paragraph ten, Clause 1 of this Section shall be regarded
as conformed to, if the parent undertaking and subsidiary have
developed at least a policy and procedures which ensure
non-distribution of information related to exercising the voting
rights between the parent undertaking and subsidiary.
[26 May 2016; 21 June 2018]
Section 62. Derogations from the
Obligations to Notify
(1) The requirements of Section 61.2 of this Law
shall not apply to shares which are acquired only for the
purposes of clearing and settlement in a standard settlement
cycle, and also to shares in possession of a financial
intermediary, if the financial intermediary may exercise the
voting rights arising from the shares only according to the
instructions which are provided by the shareholder in writing or
electronically.
(2) The duration of the standard settlement cycle referred to
in Paragraph one of this Section shall be two trading days after
the day of entering into a transaction.
(3) The requirements of Section 61.2 of this Law
shall not apply to a case when a market maker has acquired or
lost such major holding which reaches or exceeds proportion of
five per cent, if the market maker is acting in such status,
provided that it:
1) has received a licence of the home Member State in
accordance with the requirements of laws and regulations;
2) does not participate in the management of the relevant
issuer, and also does not influence the issuer in any way in
order for the shares to be purchased or the share price to be
maintained;
3) fulfils the requirements of Section 62.1 of this
Law.
(4) A credit institution or an investment brokerage company
for which the Republic of Latvia is the home Member State, upon
calculating the proportion of voting rights, shall not take into
account the shares with voting rights included in the trading
portfolio, depository receipts issued thereto, and the financial
instruments referred to in Section 60, Paragraph one, Clauses 3
and 4 of this Law, if the total proportion of voting rights does
not exceed five per cent from all shares with voting rights and
the abovementioned voting rights are not exercised or otherwise
used in order to influence the work of administration
institutions of the joint stock company (issuer) and the economic
and financial activities of the joint stock company.
(5) The requirements of Section 8, Clause 3 and Section
61.2 of this Law shall not apply to the shares,
depository receipts issued thereto, and the financial instruments
referred to in Section 60, Paragraph one, Clauses 3 and 4 of this
Law which are granted to the participants of the European System
of Central Banks or which have been granted thereby by performing
their functions as monetary institutions, including to the shares
which are granted to the participants of the European System of
Central Banks or which they have granted according to a pledge
agreement, repurchase agreement, or similar agreement related to
liquidity, which is provided for the monetary policy purposes or
in payment system. It shall also apply to the abovementioned
transactions which last for a short time period, if the voting
rights arising from such shares are not exercised.
(6) The notification specified in Section 61.2 of
this Law shall not be provided, if shares, depository receipts
issued thereto, and the financial instruments referred to in
Section 60, Paragraph one, Clauses 3 and 4 of this Law are
acquired by the subsidiary and the notification has already been
provided by the parent undertaking or the parent undertaking
itself is a controlled commercial company and the notification
has been provided by its parent undertaking.
(7) If, in accordance with the procedures laid down in Section
61.2 of this Law, a person who has acquired shares in
the form of indirect holding, has provided a notification
regarding acquisition of shares, depository receipts issued
thereto, and the financial instruments referred to in Section 60,
Paragraph one, Clauses 3 and 4 of this Law, the persons with the
help of whom the indirect acquisition of shares has taken place,
shall not be required to report on the acquisition of shares.
(8) The notification specified in Section 61.2 of
this Law shall not be provided, if voting rights arise from a
transaction with shares directed towards stabilisation of the
financial instrument and performed in accordance with the
provisions of Commission Regulation No 2273/2003, if voting
rights arising from shares are not exercised or have been
otherwise exercised in order to influence the work of
administration bodies of the issuer and its economic and
financial activities.
(9) The method for calculating the proportion of five per cent
referred to in Paragraphs three and four of this Section and the
cases when the notification requirements are not applicable to
transactions, shall be determined by Regulation No 2015/761.
[22 May 2008; 26 May 2016; 21 June 2018]
Section 62.1 Control of a
Market Maker
(1) If a market maker wants to use the exemption referred to
in Section 62, Paragraph three of this Law, it shall, as soon as
possible, however not later than within four trading days, notify
the Commission that he is acting or wants to act as a market
maker in respect of the financial instruments issued by the
particular issuer. If the market maker is no longer acting as a
market maker in respect of financial instruments issued by the
particular issuer, it shall, as soon as possible, however not
later than within four trading days, notify the Commission of his
decision.
(2) The Commission shall approve a sample form to be used for
the notifications referred to in Paragraph one of this
Section.
(3) If a market maker wants to use the exemption referred to
in Section 62, Paragraph three of this Section, the Commission
may request that the market maker indicates those financial
instruments with which it carries out trading as a market maker.
The market maker shall indicate the abovementioned financial
instruments by any verifiable means, but, if the market maker
fails to indicate precisely those financial instruments with
which it carries out trading as a market maker, the Commission
has the right to request that the market maker keeps such
financial instruments in a separate financial instrument account
for identification purposes.
[22 May 2008]
Section 63. Requirements for an
Issuer Registered in a Foreign Country
(1) An issuer the registered office of which is in a foreign
country has the right not to apply the requirements of Section
54, Paragraphs one, two, and nine, Section 54, Paragraph three,
Clause 6, Section 54, Paragraph eight, Sections 56, 57,
57.2, 58, and Section 61.1, Paragraph nine,
Section 61.3, Paragraph three and Section
61.4 of this Law, if the information provided by the
issuer in accordance with the requirements of the legal acts of
his or her country is the same as that laid down in the laws and
regulations of the Republic of Latvia or it has been recognised
as equivalent by the Commission. Information provided by the
issuer the registered office of which is in a foreign country in
accordance with the requirements of the legal acts of the foreign
country shall be provided by him in accordance with the
procedures laid down in this Law.
(2) If transferable securities of an issuer the registered
office of which is in a foreign country are admitted to trading
on a regulated market, information provided thereby in the
foreign country and also important in Latvia even when it is not
regulated information within the meaning of this Law, shall be
distributed in accordance with the procedures laid down in
Section 64.2 of this Law.
(3) When a commercial company the registered office of which
is in a foreign country provides investment services for the
provision of which the permit for the provision of investment
services is required in a Member State, it need not sum up the
shares referred to in Section 61.6, Paragraphs one,
three, and five of this Law with the shares of its parent
undertaking if it as an investment management company or
investment brokerage company conforms to such conditions for the
independence of activity that have been stipulated by the
Commission.
(4) [22 May 2008]
[22 May 2008; 26 February 2009; 26 May 2016; 21 September
2017]
Section 63.1 Recognition
of Information Provided by an Issuer Registered in a Foreign
Country as Equivalent
(1) If the registered office of an issuer is in a foreign
country and its management report is prepared in accordance with
the requirements of the legal acts of the relevant foreign
country, it shall be regarded as equivalent to the requirements
of Section 56, Paragraph one, Clause 2 of this Law, if at least
the following is provided therein:
1) a clear review regarding the development of commercial
activities and the financial results of activities of the issuer,
and also a review on the main risks and uncertainties faced
thereby. The review shall provide a comprehensive and complete
analysis of the results of the development of the commercial
activities and financial activities of the issuer, taking into
account the amount and complexity of the transactions of the
issuer. Indicators of the results of main financial and, where
possible, non-financial activities which characterise the
relevant field of commercial activities, shall be included in the
analysis referred to in this Clause insofar as it is necessary
for understanding the results of the development of commercial
activities and financial activities;
2) information on any important events since the end of the
previous financial year;
3) information on foreseeable further development of the
issuer.
(2) If the registered office of an issuer is in a foreign
country and the legal acts of the foreign country provide for a
requirement to submit, in addition to the management report for
interim periods, condensed financial statements, the management
report for interim periods prepared by such issuer shall be
regarded as equivalent to the requirements of Section 57,
Paragraph three, Clause 2 of this Law if it includes information
on at least the following:
1) the relevant interim period;
2) foreseeable development of the issuer in the next six
months of the financial year;
3) the largest transactions with related parties. This
requirements shall apply to a capital company the shares of which
are admitted to trading on a regulated market, if such
information has not been already provided.
(3) If the registered address of an issuer is in a foreign
state and legal acts of the foreign state provide for a
requirement that a person or persons of the issuer are
responsible for the preparation of financial information for a
year or half-year, particularly in respect of conformity of
preparation of financial statements with the applicable
regulations for preparing financial statements or with accounting
standards, also regarding veracity of the statement on
responsibility of the management, a statement of the management's
responsibility prepared by such issuer shall be regarded as
equivalent to the requirements of Section 56, Paragraph one,
Clause 3 and Section 57, Paragraph three, Clause 3 of this
Law.
(4) In cases when the registered address of an issuer is in a
foreign country and legal acts of the foreign country does not
provide for the requirement to submit, in addition to the
consolidated annual report, also annual statement of a capital
company, the prepared consolidated annual statement shall be
regarded as conforming to the provisions of Section 56, Paragraph
two of this Law if the consolidated financial statements have
been prepared in accordance with international financial
reporting standards or equivalent international financial
reporting standards.
(41) In addition to international financial
reporting standards in respect of consolidated financial
statements and consolidated financial statements of interim
periods of six-months, the following shall be regarded as
equivalent international financial reporting standards:
1) international financial reporting standards provided that
notes to the inspected or audited financial statements includes a
clear and direct notification that this financial statement
conforms to the International Accounting Standard 1 "Presentation
of financial statements" adopted by Commission Regulation (EC) No
1274/2008 of 17 December 2008 amending Regulation (EC) No
1126/2008 adopting certain international accounting standards in
accordance with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council as regards International Accounting
Standard (IAS) 1;
2) Generally Accepted Accounting Principles of Japan;
3) Generally Accepted Accounting Principles of the United
States of America;
4) Generally Accepted Accounting Principles of the People's
Republic of China;
5) Generally Accepted Accounting Principles of Canada;
6) Generally Accepted Accounting Principles of Korea.
(42) An issuer the registered office of which is in
a foreign country shall distribute a notification regarding the
date on which it will switch to international financial reporting
standards in accordance with the procedures laid down in Section
64.2 of this Law, and the Commission shall revoke the
requirement regarding recognition of equivalence in respect of
such issuer from the date referred to in the notification.
(43) In cases when a registered office of an issuer
is in a foreign country and it does not use international
financial reporting standards or equivalent international
financial reporting standards, the consolidated annual statement
prepared shall be regarded as conforming to the requirements of
Section 56, Paragraph two of this Law, if it comprises
information on:
1) calculation of dividends and ability to pay out dividends.
This requirement shall apply to issuers of shares;
2) liquidity of the issuer and minimum capital requirements,
if such requirements have been laid down in the legal acts of the
relevant foreign country.
(5) The issuer, upon request of the competent authority of the
home Member State, shall submit to it information examined by a
sworn auditor on its non-consolidated financial statements which
is related to information included in the consolidated annual
statement. Such information may be prepared in accordance with
the requirements of the legal acts of the relevant foreign
country.
(6) If the registered office of an issuer is in a foreign
country and in accordance with the requirements of the legal acts
of this foreign country the issuer does not prepare a
consolidated annual statement, but the financial statement
thereof is prepared in accordance with the international
accounting standards approved by the European Commission and
international financial reporting standards or in accordance with
the requirements of the legal acts of a foreign country which are
equivalent to the requirements of the international accounting
standards approved by the European Commission and international
financial reporting standards, the financial statement prepared
by such issuer shall be regarded as conforming to the
requirements of Section 56, Paragraphs three and four of this
Law. The financial statement of the issuer shall be audited.
(7) If the financial statement of a foreign issuer is not
prepared in accordance with the requirements of Paragraph six of
this Section, such issuer shall additionally indicate in the
financial statement also data which are calculated in accordance
with the requirements of the international accounting standards
approved by the European Commission and international financial
reporting standards.
(8) If the registered office of an issuer is in a foreign
country and the requirements of such foreign country provide that
the total time period for the receipt of information on acquiring
or terminating a major holding and distribution thereof is seven
trading days or less, it shall be regarded that the requirement
of the legal acts of such foreign country is equivalent to that
laid down in Section 61.3, Paragraph one of this Law.
The time periods within which the issuer is informed of acquiring
or terminating a major holding and the information received is
distributed, may differ from that laid down in Section
61.3, Paragraphs one and three of this Law.
(9) The requirements of the legal acts of a foreign country
shall be regarded as equivalent to the requirements of Section
61, Paragraph one of this Law, if the issuer the registered
office of which is in this foreign country has an obligation to
comply with the following requirements:
1) if the issuer is authorised to keep its shares which form
up to five per cent of the proportion of the voting rights, it
shall, each time when such proportion is reached or exceeded,
provide a notification thereon;
2) if the issuer is authorised to keep its shares which form
five to 10 per cent of the proportion of the voting rights, it
shall, each time when proportion of five or 10 per cent is
reached or exceeded, provide a notification thereon;
3) if the issuer is authorised to keep its shares which form
more than 10 per cent of the proportion of the voting rights, it
shall, each time when proportion of five or 10 per cent is
reached or exceeded, provide a notification thereon.
(10) If the registered office of an issuer is in a foreign
country and the requirement, that within 30 calendar days after
increase or decrease in the number of shares with voting rights
or share capital the issuer distributes such information, is laid
down in the legal acts of such foreign country, it shall be
regarded that the requirement of such foreign country is
equivalent to the requirement of Section 61, Paragraph eight of
this Law.
(11) If the registered office of an issuer is in a foreign
country and the requirement to provide information on the place,
time, and agenda of the meeting of shareholders is laid down in
the legal acts of such foreign country, it shall be regarded that
such requirement of the laws and regulations of such foreign
country in respect of the content of the abovementioned
information is equivalent to the requirements of Section 54,
Paragraph two, Clause 1 and Section 54, Paragraph three, Clause 1
of this Law.
(12) The requirements of the legal acts of a foreign country
shall be regarded as equivalent to the requirements of Paragraphs
one and five of Section 61.6 of this Law, if they
provide that the commercial companies referred to in Section 63,
Paragraph three of this Law conform to the following
conditions:
1) a subsidiary which is an investment management company or
investment brokerage company exercises the voting rights arising
from the financial instruments under its management freely and
independently from its parent undertaking;
2) in case of any conflict of interest a subsidiary which is
an investment management company or investment brokerage company
votes independently from the parent undertaking or interests of
the commercial company controlled thereby.
(13) The parent undertaking referred to in Paragraph twelve of
this Section shall conform to the requirements of Section
61.6, Paragraph seven, Clause 1 and Paragraph nine of
this Law, and also provide confirmation that the parent
undertaking has fulfilled the conditions referred to in Paragraph
twelve of this Section in respect of each subsidiary investment
management company or subsidiary investment brokerage company
thereof.
(14) The parent undertaking referred to in Paragraph twelve of
this Section shall prove the Commission that it has fulfilled the
obligation specified in Section 61.1, Paragraph
6.5 of this Law.
(15) If the registered office of an issuer is in a foreign
country and the legal acts of the foreign country provide for an
obligation to publish accounts for interim periods for the first
three, six, and nine, months, it shall be regarded that such
requirement is equivalent to the requirements of Section 57,
Paragraph one and Section 57.2, Paragraph one of this
Law.
[22 May 2008; 26 February 2009; 8 November 2012; 26 May
2016]
Section 64. Consequences of Failure
to Give Notice
[22 May 2008]
Section 64.1 Use of
Languages for the Submission of the Regulated Information
(1) If the home country of the issuer is the Republic of
Latvia and transferable securities of the relevant issuer are
admitted to trading on a regulated market only in the Republic of
Latvia, the regulated information shall be provided in the
official language.
(2) If the home country of the issuer is the Republic of
Latvia and transferable securities of the relevant issuer are
admitted to trading on a regulated market in both, in the
Republic of Latvia and in one or several Member States, the
regulated information shall be provided in the official language
and - depending on the choice of the issuer - either in a
language accepted by the competent authorities of the relevant
Member States or in a language customary in the sphere of
international finance.
(3) If transferable securities are admitted to trading on a
regulated market in one or several Member States, except for the
Republic of Latvia, the regulated information, at the choice of
the issuer, shall be provided either in a language accepted by
the competent authorities of the relevant Member States or in a
language customary in the sphere of international finance.
(4) If the home country of the issuer is not the Republic of
Latvia and transferable securities of such issuer are admitted to
trading only on a regulated market in the Republic of Latvia, but
are not admitted to trading on a regulated market of the country
of origin of the issuer, the regulated information, at the choice
of the issuer, shall be provided in the official language or in a
language customary in the sphere of international finance.
(5) If admission of transferable securities to trading on a
regulated market is requested by other persons, other than
issuer, the requirements of Paragraphs one, two, and three of
this Section shall apply to a person who has requested an
authorisation to admit transferable securities to trading on a
regulated market, but not to the issuer.
(6) Shareholders, acquirers of depository receipts, and
persons who are entitled to acquire, dispose of, or exercise
voting rights in one or several cases which are referred to in
Section 8 of this Law may provide the regulated information to a
joint stock company in a language customary in the sphere of
international finance.
(7) In cases when transferable securities the denomination of
one unit of which is at least EUR 100 000, or if the value of
debt securities is expressed in a currency other than euro, the
denomination of one unit of which is at least an equivalent of
EUR 100 000 on the day of issue, are admitted to trading on a
regulated market in one or several Member States, the regulated
information, at the choice of the issuer or a person who has
sought admission of transferable securities to trading on a
regulated market shall be provided to the public in a language
accepted by the Commission and competent authorities of the
relevant host Member State or in a language customary in the
sphere of international finance.
(8) If a Member State brings an action to the court regarding
the content of the regulated information, then the costs incurred
for the translation of the necessary information shall be covered
in accordance with the legal acts of the Member States.
(9) The requirements of Paragraph seven of this Section shall
apply also to those persons owning transferable securities the
denomination of one unit of which is at least EUR 50 000, or if
the value of debt securities is expressed in a currency other
than euro, the denomination of one unit of which is at least
equivalent of EUR 50 000, and such securities have been admitted
to trading on a regulated market in the European Union before 31
December 2010 until the day when such securities are deleted.
[26 February 2009; 13 January 2011; 22 March 2012; 19
September 2013; 21 September 2017]
Section 64.2 Distribution
of the Regulated Information and Access to the Regulated
Information
(1) An issuer or a person who has sought admission of
transferable securities to trading on a regulated market shall
disclose the regulated information by using mass media or other
information distribution channels (hereinafter in this Section -
mass media) by taking into account the provisions of this Section
and in such a way which ensures distribution of information for
the widest possible public and wherever possible concurrently for
his or her home Member State and other Member States, and
concurrently shall send the regulated information to the official
storage system of his or her home Member State in accordance with
the procedures laid down in this Section.
(2) The procedures for establishing and maintaining the
official storage system, including security requirements of the
official storage system and requirements for the distribution of
the regulated information, and also the procedures for sending
information to the official storage system shall be determined by
the Commission. The requirements for preparation, insertion, and
searching of the regulated information, for the procedures for
assigning identifiers to the European electronic access point
shall be determined by the directly applicable legal acts of the
European Union regarding harmonisation of the disclosure
requirements in relation to information on the issuers whose
securities are admitted to trading on a regulated market.
(3) The regulated information shall be distributed to the mass
media as non-revised full text. In respect of the regulated
information referred to in Sections 56, 56.1, 57, and
57.2 of this Law, this requirement shall be regarded
as fulfilled, if it is indicated in the notification provided to
the mass media on which website the regulated information is
distributed in addition to the official storage system.
(31) The regulated information shall be provided to
the mass media so as to:
1) ensure a reference to the source of the regulated
information and communications security, reduce the risk that
data could be changed or unauthorised access thereto could be
possible;
2) be explicitly clear that it is the regulated information by
clearly indicating the relevant issuer, subject of the regulated
information, and also the time and date when the regulated
information is provided.
(32) In order to guarantee security in respect of
transfer of the regulated information to the mass media, the
issuer or person who has sought admission of transferable
securities to trading on a regulated market, shall as soon as
possible rectify communication errors or interferences, if any
have occurred during the information transfer process. The issuer
or person who has sought admission of transferable securities to
trading on a regulated market is not liable for systemic errors
or deficiencies of those mass media to which the regulated
information is transferred.
(4) The regulated information shall be freely available to any
interested person for at least 10 years since the placement
thereof in the official storage system.
(5) An issuer or a person who has sought admission of
transferable securities to trading on a regulated market has no
right to charge investors for provision of the regulated
information referred to in this Law.
(6) In order to ensure that information published in
accordance with the laws and regulations is easily available to
any interested person, the Commission shall post a list with
website addresses of regulated market organisers, the Enterprise
Register, and also official storage systems of other Member
States on its website.
(7) The requirements for electronic reporting format of
financial statements for insertion of the financial statement in
the European electronic access point shall be determined by the
directly applicable legal acts of the European Union regarding
harmonisation of the disclosure requirements in relation to
information on the issuers whose securities are admitted to
trading on a regulated market.
[22 May 2008; 26 February 2009; 15 October 2009; 22 March
2012; 26 May 2016; 21 September 2017; 21 June 2018]
Section 64.3 Rights of
the Commission
(1) In order to ensure conformity with the provisions of
Section 54, and also Division D, Chapters III and IV of this Law,
in conformity with the requirements of the laws and regulations
governing personal data protection, the Commission has the
following rights in addition to the rights laid down in the Law
on the Financial and Capital Market Commission and the rights
laid down in this Law:
1) to request information and documents necessary for
performance of the tasks thereof from sworn auditors, issuers,
shareholders, acquirers of depository receipts, persons who are
entitled to acquire, dispose of, or exercise voting rights in one
or several cases that are referred to in Section 8 of this Law,
and also from persons who have control over commercial companies
or who are controlled thereby;
2) to request within the time period and in accordance with
the procedures laid down thereby that the issuer in accordance
with Paragraph one, Clause 1 of this Section discloses the
information requested by the Commission to the public, if the
Commission regards it as necessary. If the issuer or persons who
have control over a commercial company or who are controlled
thereby, fail to comply with the requirement of the Commission,
the Commission is entitled to publish such information upon its
own initiative after having listened to the opinion of the
issuer;
3) to request an issuer, shareholder, acquirer of a depository
receipt, holder of other financial instruments, or persons who
have the right to acquire, dispose of, or exercise voting rights
in one or several cases that are referred to in Section 8 of this
Law, to notify information requested by the requirements of the
laws and regulations governing operation of financial instruments
market, and also, where appropriate, to request to provide
additional information or documents;
4) to suspend or request that regulated market operator
suspend trading in securities for a time period up to 10 days, if
it has a justified reason to consider that the issuer has
infringed the requirements of the laws and regulations governing
operation of financial instruments market;
5) to prohibit trading in transferable securities on a
regulated market, if it discovers that the requirements of the
laws and regulations governing operation of financial instruments
market are violated, or there are substantiated suspicions of
such violation;
6) to supervise, if the issuer publishes information in a
timely manner in order to ensure effective and equivalent access
to information for the public in all Member States in which
transferable securities are admitted to trading on a regulated
market, and also to carry out the necessary measures, if the
requirements of the relevant laws and regulations are not
fulfilled;
7) to publicly notify the fact that an issuer, shareholder,
acquirer of a depository receipt, holder of other financial
instruments, or persons who have the right to acquire, dispose
of, or exercise voting rights in one or several cases that are
referred to in Section 8 of this Law, have not fulfilled the
requirements of the laws and regulations governing operation of
financial instruments market;
8) to verify that the regulated information is prepared in
conformity with the requirements for preparing financial
statements, and to implement the necessary measures if any
violations have been established;
81) to verify whether the regulated information
truly and fairly reflects information on the issuer, his
activities and corporate governance;
9) to verify on site the fulfilment of the requirements of the
laws and regulations governing operation of financial instruments
market;
10) to request information and documents necessary for the
performance of its tasks from a market maker, including an
agreement entered into between the market maker and regulated
market operator or issuer, if any;
11) to request the following data from the issuer or person
who has sought admission of transferable securities to trading on
a regulated market, regarding provision of the regulated
information to the mass media:
a) given name and surname of the person who has transferred
the regulated information to the mass media;
b) security observed during the process of transfer of the
regulated information;
c) data and time when the regulated information was
transferred to the mass media;
d) information medium by which the regulated information was
transferred;
e) data regarding any restrictions, if any, for disclosure of
the regulated information stipulated by the issuer.
(2) If the Commission establishes that the issuer of another
Member State or a shareholder of such issuer, acquirer of a
depository receipt, holder of other financial instruments, or a
person who has the right to acquire, dispose of, or exercise
voting rights in one or several cases that are referred to in
Section 8 of this Law, has infringed the requirements of the laws
and regulations governing operation of financial instruments
market, he or she shall notify such facts to the competent
authority of the home Member State and the European Securities
and Markets Authority.
(3) If the Commission has informed the competent authority of
the relevant home Member State in accordance with the
requirements of Paragraph two of this Section, however, the
measures carried out turned out ineffective and the persons
referred to in Paragraph two of this Section continue to infringe
or fail to fulfil the requirements of the laws and regulations
governing operation of financial instruments market, the
Commission is entitled to carry out all the necessary measures in
order to protect the interests of investors, and also shall
inform the European Commission and the European Securities and
Markets Authority thereof in accordance with the requirements of
Section 147 of this Law.
(4) [26 May 2016]
[22 May 2008; 22 March 2012; 26 May 2016; 21 September
2017]
Section 64.4
Responsibility of a Sworn Auditor
If a sworn auditor provides information to the Commission
requested thereby in accordance with Section 64.3,
Paragraph one, Clause 1 of this Law, it shall not be considered
as violation of information disclosure prohibition, and the sworn
auditor shall not be held liable in accordance with the laws and
regulations or agreement entered into between the sworn auditor
and a capital company.
Chapter V
Share Buy-back Offer
Section 65. Scope of this
Chapter
The provisions of this Chapter regarding execution of the
mandatory and voluntary share buy-back offer (hereinafter both
together - the share buy-back offer) and of the final share
buy-back and the consequences of the failure to express a
mandatory share buy-back offer shall apply to persons which make
or have an obligation to make the share buy-back offer of a
target company or to persons who perform the final share
buy-back.
[14 September 2017]
Section 66. Mandatory Share Buy-back
Offer
(1) In addition to the persons referred to in Section 1,
Paragraph one, Clause 42 of this Law within the meaning of this
Section shareholders of a target company shall be considered
persons who act in concert, if such persons are:
1) natural persons and persons under guardianship of such
natural persons;
2) spouses;
3) ascending and descending relatives up to the first
degree;
4) commercial companies which are controlled by the same
person;
5) members of the board and council of the target company;
6) the commercial company and members of its board.
(2) Action in concert of the members of the board and council
referred to in Paragraph one, Clause 5 of this Section shall be
attested by the link between the election of members of the
council and appointing of members of the board with the
particular shareholder.
(3) The persons referred to in Paragraph one of this Section
shall be considered to be persons acting in concert only if they
do not provide a credible explanation and factual proof to the
Commission regarding non-existence of action in concert.
(4) It is mandatory that an offer addressed to other
shareholders to redeem the shares belonging thereto is expressed
by a person or persons who are acting in concert, provided that
they:
1) acquire the voting rights arising from the shares, directly
or indirectly, in such amount that the voting rights of such
persons reach or exceed 30 per cent from the total number of
voting rights of the joint stock company;
2) have voted in favour of the matter regarding exclusion of
the shares from a regulated market at the meeting of shareholders
in which the decision to exclude shares from a regulated market
was taken. Such a vote may not be a closed vote. The minutes of
the meeting of shareholders shall specify those shareholders who
have voted in favour. Shareholders which at the meeting of
shareholders have voted in favour of the matter regarding
exclusion of the shares from a regulated market, shall authorise
a representative from amongst their members who will make an
offer on their behalf.
(5) A mandatory share buy-back offer need not be made, if:
1) a person or persons who are acting in concert acquire the
amount of voting rights referred to in Paragraph four, Clause 1
of this Section as a result of a voluntary share buy-back offer
which was made with a view to acquire the amount of voting rights
referred to in Paragraph four, Clause 1 of this Section in a
target company and which was expressed to all shareholders of the
target company regarding all shares of the target company. The
share price in such voluntary share buy-back offer shall be
determined in accordance with Section 74 of this Law;
2) a person or persons who are acting in concert, when making
a mandatory share buy-back offer, in the case referred to in
Paragraph four, Clause 2 of this Section acquire the amount of
voting rights referred to in Paragraph four, Clause 1 of this
Section during or as a result of the mandatory share buy-back
offer made thereby;
3) a person or persons acquire the amount of voting rights
referred to in Paragraph four, Clause 1 of this Section upon
change of control within the scope of commercial companies in one
group of companies or group, and as a result of such changes the
person who holds indirectly acquired holding with the
intermediation of controlled commercial companies does not
change;
4) an investment in shares of a target company for a person is
a short-term investment without the purpose of participation in
management of a joint stock company and is made by acquiring
shares of the target company for the trading portfolio of the
credit institution or investment brokerage company, or the credit
institution or investment brokerage company has acquired the
shares of the target company by signing up to shares of a new
issue with the purpose of selling them to its clients, if the
amount of shares with voting rights is reduced and becomes less
than the amount of voting rights specified in Paragraph four,
Clause 1 of this Section within six months after the day of
reaching or exceeding such amount of voting rights;
5) the amount of voting rights specified in Paragraph four,
Clause 1 of this Section has been reached or exceeded within the
scope of reorganisation of a shareholder of a commercial company
with the purpose of performing a merger, provided that after
entering into effect of reorganisation, as defined in the
Commercial Law, the amount of shares with voting rights is
reduced and becomes less even than the amount of voting rights
specified in Paragraph four, Clause 1 of this Section within
three months;
6) the amount of voting rights specified in Paragraph four,
Clause 1 of this Section is reached or exceeded as a result of
exercising the pledge rights or financial guarantee, if the
amount of shares with voting rights is reduced and becomes less
than the amount of voting rights specified in Paragraph four,
Clause 1 of this Section within six months after the day of
reaching or exceeding such amount of voting rights;
7) the amount of voting rights specified in Paragraph four,
Clause 1 of this Section is reached by not more than three per
cent from the total number of shares with voting rights without
the purpose of participation in the management of a joint stock
company or influencing voting in meetings of shareholders, if the
amount of shares with voting rights is reduced and becomes less
than the amount of voting rights specified in Paragraph four,
Clause 1 of this Section within one month after the day of
reaching or exceeding such amount of voting rights;
8) the amount of holding which reaches or exceeds 30 per cent
of the total number of shares with voting rights of a joint stock
company, has been been acquired prior to admission of shares of a
joint stock company to a regulated market and information has
been included in a prospectus on a person whose amount of holding
has reached or exceeded 30 per cent from the total number of
shares with voting rights of a joint stock company, or the
relevant persons who act in concert and whose total amount of
holding has reached or exceeded 30 per cent from the total number
of shares with voting rights of a joint stock company.
(6) If a person or persons who act in concert, acquire the
amount of voting rights referred to in Paragraph four, Clause 1
of this Section as a result of inheritance, he or they need not
express a mandatory share buy-back offer for two years from the
day when the inherited shares have been recorded in the account
of financial instruments or registered with the register of
shareholders.
(7) A person may not exercise any voting rights arising from
the shares belonging thereto or any indirectly acquired voting
rights, if such person:
1) within the time periods and in accordance with the
procedures laid down in this Law fails to express the mandatory
share buy-back offer;
2) expresses a share buy-back offer which does not comply with
the requirements of law;
3) in accordance with the procedures laid down in this Law has
not settled accounts with the investors who have accepted the
share buy-back offer.
(8) Decisions of the meeting of shareholders which have been
taken through the exercise of voting rights contrary to the
provisions of Paragraph seven of this Section shall be void, and
no entries in any type of public register may be requested on the
basis of such decisions.
(9) A person may resume the exercise of the voting rights
referred to in Paragraph seven of this Section only in case when
he or she, even with delay, has fulfilled the duties laid down in
this Chapter and rectified the deficiencies established by the
Commission.
[26 May 2016; 15 December 2016; 21 June 2018; 12 December
2019]
Section 67. Voluntary Share Buy-back
Offer
(1) A person is entitled to express a voluntarily share
buy-back offer if the purpose thereof is to obtain shares in an
amount which ensures not less than 10 per cent of the number of
voting rights in a joint stock company.
(2) A person expressing a voluntary offer to redeem shares
shall set the minimum or maximum number of shares it offers to
redeem.
(3) If shareholders at a target company accept a voluntary
offer to redeem shares with regard to such an amount of shares
which exceeds the maximum number of shares specified in the offer
prospectus, the offeror shall redeem the shares in proportion
from all the shareholders of the target company who have accepted
the offer. The total number of the redeemed shares may not be
less than the maximum number of shares specified in the offer
prospectus.
(4) If shareholders of a target company accept a voluntary
share buy-back offer with regard to such an amount of shares
which does not comprise the minimum number of shares specified in
the offer prospectus, the offeror shall redeem the shares from
all the shareholders of the target company who have accepted the
offer.
(5) In the case referred to in Paragraph four of this Section
the offer shall be void only when the offer prospectus specifies
that the offer becomes void, provided that the shareholders of a
target company accept the share buy-back offer with regard to
such an amount of shares which does not comprise the minimum
number of shares specified in the offer prospectus.
Section 68. Competing Share Buy-back
Offer
(1) Such a voluntary share buy-back offer shall be considered
a competing share buy-back offer which has been expressed with
regard to the share of a target company while another offer is in
effect with regard to these shares.
(2) A competing share buy-back offer may not be made by a
person who:
1) is in the same group of companies with the person making
the offer which is in effect;
2) has entered into an agreement with the person making the
offer which is in effect, regarding joint action with regard to
the offer;
3) has received an authorisation from the person making the
offer which is in effect, to vote in the name thereof at the
meeting of shareholders of the target company.
(3) A competitive share buy-back offer may be expressed if
there are at least five days from the day an advertisement is
published in the official publication Latvijas Vēstnesis
regarding the competing share buy-back offer until the end of the
time period of the offer in effect.
[9 July 2013]
Section 69. General Provisions for a
Share Buy-back Offer
(1) In order to ensure shareholders of a target company with
sufficient information in order to take a justified decision on
an offer, an offeror shall prepare a prospectus of the share
buy-back offer and submit it to the Commission.
(2) An offeror shall offer equal share disposal regulations to
all share owners of a target company of one category.
(3) The time period for a share buy-back offer may not be
shorter than 30 days or longer than 70 days from the day of
expression thereof. If during a voluntary share buy-back offer it
is decided to convene a meeting of shareholders of the target
company in the agenda of which an issue regarding the share
buy-back offer made is included, the time period of the offer
shall be extended for a time period which is necessary for
convening the meeting, however, it may not exceed 70 days.
(4) The following may not be carried out during the time
period of the mandatory share buy-back offer or upon performing
final share buy-back:
1) to calculate dividends of the target company;
2) to change the denomination of the shares of the target
company;
3) to joint and divide share issues of the target company.
(5) If any of the activities referred to in Paragraph four of
this Section is planned and announced to the public in advance,
the Commission shall determine the beginning of the time period
of the mandatory share buy-back offer after completion of the
abovementioned activity. In such case the price of the mandatory
share buy-back offer shall be adjusted after completion of the
activity referred to in Paragraph four of this Section.
(6) No restrictions on expropriation of shares specified in
either the articles of association of a target company or
reciprocal agreements of a target company and its shareholders
shall be in effect with regard to the person making the share
buy-back offer during the time period of the share buy-back
offer.
(7) When making a voluntary share buy-back offer, activities
of the target company may not be hindered for more than it is
necessary in order to make a share buy-back offer, and the time
period of the voluntary share buy-back offer may not be longer
than the time period laid down in Paragraph three of this
Section.
(8) If a joint stock company has issued shares with voting
category shares of different denominations, at the meeting of
shareholders at which the protective measures against overtaking
the company during a voluntary share buy-back offer are decided,
the number of voting rights of each shareholder shall correspond
to his or her investment in the capital of the target
company.
(9) If a joint stock company has issued shares with voting
category shares of different denominations, at the first meeting
of shareholders which is convened after the end of the term of
the offer upon initiative of an offeror to amend the articles of
association or remove current members of the council and to
assign new members of the council, the number of voting rights of
each shareholder shall correspond to his or her investment in the
capital of the target company.
(10) If an offeror has at least 75 per cent of shares with
voting rights after making an offer, the restrictions for share
disposal or voting rights laid down in the articles of
association shall not be binding to the shareholders of a target
company. Also the extraordinary rights laid down in the articles
of association of a target company or mutual agreements of
shareholders for any of shareholders to elect for the position or
to remove therefrom the members of the board or council are not
in effect.
(11) If on the basis of Paragraphs five, seven, eight, and
nine of this Section the rights of any shareholder of a target
company are restricted and, therefore, losses are caused for him
or her, such shareholder has the right to request a corresponding
compensation from the person making share buy-back offer. If
parties fail to agree regarding amount of the compensation, it
shall be determined by the court.
(12) The restrictions laid down in Paragraphs seven, eight,
and nine of this Section shall not be in effect, if a
corresponding financial compensation is intended for restrictions
of voting rights.
(13) This Section shall not be applied in respect of
co-operative societies, special rights provided for in legal acts
of the Member State which comply with the provisions of the
Treaty establishing the European Community and in the cases when
the Member States own shares of a target company which confer
special rights thereto conforming to the provisions of the Treaty
establishing the European Community.
[15 June 2006; 14 September 2017; 21 June 2018]
Section 69.1 Supervision
of a Buy-back Offer
(1) A share buy-back offer shall be governed by this Law and
the course thereof shall be supervised by the Commission, if:
1) the registered office of a target company is in Latvia and
its shares are admitted to trading on a regulated market
registered in Latvia;
2) the registered office of a target company is not in Latvia,
but its shares are admitted to trading on a regulated market
registered in Latvia;
3) the registered office of a target company is not in Latvia
and its shares are put into public circulation in Latvia and in
other Member State, but they are admitted to trading on a
regulated market registered in Latvia prior to putting into
public circulation in such Member State.
(2) If the shares of a target company are put into public
circulation in several Member States concurrently one of which is
Latvia, the target company shall determine the Member State the
supervisory authority of which will supervise the share buy-back
offer. If the target company selects the Commission as the
authority which will supervise the share buy-back offer, the
target company shall notify regulated market operators, on the
regulated markets of which the shares of the target company are
admitted to trading, and the Commission thereon on the first day
when securities are admitted to trading on a regulated
market.
[15 June 2006]
Section 70. Procedures for
Submitting a Share Buy-back Offer Prospectus
(1) The initiator of an offer shall, not later than within 10
working days after the conditions referred to in Section 66,
Paragraph four, Clause 1 of this Law have entered into effect, or
after taking of a decision of the meeting of shareholders
referred to in Section 66, Paragraph four, Clause 2 or a decision
of the offeror to make a voluntary share buy-back offer, submit a
submission to the Commission regarding making a share buy-back
offer.
(11) If an offeror must receive a permit of another
State authority for acquiring the majority of voting rights
referred to in Section 66, Paragraph four, Clause 1 of this Law,
the offeror shall submit the submission referred to in Paragraph
one of this Section within 10 working days after the day of
receipt of such permit.
(12) The voluntary share buy-back offer of the
offeror specified in Paragraph one of this Section shall be
distributed only after receipt of the permit referred to in
Paragraph 1.1 of this Section.
(2) The offeror shall submit the following concurrently with
the submission:
1) a prospectus for the share buy-back offer and the text
thereof in electronic form;
2) an assessment of the price adequacy of the offer;
3) a copy of the registration certificate if the offeror is a
non-resident, or a copy of a personal identification document if
the offeror is a natural person;
4) documents attesting to the sufficiency of resources for the
fulfilment of the obligations specified in the offer within the
time period laid down in law.
(3) When making a voluntary share buy-back offer, the
submission of a validation of the adequacy of the price shall not
be required.
(4) If a share buy-back offer is expressed in the case
referred to in Section 66, Paragraph four, Clause 2 of this Law,
the offeror shall in addition submit:
1) an extract from the minutes of the meeting of shareholders
which specifies the shareholders who have voted in favour;
2) documents attesting to the right of the offeror to make a
share buy-back offer in the name of those shareholders who have
voted in favour.
(41) If a share buy-back offer is expressed in the
case referred to in Section 66, Paragraph four of this Law and
the price of one share to be redeemed is determined in accordance
with the procedures referred to in Section 74, Paragraph seven of
this Law, the offeror shall additionally submit a liquidation
value estimate of the target company.
(5) The following documents shall be considered to be
attesting to the sufficiency of resources for the fulfilment of
the obligations provided for in the offer within the time period
laid down in law:
1) a written certification (statement of obligation) addressed
to the Commission regarding the allocation of resources to the
offeror for the discharge of obligations specified in the offer
issued by a credit institution, investment brokerage company or
an insurance company which is registered:
a) in the Republic of Latvia or a Member State;
b) in a foreign country provided that the Commission has
entered into a co-operation agreement on the exchange of
information with the relevant foreign supervisory authority;
2) statements regarding the target deposit of the offeror
which the offeror is entitled to use only for settlement of
accounts for the buy-back of shares if they have been issued
by:
a) a credit institution registered in the Republic of
Latvia;
b) a credit institution or brokerage company entitled to
accept deposits which is registered in a Member State;
c) a credit institution or investment brokerage company
entitled to accept deposits which is registered in a foreign
country (but not in a Member State) if the Commission has entered
into a co-operation agreement for the exchange of information
with the relevant foreign supervisory authority.
[15 June 2006; 24 April 2014; 26 May 2016]
Section 71. Prospectus for a Share
Buy-back Offer
The prospectus for a share buy-back offer shall specify:
1) the firm name, registration number, registered office,
telephone number, and also fax number, e-mail address (if any),
and the website address (if any) of the target company;
2) information on the offeror and person acting in concert
with the offeror or target company, where possible, indicating
relations thereof with the offeror and target company:
a) for natural persons - the given name, surname, personal
identity number (if any), or year and date of birth;
b) for legal persons - the firm name, registration number,
date and place, and also registered office;
3) the type of offer (mandatory or voluntary). If a mandatory
share buy-back offer is made, it shall be indicated which of the
conditions referred to in the laws and regulations has set in for
making the relevant offer;
4) ISIN code of shares (a unique combination of letters or
figures which is granted to financial instruments by the central
securities depository before recording thereof for identification
purposes) and, if a voluntary share buy-back offer is made, the
maximum or minimum number of shares (percentage of the total
number of shares), which the offeror undertakes to acquire;
5) price for buy-back of one share and methods used for
determination thereof (if mandatory share buy-back offer is
made);
6) information on procedures and time periods for payment of
shares, but in cases when other financial instruments are offered
as consideration for the shares - information on such financial
instruments;
7) the time period of the offer and the time period when the
results of the offer will not announced;
8) the procedures by which shareholders of a target company
may accept the offer and revoke the accepted offer, specifying
separately the procedures for accepting the offer by:
a) persons who own shares in a target company which are in
public circulation;
b) persons who own shares in a target company which are not in
public circulation;
9) intentions of the offeror regarding future activity of the
target company, retaining of workplaces, including all
significant changes in employment conditions, plans of commercial
companies (if the offeror is a legal person and the offer
influences its future activity), and strategic plans of the
offeror in respect of both commercial companies and their
possible influence on employment of the target company and
commercial company of the offeror and change of the location of
the commercial company;
10) any other significant information directly applicable to
the offer or offeror and considered by the offeror or the
Commission as necessary to be disclosed in a prospectus;
11) amount of compensation for losses offered to shareholders
of the target company the rights of which are limited in
accordance with Section 69, Paragraph eleven of this Law,
providing a detailed information on how such compensation will be
disbursed and indicating the method which is used for
determination of the compensation;
12) information on financing sources of the offer;
13) what legal acts will govern agreements entered into by the
offeror and shareholders of the target company in relation to the
offer, and information on courts examining mutual disputes.
[15 June 2006; 26 February 2009; 14 September 2017]
Section 72. Procedures for Revising
a Prospectus for a Share Buy-back Offer
(1) When a prospectus for making a share buy-back offer is
received by the Commission, it shall, without delay, but not
later than on the next working day, place the following
information on its website and notify to the relevant regulated
market operator:
1) the information referred to in Section 71, Clause 2 on the
offeror;
2) the buy-back price of one share provided for in a
prospectus;
3) the time period of the offer.
(2) The regulated market operator shall, without delay, place
the information referred to in Paragraph one of this Section on
its website.
(3) The Commission shall examine the submission and the
prospectus for the share buy-back offer and take a decision to
allow or to refuse to make the offer within 10 working days after
receipt of all the documents referred to in Section 70 of this
Law which have been prepared and documented in accordance with
the requirements of the laws and regulations. If the methods for
setting the price referred to in Section 74, Paragraph seven or
eight of this Law are used in the mandatory share buy-back offer,
the Commission shall take a decision to allow or to refuse to
express the offer within 30 working days after receipt of all the
documents prepared and documented in accordance with the
requirements of laws and regulations and referred to in Section
70 of this Law.
(4) If all the necessary documents have not been submitted to
the Commission or they have not been drawn up in accordance with
the requirements of the laws and regulations, the Commission
shall not take a decision to allow or to refuse to make an offer
and shall communicate the deficiencies established, and also the
time period for their rectification to the offeror in writing. If
the offeror rectifies the deficiencies previously indicated in
writing by the Commission within the time period specified by the
Commission, the submission shall be considered to have been
submitted to the Commission on the first day of submitting it and
the Commission shall take a decision to allow or to refuse to
make the offer. If the offeror fails to rectify the deficiencies
previously indicated in writing by the Commission within the time
period specified by the Commission, the submission shall be
considered not to have been submitted.
(5) The Commission shall, without delay, but not later than on
the next working day after taking of the decision, inform the
offeror of the decision taken.
(6) After a decision has been taken on permission to express
an offer, the Commission shall concurrently inform thereof the
offeror, the relevant regulated market operator in the regulated
market of which the shares have been admitted to trading, and the
central securities depository in which shares of the target
company have been recorded and send the offer prospectus to the
regulated market organiser and the central securities depository
in electronic form for buy-back of the shares. The central
securities depository shall send the offer prospectus in
electronic form for buy-back of the shares to all members of the
central securities depository in whose accounts in the central
securities depository the shares of the target company have been
recorded.
(7) The regulated market operator shall, without delay, post
the prospectus for the share buy-back offer on its website.
[15 June 2006; 22 May 2008; 24 April 2014; 14 September
2017; 21 June 2018]
Section 72.1 Mutual
Recognition of a Prospectus for Buy-back Offer
(1) After approval of a prospectus for buy-back offer an
offeror, having translated the prospectus for buy-back offer into
languages recognised by the competent authorities of the relevant
Member States and supplemented it with the information laid down
in the legal acts of the relevant Member States, is entitled to
make a share buy-back offer in all Member States on the regulated
markets of which the shares of the target company are admitted to
trading.
(2) An offeror is entitled to make a buy-back offer regarding
the shares of companies registered in another Member State
admitted to trading on a regulated market registered in Latvia by
submitting a prospectus for the share buy-back offer approved in
such Member State to the Commission and a notarially certified
translation thereof, supplementing the prospectus for share
buy-back offer and including therein the procedures for accepting
an offer by shareholders of a target company present in Latvia,
and the procedures for settlement of accounts for such
shares.
[15 June 2006]
Section 73. Disclosure of
Information on a Share buy-back Offer
(1) A person who has taken the decision to make a voluntary
share buy-back offer or a person who has an obligation to make a
mandatory share buy-back offer in accordance with the provisions
of this Law, after taking of the decision or entering into effect
of the relevant conditions, shall inform thereof the board of the
target company.
(2) The offeror is entitled to express a share buy-back offer
only after the Commission has taken a decision on permission to
express a share buy-back offer.
(3) After receipt of the decision of the Commission on
permission to express a share buy-back offer, the offeror shall,
without delay, inform in writing the target company of the
provisions of the offer and provide an opportunity for its board
to become acquainted with the offer prospectus, and also provide
information on an offer to the central securities depository in
which the shares of the target company have been recorded in the
amount and according to the procedures stipulated by the central
securities depository.
(4) Within five working days after receipt of the decision of
the Commission on permission to make a share buy-back offer, the
offeror shall publish the following information on the share
buy-back offer in the official publication Latvijas
Vēstnesis:
1) the information referred to in Section 71, Clauses 1, 2, 5,
and 7 of this Law;
2) the place where and time when becoming acquainted with the
prospectus of the share buy-back offer shall be possible;
3) in conformity with the time periods for the offer and
payment indicated in the prospectus - the dates when the offer
will end, when the results of the offer will be announced, and
when the settlement will take place.
(5) The offeror who makes a voluntary share buy-back offer in
accordance with the provisions of Section 67, Paragraph two of
this Law shall also specify in the publication the minimum or
maximum number of shares it has intended to redeem.
(6) The offeror who will not redeem shares in accordance with
the provisions of Section 67, Paragraph five of this Law, unless
the shareholders of the target company accept the offer in at
least the minimum amount specified in the offer prospectus of the
share buy-back offer, shall unmistakably indicate thereof in the
publication.
[9 July 2013; 14 September 2017]
Section 74. Setting of Price in a
Mandatory Share Buy-back Offer
(1) Upon making a share buy-back offer the price of one share
to be redeemed may not be lower than:
1) the price at which an offeror or persons acting in concert
with the offeror have acquired the shares of the target company
during the last 12 months. If the shares have been acquired at
different prices, the redeeming price shall be the highest price
for the acquisition of shares within the last 12 months prior to
the entering into effect of the circumstances specified in
Section 66, Paragraph four of this Law;
2) the weighted average share price on a regulated market or
multilateral trading facility in which the largest turnover with
the relevant share was during the last 12 months. The weighted
average share price is calculated for the last 12 months before
entering into effect of the circumstances indicated in Section
66, Paragraph four of this Law;
3) the value of a share that is calculated by dividing the net
assets with the number of shares issued. Net assets shall be
calculated by deducting from the total assets own shares and
obligations belonging to the target company. If the target
company owns shares with different denominations, when
calculating the value of shares the net assets shall be divided
proportionally for the proportion of shares at each denomination
in the share capital.
(2) When determining the value of one share to be redeemed in
conformity with Paragraph one, Clause 3 of this Section, in the
calculation of the value of shares the data from the last target
company annual statements approved by the meeting of
shareholders, regarding which a report by a sworn auditor has
been provided, shall be used. The time period between the last
day of the year of operation for which the annual statement is
prepared and the day on which the offer is made to the Commission
may not exceed 16 months. If, in accordance with laws and
regulations, a target company prepares an annual statement not
later than seven months after the end of a reporting year, the
time period between the last day of the year of operation for
which an annual statement is prepared and the day on which an
offer is expressed to the Commission may not exceed 19 months. In
the calculation of the value of shares the data from the last
quarterly statement of a target company shall be used, provided
that the value of shares which has been calculated by using the
data of the quarterly statement shall exceed by at least 10 per
cent the value of shares which has been determined by using the
data of the reporting year. If a target company also prepares a
consolidated annual statement, then, in determining the value of
the share to be redeemed, the data of the consolidated statement
shall be used. If a target company prepares annual statements in
accordance with both, the laws of the country of registry, and
according to the international financial reporting standards,
then, in determining the value of the share to be redeemed, the
data of the statement prepared according to the international
financial reporting standards shall be used.
(3) If a mandatory share buy-back offer is made after entering
into effect of the circumstances specified in Section 66,
Paragraph four, Clause 2 of this Law, Paragraph one, Clause 1 of
this Section is not applied in the determination of the offer
price.
(4) If a target company owns shares at different denomination,
the price of one share to be redeemed shall be determined for
shares of each denomination separately.
(5) If the offeror, from the day on which the circumstances
have entered into effect under which it must make a mandatory
share buy-back offer until the final day of the time period of
the offer, enters into a transaction regarding the acquisition of
target company shares at a price exceeding the price specified in
the offer, the price of this particular transaction shall become
the offer price.
(6) Within six months from the day the time period for the
offer expires, the offeror is entitled to enter into a
transaction regarding the acquisition of target company shares at
a price which is higher than that specified in the offer, only
provided that it pays out the price difference to all persons
which have sold shares thereto in response to the share buy-back
offer.
(7) If a court has initiated a case regarding legal protection
proceedings, the share buy-back price in the mandatory share
buy-back offer shall be determined by dividing the liquidation
value of the target company by the number of issued shares. The
liquidation value shall be calculated as an estimated value which
could be obtained by selling assets of the target company, except
for those non-material assets which cannot be sold as separate
assets. Asset selling costs and liabilities of the target company
shall be deducted from the obtained value. The liquidation value
shall be determined by an expert in material investment
evaluation included in the list of material investment evaluators
of the Register of Enterprises as on the day when the
circumstances have occurred which impose an obligation on the
offeror to express a mandatory share buy-back offer.
(8) The Commission, upon request of the offeror, has the right
to set another share buy-back price in the mandatory share
buy-back offer which is different from the price referred to in
Paragraph one of this Section, if financial condition of the
target company has been affected by emergency circumstances due
to which the share buy-back price set in accordance with
Paragraph one of this Section is not proportionate to the share
value as on the day when the circumstances occurred which impose
an obligation on the initiator to express a mandatory share
buy-back offer. In the case referred to in the first sentence of
this Paragraph the offeror shall submit evidence to the
Commission regarding the circumstances due to which the share
buy-back price should be set notwithstanding the principles of
setting share price referred to in Paragraph one of this Section.
In the case referred to in this Paragraph the share value shall
be calculated in accordance with the procedures laid down in
Paragraph one, Clause 3 of this Section, using the data from the
last available financial statements of the target company which
have been adjusted, if necessary, taking into consideration the
effect of the emergency circumstances.
(9) The Commission has the right to determine another time
period for setting of the share buy-back price in the mandatory
share buy-back offer which is different from the time period
referred to in Paragraph one of this Section, if the offeror has
submitted a submission to the Commission regarding the expression
of a share buy-back offer after the time period determined in
Section 70, Paragraph one of this Law.
(10) If the Commission issues an administrative act
establishing that in accordance with this Law a person has an
obligation to express a mandatory share buy-back offer but the
person has not expressed it, the time period for fulfilment of
such obligation for the abovementioned person shall start on the
day of entering into effect of the administrative act. In such
mandatory share buy-back offer the price of one share shall be
calculated in accordance with the procedures laid down in Section
74, Paragraph one of this Law, calculating the time period for
setting of the share buy-back price from the day of issue of the
administrative act. The price of a share shall be indicated in
the administrative act issued by the Commission.
[15 June 2006; 15 October 2009; 24 April 2014; 21 September
2017; 21 June 2018]
Section 74.1 Rights of a
Shareholder to Request Buy-Back of Shares in Case of Failure to
Express the Mandatory Share Buy-back Offer
(1) If a person or persons who act in concert have reduced the
quantity of voting rights arising from shares to an extent which
does not reach or does not exceed that specified in Section 66,
Paragraph four, Clause 1 of this Law, other shareholders have the
right request that such person or persons buy back the shares
belonging to them after the Commission has issued the
administrative act referred to in Section 74, Paragraph ten of
this Law (hereinafter in this Section - the administrative
act).
(2) Buy-back of shares may be requested by a shareholder which
owned the shares on the day when the Commission issued the
administrative act. The shareholder may request buy-back of
shares in an amount which does not exceed the amount of shares
that belonged to him on the day when the administrative act of
the Commission was issued. The share buy-back price shall be
determined in accordance with Section 74 of this Law, counting
the period for determination of the price from the day when the
administrative act was issued.
(3) The shareholder may request buy-back of shares within
eighteen months from the day when the administrative act issued
by the Commission entered into effect.
(4) If the obligation referred to in the administrative act
lies with persons who act in concert, they shall be solidarily
responsible for the buy-back of shares.
[21 September 2017 / See Paragraph 59 of
Transitional Provisions]
Section 75. Procedures for Amending
Provisions of a Share Buy-back Offer
(1) If there are at least 10 working days until the end of the
time period of the share buy-back offer, the offeror has the
right to amend the following provisions of the share buy-back
offer:
1) to extend the time period without exceeding the time period
limitations specified in Section 69, Paragraph three of this
Law;
2) to increase the price of one share to be redeemed;
3) to amend other provisions, provided that the conditions for
the rest of the target company shareholders do not deteriorate
and that no circumstances occur due to which target company
shareholders who have already accepted the offer are placed under
less advantageous conditions.
(2) If the offeror decides to amend the provisions of the
share buy-back offer, it shall prepare amendments to the share
buy-back offer and submit them to the Commission in accordance
with the same procedures as for the prospectus of the share
buy-back offer.
(3) Within three working days after receipt of amendments to
the prospectus for a share buy-back offer, the Commission shall
take a decision to grant permission for or to refuse to amend the
provisions of the offer and without delay inform the offeror
thereof.
(4) The Commission shall, without delay, also inform the
relevant regulated market operator and the central securities
depository in which the shares of the target company have been
recorded of granting of the permission to amend the provisions of
the share buy-back offer and send thereto the text of the
amendments to the prospectus for a share buy-back offer in
electronic form. The central securities depository shall send the
text of the amendments to the prospectus for a share buy-back
offer in electronic form to all members of the central securities
depository in whose accounts in the central securities depository
the relevant shares of the target company have been recorded.
(5) The regulated market operator shall, without delay, post
the amendments made to the prospectus for the share buy-back
offer on its website.
(6) The offeror shall, not later than within three working
days after receipt of a decision of the Commission on granting of
the permission to amend the provisions of an offer, publish the
information on the amendments to the provisions of the offer in
the official gazette Latvijas Vēstnesis.
[9 July 2013; 14 September 2017; 21 June 2018]
Section 76. Procedures for
Withdrawal of a Share Buy-back Offer
(1) The Commission is entitled to withdraw the share buy-back
offer if it determines non-compliance with laws and regulations
or circumstances independent of the offeror as a result of which
the offer may not be expressed as a result of force majeure.
(2) The Commission shall, without delay, notify the offeror,
the relevant regulated market operator, and the central
securities depository in which the shares of the target company
have been recorded of the decision to withdraw the share buy-back
offer.
[14 September 2017; 21 June 2018]
Section 77. Duties of a Target
Company
(1) The board of a target company shall, within five working
days after publishing of an advertisement on making a share
buy-back offer, prepare an opinion in which it provides its
opinion on the offer and its substantiation, on influence of the
implementation of the offer on the interests of the target
company (particularly - on employment), and also on strategic
plans of the offeror in respect of the target company and
possible indirect influence of such plans on employment and
change of the place of location of the commercial company.
(2) The board of a target company shall communicate its
opinion by using the mass media through the help of which the
widest possible range of persons interested in the offer are
informed.
(3) The board of a target company shall inform of its opinion
the regulated market operator which will immediately publishes
this information on its website or make it available to the
public by other means determined by the regulated market
operator.
(4) The board of a target company shall inform employees of
the target company or their representatives of its opinion. If
until publishing the opinion of the board representatives of
employees of the target company have submitted a separate opinion
to the board on influence of the offer on employment, such
opinion shall be added to the opinion of the board.
(5) The board and council of the target company shall, from
the moment when the offeror has informed the board and council of
its opinion to make a voluntary share buy-back offer until the
end of the time period of offer before implementing such measures
which could destroy successful course of the buy-back offer,
obtain a permission of the meeting of shareholders for such
activities. The abovementioned permission is not necessary if
alternative share purchase offers are searched.
(6) If the decisions laid down in Paragraph five of this
Section are taken before the board or council has found out about
making a voluntary share buy-back offer and the offer is not
partly or completely implemented, the consent of the meeting of
shareholders shall be necessary for any decision which is not a
part of standard economic activity of the target company and the
implementation of which could destroy share buy-back offer.
(7) If share buy-back offer is made in the case provided for
in Section 66, Paragraph four, Clause 2 of this Law, the target
company has an obligation, not earlier than within 10 working
days and not later than within 15 working days from the day when
the advertisement referred to in Section 79, Paragraph three of
this Law is published in the official gazette Latvijas
Vēstnesis, to submit a submission to the regulated market
operator regarding exclusion of the shares form the regulated
market.
(8) The regulated market operator shall, after receipt of the
submission referred to in Paragraph seven of this Section, take a
decision within 10 working days to exclude the shares of the
target company from a regulated market, unless the right to
perform a final share buy-back has arisen for the offeror within
10 working days from the day when the advertisement referred to
in Section 79, Paragraph three of this Law is published in the
official gazette Latvijas Vēstnesis. If the regulated
market operator does not receive the submission within the time
period referred to in Paragraph seven of this Section to exclude
the shares of the target company from a regulated market, the
Commission shall take a decision to exclude the shares of the
target company from a regulated market within 10 working days,
unless the right to perform a final share buy-back has arisen for
the offeror within 10 working days from the day when the
advertisement referred to in Section 79, Paragraph three of this
Law is published in the official gazette Latvijas
Vēstnesis.
(9) If the right to perform a final share buy-back has arisen
for the offeror within 10 working days from the day when the
advertisement referred to in Paragraph eight of this Section is
published in the official gazette Latvijas Vēstnesis, the
regulated market operator shall, within 10 working days, take a
decision to exclude the shares of the target company from a
regulated market after the end of the making of a share buy-back
offer conforming to this law. The day when the advertisement
referred to in Section 79, Paragraph three of this Law is
published in the official gazette Latvijas Vēstnesis shall
be regarded as the end of the making of a share buy-back offer
referred to in this Paragraph.
(10) If the right to perform a final share buy-back has arisen
for the offeror within 10 working days from the day when the
advertisement referred to in Paragraph eight of this Section is
published in the official gazette Latvijas Vēstnesis, but
the offeror has not exercised his right arising from the
provisions of Section 81 of this Law within the time period
provided for in the Law, the Commission shall, not earlier than
within 10 and not later than within 15 working days from the end
of the time period for exercising the rights of the offeror, take
a decision to exclude the shares of the target company from a
regulated market.
[15 June 2006; 22 May 2008; 9 July 2013; 14 September 2017;
21 June 2018]
Section 78. Prohibition against
Hindering the Procedure of a Share Buy-back Offer
(1) Members of the council and board of a target company are
prohibited from hindering with their action or absence of action
the course of a share buy-back offer.
(2) After publishing of an advertisement regarding the share
buy-back offer in the official gazette Latvijas Vēstnesis,
or from the moment the target company becomes aware of the
information on the obligation to make a mandatory offer, the
target company may not perform any new issues of shares or
convertible bonds as a result of which the division of voting
rights at the meeting of shareholders changes or may change.
