OFFICIAL TRANSLATION
REPUBLIC OF LITHUANIA
LAW ON COLLECTIVE INVESTMENT UNDERTAKINGS
3 July 2003 No IX-1709
(As last amended on 19 June 2008 – No X-1630)
Vilnius
CHAPTER I
GENERAL PROVISIONS
Article 1. Purpose and Scope of the Law
1. This Law shall regulate the activities of collective investment undertakings and the supervision of such activities by the State. The purpose of the Law shall be to ensure protection of interests of co-owners of investment funds, shareholders of investment companies with variable capital, and closed-end type investment companies.
2. This Law shall have the aim of harmonising regulation of collective investment undertakings with the legal acts of the European Union specified in the Annex to this Law.
3. The Law shall apply to the services provided by harmonised and special collective investment undertakings, with the exception of those whose units or shares are not offered in the Republic of Lithuania and other Member States, or, based on their instruments of incorporation, are offered exclusively in non-Member States.
4. The Law shall not apply to the services provided by management companies and collective investment undertakings to the State, the Bank of Lithuania, the ECB, Central banks or institutions of the EU Member States engaged in public debt management.
5. Management companies, investment companies with variable capital and closed-ended investment companies shall be subject to requirements of the Law on Companies to the extent the present Law does not provide otherwise.
Article 2. Definitions
1. “Collective investment undertaking of the open-ended type” shall mean a collective investment undertaking whose units or shares are issued and redeemed upon a request of investors.
2. “Subsidiary” shall mean a subsidiary undertaking as defined in the Law on Financial Statements of Entities.
3. “Financial instrument” shall mean:
1) in respect of a harmonised undertaking for collective investment in transferable securities (hereinafter referred to as a “harmonised collective investment undertaking”) – as defined in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments;
4. “Financial instrument index” shall mean a statistical ratio showing the movement in the value of the financial instruments of which such index is composed.
5. “Financial instrument portfolio” shall mean the financial instruments portfolio as defined in the Law on Markets in Financial Instruments.
7. “Net assets” shall mean the difference between the value of assets of the investment fund or the investment company and non-current and current liabilities of the investment fund or the investment company.
8. “Investment company” shall mean an investment company with variable capital or a closed-ended investment company.
9. “Investment company with variable capital” shall mean a company whose shareholders have the right to request at any time that their shares be redeemed and the amount of whose capital varies depending on the issue and redemption of shares. The investment company with variable capital may be of the open-ended type only.
10. “Investment instruments” shall mean:
1) in respect of a harmonised collective investment undertaking – the financial instruments indicated in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments, also deposits, the immovable and movable property necessary for the direct activities of an investment company with variable capital;
2) in respect of a special collective investment undertaking – the financial instruments indicated in paragraph 4 of Article 3 of the Law on Markets in Financial Instruments, also deposits, immovable property as well as the movable property and the installations necessary for the operations thereof.
11. “Investment fund” shall mean a type of activity whereby the assets managed by legal or natural persons by the right of common partial ownership under the trust right in accordance with the procedure and under the conditions established in this Law and the rules of the investment fund. The concept of the investment fund used for the purposes of this Law shall include investment funds of the open-ended and closed-ended types unless a specific Article of the Law specifies otherwise.
12. “Unit” shall mean a transferable security certifying the title of the co-owner of an investment fund to a part of the assets comprising the investment fund.
13. “Offering of units or shares” shall mean the offering of units or shares in the mass media, advertising or by other methods addressed to more than 100 persons.
14. “Derivative financial instruments” shall mean:
1) in respect of a harmonised collective investment undertaking – the financial instruments indicated in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments the value whereof changes according to the interest rate, the price of transferable securities, a currency exchange rate or the financial index;
15. “Collective investment undertaking” shall mean an investment fund or an investment company the sole purpose of the incorporation whereof shall be, by offering the units or shares in accordance with the procedure laid down in Article 13 of this Law, accumulate personal funds and invest such funds collectively into the assets specified in this Law by complying with the investment requirements set forth by this Law.
16. “Participant in a collective investment undertaking” shall mean a co-owner of an investment fund or a shareholder of an investment company.
17. “Prospectus of a collective investment undertaking” shall mean the document providing to investors and the public the essential information about the offered transferable securities of a collective investment undertaking.
18. “A sub-fund of a collective investment undertaking” shall mean a part of the assets of an umbrella collective investment undertaking managed separately from other assets thereof.
20. “Benchmark index” shall mean a ratio chosen by a management company or investment company the management of whose assets has not been delegated to a management company against the value of which the return on investment of a collective investment undertaking is measured.
21. “Persons of sufficiently good repute” shall mean the persons as defined in the Law on Markets in Financial Instruments.
22. “Parent company” shall mean a company as defined in the Law on Consolidated Accounts of Entities.
23. “Periodical report” shall mean a report addressed to investors and the public containing information on the performance of the management company and collective investment undertakings, their financial status and other major events of a certain period.
24. “Transferable securities” shall mean:
25. “Money market instruments” shall mean:
1) in respect of a harmonised collective investment undertaking – the liquid instruments which are normally dealt in on the money market and whose value may be accurately determined at any time;
26. “Initial capital” shall mean the minimum amount of the equity capital that a management company or an investment company must accumulate.
27. “Professional investor” shall mean a professional client defined in the Law on Markets in Financial Instruments and a participant of a collective investment undertaking whose instruments of incorporation provide for a minimum investment amount of EUR 50,000 or more.
28. “Special collective investment undertaking” shall mean the collective investment undertaking whose units or shares cannot be distributed in another Member State in accordance with the procedure laid down in the legal acts indicated in the Annex to this Law and which is not subject to requirements of the European Union law.
29. “Instruments of incorporation” shall mean the rules of an investment fund or the articles of association of an investment company.
30. “Harmonised collective investment undertaking” shall mean the collective investment undertaking regulated under the European Union law, whose funds, for the purpose of risk spreading, are invested in transferable securities and/or other liquid assets provided for in Chapter VI of this Law, and whose transferable securities (units or shares) must be redeemed at any time upon a request of the holder thereof.
31. “Umbrella collective investment undertaking” shall mean an investment fund of the open-ended type or an investment company with variable capital whose assets are divided into separate sub-funds.
32. “Asset management” shall mean:
2) accounting management, responding to customer inquiries, calculation of net assets, internal control of regulatory compliance, maintenance of the register of unit holders or shareholders, distribution of income, unit or share pricing, issuance and redemption thereof, contract settlements, keeping of record of the completed operations;
33. “Closed-ended investment company” shall mean a public limited liability company that issues a fixed number of the shares redeemed upon the expiry of the period of activity of the company provided for in the articles of association of the public limited liability company or another time specified in advance in its articles of association.
34. “Closed-ended investment fund” shall mean a collective investment undertaking whose units may be redeemed only upon the expiry of the period of activity of a public limited liability company provided for in the rules thereof or another time specified in advance in these rules.
35. “Foreign supervisory authority” shall mean shall mean an institution which in a foreign state performs the functions similar to those of the Securities Commission in the sphere of licensing and supervision of management companies and collective investment undertakings.
36. “Management company” shall mean any company the regular business of which is management of investment funds and investment companies.
37. “Qualifying holding in a management company” shall mean any direct or indirect holding in a management company which represents 1/10 or more of the shares of a management company or of the voting shares or such a number of the shares which makes it possible to exercise a significant influence over the management company.
Article 3. Right to Engage in the Activities of a Management Company or Investment Company
1. Only a private or public limited liability company holding a licence for the activities of a management company issued by the Securities Commission shall have the right to engage in the management of common funds and/or investment companies with variable capital. A company holding such a licence shall be referred to as a management company. Only management companies shall have the right to use in their names and advertisements the words “investment fund management company”, “management company of investment companies” or other combinations or derivatives of these words.
2. Only a public limited liability company holding a licence for the activities of an investment company with variable capital issued by the Securities Commission may engage in the activities of an investment company with variable capital. Only investment companies with variable capital may use in their name the words “investment company with variable capital” or the acronym ICVC. In the name of an investment company with variable capital, the words “public limited liability company” or the acronym AB shall be optional.
3. Only a public limited liability company holding a licence for the activities of a closed-ended investment company issued by the Securities Commission may engage in the activities of a closed-ended investment company. Only closed-ended investment companies may use in their name the words “closed-ended investment company” or the acronym CEIC. The words “public limited liability company” or the acronym AB are optional in the name of a closed-ended investment company.
Article 4. Activities of Management Companies and Investment Companies
1. A management company shall have the right to engage in the principal activities – management of investment funds and/or investment companies specified by this Law – and to provide the following auxiliary services on the condition that they have been provided for in the licence issued to the company and where it engages in the principal activity:
2) management of the financial instrument portfolios of pension funds where the management company complies with the requirements set forth in the Law on Supplementary Voluntary Accumulation of Pensions and the Law on Accumulation of Pensions;
2. A management company may not provide the auxiliary services indicated in subparagraphs 3 and 4 of paragraph 1 of this Article, unless it is entitled to provide the services indicated in subparagraphs 1 and 2 of paragraph 1 of this Article.
3. An investment company may not manage the assets of other persons or engage in the activities not provided for under this Law.
4. A management company managing at least one harmonised collective investment undertaking may not engage in any activity other that provided for by this Law.
5. Chapter IX of this Law shall not apply to the management companies not managing any harmonised collective investment undertakings.
6. A management company that has the right to engage in the activities indicated in subparagraphs 1-4 of paragraph 1 of this Article shall be subject mutandis mutandis to the requirements set forth in Articles 13 and 22 of the Law on Markets in Financial Instruments and the implementing regulations of the Securities Commission. When applying the abovementioned requirements of the Law on Markets in Financial Instruments, account shall be taken of the provisions of paragraph 5 of Article 2 of the Law on Markets in Financial Instruments.
Article 5. Procedure for Granting Licences for the Activities of a Management Company or Investment Company
1. A public limited liability company or a private limited liability company wishing to engage in the activities of a management company or a public limited liability company wishing to operate as an investment company with variable capital or a closed-ended investment company shall file an appropriate application with the Securities Commission. The application shall be accompanied by a programme of the activities to be performed (business plan) containing, inter alia, a description of areas of the activities to be performed, the organisational structure of the company, also information about the legal person, participants, heads thereof, activities, compliance with capital requirements, and other information specified in the licensing rules approved by the Securities Commission, upon considering which the Securities Commission could state that the company complies with the requirements of licensed activities. The list of the documents to be furnished for the acquisition of the licence for activities and the procedure for filing thereof shall be established by the Securities Commission.
2. The Securities Commission shall refuse to issue the licence where:
1) data (documents) do not conform to the established requirements, the documents and data presented are incomplete or false, or the company’s programme of activities is not adequately substantiated;
2) the initial capital of a company wishing to obtain the licence for activities of a management company or investment company with variable capital whose management has not been delegated to a management company or the authorised capital of a company seeking to obtain the licence for activities of a closed-ended investment company is below the minimum amount set by the Securities Commission, or management company capital adequacy requirements are not complied with;
3) the company has failed to furnish the information as provided for in the licensing rules about shareholders of the company and the qualifying holdings directly or indirectly managed thereby, as well as the size of these qualifying holdings;
4) there is a ground for believing that holders of the undertaking’s qualifying holding will not ensure a sound and transparent management of the company;
5) at least one employee of the company is an employee of the operator of the regulated market operating in the Republic of Lithuania, the Securities Commission or the Central Securities Depository of Lithuania;
6) members of the board of the company, the head of the administration or his deputies are not persons of sufficiently good repute, do not possess the qualification or work experience specified by the Securities Commission;
8) a close link exists between the company and another legal or natural person which may prevent the Securities Commission from exercising effective supervision;
9) a close link exists between the company and a person from a non-EU Member State whose legal acts regulating this person's activities or the enforcement of such legal acts may prevent the Securities Commission from exercising effective supervision;
10) the company’s articles of association indicate that the shares or the units of the collective investment undertaking to be established will not be marketed in the Republic of Lithuania;
3. The Securities Commission shall notify an applicant of its consent or refusal to issue the licence within 6 months from the filing of all documents, data and clarifications. The time limit for the consideration of an application shall be calculated from the filing of the last documents or data. A refusal to issue the licence shall be motivated in writing.
4. The Securities Commission must refer to a foreign supervisory authority with a request to provide its opinion where:
1) the applicant is a subsidiary of a management company, financial brokerage firm, credit institution or insurance company licensed in another Member State;
2) the applicant is a subsidiary of the parent company of a management company, financial brokerage firm, credit institution or insurance company licensed in another Member State;
5. For the purpose of assessing the suitability of owners of the qualifying holding of a management company or investment company and the repute and experience of heads of the companies belonging to the same group, the Securities Commission shall seek the opinion of the supervisory authority referred to in paragraph 4 of this Article.
6. The Securities Commission shall give notice of the issuance or revocation of a licence to the manager of the Legal Entities’ Register and publish it in the website of the Securities Commission.
Article 6. Management of Management Companies and Investment Companies and Heads Thereof
1. A management company and investment company the management of whose assets has not been delegated to a management company must have the board and the administration.
2. An investment company the management of whose assets has been delegated to a management company shall not form any management bodies. The management company which has been delegated the management of the investment company shall be responsible for the performance of the actions indicated in paragraph 3 of Article 2.82 of the Civil Code of the Republic of Lithuania.
3. The general meeting of shareholders of an investment company may pass resolutions irrespective of the voting rights carried by the shares held by the participating shareholders.
4. Heads of a management company or an investment company shall be:
5. Heads of a management company or an investment company the management of whose assets has not been delegated to the management company must be persons of sufficiently good repute and possess sufficient experience to ensure a sound and transparent management of the company.
6. A management company or an investment company the management of whose assets has not been delegated to the management company must give advance notice to the Securities Commission of all future changes to the heads of the company along with submitting the information specified by the Securities Commission and needed to assess whether the new heads elected or planned to be elected comply with the requirements of sufficiently good repute and sufficient experience. The newly elected managers of a management company or an investment company the management of whose assets has not been delegated to the management company may assume office only upon approval of their candidatures by the Securities Commission.
7. The Securities Commission shall have the right not to approve the candidatures of newly elected heads where the elected heads are not of sufficiently good repute, do not possess sufficient experience, or where there are other objective grounds for believing that the planned changes to the heads of the company will pose a threat to the appropriate and transparent management of the company. Detailed requirements for candidate heads and the procedure for approving these candidates by the Securities Commission shall be established by the Securities Commission.
