Authorisation of Management Companies Acting in accordance with the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings
Authorisation of Management Companies Acting in accordance with the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings
The aim of this Guide is to introduce persons concerned to the authorisation process for management companies, acting in accordance with Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings (the Law on MACIU), conducted by the Bank of Lithuania, requirements for management companies being established (legal persons not yet established) or being authorised (already established legal persons), set out the approach of the Bank of Lithuania to new market participants, set out a list of the documents to be submitted with an application for authorisation, and to identify other major aspects of authorisation.
Management companies, acting in accordance with the Law on MACIU, licence
Management company operating in accordance with the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings1 – a legal person whose usual activity is management of one or more alternative collective investment undertakings.
1 – Lithuanian consolidation version valid as of 1 January 2017. English version last amended on 4 December 2015.
Minimum equity capital requirements for a management company, acting in accordance with the Law on MACIU
The initial capital of a management company operating according to the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings shall not be less than EUR 125,000. Where the value of the portfolios of collective investment undertakings managed by such management company is over EUR 250 million, the management company shall hold an additional amount of own funds. This additional amount of own funds shall not be less than 0.02 per cent of the amount by which the portfolio value of the collective investment undertaking exceeds EUR 250 million; however, the required initial capital together with the additional amount of own funds shall not exceed EUR 10 million.
The initial capital of a management company operating under the Republic of Lithuania Law on the Supplementary Voluntary Accumulation of Pensions shall not be less than EUR 150,000;
Both the initial and authorised capital of a company having the right to manage pension funds for the accumulation of a portion of the state social insurance contribution shall not be less than EUR 300,000.
The approach of the Bank of Lithuania to the authorisation process for management companies, as well as for other institutions, is, as far as possible, an open one and normally begins well before an application for an authorisation is submitted to it. We encourage all applicants who actively seek a licence of a management company to contact us as early as possible in their planning process so that we can discuss it together and help assess their proposed operating plans. This allows us to be clearer in explaining the authorisation process and its meaning, our requests, requirements, expectations and all other major aspects that may affect the authorisation process.
The following basic stages in the authorisation process can be singled out:
- the pre-application stage: introducing the representatives of a prospective management company to the regulation applied in Lithuania, pre-application meetings and discussions with specialists of the Bank of Lithuania, a concise discussion of the list of submitted documents and their contents;
- submission of an application to the Supervision Service of the Bank of Lithuania (hereinafter ‘Supervision Service’): the Supervision Service, within 5 business days, reviews whether all necessary documents have been submitted and, where no formal deficiencies are identified, accepts the application for consideration;
- assessment of an application to issue a licence of a management company and attached documents;
- issuance of a licence or refusal to issue a licence: after finishing assessment of submitted documents, the Board of the Bank of Lithuania analyses summary information submitted by the Supervision Service and takes a decision regarding the issuance of a licence or refusal to issue it.
The Bank of Lithuania shall, within 3 months of submission of detailed information, notify a legal person in writing of the issuance or non-issuance of a licence of a management company operating according to the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings. In extraordinary cases, the supervisory authority has the right to extend this term, but for no more than 3 months.
The Bank of Lithuania, knowing that the legal acts regulating the authorisation process may not always be clear for both newcomers to the financial sector and experienced specialists, encourages applicants for a licence of a management company to contact the Bank of Lithuania at an early stage. The Bank will provide more detailed information about the authorisation process and the requirements for a prospective (existing) management company (companies).
The representatives of firms who participated in pre-application meetings with representatives of the Bank of Lithuania more than once emphasised the benefits of such meetings, as they not only helped get the answers to the questions that arose, but also enter into a direct contact with the specialists of the Bank of Lithuania. The number of pre-application meetings is subject to the applicant’s experience and knowledge; however, usually a minimum of one pre-application meeting is organised to get acquainted and to answer all questions that arose in the pre-application stage, to find out what licence needs to be issued or what licence is fit. The attendees to such meetings typically include at least two specialists from the Supervision Service of the Bank of Lithuania (who typically answer the questions about the authorisation process); however, any other, e.g. technical specialists may be required to attend as well.
During the pre-application meeting, the Bank of Lithuania aims at discussing the following:
- Who the applicant is and what kind of entity it will be?
- Who are (will be) the shareholders, holders of voting rights and investors of the prospective management company and what is their country of origin?
- How advanced or developed is the applicant’s proposition? In some cases it may be too early to have a meeting.
- Is the applicant part of a larger group?
- Who will be responsible for running the business?
- Summary of the applicant’s operating plan.
- Details of the products/services, target markets, delivery channels, pricing policy, and the corresponding regulated activities that will be applied for;
- Funding sources of the management company;
- Anticipated staffing levels.
- Key outsourcing arrangements.
It is our view that the process works well if the above information is provided to us in the form of a presentation ahead of the first meeting. We therefore urge prospective applicants to answer all the above questions before the anticipated meeting, i.e. to check whether all necessary information has been collected to be able to talk in detail in this regard and also to be prepared to be challenged on any aspects of their plans.
Management company licence fee
Prior to applying for a licence of a management company it is necessary to pay into the account of the State Tax Inspectorate (STI) a state levy for the granting of the licence, which currently is EUR 826 (the sizes of levies are established by Resolution No 1458 of the Government of the Republic of Lithuania of 15 December 20002).
The procedure for the generation of orders to the income collection accounts of the STI online and the numbers of the income collection accounts are available on the STI website.
2 – Available only in Lithuanian.