(3) A target company may not take any decisions that are in
conflict with the requirements of Section 69, Paragraph four of
this Law.
(4) The prohibition laid down in Paragraphs two and three of
this Section shall be valid until the end of the time period for
the payment laid down in the share buy-back offer.
[9 July 2013]
Section 79. Notification on Results
of a Share Buy-back Offer
(1) The offeror shall, without delay, but not later than
within five working days after the end of the time period of an
offer, submit a report to the Commission, the relevant regulated
market operator, and target company on the results of the offer
in which it shall specify:
1) the information referred to in Section 71, Clauses 1 and 2
of this Law;
2) the number of shares offered for sale;
3) the number of shares which will be at the disposal of the
offeror after implementation of the share buy-back offer.
(2) If the shareholders of a target company have accepted the
voluntary share buy-back offer at an amount of shares which
exceeds the maximum number of shares which the offeror has
intended to redeem, as indicated in the offer prospectus, the
offeror shall indicate the coefficient of the proportional
distribution concurrently with the information referred to in
Paragraph one of this Section.
(3) Within five working days after the end of the time period
of a share buy-back offer, the offeror shall publish in the
official gazette Latvijas Vēstnesis an advertisement
regarding the results of the offer which shall contain the
information referred to in Paragraph one of this Section.
(4) The offeror shall also submit a report to the Commission
and the regulated market operator in electronic form. The
regulated market operator and the Commission shall, without
delay, post the report on their website.
[22 May 2008; 9 July 2013; 14 September 2017; 21 June
2018]
Section 80. Accounting
(1) The offeror, in addition to the payment for the shares of
a target company, may also provide for exchange of shares for
other transferable securities or the rights to obtain such. If
the offeror exercises these rights, it shall be indicated in the
prospectus for the share buy-back offer, stating the conditions
for exchange. The procedures for exchange must be such as to
prevent the risk that any shareholders at the target company who
have replied to the offer do not receive the exchangeable
transferable securities.
(2) An investor who has decided to accept a share buy-back
offer and has submitted a relevant submission within the time
period for buy-back of the shares is entitled to withdraw the
submission before the end of the time period indicated by the
offeror in the prospectus of the share buy-back offer.
(3) If an investor chooses to receive transferable securities
as buy-back for the shares, it shall be indicated in the
submission.
(4) The buy-back or exchange of shares shall be performed as
close to the final day of the time period for the share buy-back
offer, but not later than within five working days after the
final day of the time period for the share buy-back offer.
(5) Buy-back or exchange of shares which are in public
circulation shall take place according to the procedures
stipulated by the central securities depository in which the
shares of the target company have been recorded. Upon performing
buy-back or exchange of shares, it is ensured that shares are
transferred from the account of the alienor of shares only after
the central securities depository has ascertained that the whole
amount of money or financial instruments necessary for buy-back
or exchange has been transferred into the account of money or
financial instruments indicated by the central securities
depository.
(6) Payment for closed issue shares shall be performed in
conformity with the procedures set out in the offer prospectus.
Amendments which are required to be made in the register of
shareholders of a target company after closure of the share
buy-back offer shall be made by the board of the target company
on the basis of documents attesting to the payment for the
shares.
[15 June 2006]
Section 81. Final Share Buy-back
(1) A person who in accordance with the requirements of this
Law has acquired shares of a target company in such amount which
reaches or exceeds 95 per cent of the total number of shares with
voting rights of the target company or which, as a result of
share buy-back offer, has entered into agreements according to
which it will directly acquire the voting rights arising from the
shares in such amount which reaches or exceeds 95 per cent of the
total number of shares with voting rights, may buy back the
shares of the target company from other shareholders owned by
them without consent of the abovementioned shareholders. Such
buy-back of shares shall be considered to be a final share
buy-back.
(2) If 95 per cent of the total amount of shares with voting
rights are raised by a person through both direct and indirect
holding, such person is entitled to perform a final share
buy-back only provided that, in accordance with the procedures
and within the time periods laid down in this Law, this person
has provided notification regarding indirect acquisition of a
major holding.
(3) The person referred to in Paragraph one of this Section is
entitled to perform a final share buy-back within three months
from the day when he or she has acquired such number of shares
which reaches or exceeds 95 per cent of the total number of
shares with voting rights, or, if such person has not performed a
final share buy-back within the abovementioned time period -
within three months from the day when the time period has lapsed
for the mandatory share buy-back offer made anew by such person
or a voluntary share buy-back offer made to all shareholders of
the target company regarding all shares of the target
company.
(4) A final share buy-back may be performed only after a
decision to exclude the shares from a regulated market has been
taken. If at the meeting of shareholders the majority of
shareholders has voted in favour of exclusion of shares from a
regulated market and one of them is the person referred to in
Paragraph one of this Section, such person may join a mandatory
share buy-back offer with a final share buy-back offer and those
shareholders who have voted regarding exclusion of the shares
from a regulated market, but who fail to comply with the criteria
referred to in Paragraph one of this Section, have no obligation
to make a mandatory share buy-back offer. In such case the
offeror shall, not later than within 10 working days after taking
of the decision in the meeting of shareholders on exclusion of
shares from a regulated market, submit a submission to the
Commission regarding a final share buy-back.
(5) In the cases referred to in Paragraphs one and four of
this Section, the share buy-back price shall be determined in
accordance with the requirements of Section 74, Paragraph one of
this Law. If a person acquires the amount of voting rights
specified in Paragraph one of this Section as a result of a
voluntary share buy-back offer, he is entitled to perform a final
share buy-back for a price which was determined in the voluntary
share buy-back offer.
(6) In the cases referred to in Paragraph one of this Section
the shares of the target company owned by other shareholders
shall be alienated according to the procedures specified in the
prospectus for a final share buy-back.
(7) The entry date in case of a final share buy-back may not
be later than 10 working days after the date of publishing the
information referred to in Section 82, Paragraph seven of this
Law.
[14 September 2017]
Section 82. Examination of Documents
of a Final Share Buy-back
(1) If an offeror decides to perform a final share buy-back,
he shall prepare a prospectus for a final share buy-back and
submit it to the Commission concurrently with the submission and
documents referred to in Section 70, Paragraph two, Clauses 2, 3,
and 4 of this Law.
(2) If a person performing a final share buy-back has acquired
percentage of the holding indirectly, it shall concurrently with
the documents referred to in Paragraph one of this Section also
submit to the Commission the contracts, authorisation, and other
documents attesting the rights thereof to the indirect
holding.
(3) The prospectus for a final share buy-back shall include at
least the information referred to in Section 71, Clauses 1, 2, 4,
5, and 6 of this Law, and also the information on the procedures
by which an entry date will be determined.
(4) The Commission shall, within 10 working days after receipt
of all the documents referred to in this Section which have been
prepared and drawn up in accordance with the requirements of the
laws and regulations, examine the submission and the prospectus
for a final share buy-back and take a decision on a permission
for or refusal to perform a final share buy-back. The Commission
shall, without delay, but not later than on the following working
day, inform the offeror of the decision taken.
(5) The Commission shall, without delay, inform the relevant
regulated market operator of the permission to perform the final
share buy-back and send thereto the prospectus for the final
share buy-back in electronic form. The regulated market operator
shall, without delay, post the prospectus for the final share
buy-back on its website.
(6) The Commission shall, without delay, send a copy of the
decision to the central securities depository in which the shares
of the target company have been recorded on granting of
permission to perform a final share buy-back and the prospectus
for the final share buy-back in electronic form. The central
securities depository shall send the prospectus for the final
share buy-back in electronic form to all members of the central
securities depository in the accounts of which the relevant
shares of the central securities depository have been
recorded.
(7) The offeror shall, within five working days after receipt
of the decision of the Commission to grant permission to perform
a final share buy-back, publish the following information on the
share buy-back offer in the official gazette Latvijas
Vēstnesis and submit it to the central securities depository
in which the shares of the target company have been recorded:
1) the information referred to in Section 71, Clauses 1, 2,
and 5 of this Law;
2) the information indicated in the prospectus on
determination of the date of entry and payment, and also the
dates of entry and payment;
3) the place where and time when becoming acquainted with the
prospectus for the final share buy-back shall be possible.
[14 September 2017; 21 June 2018]
Section 83. Alienation of Shares in
Favour of a Person who Performs the Final Share Buy-back
(1) On the day of entry specified in the prospectus for a
final share buy-back, the shares are blocked in the accounts of
the shareholder and the shareholder shall lose the right to
operate therewith. A responsible member of the central securities
depository shall be responsible for the blocking of shares.
(2) A member of the central securities depository shall block
the shares on the basis of the prospectus for the final share
buy-back received from the central securities depository.
(3) The offeror shall, on the next working day after the date
of entry of the final share buy-back which has been specified in
the prospectus and published in accordance with the requirements
of Section 82, Paragraph seven of this Law, transfer such an
amount of money in euro into the money account of the central
securities depository which conforms to the total value of the
shares yet unredeemed according to the value of one share
specified in the prospectus for the final share buy-back.
(4) After the amount of money specified in Paragraph three of
this Section is transmitted in full amount to the money account
of the central securities depository, the central securities
depository shall transmit all relevant shares of the joint stock
company recorded in the initial register and in the accounts in
the central securities depository opened by members of the
central securities depository to the account of the person who is
buying back shares, concurrently carrying out money transfers to
the money accounts of the relevant members of the central
securities depository and sending a request to members of the
central securities depository to delete the shares of the
relevant joint stock company from accounts of financial
instruments of the shareholders referred to in Paragraph one of
this Section.
(5) A member of the central securities depository shall,
within one working day after receipt of money from the central
securities depository, transfer such amount of money into the
money accounts of such persons in conformity with the amount of
the recorded shares in the accounts of financial instruments of
which the shares of the relevant joint stock company were
recorded at the end of the settlement day of the date of entry
specified in the prospectus for the final share buy-back.
(6) Remuneration for those shareholders the shares of which,
at the end of the settlement day of the date of entry for the
final share buy-back, are in the initial register of the central
securities depository, shall be transferred into the money
account of the central securities depository.
[14 September 2017]
Section 83.1 Request of
Minority Shareholders to Redeem Shares
If a person, directly or indirectly, owns 90 per cent or more
of the shares of a capital company, each of the rest of
shareholders of such capital company until the time when a final
share buy-back is performed, may request that this person redeems
the shares owned by him or her for a price which is not less than
the price determined in accordance with Section 74 of this
Law.
[15 June 2006; 14 September 2017]
Chapter
VI
Prohibition to Use Inside Information and Market
Manipulation
Section 84. Scope of this
Chapter
(1) This Chapter, in addition to that provided for in
Regulation No 596/2014, shall determine the rights and
obligations of the Commission as the competent authority within
the meaning of Regulation No 596/2014 in supervising the use of
inside information and preventing manipulations in financial
markets.
(2) In order to ensure the fulfilment of the rights and
obligations referred to in Paragraph one of this Section, the
Commission shall issue regulatory provisions determining:
1) the information to be considered inside information and
disclosable to the public;
2) the cases when a delay of publishing inside information may
mislead the public or immediate disclosure if information may
endanger the lawful interests of an issuer or a participant of
the emissions trading market;
3) the requirements in relation to the procedures by which a
person performing administration duties or persons closely
affiliated therewith shall notify of the transactions
performed.
[12 December 2019]
Section 84.1 Liability
for Unlawful Use, Disclosure, of and Manipulations with Inside
Information in Financial Markets
(1) A person shall be held criminally liable for unlawful use
of inside information in financial markets, recommendation to
another person, or incitation of another person to engage in the
use of inside information in financial markets in the cases
provided for in the Criminal Law, if the violation of the
prohibition referred to in Article 14(a) or (b) of Regulation No
596/2014, and also the activities provided for in Article 8 of
this Regulation are established. In other cases when the
violation of the prohibition referred to in Article 14(a) or (b)
of Regulation No 596/2014, and also the activities provided for
in Article 8 of this Regulation are established, liability shall
set in for the person in accordance with Section 148 of this
Law.
(2) If inside information of the financial market is or has
been at the disposal of a person and the action of a person is
lawful in accordance with Article 9 of Regulation No 596/2014, it
shall not be considered that the abovementioned person has
unlawfully used such information and engaged in the use of inside
information in financial markets in relation to acquisition or
alienation of securities.
(3) A person shall be held criminally liable for unlawful
disclosure of inside information of financial market, if the
prohibition of unlawful disclosure of inside information referred
to in Article 14(c) of Regulation No 596/2014, and also the
activities provided in in Article 10 of this Regulation have been
established. It shall not be considered that a person has
unlawfully disclosed inside information of financial market, if
disclosure of information takes place when the person carries out
work, official or professional duties or when disclosure is
considered market sounding conducted in accordance with Article
11(1), (2), (3), (4), (5), (6), (7), and (8) of Regulation No
596/2014.
(4) A person shall be held criminally liable in the cases
provided for in the Criminal Law for manipulations in financial
markets, if the violation of the prohibition of manipulations
referred to in Article 15 of Regulation No 596/2014 has been
established, upon the person committing any of the following
activities:
1) entering into a transaction, placing an order to trade or
any other behaviour which:
a) gives, or is likely to give, false or misleading signals as
to the supply of, demand for, or price of, a financial
instrument, or a related spot commodity contract;
b) secures, or is likely to secure, the price of one or
several financial instruments, a related spot commodity contract
at an abnormal or artificial level, unless the person entering
into a transaction or placing an order to trade establishes that
such transaction, order or behaviour have been carried out for
legitimate reasons, and conform with an accepted market practice
in the relevant market place;
2) entering into a transaction, placing an order to trade or
any other activity or behaviour which affects or is likely to
affect the price of one or several financial instruments or a
related spot commodity contract, which employs a fictitious
device or any other form of deception or contrivance;
3) disseminating information through the media, including the
internet, or by any other means, which gives, or is likely to
give, false or misleading signals as to the supply of, demand
for, or price of, a financial instrument or a related spot
commodity contract or secures the price of one or several
financial instruments or a related spot commodity contract at an
abnormal or artificial level;
4) transmitting false or misleading information, providing
false or misleading data, or any other behaviour which
manipulates the calculation of a benchmark.
(5) In cases when a person is not to be held criminally liable
for manipulations in financial markets, however, the activities
referred to in Paragraph four of this Section and Article 12 of
Regulation No 596/2014 are established, the liability of the
person shall set in in accordance with Section 148 of this
Law.
[26 May 2016]
Section 85. Prohibition to Use
Inside information
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 86. List of Holders of
Inside Information
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 86.1 Notification
Regarding a Transaction with Financial Instruments
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 87. Duty to Publish Inside
Information and Derogations therefrom
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 88. Prohibition against
Market Manipulation
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 88.1 Accepted
Market Practice
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 89. Duty to Refrain from
Executing a Transaction
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Section 90. Rights of the
Commission
In order to ensure conformity with the provisions of
Regulation No 596/2014 and this Chapter, in addition to the
rights laid down in the Law on Financial and Capital Market
Commission and other rights laid down in this Law, the Commission
has the following rights:
1) to request and receive from the participants of the
financial instrument market the records of telephone
conversations and other types of data transmission records;
2) to request from market participants standardised
information and reports on transactions with derived instruments
of goods in related spot markets, and also to directly access
such trading systems;
3) to assign credit institutions and investment brokerage
companies to suspend operations with financial instruments in the
account of a person or movement of funds in the account of a
person for the period specified in the decision of the
Commission;
4) to temporarily suspend trade in financial instruments;
5) to request that the members of a financial instrument
market cease any practice which is contrary to the provisions of
Regulation No 596/2014 and this Chapter;
6) to temporarily restrict the activities of a participant of
the financial instrument market;
7) to request, within the time period specified thereby, that
the issuer or another person which has disclosed or distributed
false or misleading information, publishes a notification
regarding amending of the previously provided information in
accordance with the procedures laid down in Regulation No
596/2014;
8) to address law enforcement authorities with an application
regarding initiation of criminal proceedings.
[26 May 2016 / The new wording of the Paragraph shall come
into force from 3 July 2016. See Paragraph 55 of Transitional
Provisions]
Section 91. Civil Liability
[26 May 2016 / See Paragraph 55 of Transitional
Provisions]
Division
E
Central Securities Depository
[14 September 2017]
Section 92. Operation of the Central
Securities Depository
The central securities depository shall operate in accordance
with Regulation No 909/2014, this Law and other laws, the
regulatory provisions of the Commission and the articles of
association of the relevant central securities depository.
[14 September 2017]
Section 92.1 Continuity
of the Operation of the Central Securities Depository
(1) If the central securities depository cannot provide the
services referred to in Section A of Annex to Regulation No
909/2014 due to insolvency, liquidation, or other reasons, the
central securities depository shall transfer the information
(including accounting data and data of registers) which is
necessary to ensure the continuity of the provision of services
to members of the central securities depository and issuers to
another central securities depository which has received a
permission of the Commission for the operation of the central
securities depository or, in accordance with the procedures laid
down in Article 23 of Regulation No 909/2014, has obtained the
right provide services of the central securities depository in
the Republic of Latvia.
(2) The central securities depository shall continue the
provision of services and the Commission shall perform
supervision of the central securities depository until the moment
when another central securities depository commences the
provision of the relevant services of the depositary.
[14 September 2017]
Section 92.2 Rounding as
a Result of the Corporate Actions of Financial Instruments
If, as a result of corporate actions involving financial
instruments, a new issue or several new issues are registered by
joining several existing issues of financial instruments or
dividing an existing issue of financial instruments, then the
number of financial instruments due to an investor as a result of
such reorganisation is rounded down to a whole number. The losses
incurred as a result of such rounding by persons who own
financial instruments are compensated according to the procedures
specified in the decision taken by the administrative body of the
relevant issuer on joining or division of issues.
[14 September 2017]
Section 93. Informing of Persons who
Own Financial Instruments and of Corporate Actions Involving
Financial Instruments
(1) The investment brokerage companies and credit institutions
which have not opened accounts of financial instruments in the
central securities depository for holding of their financial
instruments and financial instruments of the clients, but holding
of financial instruments recorded in the central securities
depository is ensured with intermediation of another investment
brokerage company or credit institution, have an obligation to
carry out the following upon request of such investment brokerage
company or credit institution in the accounts of which it holds
financial instruments recorded in the central securities
depository, and according to the time period stipulated by such
investment brokerage company or credit institution:
1) to provide information on persons who own financial
instruments or who have financial instruments in their
possession;
2) to distribute information to clients on meetings of owners
of financial instruments and at least such corporate actions
involving financial instruments when an issuer has specified the
right of option by owners of financial instruments in relation to
the benefits to be received;
3) to submit a lock-up assignment to this investment brokerage
company or credit institution in respect of financial instruments
of those persons who own financial instruments and who wish to
participate in meetings of owners of financial instruments.
(2) The central securities depository shall provide for in an
agreement with its member that its member, clients of the member,
and other persons who are holding financial instruments recorded
in the relevant central securities depository for the benefit of
third parties include the obligations specified in Paragraph one
of this Section in mutual agreements, insofar as it is not in
contradiction with the applicable legal acts of the relevant
country.
[14 September 2017]
Section 94. Regulations of the
Central Depository
[14 September 2017]
Section 95. Participants of the
Central Depository
[14 September 2017]
Section 95.1 Substantive
Changes in the Information Submitted for Licensing
(1) In the case referred to in Article 16(4) of Regulation No
909/2014 the Commission shall assess the conformity of the
planned changes with the requirements of the laws and regulations
governing the operation of the central securities depository. The
Commission has the right to express objections against the
planned changes within 20 working days after the receipt thereof,
if it detects a non-conformity of the planned changes with the
requirements of the laws and regulations. If the Commission has
an obligation to consult with other supervisory or monitoring
institutions according to the cooperation agreement entered into
on the basis of Article 24(4) of Regulation No 909/2014, the
Commission is entitled to extend such time period up to 40
working days, sending a relevant notification to the central
securities depository.
(2) If the Commission has not expressed objections within the
time periods referred to in Paragraph one of this Section, the
central securities depository is entitled to introduce the
planned changes.
[14 September 2017]
Section 95.2 Control in
the Central Securities Depository
(1) Such person may be a shareholder in the central securities
depository which conforms to Article 27(6) of Regulation No
909/2014.
(2) Acquisition and change of control in the central
securities depository shall be implemented in conformity with
Article 27(7) and (8) of Regulation No 909/2014.
(3) After receipt of the information referred to in Article
27(7) of Regulation No 909/2014 the Commission shall assess the
financial stability of the person and the financial validity of
the planned acquisition of control in order to ensure stable and
diligent management of such central securities depository in
which it is planned to acquire control, and also the potential
impact of the person on the management and operation of the
central securities depository. During the evaluation process the
Commission shall also take into account the following
criteria:
1) the impeccable reputation of the person and conformity with
the requirements laid down for shareholders of the central
securities depository;
2) the impeccable reputation and the professional experience
of the person who, as a result of the planned acquisition of
control, will manage the operation of the central securities
depository;
3) the financial stability of the person, in particular in
relation to the type of the performed or planned economic
activity in the central securities depository where the
acquisition of control is planned;
4) whether the central securities depository will be able to
conform to the regulatory requirements laid down in the laws and
regulations and whether the structure of such group of
undertakings where the central securities depository is going to
be incorporated will not restrict the Commission's possibilities
to perform the supervisory functions vested to it by law, to
ensure an efficient exchange of information among supervisory
authorities, and to determine the allocation of supervisory
powers among the supervisory authorities;
5) whether there is a substantiated suspicion that in relation
to the planned acquisition of control, actual or attempted money
laundering or terrorist financing has been carried out, or that
the planned acquisition of the holding could increase such a
risk.
(4) During the assessment period specified in Article 27(8) of
Regulation No 909/2014, but not later than on the fiftieth
working day of the assessment period, the Commission has the
right to request additional information on the persons referred
to in this Section in order to assess the conformity of such
persons with that specified in Paragraphs one and three of this
Section.
(5) Upon requesting the additional information referred to in
Paragraph four of this Section, the Commission has the right to
suspend the assessment period once until the day when such
information is received, but for not more than 30 working days.
If the Commission has suspended the assessment period, such
suspension time shall not be included in the assessment
period.
(6) The Commission shall determine the requirements in
relation to information which is provided to the Commission by
the person who wishes obtain control in the central securities
depository in order to be able to assess the conformity of such
person with the criteria of Paragraphs one and three of this
Section.
(7) Persons who have obtained control in the central
securities depository without conforming to the procedures laid
down in this Section may not exercise voting rights of shares
owned by him or her, but the decisions of the meeting of
shareholders that have been taken by exercising the voting rights
of those shares shall be invalid as of the moment of taking
thereof and making of entries in the commercial register and
other public registers may not be requested on the basis of such
decisions. The Commission shall, without delay, inform the
relevant shareholders and the central securities depository of
this fact.
[14 September 2017]
Section 95.3 Notification
Regarding Changes after Receiving of a Licence
The central securities depository shall, within seven days
after changes in the composition of the board or council of the
central securities depository, submit a notification to the
Commission on the changes which have occurred. Concurrently with
the notification, the central securities depository shall submit
documents of the newly appointed member of the board or council
which are referred to in Article 13 of Commission Delegated
Regulation (EU) 2017/392 of 11 November 2016 supplementing
Regulation (EU) No 909/2014 of the European Parliament and of the
Council with regard to regulatory technical standards on
authorisation, supervisory and operational requirements for
central securities depositories (hereinafter - Regulation No
2017/392).
[14 September 2017]
Section 96. Administrative Bodies of
the Central Securities Depository and Their Obligations
(1) The central securities depository shall, without delay,
but not later than within five days after a meeting of the board
or council of the central securities depository, inform the
Commission of the decisions taken at the relevant meetings. The
central securities depository shall submit minutes of these
meetings to the Commission as soon as they have been signed.
(2) The relevant administrative body of the central securities
depository has an obligation, upon its own initiative or upon
request of the Commission, to remove members of the board or
council from the office without delay if they do not conform to
the requirements of Article 27 of Regulation No 909/2014.
(3) The procedures for the establishment and operation of user
committees of the central securities depository, and also their
composition shall be approved by the council of the central
securities depository.
[14 September 2017]
Section 97. Requirements for Members
of the Board and Council
[14 September 2017]
Section 98. Election to Council of
Representatives of Participants of the Central Depository
[14 September 2017]
Section 99. Rights and Obligations
of the Central Depository
[14 September 2017]
Section 99.1 Accounts for
Funds of the Central Securities Depository
(1) The central securities depository is entitled to open cash
accounts in the central bank of a Member State or a foreign
country if it provides such service, or in a credit institution
to ensure the settlements of funds for the transfer orders
submitted in the settlement system of financial instruments, and
also settlements of funds for corporate actions involving
financial instruments. The central securities depository shall
keep separate the resources transferred into the account of funds
from its own funds.
(2) The funds referred to in Paragraph one of this Section
shall not be used for satisfying claims of creditors of the
central securities depository. This requirement shall also apply
to cases when insolvency proceedings have been declared for the
central securities depository.
[14 September 2017]
Section 99.2 Initial
Register
(1) The initial register shall be kept by the central
securities depository which is the successor to rights and
liabilities of the Latvian Central Depository.
(2) Apart from financial instruments, also rights to funds
which have been received as a result of buy-back of financial
instruments and corporate actions involving financial instruments
and which are applicable to persons owning the financial
instruments listed in the initial register may be accounted in
the initial register.
(3) The central securities depository shall keep separate the
monies referred to in Paragraph two of this Section from its own
funds. The central securities depository shall keep such funds at
Latvijas Banka or a credit institution, informing the relevant
institution that such funds are the property of third parties
being held by the central securities depository.
(4) The central securities depository is entitled to place the
funds referred to in Paragraph two of this Section in highly
liquid low-risk debt securities and use the income (hereinafter
in this Section - the interest) obtained from investment,
including them into its revenues. If, upon investing the funds
referred to in Paragraph two of this Section, losses occur, the
central securities depository shall cover them from its
resources, but not more than in the amount of the interest
received in the last 10 years. The central securities depository
shall keep separate such debt securities from its own assets. If
the central securities depository keeps such securities in a
account with a third party, such account is identified as the
nominal account.
(5) Such debt securities which conform to the requirements of
Article 46(3) and (6) of Regulation No 909/2014 are considered as
debt securities which are highly liquid and which have low risk
level.
(6) The funds referred to in Paragraph two of this Section and
the securities referred to in Paragraph four of this Section
shall not be used for satisfying claims of creditors of the
central securities depository. This requirement shall also apply
to the cases when the central securities depository has been
declared insolvent in accordance with the procedures laid down in
law.
(7) The central securities depository is entitled to deduct
expenditures related to the storage of such resources from the
funds accounted in the initial register.
[14 September 2017]
Section 100. Supervision of the
Central Depository
[14 September 2017]
Section 100.1 Accounts of
the Central Securities Depository
(1) The central securities depository shall ensure at least
the following accounts of financial instruments in the settlement
system of financial instruments to which the laws and regulations
of Latvia are applicable:
1) participant's account - an account of financial instruments
in which the financial instruments owned by the central
securities depository participant are listed;
2) account of participant's clients - an account of financial
instruments in which the financial instruments owned or held by
clients of the central securities depository participant are
jointly listed;
3) individual account - an account of financial instruments in
which the financial instruments owned or held by one client of
the central securities depository participant are listed with or
without identification of the client of the participant.
(2) Such credit institution or investment brokerage company
with the intermediation of which the individual account has been
opened and with which the client of the participant has entered
into a contract for the servicing of the individual account shall
be responsible for the enforcement of the requirements of
Division F of this Law in relation to the client of the
participant in whose name the individual account has been
opened.
[14 September 2017]
Section 100.2 Servicing
the Account of the Central Securities Depository Participant
after Suspending the Activity of the Participant
(1) If insolvency proceedings have been initiated for the
central securities depository participant within the meaning of
Section 1, Paragraph one, Clause 11 of the law On the Settlement
Finality in Payment and Financial Instrument Settlement Systems,
the central securities depository shall, without delay as soon as
such information has become known thereto, suspend the activity
of such participant in the settlement system of financial
instruments.
(2) If the activity of the central securities depository
participant in the settlement system of financial instruments has
been suspended in the case referred to in Paragraph one of this
Section, the central securities depository shall complete the
settlements of such transfer orders which are in effect in
accordance with the law On the Settlement Finality in Payment and
Financial Instrument Settlement Systems and afterwards shall
execute only such transfer order in the settlement system of
financial instruments of the participant as a result of which the
remaining amount of accounts of such participant and clients of
such participant decrease.
[14 September 2017]
Section 100.3 Reporting
on Potential and Actual Violations of Regulation No 909/2014
[12 December 2019]
Section 100.4 Supervision
of the Central Securities Depository
(1) In addition to the rights specified in Regulation No
909/2014 and the Law on the Financial and Capital Market
Commission, the Commission has the following rights for the
performance of the supervisory functions:
1) to become acquainted with all documents, account books, and
databases of the central securities depository, and also to take
statements, to make true copies (copies) therefrom;
2) to request revocation of decisions of the administrative
bodies of the central securities depository, if they do not
conform to Regulation No 909/2014, other laws and regulations
governing the operation of the central securities depository, the
articles of association or other documents of the central
securities depository, or may significantly affect the financial
state of the central securities depository;
3) to restrict the provision of services of the central
securities depository, if it is necessary in order to ensure
stable functioning of the financial market, including to request
that such activities are terminated which are in contradiction to
Regulation No 909/2014, this Law, and other laws and
regulations;
4) if it is justified with the circumstances indicated in
Clause 3 of this Paragraph, to request that the central
securities depository:
a) restricts or suspends the activity of the participant of
the maintained settlement system of financial instruments in the
system;
b) restricts, suspends, or terminates the link within the
meaning of Article 2(29) of Regulation No 909/2014 with another
central securities depository;
5) to issue regulatory provisions which determine the
information to be provided by the central securities depository
to the Commission on the services provided thereby and its
operation, including reports for prudential supervision, reports
on activities in the settlement systems of financial instruments
which are maintained by the central securities depository, and
also the procedures and time periods for the provision of such
information.
(2) If a shareholder has acquired control in the central
securities depository without conforming to the procedures laid
down in Section 95.2 of this Law and has exercised its
voting rights in a meeting of shareholders for the election of
members of the council of the central securities depository, the
Commission has the right to suspend the activity of members of
the board and the council of the central securities depository
and to authorise representatives of the Commission to perform the
functions of the administrative bodies of the central securities
depository until the moment when all violations are
eliminated.
(3) The central securities depository shall, without delay,
inform the Commission if it has become aware or suspects that its
participant systematically does not comply with the requirements
laid down for the activity in the central securities
depository.
[14 September 2017]
Section 100.5
Restrictions Applicable to the Central Securities Depository
(1) If the Commission detects that the central securities
depository does not comply with or the Commission has grounds for
assuming that, within 12 months from the day when it took the
decision on implementation of the activities referred to in this
Section, the central securities depository will not comply with
the requirements laid down in this Law, Regulation No 909/2014,
the directly applicable legal acts which have been issued by the
European Union authorities and which are subjected to the
abovementioned Regulation, or decisions or regulatory provisions
of the Commission which have been issued in accordance with
Section 100.4, Paragraph one, Clause 5 of this Law, or
if the operation of the central securities depository endangers
its stability or solvency, the security or stability of the
financial sector of Latvia, threatens to cause significant losses
to national economy of the State, then the Commission is entitled
to implement one or more of the following activities, upon taking
a decision:
1) to give binding written instructions to members of the
board and council of the central securities depository which are
necessary for the prevention of such situation;
2) to impose restrictions for the rights and activities of the
central securities depository, including to suspend the provision
of services of the central securities depository in full or in
part, and also to determine restrictions for performance of
liabilities;
3) to appoint one or more authorised persons of the Commission
in the central securities depository;
4) to request that the central securities depository reduces
or does not perform distribution of profits or interest payments
to shareholders, if it does not cause non-performance of
liabilities;
5) to request that the central securities depository provides
additional reports or provides reports more frequently, including
reports on capital and liquidity items of the central securities
depository and reports on the items of the initial register;
6) to request that, after payment of taxes, the central
securities depository directs profits for strengthening of own
funds;
7) to request that the central securities depository
determines such restriction on the variable part of the
remuneration of officials and employees which is expressed as
percentage of net income and allows the central securities
depository to maintain a stable capital base;
8) to request that the central securities depository improves
its strategy, procedures, and measures to be carried out for
execution of the requirements of Regulation No 909/2014;
9) to request that the central securities depository draws up
a plan for renewing conformity with the requirements of
Regulation No 909/2014 and other laws and regulations,
determining the time periods for execution of the measures
included in the plan;
10) to request that the central securities depository
mitigates risks characteristic to its activity, services, or
systems;
11) to request that the central securities depository narrows
or restricts commercial activity or refused such fields of
activity which excessively endanger its stability.
(2) The Commission is entitled to implement one or more of the
activities referred to in Paragraph one of this Section also if
activity of a commercial company involved in the consolidation
group of the central securities depository endangers or may
endanger sound operation of the central securities
depository.
[14 September 2017]
Section 100.6 Appointing
of an Authorised Person in the Central Securities Depository
(1) An authorised person shall be appointed by the Commission
for a time period which does not exceed one year. If, within a
year from appointing of the authorised person, the circumstances
referred to in Section 100.5, Paragraph one of this
Law have not been eliminated, the Commission may extend such time
period for a period which does not exceed one year. A person may
not be appointed to be an authorised person without his or her
written consent.
(2) The objective of activities, tasks and functions of an
authorised person, the scope and time period of authorisation,
the amount of remuneration of an authorised person, the amount of
expenditures allowed for the carrying out of the tasks of an
authorised person, and also other provisions considered as
essential by the Commission shall be laid down in the decision of
the Commission to appoint an authorised person.
(3) If several authorised persons are appointed, in addition
to the provisions of Paragraph one of this Section the
distribution of the scope of the powers of authorised persons and
their mutual subordination shall be determined in the decision to
appoint an authorised person.
(4) Appointing of an authorised person in the central
securities depository shall not restrict the rights of
shareholders specified in the Commercial Law.
[14 September 2017]
Section 100.7
Requirements for an Authorised Person
(1) The following may be an authorised person in the central
securities depository:
1) a natural person who conforms to that specified in
Paragraphs two and three of this Section;
2) a capital company members of the board of which meet that
specified in Paragraph three of this Section and the majority of
members of the board of which meet that specified in Paragraph
two of this Section.
(2) A natural person who has the following may be appointed as
an authorised person in the central securities depository:
1) State recognised second level higher vocational education
or higher academic education and corresponding qualification;
2) corresponding competence and sufficient professional work
experience;
3) impeccable reputation;
(3) The following natural person may not be appointed as an
authorised person in the central securities depository:
1) who is recognised as the related party of the central
securities depository within the meaning of Section 1, Paragraph
four of this Law;
2) against whom insolvency proceedings have been completed or
initiated as against a debtor or who is considered to be the
debtor's representative in an insolvency case and this case has
not been terminated;
3) who has been convicted of a crime against the State, a
criminal offence against the property, general security and
public order, management procedures or jurisdiction or a criminal
offence in the national economy or service of public authorities
regardless of extinguishing or setting aside of the criminal
record;
4) against whom criminal prosecution has been initiated or who
is a suspect in criminal proceedings;
5) who has been convicted of committing the criminal offence
laid down in Clause 3 of this Paragraph, although released from
serving his or her punishment due to limitation period, clemency
or amnesty;
6) against whom criminal proceedings for committing the
criminal offence laid down in Clause 3 of this Paragraph are
terminated due to limitation period or amnesty;
7) to whom rights have been restricted in accordance with the
procedures laid down in the Criminal Law to perform in a specific
commercial activity or take up specific offices;
8) who has been a member of the administrative body of a
commercial company or a procurator in a commercial company and as
a result of his or her negligence or intentionally has driven
such commercial company to insolvency subject to criminal
punishment.
(4) If the decision to appoint an authorised person in
accordance with Section 100.8, Paragraph one, Clause 3
of this Law provides that the authorised person shall manage the
central securities depository, then, in addition to that
specified in Paragraphs one, two, and three of this Section, only
the capital company referred to in Paragraph one of this Section
or such natural person who is an employee of the Commission or
has been appointed to the position of the administrator of
insolvency proceedings in accordance with the Insolvency Law may
be such authorised person.
[14 September 2017]
Section 100.8 Rights and
Obligations of the Authorised Person
(1) The Commission may determine the following rights and
obligations of an authorised person in the decision to appoint an
authorised person:
1) to convene a meeting of shareholders of the central
securities depository, a meeting of the council and the board and
to participate therein with the right to propose the issues to be
considered at either meeting;
2) to decide on a permission for the central securities
depository to make payments, to conclude new transactions, and
also to amend or terminate current transactions;
3) to perform the management of the central securities
depository.
(2) If the decision to appoint an authorised person specifies
his or her rights in accordance with Paragraph one, Clause 1 of
this Section, the decision of the relevant administrative body of
the central securities depository shall not be taken, if the
authorised person objects to it.
(3) If the Commission takes the decision to suspend the
activity of the council, the board, and a procurator of the
central securities depository, and to impose a prohibition for
the central securities depository to act with the property
thereof, and also with the property belonging to the third
parties in the possession or ownership thereof, the authorised
person shall obtain this right.
(4) If the right to represent the central securities
depository has been specified for the authorised person, then the
Commission shall publish the decision on determination of such
rights on its website.
(5) For the performance of his tasks the authorised person is
entitled:
1) to issue binding orders to all administrative bodies and
employees of the central securities depository;
2) not to conform to the restrictions specified in the
articles of association, by-laws, and other documents of the
central securities depository;
3) to act with the property of the central securities
depository, if the objective of such activities is to ensure
continuity of the activity of the central securities
depository;
4) to draw up and approve financial statements of the central
securities depository.
(6) An authorised person may implement the authorisation to
convene a meeting of shareholders and to determine its agenda
only with the consent of the Commission.
(7) The authorised person has an obligation to provide a
report on his or her activities to the Commission within the time
period stipulated thereby and to notify the Commission without
delay of the findings which may have an impact on the financial
situation of the central securities depository.
(8) The authorised person, when performing his or her tasks,
shall take care of the interests of national economy, the safety
and stability of the financial sector of Latvia, and also careful
and prudent management of the central securities depository.
(9) The authorised person is entitled to resign from the
fulfilment of his or her obligations by submitting a
substantiated submission to the Commission to which a report on
activities of the authorised person regarding the whole time
period of his or her activities is appended.
(10) The Commission shall examine the submission of the
authorised person regarding refusal from the fulfilment of the
obligations and, within one month from the day of receipt of the
abovementioned submission, decide on its further action. Until
taking such decision is taken and matters are handed over, the
authorised person shall continue the fulfilment of the
obligations assigned to him or her.
[14 September 2017]
Section 100.9
Remuneration of the Authorised Person
(1) The Commission shall disburse remuneration to the
authorised person and shall cover the expenditures necessary for
the performance of his or her tasks in the amount specified in
the decision to appoint an authorised person. The central
securities depository shall compensate the costs specified in
this Paragraph to the Commission within the time period
stipulated thereby.
(2) The authorised person does not have the right to receive
any remuneration or other income for the performance of his or
her tasks in addition to that provided for in the decision to
appoint an authorised person.
[14 September 2017]
Section 100.10
Cooperation with the Authorised Person
(1) Members of the council and the board, employees, other
representatives, and shareholders of the central securities
depository have an obligation to cooperate with the authorised
person and, upon his or her request, to transfer objects and
information to him or her which are necessary for the performance
of the functions of the authorised person.
(2) The authorised person shall, without delay, notify the
Commission of a failure to conform to the provisions referred to
in Paragraph one of this Section, and also of other obstacles for
the performance of his or her tasks.
[14 September 2017]
Section 100.11 Expiry of
Authorisation of the Authorised Person
(1) The Commission shall supervise the activity of the
authorised person.
(2) The authorisation of the authorised person shall
expire:
1) upon expiry of the time period specified in the decision to
appoint an authorised person;
2) by the decision of the Commission on revocation of the
authorised person;
3) upon the authorised person refusing from the fulfilment of
his or her obligations in accordance with Section
100.8, Paragraphs nine and ten of this Law.
(3) The Commission shall decide on revocation of the
authorised person, if it detects that the authorised person does
not comply with the provisions of this Law or other laws and
regulations governing the operation of the central securities
depository or does not conform to the requirements laid down in
this Law.
(4) Upon expiry of authorisation, the authorised person shall
transfer files to the Commission or a person stipulated thereby
within the time period stipulated by the Commission.
[14 September 2017]
Division
E.1
Data Reporting Services
[21 June 2018]
Section 100.12 Right to
Provide Data Reporting Services
(1) Data reporting services providers, and also investment
brokerage companies, credit institutions providing investment
services and regulated market operators which, in accordance with
the procedures laid down in laws and regulations, have received a
permit to provide data reporting services are entitled to provide
data reporting services in the Republic of Latvia.
(2) Data reporting services providers shall operate in
accordance with this Law, the regulatory provisions of the
Commission, and the directly applicable legal acts of the
European Union.
(3) The Commission shall establish, maintain, and regularly
update the register of data reporting services providers which
includes such data reporting services providers that are entitled
to provide the relevant services in the Republic of Latvia. The
type of such data reporting services shall be indicated in the
register for the provision of which the data reporting services
provider has received a permit or the right to provide which has
been obtained by the organiser of the trading venue in accordance
with the procedures laid down in the law. The Commission shall
post the register on its website.
[21 June 2018]
Section 100.13 General
Requirements for Data Reporting Services Providers
(1) A data reporting services provider is entitled to commence
the provision of data reporting services only after it has
received a permit at the Commission for the provision of data
reporting services (hereinafter in this Division - the permit).
The type of data reporting services which is intended to be
provided by the data reporting services provider shall be
indicated in the permit. The Commission shall issue the permit
for an indefinite period of time.
(2) The data reporting services provider is entitled to
receive the permit only in case when it has fulfilled all the
requirements laid down in this Law, the regulatory provisions of
the Commission, and the directly applicable legal acts of the
European Union for the receipt of the permit.
(3) The Commission shall inform the European Securities and
Markets Authority of the issuance of the permit to the data
reporting services provider.
(4) If the data reporting services provider wishes for the
data reporting services indicated in the permit issued thereto to
be supplemented with a new data reporting service or wishes to
refuse from the provision of any data reporting service indicated
in the permit, it shall submit a relevant submission to the
Commission.
(5) A person who has received the permit for the provision of
data reporting services has the right to provide services for the
provision of which the permit has been received throughout the
European Union.
[21 June 2018]
Section 100.14
Requirements for Members of the Board and Council of the Data
Reporting Services Provider
(1) The following persons may be members of the board of the
data reporting services provider:
1) who have impeccable reputation;
2) who have sufficient knowledge, skills, and experience;
3) who have the ability to dedicate sufficient amount of time
for the fulfilment of their obligations.
(2) The Commission shall determine the requirements for
members of the board and council of the data reporting services
provider in relation to their functions in the field of the
internal control system.
(3) The administrative body of the data reporting services
provider has an obligation, upon its own initiative or upon
request of the Commission, to recall members of the board and the
council from the office without delay if they do not conform to
the requirements laid down in this Law.
(4) The data reporting services provider has an obligation to
notify the Commission of any changes in the information on
members of its board and council.
[21 June 2018]
Section 100.15 Documents
to be Submitted by the Data Reporting Services Provider for the
Receipt of the Permit
(1) In order to receive the permit, the data reporting
services provider shall submit a submission to the Commission.
The type of data reporting services wished to be provided thereby
shall be indicated in the submission.
(2) The data reporting services provider shall, concurrently
with the submission, submit the information specified in Article
1 of Commission Delegated Regulation (EU) 2017/571 of 2 June 2016
supplementing Directive 2014/65/EU of the European Parliament and
of the Council with regard to regulatory technical standards on
the authorisation, organisational requirements and the
publication of transactions for data reporting services providers
(hereinafter - Regulation No 2017/571), inter alia:
1) a list of members of the board and council and a
notification of the abovementioned persons with information
prepared in conformity with the requirements of Article 4 of
Regulation No 2017/571;
2) an operational programme in which the planned activities,
organisational structure, and other information provided for in
Article 2 of Regulation No 2017/571 of the data reporting
services provider have been indicated;
3) a description of the internal corporate management of the
data reporting services provider which contains the information
provided for in Article 3 of Regulation No 2017/571.
(3) If an application for the receipt of the permit is
submitted by a regulated market operator, the requirements of
Section 100.14, Paragraph one of this Law shall be
applicable to members of its board and council.
(4) The sample forms, templates, and procedures necessary for
the submission of the information referred to in this Section
shall be determined by Commission Implementing Regulation (EU)
2017/1110 of 22 June 2017 laying down implementing technical
standards with regard to the standard forms, templates and
procedures for the authorisation of data reporting services
providers and related notifications pursuant to Directive
2014/65/EU of the European Parliament and of the Council on
markets in financial instruments.
(5) The Commission has the right to request the data reporting
services provider to update the submitted documents and
information.
(6) If, pending a decision on the issue of the permit, changes
in the information indicated in Paragraph two of this Section
occur or amendments to the documents are made, the capital
reporting services provider has an obligation to submit without
delay to the Commission the new information or the full text of
the relevant documents with the amendments made.
[21 June 2018; 20 June 2019]
Section 100.16 Procedures
for Granting the Permit
(1) The Commission shall examine the submission of a data
reporting services provider for receipt of the permit and take a
decision within six months after the day of receipt of all the
documents specified in this Law and prepared and drawn up in
accordance with the requirements of the laws and regulations
which are necessary for taking of the decision.
(2) The Commission shall not issue the permit to the data
reporting services provider, if it does not conform to the
requirements laid down in this Law, including:
1) a member or members of the board of the data reporting
services provider do not have impeccable reputation;
2) there is an objective and provable justification that
changes in the management of the data reporting services provider
might endanger its due and prudent management, the interests of
clients, and the market integrity.
[21 June 2018]
Section 100.17 Procedures
for the Cancellation of the Permit
(1) The Commission shall cancel the permit issued to a data
reporting services provider in the following cases:
1) the data reporting services provider has not commenced
activity within 12 months from the day when the permit was
issued;
2) the data reporting services provider has not provided the
services indicated in the permit for more than six months, unless
the Commission has issued a permit in which such action is
intended;
3) the data reporting services provider has submitted a
written submission regarding the cancellation of the permit;
4) it is detected that the data reporting services provider
has provided false information or otherwise violated the
requirements of the laws and regulations in order to receive the
permit;
5) it is detected that the data reporting services provider
does not conform to the requirements laid down in this Law for
the receipt of the permit anymore;
6) the data reporting services provider substantially and
systematically does not comply with the requirements of the laws
and regulations and Regulation No 600/2014;
7) the data reporting services provider has failed to rectify
the violations of laws and regulations detected by the Commission
within the time period stipulated by the Commission.
(2) The Commission shall inform the European Securities and
Markets Authority of cancellation of the permit issued to the
data reporting services provider.
(3) Information on cancellation of the permit of the data
reporting services provider is posted on the website of the
Commission and shall be available for five years from the day of
the posting thereof.
(4) The Commission shall implement the supervision of the data
reporting services provider specified in this Law until it has
completely settled all of its obligations with regard to its
clients.
[21 June 2018]
Section 100.18
Organisational Requirements for Approved Publication
Arrangements
(1) An approved publication arrangement shall adopt a
corresponding policy and implement measures in order to make
available the information referred to in Articles 20 and 21 of
Regulation No 600/2014 in real time to the extent that it is
technically possible, on the basis of justified commercial
conditions.
(2) The approved publication arrangement shall make available
the information referred to in Paragraph one of this Section free
of charge within 15 minutes after publishing of the relevant
information.
(3) The approved publication arrangement shall ensure
efficient and consistent distribution of the information referred
to in Paragraph one of this Section in a manner that is available
and non-discriminatory to all and in a format that facilitates
consolidation of the information with similar data from other
sources.
(4) The approved publication arrangement shall include at
least the following data in the information published in
accordance with Paragraph one of this Section:
1) the identifier of a financial instrument;
2) the price for which the transaction was concluded;
3) the amount of the transaction;
4) the time of the transaction;
5) the time when a notification regarding the transaction was
sent;
6) the type of the transaction price;
7) the code of such trading venue where the transaction was
executed or where the transaction was executed with the
intermediation of the systematic internaliser - the code "SI" or
in other cases - the code "OTC";
8) if necessary, a reference that the transaction was
performed under special circumstances.
(5) The approved publication arrangement shall independently
establish and implement efficient administrative measures to
prevent conflict of interest with clients. The approved
publication arrangement which is also operating as a regulated
market operator, credit institution, or investment brokerage
company shall process all the aggregated information in a manner
that is available and non-discriminatory to all and shall operate
in conformity with appropriate provisions in order to separate
different functions of commercial activity.
(6) The approved publication arrangement shall have security
mechanisms in place designed to guarantee the security of the
means of transfer of information, to minimise the risk of data
corruption and unauthorised access and to prevent information
leakage prior to publishing thereof. The approved publication
arrangement shall ensure corresponding resources and reserve
systems for it to be able to provide its services
continuously.
(7) The approved publishing arrangement shall introduce
systems which are able to efficiently check the completeness of
trading reports, to identify obvious mistakes and deficiencies,
and to request that investment brokerage companies and credit
institutions re-send the report, correcting the mistakes
made.
(8) Joint formats, data standards, and technical provisions
for ensuring the requirements of this Section shall be determined
by Regulation No 2017/571 and Regulation No 2017/565.
[21 June 2018]
Section 100.19
Organisational Requirements for Consolidated Tape Providers
(1) A CTP shall adopt a corresponding policy and implement
measures in order to aggregate the information published in
accordance with Articles 6 and 20 of Regulation No 600/2014, to
consolidate it in a continuous electronic data flow, and to make
it available in real time to the extent that it is technically
possible, on the basis of justified commercial conditions.
(2) The information referred to in Paragraph one of this
Section shall include at least the following data:
1) the identifier of a financial instrument;
2) the price for which the transaction was concluded;
3) the amount of the transaction;
4) the time of the transaction;
5) the time when a notification regarding the transaction was
sent;
6) the type of the transaction price;
7) the code of such trading venue where the transaction was
executed or where the transaction was executed with the
intermediation of the systematic internaliser - the code "SI" or
in other cases - the code "OTC";
8) if necessary, information in relation to the fact that a
computer algorithm used in an investment brokerage company is
responsible for taking of an investment decision and performance
of a transaction;
9) if necessary, a reference that the transaction was
performed under special circumstances;
10) if, in accordance with Article 4(1)(a) or (b) of
Regulation No 600/2014, an exemption from the obligation to
publish the information referred to in Article 3(1) of this
Regulation was granted - a reference to which of the
abovementioned exemptions was applied to the particular
transaction.
(3) The information referred to in Paragraph one of this
Section shall be made available free of charge within 15 minutes
after the CTP has published it. The CTP shall comply with
efficient and and consistent distribution of information in a
manner that is available and non-discriminatory to all and in a
format that is easy to access and convenient to use for market
participants.
(4) The CTP shall adopt a corresponding policy and measures in
order to aggregate the information published in accordance with
Articles 10 and 21 of Regulation No 600/2014, to consolidate it
in a continuous electronic data flow, and to make it available in
real time to the extent that it is technically possible, on the
basis of justified commercial conditions, by including at least
the following information:
1) the identifier or identifying characteristics of the
financial instrument;
2) the price for which the transaction was concluded;
3) the amount of the transaction;
4) the time of the transaction;
5) the time when a notification regarding the transaction was
sent;
6) the type of the transaction price;
7) the code of such trading venue where the transaction was
executed or where the transaction was executed with the
intermediation of the systematic internaliser - the code "SI" or
in other cases - the code "OTC";
8) if necessary, a reference that the transaction was
performed under special circumstances.
(5) The CTP shall make available the information referred to
in Paragraph four of this Section free of charge within 15
minutes after publishing of the relevant information.
(6) The CTP shall conform to efficient and consistent
distribution of information, ensuring rapid access to the
information to all in a non-discriminatory manner and in
generally recognised formats that are mutually compatible, easy
to access and use for market participants.
(7) The CTP shall ensure that the data sent are consolidated
from all regulated markets, MT systems, OT systems, and approved
publication arrangements and apply to such financial instruments
which are mentioned more specifically in the directly applicable
legal acts of the European Union referred to in Paragraph ten of
this Section.
(8) The CTP shall provide for the procedures and implement
measures in order to prevent conflict of interest. A specially
regulated market operator or an approved publication arrangement
which also operates as a CTP shall process all the aggregated
information in a manner that is available to all and
non-discriminatory and shall operate in compliance with
corresponding measures to separate different functions of
commercial activity.
(9) The CTP shall have security mechanisms in place designed
to guarantee the security of the means of transfer of information
and to minimise the risk of data corruption and unauthorised
access. The CTP shall ensure corresponding resources and reserve
systems for it to be able to provide its services
continuously.
(10) Data standards, format, and other technical provisions of
the information to be published for ensuring the requirements of
this Section shall be determined by Regulation No 2017/571 and
Regulation No 2017/565.
[21 June 2018]
Section 100.20
Organisational Requirements of Approved Reporting Mechanisms
(1) An approved reporting mechanism shall adopt a
corresponding policy and implement measures in order to, as soon
as possible, but not later than until the end of the working day
following the day when a transaction took place, notify the
information referred to in Article 26 of Regulation No 600/2014.
Such information shall be sent in accordance with the
requirements referred to in Article 26 of Regulation No
600/2014.
(2) An approved reporting mechanism shall provide for the
procedures and implement measures in order to prevent conflict of
interest with clients. The approved reporting mechanism which is
also operating as a regulated market operator or investment
brokerage company, or credit institution shall process all the
aggregated information in a non-discriminatory manner, and also
shall carry out and maintain corresponding measures in order to
separate different functions of commercial activity.
(3) The approved reporting mechanism shall have security
mechanisms in place designed to guarantee the security and
authenticity of the means of transfer of information, to minimise
the risk of data corruption and unauthorised access and to
prevent information leakage prior to publishing thereof, always
preserving data confidentiality. The approved reporting mechanism
shall ensure corresponding resources and reserve systems for it
to be able to provide its services continuously.
(4) The approved reporting mechanism shall introduce systems
in order to be able to efficiently check the completeness of
trading reports, to identify obvious mistakes and deficiencies
admitted by a particular investment brokerage company or credit
institution and, if such mistake or deficiency has been detected,
provide information to the relevant investment brokerage company
or credit institution on explanation of the mistake or
deficiency, requesting re-sending of correct reports on
transactions in which the mistakes or deficiencies were
detected.
(5) The approved reporting mechanism shall introduce systems
to be able to detect mistakes or deficiencies admitted by the
approved reporting mechanism and for the system to be able to
correct and send correct and complete reports on transactions to
the Commission.
(6) The way in which the approved reporting mechanism may
fulfil the requirement for the provision of information referred
to in Paragraph one of this Section and the particular
organisational requirements laid down in Paragraphs two, three,
four, and five of this Section shall be determined by Regulation
No 2017/571.
[21 June 2018]
Division
F
Investment Services
Chapter
VII
General Provisions
Section 101. Right to Provide
Investment Services and Ancillary Investment Services
(1) Only investment brokerage companies and credit
institutions, insurance brokers - legal persons, and also
investment management companies in accordance with the procedures
laid down by the laws and regulations governing their activities
are entitled to provide investment services in the Republic of
Latvia. Foreign investment brokerage companies the branches of
which have received a permit in accordance with the procedures
laid down in Section 113.4 of this Law are also
entitled to provide investment services in the Republic of
Latvia. A regulated market operator which has received the
licence for operating a regulated market and in accordance with
the procedures laid down in Section 103.1 of this Law
- the permit to operate an MT facility, is also entitled to
operate an MT facility. A regulated market operator which has
received the licence for operating a regulated market and in
accordance with the procedures laid down in Section
103.1 of this Law - the permit to operate the OT
facility, is also entitled to operate an OT facility.
(11) An insurance broker - legal person shall
obtain a licence for provision of investment services in
accordance with the procedures laid down in Chapter VIII of this
Law and comply with the requirements set out for activities of an
investment brokerage company.
(2) Credit institutions registered in the Republic of Latvia
and branches of foreign credit institutions, and also credit
institutions registered in other Member States shall be regarded
as credit institutions within the meaning of Division F of this
Law.
(3) Investment brokerage companies and branches of foreign
investment companies, and also investment brokerage companies
registered in other Member States shall be regarded as investment
brokerage companies within the meaning of Division F of this
Law.
(31) [21 June 2018]
(4) Investment services and ancillary investment services
shall be regarded as investment services and ancillary investment
services which are provided in the Republic of Latvia, if
they:
1) are provided by a commercial company registered in the
Republic of Latvia;
2) are provided by a commercial company or natural person
registered outside the Republic of Latvia or by a natural person
whose place of residence is not in the Republic of Latvia, but
the language, type or content of the advertising or offering of
investment services and ancillary investment services indicate
that the relevant service is being offered in the Republic of
Latvia;
3) are offered virtually from the Internet protocol address
area granted to the Republic of Latvia or if at least one of the
measures necessary for receipt of the service is to be conducted
with a person whose location or address is in the Republic of
Latvia.
(5) Investment brokerage companies and credit institutions
providing investment services shall conform to this Law,
regulatory provisions of the Commission and administrative acts
issued in relation thereto, and also internal policy and
procedures.
(6) The Commission shall establish and maintain a register of
investment brokerage companies and of those credit institutions
which have the right to provide investment services and ancillary
investment services in the Republic of Latvia. The register shall
include the type of the investment service or ancillary service
for the provision of which the investment brokerage company has
obtained a licence or the rights for provision of which a credit
institution has obtained in accordance with the procedures laid
down in the law. The Commission shall post the register on its
website. The Commission shall inform the European Securities and
Markets Authority on all the licences and permits issued.
(7) The provisions of Division F of this Law shall not apply
to:
1) insurers and reinsurers;
2) commercial companies included within a group of companies
which provide investment services only to other commercial
companies included within such group of companies;
3) persons providing investment services on an occasional
basis only within the scope of their professional activities if
profession activities of such persons are regulated by special
laws and regulations and code of conduct which do not preclude
them from provision of investment services;
4) commercial companies providing investment services only to
their own members of the board and council and employees, and
where such commercial companies are not included within a group
of companies - also to the members of the board and council and
employees of commercial companies included in the same group of
companies;
5) the operation of investment management companies,
alternative investment fund managers, pension funds registered in
the Republic of Latvia, investment management companies,
collective investment undertakings, alternative investment fund
managers, pension funds registered in a Member State, and also
the function of a custodial bank in accordance with that provided
for in the law On Investment Management Companies, the Law on
Alternative Investment Funds and Managers Thereof, and the law On
Private Pension Funds;
6) persons dealing on own account in financial instruments
other than commodity derivatives or emission allowances or
derivatives thereof and not providing any other investment
services or performing any other investment activities in
financial instruments other than commodity derivatives or
emission allowances or derivatives thereof unless such
persons:
a) are market makers;
b) are members of or participants in a regulated market or the
MT facility, on the one hand, or have direct electronic access to
a trading venue, on the other hand, except for non-financial
entities who make transactions on a trading venue which are
objectively measurable as reducing risks directly relating to the
commercial activity or treasury financing activity of those
non-financial entities or their groups;
c) apply a high-frequency algorithmic trading technique;
d) deal on own account when executing client orders;
7) the members of the European System of Central Banks and
other national bodies performing similar functions, and other
public bodies charged with or intervening in the management of
the public debt, and also international financial institutions
established by two or more Member States which have the purpose
of mobilising funding and providing financial assistance to the
benefit of the members of such international financial
institutions which are experiencing or threatened by severe
financing problems;
8) [21 June 2018];
9) persons who, upon carrying out the professional activities
non-regulated by this Law, provide investment advice and do not
receive a separate remuneration for it;
10) [21 June 2018];
11) [21 June 2018];
12) operators with compliance obligations under the
requirements of the law On Pollution who, when dealing in
emission allowances, do not execute client orders and who do not
provide any investment services or perform any investment
activities other than dealing on own account, provided that those
persons do not apply a high-frequency algorithmic trading
technique;
13) transmission system operators within the meaning of the
Electricity Market Law or the Energy Law when carrying out their
tasks under the abovementioned laws or Regulation (EC) No
714/2009 of the European Parliament and of the Council of 13 July
2009 on conditions for access to the network for cross-border
exchanges in electricity and repealing Regulation (EC) No
1228/2003, or under Regulation (EC) No 715/2009 of the European
Parliament and of the Council of 13 July 2009 on conditions for
access to the natural gas transmission networks and repealing
Regulation (EC) No 1775/2005, or under other legal acts adopted
in accordance with the abovementioned Regulations, and any person
which provides services on behalf of such operators;
14) central securities depositories insofar as they are
governed in the directly applicable legal acts of the European
Union;
15) persons dealing on own account, including market makers,
concluding transactions in commodity derivatives or emission
allowances or derivatives thereof, excluding persons who deal on
own account when executing client orders;
16) persons providing investment services, other than dealing
on own account, in commodity derivatives or emission allowances
or derivatives thereof to the customers or suppliers of their
main activity.
(8) That specified in Paragraph seven, Clause 13 of this
Section shall only apply to the persons referred to in this
Clause, if they provide investment services in relation to
commodity derivatives, only to carry out the activities referred
to in Paragraph seven, Clause 13 of this Section. The
abovementioned shall not apply to the operation of the secondary
market, inter alia, the platform for secondary trading
with financial transmission rights within the meaning of
Commission Regulation (EU) 2016/1719 of 26 September 2016
establishing a guideline on forward capacity allocation.
(9) The activity of the persons referred to in Paragraph
seven, Clauses 15 and 16 of this Section shall be ancillary
activity to their main activity within the scope of a group of
commercial companies. If their main activity is not the provision
of investment services or the provision of the financial services
specified in the Credit Institution Law, or making of the market
in relation to commodity derivatives, the abovementioned persons
shall not apply the high-frequency algorithmic trading technique
and shall, on an annual basis, inform the Commission of the fact
that they use the exemption referred to in Paragraph seven,
Clauses 15 and 16 of this Section, and also upon request of the
Commission shall provide an explanation on the reasons due to
which they regard the activity referred to in Paragraph seven,
Clauses 15 and 16 of this Section as ancillary activity to their
main activity.