Article 7. Requirements Applicable to Activities and Prudential Requirements
1. A management company or an investment company the management of whose assets has not been delegated to the management company must:
1) act honestly in the interests of participants in collective investment undertaking and integrity of the market;
4) seek to obtain from the client information about his financial position, investment experience and the objectives pursued by him in making use of the services provided by the company, also take into account whether or not the client is a professional investor;
6) try to avoid conflicts of interests and, when they cannot be avoided, ensure fair treatment of participants in a collective investment undertaking;
7) ensure that it has sound management procedures and a sound system for keeping accounting records and accounting system and that each transaction may be reconstructed according to the parties thereto, the content, time and venue thereof and that the assets are invested under the terms and conditions provided for in instruments of incorporation and legal acts;
8) exercise internal control, control the transactions in financial instruments concluded by its head of the administration, deputy thereof, members of the board and employees;
9) keep documents of the effected operations for at least 10 years from the date of effecting of the operations, unless other legal acts provide for a longer time period of keeping of the documents;
10) have such an organisational structure as to avoid a conflict of interest between the managing company or investment company and its clients, conflict of interest between its clients, conflict of interest between participants in a collective investment undertaking and its clients or conflict of interest between participants in a collective investment undertaking;
11) ensure that the persons taking the decisions relating to asset management have the qualification and experience specified by the Securities Commission and are of sufficiently good repute;
12) have in place a description of procedures for taking investment decisions specifying, inter alia, the structure of a body taking the investment decisions, and comply therewith;
2. A management company entitled to provide the services provided for in subparagraph 1 or 2 of paragraph 1 of Article 4 may invest client's funds into the investment funds or investment companies managed by itself only upon subject to a client's prior consent.
Article 8. Right of the Securities Commission to Establish a Procedure for Discharging the Duties of a Management Company or an Investment Company
The Securities Commission shall establish:
2) a procedure for organising and effecting the internal control of management companies and the investment companies the management of whose assets has not been delegated to the management companies;
3) the contents of and a procedure for publishing periodical reports, other reports, prospectuses, communications to the public and Securities Commission;
4) contents of and a procedure for publishing reports on the liquidation of an investment company and division of a unit;
7) a procedure for measuring counterparty risk when verifying compliance with diversification requirements;
9) a procedure for using derivative financial instruments of collective investment undertakings and procedure for assessing related risks;
Article 9. Right of an Management Company or Investment Company to Delegate a Part of its Functions to another Company
1. In aiming at a more efficient management, a management company or an investment company the management of whose assets has not been delegated to the management company shall have the right to delegate a part of its management functions to a company authorised to provide appropriate services and must forthwith notify the Securities Commission thereof. The notification of the delegation of a part of the management functions must indicate the name of the company whereto it has been delegated (the agent) and the list of the functions delegated.
2. Performance of a part of management functions may be delegated only in the case when:
1) this will not prevent supervision of a management company or investment company, also when this will not harm investors' interests;
2) the Securities Commission has concluded an agreement on the exchange of information with an appropriate supervisory authority of a non-Member State in which a part of the functions is delegated to a licensed management company;
3) heads of a management company or investment company may at any time monitor activities of the agent;
4) a management company or an investment company may at any time, when this is in the interests of participants in a collective investment undertaking, give additional instructions to the agent or withdraw the mandate;
5) the agent possesses the qualification specified by the Securities Commission and may perform the indicated functions;
3. A management company or the investment company provided for in paragraph 1 of this Article shall not have the right to delegate its management functions to third parties to the extent that it essentially surrenders all the functions. Delegation of the function of investment decision-making and/or execution to a depository safe-keeping the assets comprising the investment funds of that management company or assets of investment companies or to third parties whose interests may conflict with those of the management company, the investment company or participants therein shall be prohibited.
Article 10. Acquisition of the Qualifying Holding of a Management Company
1. A natural or legal person that proposes to acquire or increase, directly or indirectly, the qualifying holding of a management company already held by him, where in consequence of a proposed acquisition of shares the proportion of voting rights at the General meeting of shareholders or of the capital that the person holds would reach or exceed in the increasing order 20%, 33% or 50% or the company would become a subsidiary of that legal person, must obtain a prior consent of the Securities Commission.
2. The person referred to in paragraph 1 of this Article must give prior notice to the Securities Commission of a proposed acquisition of the qualifying holding and submit supporting documents as well as other information specified by the Securities Commission. The Securities Commission shall, not later than within 3 months from the receipt of the application, give notice to the person of its consent or refusal to grant consent for the acquisition of the qualifying holding. The Securities Commission shall have the right require submission of additional documents and information about the proposed acquisition or increase of the qualifying holding of a management company; in such a case, the time limit of 3 months shall be calculated from the submission of all required documents and information to the Securities Commission.
3. The Securities Commission shall not grant consent to acquire the qualifying holding where:
1) a natural person (in the case of a legal person – head of the administration, his deputy, members of the board and the controlling persons) is not of sufficiently good repute;
2) the natural person is an employee of the operator of a regulated market operating in the Republic of Lithuania, the Securities Commission or the depository safe-keeping the assets comprising the investment funds managed by the management company or assets of investment companies;
5) the person has not submitted the documents evidencing the legitimate origin of the funds allocated for payment of the shares;
7) the granting of the consent would result in such a close link which would constitute a ground for the refusal to issue the licence of the management company;
4. A refusal to allow the acquisition of the qualifying holding must be reasoned in writing and may be appealed against to court. If the Securities Commission makes no objections to the acquisition of the qualifying holding, it shall have the right to lay down a reasonable time limit for fulfilment of a person’s intention to acquire or increase the qualifying holding of a management company. Under regular circumstances, such a time limit may not be shorter than one month.
5. A person shall also give notice to the Securities Commission before disposing of the shares held by it to the extent that the proportion of voting rights in the general meeting of shareholders or the proportion of the capital held by it reaches or falls below, in the decreasing order, the thresholds of 20%, 33% or 50% or that a management company ceases to be its subsidiary.
6. Where a company becomes aware of the acquisition or disposal of the qualifying holding which is above the thresholds set in this Article, it shall notify the Securities Commission thereof without delay. Annual information about the persons who own qualifying holdings and the amounts of such holdings shall be communicated to the Securities Commission in accordance with the procedure laid down by it.
7. The shares held by a person who has acquired the qualifying holding of a management company or has increased the qualifying holding exceeding the thresholds provided for in this Article without a prior consent of the Securities Commission shall be divested of the voting right at the general meeting of shareholders until the consent of the Securities Commission is obtained.
8. Where a person who proposes to acquire the qualifying holding of a management company is a management company, financial brokerage firm, credit institution, insurance company or the parent company or controlling person of any of these entities licensed in another Member State, and the management company would become the acquirer’s subsidiary or come under its control after acquisition of the qualifying holding, the Securities Commission must seek the opinion of the supervisory authority of the respective Member State on the issues provided for in paragraph 5 of Article 5 of this Law.
Article 11. Duty to Obtain an Authorisation of the Securities Commission
1. A prior authorisation of the Securities Commission shall be required in order to:
2. The Securities Commission may refuse an authorisation only where this would contradict legal acts or would prejudice the interests of participants in a collective investment undertaking.
Article 12. Audit of a Management Company, the Collective Investment Undertakings Managed by It or an Investment Company
Audit of a management company, the collective investment undertakings managed by it or an investment company shall be subject to the requirements set forth in the Law on Audit, the Law on Financial Institutions, and paragraph 6 of Article 22 of this Law.
Article 13. Right to Transfer the Assets Comprising an Investment Fund or Owned by an Investment Company
1. The assets comprising an investment fund or owned by an investment company may not be transferred to a management company which manages the assets, the head of the administration of such a company, his deputy, members of the board and supervisory board and employees of the company (including their spouses). A management company on account of a collective investment undertaking managed by it or an investment company shall also be prohibited from acquiring assets of the persons provided for in this paragraph.
2. The prohibitions provided for in paragraph 1 of this Article in respect of an investment company shall also apply to its head of the administration, his deputy, members of the board and supervisory board and employees (including their spouses).
3. The assets comprising an investment fund or owned by an investment company may not be lent, pledged or given as guarantee or surety to secure other persons’ liabilities. The above shall not constitute a prohibition of acquisition of non-paid transferable securities, money market instruments or other instruments specified in subparagraphs 5, 7 or 8 of paragraph 1 of Article 57.
4. The assets of an investment fund or an investment company may not be used to conclude short-sale transactions in transferrable securities, money market instruments or other investment instruments.
5. An investment company or a management company which manages the assets of an investment fund may not borrow, on the account of the investment fund, except for loans with a duration of 3 months in the amount of up to 10% of its net assets taken for maintaining the liquidity. This shall not constitute a prohibition to borrow foreign currency for the purpose of acquisition of transferable securities or money market instruments, provided the lender is submitted at least an equivalent amount in another currency in order to secure repayment of the loan.
Article 14. Approval of the Agreement with a Management Company and a Depository
1. An agreement on the management of assets of an investment company and an agreement with a depository shall be subject to approval by the general meeting of shareholders of the investment company. The general meeting of shareholders may take such a decision by the majority of at least 2/3 of votes of those present at the meeting. The company’s articles of association may require a larger majority for the taking of such a decision.
2. The general meeting of shareholders may delegate the right to take a decision provided for in paragraph 1 of this Article to the supervisory board, but for a period not exceeding 3 years, provided the company's articles of association stipulate the maximum fee payable to the management company and the depository. The supervisory board shall have the right to take the decision by the majority of 2/3 of votes of all members of the supervisory board.
Article 15. Sanctions Imposed against Management Companies, Investment Companies, Their Heads and Depositories
The Securities Commission shall have the right to apply the following sanctions against management companies or investment companies:
1) to issue a warning regarding shortcomings and infringements of activities and set a deadline for their elimination;
5) to prohibit the conclusion of transactions for the acquisition of investment instruments on account of a collective investment undertaking for a period not exceeding 3 months;
6) to appoint a temporary representative of the Securities Commission for supervision of the activities;
7) to suspend the validity of the licence of the management company to provide one or several services.
2. The Securities Commission shall have the right to impose the sanctions provided for in the Code of Administrative Offences against heads of the administration, their deputies, members of the board or the employees of a management company or an investment company.
Article 16. Basis for the Imposition of Sanctions
1. The sanctions specified by this Law may be imposed where at lease one of the following infringements has been committed:
1) a management company, an investment company or the depository has supplied incorrect information to the Securities Commission;
2) the Securities Commission has not been provided with the information or the documents necessary for supervision;
3) the management company or the investment company no longer meets the requirements on the basis whereof the licence has been issued;
2. The choice of a sanction shall depend on the content of an infringement for which it is applied, the impact of the infringement and the sanction on a company and security of the financial system. The issue of imposition of sanctions shall be considered following prior notification of a management company, an investment company or a depository and providing them with an opportunity to present explanations. A failure of a representative to attend the consideration of the issue or to present explanations shall not prevent adoption of a decision concerning the imposition of sanctions.
3. A decision on the imposition of sanctions may be taken where not more than two years have lapsed from the commitment of an infringement, and in the case of a continuing infringement – not more than two years have lapsed from the carrying out of last actions.
Article 17. Temporary Representative for the Supervision of Activities
1. In urgent cases and possessing data about an infringement of legal acts, the Securities Commission shall have the right to appoint a temporary representative for the supervision of activities of a management company or an investment company for the purpose of protection of investors' assets against depreciation or any other loss. An employee of the Securities Commission may be appointed the temporary representative.
2. The head of the administration, his deputy, and members of the board of a management company or an investment company must obtain a consent of a temporary representative for the supervision of activities with regard to each decision relating to the activities of the company. Actions of the temporary representative may be subject to appeal in accordance with the procedure laid down in the Law on Administrative Proceedings.
3. A temporary representative shall be recalled in the following cases:
Article 18. Revocation of the Licence
1. The Securities Commission shall have the right to revoke the licence of a management company or an investment company where:
3) the holder of the licence fails, within 12 months from the issuance of the licence, to commence the use of the licence or does not perform activities for a period over 6 months;
Article 19. Peculiarities of the Bankruptcy Proceedings of a Management Company or an Investment Company
1. Bankruptcy proceedings of a management company or an investment company may be heard solely by court.
2. The Securities Commission shall have the right to file a petition with a court for the institution of bankruptcy proceedings against a management company or an investment company.
3. Upon the receipt from the Securities Commission of a petition for the institution of bankruptcy proceedings, a court must, on the same day, freeze the bank accounts and investment instruments of a management company or an investment company.
4. Not later than within 15 days of the receipt of a petition, a court shall pass a ruling on the institution of or refusal to institute bankruptcy proceedings.
5. The administrator of a management company or an investment company shall repay the funds owned by participants in the collective investment undertakings managed by the management company or shareholders of the investment company or delegate the management of the collective investment undertakings managed by the management company to a different management company.
Article 20. Reorganisation and Transformation of a Management Company. Liquidation of an Investment Company
1. A management company may not be reorganised or transformed into a company not subject to requirements of this Law.
2. The sale and redemption of shares of an investment company shall be terminated as from the moment of taking of a decision on the liquidation of the investment company.
3. The assets of an investment company under liquidation must be sold in accordance with the procedure laid down by the Securities Commission, and settlement with shareholders shall be made in cash.
SECTION TWO
INFORMATION WHICH MUST BE COMMUNICATED TO THE PUBLIC
BY A MANAGEMENT COMPANY OR AN INVESTMENT
COMPANY
Article 21. Duty to Draw up Prospectuses and Periodical Reports
1. A management company (for each investment fund it manages) and an investment company must publish:
2. The requirement specified in subparagraph 2 of paragraph 1 of this Article shall not apply to a management company managing a closed-ended investment fund or a closed-ended investment company taking advantage of the right as granted by this Law not to draw up a simplified prospectus.
3. A management company of a hedge collective investment undertaking or a closed-ended investment company of a hedge collective investment undertaking, also the management company of a private capital collective investment undertaking whose participants, according to its instruments of incorporation, may include solely professional investors, or a private capital closed-ended investment company whose shareholders, according to its articles of association, may include solely professional investors shall not under an obligation to publish the documents listed in paragraph 1 of this Article.
Article 22. Contents of Prospectuses and Periodical Reports
1. A full and a simplified prospectus must supply the information sufficient for an investor to be able to make an informed judgement of the investment proposed to him and associated risk. A full prospectus must explicitly and comprehensibly indicate the nature of risk.
2. The structure and layout of a simplified prospectus must be easily comprehensible to an average investor. The simplified prospectus of an investment fund managed by a management licensed in another Member State or of an investment company with variable capital may, translated into the Lithuanian language, be used in the Republic of Lithuania as promotional material not requiring any additional information.
3. An annual report must include the financial statements and other information specified by the Securities Commission which will enable investors to make an informed judgement of activities of an collective investment undertaking and their results. Where interim dividends are paid, they must be indicated in a half-yearly report.
4. Instruments of incorporation shall form annexes of a full prospectus. The instruments of incorporation need not be annexed to the prospectus where participants in a collective investment undertaking are informed that, upon their request, the instruments will be delivered to them in personal or they will be notified of the place in the territory of the Republic of Lithuania where they may access them.
