The consideration of the imposition of a sanction on a financial market participant or another person may be completed upon the conclusion of an administrative agreement between them and Lietuvos bankas.
The process of concluding an administrative agreement is stipulated in Article 434 of the Law on the Bank of Lithuania.
An administrative agreement can achieve several objectives:
- Consensus. Under the administrative agreement, consensus is reached between Lietuvos bankas and a financial market participant or another person regarding the established actual data that form the basis for the imposition of a sanction, the evidence in support of such data and the liability to be imposed, as well as the issue of the imposition of the sanction is resolved.
- Efficiency. The aim is to ensure that the processes of imposing sanctions are completed in the shortest and objectively possible time and to minimise the human and financial resources which are allocated to these processes by Lietuvos bankas and persons under supervision.
By its very nature, an administrative agreement should be considered as a settlement agreement. However, the public interest in financial market regulation limits the freedom of the parties to this agreement to negotiate and conclude such an agreement.
In the process of concluding an administrative agreement, all parties undertake to respect the principle of confidentiality (except in cases where Lietuvos bankas becomes aware of new potential infringements of legislation to which it must react in the performance of its functions).
If the financial market participant or another person admits to having committed infringements of legislation in the process of concluding an administrative agreement, the admission made by the financial market participant or another person may not, and will not, be used as evidence of its guilt if no administrative agreement is concluded or in the course of the examination of other alleged infringements by the same person.
Process of concluding an administrative agreement
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Submission of a proposal to conclude an administrative agreement
Key principles of submission of a proposal
It is essential that the intentions of a financial market participant or another person (hereinafter collectively – the person) submitting a proposal to conclude an administrative agreement are genuine, that is, they must not be based on mere declarative statements and a hidden purpose to obtain an offer from Lietuvos bankas in order to obtain information on the sanction that the person is facing.
The person’s intentions must also be real, which means that unrealistic offers which are not in line with the nature of the established alleged infringements of legislation, the provisions on liability laid down in the legal acts, the case law of Lietuvos bankas and courts and/or which may have the concealed motive of delaying the process are not acceptable.
Moreover, the person’s intentions must be constructive, that is, the process of concluding an administrative agreement is not intended to repeat certain actions already carried out and completed by Lietuvos bankas and the person, for example, at the inspection stage, therefore they should not be subject to reconsideration and the person should not have such unreasonable expectations.
In its proposal, the person must set out its intention to complete the process of imposing the sanction amicably and confirm the seriousness of this intention by presenting a concrete standpoint and proposals. A reasoned proposal for an administrative agreement would allow both parties to properly assess the feasibility of concluding an administrative agreement and to prepare for the process of concluding an administrative agreement and to pursue it in a constructive manner.
Who can submit a proposal?
Pursuant to the Law on the Bank of Lithuania, a financial market participant or another person (hereinafter collectively – the person) in respect of whom Lietuvos bankas has commenced the process of imposing a sanction is entitled to propose to conclude an administrative agreement.
In order to ensure uniform awareness of persons, by providing the person with essential information on provisions of legal acts and the established actual data that form the basis for the imposition of a sanction, Lietuvos bankas will at the same time remind the person of its right to propose to Lietuvos bankas to conclude an administrative agreement in a specific process of imposing sanctions. Such a reminder will be of a general nature and therefore cannot create any expectation on the part of the person that the administrative agreement will be concluded.
Lietuvos bankas will examine the possibility of concluding an administrative agreement in a specific process of applying sanctions in accordance with the criteria set out in the Law on the Bank of Lithuania upon receipt of a specific proposal from a person.
When can an administrative agreement be proposed?
A financial market participant or other person (hereinafter jointly – the person) has the right to propose the conclusion of an administrative agreement only upon receipt of a letter from Lietuvos bankas containing essential information on the provisions of the legislation and the factual data established which constitute the basis for the imposition of the sanction(s) in accordance with the procedure laid down in Article 433(2) of the Republic of Lithuania Law on the Bank of Lithuania.