(10) The persons to whom exemption is applied in accordance
with Paragraph seven, Clauses 1, 5, or 15 and 16 of this Section
need not comply with the conditions laid down in Clause 6 of the
abovementioned Paragraph in order to conform to the exemption
criteria.
(11) The subjects referred to in Paragraph seven of this
Section shall comply with the requirements of Sections
133.14 and 133.15 of this Law.
(12) Investment brokerage companies and credit institutions
which, on an organised, frequent, systematic, and substantial
basis, deal on own account when executing client orders outside a
regulated market, the MT facility, or the OT facility shall
operate in accordance with Title III of Regulation (EU) No
600/2014.
(13) Without prejudice to that specified in Articles 23 and 28
of Regulation (EU) No 600/2014 in relation to all transactions in
financial instruments which are not concluded on a multilateral
system or systematic internaliser shall comply with the
provisions of Title III of Regulation (EU) No 600/2014.
(14) Regulation No 2017/565 shall determine the cases when the
activity referred to in Paragraph seven, Clause 3 of this Section
is considered as an activity that is performed irregularly.
(15) Commission Delegated Regulation (EU) 2017/592 of 1
December 2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council with regard to regulatory technical
standards for the criteria to establish when an activity is
considered to be ancillary to the main business shall determine
the criteria according to which it shall be detected whether the
activities referred to in Paragraph seven, Clauses 15 and 16 of
this Section are to be considered an ancillary activity within
the scope of a group of commercial companies.
(16) An investment brokerage company and a credit institution
have an obligation to ensure the fulfilment of the requirements
of the law throughout the period of operation of the licence or
permit issued by the Commission.
[4 October 2007; 22 May 2008; 9 July 2013; 26 May 2016; 14
September 2017; 21 June 2018; 20 June 2019]
Section 102. Rights of Investment
Brokerage Companies to Provide Investment Services and Ancillary
Investment Services
(1) An investment brokerage company is entitled to commence
the provision of investment services only upon obtaining a
licence from the Commission for the provision of investment
services (hereinafter in this Division - the licence). The
ancillary investment services which the investment brokerage
company intends to provide, shall also be indicated in the
licence.
(2) The ancillary investment services referred to in Section
3, Paragraph five, Clause 1 of this Law may be provided only if a
licence for provision of investment services is obtained.
(21) The requirements of this Law are not applied
to commercial companies which provide only the ancillary
investment services referred to in Section 3, Paragraph five,
Clauses 2, 3, 4, 5, 6, and 7 of this Law.
(3) The Commission shall issue a licence for an indefinite
period of time. The licence shall specify the investment services
and ancillary investment services the investment brokerage
company is entitled to provide.
(4) Investment brokerage companies registered in Member States
are entitled to commence the provision of investment services and
ancillary investment services in the Republic of Latvia in
accordance with the procedures laid down in Section 112 of this
Law.
(5) An investment brokerage company has no right to conduct
commercial activities which are not related with provision of
investment services, ancillary investment services, other
financial services or professional activity of an insurance
broker - legal person.
(6) Only a capital company which has obtained a licence for
the provision of investment services has the right to use the
expression "ieguldījumu brokeru sabiedrība" [investment brokerage
company] or the abbreviation thereof "IBS" in its firm name.
(7) An investment brokerage company, by ensuring due skill and
care and conforming to the procedures laid down in Division
F.1 of this Law, has the right to delegate provision
of the following outsourcing services to the provider of
outsourcing services:
1) conducting of accounting;
2) management or development of information technologies or
systems;
3) organising internal control;
4) provision of investment service and ancillary investment
service or any significant element thereof.
(8) An investment brokerage company may delegate the duties of
the internal audit service as outsourcing service only to a sworn
auditor, commercial company of sworn auditors or a parent
undertaking of the investment brokerage company - credit
institution, insurance company, or investment brokerage company
registered in the Member State.
(9) If an investment brokerage company delegates the
investment service referred to in Section 3, Paragraph four,
Clause 4 of this Law which is provided thereby to a retail
client, to a provider of outsourcing service registered in a
foreign country, then it shall ensure fulfilment of the following
requirements in addition to that laid down in Division
F.1:
1) the provider of outsourcing service has obtained a licence
in his home country for the provision of such service or is
registered as a provider thereof and is subject to supervision of
financial status;
2) a corresponding information exchange agreement has been
entered into between the Commission and the supervisory authority
of the service provider in accordance with Section 145 of this
Law.
(10) The Commission is entitled to allow to delegate the
investment service referred to in Section 3, Paragraph four,
Clause 4 of this Law which is provided thereby to a retail
client, to a provider of outsourcing service registered in a
foreign country, without applying the conditions referred to in
Paragraph nine of this Section, if the guidelines of the policy
referred to in Paragraph eleven of this Section are conformed
to.
(11) The Commission shall approve the policy regarding the
right of an investment brokerage company to delegate the
investment service referred to in Section 3, Paragraph four,
Clause 4 of this Law which is provided thereby to a retail
client, to a provider of outsourcing service registered in a
foreign country, and publish it on its website. This policy shall
contain at least the following information:
1) samples for cases in which the Commission allows delegation
of the relevant service to a provider of outsourcing service in a
foreign country if one or both conditions referred to in
Paragraph nine of this Section are not met;
2) justification why in the cases referred to in Clause 1 of
this Paragraph it shall be regarded that the investment brokerage
company will be able to ensure the requirements set out for the
provision of outsourcing services in this Law.
(12) An investment brokerage company has no right to:
1) delegate the responsibilities of management bodies of the
investment brokerage company laid down in accordance with the
laws and regulations governing the activities of an investment
brokerage company or the articles of association of the
company;
2) completely transfer provision of investment services or
ancillary investment services authorised in a licence to
providers of outsourcing services.
(13) The Commission shall post on its website the list of
those supervisory authorities of foreign countries with which it
has entered into the information exchange agreement.
(14) An investment brokerage company has the right to provide
investment services and ancillary investment services with the
intermediation of another investment brokerage company or credit
institution in conformity with Section 128.1,
Paragraphs eight, nine, and ten of this Law.
[9 June 2005; 15 June 2006; 4 October 2007; 22 May 2008; 4
February 2016; 21 September 2017; 21 June 2018]
Section 103. Right of a Credit
Institution to Provide Investment Services and Ancillary
Investment Services
(1) Credit institutions, branches of foreign credit
institutions registered in the Republic of Latvia which have
obtained a licence for the operation of a credit institution in
accordance with the procedures laid down in the law shall, prior
to the commencement of the provision of investment services and
ancillary investment services, submit to the Commission the
following documents:
1) a description of provision of investment services and
ancillary investment services and control procedures thereof;
2) regulations for the protection of the accounting database
for documentation of financial instruments;
21) a description of procedures for identification
of those transactions which are performed by using inside
information or with a view to commit manipulations in a financial
instrument market;
3) the articles of association of the division providing
investment services and ancillary investment services. If it is
intended to provide investment services and ancillary investment
services in branches of a credit institution or in constituent
bodies regarded as equivalent in terms thereto, the credit
institution shall also specify in the articles of association the
provision of investment services and ancillary investment
services by those constituent bodies;
4) [21 June 2018];
5) a document describing and explaining how the strategy of
the credit institution, in accordance with Section
126.3 of this Law, includes the exercise of the rights
of a shareholder, if the credit institution intends to provide
portfolio management services by including such shares of a joint
stock company in the portfolio the registered office of which is
in a Member State and the shares of which are admitted to trading
on a regulated market of the Member State.
(2) Credit institutions registered in the Republic of Latvia
and branches of foreign credit institutions are entitled to
commence the provision of investment services and ancillary
investment services provided that within 30 days from the date of
submitting the documents referred to in Paragraph one of this
Section they have not received any objections from the
Commission.
(3) Credit institutions to be established and branches of
credit institutions to be opened which are proposing to provide
investment services and ancillary investment services, shall
submit to the Commission the documents referred to in Paragraph
one of this Section concurrently with other documents submitted
thereby, in accordance with laws and other regulatory enactments,
in order to obtain a licence for the commencement of operations
of a credit institution.
(4) Credit institutions registered in Member States are
entitled to commence the provision of investment services and
ancillary investment services in the Republic of Latvia upon the
moment when, in accordance with the law, they are entitled to
commence activity as a credit institution in the Republic of
Latvia with or without the opening of a branch.
(5) A credit institution has the right to provide investment
services and ancillary investment services with the
intermediation of an investment brokerage company or credit
institution in conformity with Section 128.1,
Paragraphs eight, nine, and ten of this Law.
[9 June 2005; 4 October 2007; 26 May 2016; 21 June 2018; 20
June 2019]
Section 103.1 Right of a
Market Operator to Provide an Investment Service for the
Operation of a Multilateral Trading Facility and Organised
Trading Facility
(1) A market operator registered in the Republic of Latvia
which, in accordance with the procedures laid down in the law,
has received the licence for the operation of a regulated market
shall submit the following documents to the Commission before
commencement of operation of the MT facility or OT facility:
1) in the event of a service for the operation of the MT
facility - the draft provisions referred to in Sections
133.4 and 133.5 of this Law;
2) in the event of a service for the operation of the OT
facility - the draft provisions referred to in Sections
133.4 and 133.6 of this Law;
3) amendments to the documents referred to in Section 30,
Paragraph one, Clauses 3, 4, 5, 6, 7, 8, and 9 of this Law, if
such amendments are to be made in relation to the operation of
the MT facility or OT facility.
(2) A market operator registered in the Republic of Latvia is
entitled to commence the operation of the MT facility or OT
facility, if, within 30 days from the date of submitting the
documents referred to in Paragraph one of this Section, he has
not received any objections from the Commission.
(3) A market operator registered in another Member State is
entitled to operate the MT facility or OT facility in the
Republic of Latvia, if he has obtained the right to provide such
investment service in the home country. The market operator
registered in other Member State is entitled to commence the
operation of the MT facility or OT facility in the Republic of
Latvia in accordance with the provisions of Section
113.2 of this Law.
[21 June 2018]
Section 103.2 Provision
of Investment Services with Intermediation of Tied Agents
(1) An investment brokerage company and credit institution
have the right to use tied agents so that, on behalf of the
investment brokerage company or credit institution, to advertise
and offer investment services provided by the company or receive
orders from clients or potential clients and to transmit such
order to the investment brokerage company or credit institution,
to place financial instruments and provide investment advice
regarding such financial instruments and services which are
offered by the abovementioned investment brokerage company or
credit institution. The investment brokerage company and credit
institution have the right to use the tied agent, if he is
registered with the register of tied agents referred to in
Paragraph six of this Section.
(2) The following natural person with the capacity to act may
be a tied agent's responsible person and employee directly
involved in the performance of activities related to the
provision of investment services referred to in Paragraph
one:
1) who has attained eighteen years of age;
2) who has acquired at least secondary education;
3) who has acquired the necessary professional knowledge
regarding investment service to be distributed and financial
instruments to be offered in order to be able to ensure the tasks
of the tied agent laid down in Paragraph one of this Section;
4) who has impeccable reputation and to whom none of the
restrictions referred to in Paragraph three of this Law
apply.
(3) The following person may not be a tied agent's responsible
person and employee directly involved in the performance of
activities related to the provision of investment services
referred to in Paragraph one:
1) who has been convicted for committing an intentional
criminal offence;
2) who has been convicted for committing an intentional
criminal offence, even if the person has been released from
serving the sentence because of expiry of the limitation period,
clemency or amnesty;
3) against whom a criminal matter for the committing of an
intentional criminal offence has been discontinued because of the
expiry of the limitation period or amnesty;
4) who has been held criminally liable for committing an
intentional criminal offence, however, the criminal matter
against him or her has been terminated for reasons other than
exoneration.
(4) An investment brokerage company and credit institution
shall ensure training of the tied agent's responsible person and
of those employees who are directly involved in performance of
activities related to the provision of the investment services
referred to in Paragraph one of this Section in order to provide
them with the necessary knowledge regarding investment services
which are distributed with intermediation of a tied agent.
(5) An investment brokerage company and credit institution
shall be responsible for conformity with the criteria laid down
in Paragraphs two and three of this Section by the tied agent's
responsible person and employees who are directly involved in
performance of activities related to the provision of the
investment services referred to in Paragraph one of this
Section.
(51) An investment brokerage company and credit
institution which wish to use the tied agent shall submit a
relevant submission to the Commission regarding registration of
the tied agent in the register of tied agents, indicating the
information referred to in Paragraph six of this Section, and
append a certification that the tied agent's responsible person
and employees conform to the criteria specified in Paragraphs two
and three of this Section.
(52) The Commission shall, within 10 working days
after receipt of the submission referred to in Paragraph
5.1 of this Section, register the tied agent in the
register of tied agents or send a refusal to the investment
brokerage company or credit institution to register the tied
agent, if it does not conform to the criteria specified in
Paragraphs two and three of this Section.
(6) The Commission shall maintain the register of tied agents
in which the following information shall be entered:
1) the firm name or the given name and surname (for a natural
person) of a tied agent, registration number, registered office,
phone number or telefax number, and electronic mail address;
2) the given name and surname of the tied agent's responsible
person;
3) the Member State in which the tied agent carries out the
activities related to the provision of the investment services
referred to in Paragraph one of this Section.
(7) The register of tied agents shall be available to the
public on the website of the Commission, it shall be publicly
reliable and any person has the right to become acquainted
with.
(8) A tied agent, in carrying out his or her professional
activity, shall disclose completely information to the clients on
his or her status and the investment brokerage company or credit
institution represented by him or her. The investment brokerage
company or credit institution on behalf of which the tied agent
is acting shall be completely and unconditionally responsible for
professional activities of the tied agent.
(9) An investment brokerage company and credit institution
shall supervise the conformity of activity of the selected tied
agent with the requirements laid down in this Law. The investment
brokerage company and credit institution shall, without delay,
notify the Commission, if the tied agent selected thereby does
not conform to the requirements of this Section or has violated
the requirements of this Law.
(10) The Commission shall cancel registration of the tied
agent and exclude the tied agent from the register of tied
agents, if:
1) the tied agent has infringed the requirements of this
Law;
2) the tied agent has infringed the requirements of the laws
and regulations governing prevention of the laundering of
proceeds from crime;
3) the tied agent who is acting in a Member State, in
conformity with the principle of freedom of establishment and
provision of services, has infringed the requirements contained
in the laws protecting the public interests and other laws and
regulations governing financial instruments market;
4) the tied agent requests to cancel the entry in the register
of tied agents;
5) the tied agent is liquidated.
(11) If the administrative act issued by the Commission
regarding cancellation of the entry in the register of tied
agents is appealed, it shall not suspend the execution of such
act.
(12) A tied agent - legal person - has an obligation himself
or herself or upon proposal of the Commission to remove the tied
agent's responsible person or employee directly involved in the
performance of activities related to the provision of the
investment services referred to in Paragraph one of this Section
from office without delay, if:
1) it is detected that he or she has caused a situation which
may endanger interests of the clients of the tied agent;
2) he or she fails to comply with the requirements laid down
in Paragraph two of this Section or any of the restrictions laid
down in Paragraph three of this Section may be applied to him or
her;
3) he or she has infringed the requirements of the laws and
regulations governing prevention of the laundering of proceeds
from crime;
4) he or she has infringed the requirements of this Law.
(13) If an administrative act issued by the Commission
regarding removal of the persons referred to in Paragraph twelve
of this Section from the office is appealed, such appeal shall
not suspend the execution thereof.
[4 October 2007; 21 June 2018]
Section 104. Restriction on the
Provision of Investment Services
(1) The Commission is entitled to restrict the right of an
investment brokerage company to provide one or several investment
services or to hold financial instruments if:
1) the investment brokerage company has not been complying
with the requirements laid down in laws and other regulatory
enactments;
2) the investment brokerage company has not followed the
administrative instructions included in administrative acts of
the Commission issued in relation thereto or in the
administrative acts issued by other institutions which ensure the
implementation of this Law, and also the regulatory provisions of
the Commission subordinated thereto;
3) an insolvency application of the investment brokerage
company has been submitted to the court or the investment
brokerage company has been declared insolvent;
4) a liquidation process of the investment brokerage company
has been commenced;
5) the investment brokerage company performs activities which
threaten or may threaten the financial stability, insolvency, or
reputation of this investment brokerage company.
(2) The Commission is entitled to restrict the right of a
credit institution to provide one or several investment services
or to hold financial instruments if:
1) the credit institution has not complied with the
requirements set forth in laws or other regulatory
enactments;
2) the credit institution has not followed the administrative
instructions included in the administrative acts of the
Commission issued in relation thereto or in the administrative
acts issued by other institutions which ensure the implementation
of this Law, and also the regulatory provisions of the Commission
subordinated thereto;
3) the Commission has applied an intensified supervision
procedure upon the credit institution;
4) the Commission has received an application for insolvency
or takes a decision itself on the submission to a court of an
application for insolvency of the credit institution;
5) the Commission has received a submission for liquidation of
the credit institution;
6) the credit institution performs any activities which
threaten or may threaten the financial stability, insolvency, or
reputation of this credit institution.
(3) If the Commission restricts the right of an investment
brokerage company to hold financial instruments, it shall be
entitled to require the investment brokerage company to transfer
all financial instruments belonging to any clients to another
investment brokerage company or credit institution entrusted with
the holding of financial instruments.
[9 June 2005; 15 June 2006; 4 October 2007]
Chapter
VIII
Licensing of Investment Brokerage Companies
Section 105. General Requirements
for Obtaining a Licence
An investment brokerage company is entitled to receive a
licence only if its:
1) initial capital conforms to the requirements of this Law,
the regulatory provisions of the Commission, and Regulation No
575/2013;
2) members of the board and council (where such has been
established) conform to the requirements of this Law;
3) shareholders (members) conform to the requirements of this
Law;
4) the chairperson of the board and at least one more member
of the board are competent in investment matters;
5) head office is located in the same Member State where its
registered office is.
[21 June 2018]
Section 105.1
Requirements for Shareholders (Members) of an Investment
Brokerage Company
Only the following persons may be shareholders (members) of an
investment brokerage company which have a qualifying holding:
1) who have an impeccable reputation;
2) who have financial stability and the lawfulness of the
acquisition of financial resources of which may be proved by
documentary evidence. Upon assessing financial stability of
shareholders (members), if a person is not a credit institution
or insurance company, it shall be taken into account whether the
person has sufficient free capital;
3) whom it is possible to identify.
[21 June 2018]
Section 106. Requirements for
Officials of an Investment Brokerage Company
(1) Such person may be the chairperson of the board, a member
of the board of an investment brokerage company, the person
responsible for the fulfilment of the requirements for the
prevention of money laundering and terrorism financing, the head
of a branch of a foreign investment brokerage company or a branch
of an investment brokerage company in another Member State:
1) who is competent in the financial management issues. Also a
person who is competent in the management issues of an
undertaking may be the person responsible for the fulfilment of
the requirements for the prevention of money laundering and
terrorism financing;
2) who has the necessary education and three years
professional work experience in a commercial company,
organisation, or institution of the relevant size;
3) who has an impeccable reputation;
4) who has not been deprived of the right to perform
commercial activities.
(2) The chairperson of the board, members of the board of an
investment brokerage company, the head of a branch of a foreign
investment brokerage company or a branch of an investment
brokerage company in another Member State must have higher
education.
(3) Such person may not be the chairperson of the board, a
member of the board of an investment brokerage company, the
person responsible for the fulfilment of the requirements for the
prevention of money laundering and terrorism financing, the head
of a branch of a foreign investment brokerage company or a branch
of an investment brokerage company in another Member State:
1) who has been punished for committing an intentional
criminal offence (regardless of whether or not the conviction has
been extinguished or set aside);
2) who has been convicted of committing an intentional
criminal offence by releasing from punishment or against whom
criminal proceedings have been terminated for reasons other than
exoneration.
(4) The council of an investment brokerage company has an
obligation to remove the persons referred to in Paragraph one of
this Section from the office without delay, if they do not
conform to the requirements of Paragraph one of this Section or
Paragraph three, Clause 1 or 2 of this Section may be applied to
them.
(5) A person who conforms to the requirements of Paragraph
one, Clauses 1, 2, 3, and 4 of this Section may be the
chairperson of the council and a member of the council of an
investment brokerage company. A person to whom Paragraph three,
Clause 1 or 2 of this Section may be applied may not be the
chairperson of the council and a member of the council of the
investment brokerage company.
(6) The meeting of shareholders or participants has an
obligation to remove the persons referred to in Paragraph one of
this Section from the office without delay, if they do not
conform to the requirements laid down in the relevant
Paragraph.
(7) The Commission shall not grant a permit to an investment
brokerage company for the provision of investment services while
it has not been informed of the identity of shareholders or
participants, of legal or natural persons who have a qualifying
holding, and of the amount of the abovementioned holding.
[21 June 2018]
Section 106.1 Provisions
Regarding the Total Number of Positions of a Member of the
Council and Board to be Held by a Member the Board and Council of
an Investment Brokerage Company
(1) When determining the number of positions of a member of
the council and board in an investment brokerage company which a
member of the board or council, if such has been established, may
hold simultaneously, individual circumstances shall be taken into
consideration, and also the nature, scope, and complexity of
activities of the investment brokerage company.
(2) A member of the council and board of an investment
brokerage company which is important in terms of its size,
internal organisation and the nature, scope and complexity of
activities, may, except for the cases when he or she represents
the Republic of Latvia, simultaneously hold no more than:
1) one position of a member of the board and two positions of
a member of the council;
2) four positions of a member of the council.
(3) Within the meaning of this Section one position of a
member of the board or council shall be considered positions of a
member of the board or council:
1) within the framework of one consolidation group;
2) in the institutions which are members of the same
institutional protection scheme referred to in Article 113(7) of
Regulation No 575/2013;
3) in companies (including those that are not financial
institutions) in which investment brokerage companies have a
qualifying holding.
(4) Within the meaning of this Section positions of a member
of the board or council in associations, foundations and other
organisations whose activities are not aimed at generating profit
shall not be considered a position of a member of the board or
council.
(5) The Commission is entitled to allow a member of the board
or council of an investment brokerage company to hold one
additional position of a member of the council.
(6) The Commission shall regularly provide the European
Banking Authority with information on permits granted in
accordance with Paragraph five of this Section.
[24 April 2014]
Section 107. Documents Submitted by
an Investment Brokerage Company for Receipt of a Licence
(1) In order to receive a licence, an investment brokerage
company shall submit to the Commission a submission specifying
the investment services and ancillary investment services it
proposes to provide.
(2) An investment brokerage company shall submit concurrently
with a submission the following documents:
1) information on members of the board and council (if such
has been established) in accordance with Commission Delegated
Regulation (EU) 2017/1943 of 14 July 2016 supplementing Directive
2014/65/EU of the European Parliament and of the Council with
regard to regulatory technical standards specifying
organisational requirements of trading venues (hereinafter -
Regulation No 2017/1943);
2) a balance sheet and capital adequacy calculation regarding
the situation on the last day of the previous month which have
been prepared in accordance with the requirements of the laws and
regulations governing the preparation of statements and capital
adequacy calculation of investment brokerage companies, and aso
documents attesting to conformity with the initial capital
requirements (for example, a financial statement audited by a
sworn auditor, a statement from a credit institution, documents
attesting to changes in capital during the current year);
3) an internal control system policy of the investment
brokerage company necessary for the activity of the investment
brokerage company and qualitative provision of investment
services and ancillary investment services and procedure
descriptions:
a) a description of the organisational structure of the
investment brokerage company with the obligations and
authorisation of members of the council (where such has been
established) and board clearly specified, and also precisely
specified and assigned tasks of any constituent bodies, and the
duties of the heads and employees of the constituent bodies
providing investment services or ancillary investment services.
If the establishment of branches is intended, the investment
brokerage company shall also submit a description of the
organisational structure of the branches and the duties of heads
and employees of the branches providing investment services or
ancillary investment services;
b) the main principles of the accounting policy and organising
of accounting record-keeping, including record-keeping of
financial instruments and funds related to transactions with
financial instruments;
c) a description of the management information system;
d) the provisions for the protection of the information
system, including the provisions for the protection of the
database for record-keeping of financial instruments and fund
related to transactions with financial instruments;
e) a description of the internal audit system;
f) a description of internal control procedures for prevention
of money laundering of the proceeds from crime and funding of
terrorism which comprises also a description of the procedures
for identification of clients and management of economic
activity;
g) descriptions of policies and procedures for the management
of significant operational risks;
h) descriptions of the conformity policy and procedures for
activities of the company;
i) [21 June 2018];
4) an activity plan for at least the next three years of
operation which provides an expanded reflection of the
operational strategy, financial prognoses (including balance
sheets, draft calculations of returns or losses, draft
calculations of capital adequacy, forecast amount of costs per
year), descriptions of market research, other information which
is considered necessary by the investment brokerage company and
which allows the acquisition of a clear and true representation
with regard to the planned activities;
5) a description of the procedures for provision and control
of investment services and ancillary investment services for the
provision of which the investment brokerage company wants to
obtain a licence;
51) a description of the procedures for
identification of such transactions which are performed, using
inside information or with a view to carry out market
manipulations;
52) a description of the policy for the prevention
of a conflict of interest;
53) a description of the policy for execution of
orders;
6) information on shareholders (members) in the investment
brokerage company:
a) for natural persons - a copy of the page of a passport or
other personal identification document specified by law which
indicates data identifying a person [given name, surname,
citizenship, personal identity number (if any) or year and date
of birth];
b) for legal persons - the firm name, registered office,
registration number and place. Legal persons registered in a
foreign country shall also submit copies of registration
documents;
c) amount of directly and indirectly acquired qualifying
holding of shareholders or members of the investment brokerage
company;
7) a document describing and explaining how the strategy of
the investment brokerage company, in accordance with Section
126.3 of this Law, includes the exercise of the rights
of a shareholder, if the investment brokerage company intends to
provide portfolio management services by including such shares of
a joint stock company in the portfolio the registered office of
which is in a Member State and the shares of which are admitted
to trading on a regulated market of the Member State.
(3) An investment brokerage company need not submit
regulations governing the procedures for the record-keeping of
financial instruments and funds related to transactions with
financial instruments and regulations for the protection of
accounting database of the financial instruments and funds
related to transactions with financial instruments, unless it
plans to hold financial instruments.
(4) [21 June 2018]
(5) The Commission has the right to request the investment
brokerage company to clarify any documents and information
submitted.
(6) If, pending the decision on the issue of the licence,
changes in the information specified in Paragraph two of this
Section occur, or amendments to the documents are made, the
company has an obligation to submit to the Commission the new
information or the full text of such documents with the
amendments made without delay.
(7) [9 June 2005]
[9 June 2005; 4 October 2007; 22 March 2012; 21 June 2018;
20 June 2019]
Section 107.1 Additional
Requirements for the Preparation of Information
(1) Additional requirements for the preparation of the
information specified in Section 107 of this Law shall be
determined by Regulation No 2017/1943.
(2) The sample forms, templates, and procedures necessary for
the submission of the information referred to in Section 107 of
this Law shall be determined by Commission Implementing
Regulation (EU) 2017/1945 of 19 June 2017 laying down
implementing technical standards with regard to notifications by
and to applicant and authorised investment firms according to
Directive 2014/65/EU of the European Parliament and of the
Council.
[21 June 2018; 20 June 2019]
Section 108. Procedures for Granting
a Licence
(1) The Commission shall examine the submission of an
investment brokerage company for the receipt of a licence and
take a decision within six months after receipt of all the
documents specified in this Law and prepared and drawn up in
accordance with the requirements of the laws and regulations
which are necessary for taking the decision.
(2) The Commission shall not issue a licence to an investment
brokerage company if:
1) during the establishment of the investment brokerage
company this Law and other laws and regulations have not been
conformed to;
2) close links of the investment brokerage company with third
parties endanger or may endanger its financial stability or
restrict the right of the Commission to perform the supervisory
functions laid down in the law;
3) foreign laws and other regulatory enactments related to
persons who have close links with the investment brokerage
company restrict the right of the Commission to perform the
supervisory functions laid down in law;
4) the documents submitted by the investment brokerage company
contain incorrect or incomplete information;
5) the members of the board or council of the investment
brokerage company do not conform to the requirements laid down in
this Law and the regulatory provisions of the Commission, and
also if the Commission has not been able to ascertain to a
satisfactory extent that members of the board or council of the
investment brokerage company have impeccable reputation,
sufficient knowledge, skills, and experience and that they
dedicate sufficient amount of time for the performance of the
functions assigned to them by the investment brokerage company,
or if there are objective and demonstrable grounds to believe
that board or council of the investment brokerage company may
pose a threat to its effective, sound, and prudent management,
and also might not adequately consider the interest of its
clients and the integrity of the market;
6) the identity, reputation, or adequacy of free capital of
such persons who have a qualifying holding in the investment
brokerage company cannot be verified, or if the Commission
determines that the financial resources that are invested in the
capital of the investment brokerage company have been acquired in
unusual or suspicious financial transactions or the lawfulness of
the acquisition of these financial resources has not been proved
by documentary evidence;
7) the Commission establishes that the influence of the
persons who have acquired a qualifying holding in the investment
brokerage company would not ensure that the administration of it
would be financially sound, prudent and in conformity with the
laws and regulations governing activities of investment brokerage
companies.
(21) The obstacles which may hinder efficient
fulfilment of the supervisory obligations of the Commission
referred to in Paragraph two, Clauses 2 and 3 of this Section are
specified in Article 10 of Regulation No 2017/1943.
(3) Where the Commission has taken a decision to refuse to
issue a licence, an application for the receipt of the licence
may be resubmitted after the rectification of all deficiencies
referred to in the refusal.
(4) The Commission shall consult with the supervisory
authority of the relevant Member State before issuing a licence
to such investment brokerage company:
1) which is a subsidiary of the investment brokerage company,
credit institution, regulated market operator, or insurance
company licensed in a Member State;
2) which is a subsidiary of such a parent undertaking another
subsidiary of which is an investment brokerage company, credit
institution, or insurance company licensed in a Member State;
3) which is controlled by a person who also controls another
investment brokerage company, credit institution, or insurance
company licensed in a Member State.
(5) The Commission shall, before issuing a licence, and also
during the course of supervision of the licensed investment
brokerage company, request and assess information from the
relevant supervisory authority on suitability of shareholders of
the investment brokerage company and reputation and experience of
the council, if such has been established, and members of the
board if such persons are involved in the administration of
commercial companies of such group of companies in which the
relevant investment brokerage company will be included.
(51) The sample forms, templates, and procedures
for consultations on the cases referred to in Paragraph four of
this Section shall be determined by Regulation No 2017/981.
(6) The Commission shall notify the European Securities and
Markets Authority of issuance of a licence to an investment
brokerage company.
[9 June 2005; 4 October 2007; 13 January 2011; 22 March
2012; 24 April 2014; 21 June 2018]
Section 108.1
Notification Regarding Changes after Obtaining of a Licence
(1) Within seven days after changes in the composition of the
board or council (if such has been established) of an investment
brokerage company, the investment brokerage company shall submit
a notification to the Commission regarding the changes made.
Concurrently with the notification the investment brokerage
company shall submit the information referred to in Section 107,
Paragraph two, Clause 1 of this Law on the new member of the
board or council.
(2) The investment brokerage company shall notify the
Commission of all substantial changes which are related to the
provision of the investment services and ancillary investment
services specified in the licence issued thereto.
[21 June 2018]
Section 109. Change of Investment
Services and Ancillary Investment Services Specified in a
Licence
(1) If an investment brokerage company proposes to supplement
the investment services indicated in the licence or ancillary
investment services with new investment services or ancillary
investment services, or proposes to abandon the provision of some
investment service or ancillary investment service indicated on
the licence, it shall submit to the Commission a relevant
application.
(2) If an investment brokerage company wishes to commence the
provision of new investment services or ancillary investment
services it shall submit concurrently with the submission:
1) a supplement to the activity plan;
2) a description of the procedure of investment services and
ancillary investment services the provision of which the
investment brokerage company wants to commence;
3) amendments to the existing descriptions of policies and
procedures of the investment brokerage company, if such
amendments have to be made in relation to commencement of
provision of new investment services and ancillary investment
services;
4) [9 June 2005];
5) calculation of capital adequacy, if there is a requirement
of greater initial capital for the investment brokerage company
in relation to commencement of provision of new investment
services or ancillary investment services.
(3) The Commission shall, within 30 days after receipt of all
the documents specified in this Law and prepared and drawn up in
conformity with the requirements of laws and regulations which
are necessary for the taking of the decision, examine a
submission from an investment brokerage company regarding any
change in the investment services and ancillary investment
services indicated on the licence.
(4) No State fee shall be paid for any change in the
investment services and ancillary investment services indicated
on the licence.
(5) An investment brokerage company which has lost the right
to the holding of financial instruments as provision of ancillary
investment service shall handle the property owned by its clients
in conformity with the requirements laid down in Division I of
this Law.
[9 June 2005; 24 April 2014; 21 June 2018]
Section 110. Re-registration of a
Licence
(1) If the firm name of an investment brokerage company is
changed, the Commission shall re-register the licence.
(2) The submission of an investment brokerage company for the
re-registration of the licence shall be submitted to the
Commission within five working days after re-registration of the
firm name.
(3) The Commission shall re-register the licence within five
working days after receipt of the submission.
[21 June 2018]
Section 111. Procedures for
Cancellation of a Licence
(1) The Commission shall cancel a licence issued to an
investment brokerage company in the following cases:
1) the investment brokerage company has not commenced
operations within 12 months from the day of issue of the
licence;
2) it is determined that the investment brokerage company has
provided false information in order to obtain the licence;
3) the investment brokerage company has not been providing
investment services and ancillary investment services indicated
in the licence thereof for a period longer than six months;
4) the investment brokerage company fails to conform to the
requirements of laws and regulations;
5) the investment brokerage company has failed to rectify the
violations of the laws and regulations established by the
Commission within the time period stipulated by the
Commission;
6) the investment brokerage company has itself commenced
liquidation proceedings;
7) bankruptcy proceedings for the investment brokerage company
are initiated in accordance with the procedures laid down in the
law;
8) the investment brokerage company has submitted a written
submission regarding the cancellation of the licence;
9) it is established that the investment brokerage company
fails to conform to the requirements laid down in this Law for
obtaining a licence;
10) the prohibition of exercising of the voting right of
shares belonging to shareholders of the investment brokerage
company with a qualifying holding has set in and it lasts for
more than six months.
(11) The Commission shall inform the European
Securities and Markets Authority of cancellation of a licence
issued to an investment brokerage company.
(2) The Commission shall implement the supervision of the
investment brokerage company specified in this Law until the
investment brokerage company has completely settled all of its
obligations with regard to its clients.
(3) An investment brokerage company whose licence has been
cancelled shall handle the property owned by its clients in
conformity with the requirements laid down in Division I of this
Law.
(4) If the Commission has cancelled the licence issued to the
investment brokerage company in the cases specified in Paragraph
one, Clauses 2, 4, and 9 of this Section, information on
cancellation shall be published on the website of the Commission
and stored for five years.
[9 June 2005; 4 October 2007; 13 January 2011; 22 March
2012; 24 April 2014; 21 June 2018]
Chapter
VIII1
Permit for a Holding Company and Licence
(Permit) for an Investment Brokerage Company belonging to a
Third-Country Group
[29 April 2021]
Section 111.1 Additional
Requirements for Holding Companies
(1) A parent financial holding company in a Member State,
parent mixed financial holding company in a Member State,
European Union parent financial holding company and European
Union parent mixed financial holding company, financial holding
company and mixed financial holding company (hereinafter in
Section - the holding company) consolidated supervision of which
is exercised by the Commission in accordance with Section 142 of
this Law shall submit an application and the following
information to the Commission:
1) information regarding the organisational structure of such
group to which the financial holding belongs, indicating the
location and type of activity of the subsidiary and parent
undertaking of the group, and each company belonging to the
group;
2) information regarding at least two members of the board of
the holding company and their conformity with the requirements of
Section 106 of this Law;
3) information regarding the conformity of stockholders or
shareholders of a holding company who have qualifying holding in
the holding company with the requirements of Section 1o of this
Law;
4) information regarding creation of an internal control
system - at least the division of the responsibilities,
functions, and competence in relation to decision-making in the
group, the prevention of conflicts of interest in the group, and
the application of internal procedures and policies in the group
management.
(2) The Commission shall allow the holding company to be a
parent undertaking of an investment brokerage company if:
1) the internal control system in the group conforms to the
purpose of ensuring conformity with the requirements laid down in
this Law and EU Regulation No 575/2013 on a consolidated or
sub-consolidated basis;
2) the organisational structure of such group to which the
holding company belongs does not limit the possibilities of the
Commission as the consolidated supervisor to efficiently
supervise subsidiaries and parent undertakings in relation to
individual, consolidated, or sub-consolidated liabilities;
3) the conformity of the members of the board of the holding
company with the requirements of Section 106 of this Law and the
conformity of stockholders or shareholders who have qualifying
holding in the holding company with the requirements of Section
10 of this Law is ensured.
(3) The holding company shall not need the permit referred to
in Paragraph two of this Section, if all of the following
conditions are met:
1) the principal activity of the holding company is to acquire
holdings in subsidiaries;
2) the holding company is not a resolution entity within the
meaning of the Law on Recovery of Activities and Resolution of
Credit Institutions and Investment Brokerage Companies;
3) a credit institution which is a subsidiary is entitled to
ensure the conformity of the group with prudential requirements
on a consolidated basis and it has all the necessary resources to
ensure it;
4) the holding company does not participate in taking such
management, operational, or financial decisions which affect the
group or its subsidiary which is a credit institution, investment
brokerage company, or financial institution;
5) there are no impediments to the effective supervision of
the group on a consolidated basis.
(4) The Commission as the consolidated supervisor may request
additional information which is necessary for the performance of
the assessment referred to in Paragraphs two and three of this
Section.
(5) The Commission as the consolidated supervisor shall take
the decision on the permit referred to in Paragraph two of this
Section or on the application of the exception referred to in
Paragraph three within four months from the day when complete
information for taking of the decision has been received, but not
later than within six months from the day when the application
and complete information were submitted.
(6) If a holding company is registered in another Member
State, the Commission as the consolidated supervisor shall, prior
to taking of the decision, cooperate with the supervisory
authority of the Member State and provide its assessment thereto
on the conformity of the holding company with the conditions of
Paragraphs two and three of this Section. Within two months from
the day of preparation of the evaluation, the Commission as the
consolidated supervisor shall, having joint discussions and
coordinating opinions with the supervisory authority of the
Member State and the coordinator within the meaning of the
Financial Conglomerates Law, take the decision to grant the
permit for being a parent undertaking of a credit institution to
the holding company or on the application of an exception in
accordance with Paragraph three of this Section. If the
abovementioned decision is not taken, the Commission as the
consolidated supervisor has the right, in order to settle
disputes, to turn to the relevant European Supervisory Authority
for the settlement of disputes in accordance with Regulation (EU)
No 1093/2010 of the European Parliament and of the Council of 24
November 2010 establishing a European Supervisory Authority
(European Banking Authority), amending Decision No 716/2009/EC
and repealing Commission Decision 2009/78/EC.
[29 April 2021]
Section 111.2 Additional
requirements for an investment brokerage company of the
third-country group
(1) An investment brokerage company belonging to a
third-country group the total value of assets of which in the
European Union is at least EUR 40 billion may receive the licence
(permit), register with the Commercial Register and operate in
the Republic of Latvia only if at least one of the following
conditions has been met:
1) the investment brokerage company is the only credit
institution or investment brokerage company of the third-country
group in the European Union;
2) the investment brokerage company has a parent undertaking
registered in the European Union;
3) the investment brokerage company is a parent undertaking
for a credit institution or investment brokerage company
registered in the European Union.
(2) The total value of assets of a third-country group in the
European Union shall consist of the following sum:
1) the sum total of the value of assets of each credit
institution and investment brokerage company of the third-country
group in the European Union on the basis of the data of
consolidated financial statements or, if consolidated data is not
available, - on the basis of the data of individual financial
reports;
2) the sum total of the value of assets of each branch of the
third-country group which has received a permit for operation in
the European Union as a credit institution or investment
brokerage company.
(3) If an investment brokerage company belongs to a
third-country group and a credit institution or investment
brokerage company of the Member State also belongs to such group,
then the third-country group has an obligation to create one
parent undertaking in the European Union. The Commission may
permit the creation of a second parent undertaking in the
European Union if it executes consolidated supervision of the
credit institution in accordance with Section 142 of this Law and
one of the following conditions has been met:
1) the creation of one parent undertaking in the European
Union would not ensure the requirement fr separating activities
as stipulated by the provisions or supervisory authority of such
foreign country in which the main management of the parent
undertaking of the third-country group is located;
2) the creation of one parent undertaking in the European
Union would reduce the efficiency of resolvability in comparison
to the case when two parent undertakings are in the European
Union.
(4) In the case referred to in Paragraph three of this
Section, a parent undertaking of an investment brokerage company
may be a credit institution registered in a Member State or a
holding company which has been granted a permit in accordance
with Section 111.1, Paragraph two of this Law. A
parent undertaking may be and investment brokerage company if the
no credit institution of the Member State belongs to the
third-country group or the Commission allows to create the second
parent undertaking in the European Union with the provision of
investment services.
(5) The Commission shall provide the following information to
the European Banking Authority in relation to a third-country
group operating in the territory of the Republic of Latvia:
1) regarding the credit institution and investment brokerage
company which belong to any third-country group - the name and
the total value of assets;
2) regarding the branch which is operating in the Republic of
Latvia as a credit institution or investment brokerage company -
the name, the total value of assets, and the type of
activity;
3) regarding the credit institution and the parent undertaking
of the investment brokerage company which is registered in the
Republic of Latvia - the name and the name of the third-country
group to which it belongs.
[29 April 2021]
Chapter
IX
Provision of Investment Services in the Internal Market of the
European Union
Section 112. Procedures by which an
Investment Brokerage Company and Credit Institution Registered in
a Member State Commences Provision of Investment Services and
Ancillary Investment Services in the Republic of Latvia
(1) An investment brokerage company and credit institution
registered in the Republic of Latvia are entitled to provide only
such investment services and ancillary investment services for
the provision of which the investment brokerage company has
received a licence in the home country thereof.
(2) A branch of an investment brokerage company which is
registered in a Member State may commence the provision of
investment services and ancillary investment services in the
Republic of Latvia only after:
1) the Commission has received a notification from the
supervisory authority of the home country, which shall
include:
a) a certification stating that the relevant investment
brokerage company has a valid licence for the provision of
investment services;
b) the operational programme of the branch;
c) the address of the branch;
d) the given name, surname, citizenship, personal identity
number (if any) or year and date of birth of the head of the
branch;
e) information on the system for the protection of investors
in which the relevant investment brokerage company is a
participant;
f) a written declaration by the supervisory authority of the
home country stating that, prior to the commencement of internal
control, it will in a timely manner inform the Commission of
examinations at any branches of investment brokerage companies in
the Republic of Latvia and will not hinder representatives of the
Commission from any participation in those examinations, and also
submit to the Commission a notification regarding the examination
performed after the end of the examination;
2) the Commission has informed the supervisory authority of
the home country that it is ready to commence the supervision of
the branch of the investment brokerage company, or two months
have passed since the day the Commission has received from the
supervisory authority of the home country the notification
referred to in Paragraph two, Clause 1 of this Section.
(3) An investment brokerage company registered in a Member
State has an obligation to inform the supervisory authority and
the Commission 30 days in advance of any amendments to the
information referred to in Paragraph two, Clause 1 of this
Section, and also of the intention to terminate operations at the
branch.
(4) An investment brokerage company registered in a Member
State is entitled to commence the provision of investment
services and investment brokerage services in the Republic of
Latvia without opening a branch, provided that the Commission has
received a relevant notification from the supervisory authority
of the home country of such investment brokerage company and has
sent approval to such authority regarding receipt of the
notification.
(5) If an investment brokerage company registered in other
Member State, upon commencing the provision of investment
services and ancillary investment services in the Republic of
Latvia, plans to use tied agents registered in its home Member
State, the supervisory authority of the home state of the
investment brokerage company shall, within one month after
receipt of information, notify the identifying data of such tied
agents to the Commission which the investment brokerage company
plans to use for the provision of investment services in Latvia.
The Commission shall make public the list of tied agents.
(6) If an investment brokerage company uses a tied agent
registered outside its home Member State, such tied agent shall
be considered equivalent to a branch and the requirements of the
laws and regulations for a branch of an investment brokerage
company shall apply thereto.
(7) If a credit institution registered in other Member State,
upon commencing the provision of investment services and
ancillary investment services in the Republic of Latvia, plans to
use tied agents registered in its home Member State, the
supervisory body of the home state of the credit institution
shall, within one month after receipt of information, notify the
identifying data of such tied agents to the Commission which the
credit institution plans to use for the provision of investment
services in Latvia. The Commission shall publish a list of tied
agents on its website.
(8) If a credit institution uses a tied agent registered
outside its home Member State, such tied agent shall be
considered equivalent to a branch and the requirements of the
laws and regulations for a branch of a credit institution shall
apply thereto.
[4 October 2007; 21 June 2018]
Section 113. Procedures by which an
Investment Brokerage Company and Credit Institution Registered in
the Republic of Latvia Commences the Provision of Investment
Services and Ancillary Investment Services in Another Member
State
(1) An investment brokerage company and credit institution
registered in the Republic of Latvia is entitled to provide only
such investment services and ancillary investment services in
another Member State for the provision of which it has received a
licence from the Commission.
(2) An investment brokerage company and credit institution
registered in the Republic of Latvia is entitled to commence the
provision of investment services and ancillary investment
services in another Member State with or without opening a
branch.
(3) An investment brokerage company registered in the Republic
of Latvia which proposes to commence the provision of investment
services and ancillary investment services in any of the Member
States shall submit a submission to the Commission. It shall
specify in the submission the investment services and ancillary
investment services intended to be provided, the Member State in
which the provision of such investment services and ancillary
investment services is intended, and also the manner in which
they are intended to be provided (with or without opening a
branch or using tied agents). If the investment brokerage company
plans to use tied agents, it shall submit data identifying such
agents to the Commission. Upon request of the supervisory
authority of the host Member State the Commission shall provide
to it the data identifying those tied agents which the investment
brokerage company plans to use in the abovementioned Member
State.
(4) An investment brokerage company which wishes to commence
the provision of investment services and ancillary investment
services in any of the Member States shall, upon opening a
branch, specify in the submission the address of the branch and
the information referred to in Section 107, Paragraph two, Clause
1 of this Law on the head of the branch. The investment brokerage
company shall append such documents to the submission which give
fair and true representation regarding the planned activities of
the branch, investment services and ancillary investment services
to be provided, structure and organisation of work corresponding
thereto, and also information on whether the relevant branch
plans to use tied agents, and if plans - the identifying data of
tied agents.
(41) If an investment brokerage company plans to
use tied agents registered in another Member State, the
identifying data of tied agents, and also a description of the
planned use of such agents and organisational structure, inter
alia, reporting channels, shall be indicated in the
submission, indicating the type of involvement of such agents in
the corporate structure of the investment brokerage company.
(42) If an investment brokerage company uses a tied
agent registered outside its home Member State, such tied agent
shall be considered equivalent to a branch and the requirements
of the laws and regulations for a branch of an investment
brokerage company shall apply thereto.
(5) The Commission shall examine the submission for the
commencement of the provision of investment services and
ancillary investment services in other Member State within 30
days after receipt of all necessary documents prepared and drawn
up in accordance with the requirements of this Law, and inform
the supervisory authority of the relevant Member State and the
relevant investment brokerage company of the decision thereof in
writing. The Commission shall take a decision not allow the
investment brokerage company to commence provision of investment
services and ancillary investment services in any of Member
States by opening a branch, if the management structure or
financial status of the investment brokerage company fails to
conform to the planned activity.
(51) The Commission shall, within six months after
receipt of all the necessary documents prepared and drawn up in
accordance with the requirements of this Law, take the decision
not to allow the investment brokerage company to commence the
provision of investment services and ancillary investment
services in any of the Member States by opening a branch or using
tied agents, if the administrative structure or financial
situation does not conform to the planned activity. The
Commission shall inform the supervisory authority of the relevant
Member State and the investment brokerage company of its decision
in writing.
(6) Concurrently with the decision referred to in Paragraph
five of this Section, the Commission shall send the information
provided by the investment brokerage company and information on
the system for the protection of investors and maximum amounts of
compensation in force in the Republic of Latvia to the
supervisory authority of the relevant Member State.
(7) An investment brokerage company shall, not later than one
month prior to making any amendments to the information referred
to in Paragraphs three, four, and 4.1 of this Section
or the intended termination of activities at the branch, inform
the Commission and supervisory authority of the relevant Member
State in writing of making of amendments, and also of the
intention to terminate activities at the branch.
(8) Within 30 days from the day of receipt of the documents,
the Commission shall examine the documents referred to in
Paragraph seven of this Section and inform the supervisory
authority of the relevant Member State and the investment
brokerage company of the decision thereof in writing.
(9) An investment brokerage company may commence provision of
investment services and ancillary investment services in a Member
State without opening a branch after the Commission has informed
the supervisory authority of the relevant Member State in
accordance with the procedures laid down in Paragraph five of
this Section.
(10) An investment brokerage company may commence activities
of a branch, if the Commission has received a notification of the
supervisory authority of the relevant Member State that it is
ready to commence supervision of the branch of the investment
brokerage company, or two months have passed since the day when
the Commission has sent the notification referred to in Paragraph
five of this Section to the supervisory authority of the relevant
Member State.
(11) A credit institution which wishes to commence the
provision of investment services and ancillary investment
services in any of Member States without opening a branch, but
using tied agents registered in another Member State, the
identifying data of tied agents, a description of the planned use
of such agents and organisational structure, inter alia,
reporting channels, and also the type of involvement of such
agents in the corporate structure of the credit institution shall
be indicated in addition to the information referred to in
Paragraph three of this Section.
(12) The Commission shall examine the submission for the
commencement of the provision of investment services and
ancillary investment services in other Member State, using a tied
agent registered in such Member State, within one month after
receipt of all necessary documents prepared and drawn up in
accordance with the requirements of this Law, and inform the
supervisory authority of the relevant Member State and the
relevant credit institution of the decision thereof in
writing.
(13) The Commission shall, within three months after receipt
of all the necessary documents prepared and drawn up in
accordance with the requirements of this Law, take the decision
not to allow the credit institution to commence the provision of
investment services and ancillary investment services in any of
the Member States by using tied agents, if the structure or
financial situation of the credit institution does not conform to
the planned activity. The Commission shall inform the supervisory
authority of the relevant Member State and the credit institution
of its decision in writing.
(14) The tied agent of a credit institution may commence
activity, if the Commission has received a notification of the
supervisory authority of the relevant Member State or two months
have passed since the day when the Commission has sent the
notification referred to in Paragraph twelve of this Section to
the supervisory authority of the relevant Member State.
(15) If a credit institution uses a tied agent registered
outside its home Member State, such tied agent shall be
considered equivalent to a branch and the requirements of the
laws and regulations for a branch of a credit institution shall
apply thereto.
(16) A credit institution shall, not later than one month
prior to making any amendments to the information referred to in
Paragraph eleven of this Section or the intended termination of
activities at the branch, inform the Commission and supervisory
authority of the relevant Member State in writing of making of
amendments.
[4 October 2007; 21 June 2018]
Section 113.1 Procedures
for the Commencement of Activities in Another Member State as an
Operator of a Multilateral Trading Facility and an Operator of an
Organised Trading Facility Licensed in the Republic of Latvia
(1) An operator of the MT facility or an operator of the OT
facility licensed in the Republic of Latvia is entitled to
commence activity in another Member State to facilitate access by
investment brokerage companies and credit institutions registered
in such Member State to the MT facility or OT facility.
(2) An operator of the MT facility or an operator of the OT
facility licensed in the Republic of Latvia who wishes to
commence activities in any of the Member States shall submit a
submission to the Commission where he or she shall specify such
Member State.
(3) The Commission shall, within one month after receipt of
the submission, send a notification to the supervisory authority
of the relevant Member State. An operator of the MT facility or
an operator of the OT facility may commence activities from the
day when the supervisory authority of the relevant Member State
has received a notification of the Commission.
(4) The Commission, upon request of the supervisory authority
of the relevant Member State, shall send identifying data on an
investment brokerage company or credit institution registered in
the Republic of Latvia which is a member or participant to the MT
facility or OT facility in such Member State.
[21 June 2018]
Section 113.2 Procedures
for the Commencement of Activities in the Republic of Latvia as
an Operator of a Multilateral Trading Facility and an Operator of
an Organised Trading Facility Licensed in Another Member
State
(1) An operator of the MT facility or an operator of the OT
facility registered in another Member State is entitled to carry
out activities in the Republic of Latvia to promote access by
investment brokerage companies and credit institutions registered
in the Republic of Latvia to the MT facility or OT facility.
(2) An operator of the MT facility or an operator of the OT
facility registered in another Member State is entitled to
commence activities in the Republic of Latvia, if the Commission
has received a relevant notification from the supervisory
authority of the home country of the operator of the MT facility
or the operator of the OT facility.
(3) The Commission has the right to request identifying data
on members or participants of the MT facility or OT facility
registered in the Republic of Latvia from the supervisory
authority of the home country of the operator of the MT facility
or the operator of the OT facility.
[21 June 2018]
Section 113.3 Additional
Requirements for the Provision of Investment Services in the
Internal Market of the European Union
(1) A more detailed information to be notified to the subjects
referred to in this Chapter shall be determined by Commission
Delegated Regulation (EU) 2017/1018 of 29 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the
Council on markets in financial instruments with regard to
regulatory technical standards specifying information to be
notified by investment firms, market operators and credit
institutions.
(2) The sample forms, templates, and procedures necessary for
the exchange of the information referred to in this Chapter shall
be determined by Commission Implementing Regulation (EU)
2017/2382 of 14 December 2017 laying down implementing technical
standards with regard to standard forms, templates and procedures
for the transmission of information in accordance with Directive
2014/65/EU of the European Parliament and of the Council.
[21 June 2018; 20 June 2019]
Chapter
IX.1
Foreign Investment Brokerage Companies
[21 June 2018]
Section 113.4 Rights of
Foreign Investment Brokerage Companies to Provide Investment
Services and Ancillary Investment Services
(1) A foreign investment brokerage company which is planning
to provide investment services or ancillary investment services
in Latvia to clients with the status of a retail client or to
clients which, in accordance with Section 124.1,
Paragraph five of this Law, have been granted the status of a
professional client has an obligation to create a branch and to
receive a permit of the Commission for the operation of a
branch.
(2) A foreign investment brokerage company is entitled to
receive a permit for the provision of investment services with or
without ancillary investment services only if:
1) the competent supervisory authority of its home country has
previously issued a permit for the provision of the relevant
investment services and ancillary investment services in the home
country of the foreign brokerage company, if the provision of
such services is being supervised, and also it is ensured within
the scope of supervision of the foreign competent supervisory
authority that the foreign investment brokerage company pays due
regard to any recommendations of the Financial Action Task Force
(FATF) in the field of combating money laundering and financing
of terrorism;
2) cooperation arrangements that include provisions regulating
the exchange of information for the purpose of preserving the
integrity of the market and protecting investors are in place
between the Commission and the competent supervisory authority of
the home country of the investment brokerage company;
3) the initial capital of the foreign investment brokerage
company conforms to the requirements laid down in Section 120 of
this Law;
4) the person or persons responsible for the branch of the
foreign investment brokerage company conform to the requirements
provided for in Sections 106 and 106.1 of this Law and
the regulatory provisions of the Commission;
5) such agreements have been signed between Latvia and the
home country of the investment brokerage company which fully
comply with the standards laid down in Article 26 of the Model
Tax Convention on Income and on Capital of the Organisation for
Economic Co-operation and Development (OECD) and ensure an
effective exchange of information in tax matters, including, if
any, multilateral tax agreements;
6) the foreign investment brokerage company is a participant
in to an investor protection system which has been recognised in
its home country and is equivalent to the investor protection
system of Latvia.
(3) A foreign brokerage company which is planning to obtain a
permit for the provision of investment services and ancillary
investment services in the territory of Latvia with the
intermediation of a branch shall submit the following to the
Commission:
1) the name of the institution which is responsible for the
supervision of the foreign investment brokerage company in its
home country. If more than one institution is responsible for
supervision, information on the fields of competence of such
institutions shall be submitted;
2) any corresponding information on the foreign investment
brokerage company (the name, legal form, registered office and
actual address, members of the board and council, shareholders),
its operational programme, listing the investment services and
ancillary investment services which it is preparing to provide,
the organisational structure of its branch, including a
description of any essential functions of the operation, if it is
planned to entrust such activities to third parties;
3) information on such persons of the foreign investment
brokerage company who are responsible for the management of the
branch, and documents proving the compliance of such persons with
the requirements provided for in Sections 106 and
106.1 of this Law and the regulatory provisions of the
Commission;
4) information attesting that the initial capital of the
foreign investment brokerage company conforms to the requirements
laid down in Section 120 of this Law.
(4) The Commission shall examine the submission of the foreign
investment brokerage company for the receipt of a permit and take
a decision within six months after receipt of all the documents
specified in this Law and prepared and drawn up in accordance
with the requirements of the laws and regulations which are
necessary for taking of the decision.
(5) The Commission shall issue the permit referred to in
Paragraph one of this Section only in case if:
1) all the conditions of Paragraph two of this Section have
been met;
2) the Commission has ascertained that the foreign investment
brokerage company conforms to the requirements of Section 102,
Paragraphs seven, eight, nine, ten, eleven, twelve, Sections 124,
124.2, Section 125.1, Paragraph six,
Section 126, Paragraph one, Sections 126.2, 127, 128,
Section 128.1, Paragraph one, Sections
128.2, 128.3, 129, 129.1,
132.1, 133.4, 133.5,
133.6, 133.7, 133.8 of this Law
and Articles 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17,
18, 19, 20, 21, 22, 23, 24, 25, and 26 of Regulation No
600/2014.
(6) The conformity of the operation of the branch of the
foreign investment brokerage company with the requirements of
this Law shall be supervised by the Commission.
(7) Additional requirements for the branch of the foreign
investment brokerage company for the provision of investment
services shall be determined by Regulation No 2017/565.
[21 June 2018]
Section 113.5 Provision
of Investment Services Upon Initiative of a Client
If a retail client or professional client located in Latvia,
upon its own initiative, proposes the provision of an investment
service by a foreign investment brokerage company, the
requirement provided for in Section 113.4 of this Law
to obtain a permit shall not be applied to the service which is
provided by the foreign investment brokerage company to the
abovementioned person. Such initiative of the client shall not
give the right for the particular foreign investment brokerage
company to sell new investment products to such client or to
provide new investment services otherwise than through a
branch.
[21 June 2018]
Section 113.6 Procedures
for the Cancellation of the Permit
The Commission shall cancel the permit referred to in Section
113.4 of this Law, if a foreign investment brokerage
company:
1) has not commenced the operation within 12 months after the
day when the permit was issued;
2) expressly renounces the permit;
3) has not performed the activity indicated in the permit for
more than six months unless the Commission has issued a permit
providing for special conditions for the use of the permit;
4) has provided false information or acted unlawfully in order
to receive the permit;
5) does not conform to the requirements laid down in this Law
for the receipt of the permit anymore;
6) has seriously and systematically infringed the provisions
of this Law and other laws and regulations.
[21 June 2018]
Chapter X
Annual Statements of an Investment Brokerage Company
Section 114. Rights of the
Commission
(1) The Commission shall determine the procedures for
preparing an annual statement and consolidated annual statement
of the investment brokerage company in accordance with the laws
and regulations regarding conducting of accounting and
international financial reporting standards.
(2) [29 May 2008]
(3) The Commission is entitled to require that an investment
brokerage company submits additionally an extended report
prepared by sworn auditors with comments regarding adequacy of
the internal control system, an operational risk analysis of the
investment brokerage company, and an assessment regarding
conformity with the requirements of laws and regulations and the
regulatory provisions and orders of the Commission.
[29 May 2008]
Section 115. Annual Statements of an
Investment Brokerage Company
(1) An investment brokerage company shall prepare accounts for
each year of operation which shall include a balance sheet,
off-balance items, a profit or loss account, a statement of any
changes in capital and reserves, a cash flow statement and
annexes, and also a report by the management of the investment
brokerage company.
(2) Annual statements shall be prepared in accordance with
this Law, and also instructions by the Commission arising from
this Law and international financial reporting standards. Annual
statements shall give a true and fair representation of the
assets and liabilities of the investment brokerage company,
financial position, the results of operations and cash flow
thereof.
(3) Where the acquisition of a true and fair representation of
an investment brokerage company is impossible in accordance with
the requirements of Paragraph two of this Section, the annual
statements shall also include relevant additional
information.
[9 June 2005]
Section 116. Evaluation Principles
for Items in the Annual Statements of an Investment Brokerage
Company
[29 May 2008]
Section 117. Report by Management on
the Annual Statements of an Investment Brokerage Company
(1) The report shall include a characterisation of the
financial status and development of the investment brokerage
company. If the results of operations at the investment brokerage
company which are reflected in the annual statements have been
significantly affected by special circumstances, or the annual
statements may be considered as inadequate, additional
information shall be provided in a separate paragraph of the
report.
(2) The report shall also provide information on important
corporate actions where such events have taken place after the
end of the reporting year, on anticipated developments at the
investment brokerage company and important development
measures.
Section 118. Verification of the
Annual Statements of an Investment Brokerage Company
(1) A sworn auditor shall verify the annual statements of an
investment brokerage company. If such verification has not been
performed, it is prohibited for the meeting of shareholders
(members) to approve the annual statements.
(2) Upon performance of the verification of the annual
statements, the sworn auditor has the right to become acquainted
with the assets, accounting records, and supporting documents
thereof, and also other information on the investment brokerage
company. The board, responsible officials and employees of the
investment brokerage company have an obligation to provide to the
sworn auditor all of the required information.
(3) Where the opinion of the sworn auditor includes comments
(objections), dividends may be disbursed only by consent of the
Commission.
(4) A sworn auditor has a duty, upon request of the
Commission, to provide any information thereto on verification
carried out and facts established therein.
(5) A sworn auditor shall, without delay, submit a written
report to the Commission on any violations of laws and
regulations or other facts ascertained during the provision of
auditing services and during the fulfilment of expert's or
confidence task due to which fulfilment of liabilities or
continuity of the activities of the investment brokerage company,
or interests of the clients of the investment brokerage company
are exposed to danger, or due to which the sworn auditor refuses
to give his or her opinion or gives his or her opinion with
objections. This report shall concurrently be submitted to the
management of the investment brokerage company, unless there are
compelling reasons for not doing it.