5. In the event of any changes in the information published in a full or simplified prospectus, the prospectuses must be amended not later than within 7 days from the occurrence of the changes. The amendments may be published in annexes indicating specific changes. Incorrect information shall be clearly deleted in the old prospectus, or a new prospectus shall be provided.
6. The data provided in annual financial statements must be audited. The auditor's report, including any qualifications, and the report on audit must be annexed to the annual report. The report on audit must indicate whether the value of net assets has been calculated correctly, whether the assets have been invested in compliance with instruments of incorporation, also list all infringements of this Law and other legal acts. The auditor of a management company, the collective investment undertakings managed by it or an investment company the management of whose assets has not be delegated to the management company must file with the Securities Commission a report on audit, and upon an individual request by the Securities Commission – the explanations concerning the performed audit of the management company or the collective investment undertakings.
Article 23. Procedure for Publishing Prospectuses and Periodical Reports
1. Annual and half-yearly reports must be published and submitted to the Securities Commission within the following time limits:
2. A copy of a simplified prospectus, where it is mandatory to draw it up, must be provided to subscribers of units or shares free of charge before the conclusion of a purchase agreement. Copies of a full prospectus, the most recent annual report and subsequent half-yearly report must be supplied to subscribers for units or shares free of charge on their request.
3. Subscribers of units or shares of a closed-ended collective investment undertaking in respect of which a simplified prospectus is not drawn up must be provided with a full prospectus free of charge prior to the conclusion of a contract.
4. A hedge collective investment undertaking, a private capital collective investment undertaking whose participants, in accordance with its instruments of incorporation, may include solely professional investors, or the management companies managing them shall have the right not to provide a simplified prospectus, a full prospectus or instruments of incorporation to subscribers of units or shares of such collective investment undertakings where such a possibility has been provided for in the instruments of incorporation of a collective investment undertaking. In this case, the subscribers of the units or shares of such collective investment undertakings must be submitted a summary of the instruments of incorporation of the contents specified by the Securities Commission.
5. Upon the request of participants in a collective investment undertaking, annual and half-yearly reports shall be supplied to the free of charge.
Article 24. Publication of the Price
1. A management company and an investment company must make public in accordance with the procedure laid down in the instruments of incorporation of a collective investment undertaking the price of units or shares every time it sells or redeems them.
2. The management company of a harmonised undertaking for collective investment or an investment company with variable capital must make public the prices of units or shares at least twice per month. With the consent of the Securities Commission, the frequency may be reduced to once per month provided that such derogation does not prejudice the interests of investors.
Article 25. Offering and Promotion
1. A public offer to purchase units or shares must indicate that prospectuses have been drawn up, also the places where they may be obtained or accessed by the public. Only the information contained in the prospectuses and periodical reports may be used for the purpose of promotion.
2. The performance of a collective investment undertaking as presented in the promotion material of the collective investment undertaking must be compared to the benchmark index of that collective investment undertaking. This requirement shall be waived in respect of the collective investment undertakings that are not under an obligation, according to this Law, to use the benchmark index.
Article 26. Duty to Transfer Assets to a Depository
1. Assets of a collective investment undertaking must be entrusted to a depository for safe-keeping. Only a bank which has the right to provide investment services in a Member State and having the registered office or a division in the Republic of Lithuania may be the depository.
Article 27. Duties of a Depository
1. A depository must act for the benefit of participants in a collective investment undertaking and:
1) ensure that the sale, issue, redemption, and cancellation of units and shares is carried out in compliance with requirements of legal acts and instruments of incorporation of the collective investment undertaking;
2) ensure that the value of the units or shares is calculated in compliance with requirements of legal acts and instruments of incorporation of the collective investment undertaking;
3) carry out the instructions of a management company or an investment company, unless they contradict legal acts and instruments of incorporation of the collective investment undertaking;
4) ensure that consideration for transferred assets is credited to a fund's account or to an investment company within an established time limit;
2. Prior to each valuation of an object of immovable property, a depository of an immovable property collective investment undertaking must verify whether the valuator (valuators) of immovable property meets the requirements of independence set forth for him and the selection criteria specified in the instruments of incorporation of the collective investment undertaking, also whether immovable property valuation will not infringe the requirements of paragraph 4 of Article 72 of this Law.
3. A depository must give a notice to the Securities Commission and the supervisory board or board of a management company or an investment company of all detected infringements of legal acts or instruments of incorporation of a collective investment undertaking.
4. Remuneration for a depository's services may not exceed the amount set in instruments of incorporation of a collective investment undertaking.
Article 28. Delegation of Management Functions to a Depository
Where the right of a management company to manage a collective investment undertaking expires and management functions are not delegated to another management company, they shall be temporarily taken over by the depository of the collective investment undertaking. The management company must give a notice to the depository of the expiry of the right to manage assets. In such a case, the depository shall have all the rights and duties of the management company, unless laws or instruments of incorporation provide otherwise. The depository must delegate management functions to another management company within 3 months from the taking over of the management functions. The collective investment undertaking that has not been transferred to another management company within 3 months shall be liquidated (divided).
Article 29. Separation of a Management Company or an Investment Company from a Depository
1. A depository may not simultaneously engage in the activities of both a management company and an investment company, with the exception of the case established in Article 28 of this Law.
2. The head of the administration, his deputy, a member of the board or employee of a management company or an investment company may not be the head of the administration, his deputy, member of the board or employee of a depository safe-keeping the assets comprising an investment fund managed by that company or assets of the investment company, where his functions are directly linked to activities of the depository.
3. The head of the administration, his deputy, members of the board, members of the supervisory board or employees of the depository safe-keeping the assets comprising an investment fund or assets of an investment company, where their functions are directly linked to activities of the depository, may constitute not more than 1/4 of members of the supervisory board of the management company which manages the investment fund or the investment company.
Article 30. Replacement of a Depository
1. A management company or an investment company may replace a depository only subject to approval of the Securities Commission.
2. Where a depository fails to comply with requirements of legal acts, perform its obligations or performs them improperly, the Securities Commission shall have the right, with a view to ensuring rights of participants in a collective investment undertaking, to instruct a management company or an investment company to terminate a contract concluded with the depository and replace the depository.
CHAPTER IV
SECTION ONE
GENERAL PROVISIONS GOVERNING ACTIVITIES
OF COLLECTIVE INVESTMENT UNDERTAKINGS
Article 31. Forms of Activities, Types and Sorts of Collective Investment Undertakings
1. According to this Law, harmonised and special collective investment undertakings may be established in Lithuania in the form of activities of an investment company or an investment fund, unless this Article provides otherwise. Special collective investment undertakings shall be subdivided into types and sorts.
2. Harmonised collective investment undertakings may be formed only in the form of activities of an investment fund or an investment company with variable capital. Formation of harmonised collective investment undertakings of the closed-ended type shall be prohibited.
3. In accordance with this Law, special collective investment undertakings of the following sorts may be formed:
Article 32. Investment Fund
1. The assets comprising an investment fund shall be held in common partial ownership by participants in the investment fund. The share of a participant in the assets held by the right of common partial ownership shall be determined on the basis of the number of units entered into his personal unit account.
2. A management company shall manage, use and dispose of the assets constituting a investment fund on a fiduciary basis.
3. It shall be prohibited to levy execution against the assets comprising an investment fund according to liabilities of a management company or participants in a fund. Creditors of a participant in the investment fund shall have the right to levy their claims in respect of the participant only against the units of the investment fund held by the participant.
Article 33. Benchmark Index
1. Harmonised collective investment undertakings must use a benchmark index. This requirement shall be waived in respect of special collective investment undertakings.
2. The benchmark index of a collective investment undertaking must enable the public to properly assess the performance of the collective investment undertaking. The benchmark index of the collective investment undertaking must be selected with reference to the investment strategy of a specific collective investment undertaking.
3. The Securities Commission shall have the right to set forth requirements for the benchmark index.
4. When announcing the performance of a collective investment undertaking, a management company or an investment company whose management has not been delegated to the management company must compare it with the benchmark index in accordance with the procedure laid down by the Securities Commission. The benchmark index of the collective investment undertaking must also be indicated in the annual report of its management company or the investment company whose management has not been delegated to the management company.
SECTION TWO
PROCEDURE FOR SELLING AND REDEMPTING THE UNITS OR SHARES OF COLLECTIVE INVESTMENT UNDERTAKINGS
Article 34. Sale of Units or Shares
1. An investor shall acquire units or shares by concluding a simple written contract with a management company, an investment company or a distributor of the units or shares.
2. Units or shares may be issued only after payment funds have been credited to the account of a collective investment undertaking. The right of ownership of units or shares shall be acquired after an appropriate entry is made in a personal unit or share account. The entry in the personal unit or share account must be made not later than within one working day from the crediting of the payment funds to the account of the collective investment undertaking. Where units or shares are additionally allocated in the course of profit distribution, the right of ownership shall be acquired after the entry has been made in the personal unit or share account.
3. The units or shares of the collective investment undertakings formed under this Law may, with the exception of hedge collective investment undertakings, be distributed through the use of technical and organisational measures of the operator of a regulated market and/or settlement system in accordance with the procedure laid down by the Securities Commission.
Article 35. Price of Units or Shares
1. The price of units or shares shall be specified by dividing the value of net assets by the number of all units or shares in circulation.
2. The price referred to in paragraph 1 of this Article may be increased by an amount corresponding to the deductions in relation to the sale of units or shares of a collective investment undertaking (where this is provided for in instruments of incorporation) only provided that the value of net assets has not been reduced by the amount of these deductions. The redemption price of the units or shares subject to redemption may be reduced by the amount of the deductions in relation to their redemption only provided that the value of net assets has not been reduced and the selling price has not been increased by this deduction amount.
Article 36. Valuation of Net Assets
Net assets valuation shall be carried out taking into account the market price of a collective investment undertaking's assets and based on the principles of net assets valuation laid down in legal acts of the Securities Commission as well as the rules for net assets valuation set forth in the instruments of incorporation.
Article 37. Redemption of Units or Shares
1. A management company or an investment company must, upon the request of a participant in a collective investment undertaking, redeem his units or shares at the price valid on the day of filing the request.
2. Settlement for the redeemed units or shares of a harmonised collective investment undertaking must be effected within 7 days from the request for redemption.
3. The procedure for settling for the redeemed units or shares of special collective investment undertakings shall be laid down by other Articles of this Law governing the activities of special collective undertakings of an appropriate sort and type.
Article 38. Suspension of Redemption of Units or Shares
1. The right to suspend redemption of units or shares shall be vested in a management company, an investment company and the Securities Commission.
3. Redemption of units or shares may be suspended where:
1) this is necessary to safeguard interests of the public and participants against potential insolvency of a collective investment undertaking or fall in the redemption price in the event of an unfavourable situation on a market in investment instruments or fall in the value of the portfolio of investment instruments;
2) the available amount of funds is insufficient to pay for the units or shares subject to redemption, while the sale of the available investment instruments would result in a loss;
4. The following shall be prohibited from the moment the decision is taken to suspend redemption of units or shares:
5. A notice of suspension of redemption must be forthwith communicated to the persons who are intermediaries in the process of redemption, also to the Securities Commission, and in the case of distrubution of units or shares in foreign states – also to foreign supervisory authorities; a notice thereof must also be announced by the media.
Article 39. Resumption of Redemption
1. Where a decision on the suspension of redemption has been made by the Securities Commission, the right to resume it shall be vested solely in the Securities Commission or a court which has annulled this decision. In other cases, this right shall also be vested in a management company or an investment company.
Article 40. Peculiarities of Distribution of Shares of Investment Companies with Variable Capital
1. When selling shares of investment companies with variable capital, the provisions of the Law on Companies regulating subscription of and payment for shares of public limited liability companies shall not apply. Distribution of the shares of these companies may be commenced after a company obtains the licence of an investment company with variable capital and the authorisation of the Securities Commission to approve the articles of association of the investment company with variable capital and after a full and a simplified prospectuses are approved.
2. Shares of an investment company with variable capital may be distributed for an indefinite period. The amount of an issue of shares shall not be limited, with the exception of the case where the articles of association stipulate the largest amount that may be issued in shares.
3. An investment company with variable capital shall have no right to sell its shares by instalment or to defer payment for them.
Article 41. Instruments of Incorporation of an Umbrella Collective Investment Undertaking
1. The information indicated in subparagraphs 2, 3, 5 and 7 of paragraph 1 of Article 54 and subparagraphs 1 and 2 of paragraph 2 of Article 65 of this Law shall be provided in the articles of association of an umbrella investment company with variable capital in respect of each sub-fund constituting it. The following information shall be indicated in the articles of association respect of each sub-fund:
2. The information indicated in subparagraphs 3, 4, 5, 6, 7, 9, 12, 14 and 15 of Article 46 and subparagraphs 1 and 2 of paragraph 2 of Article 65 of this Law shall be provided in the rules of an umbrella investment fund in respect of each sub-fund constituting it. The rules shall additionally provide the information specified in subparagraphs 1, 2 and 3 of paragraph 1 of this Article in respect of each sub-fund.
3. The instruments of incorporation of an umbrella collective investment undertaking must also indicate:
1) the currency in which financial statements of the collective investment undertaking will be drawn up;
2) the procedure for exchanging units or shares of one sub-fund into the units or shares of another sub-fund of the same collective investment undertaking;
Article 42. Requirements Set Forth for Umbrella Collective Investment Undertakings and Their Management Companies
1. The management company of an umbrella collective investment undertaking or an investment company with variable capital must comply with the requirements set forth in this Law and other legal acts and applicable to collective investment undertakings of an appropriate sort and type and their management companies.
2. The provisions of this Law and other legal acts governing the activities of a collective investment undertaking, with the exception of provisions of Section One of Chapter II and Articles 59, 72 and 90 of this Law shall be applied individually to each sub-fund.
3. Assets of the sub-funds constituting an umbrella collective investment undertaking must be entrusted to a single depository for safe-keeping.
4. The assets constituting each sub-fund must be accounted for separately from the assets of other sub-funds constituting the same collective investment undertaking.
5. The assets constituting one sub-fund may not be used for discharging the liabilities to participants in another sub-fund constituting the same collective investment undertaking and to third parties.
6. An umbrella collective investment undertaking must have a common full prospectus. Simplified prospectuses may be drawn up for each sub-fund individually.
7. A management company or an investment company shall manage the list of owners of units or shares of a collective investment undertaking individually according to each sub-fund. Ownership certification documents shall indicate the name(s) of a specific sub-fund(s).
8. A management company or an investment company with variable capital shall be prohibited from making any deductions from assets of a collective investment undertaking in respect of the transactions concluded between its sub-funds.
Article 43. Peculiarities of an Umbrella Investment Company with Variable Capital
1. One share of an umbrella investment company with variable capital shall, irrespective of the value thereof, entitle a shareholder to one vote at the general meeting of shareholders.
