REPUBLIC OF LITHUANIA LAW ON  COLLECTIVE INVESTMENT UNDERTAKINGS 4 July 2003   No IX-1709 (As last amended on 18 June 2013 – No XII-375) Vilnius CHAPTER I GENERAL PROVISIONS Article 1. Purpose and scope of the Law 1. This Law shall define activities of harmonised collective investment undertakings, special collective investment undertakings for retail investors and management companies of collective investment undertakings, as well as the supervision of these activities by the State. The purpose of the Law shall be to ensure protection of interests of co-owners of investment funds and shareholders of investment companies. 2. This Law shall have the aim of harmonising the regulation of collective investment undertakings and management companies of collective investment undertakings with legal acts of the European Union specified in the Annex to this Law. 3. The Law shall apply to: 1) harmonised collective investment undertakings; 2) special collective investment undertakings for retail investors, except for those the units or shares of which are not publicly offered in the Republic of Lithuania and other Member States, or according to their instruments of incorporation are offered exclusively in third countries; 3) management companies of harmonised collective investment undertakings and special collective investment undertakings for retail investors. 4. The Law shall not apply to the services provided by management companies of collective investment undertakings or by collective investment undertakings to the State, the Bank of Lithuania, the European Central Bank, central banks or institutions of other Member States engaged in the management of public debt. 5. Management companies of collective investment undertakings and investment companies shall be subject to the requirements of the Republic of Lithuania Law on Companies (hereinafter – the Law on Companies) to the extent this Law does not provide otherwise. Article 2. Definitions 1. Open-ended type collective investment undertaking means a collective investment undertaking the units or shares of which are issued and redeemed upon request of investors. 2. Multilateral trading facility – as defined in the Republic of Lithuania Law on Markets in Financial Instruments (hereinafter: ‘Law on Markets in Financial Instruments’). 3. Subsidiary means a subsidiary undertaking as defined in the Republic of Lithuania Law on Consolidated Accounts of Groups of Undertakings (hereinafter: ‘Law on Consolidated Accounts of Groups of Undertakings’). 4. Financial instruments: 1) in the case of a harmonised collective investment undertaking – as defined in Points 1 to 4 of Article 3(4) of the Law on Markets in Financial Instruments; 2) in the case of a special collective investment undertaking – as defined in Article 3(4) of the Law on Markets in Financial Instruments. 5. Index of financial instruments means a statistical ratio used to express the changes of value of financial instruments. 6. Portfolio of financial instruments – as defined in the Law on Markets in Financial Instruments. 7. Master collective investment undertaking (hereinafter: ‘a master undertaking’) means a collective investment undertaking or its sub-fund which meets the following conditions: 1) has among holders of its units or shares at least one feeder collective investment undertaking (hereinafter: ‘a feeder undertaking’); 2) it is not itself a feeder undertaking; 3) does not hold units or shares of a feeder undertaking. 8. Feeder undertaking means a collective investment undertaking or its compartment which invests at least 85 % of its net assets into the master undertaking in observance of requirements laid down in Section Two of Chapter VI of this Law. 9. Close links means a situation as defined in Law on Markets in Financial Instruments. 10. Net assets means 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. 11. Investment company means a joint-stock company the shares of which are issued and redeemed in accordance with the procedure laid down by this Law. For the purposes of this Law the term ‘investment company’ covers the investment company with variable capital and closed-ended investment company, unless established otherwise in the particular article of the Law. 12. Investment company with variable capital means an investment company the shareholders of which have the right to request at any time the redemption of their shares and the amount of capital of which varies depending on the issue and redemption of shares. The investment company with variable capital may be only of an open-ended type. 13. Investment instruments means: 1) in the case of a harmonised collective investment undertaking – financial instruments specified in Points 1 to 4 of Article 3(4) of the Law on Markets in Financial Instruments, also deposits, the immovable and movable property necessary for the direct activities of the investment company with variable capital; 2) in the case of a special collective investment undertaking – financial instruments indicated in Article 3(4) of the Law on Markets in Financial Instruments, also deposits, the immovable and movable property and installations necessary for its operation. 14. Investment fund means an unincorporated fund the assets of which are held by legal or natural persons by right of common fractional ownership and managed by the management company of a collective investment undertaking by trust in accordance with the procedure and conditions laid down in this Law and in the rules of the investment fund. For the purposes of this Law the term ‘investment fund’ includes open-ended and closed-ended investment funds, unless a specific article of the Law establishes otherwise. 