REPUBLIC OF LITHUANIA
LAW ON
PUBLIC TRADING IN SECURITIES
Chapter I
GENERAL PROVISIONS
The objective of this Law is to provide legal basis for
safe, open and efficient functioning of the securities
market, seeking to maximise the security of the interests of
all investors and to ensure the competition between the
market participants.
Article 2. Definitions
As used in this Law:
secondary trading in securities means an offer by an
investor or any other person (who is not an issuer) to
acquire outstanding securities as well as their transfer to
other investors;
a person affiliated to the issuer means an enterprise or
organisation in which the issuer holds shares (units or any
other shares of capital) which carry over 10% of all votes,
the subject controlled by the issuer or the controlling
subject, the executive of the issuer as well as the person
holding the issuer's securities carrying over 5% of all
votes ;
issue means the issue of a series of securities
conferring identical property and non- property rights to
their owners;
issuer means a legal or natural person who proposes to
issue securities in its name or issues same;
material event means any event which might influence the
investor's decision to buy or sell the issuer's securities
or which might affect the market price thereof;
brokerage firm means any enterprise engaged in the
intermediary activity in public trading in securities;
investment management and consulting firm means any
enterprise engaged in the business of consulting on the
issues of investment into securities;
investor means a natural or legal person who has acquired
in its name or holds securities by the right of ownership;
controlled subject means an enterprise or organisation in
which the natural or legal person being a shareholder
(partner, member) personally has more than 1/3 of all votes
or, according to the agreement with other shareholders (
partners, members), is the sole controller of more than 1/3
of all votes, or has the right to elect (select) the
majority of the Supervisory Board (Board) members or the
Administration heads, or actually controls the decisions
adopted by the subject;
broker means a person who offers, purchases or sells
securities on behalf of his client or the intermediary of
public trading in securities;
primary trading in securities means the offer made by the
issuer or intermediary of public trading in securities
acting on behalf of the issuer to acquire securities at the
time of their issue and their transfer to the ownership of
investors;
prospectus means a document intended for investors and
the general public, containing the basic information about
the issuer and the securities offered by it.
executive means a member of the Supervisory Board, the
Board, the head of the Administration or his deputy, chief
financier as well as a person authorised by an enterprise to
conclude transactions on its behalf;
stock exchange means an enterprise engaged in the
activities of a stock exchange;
activities of a stock exchange means the activities
whereby by technical and organisational means for the
meeting (either directly or by using technical means) of
persons intending to buy or sell securities or transfer them
in any other manner;
Securities Commission means an institution which
regulates and supervises the securities market and operates
in compliance with the provisions of Chapter 7 of this Law;
block of securities means 1/10 or a greater portion of
the issuer's securities of the same class;
portfolio of securities means all the securities owned by
a single natural or legal person;
public trading in securities means offer, allotment or
transfer of securities carried out through the
intermediaries of public trading in securities and (or) by
offering securities to the public through advertisements or
in any other manner and (or) by offering securities to more
than 50 persons;
intermediaries of public trading in securities means
brokerage firms, investment management and consulting firms,
and commercial banks;
Ethics Code of the Intermediaries of Public Trading in
Securities means a set of ethics rules intended for ensuring
honest activities of brokerage firms, investment management
and consulting firms, and brokers; and
securities means the means of financing issued in a
series, evidencing participation in share capital or (and)
the rights arising from credit relations, and granting the
right to receive dividends, interest or other income.
Financial instruments which evidence the right or obligation
to buy (sell) the means of financing specified in this
definition are also securities.
Article 3. Application of the Law
1. The following shall not be treated as securities under
this Law and shall not be regulated by it:
1) obligations of commercial banks, credit unions and
other credit institutions operating under the laws of the
Republic of Lithuania which are connected with the reception
of deposits or other fixed-term financing if they arise when
services are provided to the clients directly and without
any intermediaries and are not the object of public
circulation;
2) contracts of insurance concluded by insurance
organisations operating according to the Law on Insurance
under which the insurance organisation obligates itself to
pay a specified amount of money (either once or at regular
intervals) provided that the contracts of insurance would
have no effect of insurance on the fulfilment of obligations
of another person, incidental to the securities held by him.
2. The provisions of this Law shall not apply to
securities which are:
3. This Law shall regulate the issue and circulation of
securities which evidence the debt of the state and (or) are
issued by the Bank of Lithuania, provided that its
provisions do not contravene the laws and other legal acts
regulating the issue and trading in these securities.
4. The provisions of this Law shall not apply to the
secondary trading in securities, carried out in an over the
county market when privatising property under the Law on
Privatisation of State-Owned and Municipal Property.
(Amended 23 April 1996)
Chapter II
PUBLIC TRADING IN SECURITIES
Article 4. Registration of Securities
1. The issuer must register its securities with the
Securities Commission if at least one of the following
requirements is met:
1) the issuer is a public company which is being founded
or which is already operating, or an enterprise of any other
type which is being reorganised into a public company;
2) according to the data of the end of the last day of
the preceding business year the number of owners of at least
one class of securities exceeded 50;
2. The issuer who intends to register securities must
file the following documents with the Securities Commission:
2) prospectus ( If the securities are intended for
private placement, the memorandum, an abridged variant
prospectus, may be submitted);
3) if the securities are registered for the first time,
copies of founding documents certified by a notary, or
copies of amendments to the founding documents certified by
a notary, introduced over the period since the last
registration of securities;
4) copies of decisions certified by a notary, on the
basis of which the issuer has issued or intends to issue
securities;
3. According to the rules approved by the Securities
Commission, the issuer must provide in the prospectus
(memorandum) financial statements, disclose information
about its activities and the issued securities and those
about to be issued, about the managing bodies and contracts
entered into by their members with the issuer, about the
persons affiliated to with the issuer, as well as persons
who are the issuer's business partners, and also any other
information provided for by the rules. The prospectus must
also contain findings of an independent auditor acting under
the legal acts regulating the activities of auditors
concerning the compliance of the issuer' accounting and
financial accountability with the laws of the Republic of
Lithuania and general accounting principles.
4. The Securities Commission may, under the rules
approved in advance, set different requirements for
furnishing information, depending on the size of the issuer,
the type of activities, the type of already issued or
planned to be issued securities, as well as the number of
holders of securities.
5. The Securities Commission must within 30 days consider
the documents filed for the purpose of securities
registration and give a written response to the issuer. The
Securities Commission shall have the right to request from
the issuer additional information necessary to ensure the
protection of the investors' interests, as well as to
explain or revise the furnished data. In such case the 30-
day period specified herein shall be calculated anew from
the moment additional information or explanations and
amendments are submitted. If the data presented by the
issuer is not in conformity with the rules set by the
Securities Commission, or if the issuer refuses to present
documents, data or explanations specified herein and in par.
2 and 3 of this Article, the Securities Commission shall
have the right to refuse registration of securities. The
decision concerning the refusal of securities registration
must be justified. Upon eliminating the specified
deficiencies, the issuer may repeatedly file the documents
for the second time. Documents filed for the second time
shall be considered according to the general procedure. The
decision to refuse registration of securities may be
appealed to court.
6. The registration of securities confirms that the
information furnished by the issuer is in compliance with
the rules established by this Law and other legal acts
regulating the disclosure of information. The registration
of securities does not confirm the truthfulness of the
disclosed information, neither may it be considered as a
recommendation of the Securities Commission for investors.
7. The Securities Commission must publish the data on the
class, volume and price of the issue of registered
securities in the "Valstybës þinios" (Official gazette) as
well as provide the investors with the opportunity to
familiarise themselves with the prospectus (memorandum) .
The issuer must provide the opportunity to familiarise
themselves with the documents filed for registration to all
the persons who are willing to do so.
Article 5. Regular Disclosure of Information
1. Upon registering the securities with the Securities
Commission, the issuer shall be considered an accountable
issuer. The accountable issuer must, according to the
procedure and at time intervals set by the Securities
Commission, prepare and submit to it :
2. The annual prospectus - statement must contain
information analogous to that specified in par. 3 of Article
4 of this Law. Annual financial accounts must be submitted
alongside with the findings of an independent auditor
concerning the compliance of the accounting and financial
accounts with the laws of the Republic of Lithuania and
general accounting principles.