Key requirements for a management company being established or authorised
Taking into account that, at the time of authorisation, the management company being established or authorised must be prepared to comply with all requirements set for it, as a management company in operation, the Bank of Lithuania requests that detailed data is submitted already at the time of application. Nevertheless, when assessing the critical aspects that may determine authorisation, the following basic elements can be singled out:
- fitness of submitted documents: the documents submitted must comply with the requirements of legal acts regulating the activities of management companies and their supervision; all correct data established in legal acts or requested additionally must be submitted;
- fitness and propriety of a management company and its shareholders (holders of voting rights): entities with a qualifying holding in the management company’s authorised capital and/or voting rights must be of good repute and have required competence;
- fitness and propriety of heads of a management company: the heads of a management company must be of good repute and possess the qualification and experience necessary to properly perform their duties.
The planned business plan must correspond to the possibilities of the founders of the management company (shareholders or holders of voting rights) to implement it, while the prospective management company must, at the time of authorisation, be prepared to provide financial services in a safe and sound manner.
Assessment of submitted documents
Prior to submission of documents to the Supervision Service, we recommend that you should perform a self-control test, which will help determine whether all necessary documents have been prepared.
The process usually involves verification and assessment by a number of specialists from the Supervision Service and other structural units of the Bank of Lithuania to assist in the formation of a common opinion and in reaching a decision about the application. During the assessment period, the following processes are also carried out:
- regular communication and meetings with representatives of the applicant firm (when required);
- submission of comments by the Supervision Service, according to which the management company must eliminate identified material deficiencies.
All applicants for a licence of a management company have direct access to Bank of Lithuania specialists, who are experts in assessing submitted documents. We are on hand to take applicants through the authorisation process, inform about the progress of the process, and aim to ensure a cooperation-based relationship between the Bank of Lithuania and financial market participants during both the authorisation process and after it.
Documents and information to be submitted to the Bank of Lithuania in order to be granted a licence of a management company, acting in accordance with the Law on MACIU
To obtain a licence of a management company operating according to the Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings, the company which intends to obtain a licence of a management company, must attach to an application the following:
- a curriculum vitae of each candidate to the position of the manager of the management company and the position of the person passing investment decisions certified by the signature of the candidate, specifying the date of its drawing up and other information certifying that the persons concerned comply with the requirements specified in this Law and other legal acts;
- the information about the identity of the owners of the holdings of the management company, and the amount of the holding held by them. The data referred to in the present Item are submitted about the owners of the holdings of the management company. In case the owners of the holding of the management company are public companies or private companies, the applicant is required to disclose the data of the natural persons holding more than 10 per cent of the voting rights and/or the authorised capital of such companies; in case the owners of the holding of the management company are general or limited partnerships, the applicant is required to disclose the data of those participants-natural persons (in case the participants of a general or a limited partnership having the holding of the management company are public or private companies, the applicant is required to disclose the data of the natural persons holding in those companies more than 10 % of their voting rights and/or authorised capital);
- an activity plan containing, inter alia, a description of intended areas of activities, of the organisational structure of the legal person, as well as the information about the legal entity, its participants, managers, operations, compliance with the capital and other prudential requirements;
- information on the remuneration policy and the related practice of the management company;
- the information about the arrangements to delegate part of own functions to another company in accordance with Article 14 of this Law;
- information about the investment strategies of the collective investment undertakings intended to be managed, including the types of the principal collective investment undertakings, in case the collective investment undertaking invest into other collective investment undertakings;
- policy of the collective investment undertakings intended to be managed as regards the use of leverage;
- information about the risk profile and other characteristics of the collective investment undertakings intended to be managed, including information about the Member States or third countries in which such collective investment undertakings are established or are expected to be established;
- information on where the master collective investment undertaking is established if the collective investment undertaking is a feeder collective investment undertaking;
- the instruments of incorporation of each collective investment undertaking the management company intends to manage;
- the agreement with the future depository of the collective investment undertaking (provided such agreement has been concluded), the account manager, the person intending to provide administrative services, and other service providers whose services will have an essential impact upon the performance of the management company;
- description of the procedure for the appointment of the depositary for each collective investment undertaking that the management company intends to manage, in accordance with Article 23 of this Law;
- any additional information requested by the supervisory authority, or the information referred to in Article 18 of this Law about each collective investment undertaking that the management company manages or intends to manage.
Laws and legal acts regulating the activities and authorisation of management companies
- Republic of Lithuania Law on Financial Institutions3;
- Republic of Lithuania Law on Managers of Alternative Collective Investment Undertakings;
- Law of the Republic of Lithuania on the Prevention of Money Laundering and Terrorist Financing (173.2 KB )4;
- Resolution No 58 of the Board of the Bank of Lithuania of 6 May 2004 on the approval of the General Regulations on the Submission and Examination of the Applications for Authorisations of the Financial Market Participants Supervised by the Bank of Lithuania and on the Granting of the Authorisations (62 KB );
- Resolution No 1K-2 of the Securities Commission of the Republic of Lithuania of 5 March 2009 on the Approval of the Guidance for the Financial Brokerage Firms, Investment Companies, Management Companies and Depositories Aimed at the Prevention of Money Laundering and/or Terrorist Financing;
- Resolution No 03-144 of the Board of the Bank of Lithuania of 12 July 2012 on the Approval of the Rules on the Organisation and Conduct of Business of Management Companies;
- Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013 on approval of the Guidelines on the Assessment of Members of the Management Body and Key Function Holders of the Financial Market Participants Supervised by the Bank of Lithuania (94.6 KB );
- Capital Requirements Directive and Regulation (CRD IV/CRR);
- other legal acts.
3 – Lithuanian consolidated version valid as of 1 March–30 June 2017. English version last amended on 12 March 2015.
4 – Lithuanian consolidated version valid as of 1 December 2016. English version last amended on 17 January 2008.