(6) The sworn auditor has an obligation to immediately submit
a written report to the Commission on any facts referred to in
Paragraph five of this Section which have been discovered during
the provision of auditing services to the client, which has a
close relationship with the investment brokerage company in the
form of holding or control, or during the fulfilment of expert's
or confidence task assigned by this client.
(7) Provision of the information referred to in Paragraphs
four and five of this Section to the Commission shall not be
considered disclosure of non-disclosable information, and civil
liability shall not be established for the conduct of the sworn
auditor.
(8) An investment brokerage company shall notify the
Commission of paying out the dividends one month in advance. The
Commission has the right to prohibit an investment brokerage
company from paying out the dividends if, as a result of paying
out the dividends, the investment brokerage company fails to
conform to the indicators and restrictions, the amount (level) of
which affects paying out of the dividends, determined in this Law
and directly applicable legal acts of the European Union.
[4 October 2007; 24 April 2014]
Section 119. Duties of an Investment
Brokerage Company
(1) An investment brokerage company shall inform the
Commission of all circumstances which may significantly affect
further operations at the investment brokerage company.
(2) The investment brokerage company shall, within 10 days
after receipt of the report from a sworn auditor addressed to the
management thereof, but not later than 1 April of the year
following the reporting year, submit to the Commission a copy of
such report.
(21) The investment brokerage company shall, not
later than within 10 days after approval of the annual statement
and not later than three months after the end of the reporting
year, submit a copy of the annual statement and of the report of
a sworn auditor to the territorial office of the State Revenue
Service according to the registration place of the investment
brokerage company, together with an extract from the minutes of
the meeting of shareholders or members regarding approval of the
annual statement. The investment brokerage company which draws up
a consolidated annual statement in addition to that laid down in
the first sentence of this Paragraph shall, not later than within
10 days after approval of the consolidated annual statement and
not later than seven months after the end of the reporting year,
also submit to the territorial offices of the State Revenue
Service according to the registration place of the investment
brokerage company a copy of the consolidated annual statement and
of a report of the sworn auditor together with an extract from
the minutes of the meeting of shareholders or members regarding
approval of the consolidated annual statement. The investment
brokerage company shall submit the documents referred to in this
Paragraph in printed form or in electronic form.
(22) The State Revenue Service shall, not later
than within five working days, hand over the documents referred
to in Paragraph 2.1 of this Section, if they have been
submitted in electronic form, or electronic copies of such
documents, if they have been submitted in printed form, to the
Enterprise Register in electronic form. The Enterprise Register
shall ensure public access to the received documents. The
procedures for handing over and certification of electronic
documents shall be determined by an interdepartamental agreement
entered into by the State Revenue Service and the Enterprise
Register.
(23) The Enterprise Register shall, after receipt
of the documents referred to in Paragraph 2.2 of this
Section not later than within five working days, publish a
notification in the official publication Latvijas
Vēstnesis that the information referred to in Paragraph
2.1 of this Section is available in the Enterprise
Register.
(3) An investment brokerage company, to which the regulatory
capital adequacy requirements are applicable individually and on
the level of consolidation group in accordance with this Law, in
addition to that laid down in Paragraph 2.1 of this
Section shall ensure itself that the annual account is made
public together with a report of the sworn auditor not later than
on 1 April of the year following the reporting year, but the
consolidated annual statement together with a report of the sworn
auditor - not later than seven months after the end of the
reporting year. The abovementioned annual statement and the
consolidated annual statement shall be identical to the one
examined by a sworn auditor. The investment brokerage company may
make the relevant information public on its website or also
choose another corresponding information medium or place for
making the information public.
(4) [29 May 2008]
(5) [29 May 2008]
(6) [29 May 2008]
(7) A branch of a foreign investment brokerage company or of
an investment brokerage company of a Member State shall ensure
that the annual statement of the foreign investment brokerage
company or investment brokerage company of a Member State is made
public not later than seven months after the end of the reporting
year. At least the balance sheet, profit or loss account of the
annual statement and opinion of the sworn auditor must be
translated into Latvian. A branch of a foreign investment
brokerage company or of an investment brokerage company of a
Member State may make the relevant information public on its
website or choose other appropriate information medium or place
for making the information public.
[4 October 2007; 29 May 2008; 9 July 2013]
Chapter
XI
Requirements Regulating Activities of an Investment Brokerage
Company
[24 April 2014]
Section 119.1 General
Provisions
(1) The requirements laid down in Section 122 of this Law
shall be binding upon such investment brokerage company to which
the restrictions of large exposures as defined in Part Four of
Regulation No 575/2013 apply. The requirements laid down in
Sections 121.1, 122.1, 122.2,
122.3, 123.1, 123.2,
123.3, 123.4, and 123.5 of this
Law shall be binding upon such investment brokerage company which
is an institution within the meaning of the Regulation No
575/2013.
(2) Within the meaning of this Chapter the term "host Member
State" conforms to the term used in Regulation No 575/2013.
(3) The Commission has the right to determine other
requirements regulating the activities of investment brokerage
companies in addition to the requirements laid down in this Law
and Regulation No 575/2013 in order to reduce the risk of
activities of such companies and to protect the interests of
investors.
[24 April 2014]
Section 120. Initial Capital of an
Investment Brokerage Company
(1) An investment brokerage company proposing to obtain a
licence shall ensure that the initial capital thereof amounts to
at least:
1) EUR 50 000, if the investment brokerage company proposes to
provide any of the investment services referred to in Section 3,
Paragraph four, Clause 1, 2, 4, 5, or 7 of this Law, except for
the case when the investment brokerage company proposes to
provide only the investment service referred to in Section 3,
Paragraph four, Clause 1 or 8 of this Law;
2) EUR 125 000, if the investment brokerage company proposes
to provide at least one of the investment services referred to in
Section 3, Paragraph four, Clause 1, 2, 4, 5, or 7 of this Law
and to hold the financial instruments and funds of clients;
3) EUR 730 000, if the investment brokerage company proposes
to provide investment services at least one of which is the
investment service referred to in Section 3, Paragraph four,
Clause 3, 6, 8, or 9 of this Law.
(2) An investment brokerage company which wants to obtain a
licence only for the provision of the investment services
referred to in Section 3, Paragraph four, Clause 1 or 5 of this
Law without holding of the financial instruments and funds of
clients shall ensure that one of the requirements referred to
hereinafter is conformed to:
1) its initial capital is at least EUR 50 000;
2) it insures its civil liability which sets in when damages
are incurred to clients due to mistakes of professional
activities or negligence of the investment brokerage company. The
minimum amount of civil liability may not be less than EUR 1 500
000 a year, but for one insurance case - less than EUR 1 000
000;
3) it, by combining the initial capital and civil liability
insurance amount, ensures coverage to such extent which is
equivalent for conformity with the requirements referred to in
Clause 1 or 2 of this Paragraph.
(3) A commercial company which wants to obtain a licence only
for the provision of the investment services referred to in
Section 3, Paragraph four, Clauses 1 and 5 of this Law without
holding financial instruments and funds of clients and which is
registered in the register of insurance and re-insurance
intermediaries in the status of an insurance broker, in
accordance with the Activities of Insurance and Reinsurance
Intermediaries Law, in addition to the requirements laid down in
the Activities of Insurance and Reinsurance Intermediaries Law
shall ensure that one of the following requirements is conformed
to in respect of the civil liability insurance amount:
1) its initial capital is at least EUR 25 000;
2) in addition it insures its civil liability which sets in
when damages are incurred to clients due to mistakes of
professional activities or negligence of the investment brokerage
company. The minimum amount of civil liability may not be less
than EUR 750 000 a year, but for one insurance case - less than
EUR 500 000;
3) it, by combining the initial capital and civil liability
insurance amount, ensures coverage to such extent which is
equivalent for conformity with the requirements referred to in
Clause 1 or 2 of this Paragraph.
(4) The minimum amount of the requirements laid down in
Paragraphs two and three of this Section which is expressed in
euro, shall be reviewed once a year and indexed, if in accordance
with information provided by the statistical office Eurostat the
consumer price index has changed in the European Economic Area
states and the European Commission has taken a decision to carry
out indexation.
(5) Own funds of an investment brokerage company may not be
less than the minimum initial capital laid down in this
Section.
[29 March 2007; 4 October 2007; 13 January 2011; 19
September 2013; 21 June 2018; 12 December 2019]
Section 121. Own Funds of an
Investment Brokerage Company
[24 April 2014]
Section 121.1
Requirements for Capital Buffers, Restrictions of Distribution
and Capital Conservation Plan
An investment brokerage company with a licence which allows it
to provide the investment services referred to in Section 3,
Paragraph four, Clauses 5 and 6 of this Law shall be bound by the
provisions of Chapter IV of the Credit Institution Law regarding
the capital conservation buffer, counter-cyclical capital buffer,
capital buffer of a global and other systematically important
institution, systemic risk capital buffer, requirements for total
capital buffers, restrictions of distribution and capital
conservation plan.
[24 April 2014]
Section 122. Restrictions of
Exposures of an Investment Brokerage Company
(1) Exposures with shareholders (members) of an investment
brokerage company who have a qualifying holding in the investment
brokerage company, and spouses, parents and children of these
shareholders - natural persons, members of the board and council
of the investment brokerage company, heads of the internal audit
service, risk directors, compliance officers and company
controllers, spouses, parents and children of such persons, and
also with commercial companies, in which the abovementioned
persons have a qualifying holding, may not in total exceed 20 per
cent of own funds of the investment brokerage company which is
applicable to the determination of restrictions of large
exposures in accordance with the Regulation No 575/2013.
(2) The procedures for determination of the amount of
exposures with the persons referred to in Paragraph one of this
Section shall be determined by the Commission.
[24 April 2014; 29 April 2021]
Section 122.1 Risk
Management and Action Plans
(1) An investment brokerage company shall draw up and
implement a prudent strategy, policies, procedures, and systems
which allow to timely identify, assess, analyse and manage credit
risk, concentration risk, market risk, operational risk, interest
rate risk in the non-trading portfolio, risk of excessive
leverage and other risks of importance to the investment
brokerage company.
(2) The strategy, policies, procedures, and systems of an
investment brokerage company shall conform to the complexity and
amount of its activities, and also the permissible risk level
determined for the council of an investment brokerage company (or
a meeting of members, if no council has been established) and
shall be drawn up taking into consideration the systematic
importance of an investment brokerage company in each Member
State where it operates.
(3) An investment brokerage company shall draw up action plans
for emergency situations, liquidity restoration and for ensuring
continuity of the activities, and also determine the measures
necessary for their implementation.
(4) The Commission shall determine requirements for risk
management of an investment brokerage company, action plans for
emergency situation, liquidity restoration and for ensuring
continuity of the activities.
[24 April 2014]
Section 122.2 Drawing up
of a Recovery Plan and an Adjustment Plan
(1) An investment brokerage company shall draw up, maintain,
and update its recovery plan for restoration of financial
stability after it has been significantly deteriorated.
(2) The Commission shall draw up adjustment plans for
investment brokerage companies in order to ensure continuity of
their activities and to preserve stability of the financial
sector.
(3) The Commission shall determine the requirements for the
content and drawing-up procedures of the plan referred to in
Paragraph one of this Section.
(4) The Commission may set reduced requirements for drawing up
the recovery plan referred to in Paragraph one of this Section or
need not to draw up the adjustment plan for an investment
brokerage company referred to in Paragraph two of this Section,
if after consultation with the Bank of Latvia it has concluded
that insolvency of an investment brokerage company, taking into
consideration the size, business model, and association of the
investment brokerage company with other investment brokerage
companies and financial system, or other circumstances cannot
pose a threat to the stability or funding conditions of the
financial market and other investment brokerage companies.
(5) The Commission shall timely notify the European Banking
Authority of the time and agenda of the meetings that it
organises in relation to the drawing up of recovery and
adjustment plans for investment brokerage companies.
[24 April 2014]
Section 122.3 Calculation
of Own Funds Requirements for Benchmark Portfolios of an
Investment Brokerage Company
(1) An investment brokerage company which has received a
permit for the use of risk-weighted exposure amounts in its
internal approach or its own funds requirements for the
calculation shall, except for the permit for the use of its own
funds requirements for operational risk in its internal approach
for the calculation, in addition to the requirements as defined
in the Regulation No 575/2013, calculate the risk-weighted
exposure amounts or its own funds requirements for the exposures
and positions of financial instruments included in the benchmark
portfolio or portfolios determined by the European Banking
Authority.
(2) Upon consulting with the European Banking Authority the
Commission is entitled to determine a benchmark portfolio or
portfolios different from those determined by the European
Banking Authority.
(3) An investment brokerage company shall prepare and at least
once a year submit a report to the Commission on the calculation
of the risk-weighted exposure amounts or own funds requirements
for the exposures and positions of financial instruments included
in the benchmark portfolio or portfolios determined by the
European Banking Authority, and an explanation regarding the
methodology used for the calculation referred to in Paragraph one
of this Section.
(4) If the Commission has determined a benchmark portfolio or
portfolios different from those determined by the European
Banking Authority, an investment brokerage company shall prepare
and at least once a year submit a separate report to the
Commission on the calculation of the risk-weighted exposure
amounts and own funds requirements for the exposures and
positions of financial instruments included in the benchmark
portfolio or portfolios determined by the Commission.
[24 April 2014]
Section 123. Subordinated
Capital
[29 March 2007]
Section 123.1 Capital of
an Investment Brokerage Company for Covering of Risks
(1) In addition to the own funds requirements laid down in
Regulation No 575/2013, an investment brokerage company shall
assess the capital necessary for covering of the inherent and
potential risks for activities and ensure that the capital
necessary for covering of the inherent and potential risks for
activities is sufficient, and also determine the elements and
structure of such capital.
(2) An investment brokerage company shall develop a strategy
and procedures being appropriate, comprehensive, substantiated
and effective for the nature, volume and complexity of its
activities and shall carry out the necessary measures for
continuous capital assessment and the maintenance of adequate
capital.
(3) An investment brokerage company shall regularly review the
strategy and procedures referred to in Paragraph two of this
Section in order to ensure that they are constantly comprehensive
and proportionate to the nature, scope, and complexity of
activities of the investment brokerage company.
[29 March 2007; 22 March 2012; 24 April 2014]
Section 123.2 Disclosing
of Information Related to Regulatory Requirements
(1) An investment brokerage company, in accordance with Part
Eight of Regulation No 575/2013, shall make the information
available to the public on its website or choose another
appropriate information medium or place for making this
information available to the public.
(11) The Commission is entitled to request that the
information referred to in Paragraph one of this Section is made
available to the public more than once a year and to determine
the deadlines for making the information public.
(12) An investment brokerage company which is a
parent undertaking shall each year make the information public on
the legal structure of the group, and also the organisational
structure of its management and activities that ensure conformity
with the requirements laid down in Section 108, Paragraph two,
Clause 2, Section 123.4, Paragraph two and Section
124, Paragraph one, Clause 11 of this Law.
(2) [24 April 2014]
(3) [24 April 2014]
[29 March 2007; 13 January 2011; 8 November 2012; 24 April
2014; 11 June 2015]
Section 123.3 Level of
Maintenance of Sufficient Capital for Risk Coverage of an
Investment Brokerage Company
(1) An investment brokerage company which is neither a parent
undertaking registered in the Republic of Latvia and subject to
the consolidated supervision nor its subsidiary, and also any
other investment brokerage company which is not subject to the
consolidated supervision in accordance with the requirements laid
down in Article 19 of Regulation No 575/2013 shall conform to the
requirements laid down in Section 123.1 of this Law on
an individual basis.
(2) An investment brokerage company released from the
obligation to conform to the own funds requirements on a
consolidated basis for groups in accordance with Article 15 of
Regulation No 575/2013 shall conform to the requirements laid
down in Section 123.1 of this Law on an individual
basis.
(3) A parent investment brokerage company of the Republic of
Latvia shall conform to the requirements laid down in Section
123.1 of this Law on a consolidated basis for
groups.
(4) An investment brokerage company which is a subsidiary of a
parent financial holding company in the Republic of Latvia or a
parent mixed financial holding company in the Republic of Latvia
shall comply with the requirements laid down in Section
123.1 of this Law at the consolidation group level. If
a parent financial holding company or a parent mixed financial
holding company controls more than one institution, the
requirements laid down in this Paragraph shall only be applied to
the investment brokerage company which is under the consolidated
supervision in accordance with Section 142 of this Law.
(5) If an investment brokerage company which is a subsidiary
of a parent investment brokerage company in the Republic of
Latvia, parent financial holding company in the Republic of
Latvia, or parent mixed financial holding company in the Republic
of Latvia, or if its parent financial holding company or parent
mixed financial holding company has a subsidiary registered in a
foreign country which is an institution, financial institution or
asset management company or which has a holding in the
abovementioned institutions or companies, such investment
brokerage company shall comply with the requirements laid down in
Section 123.1 of this Law on a sub-consolidated
basis.
[24 April 2014]
Section 123.4 Level of
Application of Plans, Policies, Procedures and Mechanisms of
Investment Brokerage Companies
(1) An investment brokerage company which is not released from
the duty to conform to the regulatory requirements on an
individual basis in accordance with Article 7 of Regulation No
575/2013 shall conform to the requirements laid down in Sections
122.1, 122.2, 122.3 and Section
124, Paragraph one, Clause 11 and Paragraphs 1.2,
1.3, 1.4, 1.5 and 1.6
of this Law on an individual basis.
(2) An investment brokerage company which is subject to the
consolidated supervision in accordance with the requirements of
Title II of Part One of Regulation No 575/2013 shall conform to
the requirements laid down in Sections 122.1,
122.2, 122.3 and Section 124, Paragraph
one, Clause 11 and Paragraphs 1.2, 1.3,
1.4, 1.5 and 1.6 of this Law on
a consolidated basis for group or on a sub-consolidated basis and
shall ensure that its internal control system is consistent,
well-integrated and implemented in all of its subsidiaries,
including those that are not included in the consolidation groups
in accordance with the requirements of Title II of Part One of
Regulation No 575/2013, and also ensure the preparation of all
data and information necessary for the supervision. If the
Commission has permitted so, an investment brokerage company need
not comply with the requirements laid down in Sections
122.1, 122.2, 122.3, and Section
124, Paragraph one, Clause 11 and Paragraphs 1.2,
1.3, 1.4, 1.5, and
1.6 of this Law in its foreign subsidiaries which are
not included in the consolidation group in accordance with the
requirements of Title II of Part One of Regulation No 575/2013,
if it may prove that these requirements do not conform to the
laws and regulations of the foreign country where the subsidiary
is registered.
[24 April 2014]
Section 123.5 Application
of the Optionality Provided for in Regulation No 575/2013,
Procedures for the Provision of Statements and Reports,
Assessment of Macroprudential or Systemic Risk and Action
(1) The optionality provided for in Regulation No 575/2013
with regard to the determination of prudential requirements and
transitional periods for the application of provisions of this
Regulation shall be determined by the Commission.
(2) The Commission is entitled to determine provisions for the
submission of reports related to separate corporate actions,
preparation and submission of statements, and also the procedures
for preparation and provision of information necessary for the
supervision of investment brokerage companies and the procedures
for receipt of the necessary permits, if it has not been
determined by the European Commission.
(3) The Commission, in accordance with Regulation No 575/2013,
may determine stricter regulatory requirements in specific areas
than those defined in this Regulation.
[24 April 2014]
Chapter
XII
Provision of Investment Services
Section 124. General
Requirements
(1) An investment brokerage company shall, in accordance with
a licence issued thereto for the provision of investment services
within the term of operation of the licence, comply with and
observe the following requirements:
1) ensure that the capital adequacy thereof conforms to the
requirements of Regulation No 575/2013 and the regulatory
provisions of the Commission, and also that other requirements
regulating the activities of the investment brokerage company are
conformed to;
2) ensure that the members of its board and council (where
such has been established) are persons who have an impeccable
reputation;
3) ensure that the head of its board and at least one more
member of its board are persons who are competent in investment
matters;
4) ensure the internal supervision and auditing of activities,
including the determination of procedures by which employees of
the investment brokerage company may receive investment services
from that investment brokerage company, and also from other
investment brokerage companies and credit institutions;
5) ensure the implementation of transactions performed with
financial instruments, the confidentiality of client financial
instrument accounts and relevant transactions, in conformity with
the requirements of the law;
6) carry out security measures for the processing, storage,
and transmission of data, in accordance with the requirements of
this Law, the regulatory provisions of the Commission, and
internal rules of procedure;
61) have reasonable security mechanisms in place
designed to guarantee the security and authenticity of the means
of transfer of information, to minimise the risk of data
corruption and unauthorised access and to prevent information
leakage prior to publishing thereof, always preserving data
confidentiality;
7) ensure that the financial instruments of clients and the
investment brokerage company's own financial instruments are
permanently kept separately;
8) ensure that the funds of clients and the investment
brokerage company's own funds are permanently kept separate;
9) ensure storage for five years of source documents of
transactions performed with financial instruments and other
services provided and transactions performed, and also conformity
with the requirements brought forward in the regulatory
provisions of the Commission and Regulation No 2017/565 related
to the completion and keeping of source documents. The Commission
is entitled to extend the time period specified in this Clause
for up to seven years;
10) ensure compliance with the requirements for the storage of
source documents also in relation to recordings of telephone
conversations or electronic communications relating to
transactions made when dealing on own account and the provision
of services that relate to the reception, transmission, and
execution of client orders. Such telephone conversations and
electronic communications shall also include those that are
intended to agree on transactions that would be concluded when
dealing on own account or in the provision of services that
relate to the reception, transmission, and execution of client
orders, even if those conversations or communications do not
result in the conclusion of such transactions. In order to ensure
the execution of the requirements for the storage of source
documents in relation to recording of telephone conversations or
electronic communications, an investment brokerage company:
a) shall take all reasonable steps to record relevant
telephone conversations and electronic communications, made with,
sent from, or received by equipment provided by the investment
brokerage company to an employee or contractor or the use of
which by an employee or contractor has been accepted or permitted
by the investment brokerage company;
b) shall make known that telephone communications or
conversations between the investment brokerage company and its
clients that result or may result in transactions will be
recorded. Such a notification may be made once - before the
provision of the investment service to clients;
c) shall not provide, by telephone, investment services and
activities to clients who have not been notified in advance about
the recording of their telephone communications or conversations,
where such investment services and activities relate to the
reception, transmission, and execution of client orders;
d) may place client orders using other channels of
communication and concurrently ensuring that such communication
takes place in a form that can be saved. The relevant
face-to-face conversation with a client may be recorded by using
written minutes or notes. Such orders shall be considered
equivalent to orders received by telephone;
e) shall implement all reasonable measures to prevent an
employee or contractor from making, sending, or receiving
relevant telephone conversations and electronic communications on
privately-owned equipment which the investment brokerage company
is unable to record or copy;
11) ensure the establishment and operation of a comprehensive
and effective internal control system which is applicable to the
nature, volume, and complexity of its activities, comprising the
following basic elements:
a) organisational structure corresponding to the size of the
investment brokerage company and activity risks with clearly
defined, unambiguous and systematic distribution of duties,
powers, and responsibility in performance and control of
transactions between divisions of the investment brokerage
company and responsible employees,
b) a system for the identification, management, supervision
and reporting of inherent and potential risks for activities of
the investment brokerage company,
c) internal control procedures,
d) remuneration system;
12) ensure continuous and systematic provision of investment
services and ancillary investment services by using corresponding
systems, means, and procedures;
13) ensure all the necessary and commensurate administrative
and organisational measures in order to prevent the negative
effect of the conflict of interest referred to in Section 127 of
this Law on the interests of clients;
14) ensure the creation of a corresponding organisational
structure for the provision of investment services and ancillary
investment services and the conformity with the criteria for
skills, knowledge, and competence of the employees involved in
the provision of such services;
15) ensure the creation of policy in relation to the services,
products, and operations (transactions) offered or provided,
taking into account the risk profile of the investment brokerage
company and the clients to whom the abovementioned services,
products, and operations (transactions) are offered or provided,
inter alia, providing for the performance of corresponding
stress tests;
16) ensure the remuneration policy of the responsible
officials and employees who directly participate in the provision
of investment services or ancillary investment services to
clients, for the purpose of promoting prudent and responsible
operation of the institution, fair treatment of a client and
preventing situations of a conflict of interest in relationships
with a client;
17) regularly assess the suitability and implementation of the
strategic objectives of the investment brokerage company, upon
providing investment services and ancillary investment services,
the efficiency of the management system, and also the policy in
relation to the conformity of the provision of investment
services or ancillary investment services, and, if necessary,
carry out the relevant measures to eliminate deficiencies.
(11) The Commission shall determine the
requirements for the establishment of an internal control system
of an investment brokerage company.
(12) An investment brokerage company with a licence
which allows it to provide the investment services referred to in
Section 3, Paragraph four, Clauses 3 and 6 of this Law shall
provide its officials or employees whose professional activities
significantly affect the risk profile of the investment brokerage
company with the following:
1) ensure such remuneration policy and practice which conform
to prudent and effective risk management and contribute to it but
does not contribute to risk-taking above the risk-taking level
allowed by the investment brokerage company;
2) not determine the variable component of remuneration to the
extent that would exceed the fixed component of remuneration
determined for the relevant official or employee during the
reporting year, except for the cases when the provisions referred
to Paragraphs 1.3, 1.4, 1.5, and
1.6 of this Section are conformed to.
(13) For those officials or employees whose
professional activities significantly affect the risk profile of
an investment brokerage company, a meeting of shareholders
(members) of an investment brokerage company may, under a
separate decision, determine the variable component of
remuneration to the extent that exceeds, but not more than twice,
the fixed component of remuneration determined for the relevant
official or employee during the reporting year.
(14) With regard to officials or employees whose
professional activities significantly affect the risk profile of
an investment brokerage company, a meeting of shareholders
(members) of an investment brokerage company shall take a
decision on the variable component of remuneration which exceeds
the fixed component of remuneration determined for the relevant
official or employee during the reporting year on the basis of a
draft decision prepared by the investment brokerage company which
includes the grounds for determination of such variable component
of remuneration, indicates the number of the relevant officials
and employees, positions held and functions performed, and also
assesses the impact of the decision on the ability of the
investment brokerage company to maintain extent of its own funds
necessary for stable activities. The decision shall be taken by
the majority of at least 66 per cent of the shares with voting
rights (stocks) with a condition that at least 50 per cent of the
shares with voting rights (stocks) are represented at the meeting
of shareholders (members) of an investment brokerage company, or
by the majority at least 75 per cent of the shares with voting
rights (stocks) with a condition that less than 50 per cent of
the shares with voting rights (stocks) are represented at the
meeting of shareholders (members) of an investment brokerage
company, if in accordance with the requirements laid down in laws
and regulations or provisions of the articles of association of
an investment brokerage company such meeting of shareholders
(members) is considered competent to take decisions. Officials or
employees of an investment brokerage company that are also
holders of the shares with voting rights (stocks) shall not
participate in the taking of such decision of the meeting of
shareholders (members) of the investment brokerage company which
relates to the determination of their remuneration.
(15) An investment brokerage company shall, without
delay but not later than within five working days after
submitting a draft decision prepared in accordance with the
requirements laid down in Paragraph 1.4 of this
Section to the shareholders (members), submit this draft decision
electronically to the Commission along with the evidence that
determination of the variable component of remuneration to the
extent that exceeds the fixed component of remuneration
determined during the reporting year for the relevant officials
or employees whose professional activities significantly affect
the risk profile of an investment brokerage company, does not
restrict the capability of the investment brokerage company to
further conform to the requirements laid down in this Law and
Regulation No 575/2013, especially own funds requirements.
(16) An investment brokerage company shall, without
delay but not later than within five working days after taking of
the decision of the meeting of shareholders (members) of the
investment brokerage company referred to in Paragraph
1.3 of this Section, submit it electronically to the
Commission.
(17) The Commission shall determine the
requirements for the policy and practice of remuneration referred
to in Paragraph 1.2, Clause 1 of this Section with
regard to the officials and employees of an investment brokerage
company whose professional activities significantly affect the
risk profile of an investment brokerage company.
(2) A credit institution providing investment services or
ancillary investment services shall comply with and observe the
following requirements:
1) establish relevant constituent bodies for the provision of
investment services and ancillary investment services and ensure
the administration, internal supervision, and review, audit of
such constituent bodies, including the determination of
procedures by which employees of such constituent bodies may
receive investment services from this division, and also from
another credit institution or investment brokerage company;
2) ensure that the head of this constituent body is a person
who is competent in investment matters and who has an impeccable
reputation;
3) ensure the execution of transactions performed with
financial instruments and the confidentiality of client financial
instrument accounts and transactions, in conformity with the
requirements of the law;
4) carry out security measures for the processing, storage,
and transmission of data, in accordance with the requirements of
this Law, the regulatory provisions of the Commission, and
internal rules of procedure;
5) ensure that the financial instruments of clients and the
credit institution's own financial instruments are permanently
kept separate;
6) ensure storage for five years of source documents of
transactions performed with financial instruments and other
services provided and transactions performed, and also conformity
with the requirements brought forward in the regulatory
provisions of the Commission and Regulation 2017/565 related to
the completion and keeping of source documents. The Commission is
entitled to extend the time period specified in this Clause for
up to seven years;
7) ensure compliance with the requirements for the storage of
source documents also in relation to recordings of telephone
conversations or electronic communications relating to
transactions made when dealing on own account and the provision
of services that relate to the reception, transmission, and
execution of client orders. Such telephone conversations and
electronic communications shall also include those that are
intended to agree on transactions that would be concluded when
dealing on own account or in the provision of services that
relate to the reception, transmission, and execution of client
orders, even if those conversations or communications do not
result in the conclusion of such transactions. In order to ensure
the execution of the requirements for the storage of source
documents in relation to recording of telephone conversations or
electronic communications, a credit institution:
a) shall take all reasonable steps to record relevant
telephone conversations and electronic communications, made with,
sent from, or received by equipment provided by the credit
institution to an employee or contractor or the use of which by
an employee or contractor has been accepted or permitted by the
credit institution;
b) shall make known that telephone communications or
conversations between the credit institution and its clients that
result or may result in transactions will be recorded. Such a
notification may be made once - before the provision of the
investment service to clients;
c) shall not provide, by telephone, investment services and
activities to clients who have not been notified in advance about
the recording of their telephone communications or conversations,
where such investment services and activities relate to the
reception, transmission, and execution of client orders;
d) may place client orders using other channels of
communication and concurrently ensuring that such communication
takes place in a form that can be saved. The relevant
face-to-face conversation with a client may be recorded by using
written minutes or notes. Such orders shall be considered
equivalent to orders received by telephone;
e) shall implement all reasonable measures to prevent an
employee or contractor from making, sending, or receiving
relevant telephone conversations and electronic communications on
privately-owned equipment which the investment brokerage company
is unable to record or copy;
8) ensure continuous and systematic provision of investment
services and ancillary investment services by using corresponding
systems, means, and procedures;
9) carry out all the necessary administrative and
organisational measures in order to prevent the negative effect
of the conflict of interest referred to in Section 127 of this
Law on the interests of clients;
10) have reasonable security mechanisms in place designed to
guarantee the security and authenticity of the means of transfer
of information, to minimise the risk of data corruption and
unauthorised access and to prevent information leakage prior to
publishing thereof, always preserving data confidentiality.
(21) Additional requirements for the provision of
investment services shall be determined by Regulation No
2017/565.
(3) [21 June 2018]
(4) [21 June 2018]
[4 October 2007; 13 January 2011; 24 April 2014; 21 June
2018]
Section 124.1 Status of a
Client
(1) A person to whom an investment brokerage company and
credit institution provide investment services and ancillary
investment services may have the status of a professional client,
retail client, or eligible counterparty.
(2) Professional clients in respect to all investment services
and instruments are:
1) persons licensed or regulated for operation in a financial
market in the Republic of Latvia or in another country:
a) credit institutions;
b) investment brokerage companies;
c) other licensed or regulated financial institutions;
d) investment funds and investment management companies;
d1) alternative investment funds and managers of
alternative investment funds;
e) insurers;
f) pension funds and managers of pension funds;
g) commodity dealers;
h) companies which are performing such transactions on their
own behalf in the markets of options, futures or other
derivatives markets or markets of the base asset of the
derivative the only purpose of which is to restrict financial
risk in the market of derivatives, or which are performing
transactions on the account of other participants of these
markets or make prices for them and which are guaranteed by the
participants of settlement system in this market, if
responsibility for ensuring the fulfilment of the agreements
entered into by such companies is undertaken by the participants
of settlement system in this market,
i) other commercial companies the main activity of which is
investing in financial instruments and which are making such
investments in large amounts;
2) commercial companies and other legal persons which conform
to two of the abovementioned three requirements:
a) own funds - not less than EUR 2 million;
b) net turnover - not less than EUR 40 million;
c) balance sheet value - not less than EUR 20 million;
3) State institutions managing government debt, national
central banks, the World Bank, the International Monetary Fund,
the European Central Bank, and other international financial
authorities;
4) other commercial companies the main activity of which is
investing in financial instruments, inter alia, such which
are engaged in securitisation of financial assets or financing of
other transactions, and which are making such investments in
large amounts;
5) a person who is recognised in another country as a
professional client in accordance with the procedure that is
equivalent to that laid down in this Section.
(3) An investment brokerage company or credit institution
shall inform the client of his or her status prior to the
commencement of provision of investment services and ancillary
investment services.
(4) The client has the right to request that an investment
brokerage company or credit institution grants another status of
a client thereto. A retail client may acquire the status of a
professional client in accordance with the procedures laid down
in Paragraphs five, six, and seven of this Section. A
professional client may acquire the status of a retail client in
accordance with the procedures laid down in Paragraphs nine and
ten of this Section. An investment brokerage company and credit
institution shall inform the client of such rights in accordance
with the procedures laid down in Section 126.1 of this
Law.
(5) An investment brokerage company or credit institution
which provides investment services and ancillary investment
services is entitled to recognise any person as a professional
client other than referred to in Paragraph two of this Section,
but who has expressed the relevant request, the knowledge and
experience of which has been evaluated by the investment
brokerage company and credit institution, and which conforms to
at least with two of the following criteria:
1) the person has performed transactions of significant amount
in the relevant market - at least 10 transactions per quarter
during preceding four quarters;
2) the value of the financial instrument portfolio of the
person which comprises financial resources and financial
instruments exceeds EUR 500 000;
3) the person has at least one year experience in the
financial sector in a position where knowledge in respect of
transactions and services that the person is planning to perform
or receive as a client, is necessary.
(6) An investment brokerage company or credit institution
shall, prior to recognising the person referred to in Paragraph
five of this Section as a professional client, evaluate his or
her competence, experience, and knowledge in order to get
certification that, by taking into account the specifics of the
intended transactions or services, the client is able to take an
investment decision independently and is aware of the relevant
risks.
(7) The status of a professional client may be granted to the
person referred to in Paragraph five of this Section in general
or in respect of certain type of investment service, type of
transaction, of particular transaction or product. A person who
wants to be recognised as a professional client shall submit a
submission to an investment brokerage company or credit
institution, indicating the type of investment service,
transaction, or product therein in respect of which he or she
wants to receive the status of a professional client. The
investment brokerage company or credit institution shall, prior
to granting the status of a professional client to the person,
warn in writing regarding the right of investor protection which
he or she may lose being in the status of a professional client,
and the person shall sign a certification that he or she has
received such warning and is aware of the consequences from loss
of such right. A written agreement shall be entered into
regarding granting of a professional status.
(8) A person who is recognised as a professional client shall
provide information to an investment brokerage company or credit
institution in accordance with the procedures referred to in
Paragraphs five, six, and seven of this Section on the changes in
his or her activities which may affect the conformity of such
person with the requirements defined for the status of a
professional client. The investment brokerage company or credit
institution which receives information that a client does not
comply with the requirements defined for a professional client,
shall take a decision to withdraw such status and inform the
relevant person thereof in writing.
(9) The status of a retail client may be granted to a
professional client in general for all services to be provided or
for separate types of investment services, transactions, or
products. A professional client who wants that the status of a
retail client is granted to him or her, shall submit a submission
to an investment brokerage company or credit institution,
indicating the type of investment service, transaction, or
product therein in respect of which he or she wants to receive
the status of a retail client.
(10) In order for a professional client to be granted the
status of a retail client, an investment brokerage company or
credit institution and a person who is regarded as a professional
client, shall enter into a written agreement. Such agreement
shall provide for the types of investment services, transactions,
or products to which the status of a retail client is
applied.
(11) An investment brokerage company or credit institution
which provides investment services and ancillary investment
services shall draw up and approve internal policy and procedure
which ensure conformity with the requirements of this Section in
respect of the status of a client.
[4 October 2007; 13 January 2011; 9 July 2013; 19 September
2013; 21 June 2018]
Section 124.2 Eligible
Counterparties
(1) An eligible counterparty may be an investment brokerage
company, credit institution, insurance company, investment
management company, pension fund and management companies
thereof, other financial institutions which are licensed and
carry out activities in accordance with the legal acts of a
Member State or foreign country governing financial services,
governments of the countries and other State institutions which
are managing government debt, central bank and supranational
organisations.
(11) An investment brokerage company and credit
institution may apply the status of an eligible counterparty also
in respect of the persons referred to in Section
124.1, Paragraph two, Clause 1, Sub-clauses "g", "h",
"i", Clauses 2 and 3 of this Law.
(2) An investment brokerage company and credit institution
which are entitled to provide the investment services referred to
in Section 3, Paragraph four, Clause 1, 2, or 3 of this Law may
commence transactions or engage in transactions with an eligible
counterparty, without applying the requirements laid down in
Sections 126, 126.1, 126.2, 128 (except for
Section 128, Paragraphs six, seven, and eleven), Section
128.1, Paragraph one, Sections 128.2 and
128.3 of this Law.
(21) An investment brokerage company and credit
institution shall act honestly, fairly, and professionally in
relationships with eligible counterparties and implement fair,
clear and not misleading communication, taking into account the
nature of the eligible counterparty and its commercial
activity.
(3) An investment brokerage company and credit institution
before provision of investment services and ancillary investment
services shall inform the companies referred to in Paragraph one
of this Section of the status of an eligible counterparty applied
to them.
(4) The persons referred to in Paragraph one of this Section
have the right to request in accordance with the procedures laid
down in Section 124.1 of this Law that an investment
brokerage company or credit institution grants the status of a
professional or retail client to them. If the person referred to
in Paragraph one of this Section does not directly indicate which
status - the status of a professional or retail client - should
be granted to him or her, the investment brokerage company and
credit institution shall grant the status of a professional
client to him or her.
(5) In order to apply the status of an eligible counterparty
to the persons referred to in Section 124.1, Paragraph
two, Clause 1, Sub-clauses "g", "h", "i", Clauses 2 and 3, an
investment brokerage company and credit institution shall obtain
a consent of such person. The consent may be obtained in respect
of investment services to be provided in general, to individual
investment services or individual transactions.
(6) If a potential client of the investment brokerage company
and credit institution is the commercial company equivalent to
the commercial companies referred to in Paragraph 1.1
of this Section which is registered in another Member State, the
investment brokerage company and credit institution may apply the
status of the eligible counterparty thereto, in conformity with
the provisions of this Section.
(7) Additional requirements for the application of the
provisions of this Section shall be determined by Regulation No
2017/565.
[4 October 2007; 22 May 2008; 21 June 2018]
Section 125. Right to Financial
Instruments
(1) Financial instruments belong to the acquirer thereof from
the moment they are registered in the financial instrument
account of such acquirer.
(2) Entry in the participant's account shall be proof that
financial instruments registered in the central securities
depository are owned by the central securities depository
participant.
(21) Entry in the individual account shall be proof
that financial instruments registered in the central securities
depository are owned by a client of the central securities
depository participant upon whose assignment the abovementioned
individual account has been opened with the central securities
depository, identifying the participant's client in the central
securities depository.
(22) Entry in the client's account which has been
opened with the participant shall be proof that financial
instruments registered in the central securities depository are
owned by a client of the central securities depository
participant upon whose assignment an individual account has been
opened with the central securities depository, without
identifying the participant's client in the central securities
depository.
(23) In the case which is not referred to in
Paragraphs two, 2.1, 2.2, and three of this
Section, entry in the financial instrument account of the person
opened with an investment brokerage company or credit institution
shall be proof that financial instruments are owned by the
abovementioned person.
(24) A relevant entry in the financial instrument
account - entry certifying the ownership of financial instruments
- shall be proof of pledge right in relation to financial
instruments.
(3) An investment brokerage company and credit institution or
the central securities depository may open such a financial
instrument account for the central securities depository
participant or participant's client in which the financial
instruments within the holding of such client, participant, or
participant's client are listed (nominal account).
(4) An investment brokerage company and credit institution are
liable for ensuring that the transactions performed with
financial instruments are registered without delay and the
financial instruments acquired as a result of such transactions
are registered in the financial instrument accounts of
clients.
(41) [21 June 2018]
(42) [21 June 2018]
(43) [21 June 2018]
(5) Financial instruments which belong to a client of the
central securities depository participant, a client of an
investment brokerage company, or a client of a credit institution
may not be used for the satisfaction of claims by creditors of
the central securities depository participant, creditors of the
investment brokerage company, or creditors of the credit
institution. This requirement shall also apply to cases where the
central securities depository participant, investment brokerage
company, or credit institution has been declared insolvency
proceedings.
(51) Financial instruments that have been recorded
in the financial instrument account which has been opened with a
settlement system of financial instruments maintained by the
central securities depository and in which financial instruments
owned or held by a participant or one or several clients of a
participant are accounted may not be used for the satisfaction of
claims by creditors of the central securities depository. This
requirement shall also apply to cases when insolvency proceedings
have been declared for the central securities depository.
(6) Financial instruments regarding which an investor has
submitted to an investment brokerage company or credit
institution a disposal order, on the basis of which the
investment brokerage company or credit institution has initiated
the implementation of the transaction, may not be used for the
satisfaction of claims of creditors.
(7) Such financial instruments owned by legal persons which
have been recorded in a financial instrument account opened at an
investment brokerage company or credit institution or an
individual account in which financial instruments owned by a
client of the central securities depository participant are
accounted, and such financial instruments owned by investment
brokerage companies and credit institutions which have been
recorded in a participant's account, may be seized only by an
order of a bailiff in accordance with the procedures laid down in
the Civil Procedure Law.
(8) Such financial instruments owned by natural persons which
have been recorded in a financial instrument account opened at an
investment brokerage company or credit institution or an
individual account in which financial instruments owned by a
client of the central securities depository participant are
accounted may be seized only by an order of a bailiff in
accordance with the procedures laid down in the Civil Procedure
Law or arrested in accordance with the procedures laid down in
the Criminal Procedure Law.
(9) Recovery against such financial instruments owned by legal
persons which have been recorded in a financial instrument
account opened at an investment brokerage company or credit
institution or an individual account in which financial
instruments owned by a client of the central securities
depository participant are accounted, and such financial
instruments owned by investment brokerage companies and credit
institutions which have been recorded in a participant's account,
may be directed only on the basis of an order by a bailiff, in
accordance with the procedures laid down in the Civil Procedure
Law or upon request by the tax administration - in cases provided
for in tax laws, but upon request by the State Revenue Service -
also in cases provided for in other laws.
(10) Recovery against such financial instruments owned by
natural persons which have been recorded in a financial
instrument account opened at an investment brokerage company or
credit institution or an individual account in which financial
instruments owned by a client of the central securities
depository participant are accounted may be directed only on the
basis of an order by a bailiff, in accordance with the procedures
laid down in the Civil Procedure Law, or on the basis of a
decision of the tax administration on recovery of late tax
payments - in accordance with the law On Taxes and Fees.
[4 October 2007; 14 September 2017; 21 June 2018]
Section 125.1 Use of
Client Financial Instruments
(1) Financial instruments which are owned by a client of an
investment brokerage company or credit institution may not be
used in transactions which are performed by the investment
brokerage company or credit institution on its own behalf or on
account of another client, including in securities financing
transactions. Such requirement shall not be applied, if the
client has given a prior consent to the use of its financial
instruments with special conditions stipulated by the client and
such consent has been certified with the signature of the client
or a certification equivalent to a signature and the use of the
client financial instruments is restricted with the conditions to
which the client has agreed.
(2) Financial instruments which are owned by clients of an
investment brokerage company or credit institution and which are
accounted in a nominal account opened at the third party and
where financial instruments of several clients are kept together,
may not be used in securities financing transactions or other
transactions which are performed by the investment brokerage
company or credit institution on its own behalf, except for the
case when in addition to the requirements of Paragraph one of
this Section at least one of the following provisions is
fulfilled:
1) all clients the financial instruments owned by which are
kept in a nominal account have given prior consent to
transactions of such type;
2) the investment brokerage company or credit institution has
a system or control mechanism at its disposal which ensures that
only financial instruments owned by a client who has given prior
consent are being used.
(3) The investment brokerage company and credit institution
shall, in the case referred to in Paragraph two of this Section,
perform accounting of financial instruments which ensures
information from clients the financial instruments of which have
been used to ensure corresponding distribution of losses if such
have occurred.
(4) The investment brokerage company and credit institution
shall carry out respective measures in order to prevent
unauthorised use of client financial instruments in its own
interests or in the interests of any person, inter
alia:
1) by entering into an agreement with the client regarding
measures which should be carried out by the investment brokerage
company and credit institution in the event of insufficient
security in the account of the client on the day of
settlement;
2) by especially supervising its projected ability to supply
securities on the day of settlement and by introducing corrective
measures, if it is not possible;
3) by especially supervising and requesting, without delay, to
ensure securities which have not been supplied on or after the
day of settlement.
(5) The investment brokerage company and credit institution
shall determine special procedures in relation to all clients in
order to ensure that the person borrowing client financial
instruments provides a corresponding security, and the investment
brokerage company and credit institution shall supervise
continuous conformity of such security and carry out the
necessary measures in order to ensure that its remainder remains
corresponding to the value of client financial instruments.
(6) The investment brokerage company and credit institution
shall not conclude title transfer financial collateral
arrangements with retail clients for the purpose of securing or
covering present or future, actual or contingent or prospective
obligations of clients.
[21 June 2018]
Section 125.2 Use of a
Non-conforming Title Transfer Financial Collateral
Arrangement
(1) An investment brokerage company and credit institution
shall take into account - and shall be able to prove that it has
adequately taken into account - the link between the use of a
title transfer financial collateral arrangement and the
liabilities of a client in relation to the investment brokerage
company or credit institution and the assets of the client to
which the investment brokerage company or credit institution
applies the provisions arising from the title transfer financial
collateral arrangement.
(2) Upon assessing and documenting the conformity of the use
of a title transfer financial collateral arrangement, the
investment brokerage company and credit institution shall take
into account all the following circumstances:
1) whether there is only a very weak link between the
liabilities of the client in relation to the investment brokerage
company or credit institution and the use of the title transfer
financial collateral arrangement, including whether the potential
relation of the client in relation to the investment brokerage
company or credit institution is small or insignificant;
2) whether the amount of funds or financial instruments of the
client to which the provisions arising from the title transfer
financial collateral arrangement are applied significantly exceed
the liabilities of the client or is even unlimited, if the client
has any liabilities at all in relation to the investment
brokerage company or credit institution;
3) whether the provisions arising from the title transfer
financial collateral arrangement are applicable to the financial
instruments or funds of all clients, regardless of the type of
liabilities of each client in relation to the investment
brokerage company or credit institution.
(3) Upon applying the provisions arising from the title
transfer financial collateral arrangement, the investment
brokerage company and credit institution shall, for the
professional clients and eligible counterparties, especially
indicate the related risks and impact which can be left on
financial instruments and funds of the client by any provisions
arising from the title transfer financial collateral
arrangement.
[21 June 2018]
Section 125.3 Management
Procedures in Relation to the Safeguarding of Client Assets
(1) An investment brokerage company and credit institution
shall appoint one employee who has sufficient skills and
authorisation and who is specifically responsible for the issues
as to whether the investment brokerage company and credit
institution fulfil their obligations in the field of the
safeguarding and separate keeping of the financial instruments
and funds of the client.
(2) In order to ensure complete conformity with the
requirements of Sections 125.1, 125.2, 129,
129.1, 129.2, and 131.1 of this
Law, the investment brokerage company and credit institution may
decide whether the appointed employee carries out only this task
or may efficiently fulfil his or her duties, concurrently
fulfilling other duties.
[21 June 2018]
Section 126. Contract for the
Provision of Investment Services and Ancillary Investment
Services
(1) Prior to commencement of the provision of investment
services and ancillary investment services, an investment
brokerage company and credit institution shall enter into a
contract with the client regarding the provision of investment
services and ancillary investment services in which the rights
and obligations of the parties and other conditions by which the
investment brokerage company or credit institution shall provide
services to its client shall be indicated. The rights and
obligations of the contracting parties may be specified by
referring to other documents.
(2) The requirements for the content of the contract shall be
determined by Regulation No 2017/565.
(3) The contract may be entering into in writing (in paper
form or using another durable medium).
(4) Prior to entering into a contract for the provision of
investment services and ancillary investment services, an
investment brokerage company and credit institution have an
obligation to inform the client of the procedures by which
complaints and disputes arising from such contract are to be
examined out-of-court.
[21 June 2018]
Section 126.1 Types of
Exchange of Information Related to Investment Services
(1) An investment brokerage company and credit institution
shall provide the information intended for a client, using a
durable medium.
(2) An investment brokerage company or credit institution
shall ensure an option in respect of changing the type of
exchange of information. The type of exchange of information in
which the investment brokerage company and credit institution
provide information to a client shall be provided for in the
agreement regarding provision of investment services.
(3) An investment brokerage company or credit institution
shall provide information intended for the client electronically,
if:
1) provision of information in electronic form is suitable for
conditions in which transactions occur or will occur between the
investment brokerage company or credit institution and the
client;
2) the client to whom information will be provided, has been
offered a possibility to choose whether he or she will receive
information in printed form or electronically, and the client has
specifically indicated that he or she wants to receive
information in such form.
(4) An investment brokerage company or credit institution is
entitled to provide information intended for the client which is
not addressed to him or her personally, via the Internet,
provided that the following provisions are complied with:
1) the client has approved that Internet is available to him
or her;
2) the client has specifically indicated that he or she agrees
to provision of information in such form;
3) the client has been electronically notified of the website
address and place on the website where information is
available;
4) information is updated in a timely manner;
5) information is constantly available on the website so long
as it is justifiably necessary for the client in order to be able
to verify it.
[4 October 2007; 21 June 2018]
Section 126.2 Suitability
of Investment Service and Ancillary Investment Service and
Conformity Thereof with the Interests of a Client
(1) In order to determine the suitability of investment
service for a client, an investment brokerage company or credit
institution shall request information from the client or
potential client on his or her experience and knowledge in the
field of investments in relation to the particular investment
service or product offered or requested, if the investment
brokerage company or credit institution provides investment
service other than investment advice or portfolio management. If
it is intended to offer a bundle of services or products to a
client in accordance with Section 128, Paragraph 12.5
of this Law, the evaluation shall encompass the overall
suitability of the bundled package for the client.
(11) In order to determine whether the investment
service which is investment advice or portfolio management is
suitable for a client, the investment brokerage company or credit
institution shall request information from the client or
potential client on his or her experience and knowledge in the
field of investments in relation to the particular investment
service or product, the financial situation of the person,
including his ability to bear losses, to investment objectives,
including the risk tolerance of the person. If the investment
advice includes a bundle of services or products in accordance
with Section 128, Paragraph 12.5 of this Law, the
evaluation shall encompass the overall suitability of the bundled
package for the client.
(21) The investment brokerage company and credit
institution shall use the information which is obtained in
accordance with Paragraph 1.1 of this Section in order
to determine, giving due consideration to the nature and extent
of the service offered, that the particular recommended
transaction, when providing investment advice, or the transaction
entered into, when providing portfolio management:
1) is appropriate for the objective of the relevant
client;
2) is such that the client is able to financially undertake
any investment risks related to his or her investment
objectives;
3) is such that the client has the necessary experience and
knowledge in order to understand the risk related to the
transaction or management of his or her portfolio.
(3) An investment brokerage company and credit institution
shall use the information obtained in accordance with Paragraph
one of this Section in order to determine whether the client has
the necessary knowledge in order to understand the risks related
to the type of offered service or product.
(4) Information on knowledge and experience of a client or
potential client in the field of investment shall include
information on:
1) the types of services, transactions, and financial
instruments managed by the client;
2) the transactions of the client with financial instruments -
their nature, amount, frequency, and time period during which
they were performed;
3) the level of education and profession or relevant previous
profession of the client or potential client.
(5) When requesting the information referred to in Paragraph
four of this Section, an investment brokerage company and credit
institution shall take into account such factors as the status of
a client (retail client, professional client), the type and
amount of service to be performed, the type of product or
intended transaction, the complexity of a service and risks
related thereto.
(6) Information on investment objectives of a client or
potential client, where appropriate, shall contain information on
a time period during which the client wants to keep investment,
his or her choice in relation to undertaking of risk, risk
profile, and investment purposes.
(7) Information on the financial position of a client or
potential client, where appropriate, shall contain information on
his or her sources and amount of regular income, his or her
assets, including liquid assets, investments and immovable
properties and on his or her regular financial obligations.
(8) An investment brokerage company and credit institution are
not entitled to encourage the client not to provide the
information referred to in this Section.
(9) If, upon providing investment advice or carrying out
portfolio management, an investment brokerage company or credit
institution has not obtained the information referred to in
Paragraph 1.1 of this Section, it is not entitled to
recommend financial instruments for a client or potential client
or to carry out individual management of his or her
portfolio.
(10) If an investment brokerage company or credit institution,
on the basis of information obtained in accordance with Paragraph
one of this Section, considers that the relevant product or
service is not conforming for a client, it shall warn the client.
If the client rejects to provide the information referred to in
Paragraph one of this Section to the investment brokerage company
and credit institution or if the investment brokerage company or
credit institution has information that such information is
incomplete or does not contain the last changes, the investment
brokerage company or credit institution shall warn the client or
potential client that it is not possible to evaluate the
suitability of the intended service or product for the client. If
the investment brokerage company or credit institution has warned
the client, but the client has not provided additional
information, it shall not be responsible for the consequences
caused by refusal of the client to provide information, provision
of incomplete information, or failing to give a notice regarding
changes in the previously provided information.
(11) The warnings referred to in Paragraph ten of this Section
may be made in a standardised form.
(12) If an investment brokerage company or credit institution
provides only the investment services referred to in Section 3,
Paragraph four, Clause 1 or 2 of this Law with or without the
ancillary investment services referred to in Section 3, Paragraph
five, Clauses 1, 3, 4, 5, 6, and 7 of this Law, it shall not
request the information referred to in Paragraph one of this
Section from the client if all of the following conditions are in
effect:
1) the service applies to the following financial
instruments:
a) shares which are admitted to trading on a regulated market
of a Member State or an equivalent market of a foreign country,
or on the MT facility, except for shares that embed a
derivative;
b) bonds or other forms of debt securities admitted to trading
on a regulated market or on an equivalent market of a foreign
country, or on the MT facility, except for those that embed a
derivative or incorporate a structure which makes it difficult
for the client to understand the risk involved with the relevant
financial instruments;
c) money market instruments, except for those that embed a
derivative or incorporate a structure which makes it difficult
for the client to understand the risk involved with the relevant
financial instruments;
d) investment certificates of investment funds, except for
structured investment certificates of investment funds in
accordance with Article 36(1) of Commission Regulation (EU) No
583/2010 of 1 July 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;
e) structured deposits, except for those that incorporate a
structure which makes it difficult for the client to understand
the risk of return or the cost of exiting the product before
term;
f) other non-complex financial instruments;
2) the service is provided upon initiative of a client or
potential client;
3) the client or potential client has been clearly informed
that in provision of this service the investment brokerage
company or credit institution does not evaluate the suitability
of the investment service or offered instrument for the client
and that, therefore, the client does not enjoy appropriate
protection;
4) an investment brokerage company and credit institution
conform to the requirements laid down in Section 127 of this Law
and Regulation No 2017/565 for the prevention of a conflict of
interest.
(121) If an investment brokerage company or credit
institution provides investment services to a client together
with the ancillary investment service referred to in Section 3,
Paragraph five, Clause 2 of this Law, when determining
suitability of the investment service for the client, it shall
take into account the structure of the financial product which
forms as a result of provision of the abovementioned ancillary
investment service.
(122) When applying Paragraph twelve of this
Section, a market of a foreign country shall be considered
equivalent to a regulated market, if the European Commission
takes the decision on equivalence according to the specified
examination procedure.
(13) [21 June 2018]
(14) The requirements of this Section shall not be applied in
respect of professional clients, because the professional client
is regarded as a client who has the required experience and
knowledge in relation to products, transactions, and services in
respect of which the client is classified as a professional
client and as such who is able to undertake risk for any loss
that may be caused by the investment.
(15) [21 June 2018]
(16) If a credit agreement relating residential immovable
property which is subject to the provisions of the Consumer
Rights Protection Law regarding creditworthiness assessment of a
consumer apply has as a prerequisite the provision to the same
consumer of investment services in relation mortgage bonds
specifically issued to secure the financing of and having
identical terms as the credit agreements relating to residential
immovable property, in order for the loan to be payable,
refinanced or redeemed, the abovementioned service shall not be
subject to the obligations set out for the investment brokerage
company and credit institution in this Section.
(17) The measures and provisions for the fulfilment of the
requirements laid down in this Section shall be determined by
Regulation No 2017/565.
[4 October 2007; 22 March 2012; 21 June 2018; 20 June
2019]
Section 126.3 Disclosure
of the Engagement Policy
(1) If an investment brokerage company and credit institution
are entitled to provide a portfolio management service, including
shares of such joint stock company in the portfolio the
registered office of which is in a Member State and the shares of
which are admitted to trading on a regulated market of the Member
State (hereinafter in this Section - the joint stock company),
the investment brokerage company and credit institution shall
draw up a policy (hereinafter in this Section - the engagement
policy) providing a description and explanation as to how the
exercise of the rights of a shareholder in the management of such
joint stock company is included in the strategy of the investment
brokerage company and credit institution.
(2) The engagement policy shall describe how the investment
brokerage company and credit institution supervise the activity
of the joint stock company in at least the following issues:
1) strategy;
2) results and risks of financial and non-financial
activity;
3) capital structure;
4) social impact;
5) impact on the environment;
6) corporate management.
(3) In addition to the information referred to in Paragraph
two of this Section, the engagement policy shall describe how the
investment brokerage company and credit institution:
1) implement a dialogue with the joint stock company;
2) exercise voting rights and other rights arising from stocks
in the joint stock company, including providing for the criteria
for the determination of less significant votes;
3) cooperate with other shareholders of the joint stock
company;
4) communicate with interested persons of the joint stock
company;
5) manage the actual and potential conflict of interest in
relation to engagement in the management of the joint stock
company.
(4) The investment brokerage company and credit institution
shall, each year by 1 August, publish a report on the
implementation of the engagement policy. The report shall be
provided for the period from the day when the engagement policy
is disclosed for the first time or the last report on the
implementation of the engagement policy is disclosed. The report
additionally includes the following information:
1) general information as to how the investment brokerage
company and credit institution have implemented the voting
rights;
2) an explanation of the most significant votes;
3) information on the use of the services of authorised
advisers.
(5) In addition to the information referred to in Paragraph
four of this Section the investment brokerage company and credit
institution shall disclose its votes in the meetings of
shareholders of the joint stock company. The investment brokerage
company and credit institution need not disclose the votes which,
according to the engagement policy, are to be considered
insignificant.
(6) The investment brokerage company and credit institution
need not apply one or more of the requirements of this Section.
If the investment brokerage company and credit institution do not
apply any of the requirements of this Section, they shall provide
information on which requirement is not being applied and the
justification for such action.
(7) The investment brokerage company and credit institution
shall ensure public free access to the information referred to in
Paragraphs two, three, four, five, and six of this Section on its
website.
(8) The investment brokerage company and credit institution
shall conform to the requirements of Section 127 of this Law in
relation to investments into shares of the joint stock company
and participation in the management of the joint stock
company.
[20 June 2019]
Section 127. Conflict of
Interest
(1) An investment brokerage company and credit institution
shall carry out all the corresponding measures in order to
identify and prevent conflict of interest which may arise during
the provision of investment services and ancillary investment
services between the investment brokerage company or credit
institution, including employees, tied agents thereof, the
persons who control, directly or indirectly, the investment
brokerage company or credit institution, and a client, and also
between clients thereof, including identify and prevent such
conflict of interest which might arise as a result of inducement
of third parties within the meaning of Section 133.18
or as a result of the remuneration policy and other incentive
principles by the investment brokerage company.
(2) In order to identify the types of conflict of interest
which may arise upon providing investment services and ancillary
investment services, the investment brokerage company and credit
institution shall take into account situations when the
investment brokerage company or credit institution, the person
related thereto or the person who controls, directly or
indirectly, the investment brokerage company or credit
institution:
1) is likely to make a financial gain, or avoid a financial
loss, at the expense of the client;
2) has an interest in the outcome of a service provided to the
client or of a transaction performed on behalf of the client,
which is not in the interests of the client;
3) is interested to act in favour of another client or group
of clients;
4) carries on the same professional activity as the
client;
5) receives or will receive an inducement from another person
in relation to a service provided to the client, in the form of
funds, commodities, or services, other than the standard fee for
that service.
(3) In order to ensure fulfilment of the requirements of
Paragraph one of this Section, an investment brokerage company
and credit institution shall develop, approve, and introduce the
policy for prevention of conflict of interest corresponding to
the size, organisation and type, amount and complexity of its
professional activity. If the investment brokerage company and
credit institution are in a group of commercial companies, the
policy for prevention of conflict of interest shall also provide
for prevention of such conflict of interest which may arise due
to the activity or structure of another commercial company within
the group.
(4) In the policy for prevention of conflict of interest an
investment brokerage company and credit institution shall:
1) identify, with reference to the specific investment
services and types of ancillary investment services carried out
by or on behalf of the investment brokerage company and credit
institution or a third person, the circumstances which constitute
or may give rise to a conflict of interest entailing a material
risk of damage to the interests of one or more clients;
2) determine the necessary procedures to be followed and
measures to be carried out in order to manage such conflict of
interest.