3. Regular reports may be made each quarter or every six
months. The regularity of the preparations of these reports
shall be established by the Securities Commission according
to the rules approved in advance, depending on the issuer
and the volume of turnover of the securities issued by it.
The regular reports must disclose the data on the financial
condition of the issuer and information about the material
events which occurred during the accounting period.
4. The Board of the accountable issuer must disclose to
the general meeting which approves annual reports the data
on all shareholders which, to its knowledge, have by the
right of ownership or hold more than 5 % of all votes. This
information must state the full names of shareholders (names
of enterprises), the number of shares held by each of them
and the percentage of votes. The data must be submitted and
announced as annexes to the annual prospectuses-reports.
5. The accountable issuer must provide each owner of
securities issued by it with the opportunity to familiarise
himself with all the reports specified in this Article free
of charge whereas if the owner files a written request,
provide him with copies of these reports for a fee set in
the Statutes.
6. The accountable issuer must submit reports specified
in par. 1 hereof to the stock exchange on which its
securities are listed within the same time period as for the
Securities Commission.
Article 6. Disclosure of Information Concerning Material
Events
1. The accountable issuer must no later than within 5
working days present to at least one national daily paper,
the Securities Commission and the Stock Exchange an
information report signed by its manager about every
material event with the exception of events specified in
par. 3 hereof. The information report must state the type
and short description of the event. The title of the
national daily paper in which information about stock events
will be announced must be specified in the issuer's Statutes
and the prospectus.
2. If, in the opinion of the accountable issuer, the
issuer may incur financial or competition-related losses by
reason of the disclosure of information referred to in par.
1 hereof, the accountable issuer may refrain from publishing
the information report provided for by par. 1 hereof
submitting it only to the Securities Commission with a
marking "confidential information" and a written explanation
of the reasons precluding the disclosure of information.
3. Upon submitting the report according to the
requirements referred to in par. 2 hereof, the accountable
issuer must specify therein the date until which the
information must remain confidential. On the day the
confidentiality of the information expires it must be
disclosed in the manner set out in par. 1 hereof.
4. Natural and legal persons who are aware of the
information which has not been disclosed to the public,
shall have no right to enter into transactions relative to
securities until this information is disclosed following the
requirements set forth in par. 1 hereof.
5. Prior to each material event the issuer must compile a
list of persons which alongside with the executives of the
issuer shall have the right to get to know such information
prior to its public disclosure. It shall be assumed that the
executives of the issuer always know information concerning
material events. Persons, who by reason of the positions
occupied by them or for some other lawful reasons are aware
of the information concerning the stock event, shall be
prohibited from informing other persons thereof until its
public disclosure.
6. The persons who have concluded transactions with
securities by making use of the information about material
events not subject to disclosure shall be held liable under
laws.
Article 7. Primary Public Trading in Securities
1. Primary public trading in securities may be carried
out when the issuer offers securities on its own account or
under the securities offering contracts entered into with
the intermediaries of the public trading in securities.
2. The following rules must be observed during primary
public trading in securities:
1) it shall be prohibited to advertise securities and to
announce subscription for them if they are not registered
with the Securities Commission. The issuer or the
intermediary of public trading in securities acting on its
behalf shall have the right to carry out market research
prior to the registration of securities, creating conditions
for the potential investors to familiarise themselves with
the draft prospectus presented to the Securities Commission;
2) each potential investor must be provided with the
opportunity to familiarise itself with the prospectus and
other documents on the basis of which the issuer's
securities have been registered;
3) only information contained in the prospectus, annual
prospectus-statement or regular reports may be used in
advertising offered securities;
4) every advertisement must state where and when it is
possible to familiarise oneself with the prospectus and
accounts of the issuer;
3. If during the primary public trading the data provided
in the prospectus changes or a material event occurs , the
issuer must give notice thereof in the manner prescribed by
Article 6 of this Law. In such cases the persons who have
already subscribed for the securities of the issuer shall
have the right to renounce them within 5 days from the
disclosure of new information, whereas the issuer must
within 10 days return the contributions paid by them without
making any deductions.
4. If the issuer or the intermediary of public trading in
securities who acts on its behalf does not comply with the
rules of primary public trading in securities provided for
in this Article, or if it turns out that incomplete or
incorrect data have been presented for the registration of
securities, the Securities Commission shall have the right
to suspend the registration of the issuer's securities and
to set the time limit for the elimination of the violations.
If the violations are not eliminated within the set period,
the Securities Commission shall cancel the registration of
securities. It shall be prohibited to offer securities if
the Securities Commission suspends or cancels their
registration.
Article 8. Secondary Public Trading in Securities
1. Secondary public trading in securities shall be
carried out only through intermediaries of public trading in
securities.
2. Secondary public trading in securities must be carried
out on the Stock Exchange if:
1) the authorised capital of the issuer whose securities
are listed is not less than 1 million litas;
3. The provisions of par. 2 shall not apply if other laws
prescribe a different procedure for trading in securities.
4. The transactions of the secondary trading, i.e.
purchase or/and sale (including exchange) in the securities
of the accountable issuer must be concluded, through
intermediaries of public trading in securities, by:
5. The rules of the secondary public trading outside the
boundaries of the Stock Exchange shall be established by the
Securities Commission.
6. Persons who according to this Law in the course of
secondary offering register outside the Stock Exchange a
transaction regarding the issuer's securities listed on the
Stock Exchange must, in the cases, according to the
procedure and at the date prescribed by the Securities
Commission, specify the number of securities transferred by
the transaction and the unit price.
Chapter III
ACQUISITION OF A BLOCK OF SECURITIES
Article 9. Information Concerning the Acquisition of a
Block of Shares
1. A natural or legal person who, acting independently or
together with other persons, acquires shares of an
accountable issuer registered in the Republic of Lithuania
which award him in excess of 1/10, 1/5, 1/3, 1/2, or 2/3 of
votes must, within 15 days from the moment the relevant
limit is exceeded, inform the Securities Commission and the
issuer about the total number of its shares belonging to
him. The provisions shall also apply in cases where the
specified limits are exceeded in the diminishing order.
2. Persons to whom the information disclosure
requirements set out in par. 1 hereof are applicable must
also at the same time furnish data on the securities held by
them, entitling them to vote in future and (or) hold
securities of the issuer.
3. The procedure for informing the public about the
acquisition of the block of securities shall be decided on
by the Securities Commission.
4. As used in this Law, such persons shall be considered
as acting in concert who have agreed in writing to pursue
common policy with regard to the issuer when disposing of
property and non-property rights attaching to the shares. It
shall be deemed that such an agreement always exists without
written confirmation between:
1) the executives of the issuer, with the exception of
persons who are not members of the managing bodies of the
issuer;
5. Persons acting in concert shall be jointly and
severally liable for the fulfilment of obligations
established in this Law and subordinate legislation.
6. A person who fails to inform the issuer or the
Securities Commission about exceeding the limits specified
in par. 1 hereof shall, for two years from the moment the
correct data is announced, loose at all general meetings of
shareholders held during that period all votes attaching to
the shares which he has acquired in excess of the limit
subject to declaration. Moreover, all decisions adopted in
the period between the acquisition of a block of shares and
the moment of disclosure of correct information may be
annulled in court in the event that the issuer's managing
bodies have been changed or property or non-property rights
of shareholders have been violated by the decisions.
Article 10. Tender Offer
1. Persons who intend to acquire a block of securities of
the issuer may do so by means of a tender offer. Tender
offer means the procedure for stating that a natural or
legal person is willing to acquire a part or all securities
of the issuer. Tender offers shall be executed through the
stock exchange.
2. Tender offers to acquire the shares of the accountable
issuer may be mandatory and voluntary. If a person, acting
independently or in concert with other persons, acquires
more than 50 percent of votes at the general meeting of
shareholders of the issuer who has issued securities into
public trading, he must submit a tender offer to buy up the
remaining shares of the issuer at the price stated in the
offer. This price shall be registered with the Securities
Commission and it must not be less than the weighted average
of prices of the shares the offeror acquired over a year
before exceeding the 50 percent limit.
3. Tender offers shall be registered and the rules for
their submission and execution shall be established by the
Securities Commission.