Article 44. Exchange of Units or Shares of a Sub-Fund
A participant in a collective investment undertaking may exchange the units or shares of a sub-fund held by him into the units or shares of another sub-fund of the same collective investment undertaking, unless the instruments of incorporation of the collective investment undertaking provide otherwise. When exchanging units or shares of a sub-fund, it shall be prohibited to make any deductions relating to the distribution or redemption of units or shares of the collective investment undertaking, with the exception of the deductions directly relating to the cost of exchanging of the units or shares.
Article 45. Formation of an Investment Fund
1. The rules of an investment fund shall be approved by a decision of a management company. The management company may start collecting the investors' funds intended to constitute the investment fund only after the Securities Commission approves the rules of the fund, a simplified prospectus if required and a full prospectus.
Article 46. Rules of an Investment Fund
The rules of an investment fund shall determine the relations between a management company and participants in the investment fund. The rules must indicate:
1) the name of the investment fund enabling identification of the sort of a special fund, and the information on the basis of which it shall be possible to determine whether the fund is a harmonised or a special collective investment undertaking;
3) a strategy for investment of the assets constituting the investment fund, investment restrictions and specialisation in the geographical area or economic branch, the information that the fund has a benchmark index and the venues where the procedure for forming the benchmark index may be accessed;
5) rights and duties of the management company in the management of the investment fund, the transactions which the management company may enter into and carry out on the account and for the benefit of the investment fund;
6) the methodology of calculation of the remuneration payable to the management company, the depository and the distributor as well as the amount of the fee and the procedure for paying it;
7) a finite list and methods of calculation of other expenses covered with assets comprising the investment fund;
14) the frequency of distribution of the income of the investment fund, methods of and procedure for disbursing them;
Article 47. Rights of Participants of an Investment Fund
1. A participant of an investment fund shall have the following rights:
1) to receive a portion of income of the investment fund in accordance with the procedure laid down by this Law and the rules of the investment fund;
Article 48. Remuneration and Other Expenses Covered by the Funds Comprising an Investment Fund
1. Remuneration to a management company for the management of an investment fund, to a depository for the depository's services and other expenses relating to the investment fund shall be paid using the funds comprising the investment fund.
2. Only the expenses relating to the management of an investment fund and provided for in the rules of the investment fund may be paid using the funds comprising the investment fund. The aggregate amount of these expenses may not exceed the maximum level of the fund's expenses provided for in the rules of the investment fund. All other expenses which are not provided for in the rules of the investment fund or which exceed the established level must be covered by the management company.
Article 49. Distribution of Profit of an Investment Fund
1. Participants in an investment fund shall be paid a portion of investment income (payments in cash) only where this is provided for in the rules of the investment fund. The rules of the investment fund must also provide for the periodicity of such payments, the share of investment income (profit) that will be allocated for those payments, and the payment procedure.
Article 50. Expiry of the Right of a Management Company to Manage an Investment Fund
The right of a management company to manage an investment fund shall expire:
Article 51. Division of an Investment Fund
2. Upon taking of a decision regarding division, redemption and distribution of units shall be terminated.
3. Where it emerges in the course of division that the assets constituting an investment fund are not sufficient to discharge the obligations assumed on its account, the outstanding liabilities must be discharged by a management company.
4. After creditors claims are met, the funds obtained from the sale of the assets constituting an investment fund must be distributed among participants in the investment fund in proportion to their holdings in the fund.
Article 52. Merger of Investment Funds
1. A management company may effect merger of the investment funds managed by it (merger by the formation of a new entity or merger by acquisition) only subject to obtaining a prior authorisation of the Securities Commission.
2. It shall be prohibited to merge:
1) a harmonised and a special fund where the merger would result in the operation of the special fund alone;
3. The Securities Commission shall refuse to authorise a merger of investment funds where:
2) there is a ground for believing that the merger will infringe the interests of participants in at least one of the funds being merged;
4. A management company must, not later than within one month from the receipt of an authorisation by the Securities Commission, give a proper notice to participants in funds of the merger of the funds and of the way thereof as indicated in paragraph 1 of this Article. The proper notification of the participants shall mean publication of the information listed in the first sentence of this paragraph in the daily newspaper(s) indicated in the rules of the fund being merged and giving a written notice to each participant in the investment funds being merged. The notification must indicate:
1) the names of the investment funds being merged and the investment fund to operate following the merger;
3) the period upon the expiry of which the issue or redemption of units of the investment fund(s) which will discontinue operation following the merger shall be terminated, and the merger of investment funds will be effected. This period may not be shorter than 2 months from the last proper notification of participants as provided for in the second sentence of paragraph 4 of this Article;
5) the right of participants in the investment fund(s) which will discontinue operation following the merger to require, within the period laid down by the management company on the basis of subparagraph 3 of paragraph 4 of this Article, redemption of the units of the investment funds held by them without charging the redemption fee;
5. The units held by participants in the funds being merged at the time of the merger shall be converted free of charge into units of the investment fund which will operate following the merger.
6. Participants in the investment fund(s) the activity whereof will be terminated following a merger of funds who have not exercised their right to require redemption of the units held by them within the period laid down on the basis of subparagraph 3 of paragraph 4 of this Article shall become participants in the investment fund which will operate following the merger.
7. A management company must immediately, but not later than within 5 working days, notify the Securities Commission in writing of the effected merger of investment funds and make an appropriate announcement in a daily newspaper indicated in the rules of the fund which will operate following the merger.
8. The investment portfolio of the investment fund which will operate following the merger shall be subject to the provisions on a temporary derogation from the investment rules as stipulated in this Law. The term for the temporary derogation from the investment rules shall start running from the date of effecting of the merger of the investment funds. The date of effecting of the merger of the investment funds shall be the date of making the latest entries in personal unit accounts upon conversion of units of the investment fund(s) which will discontinue operation following the merger into the units of the investment fund which will operate following the merger.
Article 53. Modification of the Investment Strategy of a Collective Investment Undertaking
1. The investment strategy of a harmonised collective investment undertaking may not be modified to the extent that the collective investment undertaking turns into a special collective investment undertaking. The investment strategy of a harmonised collective investment undertaking and a special collective investment undertaking may not be modified to the extent that they turns into a collective investment undertaking not subject to this Law.
2. In the event of a material modification of the strategy of a collective investment undertaking or where modification of the strategy results in the change of the type or sort of the collective investment undertaking, participants must be given a prior notice thereof in accordance with the procedure laid down in the instruments of incorporation or prospectuses of the undertaking.
3. In the cases provided for in paragraph 2 of this Article, a management company must create a possibility for participants of a collective investment undertaking to require, within a sufficient time limit which may not be shorter than 2 months from the proper notification of the participants of the intended modification of the investment strategy of the collective investment undertaking, redemption of the units or shares of the fund held by them without any additional deductions. The participants must be informed of this right by a notification referred to in paragraph 2 of this Article.
Article 54. Articles of Association of an Investment Company with Variable Capital
1. In addition to the requirements set forth for a company's articles of association by the Law on Companies, the articles of association of an investment company with variable capital must indicate:
1) the name of the company enabling identification of the sort of a special investment company with variable capital, and the information on the basis of which it shall be possible to determine whether this company is a harmonised or a special collective investment undertaking;
3) an investment strategy, the information that the company has a benchmark index and the venues where the procedure for forming the benchmark index may be accessed;
5) the procedure for distributing income (including dividends) among shareholders (periodicity of payments, the share of profit allocated for the dividends);
7) the structure of expenditure and the procedure for covering thereof, the amount of remuneration to a depository, also the company's highest possible amount of the expenses covered from assets of the company;
2. The amount of the authorised capital and the number of shares need not be indicated in the articles of association. They may indicate the maximum amount for which shares may be issued. The par value of shares shall be indicated only where they have a par value.
3. The procedure for electing and removing from office the head of the administration and management bodies of a company shall be indicated only where the management of the company’s assets is not delegated to a management company.
Article 55. Redeemable Shares of an Investment Company with Variable Capital
1. All shares of an investment company with variable capital may be only ordinary registered shares.
2. An investment company with variable capital shall be prohibited from issuing preference shares, bonds or non-redeemable shares.
Article 56. Agreement on the Management of Assets
1. An agreement on the management of assets concluded between a management company and an investment company with variable capital must provide for:
2) methodology of calculation of remuneration for the management company and the procedure for paying it;
5) the information which the management company will furnish to the investment company with variable capital;
Article 57. Objects of Investment
1. The assets of a harmonised collective investment undertaking may be comprised only of:
1) the transferable securities and money market instruments admitted to trading on a market that is considered regulated and operating in the Republic of Lithuania or another Member State according to paragraph 30 of Article 3 of the Law on Markets in Financial Instruments, and/or
2) the transferable securities and money market instruments admitted to trading in another Member State on a market operating according to the established rules, recognised, supervised and accessible to the public, provided this market is indicated in the instruments of incorporation, and/or
3) the transferable securities and money market instruments admitted to trading in another state (with the exception of the Member States) on a market operating according to the established rules, recognised, supervised and accessible to the public, and/or
4) newly issued transferable securities where the conditions of issue provide for a commitment to admit these securities to trading on a regulated market and where the securities will be admitted to trading not later than within one year from the date of issue (where such a market is situated in the state indicated in subparagraph 3 of this paragraph, it must be indicated in the instruments of incorporation), and/or
5) units and shares of the collective investment undertakings indicated in paragraph 1 of Article 61 of this Law;
6) fixed-term deposits with maturity not exceeding 12 months which may be withdrawn on demand from a credit institution whose registered office is in a Member State or another state in which prudential supervision is not less stringent than in the European Union, and/or
7) the derivative financial instruments referred to in paragraph 1 of Article 62 of this Law, and/or
2. Investment in the money market instruments which are not admitted to trading on a regulated market may be allowed only provided the issue or issuing body of such instruments is itself regulated for the purpose of protecting investors and their savings, and these instruments:
1) are issued or guaranteed by the government, regional or local authority or central bank of a Member State, the European Central Bank, the European Union or the European Investment Bank, the government of a non-Member State or one of the members making up a federal state or an international organisation to which at least one Member States belongs, or
2) are issued by an undertaking whose securities are admitted to trading on the regulated markets referred to in subparagraphs 1-3 of paragraph 1 of this Article, or
3) are issued or guaranteed by an undertaking subject to prudential supervision in accordance with the requirements set forth by the European Union law or the requirements which are not less stringent than in the European Union, or
4) are issued by a company meeting the criteria approved by the Securities Commission, whose capital and reserves amount to at least EUR 10 million and which draws up consolidated accounts and performs the function of financing of the group of companies, where the transferable securities of at least one company belonging to the group are admitted to trading on a regulated market, or which is used to issue the securities financed by bank loans, and the investment into such money market instruments are protected at least to the extent referred to in subparagraphs 1-3 of paragraph 2 of this Article.
3. An investment company with variable capital may acquire movable and immovable property only to the extent such property is essential for its direct business.
4. No more than 10% of net assets may be invested in transferable securities and money market instruments not referred to in paragraph 1 of this Article.
5. Assets of a collective investment undertaking may not be invested in precious metals or the securities entitling to them, but may be invested in money.
Article 58. Investment Portfolio Diversification
1. No more than 5% of the net assets comprising the assets of a harmonised collective investment undertaking may be invested in transferable securities or money market instruments of a single issuing body, with the exception of the cases specified in paragraphs 2, 5 and 6 of this Article.
2. It shall be allowed to invest in the transferable securities or money market instruments of a single issuing body more than 5%, but not more than 10% of net assets, provided the total amount of such investments does not exceed 40% of the value of the net assets (this restriction shall not apply to deposits and derivative financial instruments traded on a non-regulated market, provided their issuing body is subject to supervision by the supervisory authority).
3. The investments made in deposits with a single credit institution may not exceed 20% of net assets comprising the assets of a collective investment undertaking.
4. The aggregate amount of investments in transferable securities or money market instruments of a single issuing body, deposits and liabilities arising from derivative contracts undertaken with the same person may not exceed 20 % of the value of net assets of a collective investment undertaking.
5. Investments in the transferable securities or money market instruments of a single issuing body issued or guaranteed by a Member State or local authority thereof, other state or international organisation of which at least one Member State is a member may not exceed the aggregate amount of 35% of the value of net assets of a collective investment undertaking. The Securities Commission may allow investment of a larger share of net assets in the transferable securities or money market instruments referred to in this paragraph where investors’ interests are adequately protected, investments are made in transferable securities or money market instruments of at least 6 issues, and investment in transferable securities or money market instruments of a single issue does not exceed 30% of net assets.
6. Investments in the bonds issued by a credit institution which has its registered office in a Member State and is subject to special public supervision under law by that state for the purposes of protection of interests of bond-holders, while the amount derived from the issue of these bonds is invested in the assets which, during the whole period of validity of these bonds, are sufficient to cover claims of the bond-holders and which, in the event of insolvency of the issuing body, would be used on a priority basis to meet claims of the bond-holders for reimbursement of the principal and payment of the accrued interest, may not exceed 25% of net assets. When more than 5%, but not more than 25% of the net assets are invested in the bonds issued by a single issuing body, the aggregate amount of these investments may not exceed 80% of the net assets.
7. The transferable securities and money market instruments provided for in paragraphs 5 and 6 of this Article shall not be taken into account when calculating the amount of investment subject to the limit of 40 % according to paragraph 2 of this Article. The limits specified in paragraphs 1, 2, 3, 4, 5 and 6 of this Article may not be combined, thus the aggregate amount of investment in the transferable securities and money market instruments of a single issuing body, deposits and the liabilities arising from derivative contracts with this person may not exceed 35% of the net assets comprising the assets of a collective investment undertaking.
Article 59. Prohibition from Acquiring Significant Influence over an Issuing Body
1. The shares held by a management company or an investment company with variable capital in an issuing body together with the shares in that issuing body held by the harmonised collective investment undertakings managed by the management companies may not carry over 1/10 of all voting rights at the general meeting of shareholders of the issuing body.
2. A collective investment undertaking may acquire no more than:
3. The prohibition specified in subparagraphs 2, 3 and 4 of paragraph 2 of this Article may be disregarded at the time of acquisition where the aggregate value of those transferable securities or money market instruments cannot be calculated.
Article 60. Peculiarities of an Index Investment Fund or an Index Investment Company with Variable Capital
1. An index fund or an index investment company with variable capital shall be a fund or a company whose instruments of incorporation provide for a sole aim, namely, to replicate the composition of the index of shares, bonds or non-equity securities of other forms recognised by the Securities Commission, including the use of derivative financial instruments or other instruments or techniques provided for in paragraph 3 of Article 62 of this Law, by directly or indirectly investing in the investment instruments forming the index. The Securities Commission shall have the right to recognise only the indices which meet all of the following conditions:
2) the index represents an adequate benchmark of the market to which it refers, and the provider thereof uses a recognised methodology which generally does not result in the exclusion of a major issuer (the issuer comprising the largest part of the index) of the market to which it refers;
3) the index and its calculation procedure are published in an appropriate manner, and the index provider is independent from the undertaking replicating the index, however, they may belong to the same closely linked group of undertakings where that group has in place an efficient system for management of conflicts of interest.