(5) When determining the procedures and measures for
prevention of conflict of interest, an investment brokerage
company and credit institution shall ensure their appropriateness
to the size and professional activities of the investment
brokerage company and credit institution, or of the group to
which it belongs, and to the materiality of the risk of damage to
the interests of clients.
(6) In fulfilling the requirements referred to in Paragraph
four, Clause 2 of this Section, an investment brokerage company
and credit institution shall provide for the following in
conformity with its structure and types of investment services
provided:
1) effective procedures to prevent or control the exchange of
information between the related persons engaged in activities
involving a risk of a conflict of interest, if the exchange of
such information may harm the interests of one or more
clients;
2) separate supervision of the related persons whose principal
duties involve carrying out activities on behalf of, or providing
services to, clients whose interests may conflict, or who
otherwise represent different interests that may conflict,
including those of the investment brokerage company or credit
institution;
3) prevent any direct link between the remuneration or income
gained by the related persons the activities of which are related
to the provision of different management services, if the
conflict of interest may arise in relation to the activities
carried out while providing management services;
4) measures to prevent or limit a third person from exercising
inappropriate influence over the way in which the relevant person
carries out investment services or ancillary investment
services;
5) measures to prevent or control the simultaneous or
sequential involvement of the related person in provision of
different investment services or ancillary investment services,
if such involvement may impair the proper management of conflict
of interest;
6) other additional procedures and measures if it is necessary
in order to prevent arising of conflict of interest in activities
of the related persons.
(7) If organisational or administrative measures which have
been stipulated by an investment brokerage company and credit
institution in accordance with the requirements of this Section
for the management of conflict of interest are not sufficient in
order to ensure with due confidence that risk of damage to the
interests of clients will be prevented, the investment brokerage
company or credit institution shall clearly disclose the essence
or sources of conflict of interest to the client, and also the
measures to be carried out to reduce such risks prior it has
commenced provision of the relevant investment service to the
client, taking into account the requirements of Section
126.1 of this Law.
(71) The information referred to in Paragraph seven
of this Section is disclosed on a durable medium and, taking into
account the specific characteristics of the client, contains
sufficiently detailed information allowing the client to take a
decision based on the information in relation to the service as
regards which a conflict of interest arises.
(72) The investment brokerage company shall comply
with Regulation No 2017/565 in relation to the management of
conflict of interest.
(8) An investment brokerage company and credit institution
shall store and constantly update information on the types of
those investment services and ancillary investment services which
have been provided by the company or which have been provided on
behalf of it and which have caused or may give rise to the
conflict of interest that materially harms the interests of one
or more clients.
(9) An investment brokerage company and credit institution
shall establish and introduce a system in order to ensure the
fulfilment of the requirements laid down in Regulation No
2017/565 in respect to restrictions for the performance of
personal transactions.
(10) An investment brokerage company and credit institution
distributing investment researches shall, for the prevention of
conflict of interest, carry out the measures specified in
Regulation No 2017/565 in addition to the requirements laid down
in this Section.
(11) In order to ensure the management of conflict of interest
in relation to transactions with financial instruments, the
investment brokerage company and credit institution:
1) if financial instruments are manufactured for sale to
clients, shall maintain, operate, and review a process for the
approval of each financial instrument and significant adaptations
of existing financial instruments before it is marketed or
distributed to clients;
2) in the product approval process, shall specify the
identified target market of end clients within the relevant
category of clients for each financial instrument and shall
ensure that all relevant risks to such identified target market
are assessed and that the intended distribution strategy is
appropriate for the identified target market;
3) shall also regularly review financial instruments it offers
or markets, taking into account any event that could materially
affect the potential risk to the identified target market, to
assess at least whether the financial instrument remains
consistent with the needs of the identified target market and
whether the intended distribution strategy remains
appropriate;
4) if financial instruments are manufactured, shall make
available to any distributor all appropriate information on the
financial instrument and the product approval process, including
the identified target market of the financial instrument;
5) if financial instruments are offered or recommended which
it does not manufacture, shall carry out measures to obtain the
information referred to in Clause 4 of this Paragraph and to
understand the characteristics and identified target market of
each financial instrument.
[4 October 2007; 22 May 2008; 21 June 2018]
Section 127.1
Restrictions for Provision of Personal Transactions
[21 June 2018]
Section 127.2 Measures
for Prevention of Conflict of Interest for Persons who Develop
Investment Research
[21 June 2018]
Section 128. Obligations in
Relations with Clients
(1) Upon providing investment services and ancillary
investment services, an investment brokerage company and credit
institution have an obligation to act as an honest and careful
proprietor and to ensure the provided services and ancillary
investment services with due professionalism and care for the
interests of a client.
(11) The investment brokerage company and credit
institution shall ensure that the financial instruments
manufactured for sale to clients are designed for an identified
target market and such financial instruments meet the needs of
ends clients of an identified target market, and also the
strategy for distribution of the financial instruments is
compatible with the identified target market. The investment
brokerage company and credit institution shall carry out
reasonable measures to ensure that the financial instrument is
distributed to the identified target market.
(12) The investment brokerage company and credit
institution shall ensure that they understand the financial
instruments they offer or recommend, assess the compatibility of
the financial instruments with the needs of the clients to whom
they provide investment services, also taking account that
specified in Section 127, Paragraph eleven of this Law, and
ensure that financial instruments are offered or recommended only
when this is in the interest of the client.
(2) The investment brokerage company or credit institution may
not include in the contracts entered into with a client regarding
the provision of investment services and provision of ancillary
investment services any provisions which would be contrary to
that specified in Paragraph one of this Section or covertly
include consequences which would in any way be directed against
the client.
(3) The investment brokerage company and credit institution
shall ensure that only such natural persons who have the
necessary knowledge and competence are entitled to provide
investment advice or information on financial instruments,
investment services, or ancillary investment services to clients
on behalf of the investment brokerage company or credit
institution. The investment brokerage company and credit
institution shall, upon request of the Commission, provide
information confirming the fulfilment of the requirements laid
down in this Section.
(4) The requirements for the necessary knowledge and
competence of employees referred to in Paragraph three of this
Section shall be determined by the Commission.
(5) An investment brokerage company and credit institution
shall ensure that all information addressed to clients or
potential clients, including marketing communications, is fair,
clear, and not misleading. Marketing communications shall be
clearly identifiable.
(6) The investment brokerage company and credit institution
shall, in a timely manner, disclose the following information to
a client or potential client on the investment brokerage company
or credit institution and its services, financial instruments,
and investment strategies offered, order execution venues, and
other costs and expenditures:
1) in relation to the provision of investment advice - prior
to the provision of investment advice - as to:
a) whether or not the advice is provided on an independent
basis;
b) whether the investment advice is based on a broad or on a
more restricted analysis of different types of financial
instruments, in particular, whether the range is limited to
financial instruments issued or provided by persons having close
links with the investment brokerage company or credit
institution, or any other legal or economic relationships;
c) whether the investment brokerage company or credit
institution will provide the client with a periodic assessment of
the suitability of the financial instruments recommended to that
client;
2) in relation to financial instruments and proposed
investment strategies - appropriate guidance on and warnings of
the risks associated with investments in those instruments or in
respect of particular investment strategies and whether the
financial instrument is intended for retail or professional
clients, taking account of the identified target market of
financial instruments in accordance with the requirements of
Section 128, Paragraphs eleven and twelve of this Law;
3) in relation to all costs and expenditures - information
relating to both investment and ancillary investment services,
including the cost of advice, including the cost of the financial
instrument recommended or marketed to the client and information
how the client may pay for it, also encompassing any third-party
payments.
(61) The information referred to in Paragraph six
of this Section on all costs and expenditures, except for costs
and expenditures caused by the occurrence of underlying market
risk of the financial instrument, shall be aggregated by the
investment brokerage company and credit institution to allow the
client to understand the overall cost and the cumulative effect
on return of the investment. Upon request of the client, the
investment brokerage company and credit institution shall provide
such information in an itemised breakdown. The investment
brokerage company and credit institution shall provide the
information on all costs and expenditures to the client on a
regular basis - at least annually, during the life of the
investment.
(7) An investment brokerage company and credit institution
shall disclose the information referred to in Paragraphs six,
6.1, twelve, and 12.1 of this Section so
that clients or potential clients are reasonably able to
understand the nature of the investment service, ancillary
investment service and of the specific type of financial
instrument offered and, consequently, to take information-based
decisions on carrying out investments. Such information may be
provided in a standardised form.
(8) The requirements in respect of the content of such
information which is provided to a client on investment service,
financial instruments, service costs and transactions performed
during the course of provision of the investment service shall be
determined by the Commission.
(81) If an investment service is offered as part of
a financial product which is already subject to other provisions
of laws and regulations relating to credit institutions and
consumer credits with respect to information requirements, that
service shall not be additionally subject to the obligations set
out in Paragraphs five, six, 6.1, and seven of this
Section.
(82) If the investment brokerage company or credit
institution informs the client that investment advice is provided
on an independent basis, that investment brokerage company or
credit institution shall:
1) assess a sufficient range of financial instruments
available on the market which must be sufficiently diverse with
regard to their type and issuers or product providers to ensure
that the client's investment objectives can be suitably met and
must not be limited to financial instruments issued or provided
by:
a) the investment brokerage company or credit institution
itself or by a person having close links with the investment
brokerage company or credit institution;
b) another person with which the investment brokerage company
or credit institution has such close legal or economic
relationships as to pose a risk of impairing the independent
basis of the advice provided;
2) not accept and retain fees, commissions, and any monetary
or non-monetary benefits paid or provided by any third party or a
person acting on behalf of a third party in relation to the
provision of the service to clients. Minor non-monetary benefits
that are capable of enhancing the quality of service provided to
a client and are of a scale and nature such that they could not
be judged to impair compliance with the duty of the investment
brokerage company or credit institution to act in the best
interest of the client must be clearly disclosed and are excluded
from this Clause.
(9) The execution of an order for a client shall not be
postponed and shall be executed without delay (except for the
cases specified in law), fairly and in accordance with the
instructions of the client regarding execution of the task. When
executing the task, the investment brokerage company and credit
institution shall take into account the requirements laid down in
Section 128.1 of this Law.
(10) The investment brokerage company and credit institution,
when executing an order of the client, shall carry out all the
necessary measures in accordance with the requirements of Section
128.2 of this Law, in order to achieve the best
possible results for the client.
(11) The investment brokerage company and credit institution
shall, in accordance with the requirements of Section
126.1 of this Law and the regulatory provisions of the
Commission, provide adequate reports to the client on the
services provided. Those reports shall include periodic
communications to clients, taking into account the type and the
complexity of financial instruments involved and the nature of
the service provided to the client, including, where applicable,
the costs associated with the transactions and services
undertaken on behalf of the client.
(111) Upon providing investment advice, the
investment brokerage company and credit institution shall, before
the transaction is made, provide the client with a statement on
suitability of the investment advice in a durable medium
specifying the advice given and how the abovementioned advice
meets the preferences, objectives, and other characteristics of
the retail client. If the agreement to buy or sell a financial
instrument is concluded using a means of distance communication
which prevents the prior delivery of the suitability statement,
the investment brokerage company or credit institution may
provide the written statement on suitability in a durable medium
immediately after the client is bound by any agreement, provided
both the following conditions are met:
1) the client has consented to receiving the suitability
statement without undue delay after the conclusion of the
transaction;
2) the investment brokerage company or credit institution has
given the client the option of delaying the transaction in order
to receive the statement on suitability in advance.
(112) If the investment brokerage company or credit
institution provides portfolio management or has informed the
client that it will carry out a periodic assessment of
suitability, the periodic report shall contain an updated
statement of how the investment meets the client's preferences,
objectives, and other characteristics of the retail client.
(12) If, in relation to the provision of investment services
or ancillary investment services, the investment brokerage
company or credit institution pays any fees or commissions or
provides any monetary or non-monetary benefits to a third party
which is not a client, or to a person who is acting on behalf of
a client, or receives such fees or commissions, or monetary or
non-monetary benefits from a third party which is not a client,
or from a person who is acting on behalf of the client, it shall
be regarded the the investment brokerage company or credit
institution is not fulfilling the requirements of Paragraph one
of this Section and Section 127 of this Law, except for the cases
when such payments or benefits:
1) are designed to enhance the quality of the service provided
to the client;
2) do not impair compliance with the obligation of the
investment brokerage company or credit institution to act
honestly, fairly, and professionally in accordance with the best
interest of its clients.
(121) The existence, nature, and amount of the
payment or benefit referred to in Paragraph twelve of this
Section, or - in case where the amount cannot be ascertained -
the method of calculating that amount, must be clearly disclosed
to the client, in a manner that is comprehensive, accurate, and
understandable, prior to the provision of the relevant investment
services or ancillary investment services. Where applicable, the
investment brokerage company or credit institution shall also
inform the client of mechanisms for transferring to the client
the fee or commission or transferring monetary or non-monetary
benefit received in relation to the provision of the investment
services or ancillary investment services.
(122) The payments or benefits which are necessary
for the provision of the relevant investment services or
ancillary investment services, including custody costs,
settlement and exchange fees, regulatory levies or legal fees,
and which by its nature cannot give rise to conflicts with the
obligations of the investment brokerage company or credit
institution to act honestly, fairly, and professionally in
accordance with the best interests of its clients, shall not be
subject to that specified in Paragraph twelve of this
Section.
(123) Upon carrying out portfolio management, the
investment brokerage company and credit institution shall not
accept and retain fees, commissions, and any monetary or
non-monetary benefits paid or provided by any third party or a
person acting on behalf of a third party in relation to the
provision of the service to clients. Minor non-monetary benefits
that are capable of enhancing the quality of service provided to
a client and are of a scale and nature such that they could not
be judged to impair compliance with the duty of the investment
brokerage company or credit institution to act in the best
interest of the client must be clearly disclosed and are excluded
from this Paragraph.
(124) The investment brokerage company and credit
institution which provide investment services to clients shall
not remunerate or assess the performance of its staff in a way
that conflicts with its duty to act in the best interests of its
clients. In particular, they shall not make any arrangement by
way of remuneration, sales targets or otherwise that could
provide an incentive to its staff to recommend a particular
financial instrument to a retail client when the investment
brokerage company or credit institution could offer a different
financial instrument which would better meet that client's
needs.
(126) If the investment brokerage company or credit
institution offers an investment service together with another
service or product as part of a package or as a condition for the
same agreement or package, the investment brokerage company or
credit institution shall inform the client whether it is possible
to buy the different components separately and shall provide for
a separate evidence of the costs and charges of each component.
If the risks resulting from such an agreement or package offered
to a retail client are likely to be different from the risks
associated with the components taken separately, the investment
brokerage company or credit institution shall provide an adequate
description of the different components of the agreement or
package and the way in which its interaction modifies the
risks.
(126) More detailed measures to ensure that
investment brokerage companies and credit institutions, upon
providing investment services or ancillary investment services to
their clients, conform to the requirements laid down in this
Section shall be determined by Regulation No 2017/565.
(13) The client has the right to submit a complaint to an
investment brokerage company and credit institution related to
the provision of investment services. The investment brokerage
company and credit institution shall establish, implement, and
conform to effective procedures, in accordance with which
complaints of retail clients and potential retail clients are
registered and examined, and information is registered on
measures carried out in relation to such complaints.
(14) Clients which are regarded to be consumers within the
meaning of the Consumer Rights Protection Law are entitled to
submit complaints to the Consumer Rights Protection Centre
regarding violations of the requirements of this Law and other
laws and regulations of consumer rights protection, if it is
related with the provision of investment services.
(15) The Commission shall provide opinion to clients on
complaints concerning violations of the requirements of this Law
or other laws and regulations, if it is related with the
provision of investment services.
(16) In case of a loss incurred by a client due to incorrect
information provided by the investment brokerage company or
credit institution, or due to the failure of the investment
brokerage company or credit institution to conform to the
requirements of this Section, the client has the right to request
compensation for losses in accordance with the general procedures
laid down in laws and regulations.
[4 October 2007; 21 June 2018; 12 December 2019]
Section 128.1 Client
Order Handling Rules
(1) An investment brokerage company and credit institution
which have received a licence to execute orders on behalf of
clients shall carry out the necessary measures and implement
procedures which provide for the fair and expeditious execution
of client orders, relative to other client orders or the trading
interests of the investment brokerage company or credit
institution. The abovementioned measures and procedures shall
allow for the execution of otherwise comparable client orders in
accordance with the time of their reception by the investment
brokerage company and credit institution.
(11) The conditions and nature of the procedures
and measures which result in the fair and expeditious execution
of client orders and the situations in which or types of
transaction for which investment brokerage companies or credit
institutions may reasonably deviate from prompt execution so as
to obtain more favourable terms for clients shall be determined
by Regulation No 2017/565.
(2) The investment brokerage company and credit institution,
and also the parties related thereto shall not misuse the
information at their disposal relating to pending client
orders.
(3) If a client has submitted a limit order regarding shares
admitted to trading on a regulated market or being traded at
trading venues and such order under prevailing market conditions
is not promptly executed, the investment brokerage company or
credit institution, unless expressly otherwise provided by the
client, shall carry out measures in order to ensure execution of
the abovementioned order as soon as possible, by publicly
disclosing information to the market on such order in a manner
which is easily accessible to other market participants. It shall
be considered that such requirement has been conformed to if the
investment brokerage company or credit institution has submitted
the limit order at the trading venue.
(4) The Commission has the right to exempt the investment
brokerage company and credit institution from the obligation
referred to in Paragraph three of this Section to publicly
disclose a limit order that is large in scale compared with
normal market size as determined under Article 4 of Regulation
(EU) No 600/2014.
(41) The methods which can be used by the
investment brokerage company or credit institution to deem that
it has met its obligation to disclose not immediately executable
client limit orders to the market shall be determined by
Regulation No 2017/565.
(5) The investment brokerage company and credit institution
have the right to aggregate a client order with transaction on
their behalf or with another client order, provided that the
order aggregation and allocation policy is developed and
conformed to in the institution. The order aggregation and
allocation policy may be included in the order execution policy
and it shall provide for the following:
1) orders may be aggregated only if it is unlikely that the
aggregation of orders and transactions will work overall to the
disadvantage of clients whose orders are to be aggregated;
2) the investment brokerage company and credit institution
have an obligation before aggregation of orders or transaction to
inform each client whose order is to be aggregated with an order
of another client that the effect of aggregation may work to its
disadvantage in relation to a particular order;
3) fair allocation of aggregated orders and transactions
especially providing for an explanation how the volume and price
of orders determine allocation of orders in each particular
case;
4) procedures for allocation of aggregated client orders, if
the aggregated order is partially executed;
5) procedures for ensuring conformity with the requirements of
Paragraphs six and seven of this Section in respect of allocation
or reallocation of aggregated client orders and transactions on
their behalf.
(6) If the investment brokerage company or credit institution
has aggregated transactions on its behalf with one or more client
orders, it shall allocate or reallocate the relevant transaction
in a way that is not detrimental to the client.
(7) Where the investment brokerage company or credit
institution aggregate a client order with a transaction on its
behalf and the aggregated order is partially executed, it shall
allocate the related transaction in priority sequence - at first
to the client and then to the company. If the investment
brokerage company or credit institution is able to demonstrate on
reasonable grounds that without aggregation it would not have
been able to carry out the order on such advantageous terms, or
at all, it may apply proportional income allocation in respect of
the transaction on its behalf.
(8) The investment brokerage company and credit institution
which receive the instructions or orders of a client with the
intermediation of another investment brokerage company or credit
institution regarding provision of investment services may rely
on the client information provided by such another investment
brokerage company or credit institution, and also to rely on all
recommendations provided by another investment brokerage company
or credit institution to the client in relation to the service or
transaction.
(9) The investment brokerage company or credit institution
which transmits instructions or orders to another investment
brokerage company or credit institution regarding provision of
investment services and ancillary investment services on behalf
of a client shall be responsible for:
1) completeness and precision of the transmitted
information;
2) suitability of consultations and recommendations provided
to the client.
(10) The investment brokerage company and credit institution
which receive the instructions or orders of a client with the
intermediation of another investment brokerage company or credit
institution regarding provision of investment services shall be
responsible for the provision of investment services or
conclusion of transactions, on the basis of the information or
recommendations provided by another investment brokerage company
or credit institution to the client.
[4 October 2007; 21 June 2018]
Section 128.2 Ensuring of
the Best Possible Results for a Client
(1) An investment brokerage company and credit institution, in
executing an order on behalf of a client regarding transactions
with financial instruments, carrying out portfolio management
according to the authorisation of investors or accepting or
transmitting for execution orders of a client regarding
transactions with financial instruments, shall ensure the best
possible results by taking into account the price of the
transaction, the costs, the execution speed, the possibility for
execution and settlement, the amount of transaction, specifics or
any other considerations in respect of the execution of the
order.
(2) In order to ensure the best result for clients, the
investment brokerage company and credit institution in accordance
with the requirements of Section 128.3 of this Law
shall draw up and approve the order execution policy.
(3) [21 June 2018]
(4) The investment brokerage company and credit institution
are prohibited to perform transactions with financial instruments
owned or possessed by clients, if they, when entering into a
contract on provision of investment services, have not received a
consent of the client for the order execution policy thereof. The
investment brokerage company and credit institution may make
transactions outside a regulated market, MT facility, or OT
facility, upon receipt of a prior consent of the client to each
separate transaction or providing for such possibility in the
contract.
(5) The investment brokerage company and credit institution
have an obligation to prove, upon request of a client, order
execution conformity with the order execution policy and to
prove, upon request of the Commission, that they conform to the
requirements of this Section and Section 128.3.
(6) Where the investment brokerage company and credit
institution execute an order on behalf of a retail client, the
best possible result shall be determined in terms of the total
consideration, representing the price of the financial instrument
and the costs related to execution, which shall include all
expenses incurred by the client which are directly related to
execution of the order, including execution venue fees, clearing
and settlement fees and any other fees paid to persons involved
in execution of the order.
(7) For the purposes of delivering the best possible results
for a client, if the client order regarding transaction with
financial instruments may be executed in more than one trading
venues listed in the order execution policy, the investment
brokerage company and credit institution shall evaluate the
results to be achieved for the client on each trading venue and
compare such results. The investment brokerage company and credit
institution shall additionally take into account commissions laid
thereby and costs for executing the order on each trading venues.
When determining commissions for executing the order, the
investment brokerage company and credit institution are not
entitled to unjustifiable discriminate different trading
venues.
(71) The investment brokerage company and credit
institution shall not receive any remuneration, rebate, or
non-monetary benefit for routing client orders to a particular
trading venue or execution venue. Otherwise such action shall be
deemed, within the meaning of Section 133.18, a
violation of such governing requirements on conflict of interest
or inducements as set out in Sections 127 and 128 of this
Law.
(72) For financial instruments subject to the
trading obligation specified in in Articles 23 and 28 Regulation
(EU) No 600/2014 each trading venue and systematic internaliser
and - for other financial instruments - each execution venue
makes available to the public, without any charges, data relating
to the quality of execution of transactions on that venue on at
least an annual basis. The abovementioned periodic reports shall
include information on price, costs, speed, and likelihood of
execution for individual financial instruments.
(73) The investment brokerage company and credit
institution shall, after execution of the transaction on behalf
of the client, inform the client of the place of execution of the
order.
(8) The investment brokerage company and credit institution
shall be exempted from the obligation to deliver the best
possible results to a client according to the order execution
policy, if the client has provided special instructions on how
transactions with financial instruments are to be executed,
regarding placement of orders, when fulfilling portfolio
management of the client, regarding a person to whom the client
order is to be transmitted for execution. In such case the
investment brokerage company and credit institution shall conform
to the special instructions of the client.
(9) Regulation No 2017/565 shall determine in more detail:
1) the criteria for determining the relative importance of the
different factors that may be taken into account for determining
the best possible result, taking into account the size and type
of order, and also the retail or professional nature of the
client;
2) factors that may be taken into account by the investment
brokerage company and credit institution when reviewing their
execution measures and the circumstances under which changes to
such measures may be appropriate. In particular, the execution
measures shall be determined for the factors taken into account
for determining which venues enable investment brokerage
companies or credit institutions to obtain on a consistent basis
the best possible result for executing the client orders;
3) the nature and extent of the information to be provided to
clients on their order execution policies.
(10) The specific content, the format, and the periodicity of
data relating to the quality of execution to be published in
accordance with Paragraph 7.2 of this Section, taking
into account the type of execution venue and the type of
financial instrument concerned, shall be determined by Commission
Delegated Regulation (EU) 2017/575 of 8 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the
Council on markets in financial instruments with regard to
regulatory technical standards concerning the data to be
published by execution venues on the quality of execution of
transactions.
[4 October 2007; 21 June 2018]
Section 128.3 Order
Execution Policy
(1) If an investment brokerage company and credit institution
executes client orders for transactions with financial
instruments on behalf of the client, the client order execution
policy shall provide for the following regarding each category of
financial instruments:
1) information on trading venues on which the investment
brokerage company and credit institution execute client orders.
At least those trading venues shall be provided for in the order
execution policy where the investment brokerage company and
credit institution plan to ensure the best possible result in
execution of client orders;
2) factors which determined selection of the trading venue for
the relevant category of financial instruments.
(2) If the investment brokerage company and credit institution
carry out portfolio management of investors according to the
investors' authorisation or accept and transmit client orders for
execution regarding transactions with financial instruments, it
shall indicate information in the order execution policy on
institutions where the investment brokerage company and credit
institution place orders or transmit client orders for the
execution. The investment brokerage company and credit
institution are entitled to transmit client orders for execution
only to such institutions which have approved policy that ensures
the best possible result for the client.
(3) The investment brokerage company and credit institution
shall evaluate efficiency of the client order execution policy on
a regular basis. The investment brokerage company and investment
institution shall, each year or in case where material changes
arise, which affect the ability of the investment brokerage
company or credit institution to continue to achieve the best
possible result in respect of the client order, by permanently
using trading venues listed in the order execution policy, review
the order execution policy and order execution measures. If
material amendments are made to the order execution policy, the
investment brokerage company and credit institution shall inform
the clients thereon.
(31) The investment brokerage company and credit
institution which executes client orders shall summarise and make
public on an annual basis the top five execution venues for each
category of financial instruments in terms of trading volumes
where they executed client orders in the preceding year, and also
shall make public a summary of information on the quality of
actual execution of orders.
(4) If amendments are made to the list of order execution
venues which the investment brokerage company or credit
institution considers as material, it shall make the relevant
amendments to the order execution policy and inform the clients
thereof accordingly.
(5) The investment brokerage company and credit institution,
prior to entering into a contract on provision of investment
services, shall inform the client of the order execution policy
developed in accordance with the procedures laid down in this
Section. That information shall explain clearly, in sufficient
detail and in a way that can be easily understood by clients, how
orders will be executed by the investment brokerage company or
credit institution on behalf of the client.
(6) If the investment brokerage company and credit institution
provide in their order execution policy a possibility to execute
a client order outside a regulated market, MT facility, of OT
facility, they shall expressly inform their clients of such
possibility.
(7) The content and format of such information which should be
made public by investment brokerage companies and credit
institutions in accordance with Paragraph 3.1 of this
Section shall be determined in more detail by Commission
Delegated Regulation (EU) 2017/576 of 8 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the
Council with regard to regulatory technical standards for the
annual publication by investment firms of information on the
identity of execution venues and on the quality of execution.
[4 October 2007; 22 May 2008; 21 June 2018; 20 June
2019]
Section 129. Holding of Client
Funds
(1) An investment brokerage company is entitled to hold the
client funds, which may be used only for ensuring of transactions
to be performed with the financial instruments of the client,
according to a written contract between the client and the
investment brokerage company.
(2) The investment brokerage company shall hold the client
funds separately in an account or accounts which have been
separated and identified separately from the accounts used for
holding the funds owned by the investment brokerage company
itself:
1) in a central bank of a Member State, if it provides such
service to investment brokerage companies or credit
institutions;
2) in a credit institution registered in the Republic of
Latvia or in a credit institution registered in a Member State,
or in a credit institution registered in a foreign country;
3) in a money market fund which conforms to the requirements
referred to in Paragraph five of this Section.
(3) An investment brokerage company is entitled to hold the
client funds in a money market fund only upon prior consent by
the client. The investment brokerage company shall inform clients
that the funds to be held in the money market fund will not be
held in accordance with the requirements laid down in this Law
regarding the protection of client funds.
(4) An investment brokerage company, when taking a decision on
a credit institution or fund where to hold funds belonging to the
client, shall evaluate with proper skill and accuracy the
competence and reputation of such credit institution or fund on a
financial market, and also the requirements or case law in force
in the relevant state in respect of holding of client funds that
could be detrimental to the client's interests. The investment
brokerage company shall, once a year, evaluate repeatedly the
competence of the selected credit institution and conditions for
holding of client funds.
(41) If an investment brokerage company holds
client funds in the credit institution or money market fund of
the same group of which the investment brokerage company itself
is part, it shall limit the amount of funds held by the relevant
investment brokerage company in any unit of such group or any
combination of units of such group so that the abovementioned
funds would not exceed 20 per cent from the total amount of
client funds. The investment brokerage company need not comply
with such restriction if it is able to prove that the
abovementioned requirements are not commensurate, taking into
account the object, size, and complexity of its activity, and
also safety offered by the abovementioned third parties, and if
the amount of client funds held by the investment brokerage
company is small. The investment brokerage company shall
regularly review its assessments performed in accordance with
this Paragraph and submit its initial assessment and reviewed
assessments to the Commission.
(5) A money market fund where in accordance with Paragraph two
of this Section an investment brokerage company is entitled to
hold funds, shall be an open investment fund which is licensed
and selected in a Member State and conforms to the following
criteria:
1) its primary investment objective is to maintain the net
asset value of the undertaking either constant at par, net of
earnings, or at the value of the investors' initial capital plus
earnings;
2) it must, with a view to achieving that primary investment
objective, invest exclusively in high quality money market
instruments with a maturity or residual maturity of no more than
397 days, or regular yield adjustments consistent with such a
maturity, and with a weighted average maturity of 60 days. It may
also achieve this objective by investing on an ancillary basis in
deposits with credit institutions;
3) it must provide liquidity through same day or next day
settlement.
(6) Within the meaning of this Section, a money market
instrument shall be considered to be of high quality if the
investment brokerage company itself performs a documented
assessment on the credit rating of money market instruments
allowing it to deem that the money market instrument is of high
quality. If one or several rating agencies registered with and
supervised by the European Securities and Markets Authority have
provided rating of such instrument, the investment brokerage
company shall take into account also the abovementioned credit
ratings in its internal assessment.
(61) An investment brokerage company shall inform
the persons referred to in Paragraph two of this Section that
funds transferred by the investment brokerage company for holding
are owned by its clients.
(62) An investment brokerage company shall ensure
that security interests, liens or rights of set-off over client
financial instruments or funds enabling a third party to dispose
of client's financial instruments or funds in order to recover
debts that do not relate to the client or provision of services
to the client are not permitted unless this is provided for by
applicable legal acts in a foreign country jurisdiction in which
the client funds or financial instruments are held. If the
investment brokerage company has an obligation to enter into an
agreement that creates such security interests, liens or rights
of set-off, the investment brokerage company shall disclose the
relevant information to the client, indicating the risks
associated with the abovementioned agreement. If security
interests, liens or rights of set-off are granted by the
investment brokerage company over client financial instruments or
funds, or if the investment brokerage company has been informed
that they are granted, they shall be recorded in a client
contract and the own accounts of the investment brokerage company
to make the ownership status of client assets clear.
(7) An investment brokerage company shall perform accounting
of such funds belonging to each client which are held by the
investment brokerage company. In accounting of funds belonging to
clients, the investment brokerage company shall ensure that:
1) it is possible at any time to distinguish funds held for
one client from funds held for another client, or from funds of
the investment brokerage company;
2) accounts are compared on a regular basis with the accounts
of that third party in which the funds of clients are held by the
company;
3) accounting records and accounts ensure its accuracy and
particularly its conformity with the amount of clients funds and
give an opportunity to use it as an examination or audit
evidence.
(8) Funds belonging to a client of an investment brokerage
company may not be used for the satisfaction of claims of
creditors of the investment brokerage company. This requirement
also applies to those cases when an investment brokerage company
has been declared insolvent in accordance with the procedures
laid down in the law.
(81) An investment brokerage company shall
introduce adequate organisational arrangements to minimise the
risk of the loss or diminution of client funds, or of rights in
connection with those funds, as a result of misuse of the assets,
fraud, poor administration, inadequate record-keeping, or
negligence.
(9) If a credit institution holds the client funds necessary
for ensuring of transactions to be carried out with financial
instruments at a third party on behalf of clients, without
demonstrating the abovementioned client funds on a balance sheet
of the credit institution, it shall conform to the requirements
of Paragraphs two, three, four, 4.1, five, six,
6.1, 6.2, seven, eight, and 8.1
of this Section.
[4 October 2007; 22 May 2008; 26 February 2009; 26 May
2016; 21 June 2018]
Section 129.1 Holding of
Client Financial Instruments
(1) An investment brokerage company and credit institution are
entitled to hold client financial instruments according to a
written contract of the client and the investment brokerage
company or credit institution.
(2) An investment brokerage company and credit institution
shall hold separately the financial instruments belonging to a
client from its own financial instruments.
(3) An investment brokerage company and credit institution are
entitled to hold financial instruments belonging to a client at a
third party. The investment brokerage company and credit
institution, when taking a decision on a third party, where to
hold financial instruments belonging to the client, shall
evaluate with proper skill and accuracy the competence and
reputation of such party on a financial market, and also the
requirements or case law in force in the relevant state in
respect of holding of client financial instruments that could be
detrimental to the client's interests. The investment brokerage
company and credit institution shall, once a year, evaluate
repeatedly the competence of the selected party and conditions
for holding of client financial instruments.
(4) An investment brokerage company and credit institution are
entitled to hold financial instruments belonging to a client only
with such third party which is subjected to the requirements in
force in the relevant state regarding separate holding of client
financial instruments and which is supervised.
(5) An investment brokerage company and credit institution are
not entitled to deposit financial instruments belonging to a
client with a third party registered in a foreign country, if the
holding of financial instruments on behalf of third parties is
not regulated in the country unless one of the following
conditions is met:
1) the nature of the financial instrument or of the investment
service connected with such instrument requires it to be
deposited with a third party in that third country;
2) the financial instruments are held on behalf of a
professional client, and the client has requested the investment
brokerage company in writing to deposit them with a third party
in that third country.
(51) The requirements of Paragraphs four and five
of this Section shall also be applied if such third party has
delegated any of its functions in relation to holding and storage
of financial instruments to any other third party.
(6) An investment brokerage company and credit institution
shall perform the accounting of client financial instruments held
thereby and the storage of the relevant accounting records. In
accounting of financial instruments belonging to clients, the
investment brokerage company and credit institution shall
ensure:
1) a possibility at any time to distinguish financial
instruments belonging to one client from financial instruments
belonging to another client, or from financial instruments
belonging to the investment brokerage company or credit
institution;
2) comparison of accounts on a regular basis with the accounts
of financial instruments of that third party where the investment
brokerage company or credit institution holds the financial
instruments of clients;
3) accuracy and conformity of accounting records and accounts
with the amount of client financial instruments and give an
opportunity to visually depict the accounting data in a readable
form in order to use them as examination or audit evidence;
4) keeping of accounting registers of financial instruments in
a double entry accounting system;
5) making of records in client accounts on the basis of
corroborative documents.
(7) An investment brokerage company and credit institution
which hold the financial instruments belonging to a client with
the third party shall ensure that the financial instruments
belonging to the client are identifiable separately from the
financial instruments belonging to the third party or the company
by using accounts with different names in the accounting
documents of the third party or similar measures which ensure the
same protection level.
(71) An investment brokerage company and credit
institution shall ensure that security interests, liens or rights
of set-off over client financial instruments enabling a third
party to dispose of client's financial instruments in order to
recover debts that do not relate to the client or provision of
services to the client are not permitted unless this is provided
for by applicable legal acts in a foreign country jurisdiction in
which the client financial instruments are held. If the
investment brokerage company and credit institution have an
obligation to enter into an agreement that creates such security
interests, liens or rights of set-off, the investment brokerage
company and credit institution shall disclose the relevant
information to the client, indicating the risks associated with
the abovementioned agreement. If security interests, liens or
rights of set-off are granted by the investment brokerage company
or credit institution over client financial instruments, or if
the investment brokerage company or credit institution has been
informed that they are granted, they shall be recorded in a
client contract and the own accounts of the investment brokerage
company or credit institution to make the ownership status of
client assets clear.
(8) An investment brokerage company and credit institution
shall introduce adequate organisational arrangements to minimise
the risk of the loss or diminution of client financial
instruments, or of rights in connection with those financial
instruments, as a result of misuse of the assets, fraud, poor
administration, inadequate record-keeping or negligence.
(9) The Commission may permit an investment brokerage company
which executes orders of investors regarding transactions with
financial instruments, to hold financial instruments on its
behalf (to undertake liabilities and risk arising from positions
of financial instruments on its behalf), if the following
conditions are met concurrently:
1) the reason for such positions of financial instruments are
solely the inability of the investment brokerage company to match
orders of investors;
2) the total market value of such positions of financial
instruments does not exceed 15 per cent of the initial capital of
the investment brokerage company;
3) the investment brokerage company is carrying out the
requirements laid down in Articles 92, 93, 94, and 95 and Part
four of Regulation (EU) No 575/2013;
4) such positions of financial instruments are of chance and
temporary nature, and they exist only for the time period which
is necessary in order to perform the abovementioned transaction
with financial instruments.
[4 October 2007; 22 May 2008; 22 March 2012; 15 December
2016; 21 June 2018]
Section 129.2 Report of a
Sworn Auditor on Holding of Client Funds and Financial
Instruments
An investment brokerage company and credit institution shall
ensure that a sworn auditor examines at least annually if the
measures carried out by it are sufficient in order to comply with
the requirements laid down in Sections 125.1,
125.2, 125.3, 129, and 129.1 of
this Law. The sworn auditor shall submit a written report to the
Commission on the examination referred to in this Section.
[22 March 2012; 21 June 2018]
Section 130. Financial Instrument
Accounts
(1) Prior to opening a financial instrument account, an
investment brokerage company or credit institution shall identify
the person proposing to open an account, and also determine
whether the financial instruments to be registered in the account
will belong to or be held by this person. The account in which
the registered financial instruments are financial instruments
held by a person shall be identified as a nominal account.
(2) The opening of financial instrument accounts without the
identification of a client is prohibited. This requirement also
applies to money accounts of clients opened by investment
brokerage companies, which are opened for the ensuring of
financial instrument transactions to be performed for
clients.
(3) In the case of an opening of a nominal account, the
identification of the account shall reflect information stating
that it is a nominal account and that the financial instruments
therein do not belong to the person opening the account.
(4) An investment brokerage company and credit institution are
only entitled to open a nominal account, provided that the person
for whom the nominal account is being opened acts in accordance
with laws and regulations the requirements of which specified
wherein regarding identification of clients are not less
stringent than those laid down in the laws and regulations of the
Republic of Latvia.
(5) [4 October 2007]
(6) [9 June 2005]
(7) [4 October 2007]
(8) [4 October 2007]
(9) [4 October 2007]
[9 June 2005; 4 October 2017]
Section 130.1 Financial
Instrument and Money Account Statements
(1) An investment brokerage company or credit institution
shall, in accordance with the mutual contract regulating the
holding of financial instruments for the client, and also upon
request by the client, issue to the client a financial instrument
account statement regarding:
1) any transactions performed within a specified period of
time with one, several or all of the financial instruments;
2) any transactions performed during the entire period of
existence of the account with one, several or all of the
financial instruments, including regarding securities financing
transactions;
3) any particular transaction with the financial
instruments;
4) any financial instruments owned by the client which are
registered in the account.
(2) Account statements shall specify the data identifying an
investment brokerage company or credit institution, the data
identifying a client, the number of the account, the period of
time for which the transactions are reflected in the account, the
date of issue of the account statement, the data identifying the
financial instruments (name, ISIN code), the opening and ending
balance sheet of the account, the date on which the financial
instruments were registered in the account, the amount and price
(if such is known) of the financial instruments registered as a
result of each transaction performed with the financial
instruments, the total amount of financial instruments
transferred into and written off from the accounts within the
period of time for which the account statement has been
issued.
(3) An investment brokerage company or credit institution
shall ensure that an account statement is sent to the client at
least once a year, if information to be included therein has not
been otherwise provided to the client during the year. The
statement shall contain the following information:
1) information on financial instruments belonging to the
client which are registered in the account at the end of the
period covered by the statement. In cases where the portfolio of
a client includes the proceeds of one or more uncompleted
transactions, the information on financial instruments may be
demonstrated by applying either data of the accounting type on
the trade date or the settlement date. The selected accounting
type is applied consistently to all such information in the
statement;
2) indication whether client financial instruments have been
the subject of securities financing transactions and the extent
to which they are used;
3) the benefit that has accrued to the client by virtue of use
of financial instruments belonging to him or her in any
securities financing transactions, and the basis on which that
benefit has accrued.
(4) An investment brokerage company or credit institution
which carries out portfolio management of the client may include
the information referred to in this Paragraph in the statement
regarding investment service, provided thereby to the client in
accordance with the provisions of Section 128, Paragraph eleven
of this Law.
(5) The relevant data which provide information equivalent to
the information referred to in this Section on the financial
instrument account shall be indicated in the statement regarding
a client's money account opened with an investment brokerage
company.
[4 October 2007]
Section 131. Confidentiality of
Financial Instrument Accounts and Transactions
(1) An investment brokerage company and credit institution
have an obligation to guarantee the confidentiality of financial
instrument accounts of clients, the client funds accounted by the
investment brokerage company and referred to in Section 129 of
this Law, and the transactions performed with financial
instruments.
(2) A credit institution shall guarantee the confidentiality
of the financial instrument accounts of clients and transactions
performed with financial instruments, in conformity with the
requirements of the Credit Institution Law and Paragraphs eleven
and twelve of this Section.
(3) An investment brokerage company shall guarantee the
confidentiality of the financial instrument accounts of clients,
the client funds accounted by the investment brokerage company
and referred to in Section 129 of this Law, and the transactions
performed with financial instruments, in accordance with the
requirements of this Law.
(4) An investment brokerage company shall provide information
on the financial instrument accounts of natural persons, the
client funds accounted by the investment brokerage company and
referred to in Section 129 of this Law, and the transactions
performed with such financial instruments directly to such
natural persons and to their legal representatives.
(5) An investment brokerage company shall provide information
on the financial instrument accounts of legal persons, the client
funds accounted by the investment brokerage company and referred
to in Section 129 of this Law, and the transactions made with
financial instruments to the authorised representatives of such
legal persons, and also to their management bodies upon request
of the heads of such bodies, and also to the parent undertakings
of such legal persons upon request of their management
bodies.
(6) An investment brokerage company shall, according to a
written agreement, provide information on the client, the
financial instrument accounts, the client funds accounted by the
investment brokerage company and referred to in Section 129 of
this Law, and the transactions performed with their financial
instruments to a third party, provided that the client has
unmistakably agreed to provision of such information to the third
party in the agreement entered into with the investment brokerage
company.
(7) An investment brokerage company shall provide information
on financial instrument accounts of natural and legal persons,
the client funds accounted by the investment brokerage company
and referred to in Section 129 of this Law and transactions
performed with the financial instruments to the extent necessary
for the performance of the relevant functions, in accordance with
the procedures laid down in laws, only to the following State
authorities:
1) the court and Office of the Prosecutor, if the information
is required:
a) in criminal proceedings or in proceedings where the
confiscation of property may be applicable in cases specified by
law,
b) in civil proceedings in which a civil claim arising from
criminal proceedings has been satisfied,
c) in civil proceedings regarding recovery proceedings for an
allowance (alimony) if there are no earnings or other property
against which recovery proceedings may be brought,
d) in civil proceedings regarding the division of such
financial instruments which are the joint property of
spouses,
e) in a matter regarding the insolvency and bankruptcy of a
debtor,
f) in an inheritance matter in case of the death of a
client;
2) the State Audit Office - on legal persons having State
property at the disposal thereof or which are financed from State
resources or which perform public procurement;
3) the State Revenue Service, if:
a) a taxpayer fails to submit to the tax administration the
declarations and tax calculations required by the relevant tax
laws,
b) violations of the system of accounting or tax regulatory
enactments have been determined during the tax audit examination
of a taxpayer,
c) a taxpayer fails to perform a tax payment in conformity
with the requirements of tax laws;
4) the Prevention of the Laundering of Proceeds from Crime
Service - in cases and according to the procedures laid down in
the Law On the Service for Prevention of the Laundering of
Proceeds from Crime;
5) the State security authorities - upon request of the
Prosecutor General or specially authorised prosecutor, if the
information is necessary in order to check links to terrorism of
persons who own financial instruments.
(8) The notary public adjudicating an inheritance matter shall
be provided with information on the balance on the accounts of a
natural person - bequeather of the estate.
(9) An investment brokerage company shall provide information
on the basis of a written request by a State authority that
specifies the particular person to be examined and the necessity
of the information is justified in conformity with the
requirements of the relevant law.
(10) An investment brokerage company has the right to provide
to its parent commercial company which is an investment brokerage
company or financial holding company, information necessary for
the supervision of the investment brokerage company, in
accordance with this Law, the regulatory provisions of the
Commission, or a mutual agreement between the Commission and the
foreign supervisory authority of the investment brokerage
company.
(11) Information on a client, his or her financial instrument
accounts and money accounts which are related to financial
instrument accounting, and also on transactions carried out with
financial instruments included in regulated markets shall be
provided to a regulated market operator on the basis of their
request if such information is necessary to the organiser of a
trading venue in order to ensure performance of the supervisory
functions granted for the prevention of the use of insider
information and market manipulation.
(111) Information on a client, his or her financial
instrument accounts and money accounts which are related to
financial instrument accounting, and also transactions carried
out with financial instruments recorded in the central securities
depository shall be provided to the central securities depository
on the basis of its request if such information is necessary to
the central securities depository in order to ensure the
performance of the supervisory functions specified in Article
67(1) of Regulation No 2017/392.
(12) An investment brokerage company and credit institution
shall provide the Commission with information on the financial
instrument accounts of clients, the client funds accounted by the
investment brokerage company and referred to in Section 129 of
this Law, and the transactions with financial instruments, if it
is required by the Commission for the performance of supervisory
functions.
[29 March 2007; 4 October 2007; 14 September 2017]
Section 131.1 Access to
Information on Client Financial Instruments and Funds
(1) In addition to that specified in Section 131 of this Law
the information of an investment brokerage company and credit
institution which is related to client financial instruments and
funds shall be made freely available to:
1) the Commission;
2) appointed administrator of insolvency proceedings.
(2) The information referred to in Paragraph one of this
Section shall include:
1) related internal accounts and records that readily identify
the balances of funds and financial instruments held for each
client;
2) information on persons where client funds are held by
investment brokerage company or credit institution in accordance
with Section 129 of this Law, details on the accounts in which
client funds are held and on the relevant agreements with the
abovementioned persons;
3) information on third parties where client financial
instruments are held by investment brokerage company or credit
institution in accordance with Section 129.1 of this
Law, detailed information on the accounts opened with third
parties and on the relevant agreements with the abovementioned
persons;
4) detailed information on the third parties performing any
functions related to accounting of client assets as an outsourced
service and on functions performed as outsourced services;
5) information on responsible employees of the investment
brokerage company and credit institution involved in related
processes, including employees responsible for oversight of the
investment brokerage companies and credit institutions in
relation to the safeguarding of client assets;
6) agreements relevant to establish client ownership over
assets.
[21 June 2018]
Section 132. Liability for Breach of
Confidentiality of a Financial Instrument Account or
Transactions
(1) Anyone who has either directly or indirectly made public
or made known to persons who have no right to receive the
relevant information such information on the financial instrument
accounts of clients of an investment brokerage company, the
client funds accounted by the investment brokerage company and
referred to in Section 129 of this Law or on transactions with
financial instruments, if such information has been entrusted to
him or her or become known to him or her as a shareholder
(member), chairperson or member of the council (where such has
been established), board or the audit board, as an employee of
the investment brokerage company, as an official of the
Commission or a State authority, as a representative of a sworn
auditor, as the person referred to in Section 131, Paragraph six
of this Law, as a member of the council, board or employee of the
central securities depository or the regulated market operator,
shall be held to criminal liability in accordance with the
procedures laid down in Law.
(2) Persons who have committed the violations referred to in
this Section shall be punished also if the violations have been
committed after the persons referred to in Paragraph one of this
Section have terminated contractual relations or fulfilment of
their obligations, or employment relationship with the investment
brokerage company, Commission, State authority or as
representatives of sworn auditors.
[29 March 2007; 4 October 2007; 14 September 2017; 21 June
2018]
Section 132.1 Algorithmic
Trading and Direct Electronic Access to a Trading Venue
(1) An investment brokerage company and credit institution
that engages in algorithmic trading shall have in place effective
systems and risk controls suitable to the business it operates to
ensure that its trading systems are resilient and have sufficient
capacity, are subject to appropriate trading thresholds and
limits and prevent the sending of erroneous orders or the systems
otherwise functioning in a way that may create or contribute to a
disorderly market. Such an investment brokerage company and
credit institution shall also have in place effective systems and
risk controls to ensure the trading systems cannot be used for
any purpose that is contrary to the provisions of Regulation (EU)
No 596/2014 or to the rules of a trading venue to which it is
connected. The investment brokerage company and credit
institution shall introduce effective business continuity
measures to deal with any failure of its trading systems and
shall ensure its systems are fully tested and properly monitored
to ensure that they meet the requirements of this Paragraph.
(2) An investment brokerage company and credit institution the
home Member State of which is the Republic of Latvia shall notify
the Commission if it is engaged in algorithmic trading. The
investment brokerage company and credit institution that engages
in algorithmic trading shall also notify this to the organiser of
a trading venue at trading venues organised by which the
investment brokerage company and credit institution engages in
algorithmic trading as a member or participant of the trading
venue.
(3) The Commission has the right, at any time, to request that
the investment brokerage company or credit institution provides a
description of its algorithmic trading strategies, details of the
trading parameters or limits to which the system is subject, the
key compliance and risk controls that it has in place to ensure
the conditions laid down in Paragraph one of this Section are
satisfied and details of the testing of its systems. The
Commission has the right, at any time, to request further
information from an investment brokerage company or credit
institution on its algorithmic trading and the systems used for
that trading. The Commission may provide the information received
from the investment brokerage company or credit institution to
the competent authority of the home country of a trading venue,
upon request of such authority, at which the investment brokerage
company or credit institution as a member or participant of the
trading venue is engaged in algorithmic trading.
(4) The investment brokerage company and credit institution
shall arrange for records and notes to be kept in relation to all
activities referred to in this Section in relation to algorithmic
trading, and also shall ensure that those records and notes are
drawn up in a manner to enable the Commission to adequately
monitor the investment brokerage company and credit institution
in relation to the compliance of activity with the requirements
of this Law.
(5) An investment brokerage company and credit institution
that engage in a high-frequency algorithmic trading technique
shall ensure that data regarding all its placed orders, including
cancellations of orders, executed orders, and quotations on
trading venues, are stored in an approved form accurate and time
sequenced records, using the form specified in Commission
Delegated Regulation (EU) 2017/589 of 19 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the
Council with regard to regulatory technical standards specifying
the organisational requirements of investment firms engaged in
algorithmic trading (hereinafter - Regulation No 2017/589). The
Commission has the right to request the abovementioned recording
data and notes at any time and the investment brokerage company
and credit institution shall submit them without delay.
(6) An investment brokerage company and credit institution
that engage in algorithmic trading to pursue a market making
strategy shall, taking into account the liquidity, scale, and
nature of the specific market and the characteristics of the
instrument traded:
1) carry out this market making continuously during a
specified proportion of the trading venue's trading hours, except
under exceptional circumstances, with the result of providing
liquidity on a regular and predictable basis to the trading
venue;
2) enter into a written agreement with the organiser of a
trading venue which shall accurately specify the obligations of
the investment brokerage company or credit institution referred
to in Clause 1 of this Paragraph;
3) have in place effective systems and controls to ensure that
it fulfils its obligations under the agreement referred to in
Clause 2 of this Paragraph at all times.
(7) In accordance with the provisions of this Section and
Section 35.1 of this Law, an investment brokerage
company or credit institution that engages in algorithmic trading
shall be considered to be a market maker if it as a member or
participant of one or more trading venues is carrying out trading
on its behalf and implements a strategy, forming simultaneous
two-way quotes of comparable size and at competitive prices
relating to one or more financial instruments on a single trading
venue or across different trading venues, with the result of
providing liquidity on a regular and frequent basis to the
overall market.
(8) An investment brokerage company and credit institution
that provide direct electronic access to a trading venue shall
have in place effective systems and controls which ensure a
proper assessment and review of the suitability of clients using
the service, that such clients are prevented from exceeding
appropriate pre-set trading and credit thresholds, that trading
by clients using direct electronic access to a trading venue is
properly monitored to preclude that it may create risks to the
investment brokerage company or credit institution itself or that
could create or contribute to a disorderly market or could be
contrary to Regulation (EU) No 596/2014 or the rules of the
trading venue.
(9) If an investment brokerage company or credit institution
does not have the system or controls referred to in Paragraph
eight of this Section, it is prohibited to offer direct
electronic access to a trading venue.
(10) An investment brokerage company and credit institution
shall be fully responsible for ensuring that clients using the
service provided thereby - direct electronic access to a trading
venue - comply with the requirements of this Law and the rules of
the trading venue. The investment brokerage company and credit
institution shall ensure monitoring of all transactions in order
to identify violations of those rules, disorderly trading
conditions or conduct that may involve market abuse and that is
to be reported to the Commission. The investment brokerage
company and credit institution shall enter into a written
agreement with the client which shall include the essential
rights and obligations of both parties arising from the offering
of the service - direct electronic access to a trading venue -,
including a condition in the agreement that the investment
brokerage company and credit institution are responsible in
accordance with this Law.
(11) An investment brokerage company and credit institution
the home Member State of which is the Republic of Latvia and
which provides direct electronic access to a trading venue to
clients shall notify thereof the Commission and the competent
authority of its home Member State of the trading venue at which
the investment brokerage company or credit institution provides
direct electronic access.
(12) The Commission has the right to request at any time that
the investment brokerage company and credit institution provide a
description of the systems and controls referred to in Paragraph
eight of this Section, and also evidence that those have been
applied. The Commission may provide the information received from
the investment brokerage company or credit institution to the
competent authority of the home country of a trading venue, upon
request, in which the investment brokerage company or credit
institution ensures direct electronic access.
(13) The investment brokerage company and credit institution
shall arrange for records and notes to be kept in relation to all
activities referred to in this Section in relation to direct
electronic access, and also shall ensure that those records and
notes are drawn up in a manner to enable the Commission to
adequately monitor the investment brokerage company and credit
institution in relation to the compliance of activity with the
requirements of this Law.
(14) An investment brokerage company and credit institution
that act as a clearing member for other persons shall have in
place effective systems and controls to ensure clearing services
are only applied to persons who meet clear criteria and that
appropriate requirements are imposed on those persons to reduce
risks to the investment brokerage company and credit institution
and to the market. The investment brokerage company and credit
institution shall ensure that there is a written agreement
entered into between the investment brokerage company and credit
institution and the person regarding the essential rights and
obligations of both parties arising from the provision of the
clearing service.
(15) More detailed requirements for the application of the
requirements of this Section shall be determined by Regulation No
2017/589 and Regulation No 2017/578.
[21 June 2018]
Section 133. Information to be
Provided on a Regular Basis
(1) An investment brokerage company shall draw up and submit
reports to the Commission on the financial position, the
proportion of own funds to the sum total of the risk-weighted
assets and off-balance sheet items (calculation of capital
adequacy) of the investment brokerage company, large exposures
and transactions with persons which are related to the investment
brokerage company, and other reports in accordance with the
procedures and within time periods laid thereby.
(2) [22 May 2008]
(3) The Commission is entitled to request consolidated
financial statements from an investment brokerage company and
companies linked thereto, the procedures and time periods for the
submission of which shall be regulated by the regulatory
provisions of the Commission.
(4) The obligation of an investment brokerage company is to
inform without delay the Commission of all circumstances which
may affect further activities of the investment brokerage
company.
[9 June 2005; 4 October 2007; 22 May 2008]
Section 133.1 Trade in
Financial Instruments on a Multilateral Trading Facility
the MT facility may be organised by:
1) an investment brokerage company which has received the
licence for the operation of the MT facility;
2) a credit institution to which the Commission has issued the
licence for the activity of a credit institution and which has
acquired the right to operate the MT facility in accordance with
the procedures laid down in this Law;
3) a regulated market operator who has acquired the licence
for operating a regulated market and which has acquired the right
to operate the MT facility in accordance with the procedures laid
down in this Law.
[21 June 2018]
Section 133.2 Obligations
of an Operator of a Multilateral Trading Facility
[21 June 2018]
Section 133.3 Members or
Participants of a Multilateral Trading Facility
(1) A member or participant in the MT facility is a person who
is entitled to make transactions in this facility in accordance
with the provisions referred to in Section 133.4,
Paragraph four of this Law.
(2) The following may become a member or participant in the MT
facility:
1) an investment brokerage company to which the Commission has
issued a licence for provision of investment services, or a
credit institution to which the Commission has issued a licence
to operate a credit institution and which has commenced the
provision of investment services in accordance with the
procedures laid down in this Law;
2) an investment brokerage company or a credit institution of
other Member State which in the country of incorporation thereof
has obtained a licence for provision of investment services.
(3) An operator of MT facility is entitled to grant the status
of a member or participant also to a person other than referred
to in Paragraph two of this Section but who according to the
criteria approved by the facility operator is appropriate and
conforming, who has sufficient level of skills and competence in
respect of trading on the MT facility and who has sufficient
resources and organisational structure in order to perform the
obligations of the member or participant of the MT facility and
to guarantee due settlements for transactions.
[21 June 2018]
Section 133.4 Trading
Process and Finalisation of Transactions in a Multilateral
Trading Facility and an Organised Trading Facility
(1) Investment brokerage companies, credit institutions, and
regulated market operators operating MT facilities or OT
facilities shall establish transparent rules and procedures for
fair and orderly trading and establish objective criteria for the
efficient execution of orders. The operator of the MT facility or
OT facility shall implement measures in relation to the sound
management of the technical operations of the facility, including
the establishment of effective contingency arrangements to cope
with risks of systems disruption.
(2) An operator of the MT facility or OT facility shall
develop and approve the provisions regarding the criteria for
financial instruments that can be traded on its systems.
(3) An operator of the MT facility or an OT facility shall
provide public access to information to enable its users to
evaluate financial instruments and to take investment decisions,
taking into account both the nature of the users and the types of
instruments traded. The operator of the MT facility or OT
facility need not publish the abovementioned information if it is
certain that such information is available to the public.
(4) An operator of the MT facility or OT facility shall
develop, publish, keep, and implement transparent and
non-discriminatory rules that are based on objective criteria and
govern access to its facility.
(5) An operator of the MT facility or OT facility shall
develop measures to clearly identify and manage the potential
adverse consequences in relation to the operation of the MT
facility or OT facility, or in relation to the members or
participants and users of the operator of the MT facility or OT
facility, or any conflict of interest between the interest of the
MT facility, the OT facility, their owners, the operator of the
MT facility or OT facility and the sound functioning of the MT
facility or OT facility.
(6) An operator of the MT facility or OT facility shall comply
with the requirements of Sections 35.1 and
35.2 of this Law and introduce all the necessary
effective systems, procedures, and arrangements to do so.
(7) An operator of the MT facility or OT facility clearly
inform its members or participants of their respective
obligations and responsibility for the settlement of the
transactions executed in the abovementioned facility. The
organiser of the MT facility or OT facility shall determine the
measures and procedures necessary to facilitate the efficient
settlement of the transactions concluded under the relevant MT
facility or OT facility.
(8) An organiser of the MT facility or an OT facility shall
ensure that it has at least three materially active members or
participants, or users, each having the possibility and
opportunity to interact with all the other members or
participants, or users in respect to price formation.
(9) If transferable securities that have been admitted to
trading on a regulated market are also traded on the MT facility
or OT facility without the consent of the issuer, the issuer
shall not be subject to any obligation relating to initial,
ongoing, or ad hoc financial disclosure with regard to the
abovementioned MT facility or an OT facility.
(10) An organiser of the MT facility or OT facility shall
comply immediately with any instructions from the Commission in
accordance with Section 138 of this Law to suspend or remove a
financial instrument from trading MT facility or OT facility.
(11) An organiser of the MT facility or OT facility shall
provide the Commission with a detailed description of the
functioning of the MT facility or OT facility, including, without
prejudice to that specified in Section 133.6,
Paragraphs one, four, and five of this Law, a description of any
links to other trading venues (regulated market, MT facility, OT
facility) or a systematic internaliser owned by the same
organiser of the MT facility or OT facility, and a list of their
members or participants, or users. The Commission shall transfer
that information to the European Securities and Markets Authority
upon request.
(12) The Commission shall send a notification regarding every
authorisation granted to an organiser of the MT facility or OT
facility to operate as the MT facility and OT facility to the
European Securities and Markets Authority.
(13) The description referred to in Paragraph eleven and the
content and format of the notification referred to in Paragraph
twelve of this Section shall be determined by Commission
Implementing Regulation (EU) 2016/824 of 25 May 2016 laying down
implementing technical standards with regard to the content and
format of the description of the functioning of multilateral
trading facilities and organised trading facilities and the
notification to the European Securities and Markets Authority
according to Directive 2014/65/EU of the European Parliament and
of the Council on markets in financial instruments.
[21 June 2018; 20 June 2019]
Section 133.5 Special
Requirements for a Multilateral Trading Facility
(1) Investment brokerage companies, credit institutions, and
regulated market operators operating MT facilities, in addition
to the requirements laid down in Section 133.4 of this
Law, shall develop and implement rules for the execution of
orders in the system.
(2) An organiser of the MT facility shall ensure that the
rules of the MT facility for access to such facility which have
been developed in accordance with Section 133.4,
Paragraph four of this Law comply with the requirements laid down
in Section 36 of this Law.
