MiFIDII implemented by Capital Market Undertakings Act
In late June, the president signed a significant amendment to the Act on Business Activities on the Capital Market (Capital Market Undertakings Act) and other legislation regulating the provision of financial services. The amendment is a part of the implementation of an extensive EU regulation intended to enhance investor protection and increase capital market transparency.
The amendment responds to two fundamental EU regulations: the revised Markets in Financial Instruments Directive (MiFIDII) and the related Markets in Financial Instruments Regulation (MiFIR). These significantly change a number of aspects of financial markets functioning, with an obvious effort to reflect the developments in the field over recent years and the rise of new trading systems – organised trading facilities (OTFs), thanks to which the number of trades realised outside regulated markets (OTC) has dropped. The Capital Market Undertakings Act also sets out rules for algorithmic and high-frequency trading in financial instruments.
Other changes significantly affecting the functioning of the capital market concern the provision and receipt of incentives and the activities of investment intermediaries. Entities providing investment advisory services will have to declare whether their advice is dependent or independent. Advisors who identify themselves as independent could not accept any incentives in connection with their activities; more precisely, they would have to pass them on to the customer. The entire area of investment intermediaries has been revised completely; of the numerous changes, let us mention the duty to make annual payments for a licence – the Czech National Bank expects this to ensure that the list of intermediaries will be updated on a regular basis, unlike now, when over 70% of registered intermediaries are inactive.
The amendment does not only change the Capital Markets Undertakings Act, but also the Act on Investment Companies and Investment Funds. It brings substantial changes for so-called alternative assets managers registered with the Czech National Bank pursuant to Section 15 of the Act on Investment Companies and Investment Funds – it sets new rules of how to calculate the value of the assets managed. Practical changes also affect the functioning of closed-end funds: qualified investor funds will no longer be obliged to enable the redemption of investors’ units, after certain time.
The amended Capital Market Undertakings Act, same as the respective EU legislation, will enter into effect on 3 January 2018. Some partial changes, mainly to other acts, will be effective 30 days after the promulgation in the Collection of Laws.