In the letter, Lietuvos bankas sets a time limit of at least 14 days for submitting explanations. Within this time limit, the person may submit explanations on the issue of the intended imposition of the sanction and/or submit a proposal to conclude an administrative agreement. The person’s previous proposal for an administrative agreement will not be considered.
Pursuant to the Republic of Lithuania Law on the Bank of Lithuania, the person may also submit a proposal to conclude an administrative agreement at a later date, before the decision on the imposition of the sanction is taken, but in such a case, when deciding on the possibility to conclude the administrative agreement, Lietuvos bankas will additionally take into account whether the submission of the proposal at a later date would delay the consideration of the issue of the imposition of the sanction.
How to submit a proposal?
In order to ensure a transparent, constructive and expeditious process, Lietuvos bankas has developed a standard form of a proposal to conclude an administrative agreement.
In the proposal, a financial market participant or another person (hereinafter collectively – the person) must clearly and succinctly state its position on the elements that may constitute the subject of the administrative agreement, namely, the established actual data and legislative provisions that form the basis for the imposition of a sanction, and the liability to be imposed on the person, as well as formulate a specific proposal as a basis for the commencement of the process of concluding an administrative agreement. In the proposal, the person may not repeat the explanations, but present a position that is oriented towards reaching consensus between the person and Lietuvos bankas regarding the established basis for the imposition of the sanction and the liability to be imposed. The proposal should not exceed five pages.
The proposal form must be sent to tl.bl@aruizeirp.
Consequences of submission of a proposal
Lietuvos bankas is not bound by a proposal to conclude an administrative agreement. Upon receipt of a proposal from a financial market participant or another person (hereinafter collectively – the person), Lietuvos bankas will examine the possibility of concluding the administrative agreement in accordance with the criteria set out in the Law on the Bank of Lithuania and the individual circumstances of each case.
After the examination, Lietuvos bankas will take one of the following decisions: to commence the process of concluding an administrative agreement (in which case it will be proceeded to the next stage of the process of concluding an administrative agreement) or to refuse to initiate the process of concluding an administrative agreement (in which case the consideration of the issue of imposition of the sanction will proceed under standard procedures).
If the person submits a repeat proposal after Lietuvos bankas has taken a decision to refuse to commence the process of concluding an administrative agreement or the process has been terminated on the initiative of one of the parties, Lietuvos bankas will consider repetitiveness both in terms of content and good faith as one of the criteria for assessing a proposal to conclude an administrative agreement. A mere change of mind of the person will not be considered as constituting acceptable grounds for resubmitting a proposal.
Examination of a proposal to conclude an administrative agreement and taking of a decision on commencing the process of concluding of an administrative agreement
Time limit for examination of the proposal
The examination of a proposal submitted by a financial market participant or another person (hereinafter collectively – the person) to conclude an administrative agreement is subject to the time limit of 20 business days set out in the Republic of Lithuania Law on Public Administration and in the Rules for the Examination of Requests and Complaints of Individuals and the Provision of Services to Them at Lietuvos bankas.
Purpose of and criteria for examination of a proposal
The purpose of the examination of a proposal submitted by a financial market participant or another person (hereinafter collectively – the person) is to take a decision to commence or to refuse to commence the process of concluding an administrative agreement.
The Law on the Bank of Lithuania sets out the criteria that Lietuvos bankas will take into account when deciding on the possibility of concluding the process of imposing a specific sanction with an administrative agreement:
- the nature of alleged infringements of financial market legislation;
- the person’s previous infringements and the sanctions imposed on the person;
- whether the person acts in good faith, discloses the relevant facts relating to the alleged infringements and the supporting evidence;
- whether the conclusion of the administrative agreement will ensure that the purpose of supervision and/or the imposition of the sanction is effectively achieved;
- the likelihood of reaching consensus within the time limit laid down by the Law (two months), taking into account the nature and extent of the dispute over facts, the foreseeable opposing and incompatible approaches to the imposition of liability, and any other circumstances relevant to reaching consensus within the time limit.