Chapter IV
INTERMEDIARIES OF PUBLIC TRADING IN SECURITIES
Article 11. Prohibition to Engage in Intermediary
Activity in Public Trading
in Securities or in Consulting on Matters of Direct
Investment
without a Due Licence
1. Only enterprises which have a licence issued by the
Securities Commission and commercial banks which have been
issued the licence by the Bank of Lithuania shall have the
right to engage in intermediary activities in public trading
in securities or to consult third parties on matters of
direct investment in securities. As used in this Law the
following activities performed for a fee shall be considered
as consulting on matters of direct investment in securities
:
3) announcement and publishing of studies providing
specific recommendations on matters of investment in
securities;
2. The licence for consulting third parties referred to
in par. 1 of this Article shall not be required:
3) governmental services and agencies established
following the decision of the Government of the Republic of
Lithuania for the purpose of promotion of domestic or
foreign investments;
3. One person may be the owner (shareholder) or employee
of only one brokerage firm or of investment management and
consulting firm. If a person becomes the owner or
shareholder of several enterprises of such type as a result
of the reorganisation or for some other reasons, he must
immediately inform the Securities Commission thereof and
take measures to rectify the situation. Until the situation
is rectified, such person may not participate in the
management and activities of more than one enterprise.
4. Commercial banks shall have the right to engage in the
activities specified in par. 1 hereof: set up specialised
internal structural divisions or establish brokerage firms
or investment management and consulting firms as
subsidiaries of the banks. All the regulations and
requirements prescribed by this Law and other legal acts for
other intermediaries of public trading in securities shall
apply to the operations in securities carried out by
commercial banks and to the supervision of said operations.
Article 12 Brokerage Firms
1. An enterprise of any type determined by the Law on
Enterprises of the Republic of Lithuania which has obtained,
in the manner prescribed by Article 16 of this Law, a
licence to engage in intermediary activities in the sector
of public trading in securities may be a brokerage firm. A
brokerage firm may issue only registered shares.
2. Brokerage firms may engage in the following
activities:
1) act as intermediaries in public trading in securities,
being members of one or several stock exchanges or in any
other manner not prohibited by laws;
2) buy or sell securities in their own name or on behalf
of their clients and with their own or their clients' funds
in compliance with the provisions set forth in Article 13 of
this Law;
3) provide direct consultations to investors on the
issues concerning prices of securities, investment in
securities as well as their buying or selling;
6) consult the issuers on the matters concerning the
issue of securities and on attracting investments,
3. Brokerage firms shall be prohibited from engaging in
other activities not specified in this Article.
4. Brokerage firms shall have the right to establish
subsidiaries only for carrying out or servicing the
activities provided for in items 3 through 8 of par. 2
hereof. Brokerage firms shall be prohibited from
establishing subsidiaries for carrying out activities not
specified in this part.
Article 13. Duties of the Brokerage Firms
1. Brokerage firms must conduct separate accounting of
their own securities and the securities and cash funds of
their clients.
2. All contracts between brokerage firms and their
clients must be executed in writing in compliance with the
rules approved by the Securities Commission.
3. If a brokerage firm cannot execute all orders of their
clients, it must first of all execute orders to sell at the
lowest price and orders to buy at the highest price. If
several clients offer the same price, priority shall be
given to the orders which have been sent first unless the
trading rules of the stock exchange to which the order is
sent provide otherwise.
4. A brokerage firm may carry out security transactions
on its own account only after the execution of the orders of
all its clients to perform this operation or if it offers
better terms than the client : higher price when there is an
order to buy , or lower price when there is an order to sell
them.
5. A brokerage firm shall be prohibited from giving
knowingly misleading recommendations and information to its
clients.
6. Brokerage firms must comply with the capital adequacy
requirements approved by the Securities Commission as well
as keep accounting and other documents according to the
rules approved by the Commission, present to their clients
documents certifying securities transactions, statements of
accounts, and reports on their financial position, keep the
securities of their clients, prepare annual and periodical
reports on their activities and financial position.
7. In buying or selling securities, consulting on the
issues of their trading as well as in providing portfolio
management services, a brokerage firm shall be represented
by a broker who has passed qualifications exams organised by
the Securities Commission or who has some other
qualifications certificate recognised by the Commission. The
Securities Commission may determine other operations for the
performance whereof it is necessary to have a document
certifying professional qualifications.
8. A brokerage firm must keep confidential information of
its clients secret. The firm must approve regulations for
keeping confidential information secret, which shall apply
to its brokers, members of managing bodies and other
employees.
Article 14. Investment Management and Consulting Firms
1. An enterprise of any type specified in the Law on
Enterprises of the Republic of Lithuania which has been
issued, in accordance with the procedure established in
Article 16 of this Law, a licence to consult third parties
on investment matters may be an investment management and
consulting firm. Investment management and consulting firms
may issue only registered shares.
2. Investment management and consulting firms may be
engaged in activities specified in items 1 through 4 of par.
1 of Article 11 of this Law.
3. Investment management and consulting firms shall be
prohibited from participating in the activities of other
enterprises, having a share in their capital, investing in
securities.
Article 15. Duties of Investment Management and
Consulting Firms
1. Management contracts under which an investment
management and consulting firm is authorised to manage an
investment portfolio must be executed in writing in
compliance with the rules set by the Securities Commission.
A copy of such contract must be presented to the brokerage
firm in which securities referred to in the contract are
deposited. If a brokerage firm accepts orders from an
investment management and consulting firm which are not in
compliance with management contract, both firms shall be
jointly liable for the consequences.
2. Investment management and consulting firms must keep
the accounting and other documents in compliance with the
rules approved by the Securities Commission, present to
their clients documents certifying transactions with
securities, statements of accounts, reports on their
financial position, prepare annual and periodic reports on
their activities and financial position.
3. In giving professional consultations or managing
portfolios of their clients, an investment management and
consulting firm shall be represented by a broker who has
passed qualifications exams organised by the Securities
Commission or who has some other qualifications certificate
recognised by the Commission.
4. Investment management and consulting firms must keep
confidential information of their clients secret. The same
requirement shall apply to brokers, members of managing
bodies and other employees of investment management and
consulting firms.
Article 16. Licencing of Intermediaries of Public Trading
in Securities
1. An enterprise may start the activities of the
brokerage firm or investment and consulting firm only upon
obtaining a licence issued by the Securities Commission.
Brokerage firms and investment management and consulting
firms may reorganise themselves only with the prior consent
of the Securities Commission. The Securities Commission
shall have the right to refuse giving its consent to the
reorganisation of the firm if:
1) after the reorganisation, the firm would not meet the
capital adequacy requirements prescribed by this Law and the
rules approved by the Securities Commission;
2. The decision of the Securities Commission to refuse
giving its consent to the reorganisation of a brokerage firm
or an investment management and consulting firm may be
appealed to court.
3. The applicant for the licence of a brokerage firm or
an investment management and consulting firm shall file with
the Securities Commission an application containing the
following information:
2) full names of the owners (shareholders), their
addresses, share of capital and votes, and information
concerning their participation in the activities and capital
of other enterprises;
4) full names of persons responsible for the organisation
and management of activities referred to in the licence,
their addresses, professional qualifications, employment
history over the last five years;
5) the amount of its own and borrowed capital which is
planned to be used for the organisation of the activities
referred to in the licence, as well as the sources of
borrowing;
6) data on the previous activities of the firm and
reasons for which these activities have been terminated;
7) the list of persons who have the right to conclude
transactions with securities on behalf of the firm under
Article 17 of this Law;
4. A business plan describing how the firm is going to
organise and carry out its activities as well as revealing
other data on the firm as prescribed by the rules of the
Securities Commission must be attached to application for
obtaining the licence of a brokerage firm or an investment
management and consulting firm.
5. The Securities Commission shall have the right to
establish requirements for the minimum amount of own capital
and the maximum amount of borrowings provided for by item 5
of par. 3 hereof, as well as for premises and
telecommunications equipment.
6. The Securities Commission may issue special licences
for brokerage firms, entitling them to carry out only a part
of functions specified in Article 12 of this Law, as well as
refuse granting them the right to accept money for acquiring
securities, to open cash accounts for the clients and to
trade on their own account. Special licences may be issued
if a firm does not qualify for one or several types of
activities specified in Article 12 of this Law or at the
request of the firm itself.