2. Investment in shares, bonds or non-equity securities of other forms of a single issuing body may not exceed 20% of net assets of an index fund or an investment company with variable capital may be. With the consent of the Securities Commission, if this is necessary due to exceptional conditions on a regulated market where a single issuing body is dominant, investment in its shares, bonds or non-equity securities of other forms may account for up to 35% of net assets. In this case, a simplified prospectus of a collective investment undertaking must contain the information justifying such exceptional conditions.
Article 61. Investment in Other Collective Investment Undertakings
1. Investment in units and shares of collective investment undertakings shall be allowed only provided they fulfil the following conditions:
1) the undertakings are licensed in the Republic of Lithuania or a state where they are subject to supervision not less stringent than that established in the European Union, and the Securities Commission co-operates with an appropriate foreign supervisory authority;
2) the level of protection for rights of participants in the undertakings, including regulation of segregation, borrowing, lending and gratuitous transfer of assets, is not less stringent than that laid down under this Law;
3) the undertakings publish half-yearly and annual reports about their activities to enable assessment of their assets and liabilities, profit and activities over the reporting period;
2. No more than 10% of net assets of a collective investment undertaking may be invested in each of the undertakings referred to in paragraph 1 of this Article. The aggregate amount invested special collective investment undertakings and the collective investment undertakings that are not regulated under this Law may not exceed 30% of the net assets.
3. A close link shall be deemed to exist between collective investment undertakings if they are managed by the same management company or such management companies in which more than a half of members of management bodies are the same persons or which are controlled by the same person or one of which holds more than 10% of votes at the general meeting of shareholders of the other management company. Units or shares of the collective investment undertakings which are linked by close links may be acquired only for the value of net assets.
Article 62. Investment in Derivative Financial Instruments
1. It shall be allowed to invest solely in the derivative financial instruments (including exclusively cash-settled instruments) which meet the following conditions:
1) are admitted to trading on the markets referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 57 of this Law or are traded outside the abovementioned markets;
2) are linked to the investment instruments referred to in paragraph 1 of Article 57 of this Law, financial indices, interest rates, currencies or currency exchange rates in which a collective investment undertaking has the right to invest as indicated in the instruments of incorporation;
3) the counterparty to the transactions concluded outside the markets referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 57 of this Law conforms to the criteria laid down by the Securities Commission and is subject to supervision by the supervisory authority;
4) the instruments traded outside the markets referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 57 of this Law are subject to verification and reliable and accurate valuation on a daily basis and can be sold or otherwise disposed of for a consideration at any time at their fair value.
2. A management company or an investment company with variable capital must:
1) manage risk in a manner which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of the investment instrument portfolio;
2) accurately and independently assess the risk of non-standardised derivative financial instruments;
3) communicate to the Securities Commission, in accordance with the procedure laid down by it, the types of derivative financial instruments, the underlying risks, the quantitative limits and the methods chosen to assess the risks associated with transactions in derivative financial instruments and assumed by each collective investment undertaking.
3. The Securities Commission shall lay down a procedure following which a management company or an investment company with variable capital shall be entitled to use the investment and other instruments related to transferable securities or money market instruments with a view to ensuring an efficient management of investment instruments. Under no circumstances shall the use of such techniques or investment instruments mean authorisation to diverge from the investment objectives as laid down in the instruments of incorporation.
4. A collective investment undertaking shall ensure that its global exposure relating to derivative financial instruments does not exceed the value of its net assets. The exposure must be calculated taking into account the current value of a derivative financial instrument, the counterparty risk, future market movements and the time available to liquidate the positions and the circumstance that the derivative financial instrument is incorporated into a transferable security or money market instrument. Investment in derivative financial instruments may not exceed 35% of the value of net assets of a collective investment undertaking, provided that the limits laid down in Article 58 of this Law are not exceeded. When calculating compliance with the limits laid down in Article 58 of this Law, investment in index-linked financial derivative instruments shall be computed separately.
5. The commitment risk in the transactions in derivative financial instruments concluded outside the markets referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 57 of this Law may not exceed 5% of the value of net assets of a collective investment undertaking, and where the counterparty is a credit institution referred to in paragraph 6 of Article 58 the commitment risk may not exceed 10% of the value of the net assets.
Article 63. Informing about the Investment Policy
1. The prospectuses and any other promotional literature of a collective investment undertaking must include a prominent statement of the investment policy where:
1) a considerable portion of the net assets has been invested in any category of assets other than transferable securities or money market instruments or where the investment policy is index-based;
2. Upon the request of an investor, a management company or an investment company with variable capital must also provide supplementary information relating to the quantitative limits that apply in the risk management of a collective investment undertaking, the methods chosen to this end and to the most recent evolution of the risk related to the main instruments.
Article 64. Temporary Derogation from Investment Rules
1. A collective investment undertaking or its management company may derogate from the investment limits laid down in this Chapter when it exercises the pre-emptive rights attaching to the transferable securities or money market instruments held by it. In such cases and also when provisions of investment rules are violated for the reasons beyond the control of a management company or an investment company with variable capital, the derogation must be eliminated without delay, but in any case not later than within 6 months.
2. The investment portfolio of a newly established collective investment undertaking may derogate from the requirements laid down in Articles 58, 60 and 61 of this Law for 6 months after the approval by the Securities Commission of the incorporation documents and prospectuses.
3. A management company or an investment company with variable capital the management of whose assets has not been delegated to the management company and which has infringed the requirements established in the present Chapter must immediately notify the Securities Commission of the infringement in writing by specifying the reasons for the infringement, the measures intended to rectify the situation and the anticipated time limit for elimination of the infringement.
Article 65. Provisions Applicable to Special Collective Investment Undertakings and Their Instruments of Incorporation
1. Special collective investment undertakings and their management companies shall be subject to provisions of this Law, unless this Chapter specifies otherwise.
2. In addition to the information provided for in Article 46 of this Law, the rules of special collective investment undertakings must indicate:
1) the risks relating to investment into a special investment fund, a description of such risks indicating that investment in the special investment fund is related to a risk rating greater than medium and, in the case of immovable property and a private capital investment fund, a long-term risk;
2) the name of the collective investment undertaking into whose units or shares it is intended to invest through the exercise of the right specified in paragraph 7 of Article 85 of this Law, the investment policy and the amounts of the entire costs related to investment into this undertaking;
3) criteria for selection of a candidate(s) to act as an independent immovable property valuator(s) of an immovable property collective investment undertaking (such as professional experience or specialisation of an independent immovable property valuator, etc.), and the principles for replacement of the candidate(s) to act as an independent property valuator(s);
Article 66. General Investment Rules for Special Collective Investment Undertakings
1. Upon the expiry of a period of six months from the approval of the instruments of incorporation and prospectuses of a newly established special collective investment undertaking by the Securities Commission, investment of a management company in the collective investment undertaking managed thereby may not exceed 30% of the value of net assets of the collective investment undertaking.
2. A management company, on account of an immovable property collective investment undertaking managed thereby, or an immovable property investment company the management of whose assets has not been delegated to the management company may acquire the investment objects indicated in subparagraphs 1, 2, 3 and 5 of paragraph 1 of Article 74 of this Law owned by the depository of the collective investment undertaking or the company holding over 5% of the voting shares of the management company or the investment company.
3. A management company, on account of a private capital collective investment undertaking managed thereby, or a private capital investment company the management of whose assets has not been delegated to the management company may acquire the investment objects indicated in subparagraphs 1 and 2 of Article 79 of this Law owned by the depository of the collective investment undertaking or the company holding over 5% of the voting shares of the management company or the investment company.
4. Having exercised the right provided for in paragraphs 2 and 3 of this Article, a management company or an investment company the management of whose assets has not been delegated to the management company must, not later than within five working days from the conclusion of the acquisition transaction, give a notice to the Securities Commission thereof. In addition to the notification, the Securities Commission must be provided with:
1) a resolution of the board of the management company or the investment company the management of whose assets has not been delegated to the management company specifying the acquisition price of an appropriate investment object;
5. When concluding a transaction concerning the short-sale of the investment instruments using the assets comprising a collective investment undertaking, the management company of a special collective investment undertaking or an investment company the management of whose assets has not been delegated to the management company must ensure that the investment instruments that represent the object of such a transaction are acquired before the conclusion of the transaction.
Article 67. Acquisition and Redemption of Units or Shares of Special Collective Investment Undertakings
1. Units or shares of special collective investment undertakings shall be acquired in accordance with the procedure laid down in Article 34 and 35 of this Law and the instruments of incorporation.
2. Units or shares of special collective investment undertakings shall be redeemed and the settlement in respect thereof with investors shall be effected in accordance with the procedure and within the time limits laid down in the instruments of incorporation and prospectuses. The settlement for the redeemed units or shares of a special collective investment undertaking must be effected not later than within 30 calendar days from the request to redeem them. Where the instruments of incorporation of the special collective investment undertaking provide for a different date of the execution of applications to redeem the units or shares, the time limit of 30 calendar days shall commence from the date specified in the instruments of incorporation. The applications of the investors to redeem the units or shares of special collective investment undertakings of the open-ended type must be executed at least once in three months.
3. The management company of an immovable property, private capital or a hedge collective investment undertaking, or an investment company of immovable property, private capital or hedge collective investment the management of whose assets has not been delegated to the management company shall have the right to postpone the term of settlement for the units or shares being redeemed as laid down in paragraph 2 of this Article where the total value of the units or shares being redeemed exceeds the value established in the instruments of incorporation or prospectuses of the undertaking, which may not be less than 10% of the value of net assets of the undertaking, or, in exceptional cases, where there are no sufficient funds to settle for the units or shares being redeemed and the sale of the investment objects held thereby would be loss-making. The settlement time limit can be postponed only provided such right of the management company or the investment company is stipulated in the instruments of incorporation or prospectuses of the undertaking.
Article 68. Publication of the Price of Units or Shares of Special Collective Investment Undertakings
1. The management company of special collective investment undertakings or an investment company the management of whose assets has not been delegated to the management company must, in accordance with the procedure laid down in the instruments of incorporation, publish the price of units or shares each time the units or shares are sold or redeemed.
2. The values of the units or shares of immovable property or private capital collective investment undertakings of the open-ended type must be published at least once in three months and those of a collective investment undertaking of the open-ended type investing in other collective investment undertakings – at least twice a month.
Article 69. Contents of the Prospectus of Special Collective Investment Undertakings
1. In addition to the information specified in this Law, the full and simplified prospectuses of special collective investment undertakings and the summary instruments of incorporation of a hedge collective investment undertaking must include a clear specification of the risks related to investment in such collective investment undertakings and an indication that investment in a special collective investment undertaking is related to a risk rating greater than medium, and in the case of investment in immovable property or private capital collective investment undertakings – a long-term risk.
Article 70. Temporary Suspension of Distribution of Units or Shares of Special Collective Investment Undertakings
1. The right to temporarily suspend the distribution of units or shares of a special collective investment undertaking shall be vested with a management company or an investment company the management of whose assets has not been delegated to the management company.
2. The distribution of units or shares may be temporarily suspended only provided the right is provided for in advance in the instruments of incorporation of a special collective investment undertaking when the net assets of the special collective investment undertaking reach the maximum threshold specified in its instruments of incorporation.
Article 71. Peculiarities of Undertakings for Collective Investment in Transferable Securities
1. Undertakings for collective investment in transferable securities and their management companies shall be subject to all requirements set forth by this Law in respect of harmonised collective investment undertakings and their management companies, with the exception of the exceptions stipulated in this Article.
2. Undertakings for collective investment in transferable securities with the restrictions provided for in this Article shall not be subject to provisions of paragraphs 4 and 5 of Article 13, shall be exempted from the prohibition to lend or pledge the assets comprising an investment fund or an investment company as stipulated in paragraph 3 of Article 13, and provisions of paragraphs 1 and 2 of Article 58, paragraphs 2, 3 and 4 of Article 66, and Articles 67, 68, 70 and 99 of this Law. It shall be prohibited to use the assets of an undertaking for collective investment in transferable securities to guarantee or secure the obligations of other persons.
3. An undertaking for collective investment in transferable securities may invest in the transferable securities or money market instruments of a single issuing body up to 20 % of its net assets, with the exception of the cases established in paragraphs 5 and 6 of Article 58 of this Law. With the consent of the Securities Commission and where that proves to be necessary due to exceptional market conditions in a regulated market where a single issuing body is dominant, up to 35% of the net assets may be invested in its shares, bonds or non-equity securities of other forms.
4. An investment company of an undertaking for collective investment in transferable securities or a management company managing the assets of a collective investment undertaking may borrow up to 15 % of the value of net assets as of the date of a loan contract conclusion for the term laid down in advance in the instruments of incorporation of the collective investment undertaking.
5. The assets of an undertaking for collective investment in transferable securities may be lent solely to licensed financial institutions. The value of the assets thus lent may not exceed 10% of the value of net assets of the undertaking for collective investment in transferable securities. The investment company of the undertaking for collective investment in transferable securities or the management company managing the assets of a collective investment undertaking may, subject to the requirements set forth in this paragraph, lend the assets of the collective investment undertaking for a period not longer than 30 days. The requirement regarding the longest lending term as set forth in this paragraph may be waived only where a loan agreement provides for the right of the management company or the investment company for collective investment in transferable securities to claim at any time to repay the lent assets of the collective investment undertaking.
Article 72. Valuation of Immovable Property
1. The management company of an immovable property collective investment undertaking or an immovable property investment company the management of whose assets has not been delegated to the management company must ensure that the objects of immovable property comprising the investment portfolio of the collective investment undertaking or the immovable property objects intended to be acquired are valued by at least two independent valuators authorised to engage in the activity of immovable property valuation, with the exception of the property valuator assistants who would produce individual reports. The objects of immovable property comprising the investment portfolio of an immovable property collective investment undertaking whose participants, in accordance with its instruments of incorporation, may be only professional investors or the objects of immovable property intended to be acquired may be valued by a single independent immovable property valuator authorised to engage in the activity of valuation of immovable property.
2. A management company or an investment company must ensure that the objects of immovable property comprising the investment portfolio of a collective investment undertaking or the objects of immovable property intended to be acquired and located outside the Republic of Lithuania are valued by at least one immovable property valuator complying with the requirements set forth for immovable property valuators in the legal acts of that state.
3. The duty to prove that a foreign immovable property valuator complies with the requirements specified in paragraph 2 of this Article shall fall upon a management company or an investment company.
4. An immovable property valuator may not be the head of administration, the deputy head of administration, member of the board or an employee of the same management company, investment company or the depository safekeeping the assets of an immovable property collective investment undertaking. The same immovable property valuator may perform valuation of the property of the same collective investment undertaking for not longer than three successive years.