These criteria are evaluative in nature, therefore, Lietuvos bankas does not have any predefined assessment of their content and will assess them on a case-by-case basis in respect of the process of imposing the sanction.
Decision on a proposal
A decision to commence or refuse to commence the process of concluding an administrative agreement will be taken by a collegial body, namely, the Financial Market Supervision Committee.
Lietuvos bankas informs a financial market participant or another person (hereinafter collectively – the person) of the decision to commence the process of concluding an administrative agreement. Lietuvos bankas will also provide information on further process and progress in concluding the administrative agreement.
The two-month time limit within which the administrative agreement may be concluded starts to run from the taking of a decision by the Financial Market Supervision Committee.
Lietuvos bankas also informs the person about a decision to refuse to commence the process of concluding an administrative agreement and the reasons for the decision. Such a decision is not subject to appeal under the Law on the Bank of Lithuania, and once it has been taken, the issue of the imposition of a sanction on the person will continue to be considered under standard procedures.
Preparation for concluding an administrative agreement
At the stage of preparation for concluding an administrative agreement, the parties will have the opportunity to discuss, through dialogue, the basis for the alleged infringements committed by a financial market participant or another person (hereinafter collectively – the person), the remedial action to be taken, the possible compensation for the damage caused, the liability to be imposed for the infringements and other aspects related to the infringements.
The dialogue must be result-oriented, open, constructive and be conducted in good faith. Efficiency is an important principle at this stage, given that the Law on the Bank of Lithuania provides for a two-month time limit for the conclusion of an administrative agreement, and if the parties fail to reach consensus during this period, the consideration of the issue of the imposition of a sanction will continue under standard procedures.
As a rule, a single meeting is organised, which takes place at the premises of Lietuvos bankas at a time agreed in advance. Representatives of the person who have managerial authority, i.e. not only the authority to present and discuss a standpoint, but also the authority to take decisions binding on the person, are invited to attend the meeting. The number of representatives to be invited is two to three persons.
The meeting of the parties is expected to result in an open dialogue on the alleged infringements and/or deficiencies in performance, their assessment and the liability to be imposed. The dialogue must not be motivated by the person’s aspiration to avoid or significantly reduce its liability, based on the repetition of information contained in written documents (inspection report and explanations). Each party is expected to communicate openly about the aspects that are important to it, the arguments underlying its fundamental disagreement, and to cooperate constructively in order to reach a common approach towards the established facts and their assessment.
The dialogue must not go beyond the examination of the established infringements (their basis) and the imposition of liability for them. Nor can the person have, in the course of the dialogue, the expectation of seeking agreement on aspects which are imperatively regulated by law, such as the making public of the sanction applied, the offender and the conditions for the apportionment of a fine. Lietuvos bankas decides on these issues in accordance with the conditions set out in the Law on the Bank of Lithuania, after the person has submitted the evidence supporting the presence of these conditions.
If the parties reach consensus, a draft administrative agreement is prepared and considered by the collegial body of Lietuvos bankas deciding on the imposition of the sanction on the person.
Conclusion of an administrative agreement
Draft administrative agreement
If Lietuvos bankas and a financial market participant or another person (hereinafter collectively – the person) reach consensus on the basis for alleged infringements and the type and level of a sanction to be applied, Lietuvos bankas prepares a draft administrative agreement and submits it to the person for coordination.
The purpose of coordination of the draft agreement with the person is to confirm that the provisions of the draft administrative agreement correctly reflect the terms and conditions discussed and agreed upon by the parties during the dialogue.
At this stage, Lietuvos bankas expects that no new proposals will be submitted and that the parties will not return to the dialogue that took place previously.
Only a draft administrative agreement to which the person has expressed its explicit consent will be submitted to the Board of Lietuvos bankas or the Financial Market Supervision Committee for consideration.