(3) An organiser of the MT facility shall ensure:
1) adequate equipment to manage the risks to which it is
exposed, by implementing the necessary arrangements and systems
to identify all significant risks to its operation, and also
effective measures to mitigate the abovementioned risks;
2) efficient and timely finalisation of transactions performed
in the system;
3) continuously available sufficient financial resources to
ensure orderly functioning of the MT facility, having regard to
the nature and extent of the transactions concluded on the market
and the risks which are related to the operation of the MT
facility.
(4) In relation to transactions concluded according to the
rules of the MT facility between members or participants of the
MT facility or between the MT facility and a member or
participant of the MT facility, the requirements referred to in
Sections 126, 126.1, 126.2, 128,
128.1, 128.2, and 128.3 of this
Law shall not be applied. Members or participants of the MT
facility shall fulfil the obligations provided for in Sections
126, 126.1, 126.2, 128, 128.1,
128.2, and 128.3 of this Law in relation to
their clients, if, acting on behalf of the clients, they execute
their orders in the MT facility.
(5) An operator of the MT facility is prohibited from
executing client orders, performing transactions on its own
behalf, and engaging in matched principal trade.
[21 June 2018]
Section 133.6 Special
Requirements for an Organised Trading Facility
(1) Investment brokerage companies, credit institutions, and
regulated market operators operating OT facilities may not
execute client orders in their OT facility, performing
transactions on their own behalf or on account of another entity
or legal person that is part of the same group as the organiser
of the OT facility or of a group of companies. The organiser of
the OT facility shall develop relevant rules or procedures
determining conformity with the provisions of this Paragraph.
(2) An operator of the OT facility may engage in matched
principal trading in bonds, structured finance products, emission
allowances and certain derivatives only where the client has
consented to the process.
(3) An operator of the OT facility shall not engage in matched
principal trading to execute client orders in the OT facility
organised thereby, in derivatives pertaining to a class of
derivatives that has been declared subject to the clearing
obligation in accordance with Article 5 of Regulation (EU) No
648/2012.
(4) An operator of the OT facility shall implement measures,
ensuring that the matched principal trading performed thereby
conforms to the explanation of the term referred to in Section 1,
Paragraph one, Clause 80 of this Law.
(5) An operator of the OT facility is entitled to engage in
dealing on own account other than matched principal trading only
with regard to sovereign debt instruments for which there is not
a liquid market.
(6) One legal person may not concurrently be an organiser of
the OT facility and a systematic internaliser. The OT facility
may not be connected with a systematic internaliser in a way
which enables orders submitted in the OT facility and orders or
quotes submitted in a systematic internaliser to interact and
affect each other. The OT facility may not be connected with
another OT facility in a way which enables the submitted orders
in different OT facilities to interact and affect each other.
(7) An operator of the OT facility may engage another
investment brokerage company or credit institution which is
operating as a market maker on the OT facility operated thereby
on an independent basis. Within the meaning of this Section, such
investment brokerage company or credit institution which has
close links with the operator of the OT facility shall not be
deemed an investment brokerage company or credit institution
which is operating as a market maker on an independent basis.
(8) The execution of orders on the OT facility is carried out
at the discretion of an operator of the OT facility in the
following manner:
1) the operator of the OT facility shall exercise discretion
only in either or both of the following circumstances:
a) when deciding to place an order on the OT facility it
operates or to retract an order on the OT facility it
operates;
b) when deciding not to match a specific client order with
other orders available in the systems at a given time, provided
it is in compliance with specific instructions received from a
client and with the obligations specified in Section
128.2 of this Law;
2) the operator of the OT facility may decide if, when and how
much of two or more orders it wants to match within the system.
In accordance with Paragraphs one, two, three, four, six, and
seven of this Section and without prejudice to Paragraph five,
with regard to a system that arranges transactions in
non-equities, the operator of the OT facility may facilitate
negotiation between clients so as to bring together two or more
potentially compatible trading interest in a transaction.
(9) The obligations specified in Paragraph eight of this
Section shall be without prejudice to Section 128.2
and 133.4 of this Law.
(10) The Commission has the right to require, either when an
investment brokerage company, credit institution, or regulated
market operator submits a request to be authorised for the
operation as an operator of the OT facility or on ad-hoc basis,
that a detailed explanation is developed why the system does not
correspond to and cannot operate as a regulated market, MT
facility, or systematic internaliser, and a detailed description
is developed as to how discretion referred to in Paragraph eight,
Clause 1 of this Section will be exercised, in particular when an
order to the OT facility may be retracted, and also when (and
how) two or more client orders will be matched within the OT
facility. The operator of the OT facility shall provide the
Commission with the information requested thereby, explaining its
use of matched principal trading. The Commission shall monitor
engagement of the operator of the OT facility in matched
principal trading, ensuring that it continues to fall within the
definition of such trading and does not give rise to conflict of
interest between the operator of the OT facility and its
clients.
(11) For transactions which have been concluded on the OT
facility, the requirements laid down in Sections
126.2, 128, 128.1, 128.2, and
128.3 of this Law shall be applied.
[21 June 2018]
Section 133.7 Monitoring
of Compliance with the Rules of the Operator of the Multilateral
Trading Facility or the Organised Trading Facility and with Other
Legal Obligations
(1) Investment brokerage companies, credit institutions, and
regulated market operators operating MT facilities or OT
facilities shall develop and maintain effective procedures and
implement measures for the regular monitoring of the compliance
by their members or participants or users with the rules of the
MT facility or OT facility. The operator of the MT facility or an
OT facility shall monitor the orders submitted, including
cancelled orders, and the transactions concluded by its members
or participants or users in order to identify violations of the
rules of the system, disorderly trading conditions, potential
violations of Regulation No 596/2014, or system disruptions in
relation to a financial instrument, and shall deploy the
resources necessary to ensure that such monitoring is
effective.
(2) An operator of the MT facility or OT facility shall inform
the Commission immediately of significant violations of its
rules, disorderly trading conditions, potential violations of
Regulation No 596/2014, or system disruptions in relation to a
financial instrument. The Commission shall send the received
information to the European Securities and Markets Authority and
the relevant supervisory authorities of other Member States. The
Commission shall inform the European Securities and Markets
Authority and the relevant supervisory authorities of other
Member States of potential violations of Regulation No 596/2014,
if it is being certain that the requirements of Regulation No
596/2014 have been actually infringed.
(3) An operator of the MT facility or OT facility shall
provide to the Commission or the relevant law enforcement
institutions the information necessary for the determination of
facts and circumstances which is related to potential violations
of Regulation No 596/2014.
(4) The circumstances characterising the cases referred to in
Paragraph two of this Section shall be determined by Regulation
No 2017/565.
[21 June 2018]
Section 133.8 Suspension
and Removal of Financial Instruments from Trading on an
Multilateral Trading Facility or an Organised Trading
Facility
(1) Without prejudice to the right of the Commission under
Section 138 of this Law to demand suspension or removal of a
financial instrument from trading on the MT facility or OT
facility, investment brokerage companies, credit institutions, or
operators of the MT facility or OT facility may suspend or remove
from trading on the MT facility or OT facility a financial
instrument if the financial instrument no longer corresponds to
the rules of the MT facility or an OT facility, except when such
suspension or removal would be likely to cause significant damage
to the investors' interests or the orderly functioning of the
market.
(2) An operator of the MT facility or OT facility that
suspends or removes from trading on the MT facility or OT
facility a financial instrument shall also suspend or remove the
derivative referred to in Section 3, Paragraph two, Clauses 4, 5,
6, 7, 8, 9, and 10 of this Law that relates or is referenced to
the relevant financial instrument if it is necessary to support
the objectives of the suspension or removal of the abovementioned
financial instrument. The operator of the MT facility or OT
facility shall make public the decision to suspend or remove the
financial instrument and any related derivatives from trading on
the MT facility or OT facility and inform the Commission of
taking of such decision. The Commission shall request suspension
of trade in financial instruments or removal from a trading venue
also in other regulated markets, MT facilities, OT facilities,
and systematic internalisers in the Republic of Latvia where the
same financial instruments and the derivatives referred to in
Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referenced are being traded, if the suspension or removal
is due to suspected market abuse, a take-over bid, or the
non-disclosure of inside information on the issuer or financial
instrument violating Articles 7 and 17 of Regulation (EU) No
596/2014, except for the cases where such suspension or removal
could cause significant damage to the investors' interests or the
orderly functioning of the market. The Commission shall, without
delay, make public such decision and notify the European
Securities and Markets Authority and the relevant supervisory
authorities of other Member States thereof.
(3) If the Commission has received information from the
relevant competent authority of another Member State on
suspension of trade in financial instruments or removal thereof
from the MT facility or OT facility, the Commission shall request
suspension of trade in financial instruments or removal from a
trading venue also in other regulated markets, MT facilities, OT
facilities, and systematic internalisers in the Republic of
Latvia where the same financial instruments and the derivatives
referred to in Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8,
9, and 10 of this Law which are related to the relevant financial
instrument or are referenced are being traded, if the suspension
or removal is due to suspected market abuse, a take-over bid, or
the non-disclosure of inside information on the issuer or
financial instrument infringing Articles 7 and 17 of Regulation
(EU) No 596/2014, except for the cases where such suspension or
removal could cause significant damage to the investors'
interests or the orderly functioning of the market. The
Commission shall inform the European Securities and Markets
Authority and the relevant competent authorities of other Member
States of its actions. If the Commission has taken the decision
not to suspend or remove a financial instrument or the
derivatives referred to in Section 3, Paragraph two, Clauses 4,
5, 6, 7, 8, 9, and 10 of this Law which are related to the
relevant financial instrument or are referencing it, it shall
append an explanation of such decision.
(4) The procedures referred to in Paragraphs two and three of
this Section shall also be conformed if the decision to suspend
trading in or to remove from the MT facility or OT facility a
financial instrument or the derivatives referred to in Section 3,
Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of this Law which
are related to the relevant financial instrument or are
referencing it is revoked.
(5) The procedures referred to in Paragraphs two and three of
this Section shall also be conformed to if the decision to
suspend trading in or to remove from the MT facility or OT
facility a financial instrument or the derivatives referred to in
Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referencing it, or on revocation of such decision has been
taken by the Commission in accordance with Section 138 of this
Law.
(6) The situations and cases when the derivatives referred to
in Section 3, Paragraph two, Clauses 4, 5, 6, 7, 8, 9, and 10 of
this Law which are related to the relevant financial instrument
or are referencing it are to be suspended or removed concurrently
with the suspension and removal of a financial instrument from
the MT facility or OT facility are determined by Regulation No
2017/569.
(7) The format and period for the fulfilment of the
requirements laid down in Paragraphs two, three, four, and five
of this Section are determined by Regulation No 2017/1005.
(8) The situations which, within the meaning of this Section,
significantly harm the investors' interests and the orderly
functioning of the market are determined by Regulation No
2017/565.
[21 June 2018]
Chapter
XII.1
Transparency Requirements for Financial
Markets
[21 June 2018]
Section 133.6
Notifications on Transactions in Financial Instruments
[21 June 2018]
Section 133.7 Obligation
to Disclose Pre-trade Information of Investment Brokerage Company
and Credit Institution which are Systematic Internalisers
[21 June 2018]
Section 133.8
Requirements for Disclosure of Post-trade Information for
Investment Brokerage Companies and Credit Institutions
[21 June 2018]
Section 133.9
Requirements for Disclosure of Pre-trade Information in a
Multilateral Trading Facility
[21 June 2018]
Section 133.10
Requirements for Disclosure of Post-trade Information in a
Multilateral Trading Facility
[21 June 2018]
Chapter
XII.2
Growth Markets of Small and Medium-sized
Enterprises
[21 June 2018]
Section 133.11 Growth
Markets of Small and Medium-sized Enterprises
(1) An operator of the MT facility may request the Commission
to grant the status of a growth market of small and medium-sized
enterprises to the MT facility operated thereby.
(2) The Commission shall grant the status of a growth market
of small and medium-sized enterprises to the MT facility after
receipt of a relevant submission of the organiser of the MT
facility, if the MT facility meets that referred to in Paragraph
three of this Section.
(3) Rules, systems, and procedures shall be developed and
introduced for the MT facility, ensuring that:
1) at least 50 % of the issuers the financial instruments
issued by which are admitted to trading on the MT facility are
small and medium-sized enterprises at the time when the MT
facility is granted the status of a growth market of small and
medium-sized enterprises and in each year thereafter;
2) appropriate criteria are set for admission of financial
instruments for trading on the MT facility, the criteria being
constantly conformed to while the financial instrument is
admitted for trading on the MT facility;
3) on initial admission to trading of financial instruments on
the MT facility there is information available to the public
enabling investors to make an informed decision on investing in
such financial instruments, either an appropriate admission
document or a prospectus if the requirements for expressing an
offer of securities to the public are applicable;
4) issuers or their authorised persons regularly publish
financial statements, including audited annual statements;
5) issuers in accordance with point (21) of Article 3(1) of
Regulation No 596/2014, a person discharging managerial
responsibilities in accordance with point (25) of Article 3(1) of
Regulation No 596/2014, and persons closely associated with them
in accordance with point (26) of Article 3(1) of Regulation No
596/2014 comply with relevant requirements of Regulation No
596/2014;
6) the information regularly provided by issuers is stored and
published;
7) there are effective systems and control to detect and
prevent market abuse in accordance with Regulation No
596/2014.
(4) The criteria referred to in Paragraph three of this
Section shall be without prejudice to the obligation of the MT
facility to comply also with other requirements laid down this
Law in relation to the operation of MT facility. The operator of
the MT facility has the right to impose additional requirements
to the criteria referred to in Paragraph three of this
Section.
(5) The Commission may revoke the status of a growth market of
small and medium-sized enterprises for the MT facility if:
1) the organiser of the MT facility has submitted a relevant
submission for the revocation of the status of a growth market of
small and medium-sized enterprises for the MT facility operated
thereby;
2) the MT facility does not meet the criteria referred to in
Paragraph three of this Section.
(6) Having taken the decision to grant the status of a growth
market of small and medium-sized enterprises to the MT facility
or to revoke the status of a growth market of small and
medium-sized enterprises for the MT facility, the Commission
shall, without delay, notify the European Securities and Markets
Authority thereof.
(7) A financial instrument which has been admitted for trading
on any growth market of small and medium-sized enterprises may be
admitted for trading also on another growth market of small and
medium-sized enterprises, if the issuer of such financial
instruments has been informed thereof and has not objected
against it. In such case, the issuer shall not be subject to any
obligation against a growth market of small and medium-sized
enterprises to which the financial instruments of the issuer have
been admitted without initiative of the issuer, to conform to the
requirements relating to corporate governance or initial, ongoing
or ad hoc disclosure of information.
(8) The application of the requirements laid down in Paragraph
three of this Section shall be determined by Regulation No
2017/565.
(9) Within the meaning of this Section, small and medium-sized
enterprises are enterprises the average market capitalisation of
which is less than EUR 200 000 000 on the basis of end-year
quotes for the previous three calendar years.
[21 June 2018]
Chapter
XII.3
Access to Central Counterparties, Clearing
and Settlement Facilities
[21 June 2018]
Section 133.12 Access to
Central Counterparties, Clearing and Settlement Facilities and
Right to Designate Settlement System
(1) Without prejudice to Title III, IV, or V of Regulation No
648/2012, central counterparties, clearing and settlement systems
in the Republic of Latvia shall ensure that investment brokerage
companies and credit institutions from other Member States have
the possibility to directly or indirectly access thereto for the
purposes of finalising or arranging the finalisation of
transactions in financial instruments. Direct and indirect access
of the investment brokerage company or credit institution of
another Member State to central counterparties, clearing and
settlement systems in the Republic of Latvia shall be subject to
the same non-discriminatory, transparent, and objective criteria
as apply to the members or participants of central
counterparties, clearing and settlement systems registered in the
Republic of Latvia.
(2) A regulated market operator shall, within its territory,
offer all the members or participants of the regulated market
operated thereby the possibility to designate the system for the
settlement of transactions in securities undertaken on that
regulated market with financial instruments, if the following
conditions are met:
1) such links between the relevant securities settlement
system and the trading infrastructure of the regulated market or
any other system or infrastructure as are necessary to ensure
efficient and economically justified settlement have been
established;
2) the permit of the Commission to use the relevant securities
settlement system has been received.
(3) The Commission shall issue the permit referred to in
Paragraph two, Clause 2 of this Section for the use of the
securities settlement system, if it has evaluated and deemed that
technical conditions of the relevant securities settlement system
do not jeopardise stable functioning of the financial market.
(4) Prior to issuing the permit referred to in Paragraph two,
Clause 2 of this Section, the Commission shall consult with
institutions exercising supervision and monitoring of the
securities settlement system selected by members or participants
of the regulated market. The evaluation of the Commission
referred to in Paragraph three of this Section shall be without
prejudice to the competencies of the national central banks as
overseers of settlement systems or other supervisory authorities
with competence in relation to such systems. The Commission shall
take into account system control and supervision exercised by
other control or supervisory authorities of clearing and
settlement systems.
[21 June 2018]
Section 133.13 Provisions
for Central Counterparties, Clearing and Settlement Arrangements
in Multilateral Transaction Facilities
(1) An investment brokerage company, credit institution, and
regulated market operator operating MT facilities has the right
to use central counterparties or clearing house and a settlement
system of another Member State with a view to prove the clearing
or settlement of some or all transactions concluded by the
members or participants of the MT facility under the MT facility
operated thereby.
(2) The Commission has the right not to allow the operator of
the MT facility to use central counterparties or clearing houses
and settlement systems in another Member State, if it is
necessary to maintain the orderly functioning of the MT facility,
taking into account the conditions for settlement systems laid
down in Section 133.12 of this Law. In order to avoid
undue duplication of control, the Commission shall take into
account, in case of the exercise of the abovementioned rights,
the supervision of the clearing and settlement system already
exercised by the central banks as overseers of clearing and
settlement systems or by other supervisory authorities with
competence in relation to such systems.
[21 June 2018]
Chapter
XII.4
Position Limits and Position Management
Controls in Commodity Derivatives and Reporting on Positions
[21 June 2018]
Section 133.14 Position
Limits and Position Management Controls in Commodity
Derivatives
(1) The Commission shall issue the regulatory provisions,
determining position limits on the size of a net position of
commodity derivatives which a person can hold at all times in
relation to commodity derivatives traded on trading venues and
economically equivalent over-the-counter contracts. When
determining the abovementioned position limits, the Commission
shall use the calculation methodology laid down in Commission
Delegated Regulation (EU) 2017/591 of 1 December 2016
supplementing Directive 2014/65/EU of the European Parliament and
of the Council with regard to regulatory technical standards for
the application of position limits to commodity derivatives
(hereinafter - Regulation No 2017/591). Such limits shall be
determined on the basis of all positions held by the person
itself, and also those held on its behalf at an aggregate group
level in order to:
1) prevent market abuse;
2) support orderly pricing and settlement conditions,
including preventing market distorting positions, and ensuring,
in particular, convergence between prices of derivatives in the
delivery month and spot prices for the underlying commodity,
without prejudice to price discovery on the market for the
underlying commodity.
(2) Position limits shall not apply to positions held by or on
behalf of a non-financial entity and which are objectively
measurable as reducing risks directly relating to the commercial
activity of that non-financial entity.
(3) Position limits shall specify clear quantitative
thresholds for the maximum size of a position in a commodity
derivative that persons can hold.
(4) The Commission shall determine limits for each contract in
commodity derivatives traded on trading venues the home Member
State of which is the Republic of Latvia. The abovementioned
position limit shall also apply to economically equivalent
over-the-counter contracts. The Commission shall review position
limits if significant changes on the market occur.
(5) The Commission shall notify the European Securities and
Markets Authority of the exact position limits it intends to set.
The Commission shall approve the position limits only after an
opinion of the European Securities and Markets Authority on the
compatibility of the specified limits with the calculation
methodology referred to in Paragraph one of this Section has been
received. If it is indicated in the opinion of the European
Securities and Markets Authority that the planned position limits
should be modified and the Commission agrees to the opinion of
such institution, it shall approve the position limits in
accordance with that indicated in the opinion of the European
Securities and Markets Authority. If the Commission does not
agree to the opinion of the European Securities and Markets
Authority, it shall provide a justification to this institution
why it considers that the change is considered to be unnecessary.
If the Commission approves such position limits in which that
indicated in the opinion of the European Securities and Markets
Authority has not been taken into account, it shall immediately
publish on its website a notice fully explaining its reasons for
doing so.
(6) If trading in significant volumes in the same commodity
derivative which is traded at a trading venue the home Member
State of which is the Republic of Latvia is occurring in another
or several other trading venues the home Member State of which is
not the Republic of Latvia, the competent authority of the home
Member State of the trading venue where the largest volume of
trading takes place (hereinafter - the central competent
authority) shall determine the single position limits in relation
to this commodity derivative. Such single position limits shall
be applied to the whole trade related to contracts of the
relevant commodity derivatives.
(7) If the Commission is the central competent authority, it
shall, upon determining or reviewing single position limits,
consult the competent authorities of other trading venues on
which the relevant derivative is traded in significant
volumes.
(8) If the central competent authority consults with the
Commission and the Commission is of the opinion that the single
position limits planned by the central competent authority do not
conform to the calculation methodology referred to in Paragraph
one of this Section, it shall state in writing the full and
detailed reasons to the central competent authority why the
Commission is of such opinion. Any disputes arising between the
competent authorities shall be settled in accordance with that
specified in Article 19 of Regulation (EU) No 1095/2010 of the
European Parliament and of the Council of 24 November 2010
establishing a European Supervisory Authority (European
Securities and Markets Authority), amending Decision No
716/2009/EC and repealing Commission Decision 2009/77/EC.
(9) The Commission shall implement cooperation measures,
including exchange the relevant data with each other, with the
competent authorities of the home Member States of such trading
venues where the same commodity derivative which is traded at a
trading venue the home Member State of which is not the Republic
of Latvia is traded and with the competent authorities of the
country of position holders in the relevant commodity derivative
in order to enable the monitoring of conformity with the single
position limit.
(10) An investment brokerage company, credit institution, or
regulated market operator at the trading venue operated by which
commodity derivatives (hereinafter in this Section - the operator
of the trading venue) are traded shall implement position
management controls. In order to implement the abovementioned
position management controls, the operator of the trading venue
has the right to:
1) monitor the open interest positions of persons;
2) request that persons provide information or to access
information, including all relevant documents regarding the
position and risks of persons arising in relation to commodity
derivatives, the size and purpose thereof, and also information
on beneficial or underlying owners, any concert arrangements, and
any related assets or liabilities in the underlying market;
3) request that a person temporarily suspends, terminates, or
reduces activities if it is necessary, or if the abovementioned
person does not comply with the request - to unilaterally ensure
the suspension, termination, or reduction of the abovementioned
activities;
4) where appropriate, request that a person provides liquidity
back into the market at the agreed price and volume on a
temporary basis with the express intent of mitigating the effects
of a large or dominant position.
(11) The operator of the trading venue shall ensure that the
position limits and position management controls are transparent
and non-discriminatory and shall specify how they apply to
persons, taking into account the nature and composition of market
participants, and how they use the commodity derivative contracts
submitted for trading.
(12) The operator of the trading venue shall provide detailed
information to the Commission on position management controls.
The Commission shall notify such information, and also
information on the position limits stipulated thereby to the
European Securities and Markets Authority.
(13) A summary on all current position limits and position
managements controls shall be available in the database on the
website of the European Securities and Markets Authority.
(14) The Commission shall determine the position limits
referred to in Paragraph one of this Section and the conformity
therewith in accordance with Section 138, Paragraph one, Clause
16 of this Law.
(15) More detailed requirements for the application of this
Section are determined by Regulation No 2017/591.
(16) The Commission may determine limits which are more
restrictive than those adopted in accordance with Paragraph one
of this Section, if they are objectively justified and
proportionate, taking into account the liquidity of the specific
market and the orderly functioning of that market. The Commission
shall publish on its website information on the more restrictive
position limits. When determining more restrictive position
limits, they may be initially determined for a period not
exceeding six months from the date of their publication on the
website of the Commission. The period for which more restrictive
position limits have been initially determined may be renewed for
a further period not exceeding six months at a time, if the
grounds for the necessity of such more restrictive position
limits continue to be applicable. If the period for the
determined more restrictive position limits is not renewed, they
shall automatically expire after six months.
(17) If the Commission plans to determine more restrictive
position limits, it shall notify the European Securities and
Markets Authority thereof. The notification shall include a
justification for the more restrictive position limits. The
Commission shall approve the more restrictive position limits
only after the European Securities and Markets Authority has
published an opinion on its website on whether the more
restrictive position limits are necessary in the particular case.
If the Commission has determined the more restrictive position
limits which do not conform to the opinion of the European
Securities and Markets Authority, it shall immediately publish on
its website a notice fully explaining its reasons for doing
so.
(18) The Commission is entitled to impose the sanctions
specified in this Law for the violation of position limits
determined in this Section:
1) in relation to positions held by persons situated or
operating in the territory of the Republic of Latvia or outside
it which exceed the limits on commodity derivative contracts
determined by the Commission in relation to commodity derivatives
sold at trading venues situated or operating in the territory of
the Republic of Latvia or economically equivalent contracts;
2) in relation to positions held by persons situated or
operating in the territory of the Republic of Latvia which exceed
the limits on commodity derivative contracts determined by the
competent authorities in other Member States.
[21 June 2018; 20 June 2019]
Section 133.15 Reporting
on Positions by Categories of Position Holders
(1) An investment brokerage company, credit institution, or
regulated market operator at the trading venues operated by which
commodity derivatives or emission allowances, or their
derivatives (hereinafter in this Section - the operator of the
trading venue) are traded shall perform the following
activities:
1) if the number of persons and their open positions exceed
the minimum threshold, the operator of the trading venue shall
weekly make public and send a report to the Commission and the
European Securities and Markets Authority with the aggregate
positions held by the different categories of persons for the
different commodity derivatives, emission allowances or
derivatives thereof traded at the trading venue operated by the
operator of the trading venue, specifying:
a) the number of long and short positions by such categories
and changes thereto since the previous report;
b) the percentage of the total open interest represented by
each category;
c) the number of persons holding a position in each category
in accordance with Paragraph five of this Section;
2) provide the Commission with a complete breakdown of the
positions held by all persons, including the members or
participants and the clients thereof, on that trading venue, at
least on a daily basis.
(2) The following shall be distinguished in the notice
referred to in Paragraph one, Clause 1 of this Section and in the
report referred to in Paragraph one, Clause 2 of this
Section:
1) positions which in an objectively measurable way reduce
risks directly relating to the relevant commercial
activities;
2) other positions.
(3) If an investment brokerage company and credit institution
trades in commodity derivatives or emission allowances, or
derivatives thereof outside a trading venue, it shall, at least
on a daily basis, provide the competent authority or the central
competent authority, if the commodity derivatives or emission
allowances, or derivatives thereof are traded in significant
volumes on several trading venues in more than one jurisdiction,
with a report on trading venues where such commodity derivatives
or emission allowances, or derivatives thereof are traded with a
complete breakdown of the positions taken in commodity
derivatives or emission allowances, or derivatives thereof traded
on all trading venues and economically equivalent
over-the-counter contracts, and also on positions of their
clients and the clients of those clients until the end client is
reached, in accordance with Article 26 of Regulation (EU) No
600/2014 and Article 8 of Regulation (EU) No 1227/2011.
(4) The operator of the trading venue shall ensure that
members or participants of a regulated market and MT facility and
clients of the OT facility report to the operator of the trading
venue on own positions held through contracts traded on that
trading venue at least on a daily basis, and also on the
positions of their clients and the clients of those clients until
the end client is reached.
(5) The operator of the trading venue shall classify persons
holding the positions of derivatives or emission allowances, or
derivatives thereof according to the nature of their main
business, taking account the following division:
1) investment brokerage companies or credit institutions;
2) investment funds within the meaning of the law On
Investment Management Companies or alternative investment funds
within the meaning of the Law on Alternative Investment Funds and
Managers Thereof;
3) other financial institutions, including insurance and
reinsurance companies within the meaning of the Insurance and
Reinsurance Law and pension funds within the meaning of the law
On Private Pension Funds;
4) performers of economic activity;
5) in case of emission quotas or derivatives thereof -
operators to whom the obligations specified in the law On
Pollution are binding.
(6) The content and format of the notice referred to in
Paragraph one, Clause 1 of this Section and the report referred
to in Paragraph one, Clause 2 of this Section shall be determined
by Commission Implementing Regulation (EU) 2017/1093 of 20 June
2017 laying down implementing technical standards with regard to
the format of position reports by investment firms and market
operators.
(7) The minimum thresholds referred to in Paragraph one,
Clause 1 of this Section shall be determined by Regulation No
2017/565.
(8) The day and time when the notice referred to in Paragraph
one, Clause 1 of this Section shall be sent to the European
Securities and Markets Authority shall be determined by
Commission Implementing Regulation (EU) 2017/953 of 6 June 2017
laying down implementing technical standards with regard to the
format and the timing of position reports by investment firms and
market operators of trading venues pursuant to Directive
2014/65/EU of the European Parliament and of the Council on
markets in financial instruments.
[21 June 2018; 20 June 2019]
Chapter
XII.5
Product Management Requirements
[21 June 2018]
Section 133.16 Product
Management Obligations in Relation to Investment Brokerage
Companies and Credit Institutions Manufacturing Financial
Instruments
(1) In manufacturing financial instruments which encompasses
the creation, improvement, or issuance of financial instruments,
an investment brokerage company and credit institution shall
conform to the requirements of this Section. Upon applying the
requirements laid down in Paragraphs two, three, four, five, six,
seven, eight, nine, ten, eleven, twelve, thirteen, fourteen,
fifteen, and sixteen of this Section, the investment brokerage
company and credit institution shall comply, in a way that is
appropriate and proportionate, with them, taking into account the
nature of the financial instrument, the investment service and
the target market for the product.
(2) An investment brokerage company and credit institution
shall establish, implement, and maintain procedures and measures
to ensure that the manufacturing of financial instruments
corresponds to the requirements for the proper management of
conflicts of interest, including remuneration of employees. In
particular, the investment brokerage company and credit
institution manufacturing financial instruments shall ensure that
the design of the financial instrument, including its features,
does not adversely affect end clients and does not lead to
problems with market integrity by enabling the investment
brokerage company or credit institution to mitigate or dispose of
its own risks or exposure to the underlying assets of the
product, if the investment brokerage company or credit
institution already holds the underlying assets on own
account.
(3) An investment brokerage company and credit institution
have an obligation to analyse potential conflicts of interest
each time a financial instrument is manufactured. In particular,
the investment brokerage company and credit institution shall
assess whether the financial instrument creates a situation where
end clients may be adversely affected if they incur:
1) an exposure opposite to the one previously incurred by the
investment brokerage company and credit institution itself;
2) an exposure opposite to the one that the investment
brokerage company and credit institution wishes to incur after
the sale of the product.
(4) An investment brokerage company and credit institution
shall asses whether the financial instrument may jeopardise the
orderly functioning and integrity of financial markets before
deciding on the placement of a product on the market.
(5) An investment brokerage company and credit institution
shall ensure that the relevant staff involved in the
manufacturing of financial instruments possess the necessary
specific expertise to understand the characteristics and risks of
the financial instruments they intend to manufacture.
(6) An investment brokerage company and credit institution
shall ensure that its board has effective control over the
product management process of the investment brokerage company
and credit institution. The board of the investment brokerage
company and credit institution shall systematically include in
the activity compliance reports information on the financial
instruments manufactured by the investment brokerage company and
credit institution, including information on the distribution
strategy. The investment brokerage company and credit institution
shall submit activity compliance reports to the Commission upon
request.
(7) An investment brokerage company and credit institution
shall ensure that, within the scope of performance of its
activity compliance function, the development and periodic review
of product management procedures are monitored to detect any risk
of failure to fulfil the obligations set out in this Section.
(8) If an investment brokerage company and credit institution
collaborate with persons which are not licensed and supervised in
the field of investment services, or with foreign investment
brokerage companies to create, develop, or issue a product, they
shall enter into a written agreement outlining their mutual
commitments.
(9) An investment brokerage company and credit institution
shall identify at a sufficiently granular level the potential
target market for each financial instrument and specify the type
of clients with whose needs, characteristics, and objectives the
financial instrument is compatible. As part of this process, the
investment brokerage company and credit institution shall
identify any group of clients with the needs, characteristics,
and objectives of which the financial instrument is not
compatible. If the investment brokerage company and credit
institution collaborate to manufacture a financial instrument,
only one target market needs to be identified. The investment
brokerage company and credit institution manufacturing financial
instruments that are distributed through other investment
brokerage companies and credit institutions shall determine the
needs and characteristics of clients with whom the product is
compatible based on their theoretical knowledge of and past
experience with the financial instrument or similar financial
instruments, the financial markets and the needs,
characteristics, and objectives of potential end clients.
(10) An investment brokerage company and credit institution
shall undertake a scenario analysis of their financial
instruments to be manufactured, assessing the risks of poor
outcomes for end clients posed by the product and in which
circumstances these outcomes may occur. The investment brokerage
company and credit institution shall assess the financial
instruments under negative conditions covering what would happen
if:
1) the market environment deteriorated;
2) the manufacturer or a third party involved in the
manufacturing or functioning of the financial instrument
experiences financial difficulties or other counterparty risk
materialises;
3) the financial instrument fails to become commercially
viable;
4) demand for the financial instrument is much higher than
anticipated, putting a strain on the resources of the investment
brokerage company and credit institution or on the market of the
underlying instrument.
(11) An investment brokerage company and credit institution
shall determine whether a financial instrument meets the
identified needs, characteristics, and objectives of the target
market, including by examining the following elements:
1) the conformity of the financial instrument's risk and
reward profile with the target market;
2) whether financial instrument design is driven by features
that benefit the client and not by a business model that relies
on poor client outcomes to be profitable.
(12) When determining the charging structure proposed for the
financial instrument,an investment brokerage company and credit
institution shall assess and take into account:
1) how financial instrument's costs and charges are compatible
with the needs, objectives, and characteristics of the target
market;
2) whether charges do not undermine the financial instrument's
return expectations;
3) whether the charging structure of the financial instrument
is appropriately transparent for the target market.
(13) An investment brokerage company and credit institution
shall ensure that the provision of information on a financial
instrument to distributors includes information on the
appropriate channels for distribution of the financial
instruments, the product approval process, and the target market
assessment and is of an adequate standard to enable distributors
to understand and recommend or sell the financial instrument
properly.
(14) An investment brokerage company and credit institution
shall review the financial instruments they manufacture on a
regular basis, taking into account all events that could
materially affect the potential risk to the identified target
market. The investment brokerage company and credit institution
shall consider if the financial instrument remains consistent
with the needs, characteristics, and objectives of the target
market and if it is being distributed to the target market, or is
reaching clients with the needs, characteristics, and objectives
of which the financial instrument is not compatible.
(15) An investment brokerage company and credit institution
shall review financial instruments prior to any further issue or
re-launch, if they are aware of any event that could materially
affect the potential risk to investors and assess at regular
intervals whether the financial instruments function as intended.
The investment brokerage company and credit institution shall
determine how regularly their financial instruments are reviewed
based on relevant factors, including factors linked to the
complexity or the innovative nature of the investment strategies
pursued. The investment brokerage company and credit institution
shall also identify crucial events that could affect the
potential risk or return expectations of the financial
instrument, such as:
1) the crossing of a threshold that will affect the return
profile of the financial instrument;
2) the solvency of certain issuers whose securities or
guarantees may impact the performance of the financial
instrument.
(16) Upon occurrence of any of the events referred to in
Paragraph fifteen of this Section, an investment brokerage
company and credit institution shall take appropriate measures
which may consist of the following activities:
1) the provision of all the relevant information on the
relevant event and its consequences on the clients or
distributors of the financial instrument if the investment
brokerage company or credit institution does not offer or sell
the financial instrument directly to the clients;
2) changing the product approval process;
3) stopping further issuance of financial instruments;
4) changing the financial instrument to avoid unfair contract
terms;
5) considering whether the sales channels through which the
financial instruments are sold are appropriate if the investment
brokerage company or credit institution becomes aware that the
financial instrument is not being sold as envisaged;
6) contacting the distributor to discuss a modification of the
distribution process;
7) terminating the relationship with the distributor;
8) informing the relevant competent authority.
[21 June 2018]
Section 133.17 Product
Management Obligations for Distributors
(1) An investment brokerage company and credit institution
shall, when deciding on the range of financial instruments issued
by themselves or another investment brokerage company or credit
institution and services they intend to offer or recommend to
clients, comply in an appropriate and proportionate manner with
the requirements laid down in Paragraphs two, three, four, five,
six, seven, eight, nine, and ten of this Section, taking into
account the nature of the financial instrument, the investment
service, and the target market for the product. The investment
brokerage company and credit institution shall also comply with
the requirements of this Law when offering or recommending
financial instruments manufactured by persons that are not
subject to this Law.
(2) An investment brokerage company and credit institution
shall introduce suitable product management procedures to ensure
that products and services they intend to offer or recommend
correspond to the needs, characteristics, and objectives of the
identified target market and that the intended distribution
strategy is consistent with the identified target market. The
investment brokerage company and credit institution shall
appropriately identify and assess the circumstances and needs of
the clients they intend to focus on to ensure that clients'
interests are not compromised as a result of commercial or
funding pressures.
(3) An investment brokerage company and credit institution
shall, when deciding on the range of financial instrument and
services that they offer or recommend and the respective target
market, maintain procedures and measures to ensure compliance
with all applicable requirements in accordance with this Law,
including the requirements relating to disclosure, assessment of
suitability or appropriateness, inducements within the meaning of
Section 133.18, and proper management of conflict of
interest.
(4) An investment brokerage company and credit institution
shall periodically review and update their product management
procedures to ensure that they remain robust and fit for their
purpose, and make appropriate changes where necessary.
(5) An investment brokerage company and credit institution
shall review the investment products they offer or recommend and
the services they provide on a regular basis, taking into account
any corporate action that could materially affect the potential
risk to the identified target market. The investment brokerage
company and credit institution shall assess at least whether the
product or service remains consistent with the needs,
characteristics, and objectives of the identified target market
and whether the intended distribution strategy remains
appropriate.
(6) An investment brokerage company and credit institution
shall ensure that, within the scope of performance of its
activity compliance function, the development and periodic review
of product governance arrangements are monitored in order to
detect any risk of failure to comply with the obligations set out
in this Section.
(7) An investment brokerage company and credit institution
shall ensure that the relevant staff possess the necessary
specific expertise to understand the characteristics and risks of
the products which are intended to be offered or recommended and
the services provided, and also the needs, characteristics, and
objectives of the identified target market.
(8) An investment brokerage company and credit institution
shall ensure that the board has effective control over the
product management process of the investment brokerage company
and credit institution to determine the range of investment
products that they offer or recommend and the services provided
to the respective target markets. The board of the investment
brokerage company and credit institution shall systematically
include in activity compliance reports information on the
products offered or recommended thereby and the services
provided. The investment brokerage company and credit institution
shall submit activity compliance reports to the Commission upon
request.
(9) Distributors shall provide manufacturers with information
on product sales and, where appropriate, information on the
reviews of products referred to in this Section, thus supporting
product reviews carried out by manufacturers.
(10) If several investment brokerage companies or credit
institutions work together in the distribution of a product or
service, the investment brokerage company or credit institution
with the direct links with the client shall have ultimate
responsibility for the product management requirements set out in
this Section. The investment brokerage company and credit
institution operating as an intermediary in product distribution
shall:
1) ensure that the relevant product information is passed from
the manufacturer to the final distributor in the chain;
2) if the manufacturer requests information on product sales
to fulfil their own product management obligations, enable them
to obtain it;
3) apply the product management obligations laid down for
manufacturers to the service provided thereby as appropriate.
[21 June 2018]
Chapter
XII.6
Inducements
[21 June 2018]
Section 133.18 General
Requirements for Inducements
(1) An investment brokerage company and credit institution
paying or being paid any fee or commission or providing or being
provided with any non-financial benefit (hereinafter - the
inducement) in connection with the provision of an investment
service or ancillary investment service to the client shall
ensure that all the conditions and requirements laid down in
Section 128, Paragraphs twelve, 12.1, and
12.2 of this Law and Paragraphs two, three, four,
five, six, seven, and eight of this Section are met at all
times.
(2) A fee, commission, or non-financial benefit shall be
considered to be designed to enhance the quality of the relevant
service to the client if all of the following conditions are
met:
1) it is justified by the provision of an additional or higher
level service to the relevant client, proportional to the level
of inducements received, including:
a)| the provision of non-independent investment advice on wide
range of suitable financial instruments and access thereto,
including an appropriate number of instruments from third party
product providers having no close links with the investment
brokerage company or credit institution itself;
b) the provision of non-independent investment advice combined
with either an offer to the client, on an annual basis, to assess
the continuing suitability of the financial instruments in which
the client has invested, or with another on-going service that is
likely to be of value to the client;
c) the provision of access, at a competitive price, to a wide
range of financial instruments that are likely to meet the needs
of the client, including an appropriate number of financial
instruments from third party product providers having no close
links with the investment brokerage company or credit
institution;
2) it does not directly benefit the recipient investment
brokerage company or credit institution, its shareholders,
participants, or employees without tangible benefit to the
relevant client;
3) it is justified by the provision of an on-going benefit to
the relevant client in relation to an on-going inducement.
(3) A fee, commission, or non-financial benefit shall not be
considered acceptable if the provision of relevant services to
the client is biased or distorted.
(4) The investment brokerage company and credit institution
shall fulfil the requirements laid down in Paragraphs two and
three of this Section on an ongoing basis as long as they
continue to pay or receive the fee, commission, or non-financial
benefit.
(5) An investment brokerage company and credit institution
shall keep evidence that any fees, commissions, or non-financial
benefits paid or received by the investment brokerage company and
credit institution are designed to enhance the quality of the
relevant service provided to the client:
1) by keeping a list of all fees, commissions, and
non-financial benefits received by the investment brokerage
company and credit institution from a third party in relation to
the provision of investment services or ancillary investment
services;
2) by documenting how the fees, commissions, and non-financial
benefits paid or received by the investment brokerage company or
credit institution, or that it intends to use, enhance the
quality of the services provided to the relevant clients and the
steps taken in order not to impair the obligation of the
investment brokerage company and credit institution to act
honestly, fairly, and professionally in accordance with the best
interests of the client.
(6) In relation to any payment or benefit received from or
paid to third parties, an investment brokerage company and credit
institution shall disclose the following information to the
client:
1) prior to the provision of the relevant investment service
or ancillary investment service, the investment brokerage company
and credit institution shall disclose to the client information
on the payment or benefit concerned in accordance with Section
128, Paragraph 12.1 of this Law. Minor non-financial
benefits may be described in a generic way. Other non-financial
benefits received or paid by the investment brokerage company or
credit institution in connection with the investment service
provided to a client shall be priced and information thereon
shall be disclosed separately;
2) if the investment brokerage company or credit institution
was unable to ascertain on an ex-ante basis the amount of
any payment or benefit to be received or paid, and instead
disclosed to the client the method of calculating that amount, it
shall also provide its clients with information of the exact
amount of the payment or benefit received or paid on an
ex-post basis;
3) at least once a year, as long as on-going inducements are
received by the investment brokerage company or credit
institution in relation to the investment services provided to
the relevant clients, it shall inform its clients on an
individual basis of the actual amount of payments or benefits
received or paid. Minor non-financial benefits may be described
in a generic way.
(7) In implementing the requirements referred to in Paragraph
six of this Section, an investment brokerage company and credit
institution shall take into account the rules on costs and
charges referred to in Section 128, Paragraph six, Clause 3 of
this Law and in Article 50 of Commission Delegated Regulation No
2017/565.
(8) If several investment brokerage companies or credit
institutions are involved in a distribution channel, each
investment brokerage company and credit institution providing
investment services or ancillary investment services shall comply
with its obligations as regards the disclosure of information to
its clients.
[21 June 2018]
Section 133.19
Inducements in Respect of Investment Advice on an Independent
Basis or Portfolio Management Services
(1) An investment brokerage company and credit institution
providing investment advice on an independent basis or portfolio
management services shall return to clients any fees, commissions
or any financial benefits paid or provided by any third party or
a person acting on behalf of a third party in relation to the
services provided to the abovementioned client as soon as
reasonably possible after receipt. All fees, commissions, or
financial benefits received from third parties in relation to the
provision of independent investment advice and portfolio
management shall be transferred in full to the client.
(2) An investment brokerage company and credit institution
shall set up and implement a policy to ensure that any fees,
commissions, or any monetary benefits paid or provided by any
third party or a person acting on behalf of a third party in
relation to the provision of independent investment advice and
portfolio management are allocated and transferred to each
individual client accordingly.
(3) An investment brokerage company and credit institution
shall inform clients of the fees, commissions, or any monetary
benefits transferred to them.
(4) An investment brokerage company and credit institution
providing investment advice on an independent basis or portfolio
management services shall not accept non-financial benefits that
do not qualify as acceptable minor non-monetary benefits in
accordance with Paragraphs five and six of this Section.
(5) The following benefits shall qualify as acceptable minor
non-financial benefits only if they are:
1) information or documentation relating to a financial
instrument or an investment service, which is generic in nature
or personalised to reflect the circumstances of an individual
client;
2) written information material from a third party that is
commissioned and paid for by an issuer or potential issuer to
promote a new issuance, or if the third party is contractually
engaged with the issuer and paid by the issuer to produce such
information material on an ongoing basis, provided that the
relationship is clearly disclosed in the information material and
that the material is made available at the same time to any
investment brokerage companies or credit institutions wishing to
receive it or to the general public;
3) participation in conferences, seminars, and other training
events on the benefits and features of a specific financial
instrument or an investment service;
4) hospitality of a reasonable de minimis value;
5) flowers, souvenirs, books, or representation articles if
the total value of non-financial benefits provided by one entity
within one year in monetary terms does not exceed the amount of
one minimum monthly wage;
6) services and rebates of different types which are offered
by commercial companies or individual merchants and which are
available to the public.
(6) Acceptable minor non-financial benefits shall be
reasonable and proportionate and of such a scale that they are
unlikely to influence the behaviour of an investment brokerage
company or credit institution in any way that is detrimental to
the interests of the relevant client.
(7) Minor non-financial benefits shall disclosed to clients
before the provision of the relevant investment services or
ancillary investment services. In accordance with Section
133.18, Paragraph six, Clause 1 of this Law, minor
non-financial benefits may be described in a generic way.
[21 June 2018]
Section 133.20
Inducements in Relation to Research
(1) The research developed by third parties for investment
brokerage companies and credit institutions which provide
portfolio management services or other investment services or
ancillary investment services to clients shall not be regarded as
an inducement unless those are received in return for either of
the following payments:
1) direct payments by the investment brokerage company and
credit institution out of its own resources;
2) payments from a separate research payment account
controlled by the investment brokerage company or credit
institution, provided that the following conditions relating to
the operation of the account are met:
a) the funds of the account consist of a research charge
collected from the client;
b) upon establishing a research payment account and agreeing
on the research charge with their clients, the investment
brokerage company and credit institution introduce measures which
determine setting and regular assessment of a research
budget;
c) the investment brokerage company and credit institution are
responsible for the research payment account;
d) the investment brokerage company and credit institution
regularly assesses the quality of the research purchased based on
robust quality criteria and their ability to contribute to better
investment decisions.
(2) If an investment brokerage company or credit institution
makes use of the research payment account referred to in
Paragraph one, Clause 2 of this Section, it shall provide the
following information to its clients:
1) before the provision of an investment services to clients -
information on the budgeted amount for research and the amount of
the estimated research charge for each client;
2) annual information on the total costs that each client has
incurred for the provision of third party research.
(3) If an investment brokerage company and credit institution
operate a research payment account, the investment brokerage
company and credit institution shall also be required, upon
request by their clients or by the Commission, to provide a
summary of the providers of the research paid from this account -
the total amount they were paid over a defined period, the
benefits and services received by the investment brokerage
company or credit institution, and how the total amount spent
from the account compares to the budget set by the investment
brokerage company or credit institution for the abovementioned
period, noting any rebate or carry-over if residual funds remain
in the account. The research charge referred to in Paragraph one,
Clause 2, Sub-clause "a" of this Section shall:
1) only be based on a research budget set by the investment
brokerage company and credit institution for the purpose of
establishing the need for third party research in respect of
investment services rendered to its clients;
2) not be linked to the volume or value of transactions
executed on behalf of the clients.
(4) If the research charge is not collected from the client
separately but alongside a transaction commission, a separately
identifiable research charge shall be indicated to the client,
fully complying with Paragraph one, Clause 2 and Paragraph two of
this Section.
(5) The total amount of research charges received from clients
may not exceed the research budget.
(6) An investment brokerage company and credit institution
shall agree with a client in an agreement on the research charge
to be collected by the investment brokerage company or credit
institution from the client according to the research budget and
the frequency with which the specific research charge will be
deducted from the funds of the client over the year. The research
budget shall only be increased after clear information has been
provided to the client on such intended increase. If there is a
surplus in the research payment account at the end of a period,
the investment brokerage company and credit institution shall
apply a procedure to repay those funds to the client or to offset
them against the research budget and charge calculated for the
following period.
(7) The research budget referred to in Paragraph one, Clause
2, Sub-clause "b" of this Section shall be managed by an
investment brokerage company or credit institution itself based
on a reasonable assessment of the need for third party research.
The investment brokerage company and credit institution shall
control and supervise the use of the research budget funds for
the purchase of third party research in order to ensure that the
research budget is managed and used in the best interests of the
clients of the investment brokerage company and credit
institution. The abovementioned control shall also include a
clear audit trail of payments made to research providers and how
the amounts paid were determined considering the quality criteria
referred to in Paragraph one, Clause 2, Sub-clause "d" of this
Section. The investment brokerage company and credit institution
shall not use the research budget and research payment account to
fund internal research.
(8) When applying Paragraph one, Clause 2, Sub-clause "c" of
this Section, administration of the research payment account may
be delegated to a third party, provided that the arrangement
facilitates the purchase of third party research and payments to
research providers in the name of an investment brokerage company
or credit institution without any undue delay in accordance with
the instructions of the investment brokerage company or credit
institution.
(9) When applying Paragraph one, Clause 2, Sub-clause "c" of
this Section, the investment brokerage company and credit
institution shall include all necessary elements in a written
policy and provide it to their clients.
(10) The investment brokerage company and credit institution
which provides order execution services shall identify separate
charges for these services that only reflect the cost of
executing the transaction. A separately identifiable charge shall
be applied to other benefits or services provided by the same
investment brokerage company or credit institution to investment
brokerage companies or credit institutions established in the
European Union, and the provision of and charges for the
abovementioned benefits or services shall not be influenced and
conditioned by the amount of payment made for order execution
services.
[21 June 2018]
Chapter
XIII
Registration of Providers of Investment Services Registered in
Foreign Countries
[21 June 2018]
Section 134. Rights of Providers of
Investment Services Registered in Foreign Countries
[21 June 2018]
Section 135. Registration with the
Commission
[21 June 2018]
Section 136. Obligations of a
Registered Company
[21 June 2018]
Section 137. Deletion from the
Register
[21 June 2018]
Section 137.1 Supervisory
Authorities
[21 June 2018]
Chapter
XIV
Supervision of the Fulfilment of the Requirements of the Law
[21 June 2018]
Section 137.2 Rights of
the Commission in Supervising the Fulfilment of the Requirements
of the Law
(1) The provision of investment services and ancillary
investment services shall be supervised by the Commission
according to its competence.
(2) The Commission shall introduce corresponding supervisory
measures which ensure fulfilment of the requirements laid down in
this Law for investment brokerage companies and credit
institutions.
(3) The Commission has the right to issue regulatory
provisions:
1) regarding the provision of information on operation in the
field of provision of investment services and ancillary
investment services;
2) regarding the procedures for the provision of information
on transactions in financial instruments.
[21 June 2018]
Section 137.3 Reporting
on Potential and Actual Violations
[12 December 2019]
Section 138. Supervisory Activities
Applicable by the Commission
(1) In addition to the rights specified in the Law on the
Financial and Capital Market Commission, this Law, and directly
applicable legal acts of the European Union in relation to the
provision of investment services and ancillary investment
services, the operation of a regulated market operator, the
provision of data reporting services, and the requirements laid
down in Chapter XII.4 of this Law, the Commission is
entitled to implement one or several of the following
activities:
1) to request from any person information with regard to its
activities in the finance and capital market, and also to invite
such person to appear before the Commission and provide
information in person;
2) to become acquainted with the documents or other data in
any form necessary for the performance of the tasks and functions
of the Commission and to receive their copies;
3) to carry out the reviews referred to in Section 139,
Paragraph one of this Law;
4) to request and receive from the participants of the
financial instrument market the print-outs of telephone
conversations, records of electronic communication, and other
types of data transmission records;
5) to request freezing of assets or restrictions of another
kind on the use of a property;
6) to temporarily restrict the operation of a participant of
the financial instrument market, including to restrict the rights
of an investment brokerage company or credit institution to
provide investment services or hold financial instruments;
7) to request that auditors of investment brokerage companies,
regulated markets, and data reporting services providers provide
information;
8) to address law enforcement institutions with an application
for the initiation of criminal proceedings;
9) to authorise auditors or specialists to carry out
reviews;
10) to request information, including all the relevant
documents, from any person on the scale of the position or risk
and the objective arising in relation to a commodity derivative,
and on all assets or liabilities on the relevant market;
11) to request that members of a financial instrument market
cease any practice which is in contradiction to the requirements
of this Law and Regulation No 600/2014;
12) to implement measures of any kind to ensure the conformity
of the operation of such investment brokerage companies, credit
institutions, regulated market operator, and other persons to
which the requirements of this Law or Regulation No 600/2014
apply;
13) to suspend trade in the financial instruments;
14) to request that financial instruments are removed from the
trading venue;
15) to request any person that it implements appropriate
measures for the reduction of the amount of the position or risk
transaction;
16) to restrict the possibility for any person to access a
commodity derivative, including by determining limits in relation
to the amount of a position which any person may hold for the
whole period in accordance with the requirements laid down in
Section 133.14 of this Law for position limits and
position management controls in commodity derivatives;
17) to provide public notifications;
18) insofar as permitted by laws and regulations, to request
existing records of the data flow which are at the disposal of a
telecommunications operator, if there are justified suspicions of
a violation and if such records may be useful when carrying out
reviews in relation to violations of the requirements of this Law
or Regulation No 600/2014;
19) to suspend the advertising, distribution, or selling of
financial instruments or structured deposits in accordance with
that specified in Article 40, 41, or 42 of Regulation No
600/2014;
20) to suspend the advertising, distribution, or selling of
financial instruments or structured deposits, if the investment
brokerage company or credit institution has not developed or
implemented an efficient process for the approval of products or
in any other way has not conformed to the requirements of Section
124, Paragraph one, Clause 13 and Section 127, Paragraph eleven
of this Law;
21) to request that a member of the board or council of an
investment brokerage company, credit institution, or regulated
market operator is removed from the office;
22) to give binding written instructions to the management
bodies of financial instrument market participants, their heads
and members which are necessary to prevent situation in which the
norms of this Law or directly applicable legal acts of the
European Union are being violated.
(2) The Commission may apply the supervisory activities
specified in Paragraph one, Clauses 15 and 16 of this Section
also if they are necessary for the achievement of the supervisory
objective of the supervisory authority of another Member
State.
[21 June 2018]
Section 139. Supervision of
Investment Brokerage Companies
(1) The Commission and authorised persons thereof have the
right to review the activities of investment brokerage companies,
including internal reviews at investment brokerage companies.
(11) Each year the Commission shall prepare a
supervisory review programme for investment brokerage companies
indicating the following:
1) the arrangements which are provided for the performance of
the functions and duties of the Commission laid down in the Law
on the Financial and Capital Market Commission, this Law and
other laws, and also the resources necessary for such
arrangements;
2) the planned supervisory measures to be applied to the
following:
a) investment brokerage companies in which results of the
stress tests referred to in Paragraph 11.3, Clauses 4
and 5 of this Section or whose assessment carried out by the
Commission in accordance with Paragraph nine of this Section
point to the risks which pose a significant threat to the
financial stability of the relevant investment brokerage company
or to the violations of the requirements laid down in this Law,
directly applicable legal acts issued by the European Union
authorities, or regulatory provisions issued by the
Commission,
b) investment brokerage companies which pose a systemic risk
to the financial system,
c) other investment brokerage companies at the Commission's
discretion;
3) investment brokerage companies which are intended to be put
under enhanced supervision and the measures to be applied
thereto;
4) a plan for on-site reviews of investment brokerage
companies by separately indicating the planned on-site reviews in
branches of investment brokerage companies in other Member
States, subsidiaries of investment brokerage companies and the
parent undertaking of investment brokerage companies which is a
financial holding company or a mixed financial holding company,
or in another subsidiary of such financial holding company or
mixed financial holding company.
(12) If such necessity has been established in the
assessment which has been carried out in accordance with the
requirements laid down in Paragraph nine of this Section, the
Commission is entitled to make the following arrangements:
1) to increase the number and frequency of on-site reviews in
an investment brokerage company;
2) to assign an authorised person to constantly be located in
an investment brokerage company;
3) to request that an investment brokerage company submits
additional reports or submits reports more often;
4) to carry out additional or more frequent reviews of
operative, strategic, or business plans of an investment
brokerage company;
5) to carry out target reviews in order to control specific
risks which are expected to occur.
(2) [9 June 2005]
(3) The representatives authorised by the Commission have the
right to become acquainted with all the documents, account books,
and databases of an investment brokerage company, transcribe any
part thereof, make true copies (copies), and also to receive the
explanations and information necessary for carrying out reviews
from members of management bodies and other responsible
persons.
(4) Upon a written motivated request by the Commission, an
investment brokerage company shall submit to the Commission true
copies (copies) or other information related to the activities of
the investment brokerage company.
(5) The Commission shall submit to an investment brokerage
company a written report on the results of the review which shall
specify violations and provide instructions for the necessary
changes in the further activities of the investment brokerage
company.
(6) If an investment brokerage company does not agree with the
report of the Commission on the review carried out, it is
entitled to submit a complaint to the council of the Commission.
The council of the Commission is entitled to warrant a new review
or to decide on making amendments to the report on the review
carried out, or to dismiss the complaint.
(7) The Commission has the right to prohibit an investment
brokerage company from establishing close links or to request the
termination of close links with third parties, or to forbid
transactions therewith where such relations may or do endanger
the financial stability of the investment brokerage company or
restrict the rights of the Commission to perform the supervisory
functions laid down in the law.
(8) The Commission has the right to revoke the decisions of
the management bodies of an investment brokerage company on the
appointment of members of the board and council (where such has
been established) if they do not meet the requirements of this
Law.
(9) The Commission shall review the strategy, procedures, and
measures which an investment brokerage company has implemented in
order to comply with the requirements laid down in this Law,
other laws and regulations, directly applicable legal acts issued
by the European Union and regulatory provisions issued and
decisions taken by the Commission, and also shall assess the
following:
1) the inherent and likely risks of the activities of the
investment brokerage company;
2) the risks identified in the systematic risk assessment
carried out in accordance with the guidelines of the European
Banking Authority and the recommendations of the European
Systematic Risk Board which posed to the financial system by the
activities of the investment brokerage company;
3) the risks established during stress testing taking into
consideration the volume, diversity, and complexity of the
operations (transactions) performed.
(10) The Commission shall determine the amount and regularity
of the assessments referred to in Paragraph nine of this Section
depending upon the size of the investment brokerage company,
systemic importance, and the volume, diversity, and complexity of
the operations (transactions) performed. The Commission shall, at
least once a year, review and update the information included in
the assessment referred to in Paragraph nine of this Section on
at least the investment brokerage companies included in the
supervisory inspection programme.
(11) On the basis of the review and assessment carried out,
the Commission shall assess whether the strategy, procedures, and
measures implemented by an investment brokerage company ensure
sufficient risk management and whether own funds of an investment
brokerage company are sufficient for covering the inherent and
likely risks of its activities.
(111) The Commission shall inform the European
Banking Authority of the organisation of the review and
assessment process referred to in Paragraphs nine, ten, and
eleven of this Section.
(112) The Commission shall, without delay, inform
the European Banking Authority of any brokerage companies which
are recognised as systematically important as a result of the
assessment referred to in this Section.
(113) In the assessment referred to in Paragraph
nine of this Section, the Commission shall assess at least the
following in addition to the assessment of credit risk,
operational risk, and market risks:
1) management, corporate culture and values of an investment
brokerage company, and also the capability of the members of the
board or council, if such has been established, to fulfil their
duties;
2) business model of an investment brokerage company;
3) systemic risk assessment in accordance with Paragraph nine
of this Section;
4) results of the stress tests carried out in accordance with
the requirements of Regulation No 575/2013, if an investment
brokerage company has received a permit for the use of the
internal model in order to calculate the capital requirements for
credit risk;
5) results of the stress tests carried out in accordance with
the requirements of Regulation No 575/2013, if an investment
brokerage company has received a permit for the use of the
internal model in order to calculate the capital requirements for
market risk;
6) exposure of an investment brokerage company to
concentration risk and management thereof, including conformity
with the requirements of Regulation No 575/2013 with regard to
the restrictions of large exposures;
7) geographic location of exposures of an investment brokerage
company;
8) impact of diversification effects and inclusion thereof in
the risk assessment system;
9) possibility that an investment brokerage company may incur
significant losses due to the interest rate risk of exposures in
the non-trading portfolio and observations on the possible
circumstances of the incurrence of such losses;
10) exposure of an investment brokerage company to risk of
excessive leverage;
11) other risks of importance to an investment brokerage
company.
(114) The Commission shall at least once a year
carry out the stress testing of an investment brokerage company,
and the results thereof shall be taken into consideration in the
assessment which is carried out in accordance with the
requirements laid down in Paragraph nine of this Section.
Methodology of stress testing shall conform to the guidelines of
the European Banking Authority.
(115) If the Commission establishes that an
investment brokerage company does not comply with, or if the
Commission has a reason to deem that within 12 months from the
moment of starting the application of the measures referred to in
Paragraph 11.7 of this Section an investment brokerage
company will not comply with the requirements laid down in this
Law or Regulation No 575/2013, the Commission shall request that
an investment brokerage company timely implements the measures
necessary for the prevention of the relevant problems. For this
purpose the Commission may apply any of the measures referred to
in Paragraph 11.7 of this Section.
(116) In carrying out the assessment referred to in
Paragraph nine of this Section, the Commission may apply the same
or similar approach to investment brokerage companies with
similar risk profile (similar business model, geographic location
of exposures or other similar approach) which are or may be
exposed to similar risks or which pose or may pose similar risks
to the financial system.