5. An independent immovable property valuator must:
1) perform valuation of each object of immovable property comprising the assets of a collective investment undertaking constituting a basis for calculation of the value of net assets;
2) not earlier than one month prior to conclusion of a contract for the purchase or sale of an object of immovable property, perform valuation of the object of immovable property intended to be acquired using the assets of a collective investment undertaking or intended to be sold, with the exception of the cases stipulated in paragraph 2 of Article 76 of this Law.
6. The Securities Commission shall have the right to require an additional independent immovable property valuation to be conducted in the absence of the valuator(s) performing the previous property valuation where:
1) the performed property valuation fails to comply with the requirements stipulated in the instruments of incorporation of a collective investment undertaking;
Article 73. Principal Investment Rules and Peculiarities of Immovable Property Collective Investment Undertakings
1. Unless this Section provides otherwise, property investment by an immovable property collective investment undertaking shall not be subject to the restrictions stipulated in paragraphs 4 and 5 of Article 13, Article 57, with the exception of the prohibition provided for in paragraph 5 of that Article, Article 58 and paragraph 2 of Article 64, provisions of Article 99, and the prohibition to pledge the assets comprising an investment fund or the assets of an investment company as stipulated in paragraph 3 of Article 13 of this Law. It shall be prohibited to lend the assets of the immovable property collective investment undertaking, use the assets to guarantee or secure the obligations of other persons. The immovable property collective investment undertaking shall not be under the obligation to use the benchmark index.
2. The price of acquisition of an object of immovable property may not significantly exceed, and the sale price may not significantly fall below, the price established by the immovable property valuators complying with the requirements set forth in Article 72 of this Law. A significant difference in the price shall be the price which differs by more than 15% from the value of the object of immovable property as established by the property valuator(s). Having concluded a transaction on the purchase or sale of an object of immovable property whose price exceeds the largest difference specified in this paragraph, an immovable property investment company or a management company managing an immovable property collective investment undertaking must, in exceptional cases and provided that interests of participants of the collective investment undertaking are not harmed, notify the Securities Commission thereof immediately, but in any case not later than within 5 working days from the conclusion of the transaction. The notification must indicate the price of the concluded transaction, the value of the object of immovable property established by the immovable property valuator(s) and the reasons for the conclusion of the transaction.
3. An immovable property investment company or a management company managing an immovable property collective investment undertaking may, on account of the collective investment undertaking, borrow up to 75 % of the value of net assets as of the day of the loan contract conclusion for a term laid down in advance in the instruments of incorporation of the collective investment undertaking.
Article 74. Investment Objects of Immovable Property Collective Investment Undertakings
1. The assets of an immovable property collective investment undertaking may comprise:
1) the land representing an individual object of immovable property, buildings and/or premises registered in the name of the immovable property collective investment undertaking;
3) transferable securities and money market instruments of the companies whose main activity is the acquisition, reconstruction, leasing, trade and/or development of immovable property (immovable property companies), where the assets of such companies are invested in the immovable property complying with the requirements set forth in this Article;
4) units or shares of the immovable property collective investment undertakings incorporated in the Member States whose supervision regulations are at least as stringent as in the Republic of Lithuania;
5) the movable property and equipment necessary for the operation of the object of immovable property included in the investment portfolio of the collective investment undertaking;
2. The assets of an immovable property collective investment undertaking may not be used to acquire the objects listed in paragraph 1 of this Law where:
1) they are planned to be acquired into common partial ownership without specifying the shares of the co-owners;
2) the right of ownership to an object is restricted and this could result in the loss of the right of ownership;
Article 75. Diversification of the Investment Portfolio of Immovable Property Collective Investment Undertakings
1. The assets of an immovable property collective investment undertaking shall be considered sufficiently diversified where they are invested in compliance with the requirements stipulated in this Article. For the purpose of calculation of the maximum allowable investment limits, the premises located in the same building shall be considered a single object of immovable property.
2. Net assets comprising not more than 20% of the assets of an immovable property collective investment undertaking may be invested in the instruments referred to in Article 57 of this Law provided that the requirements set forth in Articles 58, 59, 61 and 62 of this Law are complied with.
3. Net assets comprising not more than 30% of the assets of an immovable property collective investment undertaking may be invested in one object of immovable property and/or an immovable property company.
4. The total amount of investment in the objects of immovable property provided for in subparagraph 2 of paragraph 1 of Article 74 of this Law may not exceed 20% of the net assets comprising the assets of an immovable property collective investment undertaking.
5. The total amount of investment in the objects of immovable property and the movable property and/or the equipment necessary for operation thereof shall not exceed 40% of the net assets comprising the assets of an immovable property collective investment undertaking.
6. The total amount of investment in the transferable securities and money market instruments issued by the same immovable property company and the amount of the liabilities arising in respect of a collective investment undertaking as a result of transactions in derivative financial instruments with that company may not exceed 30% of the net assets comprising the assets of an immovable property collective investment undertaking.
7. The total amount of investment in the investment instruments indicated in paragraph 6 of this Article and the investment objects indicated in paragraph 5 of this Article that are objects of investment of such an immovable property company and the immovable property collective investment undertaking investing in such company may not exceed 30% of the net assets comprising the assets of an immovable property collective investment undertaking.
8. The investment portfolio of a newly incorporated immovable property collective investment undertaking shall be allowed, for four years from the approval of its instruments of incorporation and prospectuses by the Securities Commission, not to comply with the diversification requirements set forth in this Article. In all cases, this shall not waive the obligation of a management company and an investment company to invest the assets of an immovable property collective investment undertaking in compliance with the requirements set forth by Articles 66 and 74 of this Law.
9. In the event of infringement of requirements of investment rules for the reasons beyond the control of a management company or an investment company, such incompliance must be eliminated within the shortest possible time, but in any case not later than within one year.
10. Upon the expiry of the time limit laid down in paragraph 8 of this Article, a management company or an investment company the management of whose assets has not been delegated to the management company infringing requirements of investment rules must immediately notify the Securities Commission in writing of the infringement indicating the reasons for the infringement, the measures it intends to take to rectify the situation and the anticipated time limit for elimination of the infringement.
Article 76. Establishment of the Value of Net Assets of Immovable Property Collective Investment Undertakings
1. The value of net assets of an immovable property collective investment undertaking shall be established on the basis of the market price of the assets of the collective investment undertaking and in compliance with the principles of establishment of the value of net assets as specified in this Law and legal acts of the Securities Commission as well as rules for the establishment of the value of net assets specified in the instruments of incorporation. The value of net assets of an immovable property collective investment undertaking shall be established at least once in three months. In all cases, the value of net assets must be established at the close of the financial year.
2. The objects of immovable property comprising the assets of an immovable property collective investment undertaking shall be considered as valued where the value thereof was established not earlier than six months ago and only provided there were no material economic changes or changes in the market price of the immovable property changes necessitating a repeated valuation.
Article 77. Contents of the Annual Report of Immovable Property Collective Investment Undertakings
1. In addition to the information provided for in paragraphs 3 and 6 of Article 22 of this Law, the annual report of an immovable property collective investment undertaking must be accompanied with:
1) information on profit and/or loss during the financial year on the sale of each object of immovable property;
2) information on the immovable property agencies whose services have been used by the management company of a collective investment undertaking or an investment company for the purposes of management of the assets of the undertaking;
Article 78. Principal Rules for and Peculiarities of Investment by Private Capital Collective Investment Undertakings
1. Unless otherwise specified in this Section, private capital collective investment undertakings and their management companies shall not be subject to the restrictions established in paragraphs 4 and 5 of Article 13, paragraphs 1, 2 and 4 of Article 57, Articles 58 and 59, and paragraph 2 of Article 64, Article 99, and the prohibition as stipulated in paragraph 3 of Article 13 of this Law to pledge the assets constituting an investment fund or the assets of an investment company. It shall be prohibited to lend the assets of a private capital collective investment undertaking or to use such assets to guarantee or secure the discharge of liabilities of other persons. The prohibition to lend shall not apply only to a collective investment undertaking intended for professional investors, however, the value of the assets lent may not exceed 50% of the value of net assets of the private capital collective investment undertaking. The private capital collective investment undertaking shall not be under the obligation to use the benchmark index.
2. A private capital investment company or a management company managing the assets of a collective investment undertaking may borrow, on the account of the collective investment undertaking, up to 80% of the value of net assets as of the date of the loan contract conclusion for the term laid down in advance in the instruments of incorporation of the collective investment undertaking.
3. Only private capital collective investment undertaking intended for professional investors may be comprised of the units or shares of different classes. In this case, the different classes of the units or shares as well as the scope of rights and duties of the investors holding them must be disclosed in the rules of a collective investment undertaking, or, where applicable, in the prospectuses thereof.
Article 79. Investment Objects of Private Capital Collective Investment Undertakings
The assets of a private collective investment undertaking may be comprised of:
1) securities of newly incorporated and/or operating companies whose transferable securities have not been admitted to trading on the markets specified in subparagraphs 1, 2 and 3 of paragraph 1 of Article 57 of this Law;
2) the money market instruments issued by the companies indicated in paragraph 1 of this Article whose transferable securities have been acquired by a private capital collective investment undertaking, provided they have not been admitted to trading on the markets specified in subparagraphs 1, 2 and 3 of paragraph 1 Article 57 of this Law;
Article 80. Diversification of the Investment Portfolio of Private Capital Collective Investment Undertakings
1. The assets of a private capital collective investment undertaking shall be considered sufficiently diversified where they have been invested in compliance with the requirements set forth in this Article.
2. Investment in transferable securities or money market instruments of a single company may not exceed 30% of the net assets comprising the assets of a private capital collective investment undertaking.
3. The investment portfolio of a newly incorporated private capital collective investment undertaking shall be allowed, for four years from the approval of its instruments of incorporation and prospectuses by the Securities Commission, not to comply with the diversification requirements set forth in this Article. In all cases, this shall not waive the obligation of a management company and an investment company to invest the assets of the private capital collective investment undertaking in compliance with the requirements of Articles 66 and 79 of this Law.
4. In the event of infringement of the requirements of investment rules for the reasons beyond the control of a management company or an investment company, the incompliance must be eliminated within the shortest possible time, but in any case not later than within one year. This time limit may be extended only in exceptional circumstances, where the management company or the investment company is not in a position to rectify the situation for the reasons beyond its control. In this case, upon the expiry of the time limit of one year the management company or the investment company must immediately notify the Securities Commission of the resulting situation and the reasons therefor. The notification must also specify the anticipated time limit for complying with the requirement.
5. Upon the expiry of the time limit laid down in paragraph 4 of this Article, a management company or an investment company the management of whose assets has not been delegated to the management company infringing requirements of investment rules must in all cases immediately notify the Securities Commission in writing of the infringement indicating the reasons for the infringement, the measures it intends to take to rectify the situation and the anticipated reasonable time limit for elimination of the infringement.
6. The requirements set forth in this Article shall be waived only in respect of the collective investment undertakings intended for professional investors. The latter shall be under the obligation to manage the investment portfolio risk. The rules of such collective investment undertakings and, where applicable, their prospectuses must indicate that these undertakings are not subject to the investment portfolio diversification requirements applicable to other private capital collective investment undertakings and that investment in a private capital collective investment undertaking intended for professional investors is related to a risk rating greater than medium.
Article 81. Establishment of the Value of Net Assets of Private Capital Collective Investment Undertakings
1. The value of net assets of private capital collective investment undertakings shall be established on the basis of the market price of the assets of a collective investment undertaking and in compliance with the principles of establishment of the value of net assets specified in legal acts of the Securities Commission and rules for the establishment of the value of net assets specified in the instruments of incorporation. The value of net assets of a private capital collective investment undertaking shall be established at least once in three months. In all cases, it must be established at the close of the financial year.
Article 82. Contents of the Annual Report of Private Capital Collective Investment Undertakings
1. In addition to the information provided for in paragraphs 3and 6 of Article 22 of this Law, the annual report of a private capital collective investment undertaking must be accompanied with:
1) information on the performance results of each company referred to in subparagraphs 1 and 2 of Article 79 of this Law in whose transferable securities and money market instruments the assets of the undertaking have been invested;
SECTION FIVE
COLLECTIVE INVESTMENT UNDERTAKINGS INVESTING IN OTHER COLLECTIVE INVESTMENT UNDERTAKINGS
Article 83. Principal Rules for and Peculiarities of Investment by Collective Investment Undertakings Investing in Other Collective Investment Undertakings
1. Unless otherwise specified in this Section, the investment of the assets of the collective investment undertakings investing in other collective investment undertakings shall not be subject to the restrictions specified in paragraphs 4 and 5 of Article 13, paragraphs 1, 2 and 4 of Article 57, and Articles 58 and 61, Article 99 and the prohibition stipulated in paragraph 3 of Article 13 of this Law to pledge the assets comprising an investment fund or the assets of an investment company. It shall be prohibited to lend the assets of such collective investment undertakings or to use the assets to guarantee or secure the discharge of liabilities of other persons. The collective investment undertakings of this sort shall not be under the obligation to use the benchmark index.
2. A management company managing a collective investment undertaking of this sort or an investment company may borrow, on the account of such a collective investment undertaking, up to 15% of the value of net assets as of the date of the loan contract conclusion for the time limit laid down in advance in the instruments of incorporation of the collective investment undertaking, which in all cases may not exceed 6 months.
Article 84. Investment Objects of Collective Investment Undertakings Investing in Other Collective Investment Undertakings
1. The assets of a collective investment undertaking investing in other collective investment undertakings may be comprised of:
1) units or shares of the harmonised collective investment undertakings incorporated in Member States;
2) units or shares of the collective investment undertaking incorporated in a Member States and/or another state and not complying with the requirements of EU legal acts, provided such undertakings and/or their management companies are subject to licensing and/or supervision for the purposes of protection of investor interests, and the Securities Commission and the foreign supervisory authority have concluded an agreement ensuring an appropriate supervision of operations of such collective investment undertakings and provision of information;
Article 85. Diversification of the Investment Portfolio of the Collective Investment Undertakings Investing in Other Collective Investment Undertakings
1. The assets of a collective investment undertaking of this sort shall be considered sufficiently diversified where they have been invested in compliance with the requirements set forth in this Article.
2. Not more than 50% of the value of net assets of a collective investment undertaking may be invested in units or shares of a single collective investment undertaking not more than 10% of whose net assets have been invested in units or shares of other collective investment undertakings.
3. Not more than 20% of the value of net assets of a collective investment undertaking may be invested in units or shares of a single collective investment undertaking more than 10% of whose net assets have been invested in units or shares of other collective investment undertakings.
4. Not more than 20% of the net assets comprising the assets of an undertaking may be invested in the instruments referred to in Article 57 of this Law in compliance with the requirements set forth in Articles 58, 59, 61 and 62 of this Law.
5. Not more than 20% of the value of net assets of a collective investment undertaking may be invested in units or shares of the hedge collective investment undertakings or identical collective investment undertakings complying with the requirements set forth in subparagraph 2 of paragraph 1 of Article 84 of this Law.
