Financial market about to change
In mid-February, an amendment that may bring significant changes to several financial market segments was submitted to the Chamber of Deputies. What are the amendment’s major points? What should entities operating in the financial market prepare themselves for?
The first amended law is the Capital Market Undertaking Act. Owing to the upcoming effectiveness of the EU Prospectus Regulation, the public offerings of investment instruments will mostly be regulated using this regulation. The Capital Market Undertaking Act will only include rules defining the liability for a prospectus’ content and the reporting mechanism. Penalties for the failure to comply with the legal provisions on public offerings will be much stricter: for such violations, penalties that may exceed CZK 18 million will be imposed on individuals and CZK 130 million on legal entities.
The Act on Ancillary Pension Savings will also be amended dramatically: the ancillary pension savings segment will be harmonised with other financial market segments, and entities authorised to mediate ancillary pension savings schemes will be widely restricted. According to the amendment, only independent intermediaries and tied representatives having a licence under the Act on Ancillary Pension Savings will be allowed to mediate ancillary pension savings. The introduction of these new types of entities will change the current practice under which it is sufficient for a person having a licence under other acts regulating the financial market to extend their existing licence. This change will affect all existing ancillary pension savings distributors.
The Act on Investment Companies and Investment Funds will offer a less strict regulation applicable to unit-holders’ meetings, whose competence and decision-making rules will fully be determined by an investment fund’s statutes. The market welcomes this change, as it brings the functioning of funds closer to the functioning of corporations.
An amendment to the Act on Investment Companies and Investment Funds also introduces a change to the rules for issuing and purchasing units. A two-year maximum period has been introduced to suspend the issue or purchase of units by qualifying investor funds that are open-end unit funds. This is also positively perceived, as it removes interpretation uncertainties regarding the suspension in issuing and purchasing units by qualifying investor funds.
The Act on Investment Companies and Investment Funds also introduces the investment fund promoter, an entirely new office held by the person with the right to decide on a fund’s manager, administrator and depositor, including the right to dismiss and replace these persons. The promoter will be established by the investment fund’s statutes; funds established before the amendment’s effective date may establish the office of promoter through a decision made by the majority of persons holding ownership interests in the fund.
The amendment may have a significant impact on entities operating in the financial market. If passed by deputies, we recommend analysing the amendment’s effects on the provision of financial services.