(117) In order to apply the requirements laid down
in Paragraphs nine and eleven of this Section, and also
Regulation No 575/2013, the Commission is entitled to request
that an investment brokerage company:
1) maintains a higher level of own funds than that required in
Regulation No 575/2013 which is increased by the requirements for
total capital buffers calculated in accordance with Sections
35.22, 35.23, 35.24, and
35.25 of the Credit Institution Law in order to cover
the inherent and likely risks of the operation of the investment
brokerage company and elements thereof not provided for in
Regulation No 575/2013;
2) improves its strategy, procedures, and measures that are to
be implemented in order to conform to the requirements laid down
in Sections 122.1, 122.2, 123.1,
and Section 124, Paragraph one, Clause 11 of this Law;
3) draws up a plan for the restoration of the conformity with
the requirements laid down in this Law, other laws and
regulations, directly applicable legal acts issued by the
European Union authorities, and regulatory provisions issued by
the Commission by determining time periods for the implementation
of the measures included in the plan;
4) applies a policy of recognition and assessment of special
provisioning or assets for the purpose of calculation of own
funds;
5) limits or restricts commercial activities, activities or
network of institutions, disclaims the areas of activities which
excessively pose a threat to its stability; reduces the risks
inherent to the systems established for its activities, products
or provision of activities;
6) determines such restriction on the variable component of
remuneration of officials and employees which is expressed in
percentage of net income and allows an investment brokerage
company to maintain a stable capital basis;
7) channels the profit after tax into strengthening of its own
funds;
8) reduces or does not perform distribution of profit or
interest payments to its shareholders (members), members or
holders of the instruments included in Additional Capital Tier 1,
unless it causes default on obligations;
9) provides additional reports or provides reports more often,
including reports on capital and liquidity positions of an
investment brokerage company.
(118) The Commission shall require that an
investment brokerage company conforms to the requirement laid
down in Paragraph 11.7, Clause 1 of this Section at
least in the following cases:
1) the investment brokerage company has not conformed to the
requirements laid down in Sections 122.1,
123.1, or Section 124, Paragraph one, Clause 11 of
this Law or the restrictions on large exposures determined in
Regulation No 575/2013;
2) risks or risk elements have been identified which are not
covered in accordance with the capital requirements or
requirements for total capital buffers determined in Regulation
No 575/2013;
3) there is a reason to deem that the application of other
administrative measures alone will not be sufficient to
appropriately improve the structure, processes, mechanisms, and
strategy of the investment brokerage company within reasonable
time periods;
4) capital requirements are not sufficient, because the
investment brokerage company has not taken into consideration a
possibility to sell within a short time period or to restrict the
risks associated with these positions without significant loss
under circumstances of a functioning market when making
adjustments to the value of trading portfolio positions, or
because the investment brokerage company which has received the
permit for the use of the internal models to calculate capital
requirements does no longer conforms to the provisions for
receipt of such permit;
5) there is a reason to deem that the risks inherent to the
activities of the investment brokerage company have been assessed
too low, although the requirements laid down in this Law and
Regulation No 575/2013 are conformed to;
6) the investment brokerage company has received the permit
for the use of the internal model to calculate the capital
requirements for the correlation trading portfolio but its
submitted reports show that results of stress testing
significantly exceed the capital requirements calculated in
accordance with the internal model.
(119) On the basis of the assessment carried out in
accordance with the requirements of this Section, the Commission
shall assess whether own funds requirements should be determined
in addition to those necessary for the coverage of the inherent
and likely risks of the activities of an investment brokerage
company taking into consideration the following:
1) qualitative and quantitative results of the assessment
carried by the investment brokerage company in accordance with
the requirements of Section 123.1 of this Law;
2) operation of the internal control system of the investment
brokerage company developed in accordance with the requirements
laid down in Section 122.2 and Section 124, Paragraph
one, Clause 11 of this Law, and also recovery and adjustment
plans thereof;
3) results of the assessment carried out by the Commission in
accordance with the requirements laid down in Paragraph nine of
this Section;
4) systemic risk assessment.
(12) [24 April 2014]
(13) The Commission shall determine the procedures conforming
to the guidelines of the European Banking Authority by which
reduction in the economic value of the investment brokerage
company shall be calculated due to sudden and unexpected changes
in interest rates.
(14) If the calculation referred to in Paragraph thirteen of
this Section indicates that the economic value of an investment
brokerage company will decrease by 20 per cent or more of its own
funds due to sudden and unexpected changes in interest rates by
200 base points or due to other changes determined in the
guidelines of the European Banking Authority, the Commission
shall request that the investment brokerage company implements
measures which would ensure conformity of own funds with the
amount of interest rate risk of exposures in the non-trading
portfolio.
(15) When exercising supervision of such investment brokerage
company which has received a permit for the use of risk-weighted
amounts in its internal approach or own funds requirements for
the calculation, the Commission shall apply Sections
105.3 and 105.4 of the Credit Institution
Law.
(16) The Commission shall apply the requirements laid down in
this Section on an individual basis and at the level of
consolidation groups, or on a sub-consolidated basis in
accordance with the level of application of the requirements of
Title II of Part one of Regulation No 575/2013. If an investment
brokerage company is released from the obligation to conform to
the own funds requirements at the consolidation group level in
accordance with the requirements of Article 15 of Regulation No
575/2013, the Commission shall apply the requirements laid down
in Paragraphs nine, ten, eleven, and 11.2 of this
Section to such investment brokerage company on an individual
basis.
(17) The requirements laid down in Paragraphs nine, ten,
eleven, 11.1, 11.2, 11.3,
11.4, 11.5, 11.6,
11.7, 11.8, 11.9, thirteen,
fourteen, fifteen, and sixteen of this Section shall be applied
to the supervision of such investment brokerage company which is
an institution within the meaning of Regulation No 575/2013.
(18) The Commission shall inform the European Banking
Authority of the principles for taking the abovementioned
decisions by the Commission.
[9 June 2005; 22 March 2012; 24 April 2014]
Section 139.1 Significant
Branches of Investment Brokerage Companies
(1) A branch of an investment brokerage company registered in
a Member State and subject to the regulatory capital adequacy
requirements in accordance with the laws and regulations
governing financial instrument market and limits to large
exposures which is registered in the Republic of Latvia shall be
recognised as significant. The Commission shall, by providing a
justification, send a request to the supervisory authority or the
home Member State of the investment brokerage company or
supervisory authority of the consolidation group to which such
investment brokerage company belongs with a branch registered in
the Republic of Latvia, to harmonise opinions for decision taking
(hereinafter - the harmonised decision) in order to recognise the
branch registered in the Republic of Latvia as significant.
(2) In order to recognise a branch to be significant, the
conformity thereof with the following criteria shall be taken
into account:
1) suspension or closure of the activities of the branch is
likely to affect financial market liquidity and the payment,
clearing and settlement systems in the host Member State;
2) the volume of transactions of the branch and number of its
clients are important for the capital market or financial system
of the host Member State.
(3) The Commission and the supervisory authority of the home
Member State or supervisory authority of the consolidation group
of the branch shall co-operate and undertake all the necessary
activities in order to take the harmonised decision to recognise
a branch as significant within two months from the day of sending
the request referred to in Paragraph one of this Section.
(4) The decision referred to in Paragraph three of this
Section may be appealed in the home Member State of the
consolidated supervisory authority or the branch in accordance
with the laws and regulations governing the appeal procedures of
the relevant state.
(5) If within two months from sending the request referred to
in Paragraph one of this Section the harmonised decision is not
taken, the Commission shall, in conformity with the opinion of
the supervisory authority of the home Member State or the
supervisory authority of the consolidation group, take the
decision to recognise the relevant branch as significant within
the following two months without harmonising opinions.
(6) A supervisory authority of another Member State may turn
to the Commission with a request to recognise a branch of the
investment brokerage company registered in the Republic of Latvia
which is registered in such Member State to be significant or, if
the Commission is the supervisory authority of the consolidation
group, with a request to recognise a branch of the investment
brokerage company included in the consolidation group which is
registered in another Member State to be significant. The
Commission shall implement all the necessary measures in order
to, within two months from the day of receipt of the request,
take the harmonised decision to recognise a branch to be
significant.
(7) The decision referred to in Paragraph six of this Section
may be appealed against to the Regional Administrative Court.
(8) The Commission shall notify the decision taken to
recognise a branch to be significant to the relevant supervisory
authorities of the Member States.
(9) The Commission shall co-operate with supervisory
authorities of host Member States of significant branches of
investment brokerage companies registered in the Republic of
Latvia, when receiving information on negative development trends
of the investment brokerage companies which may materially
influence the activity of the investment brokerage companies, and
also on sanctions and supervisory measures which are implemented
by the supervisory authorities of host Member States in respect
of investment brokerage companies, including imposition of an
obligation to maintain a higher level of own funds than the total
sum of minimum capital requirements and any restrictions on the
use of the advanced operational risk measurement approach. The
Commission shall participate in preparatory arrangements for
emergency situations and arrangements for the management of
emergency situations, including such emergency situations which
may develop in case of deterioration of the financial position of
the investment brokerage company, or due to the impact of
unfavourable development of financial markets. The supervisory
activities provided for emergency situations shall include the
preparation of a joint assessment of the situation, introduction
of a crisis management plan, and provision of public information.
During the exchange process of the necessary information already
established types of exchange of information shall be used as
much as possible for the provision of crisis management.
(10) If the Commission identifies an emergency situation,
including unfavourable trends in the development of financial
markets which have an impact on the situation in an investment
brokerage company, it shall, in accordance with the provisions
for the disclosure of restricted access information and using
already established types of exchange of information as much as
possible, immediately warn the central banks of host Member
States included in the European System of Central Banks, the
European Central Bank, and the European Systemic Risk Board of
the emergency situation, and shall notify all the material
information related to the performance of the tasks thereof.
(11) If an investment brokerage company registered in the
Republic of Latvia has significant branches in other Member
States, but the investment brokerage company is not included in
the consolidation group, the Commission shall, together with the
supervisory authorities of such Member States in which the
significant branches of the investment brokerage company have
been registered, establish and manage a board of supervisors in
order to ensure co-operation with the supervisory authorities of
the relevant Member States when implementing the activities
referred to in Paragraphs nine and ten of this Section. The
Commission shall establish a board of supervisors by entering
into a co-operation agreement with the supervisory authorities of
the host Member States.
(12) The Commission shall, taking into account the importance
of the planned or co-ordinated supervisory activities for the
supervisory authorities of the host Member States and the
potential impact on the stability of the financial system in the
relevant Member States, particularly in emergency situations,
determine those supervisory authorities which have an obligation
to participate in meetings of the board of supervisors.
(13) The Commission shall, in due time, inform all
participants of the board of supervisors of organising meetings
of the board of supervisors, the main issues to be examined and
the planned activities, and also the decisions taken or the
measures implemented in the meetings.
[13 January 2011; 24 April 2014; 21 June 2018]
Section 140. Supervision of an
Investment Brokerage Company Registered in Another Member
State
(1) The Commission shall supervise conformity of a branch of
an investment brokerage company registered in another Member
State which operates in the Republic of Latvia with the
requirements of Section 124, Paragraph one, Clauses 9 and 10,
Sections 126, 126.1, 126.2, 128,
128.1, 128.2, 128.3 of this Law
and Regulation No 600/2014. The Commission has the right to
inspect measures implemented by such branch for ensuring such
requirements. If the Commission establishes that a branch of an
investment brokerage company registered in this Member State
which operates in the Republic of Latvia undertakes activities
which are in contradiction with the requirements of Section 124,
Paragraph one, Clauses 9 and 10, Sections 126, 126.1,
126.2, 128, 128.1, 128.2,
128.3 of this Law and Regulation No 600/2014, it
shall, without delay, request the investment brokerage company of
such Member State to cease such activities.
(2) If a branch of an investment brokerage company registered
in another Member State which operates in the Republic of Latvia
continues activities which are in contradiction with the
requirements of Section 124, Paragraph one, Clauses 9 and 10,
Sections 126, 126.1, 126.2, 128,
128.1, 128.2, 128.3 of this Law
and Regulation No 600/2014, the Commission shall inform the
supervisory authority of the home Member State and implement
measures to remedy such violations. Within the framework of such
measures the Commission is entitled to prohibit the relevant
investment brokerage company from continuing the provision of
investment services in the Republic of Latvia until such
violations are rectified. The Commission shall inform the
European Commission and the European Securities and Markets
Authority of the measures implemented in accordance with the
requirements of Section 147 of this Law. The Commission is
entitled to address the European Securities and Markets Authority
with a request, according to the authorisation granted thereto,
to examine a violations of such branch of an investment brokerage
company which operates in the Republic of Latvia.
(3) If the Commission establishes that a branch of investment
brokerage company registered in another Member State which
operates in the Republic of Latvia undertakes activities which
are in contradiction with the requirements of the applicable laws
and regulations of the Republic of Latvia governing financial
instrument market, other than referred to in Paragraph one of
this Law, the Commission shall, without delay, inform the
supervisory authority of the home Member State thereof and ask it
to remedy the established violations, and also inform the
Commission of the implemented measures.
(4) If the Commission establishes that an investment brokerage
company registered in another Member State which provides
investment services without opening a branch, carries out the
activities that are in contradiction with the laws and
regulations governing financial instruments market in force in
the Republic of Latvia, it shall, without delay, inform the
supervisory authority of the home Member State thereof, and
request it to rectify the established violations, and also inform
the Commission of the implemented measures.
(5) If a branch of an investment brokerage company registered
in another Member State which operates in the Republic of Latvia,
or such investment brokerage company registered in other Member
State which provides investment services in the Republic of
Latvia without opening a branch continues activities which are in
contradiction with the applicable laws and regulations of the
Republic of Latvia governing financial instruments market, it
shall inform the supervisory authority of the home Member State
and implement measures to remedy such violations. Within the
framework of these activities, the Commission is entitled to
prohibit the relevant investment brokerage company from
continuing the provision of investment services in the Republic
of Latvia until such violations are rectified. The Commission
shall inform the European Commission and the European Securities
and Markets Authority of the measures implemented in accordance
with the requirements of Section 147 of this Law. The Commission
is entitled to address the European Securities and Markets
Authority with a request, according to the authorisation granted
thereto, to examine a violation of such branch of an investment
brokerage company which operates in the Republic of Latvia.
(6) The requirements laid down in Paragraphs one, two, three,
and four of this Section do not prohibit the Commission from
carrying out activities to prevent violations that are in
contradiction with the laws of the Republic of Latvia protecting
the public interest. Within the framework of these activities the
Commission is entitled to prohibit the relevant investment
brokerage company from continuing the provision of investment
services in the Republic of Latvia until such violations are
rectified.
(7) The provisions of this Section do not restrict the right
of an investment brokerage company registered in other Member
State to disseminate information in the Republic of Latvia and
advertise the services provided thereby, if such information and
advertising is not in contradiction with the laws and regulations
protecting the public interest.
(8) The Commission has the right to, upon its own initiative
or upon request of the supervisory authority of the home Member
State, to perform internal control at the branch in the Republic
of Latvia of an investment brokerage company registered in a
Member State. Supervisory authorities of the home Member State
are entitled to perform internal control at the branch of an
investment brokerage company in the Republic of Latvia or
authorise other persons to perform this control by informing the
Commission thereof in advance.
(9) The Commission has the right to, under a reasoned
decisions and by informing also the European Securities and
Markets Authority thereof, refuse a supervisory authority of
another Member State to conduct a control within the territory of
the Republic of Latvia upon request of the supervisory authority
of such Member State, and also to reject the participation of
authorised representatives of a supervisory authority of another
Member State in such a control or to provide information to the
supervisory authority of the Member State, if:
1) such examination or participation of authorised
representatives of the supervisory authority of another Member
State therein has an adverse effect on the national sovereignty,
security, or State policy of the Republic of Latvia;
2) court proceedings for the same violation and against the
same persons have already been initiated in the Republic of
Latvia;
3) a judgment has been given on the same violation and towards
the same persons.
(10) The Commission shall prohibit a branch of an investment
brokerage company registered in another Member State which
operates in the Republic of Latvia or an investment brokerage
company registered in another Member State which provides
investment services in the Republic of Latvia without opening a
branch from continuing the provision of investment services if it
has received a notification from the supervisory authority of the
home Member State on the cancellation of the licence issued to
the investment brokerage company.
(11) The Commission has the right to directly address an
investment brokerage company registered in other Member State
which is a member of a regulated market operator registered in
the Republic of Latvia and makes transactions on a regulated
market without opening a branch, by informing the supervisory
authority of the relevant Member State thereof.
(12) Information which may be requested when performing
internal controls in accordance with Paragraph eight of this
Section shall be determined by Commission Delegated Regulation
(EU) 2017/586 of 14 July 2016 supplementing Directive 2014/65/EU
of the European Parliament and of the Council with regard to
regulatory technical standards for the exchange of information
between competent authorities when cooperating in supervisory
activities, on-the-spot verifications and investigations.
(13) The sample forms, templates, and procedures necessary for
the supervisory activities and on-site controls shall be
determined by Commission Implementing Regulation (EU) 2017/980 of
7 June 2017 laying down implementing technical standards with
regard to standard forms, templates and procedures for
cooperation in supervisory activities, for on-site verifications,
and investigations and exchange of information between competent
authorities in accordance with Directive 2014/65/EU of the
European Parliament and of the Council (hereinafter - Regulation
No 2017/980).
(14) For statistical purposes or for ensuring the supervision
of the fulfilment of the obligations specified in this Section,
the Commission has the right to request that an investment
brokerage company registered in another Member State or a branch
of a credit institution operating in the Republic of Latvia
regularly reports on its activities.
(15) The requirements laid down in Paragraph fourteen of this
Section may not be more stringent that those laid down for
investment brokerage companies or credit institutions licensed in
Latvia.
[4 October 2007; 22 May 2008; 22 March 2012; 21 June 2018;
20 June 2019; 12 December 2019]
Section 140.1 Supervision
of a Branch of a Credit Institution Registered in Another Member
State which Provides Investment Services in the Republic of
Latvia
(1) The Commission shall supervise conformity of branches of a
credit institution registered in another Member State which
provide investment services in the Republic of Latvia with the
requirements of Section 124, Paragraph two, Clauses 6 and 7,
Sections 126, 126.1, 126.2, 128,
128.1, 128.2, 128.3 of this Law
and Regulation No 600/2014. The Commission has the right to
inspect measures implemented by such branch for ensuring such
requirements. If the Commission establishes that the branch of a
credit institution registered in this Member State which operates
in the Republic of Latvia undertakes activities that are in
contradiction with the requirements of Section 124, Paragraph
two, Clauses 6 and 7, Sections 126, 126.1,
126.2, 128, 128.1, 128.2,
128.3 of this Law and Regulation No 600/2014, it
shall, without delay, request the branch to cease such
activities.
(2) If a branch of a credit institution registered in another
Member State which operates in the Republic of Latvia continues
activities that are in contradiction with the requirements of
Section 124, Paragraph two, Clauses 6 and 7, Sections 126,
126.1, 126.2, 128, 128.1,
128.2, 128.3 of this Law and Regulation No
600/2014, the Commission shall inform the supervisory authority
of the home Member State and implement measures to remedy such
violations. Within the scope of these measures, the Commission is
entitled to, until rectification of such violations, prohibit the
relevant branch from continuing the provision of investment
services in the Republic of Latvia. The Commission shall inform
the European Commission and the European Securities and Markets
Authority of the measures implemented in accordance with the
requirements of Section 147 of this Law.
[21 June 2018]
Section 140.2 Supervision
of the Operation of a Multilateral Trading Facility and Organised
Trading Facility Registered in Another Member State
(1) If the MT facility or OT facility registered in another
Member State which operates in the Republic of Latvia undertakes
activities which are in contradiction with the applicable laws
and regulations of the Republic of Latvia governing financial
instrument market, the Commission shall, without delay, inform
the supervisory authority of the home Member State thereof and
ask to remedy the established violations, and also inform it of
the implemented measures.
(2) If the MT facility or OT facility registered in another
Member State which operates in the Republic of Latvia continues
activities which are in contradiction with the applicable laws
and regulations of the Republic of Latvia governing financial
instrument market or if the measures implemented by the
supervisory authority of the Member State turn out ineffective,
the Commission shall inform the supervisory authority of the home
Member State thereof and implement measures to remedy such
violations. Within the scope of such activities, the Commission
is entitled to, until rectification of such violations, prohibit
the relevant regulated market operator, MT facility, or OT
facility from continuing activities in the Republic of Latvia.
The Commission shall inform the European Commission and the
European Securities and Markets Authority of the measures
implemented in accordance with the requirements of Section 147 of
this Law.
(3) The Commission shall inform the relevant MT facility or OT
facility of the measures implemented in Paragraph two of this
Section or the prohibition imposed.
[21 June 2018]
Section 141. Supervision of an
Investment Brokerage Company Registered in the Republic of Latvia
which Provides Investment Services in a Member State
(1) The Commission shall inform the supervisory authority of
the relevant Member State prior to carrying out any internal
control at a branch of such investment brokerage company
registered in the Republic of Latvia which provides investment
services in a Member State.
(2) The supervisory authority of a Member State is entitled
to, upon its own initiative and also upon request of the
Commission, carry out internal control at the branch of an
investment brokerage company registered in the Republic of Latvia
and operating in its territory.
(3) The Commission shall, without delay, inform the
supervisory authorities of the relevant Member States of the
cancellation of any licence of such investment brokerage
companies registered in the Republic of Latvia the branches of
which operate in Member States or which provide investment
services in Member States without opening a branch.
Section 141.1 Collection
of Information Related to Remuneration Policy and Practice
(1) The Commission shall collect the information related to
remuneration policy and practice made public by investment
brokerage companies with a licence which allows them to provide
the investment services referred to in Section 3, Paragraph four,
Clauses 3 and 6 of this Law in accordance with the requirements
of Regulation No 575/2013, and also the information provided by
such investment brokerage companies in accordance with the
requirements laid down in Section 124, Paragraph 1.6
of this Law, and evaluate remuneration trends and practice. The
Commission shall submit the abovementioned information to the
European Banking Authority.
(2) Using an interval amounting to one million euros, the
Commission shall collect the information made public by
investment brokerage companies with a licence which allows them
to provide the investment services referred to in Section 3,
Paragraph four, Clauses 3 and 6 of this Law in accordance with
the requirements of Regulation No 575/2013 with regard to the
number of its officials and employees whose remuneration during
the reporting year is equal to or greater than one million euros,
including information on the duties, scope of activities, and
major remuneration components of such officials and employees.
The Commission shall submit the abovementioned information to the
European Banking Authority.
[24 April 2014; 21 June 2018]
Section 142. Supervision on
Consolidated Basis
The Commission shall exercise supervision of a parent
investment brokerage company in the Republic of Latvia and a
parent investment brokerage company of the European Union
registered in the Republic of Latvia on consolidated basis by
applying the provisions of Chapter VII.1of the Credit
Institution Law regarding supervision of a parent credit
institution in the Republic of Latvia and a parent credit
institution of the European Union registered in the Republic of
Latvia to the supervision of investment brokerage companies on
consolidated basis by analogy.
[13 January 2011]
Division
F1
Provision of Outsourced Services
[9 June 2005]
Section 142.1 Procedures
for Commencing Provision of Outsourced Services
(1) Within the meaning of this Law, a recipient of outsourced
service may be a regulated market operator, the central
securities depository, and an investment brokerage company. If
the outsourced service recipient and the outsourced service
provider are members of the same group of commercial companies,
the outsourced service recipient may, for the purposes of
complying with the requirements of this Section, take into
account the extent to which it controls the outsourced service
provider or the extent to which the outsourced service provider
is subject to consolidated supervision of the group.
(2) Only such outsourced service provider having experience of
at least three years in the provision of such outsourced services
which a regulated market operator, the central securities
depository, or an investment brokerage company plans to delegate
to the outsourced service provider, is entitled to provide the
outsourced services to a regulated market operator, the central
securities depository, and investment brokerage company.
(3) At least 30 days prior to receipt of outsourced service, a
regulated market operator, the central securities depository, and
an investment brokerage company shall submit a motivated written
submission to the Commission regarding receipt of the planned
outsourced service. A description of the outsourced service
policy and procedures and the original copy or certified copy of
the outsourced service contract shall be appended to the
submission.
(4) A regulated market operator, the central securities
depository, and an investment brokerage company shall submit
amendments to the description of the outsourced service policy
and procedure not later than on the following working day after
approval of the relevant amendments.
(5) The following shall be determined in an outsourced service
contract:
1) a description of the outsourced service to be received;
2) precise requirements for the amount and quality of
outsourced service;
3) the rights and obligations of the recipient and the
provider of outsourced services, including:
a) the right of the outsourced service recipient to constantly
supervise the quality of the outsourced service provision, the
right to become acquainted with all documents, the document and
accounting registers, and also to request information from the
outsourced service provider related to the outsourced service
provision;
b) the right of the recipient of outsourced service to give
the provider of outsourced services instructions to be compulsory
enforced in issues which are related to execution of outsourced
service in good faith, good quality, timely manner and
corresponding to laws and regulations;
c) the right of the outsourced service provider to submit a
motivated written request to the outsourced service provider to
terminate the outsourced service contract without delay, if the
outsourced service recipient has established that the outsourced
service provider does not fulfil the requirements laid down in
the outsourced service contract for the amount or quality of the
outsourced service;
d) the obligation of the outsourced service provider to ensure
the outsourced service recipient with a possibility to
continuously supervise the quality of the outsourced service
provision;
e) the obligation of the outsourced service provider to
terminate the outsourced service contract without delay after
receipt of a motivated written request from the outsourced
service recipient;
f) the obligation of the outsourced service provider to ensure
the quality of outsourced service provision and due management of
the risks related to outsourced service provision;
g) the obligation of the outsourced service provider to inform
the outsourced service recipient of changes which may impact the
ability thereof to provide the outsourced service effectively, in
due amount, quality and in accordance with the requirements laid
down in this Law;
h) the obligation of the outsourced service provider not to
disclose information related to the outsourced service recipient
or client and which in accordance with the requirements of the
law contains business secrets;
4) the right of the Commission to become acquainted with all
the documents, accounting and document registers and to request
from the outsourced service provider any information which is
related to the provision of outsourced services and performance
of the functions of the Commission;
5) actions of the outsourced service provider for addressing
consequences under emergency situations, including introduction
and periodic testing of backup facilities, where necessary, in
order to ensure continuous provision of investment service and
protection of client interests with regard to the function,
service, or activity that has been outsourced to the outsource
service provider.
(6) A regulated market operator, the central securities
depository, or an investment brokerage company which plans to
receive an outsourced service in accordance with the procedures
laid down in this Law shall develop the relevant policy and
procedures. The following shall be determined in the outsourced
service procedure:
1) the internal procedures by which decisions on receipt of
outsourced services are taken;
2) the procedures for entering into an outsourced service
contract, the supervision of execution and termination
thereof;
3) regarding co-operation with the outsourced service provider
and regarding the persons and units responsible for the
supervision of the amount and quality of the outsourced service
received, and also the rights and obligations of the relevant
persons;
4) the action of the outsourced service recipient in cases
when the outsourced service provider does not fulfil or is going
to be unable to fulfil the provisions of the outsourced service
contract;
5) the risk assessment and management procedures related to
receipt of the outsourced service.
(7) The Commission has the right to conduct an inspection of
activities of the outsourced service provider at the location
thereof or at the location of outsourced service provision,
including to become acquainted with all the documents, document
and accounting registers, to make copies of the documents, and
also to request information from the outsourced service provider
which is related to the outsourced service provision or which is
necessary for the performance of the functions of the
Commission.
(8) The outsourced service provider shall commence the
outsourced service provision if the outsourced service recipient
has not received a prohibition from the Commission to receive
outsourced service within 30 days from the day of submitting the
submission referred to in Paragraph three of this Section.
(9) An outsourced service provider is entitled to delegate the
outsourced service provision further to another person only after
approval in writing has been received from the relevant
outsourced service recipient. A regulated market operator, the
central securities depository, and an investment brokerage
company shall, prior to further delegating of the outsourced
service, inform the Commission thereof in writing and submit the
documents referred to in Paragraph three of this Section. The
provisions of this Law shall apply to further delegation of the
outsourced service provision and the final provider of outsourced
services.
(10) The criteria for the importance of a delegated outsourced
service, more detailed procedures for delegation, including for
foreign service providers, are determined in Articles 30, 31, and
32 of Regulation No 2017/565.
[4 October 2007; 14 September 2017; 21 June 2018]
Section 142.2 Restriction
on the Provision of Outsourced Services
(1) The Commission shall prohibit a regulated market operator,
the central securities depository, or an investment brokerage
company to receive the planned outsourced service if:
1) the provisions of this Law have not been conformed to;
2) the receipt of the outsourced service may restrict the
possibility of a regulated market operator, the central
securities depository, or an investment brokerage company to
provide the services laid down in this Law, and also may infringe
the lawful interests of its clients or deteriorate the conditions
on the basis of which the Commission has issued a licence to the
outsourced service recipient for the performance of the relevant
professional activity;
3) the receipt of the outsourced services may restrict the
possibility of the administrative bodies of the outsourced
service recipient to perform the obligations laid down for them
in laws and regulations, the articles of association of the
outsourced service recipient, or in other internal instruments of
the outsourced service recipient;
4) the receipt of the outsourced services will prohibit or
restrict the possibility of the Commission to perform the
functions laid down in the law;
5) the outsourced service contract does not conform to the law
and does not provide a clear and true idea of the intended
co-operation of the outsourced service recipient and the
outsourced service provider and the amount and quality of the
outsourced service.
(2) The receipt of the outsourced service shall not exempt a
regulated market operator, the central securities depository, and
an investment brokerage company from the responsibility laid down
in the law or in the contract with their clients. The outsourced
service recipient shall be responsible for the performance of the
outsourced service provider to the same extent as for its own
performance.
(21) The Commission has the right to request
information from an outsourced service recipient which is related
to the outsourced service provision or which is necessary for the
performance of the functions of the Commission.
(3) The Commission has the right to request that an outsourced
service recipient rectifies the deficiencies which have been
caused by the receipt of outsourced service, and to determine the
time period for rectification of such deficiencies. If the
deficiencies are not rectified within the time period stipulated
by the Commission, the Commission shall request the outsourced
service recipient to terminate the outsourced service contract,
and shall determine the time period for its termination.
(4) The Commission is entitled to request that an outsourced
service recipient immediately terminates the outsourced service
contract in effect if it establishes:
1) that the outsourced service recipient does not continuously
supervise the outsourced service or supervises it irregularly and
inadequately;
2) that the outsourced service recipient does not manage the
risk related to the outsourced service provision or manages it
irregularly and inadequately;
3) material deficiencies in the activity of the outsourced
service provider which endanger or may endanger performance of
the obligations of the outsourced service recipient;
4) that any of the circumstances referred to in Paragraph one
of this Section sets in.
(5) An outsourced service recipient shall, without delay,
inform the Commission if it has established that the outsourced
service provider does not comply with the amount or quality
requirements laid down for the the outsourced service in the
outsourced service contract.
(6) The receipt of an outsourced service shall not release the
outsourced service recipient from the obligation to manage the
risks related to the activities thereof laid down in laws and
regulations.
(7) Appeal of the administrative act issued by the Commission
referred to in Paragraphs one, three, and four of this Section
shall not suspend its enforcement.
[4 October 2007; 14 September 2017; 21 June 2018]
Division
G
Exchange of Information and Cooperation
[21 June 2018]
Section 143. Exchange of Information
and Cooperation with Supervisory Authorities of Other Member
States to Ensure Supervision over the Provision of Investment
Services
(1) The Commission shall be responsible for the cooperation
and exchange of information with the supervisory authorities of
other Member States which have been recognised as a contact
person in exchange of information to fulfil the obligations
specified in this Law and Regulation No 600/2014, including
supervisory activities or examination, and to ensure recovery of
a fine. The Commission may exercise its authority for cooperation
objectives also if the activities investigated thereby are not a
violation of the legal norms in force in the relevant Member
State.
(2) On the basis of a relevant motivated request, the
Commission shall provide the supervisory authorities of other
Member States with information on members of the board and
council (if such has been established) and the owners of those
investment brokerage companies which provide investment services
in the territory of the relevant Member States or which have
close relations to any licensed investment brokerage companies or
yet-to-be-licensed investment brokerage companies in Member
States.
(3) The Commission shall notify the supervisory authority of
the relevant Member State of sanctions and restrictions on
activities it has imposed on such investment brokerage companies
registered in the Republic of Latvia which provide investment
services in the territory of the relevant Member State.
(4) If the Commission has at its disposal information that a
commercial company which is not subject to its supervision
carries out activities in another Member State which are in
contradiction with the legal acts of this Member State in the
field of financial instrument market, the Commission shall inform
the supervisory authority of the relevant Member State and the
European Securities and Markets Authority.
(5) The Commission shall, in accordance with the requirements
of Article 15 of 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 record-keeping
obligations for investment firms, transaction reporting, market
transparency, admission of financial instruments to trading, and
defined terms for the purposes of that Directive (hereinafter -
Regulation No 1287/2006), exchange information with the
supervisory authority of another Member State which has been
recognised a contact person in exchange of information for the
objectives referred to in this Section.
(6) The Commission has the right to indicate that the
information referred to in this Section may be disclosed to third
parties to which it is necessary for the performance of the
functions laid down in the law only with a prior written consent
of the Commission.
(7) The Commission shall inform the European Securities and
Markets Authority of the supervisory activities within the scope
the following has been performed:
1) any requests to reduce the amount or risk of a position in
accordance with Section 138, Paragraph one, Clause 15 of this
Law;
2) any restrictions on the ability of person to conclude
transactions regarding commodity derivatives in accordance with
Section 138, Paragraph one, Clause 16 of this Law.
(8) The description of the request made in accordance with
Section 138, Paragraph one, Clause 10 of this Law shall be
indicated in the information referred to in Paragraph seven of
this Section, including the identity of the persons to whom the
request was addressed, and its grounds, and also the scope of
such restrictions which have been specified in accordance with
Section 138, Paragraph one, Clause 16 of this Law, including
information on the relevant person, the financial instruments
applicable thereto, any restrictions in relation to to the amount
of such positions which may be held by the person for the whole
period, and also any exceptions related thereto and granted in
accordance with Section 133.14 of this Law and the
relevant reasons.
(9) The Commission shall send the information referred to in
Paragraph seven of this Section not later than within 24 hours
before taking the planned supervisory activity. The
abovementioned condition need not be conformed to if there are
objective reasons for it.
(10) If the activities referred to in Paragraph seven of this
Section apply to retail energy products, the Commission shall
also send information to the Agency for the Cooperation of Energy
Regulators which has been founded in accordance with Regulation
(EC) No 713/2009 of the European Parliament and of the Council of
13 July 2009 establishing an Agency for the Cooperation of Energy
Regulators.
(11) In relation to emission allowances, the Commission shall
cooperate with State institutions competent for the oversight of
spot and auction markets and competent authorities, registry
administrators and other State institutions charged with the
supervision of compliance in the field of emission allowance
trading in order to ensure consolidated information on emission
allowances markets.
(12) In relation to agricultural commodity derivatives, the
Commission shall cooperate with State institutions competent for
the oversight, administration and regulation of physical
agricultural markets and shall provide information to them in
accordance with Regulation No 1308/2013.
(13) If activities of a trading venue registered in another
Member State in the Republic of Latvia in accordance with the
criteria laid down in Article 16 of the European Commission
Regulation No 1287/2006 become substantially important for the
operation of the financial instrument market and protection of
investors, the Commission shall agree with the supervisory
authority of the relevant Member State on the commensurate
cooperation methods.
(14) The criteria by which the activities of a trading venue
in a host Member State might be deemed activities which are of
substantial importance for the operation of the financial
instrument market and protection of investors in the relevant
host Member State shall be determined by Regulation No
2017/565.
(15) The sample forms, templates, and procedures necessary for
the exchange of the information referred to in Paragraph thirteen
of this Section shall be determined by Commission Implementing
Regulation (EU) 2017/988 of 6 June 2017 laying down implementing
technical standards with regard to standard forms, templates and
procedures for cooperation arrangements in respect of a trading
venue whose operations are of substantial importance in a host
Member State.
(16) The sample forms, templates, and procedures necessary for
the exchange of the information referred to in this Section shall
be determined by Regulation No 2017/980.
[21 June 2018; 20 June 2019]
Section 144. Exchange of Information
with Supervisory Authorities of Member States to Ensure
Supervision of the Prohibition against the Use of Inside
Information and Market Manipulations
(1) The Commission shall co-operate with supervisory
authorities of Member States in supervision of the prohibition
against the use of inside information and market manipulations in
accordance with the provisions of Regulation No 596/2014.
(2) If the Commission does not have information at its
disposal which has been requested by the supervisory authority of
the Member State, on the basis of a motivated request, and which
is necessary thereto in order to perform its duties of
supervision of the prohibition against the use of inside
information and market manipulation, the Commission shall carry
out activities within its competence in order to obtain the
information requested.
(3) If it is impossible for the Commission to obtain the
information requested by the supervisory authority of a Member
State, the Commission shall notify the relevant Member State
supervisory authority thereof, specifying the reasons due to
which it cannot provide the requested information.
[26 May 2016]
Section 144.1 Exchange of
Information with Supervisory Authorities of Member States for the
Purpose of Ensuring Admission of an Offer of Securities to the
Public and Financial Instruments to Trading on a Regulated
Market
[12 December 2019]
Section 144.2 Exchange of
Information with Supervisory Authorities of Member States to
Ensure Supervision over the Share Buy-back Offers
(1) The Commission shall be responsible for the exchange of
information with the supervisory authorities of other Member
States the purpose of which is to ensure supervision of the
course of share buy-back offers in the territory of all Member
States.
(2) The Commission shall, on the basis of a relevant motivated
requests, provide information and documents to the supervisory
authorities of the Member States regarding share buy-back offer,
shareholders of a target company, transactions with the shares of
the target company, and other information which is necessary for
the supervisory authorities of the Member States for ensuring
supervision of share buy-back offers or for the investigation of
potential violations related to share buy-back offers.
[15 June 2006]
Section 144.3 Exchange of
Information with Supervisory Authorities of Member States to
Ensure Disclosure of the Regulated Information
(1) The Commission is responsible for co-operation with
competent authorities of Member States in order to ensure
fulfilment of the duties and exercising of powers laid down for
it in Section 54 of this Law, and also in Division D, Chapters
III, IV, and VI of this Law.
(2) The Commission shall, on the basis of a relevant motivated
request, provide information to the competent authorities of
Member States necessary for the performance of their
functions.
[29 March 2007; 21 September 2017]
Section 144.4 Exchange of
Information with Supervisory Authorities of other Member States
on Transactions with Financial Instruments
[21 June 2018]
Section 145. Exchange of Information
with Foreign Supervisory Authorities
(1) The Commission is entitled to enter into agreements with
foreign supervisory authorities for the exchange of information
for the performance of supervisory functions, and also to accede
to the agreement of International Organization of Securities
Commissions for the exchange of information.
(11) The Commission is entitled to enter into an
agreement for the exchange of information with foreign
authorities, institutions, or other legal persons which:
1) supervises credit institutions, other financial
institutions, insurance companies, and financial markets;
2) are responsible for the liquidation, bankruptcy, and other
similar procedures of investment brokerage companies;
3) when performing supervisory functions, auditing investment
brokerage companies and other financial institutions, credit
institutions and insurance companies or which manage compensation
schemes;
4) are responsible for the supervision of such bodies which
are involved in the liquidation, bankruptcy, and other similar
procedures of investment brokerage companies;
5) are responsible for the supervision of such persons who are
carrying out auditing of investment brokerage companies,
insurance companies, credit institutions, and other financial
institutions;
6) are responsible for the supervision of such persons which
are operating on emission allowances markets;
7) are responsible for the supervision of such persons which
are operating on the markets of agricultural commodity
derivatives.
(2) In order to verify the veracity of such information on a
credit institution, investment brokerage company, another
financial institution, financial holding company, mixed-activity
company registered in a foreign country or on the subsidiary of
the credit institution, investment brokerage company, financial
holding company or mixed-holding company which the Commission has
received during the performance of supervision on the basis of
consolidated financial statements, the Commission is entitled to
send a request to the supervisory authority of the relevant
foreign country for the performance of internal control at the
relevant company.
(3) The Commission is entitled to enter into information
exchange agreements with the authorities and institutions
referred to in Paragraph one and 1.1 of this Section,
if the legal acts of the relevant foreign country provide for
such liability which is equivalent to the liability laid down in
the laws and regulations of the Republic of Latvia for
unauthorised disclosure of restricted access information. Such
information shall only be used to supervise the participants of
the financial and capital market or the functions laid down in
the law for the relevant institution. The relevant foreign
institutions are entitled to disclose the received information
only with a written consent of the Commission and only for the
purposes for which such consent was given.
[9 June 2005; 4 October 2007; 21 June 2018]
Section 146. Restricted Access
Information
(1) Information received by the Commission from a Member State
supervisory authority or a foreign supervisory authority for the
performance of supervisory functions, and also the information
specified in Section 20 of the Law on the Financial and Capital
Market Commission shall be considered to be restricted access
information.
(2) The information referred to in Paragraph one of this
Section may be disclosed to third parties for whom it is
necessary to perform their functions as laid down in the law only
with a prior written consent of the relevant Member State
supervisory authority or foreign supervisory authority, and only
for the purposes for which the relevant supervisory authority has
agreed to disclose such information.
(3) The Commission is entitled to use restricted access
information it has received from a Member State supervisory
authority or foreign supervisory authority in the performance of
its functions:
1) in order to verify information provided by investment
brokerage companies for the purpose of obtaining a licence for
the provision of investment services;
2) in order to verify the conformity of the activities of the
credit institution or investment brokerage company with the
requirements of the law;
3) in order to apply the liability laid down in the law for
violations of this Law;
4) during court proceedings wherein the administrative acts
issued by the Commission or its actual actions are being
contested;
5) in order to supervise activity of the financial instrument
trading venue.
(4) The provisions of this Section shall not restrict the
right of the Commission to provide restricted access information
to:
1) the authorities in a Member State or foreign countries
which are responsible for the supervision of credit institutions,
insurers, other financial institutions, and financial
markets;
2) the authorities or persons responsible for bankruptcy and
liquidation proceedings at investment brokerage companies in the
Republic of Latvia, Member States, or foreign countries;
3) persons who carry out internal control and auditing as laid
down in the law at investment brokerage companies or other
financial institutions in the Republic of Latvia, Member States,
or foreign countries by performing the supervisory functions of
finance and capital market;
4) bodies administering investment and deposit compensation
schemes, if such information is necessary thereto for the
performance of their functions;
5) State institutions or structures which have an obligation
to supervise the financial stability in Member States through the
macroprudential regulation;
6) reorganisation structures or State institutions of Member
States whose objective is to carry out reorganisation, and also
to protect financial stability in accordance with laws and
regulations;
7) contractual or institutional systems for client protection
of Member States.
(5) The provisions of this Section do not prohibit the
Commission from providing restricted access information to the
European Securities and Markets Authority, the European
Systematic Risk Board, the European Banking Authority, the
European Insurance and Occupational Pensions Authority, Latvijas
Banka, central banks of Member States, and other institutions
responsible for the supervision of payment, clearing and
settlement systems if such information is required by these
institutions for the performance of their functions laid down in
the law, and also from publishing results of the stress testing
carried out according to the requirements of supervisory
authorities.
(6) The provisions of this Section do not prohibit the
Commission from handing over restricted access information to a
regulated market operator, the central securities depository, and
authorities ensuring the clearing and settlement of transactions
with financial instruments in Member States, if the Commission
considers that the handing over of such information is necessary
to ensure appropriate action by these institutions where
participants in an account fail to fulfil their obligations or
there are reasonable grounds for concluding that they will not
fulfil their obligations.
(7) The provisions of this Section do not prohibit the
Commission to publish information on sanctions which have been
imposed on persons while supervising conformity with the
requirements of Articles 4, 5, 7, 8, 9, 10, and 11 of Regulation
No 648/2014, unless disclosure of such information would
seriously jeopardise the financial and capital market or cause
incommensurate damage to the persons involved.
[4 October 2007; 22 March 2012; 8 November 2012; 24 April
2014; 14 September 2017; 21 June 2018]
Section 147. Obligation of the
Commission to Provide Information to the European Commission, the
European Securities and Markets Authority, and the European
Banking Authority
(1) The Commission shall notify the European Commission
of:
1) any issue of a licence for the provision of investment
services and ancillary investment services to an investment
brokerage company which is a subsidiary of a company registered
in a foreign country;
2) cases where an investment brokerage company registered in
the Republic of Latvia becomes a subsidiary of a company
registered in a foreign country by acquiring a qualifying
holding;
3) share buy-back offers which are made for target companies
the shares of which are put on public circulation in Latvia.
(2) In the cases referred to in Paragraph one, Clauses 1 and 2
of this Section, the Commission shall send to the European
Commission any information also on the structure of such group
which includes the relevant investment brokerage company.
(3) The Commission shall inform the European Commission, and
also other Member States of those financial statements for
interim periods which a capital company the shares of which are
admitted to trading on a regulated market prepares and
disseminates in accordance with the procedures laid down in this
Law, and of application of the requirements of Section 62,
Paragraph four of this Law.
(4) The Commission shall notify the European Commission and
the European Securities and Markets Authority of:
1) the cases referred to in Section 64.3, Paragraph
three of this Law;
2) the activities which have been carried out thereby in
accordance with Section 40.1, Paragraph two and
Section 140, Paragraphs two and five of this Law;
3) the cases when it, in accordance with that laid down in
Section 63, Paragraph one of this Law, recognises as equivalent
such information which an issuer, the registered address of which
is in a foreign country, provides in accordance with the
requirements of the legal acts of his or her country;
4) any general difficulties in providing investment services
or commencing the provision of investment services in foreign
country faced by investment brokerage companies which have
received the licence for the provision of investment services or
ancillary investment services from the Commission.
(5) The Commission shall notify the European Securities and
Markets Authority of:
1) issuing a licence for an investment brokerage company for
the provision of investment services or ancillary investment
services in the Republic of Latvia, indicating such type of
investment service or ancillary investment service for the
provision of which the investment brokerage company has received
a licence, and also regarding cancellation of the licence or
change of the investment services and ancillary investment
services laid down in the licence;
2) contracts on exchange of information which the Commission
has entered into with the supervisory authorities of foreign
financial instruments markets, other authorities or legal
persons;
3) restrictive measures and sanctions which the Commission has
imposed on market participants for violations of the norms of
this Law. If the Commission publishes information on a
restrictive measure or sanction imposed on a market participant,
it shall, without delay, inform the European Securities and
Markets Authority thereof. Once a year the Commission shall send
a summary to this authority on all restrictive measures and
sanctions imposed on market participants within a year;
4) any other facts which are necessary for the European
Securities and Markets Authority for the fulfilment of the
obligations.
(6) The Commission has the right to inform the European
Securities and Markets Authority of the cases when the
supervisory authority of another Member State fails to provide
information after motivated request of the Commission or does not
provide information within a relevant (reasonable) time period,
or, regardless of the request of the Commission, refuses the
possibility for the Commission to carry out examination in the
territory of such Member State or for the authorised
representatives of the Commission to participate in examination,
or fails to reply to such request within a relevant (reasonable)
time period.
(7) The Commission shall inform the European Banking Authority
of any decisions taken with regard to the violations referred to
in Section 148, Paragraph fifteen of this Law and the course of
appeal procedure thereof.
(8) The Commission shall inform the European Commission, the
European Banking Authority, and the European Securities and
Markets Authority of any laws and regulations governing
establishment and activities of investment brokerage companies in
the Republic of Latvia.
[22 March 2012; 24 April 2014; 21 June 2018; 12 December
2019]
Division
G1
Registration and Supervision of External
Credit Assessment Institutions (Rating Agencies)
[13 January 2011]
Section 147.1 Rights and
Obligations of the Commission
(1) [8 November 2012]
(2) The Commission shall supervise the use of credit ratings
by the subjects referred to in Article 4(1) of the Regulation No
1060/2009 which use credit ratings for regulatory purposes in
accordance with this Regulation, and also in accordance with the
provisions of the Financial Instrument Market Law.
(3) An External Credit Assessment Institution (rating agency)
shall be regarded as a participant to the financial and capital
market within the meaning of the Law on Financial and Capital
Market Commission, and the norms of the Law on the Financial and
Capital Market Commission governing the activities of the
participants to the financial and capital market shall apply to
it. The regulatory provisions of the Commission issued in
accordance with this Law and Regulation No 1060/2009 shall be
binding to an External Credit Assessment Institution (rating
agency).
[8 November 2012]
Section 147.2 Issuing and
Appeal of Administrative Acts of the Commission
(1) The Commission shall issue administrative acts in
accordance with Section 4, Paragraph one of this Law in the cases
laid down in the law and in Regulation No 1060/2009.
(2) An administrative act issued in accordance with Paragraph
one of this Law may be appealed in accordance with the procedures
laid down in Section 4, Paragraph two of this Law.
Section 147.3 Payments
for Funding the Activities of the Commission
(1) The Commission shall receive funding for the registration
and supervision of External Credit Assessment Institutions
(rating agencies) to the extent and in accordance with the
procedures laid down in Regulation No 1060/2009.
(2) An investment brokerage company shall pay the Commission
for funding its activities an amount of up to 1 per cent of the
quarterly average gross income from transactions of an investment
brokerage company but not less than EUR 2845 per year.
(3) A regulated market operator shall pay the Commission for
funding its activities an amount of up to 2 per cent of the
quarterly average gross income from transactions thereof but not
less than EUR 7114 per year.
(4) The central securities depository shall pay the Commission
for funding its activities an amount of up to 2 per cent
(inclusive) of the quarterly average gross income from
transactions of the central securities depository but not less
than EUR 7114 per year.
(5) The Commission shall issue regulatory provisions for the
procedures for calculating the payments referred to in Paragraphs
two, three, and four of this Section and the submission of
reports.
(6) The payments referred to in Paragraphs two, three, and
four of this Section shall be made by the thirtieth day of the
month following the relevant quarter.
(7) If the payments referred to in Paragraphs two, three, and
four of this Section are transferred with delay or not in full
amount, late payment charge in the amount of 0.05 per cent of the
unpaid amount shall be calculated for each delayed day.
(8) The payments referred to in this Section shall be
transferred to the account of the Commission in Latvijas
Banka.
[24 April 2014; 14 September 2017]
Division
G2
Supervision of the Requirements of Law and
Regulations
[8 November 2012; 21 June
2018]
Section 147.4 Rights of
the Commission in the Supervision of Transactions with Short
Selling and Credit Default Swaps
While supervising conformity with the requirements of
Regulation No 236/2012, the Commission has the following rights
in addition to the rights laid down in the Law on the Financial
and Capital Market Commission:
1) to request a person to cease any activities which are in
contradiction with the requirements of Regulation No
236/2012;
2) to request from credit institutions and investment
brokerage companies that assets are frozen or sequestrated in
respect of a person who is carrying out activities which are in
contradiction with the requirements of Regulation No
236/2012.
[21 June 2018]
Section 147.5 Rights of
the Commission in Supervision of the Requirements of Regulation
No 2016/1011
While supervising the execution of the requirements of
Regulation No 2016/1011, the Commission has the right, in
addition to the rights specified in the Law on the Financial and
Capital Market Commission, to implement one or several
supervisory activities and examination referred to in Article
41(1) of Regulation No 2016/1011 directly or in cooperation with
other institutions.
[21 June 2018]
Division
G3
Reporting on Potential and Actual
Violations
[12 December 2019]
Section 147.6 Potential
and Actual Violations
(1) The financial instrument market participants referred to
in Section 147.7, Paragraph one of this Law shall
ensure the receipt and examination of reports on the following
potential and actual violations:
1) in provision of data reporting services;
2) in provision of investment services and ancillary
investment services;
3) in operation of a regulated market operator;
4) for the violations of the requirements laid down in Chapter
XII.4 of this Law;
5) for the violations of Regulation No 575/2013;
6) for the violations of Regulation No 596/2014;
7) for the violations of Regulation No 600/2014;
8) for the violations of Regulation No 909/2014;
9) for the violations of Regulation No 1286/2014;
10) for the violations of Articles 4 and 15 of Regulation No
2015/2365;
11) for other violations of this Law.
(2) The Commission shall establish and maintain a safe
reporting system on potential and actual violations referred to
in Paragraph one of this Section regarding which any person may
report to the Commission.
(3) The procedures by which reports on the violations referred
to in Paragraph one of this Section are submitted to the
Commission, and also received and examined thereby shall be
determined by the regulatory provisions of the Commission.
[12 December 2019]
Section 147.7 Internal
Reporting Line of Financial Instrument Market Participants
(1) A credit institution and a branch of a foreign credit
institution, an investment brokerage company and a branch of a
foreign investment brokerage company, the central securities
depository, a regulated market operator, and a data reporting
services provider shall, according to the field of their
operation, develop a procedure by which an independent and
dedicated internal line for reporting on violations is
established, ensuring that employees of a financial instrument
market participant may report on the violations referred to in
Section 147.6, Paragraph one of this Law.
(2) The procedure developed by the financial instrument market
participants referred to in Paragraph one of this Section in
relation to the establishment of an internal line for reporting
on violations shall ensure conformity with the requirements laid
down in Section 147.8 of this Law.
[12 December 2019]
Section 147.8 Protection
of Persons
(1) In accordance with the laws and regulations regarding
personal data protection, the system established by the
Commission for reporting on violations shall ensure personal data
protection of such person who is reporting on the violation, and
also personal data protection of such natural person regarding
whom there are suspicions that he or she has committed the
violation.
(2) The Commission shall ensure confidentiality for the person
who is reporting on the violation, and also for the person
regarding whom there are suspicions that he or she has committed
the violation, except for the case when disclosure of such
information is provided for by the laws and regulations of the
Republic of Latvia.
(3) Reporting which, in accordance with Section
147.6, Paragraph one and Section 147.7 of
this Law, is done by employees of a credit institution and a
branch of a foreign credit institution, an investment brokerage
company and a branch of a foreign investment brokerage company,
the central securities depository, a regulated market operator,
and a data reporting services provider shall not be considered as
a violation of the prohibition of disclosure of information
specified in an employment contract or another contract
equivalent thereto, or in any law or regulation, and the person
may not be held liable for such reporting.
(4) An employee of a credit institution and a branch of a
foreign credit institution, an investment brokerage company and a
branch of a foreign investment brokerage company, the central
securities depository, a regulated market operator, and a data
reporting services provider who is reporting on the violations
referred to in Section 147.6, Paragraph one of this
Law in the operation of his or her employer may not be subject to
discriminatory or other unjust actions due to the report
provided.
[12 December 2019]
Section 147.9 Elimination
of a Violation of the Prohibition to Cause Adverse
Consequences
If the prohibition specified in Section 147.8,
Paragraph four of this Law is not conformed to and adverse
consequences are caused to a person due to the information
provided thereby on the violations referred to in Section
147.6, Paragraph one of this Law, such adverse
consequences shall be eliminated in accordance with that
specified in the relevant laws and regulations.
[12 December 2019]
Division
H
Liability for Violations of the Laws and Regulations Governing
Financial Instrument Market
[9 June 2005]
Section 148. Liability
(1) In accordance with Article 38 of Regulation No 2017/1129,
for the violations specified in Article 38(1)(a) of the
Regulation, the Commission is entitled to impose the following
sanctions and supervisory measures:
1) to make a public notice which indicates the natural or
legal person who is responsible for the violation and informing
of the nature of the violation;
2) to request that the person who is responsible for the
violation ceases the relevant activity without delay and refrains
from repeating such activity henceforth;
3) to impose a fine of up to double amount of the income
gained as a result of the violation or potential losses avoided
if the profit gained as a result of the violation or potential
losses avoided can be determined;
4) to impose a fine on a legal person of up to EUR 5 000 000
or up to three per cent of the total annual turnover according to
the last available audited annual statement of the abovementioned
legal person. If the legal person is a parent undertaking or a
subsidiary of a parent undertaking which prepares consolidated
financial statements in accordance with the Law on the Annual
Financial Statements and Consolidated Financial Statements or
consolidated financial statements in accordance with the
requirements of the relevant legal acts of the home Member State,
the total turnover shall be formed by the total annual turnover
or income of corresponding type in accordance with the relevant
legal acts of the home Member State in the field of accounting,
taking into account the last available consolidated financial
statement which has been approved by the main management body of
the parent undertaking;
5) to impose a fine of up to EUR 700 000 on a natural
person.
(2) The Commission has the right to issue a warning or impose
a fine of up to EUR 14 200 on an issuer or person seeking
admission of financial instruments to trading on a regulated
market for dissemination of false or misleading regulated
information.
(3) [26 May 2016 / See Paragraph 55 of Transitional
Provisions]
(4) If a person who has an obligation to make a mandatory
share buy-back offer in accordance with the provisions of Section
66 of this Law fails to make it in accordance with specific
procedures, the Commission has the right to impose a fine of up
to EUR 700 000 on the person.
(5) The Commission has the right to issue a warning or impose
a fine of up to EUR 14 200 on the person who violated this Law
and the laws and regulations issued in accordance with it.
(6) [8 November 2012]
(7) [26 May 2016 / See Paragraph 55 of Transitional
Provisions]
(71) The Commission has the right to issue a
warning or impose a fine of up to EUR 14 200 on an issuer for
failing to prepare a notification on corporate governance in
accordance with the requirements of Section 56.2 of
this Law or failing to publish it in accordance with the
procedures laid down in Section 56.2 of this Law.
(8) For the violations of the provisions of this Law governing
the operation of an investment brokerage company, a credit
institution, a regulated market operator, a data reporting
services provider, a branch of a foreign investment brokerage
company, and also of the provisions of Chapter XII.4
of this Law, Regulation No 600/2014, and the regulatory
provisions issued and decisions taken by the Commission, the
Commission has the right:
1) to issue a warning;
2) to make a public notice which indicates the natural or
legal person who is responsible for the violation and the nature
of the violation;
3) to request that the natural or legal person who is
responsible for the violation ceases the relevant activity
without delay;
4) to impose a temporary prohibition on a member of the board
or council of an investment brokerage company, a credit
institution, a regulated market operator, a data reporting
service provider or another natural person responsible for the
violation to fulfil the duties specified for him or her;
5) to impose a temporary prohibition of activity on a member
or employee of a regulated market or MT facility or a client of
the OT facility;
6) to impose a fine on a legal person of up to EUR 5 000 000
or up to 10 per cent from the total turnover of the previous
financial year according to the approved annual statement of the
previous financial year. If the legal person is a subsidiary of a
parent undertaking or a branch of such subsidiary which prepares
a consolidated financial statement in accordance with the Law on
Annual Statements and Consolidated Annual Statements, the total
turnover shall be formed by the total turnover of the previous
financial year or of the income of corresponding type on the
basis of the data presented by the ultimate parent undertaking in
consolidated financial statements for the previous financial
year;
7) to impose a fine of up to EUR 5 000 000 on the official,
employee, or person who at the time of committing the violation
is responsible for carrying out a certain activity on behalf or
in the interests of the investment brokerage company or credit
institution;
8) to impose a fine on the persons referred to in Clauses 6
and 7 of this Paragraph of up to double amount of the income
gained as a result of the violation or potential losses
avoided.
(81) The Commission is entitled to impose the
sanctions provided for in Paragraph eight of this Section also
if:
1) investment services, activity of the regulated market
operator, and data reporting services are provided or the
activity specified in Chapter XII.4 of this Law is
performed without the relevant licence or permit;
2) the supervisory activities specified in Section 138,
Paragraph one of this Law applied by the Commission are not being
conformed to.
(9) [21 June 2018]
(10) For the failure to comply with the requirements of
Division G.1of this Law, the Commission has the right
to issue a warning or impose a fine from EUR 1400 to EUR 142 300
on the person who has violated laws and regulations.
(11) The Commission is entitled to impose a fine from EUR 1440
to EUR 14 200, if a person has acquired or increased major
holding in a regulated market operator or an investment brokerage
company prior to submitting the notification referred to in
Section 9, Paragraph one or two of this Law or during its
examination.
(12) [24 April 2014]
(13) If a participant to the financial instrument market or
another person referred to in Section 4.1, Paragraphs
three and four of this Law fails to meet the requirements of
Section 4.1 of this Law, the Commission has the right
to issue a warning or impose a fine of up to EUR 14 200 on such
person.
(14) If a participant of a financial instrument market or any
other person bound by the directly applicable legal acts issued
by the European Union authorities in the field of the financial
instrument market (unless it has been laid down otherwise in this
Law) fails to conform to them, the Commission has the right to
issue a warning or impose a fine on the relevant person. The fine
imposed on legal persons shall not exceed EUR 142 300, but on
natural persons - EUR 57 000.
(15) If an investment brokerage company does not comply with
the requirements laid down in Section 122.2 and
Section 124, Paragraph one, Clause 11 of this Law, Section
35.26, 35.27, or 35.28 of the
Credit Institution Law or Article 28, 52, or 63 of Regulation No
575/2013 with regard to the payments to holders of instruments
included in own funds, the requirements of Article 99(1), 101,
394(1), 395, 405, 415(1) and (2), 430(1), 431(1), (2), and (3),
or 451(1) of Regulation No 575/2013, systematically or
permanently does not conform to the requirements of Article 412
of Regulation No 575/2013, or also a member of the board or
council of an investment brokerage company does not meet the
requirements of Section 106.1 of this Law, the
Commission is entitled:
1) to make a public notice which indicates the natural or
legal person who is responsible for the violation and the nature
of the violation;
2) to request that an investment brokerage company or the
person who is responsible for the violation immediately ceases
the relevant practice;
3) to impose a temporary prohibition on a member of the board
or council of an investment brokerage company or on another
natural person who is responsible for the violation to fulfil the
duties specified for him or her duties in the investment
brokerage company;
4) to impose a fine on a legal person in the amount of up to
10 per cent of the net income from the previous financial year
that conforms to the amount which, in accordance with Regulation
No 575/2013, is used to calculate the own funds requirements for
operational risk according to the basic indicator approach. If 10
per cent of the net income from the previous financial year which
have been calculated in accordance with the first sentence of
this Clause are less than EUR 142 300, the Commission is entitled
to impose a fine not exceeding EUR 142 300. If a legal person is
a subsidiary of a parent undertaking, the net income from the
previous financial year shall conform to the amount which, in
accordance with Regulation No 575/2013, is used to calculate the
own funds requirements for operational risk according to the
basic indicator approach on the basis of the data presented by
the ultimate parent undertaking in consolidated financial
statements for the previous financial year;
5) to impose a fine of up to EUR 5 000 000 on the natural
person who is responsible for the violation;
6) to impose a fine of up to double amount of the income
gained as a result of the violation or potential losses
avoided.