6. The total investment in the collective investment undertakings provided for in paragraph 3 of this Article may not exceed 60% of the net assets of a collective investment undertaking.
7. The investment limits provided for in paragraphs 2 and 3 of this Article may be extended up to 100 and 50% respectively where a collective investment undertakings in whose units or shares a higher share of net assets is intended to be invested is indicated in advance in the instruments of incorporation or prospectuses of the collective investment undertaking when disclosing its investment policy and the amounts of all investment-related fees and expenses. In this case, for the purpose of obtaining the approval of the Securities Commission for the instruments of incorporation and prospectuses of a collective investment undertaking investing in other collective investment undertakings or for amendments of such documents, the Securities Commission shall be furnished with the instruments of incorporation and prospectuses of the relevant collective investment undertaking in which a higher share of net assets is intended to be invested.
8. In all cases, an investment company or a management company managing a collective investment undertaking of this sort must comply with the restrictions specified in Article 59 of this Law.
9. The share of liabilities per one credit institution in the investment portfolio of a collective investment undertaking may not exceed 10% of the value of net assets of the collective investment undertaking.
10. The shares of investment in units or shares of individual sub-funds of another collective investment undertaking must be accumulated, and in all cases the aggregate amount may not exceed the limits specified in paragraphs 2, 3 and 7 of this Article.
11. The investment portfolio of a newly incorporated collective investment undertaking of this sort shall be allowed, for six months from the approval of its instruments of incorporation and prospectuses by the Securities Commission, not to comply with the diversification requirements set forth in this Article. The investment portfolio of such an undertaking shall also be subject to the requirements set forth in Article paragraphs 1 and 3 of Article 64 of this Law.
Article 86. Contents of the Annual Report of the Collective Investment Undertakings Investing in Other Collective Investment Undertakings
1. In addition to the information provided for in paragraphs 3 and 6 of Article 22 of this Law, the annual report of a collective investment undertaking investing in other collective investment undertakings shall be accompanied with:
1) information on profit and/or loss during the financial year on the sale or purchase, on the account of the assets of the undertaking, of the units or shares of each collective investment undertaking specified in paragraph 7 of Article 85 of this Law;
Article 87. Principal Rules of Operation of Hedge Collective Investment Undertakings
1. On the basis of this Law, only the hedge collective investment undertakings whose participants, in accordance with the instruments of incorporation of a collective investment undertaking, may be solely professional investors may be established in the Republic of Lithuania.
2. The name of a hedge collective investment undertaking must reflect its investment policy. Its name must contain the word “hedge”.
3. The assets of a hedge collective investment undertaking may be invested in all investment objects considered as eligible for investing by harmonised or special collective investment undertakings as specified in this Law in compliance with the special requirements set forth in this Section and the investment policy of a collective investment undertaking.
4. Hedge collective investment undertakings and their management companies shall not be subject to provisions of paragraphs 3, 4 and 5 of Article, the investment restrictions specified in Articles 57, 58 and 59 of this Law, and provisions of Sections Two, Three, Four and Five of Chapter VII of this Law. A hedge collective investment undertaking shall not be under the obligation to use the benchmark index.
5. A management company managing an investment fund of a hedge collective investment investment fund or a hedge collective investment investment company whose assets are intended to be invested in immovable property shall be mutandis mutandis subject to requirements of subparagraph 3 of paragraph 2 of Article 65 and of Article 72 of this Law. The objects of immovable property comprising the investment portfolio of a hedge investment collective investment undertaking or intended to be acquired must be valued by at least one immovable property valuator.
6. The management company of a hedge collective investment undertaking or a hedge collective investment investment company the management of whose assets has not been delegated to the management company must ensure that the assets of the collective investment undertaking are invested in strict compliance with the investment policy defined in its instruments of incorporation.
7. The investment portfolio of a hedge collective investment undertaking must in all cases be diversified to the extent capable of ensuring a proper investment risk-spreading.
8. A hedge collective investment investment company or a management company managing the assets of a hedge collective investment undertaking may borrow, on the account of the hedge collective investment undertaking, up to 200 % of the value of net assets as of the day of the loan contract conclusion for a term laid down in advance in the instruments of incorporation of the collective investment undertaking.
9. The assets of a hedge collective investment undertaking may be lent only to licensed financial institutions. The value of the assets lent may not exceed 50% of the value of net assets value of the hedge collective investment undertaking. A hedge collective investment investment company or a management company managing the assets of the hedge collective investment undertaking may, in compliance with the requirements set forth in this paragraph, lend the assets of a collective investment undertaking for a period not exceeding 30 days. The requirement of the maximum duration of the lending period as specified in this paragraph may be waived only where, under the terms of the loan contract, the management company or the hedge collective investment investment company has the right to claim a return of the lent assets of the collective investment undertaking at any time.
Article 88. Provisions Applicable to the Instruments of incorporation of Hedge Collective Investment Undertakings
1. The instruments of incorporation of a hedge collective investment undertaking must explicitly disclose the investment policy of the undertaking, a finite list of eligible investment objects and the limits of investment.
2. The instruments of incorporation of a hedge collective investment undertaking must indicate that only professional investors may be its participants.
3. The requirements set forth in subparagraphs 2 and 3 of paragraph 2 of Article 65 of this Law shall apply mutandis mutandis to the rules of a hedge collective investment investment fund.
4. The articles of association of a hedge collective investment investment company shall be subject to requirements of Article 54 of this Law.
5. The instruments of incorporation of a hedge collective investment undertaking must also indicate the types of risk related to investment in the collective investment undertakings of this sort and description thereof, with an indication that investment in a hedge collective investment undertaking is related to a risk rating greater than medium.
Article 89. Establishment of the Value of Net Assets of Hedge Collective Investment Undertakings
The value of net assets of hedge collective investment undertakings shall be established on the basis of the market value of the assets of a collective investment undertaking and in compliance with the principles of establishment of the value of net assets specified in legal acts of the Securities Commission and rules for the establishment of the value of net assets specified in the instruments of incorporation. The value of net assets of a hedge collective investment undertaking shall be established at least once in six months. In all cases, it must be established at the close of the financial year.
Article 90. Peculiarities of a Closed-Ended Investment Company
1. A closed-ended investment company shall be subject to the same requirements as an investment company with variable capital, unless this Article indicates otherwise.
2. In addition to the information provided for in paragraph 1 of Article 54 of this Law, the articles of association of a closed-ended investment company must indicate:
1) type of the company (a closed-ended investment company) and the term for which it is established;
4) the procedure for issuing new shares of the company and the time limits for settlement for such shares;
3. The duration of operation of a closed-ended investment company whose articles of association provide for the issue of shares may not exceed ten years.
5. A company shall be prohibited from having its own shares or redeeming them from shareholders of the company.
6. The authorised capital of a company may be increased only from share premium account or by additional contributions upon a decision of the general meeting of shareholders.
7. When increasing the authorised capital by additional contributions the shares being issued may be acquired only by shareholders of a company in proportion to the number of shares held thereby. The shares may be offered to non-shareholders of the company only where the current shareholders of the company have failed to subscribe to all shares to be issued by the company within the time limit that may not be less than 10 days and not more than 30 calendar days as laid down in the articles of association. The shares of the new issue of shares must be paid in cash within the time limit laid down in a share subscription agreement that may not exceed 30 working days.
8. Where at least one issue of shares of a closed-ended investment company has been distributed in accordance with the procedure laid down in paragraph 13 of Article 2 of this Law, distribution of other issues of shares of the same company must be conducted in accordance with the same procedure.
9. The prospectus of the issue of shares of a closed-ended investment company type must be drawn up in compliance with the requirements set forth by the Securities Commission. A closed-ended investment company shall not be under the obligation to draw up a simplified share issue prospectus.
10. The financial statements of a company must be drawn up and audited not earlier than 30 days prior to the passing of a decision on the allocation of dividends. This requirement may be waived where the decision to pay dividends is passed at the annual general meeting of shareholders. The dividends shall be paid to the shareholders of the company within the time limits and in accordance with the procedure laid down by the articles of association of the company.
11. The transferable securities, money market and derivative financial instruments comprising the investment portfolio of a company must be assessed at least once in two weeks. Other assets must be assessed on a regular basis at the frequency specified in the articles of association of the company, but in any case at least once a year. The company must conduct a new assessment of the assets comprising the investment portfolio at each occasion of the new issue of shares.
12. The amount of the net assets of a company and the net value of a share shall be announced in accordance with the procedure and at the frequency laid down in the articles of association, but in any case at least once a year.
13. Upon the expiry of the term of operation of a closed-ended investment company as laid down in the articles of association of the company, the assets of the company shall be sold, and the funds remaining upon discharge of liabilities shall be distributed to shareholders of the company in proportion to the number of shares held thereby.
Article 91. Peculiarities of a Closed-Ended Investment Fund
1. A closed-ended investment fund shall be subject to the same requirements as special open-ended investment funds unless this Article indicates otherwise.
2. The name of an investment fund of the closed-ended type must contain the word combination “closed-ended”.
3. In addition to the information referred to in Article 46 of this Law, the rules of an investment fund must explicitly indicate the type of the fund, the duration for which the fund has been established, and a warning that units of the fund are not redeemed at the request of a participant. In compliance with the requirements set forth in this Law for the offering of units or shares, the rules of the fund may establish a limited number of participants and/or units of the fund.
4. The period of operation of a closed-ended investment fund the rules whereof provide for the issue of units not entitling to a share in investment proceeds may not exceed ten years.
5. The management company of a closed-ended investment fund shall not be under the obligation to draw up a simplified prospectus of the fund.
Article 92. Offering and Advertising of Collective Investment Undertakings of the Closed-Ended Type
In addition to the information to be included in a mandatory manner in advertising as provided for in this Law, the advertising of collective investment undertakings of the closed-ended type must contain an explicit and comprehensible indication that the investor's right to redeem the units or shares held by him shall be restricted.
CHAPTER VIII
ADMISSION OF UNITS OR SHARES TO TRADING ON A REGULATED MARKET OPERATING IN THE REPUBLIC OF LITHUANIA
Article 93. Admission of Units or Shares to Trading on a Regulated Market
1. The units or shares of a collective investment undertaking established according to this Law may be admitted to trading on a regulated market operating in the Republic of Lithuania in compliance with the rules provided for in this Law and in paragraph 1 of Article 54 of the Law on Markets in Financial Instruments governing the admission of financial instruments to trading on a regulated market. It shall be prohibited to admit to trading on a regulated market operating in the Republic of Lithuania the units or shares of hedge collective investment undertakings.
2. The admission of units or shares of collective investment undertakings of the closed-ended type to trading on a regulated market shall be subject to provisions of this Law to the extent these relations are not regulated by the Law on Securities.
3. A decision of the management body of a management company or the general meeting of shareholders of an investment company to admit the shares of the investment company or units of an investment fund to trading on a regulated market shall be applied to all units or shares of the collective investment undertaking (including those issued after the admission to trading on the regulated market).
Article 94. Trading in Units or Shares on a Regulated market
Trading in units or shares of a collective investment undertaking on a regulated market shall be conducted in accordance with rules of the regulated market.
Article 95. Disclosure of Information
1. The information concerning admission of units or shares of a collective investment undertaking to trading on a regulated market must be provided in the instruments of incorporation and prospectuses of the collective investment undertaking by indicating the name of the respective regulated market.
2. The full prospectus of a collective investment undertaking, with the exception of a collective investment undertaking of the closed-ended type whose units or shares are to be admitted to trading on a regulated market and the subsequent amendments thereto must be published in accordance with the procedure laid down by the Law on Securities. The Securities Commission shall have the right to provide for exceptions to the duty stipulated in this paragraph to additionally publish the full prospectus.
3. The drawing up, approval and publication of the prospectus of a collective investment undertaking of the closed-ended type whose units or shares are to be admitted to trading on a regulated market and the prospectus for the issue of shares of a closed-ended investment company shall be subject to provisions of this Law to the extent the mentioned relations are not governed by the Law on Securities.
4. A management company or an investment company shall notify the operator of a regulated market of the following:
1) the price of the units or shares calculated in accordance with the procedure laid down in Article 35 of this Law;
2) the number of units or shares issued, redeemed or admitted to trading on the regulated market, in the event of change thereof;
3) any changes in the composition of the financial instrument portfolio of an index-replicating collective investment undertaking;
5. The notifications referred to in subparagraphs 1 and 2 of paragraph 4 of this Article must be submitted on each day of trading on a regulated market.
6. With a view to providing an investor with a possibility to properly and timely compare the price of units or shares on a market with the price of the units or shares calculated in accordance with the procedure laid down in Article 35 of this Law, the operator of the regulated market must publish the information referred to in subparagraphs 1, 2 and 3 of paragraph 4 of this Article on each day of trading on the regulated market.
Article 96. Accounting of Units or Shares
The units or shares of a collective investment undertaking admitted to trading on a regulated market or offered by technical organisational means of the operator of the regulated market and/ or a settlement system must be accounted for in accordance with the rules drawn up by the Central Securities Depository of Lithuania and approved by the Lithuanian Securities Commission.
CHAPTER IX
SECTION ONE
ACTIVITIES OF MANAGEMENT COMPANIES AND INVESTMENT COMPANIES WITH VARIABLE CAPITAL LICENSED IN THE REPUBLIC OF LITHUANIA IN FOREIGN STATES
Article 97. Right of Management Companies of the Republic of Lithuania to Provide Services in Foreign States
1. This Article shall set forth the requirements to be complied with by a management company establishing a branch in a Member State or providing services in such a state without establishing a branch. In a non-Member State, the management company shall have the right to establish a branch or to provide services without establishing a branch in accordance with the procedure laid down in this Article, provided the agreements concluded between the Securities Commission and the foreign supervisory authority are sufficient to ensure adequate supervision of activities and provision of information. Where the management company already has at least one branch in a foreign state, the procedure laid down in this Article shall not apply to the establishment of its other branches in that state.
2. Prior to establishing a branch in a foreign state, a management company must communicate a notice thereof to the Securities Commission enclosing its programme of operations, specifying the types of business and the services intended to be provided, the proposed structure of the branch, the contact location for applying for documents and the full names of heads of the branch.
3. The Securities Commission must, within three months, communicate the information specified in paragraph 2 of this Article to the foreign supervisory authority enclosing thereto the information regarding the scheme of insurance of liabilities to investors. The Securities Commission shall have the right to refuse to grant authorisation for the establishment of a branch and to refuse, within two months, to communicate the specified information only where the structure of the proposed branch or the company's financial position does not meet the requirements set forth by the Securities Commission for the pursuit of such activities. A management company must be notified of the communication of information or the refusal to communicate it.