7. The Securities Commission may refuse to issue the
licence if:
1) the application does not meet the requirements set
forth in par. 3 hereof or the data provided in it are
incomplete or not true;
2) own funds available to the applicant are less than the
minimum amount established by the Securities Commission or
borrowed funds exceed the maximum prescribed by the
Commission;
3) owners of the applicant or persons who directly run it
have a bad reputation (there is evidence of cases of
dishonesty or violations of financial discipline, or
penalties have been imposed for the abuse of their official
position, or administrative penalties have been imposed for
the violation of legal acts regulating securities market, or
they have been penalised for fraudulent bankruptcy);
5) at least one of the owners (shareholders) or managing
body members of the applicant, or the head of its
administration or its chief financier have not served out
the sentence for crimes against property, business conduct
or finances;
8. Managers of a firm must notify in advance the
Securities Commission about the changes in the composition
of the owners (shareholders) of the brokerage firm or
investment management and consulting firm.
9. The Securities Commission must inform the applicant
about the consent or refusal to issue the licence within 3
months from the filing of all documents and data. The
Securities Commission shall have the right to request that
the applicant present additional data or explanations. In
this case the time limit for the consideration of
application shall be calculated from the date the last data
or documents have been filed. Refusal to issue the licence
must be justified in writing and may be appealed in court.
10. Commercial banks shall acquire the right to carry out
operations in securities in accordance with the licence
issued by the Bank of Lithuania. When issuing the licence to
a commercial bank, the Bank of Lithuania shall restrict
operations in securities if the commercial bank fails to
present the Securities Commission's conclusion concerning
the preparedness of the commercial bank to engage in such
activities.
Article 17. Brokers
1. A natural person who is licenced by the Securities
Commission may be a broker. The Securities Commission may
issue a general licence entitling a person to perform all
brokerage operations or a special licence entitling him to
perform one or several specified brokerage operations.
2. A person who applies for a broker's licence must pass
the examinations organised by the Securities Commission or
present to the Commission a qualifications certificate
recognised by it. The Securities Commission shall have the
right to set education or professional requirements for
brokers.
3. The Securities Commission shall have the right to
conduct from time to time but no more frequently than once a
year the brokers' qualifications re-evaluation. A broker's
qualifications may be re-evaluated on the basis of the
clients' justified complaints, as well as reports, findings
and other documents of institutions empowered by this Law to
check the activities of the intermediaries of public trading
in securities, which evidence the broker's inadequate
qualifications. According to the qualifications re-
evaluation results the number of functions to the
performance whereof the broker is entitled may be reduced
and if it is established that the broker has entirely lost
his qualifications, his licence shall be revoked.
Article 18. Suspension and Revocation of the Licence
1. The Securities Commission shall have the right to
revoke the licence issued to a brokerage firm, investment
management and consulting firm or a broker if the holder of
the licence:
2) fails to commence licenced activities within 12 months
or stops such activities for more than 12 months;
5) does not meet capital adequacy requirements, and is
unable to fulfil its obligations to the creditors and
particularly if this poses a threat to the security of the
property entrusted to it/him;
7) has concealed information about conviction for the
acts referred to in item 5 of par. 7 of Article 16;
2. The revocation of the licence shall become effective
from the moment such decision is passed, irrespective of
whether or not it is disputable.
3. The Securities Commission may suspend the licence if
the brokerage firm or investment management and consulting
firm, its broker or any other employee violates this Law or
other legal acts regulating trading in securities. The
licence shall be suspended for no longer than 3 months
during which the Securities Commission shall decide whether
to renew or revoke the licence. The accounts of such firm
may be frozen during the suspension of the licence.
4. Before passing a decision to revoke or suspend the
licence, the Securities Commission must inform the firm or
its broker regarding whom such decision may be passed and
provide them with an opportunity to give explanations.
5. Upon suspension or revocation of licence, the broker
shall loose the right to continue his professional
activities. The suspension or revocation of the broker's
licence shall cause the suspension or revocation of the
licence of the brokerage firm or investment management and
consulting firm wherein said broker is employed only if the
firm no longer qualifies for the licence that it has been
issued.
6. The Securities Commission shall have the right to
appoint the Administrator for the period of suspension of
the licence of the brokerage firm or investment management
and consulting firm, for the supervision of the firm's
activities. After the appointment of the Administrator,
managers and brokers of the firm must obtain his approval
for all the decisions relative to the activities of the
firm. Other rights and duties of the Administrator shall be
established by the Securities Commission.
7. Upon the revocation of the licence, the brokerage firm
or investment management and consulting firm shall be
liquidated or reorganised in accordance with the laws
regulating the liquidation or reorganisation of the relevant
type of enterprises and the rules approved by the Securities
Commission concerning the management of securities and money
accounts in the event of the revocation of the licence.
The Securities Commission shall notify the appropriate
Registrar responsible for the maintenance of the register of
enterprises about the revocation of the licence and shall
announce this information in "Valstybës þinios" (Official
Gazette).
8. The reasons specified in par. 1 hereof shall be
grounds for the Bank of Lithuania to apply enforcement
measures to commercial banks. The enforcement measures shall
be applied on the initiative of the Bank of Lithuania or the
Securities Commission. The enforcement measures applied
because of the reasons stated in par. 1 hereof may be lifted
only with the consent of the Securities Commission. When
applying enforcement measures the Bank of Lithuania must
follow the procedures provided for in par. 4 hereof.
Article 19. Association of the Intermediaries of Public
Trading in Securities
1. Brokerage firms and investment management and
consulting firms may form associations of the intermediaries
of public trading in securities.
2. The main objectives of the Association, as self-
regulating institution, must be as follows:
1) to express the attitude of the intermediaries of
public trading in securities belonging to the association to
the problems of the functioning of securities market;
2) to prepare the Ethics Code of the intermediaries of
public trading in securities belonging to the association
and to supervise compliance with the Code;
3. The procedure and conditions of membership in the
Association shall be defined in its Statutes. Association
Statutes and any amendments thereto must be agreed with the
Securities Commission prior to their registration.
4. Alongside with the Statutes, the Association of the
Intermediaries of Public Trading in Securities must prepare
and submit to the Securities Commission for approval the
Ethics Code of its members. An association which is being
newly formed may refrain from preparing its Ethics Code if
it passes a decision to recognise and comply with the Ethics
Code of members of an already functioning association.
5. The Association of the Intermediaries of Public
Trading in Securities may impose money penalties for
violations of the Ethics Code of the Intermediaries of the
Public Trading in Securities or the Statutes of the
Association. The Association must notify the Securities
Commission of such violations.
Chapter V
STOCK EXCHANGE
Article 20. The Concept and Purpose of the Stock Exchange
1. Only the stock exchange which has the permit issued by
the Securities Commission may engage in stock exchange
activities.
2. Stock exchange is a non-profit specialised enterprise
registered in the Republic of Lithuania, which is engaged
only in the activities of a stock exchange, the purpose of
which is :
2) to organise trading in securities, their listing,
quotation, safe and efficient transactions and settlements;
3) to promote fair trading in securities and to preclude
manipulation of prices and other unfair actions;
4) to spread unified information allowing to appraise the
securities quoted on the stock exchange and to publish
official bulletin that provides information on prices on the
stock exchange and on the issuers whose securities are
listed on the stock exchange;
3. The authorised capital of the Exchange shall be
divided into equal parts represented by shares not entitled
to dividend. The Exchange is a legal entity and has its
name, seal, and a bank account. The name of the Exchange
must contain the words "vertybiniø popieriø birþa" (stock
exchange) (or the acronym VPB). The name of the stock
exchange must meet the requirements of the regulations of
the names of enterprises, offices and organisations approved
by the Government. Disputes concerning the name of the
Exchange shall be settled in court.