(151) The Commission shall impose the sanctions
specified in the Law on the Prevention of Money Laundering and
Terrorism Financing for violations of the laws and regulations in
the field of the prevention of money laundering and terrorism
financing.
(16) If a person has not complied with the requirements of
Sections 54, 56, 56.3, 56.4, 57,
57.2, 57.3 or Chapter IV of this Law or has
not fulfilled the duty imposed thereon and has not notified,
according to specific procedures, of acquiring or losing major
holding in a joint stock company in accordance with the
requirements of Section 61 of this Law, the Commission is
entitled to impose one or several of the following sanctions:
1) to name in a public notice the natural or legal person who
is responsible for the violation and the nature of the
violation;
2) to request that the natural or legal person who is
responsible for the violation discontinues the relevant activity
without delay;
3) to impose a fine of the highest amount on the legal
person:
a) up to EUR 10 000 000 or up to five per cent of the total
turnover of the previous financial year according to the approved
annual statement of the previous financial year. If the legal
person is a subsidiary of a parent undertaking or a branch of
such subsidiary which prepares a consolidated financial statement
in accordance with the Law on Annual Statements and Consolidated
Annual Statements, the total turnover shall be formed by the
total turnover of the previous financial year or of the income of
corresponding type on the basis of the data presented by the
ultimate parent undertaking in consolidated financial statements
for the previous financial year;
b) up to double amount of the income gained or potential
losses avoided by the person the income obtained as a result of
violation or potential losses prevented can be determined;
4) to impose a fine of the largest amount on the natural
person:
a) up to EUR 2 000 000;
b) up to double amount of the income obtained or potential
losses prevented by the person if the income obtained as a result
of violation or potential losses prevented can be determined.
(17) If the person has not complied with the requirements of
Articles 14, 15, Article 16(1) or (2), Article 17 (1), (2), (4),
(5), or (8), Article 18(1), (2), (3), (4), (5), or (6), Article
19(1), (2), (3), (5), (6), (7), or (11), or Article 20(1) of
Regulation No 596/2014, the Commission is entitled to impose one
or several of the following sanctions or supervisory
measures:
1) to request that the natural or legal person who is
responsible for the violation discontinues the relevant activity
without delay;
2) to impose an obligation to reimburse the income obtained as
a result of the violation or potential losses prevented if they
can be determined;
3) to name in a public notice the natural or legal person who
is responsible for the violation and the nature of the
violation;
4) to temporarily suspend or cancel the licence issued to the
investment brokerage company for the provision of investment
services and ancillary investment services or to prohibit a
credit institution to provide investment services and ancillary
investment services;
5) to impose a temporary prohibition on a member of the board
or council of an investment brokerage company or credit
institution, or on another natural person who is responsible for
the violation to fulfil the duties specified for him or her in
the investment brokerage company or credit institution;
6) to remove a member of the board or council of an investment
brokerage company or credit institution from the office or to
prohibit another natural person who is responsible for the
violation to fulfil the duties specified for him or her in the
investment brokerage company, if the abovementioned persons have
repeatedly violated the requirements of Article 14 or 15 of
Regulation No 596/2014;
7) to impose a temporary prohibition on a member of the board
or council of an investment brokerage company or credit
institution or on another natural person who is responsible for
the violation to make transactions on its behalf;
8) to impose a fine of up to triple amount of the income
gained or potential losses avoided as a result of the violation
if the income gained as a result of the violation or potential
losses avoided can be determined;
9) to impose a fine on a natural person for the following in
relation to Regulation No 596/2014:
a) violations of the requirements of Article 14 or 15, up to
EUR 5 000 000;
b) violations of the requirements of Article 16 or 17, up to
EUR 1 000 000;
c) violations of the requirements of Article 18, 19, or 20, up
to EUR 500 000;
10) to impose a fine on a legal person for the following in
relation to Regulation No 596/2014:
a) violations of the requirements of Article 14 or 15 in the
amount of up to EUR 15 000 000 or up to 15 per cent of the total
turnover of the previous financial year according to the approved
annual statement of the previous financial year. If the legal
person is a subsidiary of a parent undertaking or a branch of
such subsidiary which prepares a consolidated financial statement
in accordance with the Law on Annual Statements and Consolidated
Annual Statements, the total turnover shall be formed by the
total turnover of the previous financial year or of the income of
corresponding type on the basis of the data presented by the
ultimate parent undertaking in consolidated financial statements
for the previous financial year;
b) violations of the requirements of Article 16 or 17, up to
EUR 2 500 000 or up to two per cent of the total turnover of the
previous financial year according to the approved annual
statement of the previous financial year. If the legal person is
a subsidiary of a parent undertaking or a branch of such
subsidiary which prepares a consolidated financial statement in
accordance with the Law on Annual Statements and Consolidated
Annual Statements, the total turnover shall be formed by the
total turnover of the previous financial year or of the income of
corresponding type on the basis of the data presented by the
ultimate parent undertaking in consolidated financial statements
for the previous financial year;
c) violations of the requirements of Article 18, 19, or 20, up
to EUR 1 000 000.
(18) If the person has not complied with the requirements of
Section 55.2, 55.3, 55.5,
55.6, 55.7, 55.8, or
55.11 of this Law, the Commission is entitled to
impose one or several of the following sanctions or supervisory
measures:
1) issue a warning;
2) publish a public notice on the website of the Commission
indicating the person who is responsible for the violation and
the nature of such violation;
3) require that the person who is responsible for the
violation immediately ceases the relevant activities;
4) impose a temporary prohibition on a member of the council
or board of the capital company who is responsible for the
relevant violation to fulfil the duties specified for him or her
in the capital company for a period of up to three years;
5) impose on the capital company a fine of up to 10 per cent
of the net turnover amount of the previous reporting year. If 10
per cent of the net turnover amount of the previous reporting
year is less than EUR 142 300, the Commission is entitled to
impose a fine of up to EUR 142 300;
6) impose a fine of up to one million euros on the natural
person who is responsible for the violation.
(19) The Commission is entitled to, in accordance with Article
24 of Regulation No 1286/2014, apply the following sanctions and
supervisory measures for the violations of this Regulation:
1) to express a warning in which the responsible person and
the nature of the violation are indicated;
2) to prohibit the distribution of packaged private investment
products;
3) to impose the obligation to temporarily suspend the
distribution of packaged private investment products;
4) to prohibit the provision of a key information document
which does not conform to the requirements of Article 6, 7, 8, or
10 of Regulation No 1286/2014, and to give an order to publish a
new key information document conforming to this Regulation;
5) impose a fine on a legal person of up to EUR 5 000 000 or
up to three per cent from the total annual turnover according to
the last available audited annual statement of the respective
legal person. If the legal person is a parent undertaking or a
subsidiary of a parent undertaking which prepares consolidated
financial statements in accordance with the Law on the Annual
Financial Statements and Consolidated Financial Statements or
consolidated financial statements in accordance with the
requirements of the relevant legal acts of the home Member State,
the relevant total turnover shall be formed by the total annual
turnover or income of corresponding type in accordance with the
relevant legal acts of the home Member State in the field of
accounting taking into account the last available consolidated
financial statement which has been approved by the main
management body of the parent undertaking;
6) to impose a fine of up to EUR 700 000 on the natural person
who is responsible for the violation;
7) as an alternative to that laid down in Clause 5 or 6 of
this Paragraph to impose a fine of up to double amount of the
income gained as result of the violation or of the prevented
possible loss;
8) to impose on the person who is the creator of a packaged
private investment product or provides consultations thereon, or
sells it the obligation to inform its retail client whose rights
and interests have been infringed of the sanction or supervisory
measure imposed and also of where the client may submit a
complaint or where he or she can go in order to initiate
extrajudicial settlement of disputes, and also of his or her
rights to bring a claim to a court.
(20) The Commission is entitled, in accordance with Article 63
of Regulation No 909/2014, to impose the following sanctions and
supervisory measures for the violations referred to in Article
63(1) of the Regulation:
1) to make a public notice which indicates the natural or
legal person who is responsible for the violation and the nature
of the violation;
2) to request that the central securities depository or the
person who is responsible for the violation ceases the relevant
activity without delay and refrains from repeating such activity
henceforth;
3) to impose a temporary prohibition or, for repeated
substantial violations, a permanent prohibition on a member of
the board or council of the central securities depository or on
another natural person who is responsible for the violation to
fulfil the duties specified for him or her in the central
securities depository;
4) to cancel permits granted in accordance with Article 16 or
54 of Regulation No 909/2014;
5) impose a fine on a legal person of up to EUR 20 000 000 or
up to 10 per cent from the total annual turnover according to the
last available audited annual statement of the respective legal
person. If the legal person is a parent undertaking or a
subsidiary of a parent undertaking which prepares consolidated
financial statements in accordance with the Law on the Annual
Financial Statements and Consolidated Financial Statements or
consolidated financial statements in accordance with the
requirements of the relevant legal acts of the home Member State,
the relevant total turnover shall be formed by the total annual
turnover or income of corresponding type in accordance with the
relevant legal acts of the home Member State in the field of
accounting taking into account the last available consolidated
financial statement which has been approved by the main
management body of the parent undertaking;
6) to impose a fine of up to EUR 5 000 000 on the natural
person who is responsible for the violation;
7) as an alternative to that laid down in Clause 5 or 6 of
this Paragraph to impose a fine of up to double amount of the
income gained or potential losses avoided as a result of the
violation.
(21) The Commission is entitled, in accordance with Article 22
of Regulation No 2015/2365, to impose the following sanctions and
supervisory measures for the violations referred to in Articles 4
and 15 of the Regulation:
1) to request that the person who is responsible for the
violation ceases the relevant activity without delay and refrains
from repeating such activity henceforth;
2) to make a public notice which indicates the natural or
legal person who is responsible for the violation and the nature
of the violation;
3) to temporarily suspend or cancel the licence for the person
who is responsible for the violation;
4) to impose a temporary prohibition on the member of the
board of the person who is responsible for the violation or on
another natural person who is responsible for the violation to
fulfil the duties specified for him or her;
5) to impose a fine of up to EUR 5 000 000 on the natural
person who is responsible for the violation;
6) to impose the following on the legal person who is
responsible for the violation:
a) for the violations of Article 4 of Regulation No 2015/2365
- a fine of up to EUR 5 000 000 or up to 10 per cent from the
total annual turnover according to the last available audited
annual statement of the abovementioned legal person. If the legal
person is a parent undertaking or a subsidiary of a parent
undertaking which prepares consolidated financial statements in
accordance with the Law on the Annual Financial Statements and
Consolidated Financial Statements or consolidated financial
statements in accordance with the requirements of the relevant
legal acts of the home Member State, the relevant total turnover
shall be formed by the total annual turnover or income of
corresponding type in accordance with the relevant legal acts of
the home Member State in the field of accounting taking into
account the last available consolidated financial statement which
has been approved by the main management body of the parent
undertaking;
b) violations of Article 15 of Regulation No 2015/2365 - a
fine of up to EUR 15 000 000 or up to 10 per cent from the total
annual turnover according to the last available audited annual
statement of the abovementioned legal person. If the legal person
is a parent undertaking or a subsidiary of a parent undertaking
which prepares consolidated financial statements in accordance
with the Law on the Annual Financial Statements and Consolidated
Financial Statements or consolidated financial statements in
accordance with the requirements of the relevant legal acts of
the home Member State, the relevant total turnover shall be
formed by the total annual turnover or income of corresponding
type in accordance with the relevant legal acts of the home
Member State in the field of accounting taking into account the
last available consolidated financial statement which has been
approved by the main management body of the parent
undertaking;
7) to impose a fine of up to triple amount of the income
gained or potential losses avoided as a result of the violation,
even if the amount of the imposed fine exceeds the amounts
referred to in Clause 5 or 6 of this Paragraph.
(22) If a person has not conformed to the requirements of
Article 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 21, 23, 24,
25, 26, 27, 28, 29, or 34 of Regulation No 2016/1011, and also if
a person is not cooperating or refuses to cooperate in the
process of examination conducted by the Commission in accordance
with Section 147.5 of this Law, the Commission is
entitled to impose one or several of the following sanctions or
supervisory measures:
1) to request that the administrator who is responsible for
the violation within the meaning of Regulation No 2016/1011
(hereinafter in this Part - the administrator) or the supervised
unit terminates the relevant activity without delay;
2) to impose a duty on the person who is responsible for the
violation to reimburse the income gained or potential losses
avoided as a result of the violation, if it is possible to
determine them;
3) to indicate in a public notification the administrator who
is responsible for the violation or the supervised unit and the
nature of the violation;
4) to temporarily suspend or cancel the permit or registration
granted to the administrator;
5) to impose a temporary prohibition on the natural person who
is responsible for the violation to fulfil the duties specified
for him or her in the administrator or the supervised data
provider;
6) to impose a fine on the person who is responsible for the
violation up to triple amount of the income gained or potential
losses avoided as a result of the violation, if it possible to
determine the income gained or potential losses avoided as a
result of violation;
7) to impose a fine on a natural person for the following in
relation to Regulation No 2016/1011:
a) violations of Articles 4, 5, 6, 7, 8, 9, 10, Article
11(1)(a), (b), (c), and (e), (2), and (3), Article 12, 13, 14,
15, 16, 21, 23, 24, 25, 26, 27, 28, 29, or 34, up to EUR 500
000;
b) violations of Article 11(1)(d) or (4), up to EUR 100
00;
8) to impose a fine on a legal person for the following in
relation to Regulation No 2016/1011:
a) violations of Articles 4, 5, 6, 7, 8, 9, 10, Article
11(1)(a), (b), (c), and (e), (2), and (3), Article 12, 13, 14,
15, 16, 21, 23, 24, 25, 26, 27, 28, 29, or 34, up to EUR 1 000
000 or up to 10 per cent from the total turnover of the previous
financial year according to the approved annual statement of the
previous financial year. If the legal person is a subsidiary of a
parent undertaking or a branch of such subsidiary which prepares
a consolidated financial statement in accordance with the Law on
Annual Statements and Consolidated Annual Statements, the total
turnover shall be formed by the total turnover in the previous
financial year or the income of the corresponding type on the
basis of the data presented by the ultimate parent undertaking in
consolidated financial statements for the previous financial
year;
b) violations of of Article 11(1)(d) or (4), up to EUR 250 00
or up to two per cent from the total turnover of the previous
financial year according to the approved annual statement for the
previous financial year. If the legal person is a subsidiary of a
parent undertaking or a branch of such subsidiary which prepares
a consolidated financial statement in accordance with the Law on
Annual Statements and Consolidated Annual Statements, the total
turnover shall be formed by the total turnover in the previous
financial year or the income of the corresponding type on the
basis of the data presented by the ultimate parent undertaking in
consolidated financial statements for the previous financial
year.
[29 March 2007; 4 October 2007; 22 May 2008; 13 January
2011; 22 March 2012; 8 November 2012; 19 September 2013; 24 April
2014; 26 May 2016; 15 December 2016; 21 September 2017; 14
September 2017; 26 October 2017; 21 June 2018; 12 December
2019]
Section 149. Collecting of Fines
The fines collected for the violations laid down in Section
148 of this Law shall be paid into the State budget.
Section 150. Disclosure of Sanctions
and Supervisory Measures
(1) The Commission shall publish information on sanctions and
the activities referred to in Section 138 of this Law applied to
persons for the violations referred to in Section 148 of this Law
on its website, indicating information on the person and the
violation committed thereby, and also on contesting of the
administrative act issued thereby and the ruling given.
(2) If, after prior assessment, the Commission finds that the
disclosure of data of such person on whom a sanction or
supervisory measure has been imposed is not commensurate or the
disclosure of such data can endanger the stability of the
financial market, examination of the relevant administrative
case, or the course of the commenced criminal proceedings, the
Commission is entitled to take one of the following
activities:
1) to postpone the disclosure of the information on the
sanctions or supervisory measures imposed on the person until the
circumstances for postponing the publication cease to exist;
2) to disclose the information referred to in Paragraph one of
this Section without identifying the person if the publication
ensures efficient protection of personal data;
3) not to disclose the information referred to in Paragraph
one of this Section, if the activities specified in Clauses 1 and
2 of this Paragraph are considered to be insufficient to ensure
the stability of the financial market and that disclosure is
commensurate to the supervisory measures imposed if they are
considered to be insignificant.
(21) The Commission has the right not to disclose
the information referred to Paragraph one of this Section on the
sanctions and supervisory measures specified in Section 148,
Paragraphs seventeen, eighteen, nineteen, twenty, and twenty-one
of this Law, if it finds after of prior assessment that
disclosure would endanger the stability of the financial market
or disclosure of such information is not commensurate with the
violation committed.
(22) The Commission shall publish information on
sanctions and supervisory measures imposed for the violations of
Regulation No 596/2014 in accordance with the provisions of this
Regulation.
(3) In the case specified in Paragraph two, Clause 2 of this
Section, the disclosure of information may be postponed for a
reasonable period of time, if it is expected that the basis for
disclosure will cease to exist within that period without
identifying the person.
(4) The information published on the website of the Commission
in accordance with the procedures laid down in this Section on
the violations referred to in Section 148, Paragraphs one, eight,
fifteen, seventeen, eighteen, nineteen, twenty, and twenty-one of
this Law shall be available for five years from the day of their
publishing.
(5) The Commission shall inform the European Banking Authority
of any sanctions imposed for the violations referred to in
Section 148, Paragraph fifteen of this Law.
(6) The Commission shall, within five working days from the
day of taking the decision, inform the Ministry of Finance of the
sanctions and supervisory measures imposed for the violations
referred to in Section 148, Paragraph eighteen of this Law.
(7) The Commission shall inform the European Supervisory
Authority of the sanctions and supervisory measures imposed for
the violations referred to in Section 148, Paragraph nineteen of
this Law.
(8) The Commission shall, once a year, inform the European
Securities and Markets Authority of the sanctions and supervisory
measures imposed for the violations referred to in Section 148,
Paragraphs twenty and twenty-one of this Law.
(9) The Commission shall inform the European Securities and
Markets Authority of the sanctions and supervisory measures
imposed on the persons referred to in Section 148, Paragraph
eight of this Law, but not disclosed in accordance with Paragraph
two, Clause 3 of this Section, including of appeal of the
relevant administrative act and the result thereof, and also the
sanctions and supervisory measures imposed and disclosed. The
Commission shall, once a year, provide the European Securities
and Markets Authority with aggregated information on all the
sanctions and supervisory measures imposed on persons in
accordance with Section 148, Paragraph eight of this Law.
(10) The procedure by which the information referred to in
Paragraph nine of this Section shall be provided shall be
determined by Commission Implementing Regulation (EU) 2017/1111
of 22 June 2017 laying down implementing technical standards with
regard to procedures and forms for submitting information on
sanctions and measures in accordance with Directive 2014/65/EU of
the European Parliament and of the Council.
[24 April 2014; 11 June 2015; 26 May 2016; 15 December
2016; 21 September 2017; 21 June 2018; 20 June 2019]
Division
I
Special Provisions for the Renewal of Activities of an Investment
Brokerage Company and Resolution, Insolvency, and Liquidation
Thereof
[24 April 2014; 11 June
2015]
Section 151. Handling Funds of
Clients
(1) The liquidator or administrator of an investment brokerage
company shall invite the clients of the investment brokerage
company to receive the funds held by this liquidator or
administrator and agree upon the procedures for the receipt
thereof. The liquidator or administrator of the investment
brokerage company shall send a written notification to each
client, and also publish it in the mass media and the official
publication Latvijas Vēstnesis.
(2) Funds that are not withdrawn by the clients of an
investment brokerage company shall be deposited by the liquidator
or an administrator of the investment brokerage company with a
credit institution registered in the Republic of Latvia and
selected at his or her own discretion by concluding a written
agreement. The liquidator or administrator of the investment
brokerage company shall immediately send a written notification
on depositing funds with credit institution to each client, and
also publish it in the mass media and the official publication
Latvijas Vēstnesis.
(3) Fee for the custody of the funds of clients of an
investment brokerage company deposited with a credit institution
shall be deducted in accordance with the price list of the credit
institution from the amount of funds due to the clients.
(4) If a client of an investment brokerage company has not
withdrawn his or her funds within ten years from the moment the
funds were deposited with a credit institution, the client shall
lose the right to claim them. The funds due to the clients of the
investment brokerage company and with regard to which
prescription period has set in shall be transferred to the State
as vacant property.
(5) Upon conclusion of a custody agreement with a credit
institution, the liquidator or administrator of an investment
brokerage company shall submit information to the Commission on
the credit institution with which the funds have been deposited
and a list of clients of the investment brokerage company,
indicating identification data of each client and amount of money
due to each of the clients.
(6) Upon complete expiration of liabilities of the liquidator
or administrator of an investment brokerage company towards the
clients of the investment brokerage company, the liquidator or
administrator shall submit information to the Commission on the
fact of expiration of liabilities.
Section 152. Handling Financial
Instruments of Clients
(1) The liquidator or administrator of an investment brokerage
company shall invite the clients of the investment brokerage
company to receive the financial instruments held by this
liquidator or administrator and agree with them on the procedures
for their receipt. The liquidator or administrator of the
investment brokerage company shall send a written notification to
each client, and also publish it in the mass media and the
official publication Latvijas Vēstnesis.
(2) The financial instruments that are not withdrawn by the
clients of an investment brokerage company may be transferred for
holding by the liquidator or an administrator of the investment
brokerage company to a credit institution registered in the
Republic of Latvia and selected at his or her own discretion or
another investment brokerage company by concluding a written
agreement. The liquidator or administrator of the investment
brokerage company shall send a written notification on the
deposit of the financial instruments with a credit institution or
another investment brokerage institution to each client, and also
publish it in the mass media and the official publication
Latvijas Vēstnesis.
(3) Fee for holding the financial instruments of clients of an
investment brokerage company deposited in a credit institution or
an investment brokerage company shall be deducted from the
clients of the investment brokerage company in accordance with a
price list of the credit institution or investment brokerage
company at the moment when they bring an action for receipt of
financial instruments and of the value of financial instruments
owned by them.
(4) If a client of an investment brokerage company has not
withdrawn his or her financial instruments within ten years from
the moment the financial instruments were deposited in a credit
institution or another investment brokerage company, the client
shall lose the right to claim them. The financial instruments due
to the clients of the investment brokerage company and as regards
to which prescription period has set in shall be transferred to
the State as vacant property.
(5) Upon conclusion of a transfer agreement with a credit
institution or another investment brokerage company, the
liquidator or administrator of an investment brokerage company
shall submit to the Commission information on the credit
institution or investment brokerage company to which the
financial instruments have been transferred for holding and the
list of clients of the investment brokerage company, indicating
identification data of each client and identification and number
of the financial instruments due for each of the clients.
(6) The financial instruments owned by clients of an
investment brokerage company for the transfer of which into
holding of a credit institution or another investment brokerage
company the liquidator or administrator of the investment
brokerage company has not concluded an agreement may be disposed
by the liquidator or administrator in a public auction. The
liquidator or administrator of the investment brokerage company
shall organise the auction and draw up its regulations.
(7) Upon disposal of financial instruments at an auction, the
liquidator or administrator of an investment brokerage company
shall invite the clients of the investment brokerage company to
enter claims for the disbursement of funds in accordance with the
procedures for handling the funds of clients laid down in Section
151 of this Law.
(8) After complete expiration of liabilities of the liquidator
or administrator of an investment brokerage company towards
clients of the investment brokerage company, the liquidator or
administrator shall submit information to the Commission on the
fact of expiration of liabilities.
Section 153. Legal Framework for the
Recovery of Activities and Resolution, Insolvency, and
Liquidation of Investment Brokerage Companies
(1) The provisions of this Law for the recovery of activities
and resolution of an investment brokerage company shall be
applicable insofar as the Law on Recovery of Activities and
Resolution of Credit Institutions and Investment Brokerage
Companies does not provide otherwise.
(2) The Commission is entitled to appoint an authorised person
for an investment brokerage company in the cases laid down in the
Law on Recovery of Activities and Resolution of Credit
Institutions and Investment Brokerage Companies. The provisions
of Chapter VII of the Credit Institution Law shall be applied to
the appointment of the authorised person and activities
thereof.
(3) The norms of the Commercial Law and the Insolvency Law
governing insolvency and liquidation shall be applied to an
investment brokerage company insofar as they are not in
contradiction with the norms of the Law on Recovery of Activities
and Resolution of Credit Institutions and Investment Brokerage
Companies.
(4) An insolvency application of the investment brokerage
company shall be submitted only with the consent of the
Commission.
(5) A court may initiate insolvency proceedings against the
investment brokerage company in respect of which the Commission
has taken the decision on further actions in accordance with the
procedures laid down in the Law on Recovery of Activities and
Resolution of Credit Institutions and Investment Brokerage
Companies only on the basis of the application of the
Commission.
(6) Upon receipt of the insolvency application of the
investment brokerage company, the court shall inform the
Commission thereof without delay regardless of whether the
resolution is applied to the investment brokerage company or the
decision is published in accordance with the procedures laid down
in the Law on Recovery of Activities and Resolution of Credit
Institutions and Investment Brokerage Companies.
(7) Upon fulfilling the information obligation laid down in
Paragraph seven of this Section, the court may examine an
insolvency application if the Commission has notified the court
that it does not plan to take resolution activities in respect of
the investment brokerage company, or it has not provided any
reply to the court within seven days.
(8) If the Commission has, upon receipt of the information
laid down in Paragraph six of this Section, notified a court that
the investment brokerage company conforms to the resolution
provisions and that it plans to take resolution activities in
respect of the investment brokerage company, the court shall give
a ruling to reject the insolvency application.
[11 June 2015]
Section 154. Special Procedures for
Covering the Creditors' Claims
(1) The funds remaining after covering the expenses of
insolvency proceedings or liquidation of the investment brokerage
company shall be distributed, for the satisfaction of the
principal sums (without interest) of the creditors' claims
according to the following procedures:
1) disbursements to investors to whom compensation is to be
disbursed in accordance with the Investor Protection Law.
Disbursements shall be determined in the amount of compensation
provided for in the Investor Protection Law. If the investor has
received the compensation, he or she shall lose the right of
claim as regards the amount received, and the relevant claim
shall be treated as claims of this group. The calculation
submitted by the Commission to a liquidator or administrator for
the disbursements made to investors in the amount of disbursed
compensations shall be regarded as the creditor's claim that has
to be satisfied as a priority before other claims of non-secured
creditors;
2) after the disbursements referred to in Paragraph one,
Clause 1 of this Section are covered completely - disbursements
to natural persons and micro-enterprises, small and medium-sized
enterprises (within the meaning of the Law on Recovery of
Activities and Resolution of Credit Institutions and Investment
Brokerage Companies) above the amount disbursed in the
compensation, except for disbursements for such investments which
have been made using a branch of an investment brokerage company
located outside the European Union.
(2) If the funds of the debtor are not sufficient to
completely satisfy all the creditors' claims referred to in
Paragraph one, Clause two of this Section, the relevant claims
shall be satisfied in proportion to the amount of the claim which
is due to other creditor.
(3) After the disbursements referred to in Paragraph one of
this Section are covered completely and creditors' claims, other
claims of non-secured creditors are covered in accordance with
the procedures for covering the creditors' claims laid down in
the Insolvency Law, including claims arising from an issued debt
security the initial maturity is at least one year according to
the prospectus, which is not considered a derivative, which does
not include a derivative, and in relation to which a lower
priority has been specified in the prospectus than for such
creditors' claims which are similar to those specified in
Paragraph one of this Section. An issued debt security with a
variable interest rate to be determined on the basis of the base
interest rate generally recognised in the financial market and an
issued debt security which is not expressed in the national
currency of the issuer, provided that the principal sum, sum to
be repaid, and the interest rate are expressed in the same
currency, shall not be considered such issued debt security in
which a derived financial instrument is included only due to the
indications referred to in this sentence.
(4) Creditors' claims for funds which have been loaned by
creditors to an investment brokerage company for a specific
period of time under the condition that they may be requested
early only in case of liquidation of the investment brokerage
company shall be covered after covering of the claims specified
in Paragraph three of this Section.
[11 June 2015; 28 February 2019]
Transitional
Provisions
1. With the coming into force of this Law, the law On
Securities (Latvijas Republikas Saeimas un Ministru Kabineta
Ziņotājs, 1995, No. 20; 1997, No. 14, 23; 1998, No. 22; 2000,
No. 6, 13; 2001, No. 12, 23) is repealed.
2. A person who has either directly or indirectly acquired a
holding in a joint stock company, the shares of which are
admitted to trading on a regulated market in an amount ensuring
at least 10 per cent of the number of shares with voting rights,
shall submit a notification to the meeting of shareholders at
which approval of the statement for the year 2003 shall be
decided upon. The notification shall include all of the
information referred to in Section 61, Paragraph six of this
Law.
3. Within one month after the meeting of shareholders at which
approval of the statement for the year 2003 was decided upon, the
joint stock company the shares of which are admitted to trading
on a regulated market shall publish in the official publication
Latvijas Vēstnesis list of those persons which have either
directly or indirectly acquired a holding in this joint stock
company. The publication shall specify how many per cent of the
number of shares with voting rights each person has acquired, and
also the extent of any indirectly acquired holding by each
person.
4. The meeting of shareholders of such joint stock company the
shares of which are put into public circulation until the day of
coming into force of this Law, but are not admitted to trading on
a regulated market, shall, not later than until 31 December 2005,
decide the issue on the admission of shares to trading on a
regulated market with simple majority of the votes of
participating shareholders. If, in voting on the issue regarding
admission of shares to trading on a regulated market, a
shareholder refrains, then it shall be regarded in such voting
that the shareholder has voted against admission of shares to
trading on a regulated market. If the meeting of shareholders
takes the decision not to admit shares to trading on a regulated
market, by counting together the votes given in favour and the
votes of those shareholders who refrain from voting, the
shareholders who have voted against and refrained from the voting
shall make the mandatory share buy-back offer in accordance with
the procedures laid down in this Law, complying with such
requirements which apply to the share buy-back cases laid down in
Section 66, Paragraph one, Clause 2 of this Law. If the meeting
of shareholders takes the decision to admit shares to trading on
a regulated market, the documents laid down in Section 48,
Paragraphs one and two of this Law shall be submitted to the
Commission not later than within three months counting from the
day of taking of the decision. In the issue regarding admission
of shares to trading on a regulated market, the meeting of
shareholders shall be considered competent to take decisions
regardless of the number of votes of participating shareholders.
The board of the joint stock company shall be responsible for
convening the meeting of shareholders.
[9 June 2005]
4.1 Such joint stock companies the shares of which
are put into public circulation until the day of coming into
force of this Law, but are not admitted to trading on a regulated
market, and which have taken the decision to admit the shares to
trading on a regulated market shall, until 31 December 2005,
submit the documents laid down in Section 48, Paragraphs one and
two of this Law to the Commission.
[9 June 2005]
4.2 For such joint stock companies the shares of
which are put into public circulation until the day of coming
into force of this Law, but are not admitted to trading on a
regulated market, and which are declared to be insolvent:
1) and are under restoration process, the meeting of
shareholders shall, not later than within three months after
completion of the restoration, decide on the admission of shares
to trading on a regulated market in accordance with the
procedures laid down in Paragraph 4 of these Transitional
Provisions;
2) and in respect of which bankruptcy procedure has been
initiated, the Commission shall take the decision to withdraw
shares from public circulation and cancel the issue
certificate.
[9 June 2005]
4.3 If the shares of a joint stock company are put
into public circulation until the day of coming into force of
this Law, but are not admitted to trading on a regulated market,
the shareholders of such company:
1) shall submit the notification laid down in Section 61 of
this Law to the Commission and joint stock company in accordance
with the procedures and time period laid down in Section 61;
2) shall make the mandatory share buy-back offer in accordance
with the procedures laid down in this Law in the case laid down
in Paragraph one, Clause 1 of Section 66.
[9 June 2005; 4 October 2007]
4.4 The joint stock companies the shares of which
are put into circulation until the day of coming into force of
this Law, but are not admitted to trading on a regulated market,
and the shareholders of such companies shall be liable for
violations of this Law in accordance with Section 148 of this
Law.
[9 June 2005]
5. The shareholders who, on the day of coming into force of
this Law, possess a qualifying holding in an investment brokerage
company shall, within 10 days, inform the Commission thereof in
accordance with the procedures laid down in this Law.
6. The provisions of Section 69, Paragraph four of this Law
also apply to those restrictions on disposal of shares specified
in Section 34 of the law On Joint Stock Companies if the joint
stock company has not re-registered with the Commercial Register
before the day of coming into force of this Law.
7. Within one month from the day of coming into force of this
Law, the Central Depository shall post on its website and also
publish in the newspaper Latvijas Vēstnesis the
regulations in force which are binding to the participants of the
Central Depository and ensure the performance of functions of the
Central Depository laid down in this Law.
8. Investment brokerage companies which have received licence
for the performance of intermediary activity from the Commission
shall, within six months from the day of coming into force of
this Law, re-register such licence with the Commission,
specifying in the submission for re-registration what investment
services and ancillary investment services they wish to
provide.
9. [9 June 2005]
10. Section 22, Section 25, Paragraphs four and five, Section
28, Paragraph four, Section 36, Paragraphs three and four,
Section 37, Paragraph seven, second sentence, Section 48,
Paragraph three, Section 49, Section 50, Paragraphs three and
seven, Section 84, Paragraph three, Section 95, Paragraphs three
and four, Section 102, Paragraph four, Section 103, Paragraph
four, Sections 112, 113, 140, and 141, Section 142, Paragraphs
five, twelve, thirteen, and fourteen, and Section 147 of this Law
shall come into force with a special law.
11. Chapter X of this Law comes into force on 1 January 2005.
An investment brokerage company shall prepare annual statements
for the years 2003 and 2004 in accordance with the requirements
of the law On Annual Accounts of Undertakings and the law On
Consolidated Annual Accounts.
12. Amendment to Section 93, Paragraph three and Section 93,
Paragraph seven of this Law shall come into force on 1 January
2006.
[9 June 2005]
13. Such issuers which are registered in any foreign country
and transferable securities of which are already admitted to
trading on a regulated market shall select their competent
authority of the home Member State in accordance with the
requirements of this Law and notify their decision to the
selected competent authority of the home Member State until 31
December 2005.
[9 June 2005]
14. If the Commission has taken the decision to allow to make
an offer of securities to the public until 1 July 2005, the issue
prospectus shall be valid for 12 months from the day of taking
the decision.
[9 June 2005]
15. If the Commission has registered a prospectus until 1 July
2005, the requirements of Section 50, Paragraph one of this Law
shall be applied.
[9 June 2005]
16. If the Commission has approved the issue prospectus or
prospectus until 1 July 2005, but the issuer, the person making
an offer, or the person seeking admission of transferable
securities to trading on a regulated market wants to make an
offer of securities to the public or seek admission of
transferable securities to trading on a regulated market also in
other Member State after coming into force of this Law, he or she
must prepare a new issue prospectus or prospectus in accordance
with the requirements of Division C and Division D, Chapter II of
this Law.
[9 June 2005]
17. If the shares of the target company are put into public
circulation in several Member States at the same time, one of
which is Latvia, and the registered office of the target company
is not located in none of them, the Commission together with the
supervisory authorities of other Member States shall, within four
weeks after coming into force of Section 56.1 of this
Law, agree which of the supervisory authorities will supervise
buy-back offers which will be made in respect of the shares of
the target company. If the Commission together with the
supervisory authorities of other Member States have not agreed
within the time period laid down, the target company shall, on
the first day following the end of the time period of four weeks,
determine which of the abovementioned authorities will supervise
buy-back offers that will be made in respect of the shares of the
target company.
[15 June 2006]
18. Sections 56.1 and 57.2 of this Law
shall come into force on 1 January 2007.
[15 June 2006]
19. The shareholders of joint stock companies (shares of which
are put into public circulation) who have acquired at least 95
per cent of the total number of shares with voting rights are
entitled to make a final share buy-back offer within three months
from the day of coming into force of Section 69.1 of
this Law.
[15 June 2006]
20. The shareholders of joint stock companies (shares of which
are withdrawn from public circulation within 12 months before
coming into force of Section 69.1 of this Law) who
have acquired at least 95 per cent of the total number of shares
with voting rights are entitled to make a final share buy-back
offer without admitting the shares of the joint stock company to
trading on a regulated market within three months from the day of
coming into force of Section 69.1 of this Law.
[15 June 2006]
21. A person who has either directly or indirectly acquired
holding in a joint stock company (shares of which are admitted to
trading on a regulated market) in such amount which ensures at
least one twentieth, but does not exceed one tenth of the total
number of shares with voting rights, shall, within three months
after the day of coming into force of Section 69.1 of
this Law, inform the regulated market operator on the regulated
markets of which the shares of such company are admitted to
trading, and the joint stock company itself thereof.
[15 June 2006; 21 June 2018]
22. A shareholder to whom the requirements of Division D,
Chapter IV of this Law apply shall, not later than until 30 June
2007, inform the issuer of the proportion of those voting rights
and capital which are owned by him or her on the day when the
information is provided, unless such shareholder has submitted
equivalent information prior to the coming into force of this
Law.
[29 March 2007]
23. An issuer shall, not later than until 30 July 2007,
publish information in accordance with the requirements of
Section 64.2 of this Law which it has received in
accordance with the requirements of Paragraph 22 of these
Transitional Provisions.
[29 March 2007]
24. Investment brokerage companies shall apply the advanced
internal ratings based approach for the calculation of credit
risk capital requirement and the advanced measurement approach
for the calculation of such risk capital requirement from 1
January 2008.
[29 March 2007]
25. Investment brokerage companies which apply the internal
ratings based approach for the calculation of risk-weighted
exposure amount shall, until 31 December 2009, ensure own funds
which are always greater than the amounts indicated in Paragraphs
27, 28, and 29 of these Transitional Provisions or equivalent to
them.
[29 March 2007]
26. Investment brokerage companies which apply the advanced
measurement approach for the calculation of the operational risk
capital requirement shall, between 1 January 2008 and 31 December
2009, ensure own funds which are always greater than the amounts
indicated in Paragraphs 28 and 29 of these Transitional
Provisions or equivalent to them.
[29 March 2007]
27. Until 31 December 2007, the own funds of the investment
brokerage company shall be at least 95 per cent of minimal own
funds which are calculated in accordance with the procedures
stipulated by the Commission for the calculation of capital
adequacy.
[29 March 2007]
28. Between 1 January and 31 December 2008, the own funds of
the investment brokerage company shall be at least 90 per cent of
the minimal own funds which are calculated in accordance with the
procedures stipulated by the Commission for the calculation of
capital adequacy.
[29 March 2007]
29. Between 1 January and 31 December 2009, the own funds of
the investment brokerage company shall be at least 80 per cent of
the minimal own funds which are calculated in accordance with the
procedures stipulated by the Commission for the calculation of
capital adequacy.
[29 March 2007]
30. For the fulfilment of the requirements of Paragraphs 25,
26, 27, 28, and 29 of these Transitional Provisions, the
indicators characterising the investment brokerage company shall
be calculated individually or at the consolidation group level in
accordance with Sections 123.3 and 123.4 of
this Law.
[29 March 2007]
31. Until 31 December 2007, an investment brokerage company
has the right to prepare the credit risk and counterparty risk
capital requirement calculation in accordance with the
standardised approach laid down in Section 121 of this Law, by
applying the capital adequacy calculation procedures stipulated
by the Commission.
[29 March 2007]
32. If an investment brokerage company uses the possibility
referred to in Paragraph 31 of these Transitional Provisions, it
has the right by 31 December 2007 to prepare the debt securities
and capital securities position risk capital requirements
calculation laid down in Section 121 of this Law according to the
capital adequacy calculation procedures stipulated by the
Commission.
[29 March 2007]
33. If an investment brokerage company uses the possibility
referred to in Paragraph 31 of these Transitional Provisions, the
requirements of Section 123.1 and 123.2 of
this Law shall not be applied until 31 December 2007.
[29 March 2007]
34. In using the possibility referred to in Paragraph 31 of
these Transitional Provisions, an investment brokerage company
shall reduce the operational risk capital requirement laid down
in Section 121, Paragraph one, Clause 4 of this Law by such an
amount which is determined as such total exposure value which is
calculated in the credit risk capital requirement in accordance
with Paragraph 31 of these Transitional Provisions, in relation
to the total exposure value subject to all credit risks.
[29 March 2007]
35. If the risk-weighted exposure for all exposures is
calculated in accordance with Paragraph 31 of these Transitional
Provisions, the investment brokerage company shall ensure the
implementation of restrictions on large exposures and
restrictions on exposures of persons related to the investment
brokerage company in accordance with the procedures stipulated by
the Commission prior to the coming into force of these
amendments.
[29 March 2007]
36. Section 124, Paragraph one, Clause 10 of this Law shall
come into force on 1 November 2007.
[29 March 2007]
37. An issuer the financial instruments of which are admitted
to trading on a regulated market, shall, until 1 February 2008,
submit to the Commission:
1) internal rules of procedure developed by the issuer
regarding establishment and maintenance of the list of holders of
inside information, and also the procedures for performing
transactions by persons included in the list of holders of inside
information with financial instruments or commodity derivatives
of such issuer;
2) the list of holders of inside information in accordance
with the requirements laid down in Section 86, Paragraph two and
three of this Law. Historical information on former holders of
inside information, starting from the day of establishment of the
list, and updated information on existing holders of inside
information shall be included in the list. The year and date when
a person was included on the list shall be provided for the
existing holders of inside information, the year and date when a
person was included on the list of holders of inside information
and the year and date when inside information of the issuer was
no longer available for the person shall be provided for the
former holders of inside information.
[4 October 2007]
38. Investment brokerage companies which have obtained a
licence of the Commission for the provision of investment
services, and credit institutions which have acquired the right
to provide investment services in accordance with the procedures
laid down in this Law, shall, until 1 February 2008, develop the
policy referred to in Section 124.1 of this Law in
respect of the ensuring the client status, the policy for
prevention of a conflict of interest referred to in Section 127,
and the order execution policy referred to in Section
128.3 of this Law.
[4 October 2007]
39. Investment brokerage companies which have obtained a
licence of the Commission for the provision of investment
services, and credit institutions which have acquired the right
to provide investment services in accordance with the procedures
laid down in this Law, shall, until 1 February 2008, inform the
existing clients of their status in accordance with the
procedures laid Section 124.1 of this Law.
[4 October 2007]
40. Section 56.2 of this Law shall come into force
on 1 September 2008 and shall be applied to the accounting
periods which end on this date or later.
[22 May 2008]
41. A capital company the transferable securities of which are
admitted to trading on a regulated market, shall apply the
provisions of Section 54.1 of this Law after
establishment of the audit committee. The capital company the
transferable securities of which are admitted to trading on a
regulated market, shall elect members of the audit committee in
the nearest meeting of shareholders or members.
[22 May 2008]
42. Amendments to Section 119 of this Law shall apply to
statements which have been submitted to the State Revenue Service
on 1 July 2008 or later.
[29 May 2008]
43. If an application regarding an administrative act of the
Financial and Capital Market Commission has been submitted to the
Administrative District Court by 1 January 2009, a decision on
the application submitted shall be taken, and also the
administrative case initiated shall be examined and a court
adjudication in this case shall be rendered and appealed in
accordance with the provisions of the Administrative Procedure
Law.
[23 October 2008]
44. An issuer the registered office of which is in a foreign
country may prepare consolidated annual financial statements and
consolidated financial statements for interim periods of
six-months in accordance with the generally accepted accounting
principles of the Republic of India for the financial years which
began until 1 January 2015.
[8 November 2012]
45. If a notification regarding convening of a meeting of
shareholders is announced until 31 December 2009, the provisions
of this Law which were in force until 31 December 2009 shall be
applicable for convening the meeting of shareholders, submitting
of issues and inclusion in the agenda and occurrence of the
meeting or shareholders.
[15 October 2009]
46. Until 31 December 2011 the own funds of the investment
brokerage company which has obtained an authorisation of the
Commission to apply the internal ratings-based approach for
calculation of the risk weighted average or to apply the advanced
measurement approach for calculation of the operational risk
capital requirements, is at least 80 per cent of the minimum own
capital which is calculated by applying appropriate simpler
approaches for determination of the credit risk and the
operational risk capital requirements in accordance with the
procedures for calculation of the minimum capital requirements
stipulated by the Commission.
[13 January 2011]
47. The requirements of Division F of this Law shall be
applicable to those contracts regarding transactions with the
financial instruments referred to in Section 3, Paragraph two,
Clause 6 of this Law which have been entered into after 1 July
2012.
[22 March 2012]
48. Until 31 December 2012 the own funds of the investment
brokerage company which has obtained an authorisation to apply
the internal ratings-based approach for calculation of the risk
weighted average or to apply the advanced measurement approach
for calculation of the operational risk capital requirements, is
at least 80 per cent of the minimum own capital which is
calculated by applying appropriate simpler approaches for
determination of the credit risk and the operational risk capital
requirements in accordance with the procedures for calculation of
the minimum capital requirements stipulated by the
Commission.
[22 March 2012]
49. The accumulated other income referred to in Section 1,
Clause 28, Sub-clause "c" of this Law which has been reflected in
the comprehensive income statement shall be included in the
initial capital from 1 January 2015 in accordance with the
provisions for transitional period stipulated by the
Commission.
[24 April 2014]
50. The requirement referred to in Section 124, Paragraph
1.2, Clause 2 of this Law shall be applied to the
variable component of remuneration which is determined not later
than with regard to results of activities in the second half of
2014 and to the fixed component of remuneration in the relevant
period, irrespective of the date of conclusion of an employment
contract or an authorisation agreement.
[24 April 2014]
51. Amendments to Section 17.1, Paragraph three (in
relation to the new wording of the first and second sentence) and
Section 44.1, Paragraph four of this Law shall come
into force on 1 January 2016.
[11 June 2015]
52. An issuer whose transferable securities are admitted to
trading on a regulated market and whose home Member State is
determined in accordance with Section 3.1, Paragraph
four, Clause 2 of this Law or Paragraph six of this Section, but
who until 27 November 2015 has not informed the competent
authorities of the choice of the home Member State, shall inform
the competent authority within three months from the day of
coming into force of amendments to Section 3.1 of this
Law.
[26 May 2016]
53. The requirements of Section 56, Paragraph three of this
Law which are applicable to a capital company debt securities of
which have been admitted to trading on a regulated market shall
be applied to annual statements of the capital company which are
prepared for the reporting period starting on 1 July 2016 or
later, unless the capital company already prepares its financial
statements in accordance with Regulation No 1606/2002.
[26 May 2016]
54. Application of Section 57 of this Law which has been
reworded, and Section 57.2 shall be commenced with
accounts of interim periods of issuers and financial information
prepared for the reporting year starting on 1 July 2016 or
later.
[26 May 2016]
55. Amendments to this Law in relation to deletion of Sections
59, 85, 86, 86.1, 87, 88, 88.1, 89, and 91,
Sections 84 and 90 which have been reworded, and also amendments
to Section 148 in relation to deletion of Paragraphs three and
seven, Paragraph four which has been reworded, and Paragraphs
sixteen and seventeen of Section 148 shall come into force on 3
July 2016.
[26 May 2016]
56. In relation to a person or persons who act in concert, who
until the day of coming into force of Section 66 of this Law (in
new wording) has directly or indirectly acquired holding in such
joint stock company shares of which have been admitted to trading
on a regulated market, in such amount which reaches or exceeds 30
per cent from the total number of shares with voting rights of
the joint stock company, however, does not reach or exceed 50 per
cent from the total number of shares with voting rights of the
joint stock company, provisions of Section 66 of this Law (in new
wording) are applied from the day when they increase the amount
of their holding above the amount of the holding obtained until
the day of coming into force of Section 66 of this Law (in new
wording). In relation to a person or persons who act in concert,
who until the day of coming into force of Section 66 of this Law
(in new wording) has directly or indirectly acquired holding in
such joint stock company shares of which have been admitted to
trading on a regulated market, in such amount which reaches or
exceeds 30 per cent from the total number of shares with voting
rights of the joint stock company, however, does not reach or
exceed 50 per cent from the total number of shares with voting
rights of the joint stock company, and who have expressed such
voluntary share buy-back offer until the day of coming into force
of Section 66 of this Law (in new wording) which has been
expressed to all shareholders of the joint stock company for all
shares of the joint stock company for a price determined in
accordance with the requirements of Section 74 of this Law, a
mandatory share buy-back offer need not be expressed.
[26 May 2016]
57. In relation to a person or persons who act in concert, who
until the day of coming into force of Section 66 of this Law (in
new wording) has directly or indirectly acquired holding in such
joint stock company shares of which have been admitted to trading
on a regulated market, in such amount which reaches or exceeds 50
per cent from the total number of shares with voting rights of
the joint stock company, the norms governing the relevant matter
regarding expressing a mandatory share buy-back offer which were
in force until the day of coming into force of Section 66 of this
Law (in new wording), shall be applied in relation to expressing
the mandatory share buy-back offer.
[26 May 2016]
58. Section 56, Paragraph one, Clause 5, introductory part and
Clauses 3 and 4 of Section 56.2, Paragraph two which
have been reworded, Section 56.2, Paragraph two,
Clause 8, Paragraph 2.1 and amendment to Paragraph
seven, Sections 56.3, 56.4 and
56.5 and amendment to Section 148, Paragraph sixteen
(liability for non-conformity with the requirements in relation
to a non-financial statement or consolidated non-financial
statement) shall be applicable to annual statements and
consolidated annual statements starting from the reporting year
of 2017 (the reporting year which starts on 1 January 2017 or
during the calendar year of 2017).
[15 December 2016]
59. A shareholder may exercise the rights referred to in
Section 74.1 of this Law, if the administrative act of
the Commission in which it establishes that the person has an
obligation to express the mandatory share buy-back offer in
accordance with the provisions of Section 66, Paragraph four,
Clause 1 of this Law has been issued not earlier than on the
following day after coming into force of Section
74.1.
[21 September 2017]
60. Until 1 July 2019, the central securities depository and
its participant shall ensure the fulfilment of the requirements
laid down in Section 93, Paragraph two of this Law in relation to
contracts concluded between the central securities depository and
its participant.
[14 September 2017]
61. Until 31 December 2017, a participant of the central
securities depository shall be deemed as the holder of a
securities account within the meaning of the law On Personal
Income Tax whose obligation is to deduct personal income tax from
the dividends disbursed to a shareholder or intermediary for
publicly traded stocks and to transfer them into the State
budget.
[14 September 2017]
62. Members of the board and council of a regulated market
operator who, until 1 August 2018, have been recognised as
corresponding to the requirements of the Law need not undergo
re-assessment of their conformity with the requirements of the
law.
[21 June 2018]
63. Until 3 January 2021, the clearing obligation specified in
Article 4 and the risk management procedures indicated in Article
11(3) of Regulation No 648/2012 shall not apply to such energy
derivative contracts which have been concluded by non-financial
counterparties conforming to the conditions of Article 10(1) of
Regulation No 648/2012 or non-financial counterparties which,
starting from 3 January 2018, receive a licence of an investment
brokerage company for the first time. Such energy derivative
contracts are not deemed to be over-the-counter derivative
contracts for determining the clearing threshold referred to in
Article 10 of Regulation No 648/2012. All other requirements laid
down in Regulation No 648/2012 shall apply to energy derivative
contracts which are subject to this Transitional Provision. The
exception referred to in this Paragraph shall be granted by the
Commission and the European Securities and Markets Authority
shall be informed thereof.
[21 June 2018]
64. The board of a capital company shall develop the
remuneration policy referred to in Section 59.3 of
this Law and submit it for approval at the next meeting of
shareholders which is convened after 1 September 2019, provided
that the remuneration policy is approved and made public not
later than by 31 December 2020.
[20 June 2019]
65. A capital company shall draw up the remuneration report
referred to in Section 59.4 of this Law starting from
the financial year of 2020 (the financial year starting on 1
January 2020 or during the calendar year of 2020).
[20 June 2019]
66. A capital company shall disclose the comparison of the
changes referred to in Section 59.4, Paragraph one,
Clause 3 of this Law starting from the financial year of 2020
(the financial year starting on 1 January 2020 or during the
calendar year of 2020) and shall provide at least for such period
of the last five financial years which starts not later than on 1
January 2020.
[20 June 2019]
67. Sections 59.6, 59.7,
59.8, 59.9, and 59.10 of this
Law shall come into force on 1 September 2020.
[20 June 2019]
68. If an investment brokerage company and credit institution
are entitled, on the day of coming into force of Section
126.3 of this Law, to provide portfolio management
services, including shares of such joint stock company in the
portfolio the registered office of which is in a Member State and
the shares of which are admitted to trading on a regulated
market, it shall develop and publish the engagement policy in
accordance with Section 126.3 of this Law by 1
November 2019.
[20 June 2019]
69. An investment brokerage company and credit institution
shall disclose the report referred to in Section
126.3, Paragraph four of this Law on the
implementation of the engagement policy and the information
referred to in Paragraph five starting from 2020.
[20 June 2019]
70. The central securities depository, regulated market
operator, and a data reporting services provider to which is
subject to the requirement referred to in Section
147.7 of this Law for the creation of an internal
reporting line shall create it not later than by 1 April
2020.
[12 December 2019]
71. The third-country group which includes more than one
credit institution or investment brokerage company of a Member
State and the total asset value of which in the European Union as
on 27 June 2019 was at least EUR 40 billion, and which continues
its activities on the day of coming into force of Section
111.2 of this Law shall, in accordance with the
requirements of the abovementioned Section, establish a parent
undertaking in the European Union by 30 December 2023.
[29 April 2021]
72. The holding company referred to in Section
111.1 of this Law which carried out activities on 27
June 2019 and continues activities on the day of coming into
force of this Section shall receive a permit in accordance with
the procedures laid down in the abovementioned Section within six
months from the day of coming into force of Section
111.1.
[29 April 2021]
Informative
Reference to European Union Directives
[9 June 2005; 15 June 2006; 29
March 2007; 4 October 2007; 22 May 2008; 29 May 2008; 26 February
2009; 15 October 2009; 13 January 2011; 22 March 2012; 24 April
2014; 11 June 2015; 29 October 2015; 26 May 2016; 15 December
2016; 21 June 2018; 28 February 2019; 20 June 2019; 17 June 2020;
29 April 2021]
This Law contains norms arising from:
1) Directive 2003/71/EC of the European Parliament and of the
Council of 4 November 2003 on the prospectus to be published when
securities are offered to the public or admitted to trading and
amending Directive 2001/34/EC;
2) [4 October 2007];
3) [4 October 2007];
4) 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;
5) [21 June 2018];
6) Directive 2001/34/EC of the European Parliament and of the
Council of 28 May 2001 on the admission of securities to official
stock exchange listing and on information to be published on
those securities;
7) Directive 2002/47/EC of the European Parliament and of the
Council of 6 June 2002 on financial collateral arrangements;
8) Directive 2002/87/EC of the European Parliament and of the
Council of 16 December 2002 on the supplementary supervision of
credit institutions, insurance undertakings and investment firms
in a financial conglomerate and amending Council Directives
73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and
93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European
Parliament and of the Council;
9) [21 June 2018];
10) [21 June 2018];
11) [21 June 2018];
12) Directive 2004/25/EC of the European Parliament and of the
Council of 21 April 2004 on takeover bids;
13) 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;
14) [21 June 2018];
15) Directive 2004/39/EC of the European Parliament and of the
Council of 21 April 2004 on markets in financial instruments
amending Council Directives 85/611/EEC and 93/6/EEC and Directive
2000/12/EC of the European Parliament and of the Council and
repealing Council Directive 93/22/EEC;
16) Directive 2006/31/EC of the European Parliament and of the
Council of 5 April 2006 amending directive 2004/39/EC on markets
in financial instruments, as regards certain deadlines;
17) Commission Directive 2006/73/EC of 10 August 2006
implementing Directive 2004/39/EC of the European Parliament and
of the Council as regards organisational requirements and
operating conditions for investment firms and defined terms for
the purposes of that Directive;
18) Commission Directive 2007/14/EC of 8 March 2007 laying
down detailed rules for the implementation of certain provisions
of Directive 2004/109/EC on the harmonisation of transparency
requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market;
19) Directive 2006/46/EC of the European Parliament and of the
Council of 14 June 2006 amending Council Directives 78/660/EEC on
the annual accounts of certain types of companies, 83/349/EEC on
consolidated accounts, 86/635/EEC on the annual accounts and
consolidated accounts of banks and other financial institutions
and 91/674/EEC on the annual accounts and consolidated accounts
of insurance undertakings;
20) Directive 2006/43/EC of the European Parliament and of the
Council of 17 May 2006 on statutory audits of annual accounts and
consolidated accounts, amending Council Directives 78/660/EEC and
83/349/EEC and repealing Council Directive 84/253/EEC;
21) [21 June 2018];
22) Council Directive 86/635/EEC of 8 December 1986 on the
annual accounts and consolidated accounts of banks and other
financial institutions;
23) [21 June 2018];
24) Directive 2007/44/EC of the European Parliament and of the
Council of 5 September 2007 amending Council Directive 92/49/EEC
and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC
as regards procedural rules and evaluation criteria for the
prudent assessment of acquisitions and increase of holdings in
the financial sector;
25) Directive 2007/36/EC of the European Parliament and of the
Council of 11 July 2007 on the exercise of certain rights of
shareholders in listed companies;
26) Directive 2009/111/EC of the European Parliament and of
the Council of 16 September 2009 amending Directives 2006/48/EC,
2006/49/EC and 2007/64/EC as regards banks affiliated to central
institutions, certain own funds items, large exposures,
supervisory arrangements, and crisis management;
27) [21 June 2018];
28) Directive 2010/73/EU of the European Parliament and of the
Council of 24 November 2010 amending Directives 2003/71/EC on the
prospectus to be published when securities are offered to the
public or admitted to trading and 2004/109/EC on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to
trading on a regulated market;
29) 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);
30) Directive 2013/36/EU of the European Parliament and of the
Council of 26 June 2013 on access to the activity of credit
institutions and the prudential supervision of credit
institutions and investment firms, amending Directive 2002/87/EC
and repealing Directives 2006/48/EC and 2006/49/EC;
31) Directive 2014/59/EU of the European Parliament and of the
Council of 15 May 2014 establishing a framework for the recovery
and resolution of credit institutions and investment firms and
amending Council Directive 82/891/EEC, and Directives 2001/24/EC,
2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU,
2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and
(EU) No 648/2012, of the European Parliament and of the
Council;
32) Directive 2014/51/EU of the European Parliament and of the
Council of 16 April 2014 amending Directives 2003/71/EC and
2009/138/EC and Regulations (EC) No 1060/2009, (EU) No 1094/2010
and (EU) No 1095/2010 in respect of the powers of the European
Supervisory Authority (European Insurance and Occupational
Pensions Authority) and the European Supervisory Authority
(European Securities and Markets Authority);
33) Directive 2013/34/EU of the European Parliament and of the
Council of 26 June 2013 on the annual financial statements,
consolidated financial statements and related reports of certain
types of undertakings, amending Directive 2006/43/EC of the
European Parliament and of the Council and repealing Council
Directives 78/660/EEC and 83/349/EEC (Text with EEA
relevance);
34) Directive 2013/50/EU of the European Parliament and of the
Council of 22 October 2013 amending Directive 2004/109/EC of the
European Parliament and of the Council on the harmonisation of
transparency requirements in relation to information about
issuers whose securities are admitted to trading on a regulated
market, Directive 2003/71/EC of the European Parliament and of
the Council on the prospectus to be published when securities are
offered to the public or admitted to trading and Commission
Directive 2007/14/EC laying down detailed rules for the
implementation of certain provisions of Directive
2004/109/EC;
35) Directive 2014/57/EU of the European Parliament and of the
Council of 16 April 2014 on criminal sanctions for market abuse
(market abuse directive);
36) Directive 2014/56/EU of the European Parliament and of the
Council of 16 April 2014, amending Directive 2006/43/EC on
statutory audits of annual accounts and consolidated
accounts;
37) Directive 2014/95/EU of the European Parliament and of the
Council of 22 October 2014 amending Directive 2013/34/EU as
regards disclosure of non-financial and diversity information by
certain large undertakings and groups;
38) Directive 2014/65/EU of the European Parliament and of the
Council of 15 May 2014 on markets in financial instruments and
amending Directive 2002/92/EC and Directive 2011/61/EU;
39) Commission Delegated Directive (EU) 2017/593 of 7 April
2016 supplementing Directive 2014/65/EU of the European
Parliament and of the Council with regard to safeguarding of
financial instruments and funds belonging to clients, product
governance obligations and the rules applicable to the provision
or reception of fees, commissions or any monetary or non-monetary
benefits;
40) Directive (EU) 2016/1034 of the European Parliament and of
the Council of 23 June 2016 amending Directive 2014/65/EU on
markets in financial instruments;
41) Directive (EU) 2017/2399 of the European Parliament and of
the Council of 12 December 2017 amending Directive 2014/59/EU as
regards the ranking of unsecured debt instruments in insolvency
hierarchy;
42) Directive (EU) 2017/828 of the European Parliament and of
the Council of 17 May 2017 amending Directive 2007/36/EC as
regards the encouragement of long-term shareholder
engagement;
43) Directive (EU) 2019/2034 of the European Parliament and of
the Council of 27 November 2019 on the prudential supervision of
investment firms and amending Directives 2002/87/EC, 2009/65/EC,
2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU;
44) Directive (EU) 2019/878 of the European Parliament and of
the Council of 20 May 2019 amending Directive 2013/36/EU as
regards exempted entities, financial holding companies, mixed
financial holding companies, remuneration, supervisory measures
and powers and capital conservation measures.
The Law shall come into force on 1 January 2004.
The Law has been adopted by the Saeima on 20 November
2003.
Acting for the President, the Chairperson
of the Saeima, I. Ūdre
Rīga, 11 December 2003
1 The Parliament of the Republic of
Latvia
Translation © 2021 Valsts valodas centrs (State
Language Centre)