15. Unit means a transferable security certifying the title of the co-owner of an investment fund to a part of the assets comprising the investment fund. 16. Investor means an actual or potential participant in the collective investment undertaking. 17. Financial derivative means: 1) in case of a harmonised collective investment undertaking – financial instruments indicated in Points 1 to 4 of Article 3(4) of the Law on Markets in Financial Instruments the value of which changes according to the interest rate, the price of transferable securities, a currency exchange ratio or the financial index; 2) in case of a special collective investment undertaking – financial instruments indicated in Points 4 to 10 of Article 3(4) of the Law on Markets in Financial Instruments the value of which depends on the value of one or several financial instruments. 18. Company’s control (hereinafter: ‘control’) means direct or indirect decisive influence on the company as defined in the Law on Consolidated Accounts of the Groups of Undertakings. 19. Supervisory authority of a host Member State means a competent authority of another Member State carrying out the functions of supervision and authorising of management companies of collective investment undertakings and collective investment undertakings in such other Member State in accordance with the provisions of legal acts applicable therein. 20. Client means a natural or legal person, or any other undertaking (including a collective investment undertaking) using the services provided by the management company of a collective investment undertaking or the investment company that has not designated the management company of the collective investment undertaking. 21. Collective investment undertaking means an investment fund or the investment company the object of which is raising of capital from the public through public offering of units or shares and collective investment into the assets specified in this Law on the basis of risk-spreading in observance of investment requirements laid down by this Law. 22. Home Member State of a collective investment undertaking means a Member State in which a collective investment undertaking is established in accordance with the procedure laid down by this Law or respective legal acts of another Member State. 23. Participant in a collective investment undertaking means a co-owner of an investment fund or a shareholder of an investment company. 24. Host Member State of a collective investment undertaking means the Member State, other than the home Member State of a collective investment undertaking, on the territory of which units or shares of a collective investment undertaking are marketed. 25. Prospectus of a collective investment undertaking (hereinafter: ‘prospectus’) means the document providing to investors and the public the information about offered transferable securities of a collective investment undertaking. 26. Instruments of incorporation of a collective investment undertaking means rules of the investment fund or articles of association of the investment company. 27. Sub-fund of a collective investment undertaking means a part of assets of an umbrella collective investment undertaking managed separately from its other assets. 28. Management of a collective investment undertaking means: 1) management of investments of a collective investment undertaking; 2) administration of a collective investment undertaking: record-keeping, answers to clients’ questions, calculation of net assets, internal control of observance of legal acts, management of the register of the holders of units or shares, distribution of income, determination of the price of units or shares, their issue and redemption, settlement on the basis of transactions, keeping of data about completed operations; 3) marketing; 4) other activities related with the activities specified in Points 1, 2 and 3 of this Paragraph. 29. Management company of a collective investment undertaking (hereinafter: ‘management company’) means a company the regular working day of which is the management of investment funds or of investment companies. 30. Benchmark means a ratio chosen by a management company or an investment company that has not designated a management company against the value of which the return on investment of a collective investment undertaking is measured. 31. Persons of sufficiently good repute means persons as defined in the Law on Markets in Financial Instruments. 32. Retail investor means a non-professional client as defined in the Law on Markets in Financial Instruments. 33. Key investor information means a short document containing key information for investors about a collective investment undertaking and its management company. 34. Parent undertaking means a parent undertaking as defined in the Law on Consolidated Accounts of the Groups of Undertakings. 35. Durable medium means an instrument which enables an investor to store information addressed personally to that investor in a way that is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored (computer disc, read-only memory compact disc (CD-ROM), universal digital (optical) disc (DVD), hard disc of an investor’s computer with installed e-mail, etc., excluding internet websites, if they do not conform to the features defining the term of durable medium). 