4. The Exchange is a limited liability firm. It shall be
liable for its obligations to the extent of all its
property. Shareholders shall be liable for its obligations
only to the extent of the amount that they must pay for
their contributions to the authorised capital. Contributions
to the authorised capital shall be represented by registered
shares not yielding dividend, which entitle to participate
in the trading and management of the stock exchange. One
share in the stock exchange shall carry one vote. Stock
exchange shares may be acquired only by brokerage firms,
commercial banks which have been licenced in the manner
prescribed by this Law to carry out operations in
securities, the Ministry of Finance of the Republic of
Lithuania and the Bank of Lithuania. Following the decision
of the regular meeting of shareholders, the Exchange must
issue such number of new shares as there are applications
for the acquisition thereof filed by brokerage firms and
banks possessing a licence issued by the Securities
Commission prior to the day of the meeting.
5. A shareholder of the Stock Exchange, upon terminating
his activities as an intermediary in public trading in
securities, must no later than within 30 days sell the share
of the Stock Exchange held by him to another person entitled
to be a shareholder of the Stock Exchange. If he fails to
sell the share within the specified period, the shareholder
must address the Stock Exchange which shall mediate in
selling the share held by him at the market price ruling at
the moment. In the event of failure to sell the share within
a year's period, the Stock Exchange shall repurchase it at
its nominal value. The shares of the Stock Exchange
repurchased by it may account for no more than 10% of its
authorised capital. The shares which exceed the limit must
be cancelled in accordance with the procedure established by
law and the authorised capital must be reduced.
6. One shareholder, with the exception of the Ministry of
Finance of the Republic of Lithuania and the Bank of
Lithuania, may hold no more than one share of the Stock
Exchange.
7. The Stock Exchange shall have no right to acquire
securities in its own name except in cases when:
2) the issuer whose shares are acquired by the Stock
Exchange performs the functions of trading, settlement or
other functions directly connected with the purpose of the
Stock Exchange, which are provided for in the trading rules
of the Stock Exchange, and the issuer's securities are not
listed on the Exchange;
2. The founders of a Stock Exchange may be natural or
legal persons who meet the requirements of par. 4 of Article
20 of this Law and who have concluded the founding agreement
in a notarised form.
3. The Stock Exchange may not commence and carry out its
activities if it has no permit of the Securities Commission
and has not been registered with the Commission in
accordance with this Law and subordinate legislation
regulating the procedure of registering Stock Exchanges. A
Stock Exchange may be reorganised or liquidated only with
the prior consent of the Securities Commission.
4. Willing to obtain a permit for the foundation of an
Exchange, its founders must file the following documents
with the Securities Commission:
1) an application stating the purpose of founding an
Exchange, its name, registered office, information
concerning the founders and other persons responsible for
the founding of the Exchange and its activities;
5. The Statute of the Stock Exchange must contain the
following data:
5) the competence of the meeting of the Exchange members,
the procedure for calling the meeting and adopting decisions
as well as conditions of invalidity thereof;
6) the formation of the Exchange Board, principles of
representation and definition of the functions of the Board;
6. The rules of trading on the Stock Exchange must
regulate:
7. Upon receiving all the required documents, the
Securities Commission must within 3 months issue a permit to
establish an Exchange or present to the founders a
substantiated written refusal. The Securities Commission may
request that the founders of the Stock Exchange present
additional information or explain the data already filed. In
this case the counting of the 3-month period shall commence
anew from the filing of appropriate data or explanations.
8. The Securities Commission shall refuse to issue a
permit to establish an Exchange if :
1) the Statute or founding agreement of the Exchange or
other submitted documents are not in compliance with the
laws of the Republic of Lithuania, decisions of the
Government of the Republic of Lithuania or the Securities
Commission;
3) the presented economic substantiation of the Exchange
activities is insufficient for it to adequately perform its
functions;
9. When issuing a permit for the establishment of an
Exchange, the Securities Commission shall at the same time
register the Statute of the Exchange. Amendments and
supplements to the Statute and rules of trading on the
Exchange shall come into effect from the day of registration
thereof with the Securities Commission.
10. The Board of the Exchange shall lodge with the
Commission an application for registration of the Exchange:
11. The following documents shall be filed together with
the application for the registration of the Exchange:
1) the statutory report and the conclusions of the
auditing committee of the Exchange concerning the report;
and
12. The Exchange shall be refused registration if:
3) the valuation of non-monetary (property) contributions
does not correspond to the actual value of the
contributions;
13. Upon eliminating the reasons set out in par. 12 which
precluded the registration of the Exchange, the founders of
the Exchange or the Board shall have the right to address
the Securities Commission one more time requesting
registration. Disputes concerning the registration of the
Exchange shall be disposed of by court.
14. The Stock Exchange shall acquire the rights of legal
person from the day of its registration.
Article 22. Members of the Stock Exchange
1. The shareholders of the Stock Exchange shall be called
its members. Only persons specified in par. 4 of Article 20
of this Law may be members of the Stock Exchange, with the
exception of cases provided for in par. 3 of Article 41.
2. Members of the Stock Exchange shall have the following
rights:
1) to participate in the management of the Exchange and
to obtain information concerning the activities and
financial position thereof;
2) to take part in the trading on the Exchange upon being
issued the licence of the Securities Commission in
accordance with the procedure established by this Law;
3. When realising his rights and performing his
obligations on the Exchange, a member of the Stock Exchange
must comply with this Law and the rules of the Exchange.
4. In the cases when a member of the Exchange violates
the rules regulating the activities of the Exchange the
Board of the Exchange shall have the right to suspend for up
to 3 months his right to take part in the trading on the
Exchange. The list of such violations shall be presented in
the rules of trading on the Exchange. The decision
concerning the suspension of the member's participation in
the trading on the Exchange shall be adopted by a 2/3 vote
of all the members of the Exchange Board. If a member of the
Exchange who has violated the rules regulating the
activities of the Exchange participates in the management of
the Exchange (either directly or through his
representative), the Board of the Exchange may suspend his
powers for the above-specified period or remove the member
from the managing bodies. The sanctions provided for in this
item may also be imposed on the brokerage firms operating on
the Exchange which are not members of the Exchange.
5. If a member of the Exchange repeatedly commits
violations specified in this Law, the Board of the Exchange
may, on the decision of 1/2 of all the Board members,
propose to the general meeting of the Exchange members
(hereinafter referred to as the general meeting) to expel
such a member from the Exchange, suspending until the
meeting the member's rights to participate in the trading on
the Exchange. The Board of the Exchange shall suspend for
the period the member's (his representative's) powers to
take part in the management of the Exchange.
6. A natural or legal person who is expelled from the
Exchange shall not be returned his contribution into the
authorised capital of the Exchange, and the share owned by
him shall be either sold to another intermediary of public
trading in securities who aspires for membership of the
Exchange, or cancelled. The losses inflicted on the Exchange
by the expelled member shall be recovered in accordance with
the procedure established by laws of the Republic of
Lithuania.
7. The member of the Exchange may appeal to court against
the decisions of the Board of the Exchange and the general
meeting concerning the suspension or termination of
membership. The filing of the appeal shall not reverse the
decision of the Board of the Stock Exchange or the general
meeting.
8. The Statute of the Exchange may also provide for other
rights and obligations of the Exchange members provided that
they are in compliance with the effective laws.
Article 23. Management of the Stock Exchange
1. The management of the Stock Exchange shall be
organised in accordance with the Company Law, taking into
consideration the peculiarities provided for in this Law.
2. The functions of the Supervisory Board in the Stock
Exchange shall be performed by the Council of the Stock
Exchange. Its formation shall be mandatory. 1/3 of the
members of the Council of the Stock Exchange must be persons
proposed by the issuers, investors, their unions
(associations, confederations, etc.) who have no property or
labour relations with the intermediaries of public trading -
shareholders of the Exchange.
3. A person authorised by the Securities Commission shall
have the right to take part in the meetings of the Council
and Board of the Exchange with deliberate vote.
Article 24. The Authorised Capital and Reserves of the
Stock Exchange
1. The authorised capital of the Exchange shall be formed
from cash and property (non-monetary) contributions of its
founders and members (shareholders).
2. The amount of the authorised capital shall be
determined in the Statute of the Exchange.
The minimum amount of the authorised capital and the
minimum nominal value of one share shall be determined by
the Securities Commission.