4. In order to provide services in a foreign state without establishing a branch, a management company must give a notice thereof to the Securities Commission indicating the foreign State. The company must also provide its programme of operations indicating the services which it intends to provide. The Securities Commission must also be communicated such a notice where distribution of units or shares is planned to be effected through intermediaries. The Securities Commission must, within one month, communicate this notice to the foreign supervisory authority alongside with the information regarding the scheme of insurance of liabilities to investors and notify the management company thereof.
5. In the event of changes to the information communicated by a management company together with a notice of the establishment of a branch, it must give a prior notice thereof to the Securities Commission and the foreign supervisory authority at least one month in advance. In such a case, where there are reasons provided for in paragraph 3 of this Article, the Securities Commission must instruct to cease the activities of the branch. The Securities Commission must notify the foreign supervisory authority of any changes in the scheme of insurance of liabilities to investors or changes in other communicated information. In the event of any changes in the programme of operations of a company providing services without establishing a branch, it must give a prior notice thereof to the Securities Commission and the foreign supervisory authority.
Article 98. Supervision of Activities of Management Companies of the Republic of Lithuania in a Foreign State
1. The Securities Commission shall supervise the compliance with prudential requirements by the management companies of the Republic of Lithuania providing investment services in a foreign state. Where the foreign supervisory authority notifies of the infringements committed by a management company, the Securities Commission must apply sanctions and inform the foreign supervisory authority thereof.
2. The Securities Commission shall have the right to request that the foreign supervisory authority carry out an inspection of activities of a branch of a management company or to carry out the inspection itself upon giving a prior notice thereof to the foreign supervisory authority.
Article 99. Distribution of Units or Shares in a Foreign State
1. A management company or an investment company with variable capital wishing to carry out distribution of units or shares in a foreign state must give a notice thereof to the Securities Commission.
2. The Securities Commission must forthwith notify the supervisory authority of a foreign state where units or shares are distributed of revocation of the licence of a management company or an investment company with variable capital, suspension of redemption of units or shares or appointment of a temporary representative of the Securities Commission for the supervision of activities of the management company or the investment company with variable capital.
SECTION TWO
ACTIVITIES OF FOREIGN MANAGEMENT COMPANIES
AND INVESTMENT COMPANIES WITH VARIABLE CAPITAL IN
THE REPUBLIC OF LITHUANIA
Article 100. Right of Foreign Management Companies to Provide Services in the Republic of Lithuania
1. A management company licensed in a Member State may establish a branch in the Republic of Lithuania provided that the foreign supervisory authority has communicated to the Securities Commission the company's programme of operations specifying the services it plans to provide, the intended structure of the branch, the contact location for applying for documents, and the full names of heads of the branch. Upon receipt of such a communication, the Securities Commission shall prepare for the exercise of supervision and, where necessary, notify the management company of the operation requirements which, in general interests, it will be under the obligation to comply with.
2. A branch may be established upon receipt by a management company of a notification of the Securities Commission provided for in paragraph 1 of this Article, and in the absence of the notification – after the lapse of two months from the day when the foreign supervisory authority communicated to the Securities Commission the information provided for in paragraph 1 of this Article. As of this moment, the management company shall acquire the right to provide services in the Republic of Lithuania and, subject to compliance with the requirements laid down in Article 102 of this Law, to distribute the units or shares of the collective investment undertakings managed by it and complying with requirements of the European Union legal acts, unless the Securities Commission establishes within the said period that there is a ground as specified in paragraph 3 of Article 102 for refusing appropriate authorisation.
3. If a management company referred to in paragraph 1 of this Article has already established at least one branch in the Republic of Lithuania, the procedure laid down in this Article shall be waived for the establishment of its other branches.
4. A management company licensed in a Member State may commence provision of services in the Republic of Lithuania without establishing a branch upon the lapse of one month from the date of communication by the foreign supervisory authority of its programme of operations to the Securities Commission. As of this moment, the management company shall acquire the right to provide services in the Republic of Lithuania and, subject to compliance with the requirements set forth in Article 102 of this Law, to distribute the units or shares of the collective investment undertakings managed by it, unless the Securities Commission establishes within the said period that there are the grounds specified in paragraph 3 of Article 102. The Securities Commission shall have the right to instruct the management company about the requirements of operation which, in general interests, it will be under the obligation to comply. The procedure laid down above shall also apply where the management company distributes units or shares through intermediaries.
5. In the event of any changes in the information about a management company provided for in paragraph 1 of this Article, the company must give a prior notice thereof to the Securities Commission at least one month in advance. A management company which provides services without establishing a branch must give a prior notice to the Securities Commission of any changes in its programme of operations.
6. A management company licensed in a non-Member State shall have the right to provide services in the Republic of Lithuania in accordance with the same procedure as laid down for the companies licensed in Member States provided there is agreement concluded between the Securities Commission and the foreign supervisory authority to ensure proper supervision of activities and provision of information.
Article 101. Supervision of Activities of the Foreign Management Companies Providing Services in the Republic of Lithuania
1. The foreign management companies providing services in the Republic of Lithuania must act in compliance with the rules of conduct laid down in the legal acts of the Republic of Lithuania governing general interests. Their branches must be organised in such a way as to comply with the requirements set forth by the Securities Commission seeking to minimise the risk of conflicts of interest between participants in and clients of a collective investment undertaking and the management company as well as their managers or members of the management bodies.
2. The Securities Commission shall have the right to require the foreign management companies providing services in the Republic of Lithuania to provide the same notifications and/or reports specified under this Law as required from the management companies licensed in the Republic of Lithuania. The Securities Commission may additionally require periodic reports of a branch drawn up for statistical purposes.
3. The foreign supervisory institution or the persons authorised by it shall have the right to carry out inspections of a branch of a foreign management companies upon giving a prior notice to the Securities Commission.
4. Where a foreign management company operating in the Republic of Lithuania infringes legal acts, the Securities Commission must require it to eliminate the infringements. Where the situation is not remedied within the established time period, the Securities Commission must give a notice thereof to the foreign supervisory authority. Where the management company persists in infringing, the Securities Commission shall have the right, upon informing the foreign supervisory authority, apply the following sanctions:
1) impose administrative penalties or the pecuniary penalties stipulated by this Law upon employees, the head of the administration, his deputy or managers of the Board of the management company;
5. The Securities Commission shall not be under the obligation to follow the procedure for applying sanctions as laid down in paragraph 4 of this Article where a foreign management company infringes the rules of conduct relating to general interests. The Securities Commission shall forthwith notify the foreign supervisory authority of the sanctions applied. Where the company infringes other rules non-compliance wherewith poses a threat to the interests of investors and recipients of services, the Securities Commission shall have the right to diverge from the procedure laid down in paragraph 4 of this Article and must communicate the sanctions applied to the foreign supervisory authority without delay, where the sanctions have been applied to a management company licensed in a Member State – also to the Commission of the European Communities.
Article 102. Right to Distribute the Units or Shares of a Collective Investment Undertakings Complying with Requirements of the Directives Referred to in the Annex to This Law
1. A management company or an investment company with variable capital licensed in a Member State, where it wishes to distribute units or shares in the Republic of Lithuania, must give a notice thereof to the Securities Commission.
2. A notification must also include:
1) a confirmation of the foreign supervisory authority that the collective investment undertaking whose units or shares will be distributed complies with requirements of the directives referred to in the Annex to this Law;
4) the most recent annual report and a half-year report, where it was drawn up following the annual report;
3. A management company or an investment company with variable capital may commence distribution of units or shares after the lapse of two months following communication of the information specified in paragraph 2 of this Article, with the exception of the case when the Securities Commission decides within the said period that:
1) the procedure for distributing the units or shares contravenes legal acts of the Republic of Lithuania or does not guarantee proper payment for the units or shares being redeemed or furnishing of information;
2) supervision of a management company or an investment company with variable capital licensed in a non-Member State does not comply with the European Union legislation or the Securities Commission has not concluded agreements with the foreign supervisory authority ensuring adequate supervision of activities and provision of information.
4. The rules for submission of the documents listed in this Article shall be established by the Securities Commission.
Article 103. Procedure for Terminating Public Distribution of Units or Shares of Foreign Collective Investment Undertakings
1. A management company or an investment company with variable capital licensed in a foreign state and wishing to terminate the public distribution of units or shares of a collective investment undertaking complying with requirements of the directives referred to in the Annex to this Law must, not later than two months in advance prior the planned termination of the distribution, notify the Securities Commission thereof in writing and make a public announcement to that effect in at least one national daily newspaper or notify thereof in writing each Lithuanian investor holding the units or shares of the collective investment undertaking.
2. The notices to investors and the Securities Commission as indicated in paragraph 1 of this Article must indicate:
1) the planned date of termination of public distribution of the units or shares in the Republic of Lithuania;
2) the consequences of termination of public distribution of the units or shares for current investors of the collective investment undertaking;
3) contact data of the undertaking to which the current investors may apply concerning the redemption of their units or shares prior to termination of public distribution thereof;
4) contact data of the undertaking to which the current investors may apply concerning the redemption of their units or shares following termination of public distribution thereof;
5) the venue at which the investors who have failed to exercise the possibility to require redemption of the units or shares prior to termination of public distribution thereof will be able to familiarise themselves with the information published by the management company or an investment company with variable capital about the collective investment undertaking;
3. A foreign management company or an investment company with variable capital must fulfil the duty stipulated in Article 104 of this Law to publish and provide to investors the information about the activities of a collective investment undertaking for a period not shorter than two months from the proper discharge of the duty provided for in paragraph 1 of this Article.
Article 104. Information Published by a Foreign Management Company or an Investment Company with Variable Capital
1. A foreign management company or an investment company with variable capital distributing units or shares in the Republic of Lithuania must publish and submit to the Securities Commission, in the Lithuanian language or in any other language prescribed by the Securities Commission and in accordance with the procedure laid down in a state of its registered office, its full and simplified prospectuses and amendments thereto, annual and half-yearly reports and the instruments of incorporation.
CHAPTER TEN
STATE SUPERVISION OF ACTIVITIES OF MANAGEMENT COMPANIES, INVESTMENT COMPANIES WITH VARIABLE CAPITAL AND DEPOSITORIES
Article 105. Accounting and Reporting
1. The accounting of a management company, investment company and investment fund, the organisation and management of accounting, the procedure for drawing up of financial statements shall be established by laws and other legal acts.
2. A depository with which a management company or an investment company has concluded an agreement on safe-keeping of assets of the investment fund or the investment company must furnish to the management company or the investment company the management of whose assets has not been delegated to the management company all documents necessary for the management of accounting and drawing up of financial statements.
Article 106. Securities Commission
1. The activities of management companies, investment companies and depositories shall be supervised by the Securities Commission.
2. The Securities Commission shall perform supervisory functions in compliance with this Law and the Law on Markets in Financial Instruments and shall possess the rights and duties specified in this Law and other laws.
Article 107. Functions of the Securities Commission Relating to Supervision of Activities of Management Companies, Investment Companies and Depositories
The Securities Commission shall:
1) draft, approve, amend or repeal the legal acts assigned to its sphere of competence under this Law;
2) submit clarifications and recommendations on the issues of application of this Law and the implementing legislation;
3) issue licences to management companies, investment companies with variable capital and closed-ended investment companies and revoke them, apply other sanctions;
4) approve the rules of investment funds, articles of association of investment companies and amendments thereto, grant the authorisations specified in this Law;
6) give the instructions binding on management companies, investment companies and depositories on the elimination of infringements of legal acts;
7) have the right to obtain, in accordance with the procedure laid down by laws, data about the persons who, under this Law, must be of sufficiently good repute;
8) co-operate with foreign supervisory authorities and exchange with them the information necessary for the exercise of supervision;
Article 108. Duty of Members and Employees of the Securities Commission to Protect Confidential Information
1. Members and employees of the Securities Commission must, in accordance with the procedure laid down by the Law on Markets in Financial Instruments, protect the confidential information which came to their knowledge while performing the functions specified by this Law. The contents of confidential information shall be specified by the Securities Commission.
Article 109. Right of the Securities Commission Members to Carry out Inspections
1. With a view to determining compliance of management companies, investment companies and depositories with this Law and the legal acts adopted on the basis thereof, the Securities Commission shall have the right to organise and carry out inspections.
2. To this end, employees of the Securities Commission may, upon notifying the administration of an enterprise, freely enter the premises of a management company, investment company or depository, temporarily seize documents subject to leaving a list of such documents or copy them, also place questions to heads of the administration of these enterprises, their deputies, members of the management bodies or employees.
Article 110. Pecuniary Penalties for an Infringement of the Law
In compliance with the procedure laid down in the Law on Markets in Financial Instruments, the Securities Commission shall have the right to impose the following pecuniary penalties:
1) on the legal persons engaged in the business of a management company, investment company with variable capital and closed-ended investment company without the licence specified in this Law – in the amount of up to LTL 200 000;
Article 111. Recovery of Pecuniary Penalties
Pecuniary penalties shall be paid into the State budget not later than within one month of the receipt by a person of a decision of the Securities Commission on the imposition of a pecuniary penalty. When the pecuniary penalty has not been paid voluntarily, the decision of the Securities Commission on the imposition of the penalty shall be enforced in accordance with the procedure laid down by the Civil Code of the Republic of Lithuania.
CHAPTER XI
FINAL PROVISIONS
Article 112. Provisions Relating to Membership in the European Union
1. The Securities Commission must inform the Commission of the European Communities:
1) that the Securities Commission shall be responsible for the supervision of collective investment undertakings in the Republic of Lithuania;
2) which institutions of the Republic of Lithuania may be communicated confidential information relating to the activities of collective investment undertakings;
3) which credit institutions meet the requirements listed in paragraph 6 of Article 58 of this Law, also specify the bonds issued by such credit institutions and the instruments safeguarding the interests of bond-holders;
4) the procedure to be followed by management companies and investment companies with variable capital when assessing the liabilities arising from transactions in derivative financial instruments;
5) about the cases when the licence is issued to a management company which is, or becomes, a subsidiary of an entity with its registered office established in a non-Member State ;
6) about the cases when the management companies licensed in the Republic of Lithuania are prevented from providing services or distributing units in non-Member States;
7) about the cases where the Securities Commission refuses to grant the management companies licensed in the Republic of Lithuania an authorisation for establishing a branch in a Member State or imposes sanctions against the management companies licensed in a Member State;
8) the indices recognised by the Securities Commission in compliance with paragraph 1 of Article 60 of this Law.
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
PRESIDENT OF THE REPUBLIC ROLANDAS PAKSAS
Annex
to the Republic of Lithuania Law
on Collective Investment Undertakings
IMPLEMENTED EU LEGAL ACTS
1. Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ 2004 special edition, Chapter 6, Volume 1, p. 139 (as last amended by Directive of the European Parliament and of the Council of 21 April 2004 (OJ 2004 special edition, Chapter 6, Volume 7, p. 263).
2. 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 (OJ 2006, L 241, p. 26).
3. Commission Directive 2007/16/EC of 19 March 2007 implementing Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards the clarification of certain definitions (OJ 2007, L 79, p. 11).