2012-07-12
The Board of the Bank of Lithuania has considered and adopted 25 legal acts needed for the implementation of amendments to the Law of the Republic of Lithuania on Collective Investment Undertakings and they form more favourable conditions for investment and information thereon.
Approved new legal acts will provide more favourable conditions for investors.
Among the novelties in this area is the Key Investor Information Document which will have to be presented to the investor prior to the conclusion of a contract on investment into collective investment undertakings.The document formation requirements have been established in Regulations for the Contents and Presentation of the Prospectus of Collective Investment Undertakings and Key Investor Information Document, that have been approved today. According to these Regulations, a document for investors must contain only key information necessary for the investor in making an investment-related decision.Abridged prospectuses prepared up to now were of a large scope, inconvenient for investors to use and difficult to understand, generating a significant amount of extraordinary expenses for the business. Therefore, by legal acts of the European Union (EU) a simpler procedure to be applied also in Lithuania has been established.Comprehensive requirements for the calculation of the Synthetic Risk and Reward Indicator and Ongoing Charges to be obligatorily provided in the Key Investor Information Document have been established in the approved Methodology for the Calculation of the Synthetic Risk and Reward Indicator and Ongoing Charges.
New Rules for the Organization and Conduct of Business of Management Companies establish requirements for the management company of investment funds to have reliable administration and accounting procedures, a suitable mechanism of internal control.The management company must avoid conflicts of interest, implement investment decisions under the best collective investment conditions. The document defines requirements for risk management and other issues.
Approved Regulations for Collective Investment Undertakings’ Risk Assessment and Management and for the Calculation of Counterparty Risk and Financial Derivatives Risk Exposure provide that management companies of investment funds have to apply proportional and effective risk assessment approaches enabling collective investment undertakings managed by them to evaluate risk they encounter or may be confronted with at any time.
Requirements for the Merger of Collective Investment Undertakings, for the Structure of Master and Feeder Collective Investment Undertakings provide a possibility of merger of harmonised collective investment undertakings established in different EU member states and a possibility to create the structure of master and feeder collective investment undertakings. These shifts are expected to provide possibilities for a stronger concentration of assets of harmonised collective investment undertakings operating in EU, preconditions for the effect of the economy of scale will appear, management costs incurred by these undertakings should shrink – this would be beneficial to investors.
Procedure for the Distribution of Investment Units and Shares of Harmonised Collective Investment Undertakings provides that the management company or investment company intending to distribute investment units or shares of harmonised collective investment undertakings in another member state, will be obliged to present to its supervisory institution a notification of a set format and required documents.The supervisory institution after the assessment of submitted documents will be obliged to transmit these documents within 10 working days to the home country supervisory institution together with a set format confirmation that the harmonised collective investment undertaking complies with requirements of EU legal acts and notify the harmonised collective undertaking about it. Investment units or shares of the harmonised collective investment undertaking will be allowed to be distributed in another EU member state from the date of notification receipt.
Requirements for the Procedure of Information on Essential Changes and for the Sample List of Essential Changes should better protect investor interests.The document defines in a comprehensive manner the procedure for the information to participants of collective investment undertakings on essential changes in respective documents, as well as rights of participants.The management company of investment funds or an investment company whose management is not transferred to a management company must inform in a written form each participant of collective investment undertakings about all essential changes in the documents establishing collective investment undertakings and in the prospectus. The investor will also be provided with a possibility to require according to the procedure set by the supervisory institution the redemption of collective investment undertaking’s investment units or shares that belong to the investor without making any deductions.
Today another 18 legal acts have been approved. These are amendments to documents of the former Securities Commission whose functions were overtaken by the Bank of Lithuania, regulating activities of collective investment undertakings. These amendments have been made regarding new EU requirements and respective changes in the Law of the Republic of Lithuania on Collective Investment Undertakings.