3. The profit of the Exchange shall consist of its
revenue less its expenditures. The received profit shall be
distributed into:
1) the profit reserve of the Exchange used for purchasing
fixed assets and for expanding and improving the activities
of the Exchange;
3) the annual payments (honorariums) which may account
for no more than 1/10 of the annual net profit of the
Exchange;
5. It shall be prohibited to increase the authorised
capital of the Exchange from the mandatory reserve, profit
reserve or other reserves of the Exchange. A permission from
the Securities Commission must be obtained for making any
changes in the authorised capital.
6. The authorised capital of the Exchange shall be deemed
increased after all shares have been fully paid up and the
capital has been accordingly registered with the Securities
Commission.
Article 25. Revenue of the Stock Exchange
1. The proceeds from the Exchange activities may consist
of:
2. Specific amounts of fees and payments provided for in
part 1 hereof shall be determined by the Board of the
Exchange upon the co-ordination thereof in advance (prior to
their coming into effect) with the Securities Commission.
3. Other payments for the services provided by the
Exchange may be prescribed only upon obtaining permission
from the Securities Commission.
Article 26. Trading in Securities on the Stock Exchange
1. Trading in securities on the Stock Exchange shall be
conducted in accordance with the rules of trading specified
in Article 21 which are approved on the proposal of the
Exchange by the Securities Commission.
3. Securities shall be included in the Current List of
the Stock Exchange on the decision of the Board of the
Exchange, pursuant to the application of the issuer of
securities or the brokerage firm. Appended to the
application must be the prospectus and the last annual
prospectus -statement. If the application for the listing of
securities is filed by the brokerage firm, it must
additionally present a copy of at least one order to buy or
sell relevant securities.
4. All securities registered with the Securities
Commission may be included in the Current List of the Stock
Exchange. The Board of the Exchange shall have no right to
refuse to include securities in the Current List of the
Exchange, except in cases when documents specified in part 3
hereof are not presented or when such list is not compiled
altogether. The issuer whose securities are included in the
Current List of the Exchange must present to the Exchange,
in accordance with the procedure established and within the
time period set by it, information concerning:
5. Securities shall be included in the Official List of
the Stock Exchange on the decision of the Board of the
Exchange following the application of the issuer or the
brokerage firm authorised by the issuer. Attached to the
application must be the prospectus, the last annual
prospectus-statement, all period statements of the current
year, and other information provided for in the rules of
trading in securities on the Exchange.
6. The Stock Exchange must set forth the requirements
which must be satisfied by the issuer in order to have his
securities included in the Official List. Only fully paid
securities the transferability of which is not limited may
be included in the List. Other requirements shall be
established in the rules of trading of the Exchange but they
may not be smaller than the requirements prescribed to
accountable issuers by this Law.
7. The inclusion of securities in the Official List of
the Exchange shall become invalid if they are not submitted
for sale within 3 months of the passing of the decision to
include them in the List. In this case the issuer shall have
the right to repeatedly apply to the Board of the Exchange
requesting the inclusion of the securities in the Official
List of the Exchange.
8. The Stock Exchange may suspend, for no longer than a 3-
month period, trading in securities which are on the
Official List, if:
2) the issuer of the securities or the securities no
longer meet the requirements set to the Official List;
9. Upon suspending trading in certain securities, the
Stock Exchange must without delay, on the same day notify
thereof the Securities Commission and the issuer. In the
event that the reasons underlying the above decision are not
eliminated within 3 months of the suspension of trading, the
Stock Exchange shall have the right to remove the securities
from the Official List.
10. The Stock Exchange must announce the total daily
trade turnover and the trade turnover and prices of the
traded securities.
11. The Stock Exchange must notify the Securities
Commission of :
12. The procedure for furnishing information specified in
par.11 shall be established by the Securities Commission.
13. Members of the Board and Council of the Stock
Exchange, the Auditing Committee and Arbitration as well as
all employees of the Exchange shall have no right to
divulge, without a special authorisation of the Exchange
Board, confidential information that comes to their
knowledge in the course of their work on the Exchange.
14. Brokerage firm intending to conclude a transaction on
the Stock Exchange, must submit an order in its name and
guarantee the payment of the securities or delivery thereof
to the other party of the transaction.
15. The Stock Exchange must form the Guarantee Fund which
would help to improve the situation if one or several
brokerage firms are not in the position to fulfil their
obligations. The Guarantee Fund shall be composed of the
deposits of the intermediaries of public trading in
securities. The rules of the Guarantee Fund formation and
use shall be approved by the general meeting of the Exchange
shareholders. The funds of the Guarantee Fund may not be
used to finance current expenditure of the Exchange. The
Securities Commission shall have the right to determine
minimum requirements for the amount and activities of the
Guarantee Fund.
Article 27. Reorganisation and Liquidation of the Stock
Exchange
1. The Stock Exchange shall be reorganised or liquidated
in accordance with the procedure established by the laws of
the Republic of Lithuania, this Law and the Statute of the
Exchange.
2. The Stock Exchange shall be liquidated in the
following cases:
3) when the own assets of the Exchange are reduced to
over 50% of the authorised capital of the Exchange;
4) when the Securities Commission revokes the licence to
engage in the activities of the Stock Exchange;
3. Liquidating itself or suspending its activities, the
Stock Exchange must immediately notify the Securities
Commission thereof. At least one liquidator of the Exchange
shall be appointed by the Securities Commission.
4. After settlement with creditors and payment of all
taxes the assets of the Stock Exchange in liquidation, upon
deducting the value of the reserves specified in par. 5
hereof, shall be proportionately distributed among its
members-shareholders.
5. The profit reserve of the Stock Exchange, mandatory
reserves and other reserves approved at the general meeting
of the Exchange shall be transferred to other non-profit
organisations (enterprises) or the Lithuanian State Budget.
Each member-shareholder of the Exchange shall have the right
to indicate, within 3 months after the discharge of the
Exchange liabilities, a non-profit organisation (enterprise)
to which the liquidators must transfer a portion of the
Exchange reserves in proportion to his contribution. The
amount of the reserves of the Exchange in liquidation that
has not been transferred to other non-profit organisations
(enterprises) shall be transferred to the Lithuanian State
Budget in accordance with the procedure established by the
Government of the Republic of Lithuania.
Chapter VI
ACCOUNTING OF SECURITIES
Article 28. The Form and Accounting of Securities
1. All securities which may be an object of public
trading shall be recorded by entries in the personal
securities accounts opened in the name of the securities
owners. The entry in the securities account shall be a
direct proof of the right of ownership to the securities
specified thereby. The securities accounts may be managed on
paper or by computer.
2. Issuers who issue securities into circulation or
intermediaries of public trading (brokerage firms or banks)
who are participants of the Central Securities Depository of
Lithuania (hereinafter referred to as the Central
Depository) operating in accordance with the procedure
established by Article 29 of this Law shall have the right
to open and manage personal securities accounts. In the
event that the provisions of this Law concerning the
operating of securities accounts apply both to issuers and
intermediaries of public trading in securities, both shall
be hereinafter referred to as account operators.
3. The issuer shall have the right to open and manage
personal accounts only of the securities issued by it,
except in cases when the issuer is at the same time an
intermediary of public trading in securities. The issuer
must open personal accounts of the securities issued by it
to each investor who has not made a written statement of
delegating the management of the account to the intermediary
of public trading in securities. The issuer may delegate by
a notarised agreement the management of such accounts to the
intermediary of public trading in securities notifying
thereof the Securities Commission and the Central Depository
no later than 10 days prior to delegating. The consent of
investors is not mandatory for concluding the above
agreement.
4. Intermediaries of public trading in securities may
open and manage personal securities accounts only by
concluding written agreements with investors, except in the
case provided for by par. 3 hereof. The intermediary of
public trading in securities may limit itself only to the
management of accounts of certain issuers or accounts of
certain types of securities. The public trading intermediary
must give a written notice of such decision to the
Securities Commission and the Central Depository.
Intermediaries of public trading shall be prohibited from
refusing to open and manage personal accounts of securities
which are within their sphere of activities.
5. The investor may choose one or several intermediaries
of public trading in securities as the managers of its
personal securities accounts.
6. The issuer shall have the right to request at any time
that the intermediaries of public trading who under
agreement with the investors manage the accounts of
securities issued by the issuer should present the list of
owners of said securities. The right shall be realised by
submitting an enquiry to the Central Depository.