The administrative agreement must address the following provisions:
- the date of conclusion of the administrative agreement;
- the particulars of the identity of the parties: the name and registration number of the legal person, the full name and the personal identification number of the natural person, as well as full names of the authorised representatives of the parties;
- information on the substance of the infringements committed, the circumstances under which the infringements were committed and the basis for the imposition of the sanction;
- the sanction imposed on the person and information on the circumstances, as set out in Article 433(7) to (9) of the Law on the Bank of Lithuania, which are taken into account when selecting the specific sanction and the level of the sanction, and the determination of the amount of a fine in accordance with Article 434(8), provided that the sanction is imposed.
If the sanction imposed under the administrative agreement is a fine, the amount of the fine will be determined in accordance with the procedure laid down in Article 433(10) of the Law on the Bank of Lithuania and will be reduced by 20 to 40%. The amount by which the fine is reduced is determined taking into account whether the person has ceased the alleged infringements or has undertaken to cease the infringements within a reasonable time limit set out in the administrative agreement, the number and significance of the circumstances and the evidence in support of the infringements disclosed by the person, what measures the person has taken, or intends to take, within the set time limit in order to prevent the reoccurrence of the infringements in the future and/or in order to eliminate the negative consequences which have arisen, as well as the extent of the cooperation.
Decision on conclusion of an administrative agreement
A decision on the conclusion of an administrative agreement will be taken by one of the collegial bodies of Lietuvos bankas, namely, the Board or the Financial Market Supervision Committee, within the limits of their competence. The competence to decide on the conclusion of an administrative agreement (as one of the ways to complete the process of applying a sanction) is equivalent to the competence to decide on the imposition of a sanction under standard procedures, as defined in Resolution No 03-67 of the Board of Lietuvos bankas of 15 March 2012 on authorising structural units of Lietuvos bankas to carry out certain functions of the Board of Lietuvos bankas related to financial market supervision.
The decision on the conclusion of an administrative agreement is taken in the absence of the financial market participant or another person.
Signing of an administrative agreement
Once the Board of Lietuvos bankas or the Financial Market Supervision Committee has taken a decision to approve the draft administrative agreement, it will be sent to the financial market participant or another person for signature and subsequently signed by an authorised representative of Lietuvos bankas.
The signing of the administrative agreement will normally be done using electronic document signing and exchange systems.
If the collegial body of Lietuvos bankas decides not to approve the draft administrative agreement, the further course of the process of applying the sanction is decided on a case-by-case basis: the consideration of the issue of the imposition of the sanction may be continued under standard procedures or, if it is appropriate and allowed by the time limit set for the process of concluding an administrative agreement, the motives of the collegial body that took the decision, the objectives pursued in the supervision of the financial market, may be addressed in the course of the process of concluding an administrative agreement.
Termination of the process of concluding an administrative agreement
In the event of failure to reach consensus or to conclude an administrative agreement within the time limit set out in Article 434(9) of the Law on the Bank of Lithuania, the process of concluding an administrative agreement is terminated and the standard procedure for applying a sanction is resumed.
Execution of an administrative agreement
After the conclusion of an administrative agreement setting out a sanction, the standard procedures for publication of the sanction imposed on a financial market participant or another person (hereinafter jointly – the person) should apply.
In addition, such publication contains the information on the conclusion of an administrative agreement. The text of the agreement is not published and is not accessible to the public.
Pursuant to the Law on the Bank of Lithuania, the administrative agreement is not subject to appeal, therefore it is enforceable from its entry into force, i.e. from the date of signature of the administrative agreement.
The administrative agreement (the sanctions set out in it) must be implemented within the time limits and in accordance with the procedure laid down in the Law and the agreement.
It is expected that the parties, having entered into and signed the administrative agreement by their free will, will duly comply with the provisions contained therein. If the person acts to the contrary, Lietuvos bankas is empowered under the Law on the Bank of Lithuania to undertake enforcement measures. The administrative agreement on the imposition of a fine and/or other amounts to be recovered is an enforceable document and will be executed in accordance with the procedure laid down in the Code of Civil Procedure of the Republic of Lithuania.
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