7. The following must be specified in every securities
account opened in the name of the securities owner:
8. The operator of securities account must notify the
owner in writing of any change in its account unless the
agreement concluded between them provides otherwise. At the
close of a calendar year the operators of securities
accounts must within 15 days present each account owner with
the statement on the condition of the securities account at
the end of the last day of the past year. Documents issued
on the basis of entries made in securities accounts shall
not be considered as securities and may not be objects of
public trading.
9. Securities accounts of investors may be managed on
behalf of the operator of securities accounts only by its
employees possessing an appropriate written authorisation.
Each operator of accounts must present the Central
Depository with the list of such employees. Only the
employee authorised by the manager of accounts, who manages
an account shall have the right to change its contents.
10. Executives and employees of the account operator must
ensure confidentiality of information that comes to their
knowledge in the course of management of investors'
accounts, with the exception of cases when under this Law or
other laws of the Republic of Lithuania they are obliged to
furnish such information.
11. Securities accounts shall be conducted according the
double-entry book-keeping principle. Operators of securities
accounts must keep a consolidated journal of operations in
which all transactions in securities held on respective
accounts and other operations effecting the condition of the
account are recorded in a chronological order. Securities of
each issue shall be recorded in separate sections of the
consolidated journal of operations or in a separate journal.
Detailed rules of securities accounting shall be approved by
the Securities Commission.
Article 29. The Central Securities Depository of
Lithuania
1. The Central Securities Depository of Lithuania is a
non-profit institution the main function of which is to
conduct the general accounting of securities, prepare and
implement accounting systems for securities book keepers,
execute their servicing and supervision.
2. The founders of the Central Depository are the
Ministry of Finance of the Republic of Lithuania, the Bank
of Lithuania and the National Stock Exchange of Lithuania.
The founders of the Central Depository must provide
conditions for all stock exchanges founded in accordance
with the procedure established by this Law to become its co-
owners, however, the shares held by the Ministry of Finance
and the Bank of Lithuania must entitle them to at least 51%
of votes at the meeting of shareholders of the Central
Depository. The Central Depository shall operate in
accordance with this Law and the bylaws approved by its
owners.
3. The Central Depository shall perform the following
functions:
1) prepare and present to the Securities Commission for
approval the rules of accounting of circulation of
securities;
2) prepare and approve instructions for securities
accounting which specify separate procedures provided for in
the rules;
4) ensure that during the carrying out of transactions in
securities said securities be timely removed from the
securities account of one account operator and placed to the
securities account of another account operator;
5) supervise that the number of securities of each issue
put into circulation should correspond to the number of
securities which are actually in circulation;
6) prepare and implement measures which ensure the
integrity and security of the system of securities
accounting;
7) verify whether the account operators comply with the
rules and instructions of securities accounting;
8) accumulate, process and disseminate information
concerning securities accounting, train and consult
specialists in securities accounting;
9) provide other services related with the servicing of
securities accounts to the issuers, intermediaries of public
trading in securities and investors;
4. The rights and duties of the members and participants
of the Central Depository shall be specified in the bylaws
of the Central Depository. The bylaws of the Central
Depository and amendments thereto must be agreed with the
Securities Commission.
5. A representative of the Securities Commission shall
have the right to attend meetings of the managing bodies of
the Central Depository with deliberate vote.
6. The instructions and directions issued by the Central
Depository on the issues of securities accounting shall be
obligatory to all account operators.
Chapter VII
THE SECURITIES COMMISSION
Article 30. The Securities Commission - the Supervisory
Institution
of the Securities Market
1. Public trading in securities shall be regulated and
supervised by the Securities Commission of the Republic of
Lithuania (hereinafter referred to as the Securities
Commission).
3. The Securities Commission shall be formed and
liquidated by the Seimas of the Republic of Lithuania on the
proposal of the Government of the Republic of Lithuania.
Article 31. The Composition of the Securities Commission
and the Procedure
of its Formation
1. The Securities Commission shall consist of the
chairman and four members. The chairman and the members of
the Securities Commission shall be appointed by the Seimas
on the nomination of the President of the Republic for the
term of 5 years.
2. During the formation of the first Securities
Commission after the entry into force of this Law, powers
shall be granted to the chairman of the Commission for the
period of 5 years. Other members of the Commission shall be
appointed to the first Securities Commission after the entry
into force of this Law at the discretion of the President of
the Republic for the period of 4, 3, 2, or 1 year
accordingly in such a manner that in each subsequent year
one member of the Commission would have to be newly elected.
The chairman of the Securities Commission shall designate
one member of the Commission as his deputy.
3. Upon the expiry of the term of their respective
powers, by a special decision of the Seimas, members of the
Commission may remain in office until the appointment of new
members.
4. If the chairman or Commission members refuse their
post or due to objective reasons find themselves not in the
position to fill the office prior to the expiry of their
powers, the President of the Republic shall appoint other
persons to fill the vacancies for the remaining term of
office.
5. During their term of office the chairman and members
of the Securities Commission may be dismissed from their
respective posts only at their own request as well as upon
coming into effect of a court sentence convicting them of
commission of a crime or upon their gross violation of the
Code of Ethics of the Members and Employees of the
Securities Commission provided for in par. 1 of Article 34
of this Law.
6. A member of the Securities Commission may not hold any
other elective or appointive post, or be employed in
business, commercial or any other private institutions or
enterprises, with the exception of educational or creative
work. Neither may he receive remuneration other than the
salary of the Securities Commission member and payment for
educational or creative activities.
Article 32. The Objectives and Functions of the
Securities Commission
1. The objectives of the Securities Commission shall be
as follows:
1) to monitor the compliance with the rules of fair trade
and competition in the public trading in securities;
2) to take measures assuring effective functioning of the
securities market and protect the interests of investors;
3) in co-operation with the ministries, other Government
institutions, the Bank of Lithuania, intermediaries and
participants of public trading in securities, to shape the
economic policy of the state which would promote the
development of securities market;
2. While implementing the tasks provided for in par.1
hereof, the Securities Commission shall perform the
following functions:
1) prepare, approve, amend or repeal the rules regulating
the licensing, establishment, reorganisation, liquidation
and activities of stock exchanges and intermediaries of
public trading in securities, the issue of and public
trading in securities;
2) prepare, approve, amend or repeal the forms of
prospectuses, annual and periodical reports and establish
the procedure for filing and announcing the above documents
for the issuers of securities;
3) present official explanations and recommendations on
issues concerning public trading in securities;
4) issue, suspend or revoke permits and licences of stock
exchanges, brokerage firms, investment management and
consulting firms, brokers and other participants in the
securities market whose licensing is provided for by other
laws of the Republic of Lithuania;
5) monitor, analyse, inspect and in other way supervise
the activities of intermediaries of public trading in
securities, their association, stock exchanges, the Central
Depository and its members;
6) approve and abolish the rules adopted by stock
exchanges, the association of intermediaries of public
trading in securities, and the Central Depository which
influence or may influence the functioning of the
participants of securities market and their financial
condition;
7) impose sanctions provided for in this Law and other
laws of the Republic of Lithuania on persons who violate
this Law and the rules and instructions approved by the
Securities Commission, the association of intermediaries of
public trading in securities and stock exchanges;
9) organise training courses, publish or take part in the
publishing of publications of general character and special
publications concerning the functioning and regulation of
securities market;
3. Legal acts approved by the Securities Commission as
well as its decisions, recommendations and exceptions shall
apply to all subjects of private and common law of the
Republic of Lithuania, with the exception of cases when the
above acts, recommendations and exceptions are recognised by
a court decision as being not in compliance with this Law or
other legal acts possessing superior legal force.
4. The Securities Commission must prepare and present to
the public and the Seimas annual report on the development
of the securities market and principal events which took
place during the accounting period.
Article 33. Organisation of Work of the Securities
Commission
1. The work of the Securities Commission shall be managed
by the chairman and in his absence - by the deputy chairman.
2. The chairman of the Securities Commission shall:
1) ensure that meetings of the Commission be called
regularly, determine issues to be considered at every
meeting, submit reports on the activities of the Commission,
in the period between meetings give instructions to the
Commission members and control their implementation;
2) manage the administration of the Commission, be
responsible for the drafting of normative acts, organise
control over the implementation of decisions adopted by the
Commission;
3. Each member of the Commission shall be responsible for
the sphere of Commission activities assigned to him and
shall participate in the consideration and adoption of
decisions on all issues within the competence of the
Commission.
4. The Securities Commission shall organise open and
closed meetings. Issues concerning the violations of this
Law and other legal acts, as well as issues concerning the
interests of only a single participant in the market shall
be considered at closed meetings. Other issues shall be
discussed at open meetings.
5. A meeting of the Securities Commission may take place
if attended by at least 3 members of the Commission.
Decisions shall be taken by a simple majority vote of those
attending the meeting, except in cases when legal acts are
adopted, amended or recognised invalid. In such cases a
decision shall be deemed passed if voted in favour of by at
least 3 members of the Commission. The Commission members
shall have equal rights of the casting vote. In the event of
a tie vote the chairman of the Commission shall have the
casting vote. The decisions of the Commission meetings shall
be adopted by open ballot voting if requested at least by
one Commission member.
6. The administration of staff members shall be formed
for the discharge of functions of the Securities Commission.
The structure of the administration and its staffing not
exceeding the annual wages fund approved by the Seimas shall
be approved by the Commission chairman.
7. In order to perform certain works and resolve certain
issues, the Commission may hire representatives and
specialists of ministries, departments, other government
agencies, municipalities, scientific and educational
institutions, organisations, interested institutions upon
agreement with their respective managers as well as invite
foreign specialists and experts.
Article 34. Duties of Members and Employees of the
Securities Commission
1. In order to avoid the conflict of interests, the
Securities Commission shall prepare the Ethics Code , which
shall regulate the activities of the present and former
members and employees of the Commission in the spheres
regulated by this Law. This Code shall take effect upon its
approval by the Seimas.
2. The present and former members and employees of the
Securities Commission shall have no right to use for their
own benefit or to disseminate the confidential information
disclosed to them in the course of their work on the
Commission.
3. Persons specified in par. 1 hereof shall be prohibited
from divulging confidential information received while
working on the Commission to other persons. Such information
may be divulged only to state officers and employees who
supervise how this Law is being complied with.
4. A person who, in cases provided by laws, has the right
to receive any confidential information from the members or
employees of the Securities Commission must comply with the
provisions of par. 1-3 hereof.
Article 35. Delegation of Powers
The Securities Commission may adopt a decision to
authorise a member or employee of the Commission to perform
any of its functions, except the adoption, amendment,
suspension or cancellation of rules and the imposition of
sanctions provided for by this Law.
Article 36. Financing of the Securities Commission
The Securities Commission shall be financed from the
State Budget.
Article 37. The Rights of the Securities Commission in
Investigating Violations
of Legal Acts Regulating the Functioning of
Securities Market
1. The Securities Commission shall have the right to
organise and carry out investigations in order to determine
violations of this Law and subordinate legislation enacted
on the basis thereof.
2. While carrying out investigations officers of the
Securities Commission shall have the right to:
2) take away temporarily, for up to 30 days, documents of
the inspected intermediaries of public trading in
securities, stock exchanges, the Central Depository, and
issuers, which may be used as proof of the committed or
intended violation, leaving behind a justified decision
concerning the taking of documents and a description of the
taken away documents;
3) insist on having copies made of accounting documents,
contracts, orders, memoranda and other documents which the
Commission considers to be of consequence for the
investigation;
4) upon producing official certificates and the justified
decision of the Commission or its chairman to conduct an
investigation, have unimpeded access to the premises of the
intermediaries of public trading in securities, stock
exchanges, the Central Depository, and the issuers, and
check the books, accounting documents and other sources of
information which might be of use for the investigation that
is being conducted;
5) upon producing justified decision of the Commission or
its chairman to receive from the banking institutions data,
certificates and copies of documents concerning financial
operations relative to the object under inspection.
Chapter VIII
LIABILITY FOR THE VIOLATIONS OF THIS LAW
Article 38. Effects of Violations of Law
1. Economic entities who violate this Law must:
1) act on the instructions given by the Securities
Commission to terminate their actions, restore the situation
to its original condition, rescind or change the agreements,
comply with other orders;
2. The Securities Commission shall have the right to
impose pecuniary penalties on:
1) the issuers who have to register securities pursuant
to Article 4 of this Law but either avoid or refuse doing
that - in the amount up to 10% of the total nominal value of
the securities subject to registration;
2) issuers, intermediaries of public trading in
securities or other economic entities who organise or
conduct public trading in securities which have not been
registered in the Securities Commission and in securities
the registration whereof has been either suspended or
annulled - in the amount equal up to the total nominal value
of securities offered for public trading, in other cases -
up to a three-fold amount of the total nominal value of the
securities offered for public trading;
3) issuers who do not meet the requirements set forth in
Article 6 of this Law - in the amount of up to 100 000 Lt;
4) economic entities who do not meet the requirements set
forth in Article 8 of this Law - in the amount of up to 100
000 Lt;
5) economic entities acting as intermediaries of public
trading in securities without the licence referred to in
Article 11 of this Law - up to the double amount of the
proceeds received illegally;
6) intermediaries in public trading in securities who
fail to meet the requirements set forth in Article 13 and 15
of this Law - in the amount of up to 100 000 Lt;
3. Prior to imposing pecuniary penalties set forth in
par. 2 hereof, the Securities Commission must provide
conditions for the managers of the economic entity on which
the penalty is imposed to give their explanations as to the
committed violation.
4. The application of sanction to economic entities, set
forth in par. 2 hereof shall not release their managers from
civil, administrative and criminal liability provided by the
laws of the Republic of Lithuania.
Article 39. Exaction of Pecuniary Penalties
1. Pecuniary penalties shall be paid into the State
Budget not later than within one month from the day of
receipt by the economic entity of the decision of the
Securities Commission to impose a penalty.
2. If an economic entity fails to pay the penalty imposed
on it within the period set forth in paragraph 1 hereof and
fails to produce a copy of the court's decision suspending
or annulling the decision to impose a pecuniary penalty,
said penalty shall be exacted from the economic entity
without suing for claims.
Article 40. Appealing against the Decisions Passed by the
Securities Commission
1. Economic entities may appeal to court for the reversal
or changing of the decision passed by the Securities
Commission within one month of the day of receipt of said
decision.
2. Appeal to court shall not suspend the fulfilment of
the instructions or decisions of the Securities Commission
unless the court stipulates otherwise.
3. Decisions of the Securities Commission and the motives
thereof shall be announced publicly.
Chapter IX
FINAL PROVISIONS
Article 41. Transitional Period
1. The Securities Commission shall be the successor to
the assets, rights and duties of the Securities Commission
under the Ministry of Finance. The Securities Commission
under the Ministry of Finance shall continue its activities
in accordance with the statute approved by the Government of
the Republic of Lithuania until the Seimas appoint the
chairman and members of the Securities Commission pursuant
to Article 31 of this Law.
2. The Central Securities Depository of Lithuania,
established following the decision of the Government of the
Republic of Lithuania, and the stock exchanges registered
prior to the entry into force of this Law, must, not later
than within one year, adopt amendments to their statutes and
the rules pursuant to this Law.
3. The shareholders of the operating stock exchanges who
do not meet the provisions of par. 4 of Article 20 of this
Law shall be entitled to further dispose of their shares,
however, they may only transfer said shares to persons who
qualify under specified provisions.
4. The chairman of the Securities Commission shall be
paid a monthly salary in the amount of 4 average monthly
wages until the law regulating wages of employess of
institutions and organisations financed out of the state and
municipal budgets is passed. The vice-chairman and the
members of the Securities Commission shall receive a salary
by 15 and 25 percent lower than the chairman of the
Securities Commission. The chairman of the Securities
Commission, its vice -chairman and other members of the
Commission Administration may not be paid any supplements or
bonuses. The wages of the employees of the Securities
Commission Administration shall be fixed by the chairman of
this Commission in accordance with the procedure for the
payment of wages to the employees of the Prime Minister's
Office, established by the Government of the Republic of
Lithuania.
I promulgate this Law passed by the Seimas of the
Republic of Lithuania.
ALGIRDAS BRAZAUSKAS
President of the Republic