36. Periodical report means a report addressed to investors and the public containing information on the performance of the management company and collective investment undertakings, their financial condition and other major events of a certain period. 37. Transferrable securities means the following negotiable securities: 1) shares in companies and other securities equivalent to shares in companies; 2) bonds and other forms of securitised debt; 3) any other negotiable securities which carry the right to acquire any such transferable securities specified in Points 1 and 2 above by subscription or exchange. 38. Money market instruments means: 1) for a harmonised collective investment undertaking – instruments normally dealt in on the money market which are liquid and have a value which can be accurately determined at any time; 2) for a special collective investment undertaking – money market instruments defined in Article 3(28) of the Law on Markets in Financial Instruments that have a value which may be accurately determined at any time. 39. Supervisory authority means the Bank of Lithuania performing the functions of authorising and supervision of activities of management companies and collective investment undertakings in accordance with the procedure laid down by this Law and other laws. 40. Repealed on 18 June 2013. 40. Special collective investment undertaking means a collective investment undertaking the units or shares of which may not be marketed in another Member State in accordance with the procedure laid down by the legal acts referred to in the Annex to this Law and which is not subject to the requirements of the European Union law. 41. Harmonised collective investment undertaking means a collective investment undertaking regulated by the European Union law the sole objective of which is raising capital from the public through public offering of units or shares and its collective investment into the transferable securities and (or) other liquid assets specified in Section One of Chapter VI of this Law according to the principle of risk-spreading in observance of investment requirements laid down by this Law and the units or shares of which are redeemable at any time upon request of their holder. 42. Umbrella collective investment undertaking means a collective investment undertaking the assets of which are divided into separate sub-funds. 43. Direct distribution of units or shares means marketing of units or shares of the collective investment undertaking performed directly by its management company without using the services of distributors on the initiative of the management company or investor and without consulting the investor on the matters of investment into other financial instruments. 44. Direct decisive influence on the company – as defined in the Law on Consolidated Accounts of the Groups of Undertakings. 45. Third country means a state other than a Member State of the European Union or of the European Economic Area. 46. Supervisory authority of a third country means a competent authority of a third country performing the functions of authorising and supervision of activities of management companies and collective investment undertakings in accordance with the provisions of legal acts applicable in that country. 47. Closed-ended type investment company means an investment company which issues a fixed number of shares redeemable at the end of period of the investment company’s activities provided for in its articles of association or at any other time fixed therein in advance. 48. Closed-ended type investment fund means an investment fund the units of which may be redeemed at the end of period of the fund’s activities provided for in its rules or at any other time fixed therein in advance. 49. Managers means the head of administration, members of the board and supervisory board of the management company, investment company and depositary. 50. Qualifying holding of the management company means any direct or indirect holding in the management company which represents at least 1/10 or more of the authorised capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the management company in which that holding subsists. For the purpose of calculating whether the holding of the company’s authorised capital or voting rights represents at least 1/10 of the authorised capital the obligations and procedure of the calculation of votes laid down in Articles 23 and 24 of the Republic of Lithuania Law on Securities (hereinafter: ‘the Law on Securities’) shall be taken into account. 51. Management company’s home Member State means a Member State, in which the management company’s registered office is situated. If in accordance with law of its Member State the management company has no registered office – a host Member State of the management company. 52. Management company’s host Member State means a Member State, other than a home Member State, within the territory of which the management company has a branch or provides services without setting up a branch. 53. Member State means a Member State of the European Union and a country of the European Economic Area. 54. Public offering of units or shares means offering of units or shares through the mass media, advertising or by other means when more than 100 persons are addressed. CHAPTER II SECTION ONE AUTHORISATION AND ACTIVITIES OF A management company AND AN investment company. ACTIVITIES OF A COLLECTIVE INVESTMENT UNDERTAKING Article 3. Right to pursue activities of a management company or an investment company 1. Only a private or public limited liability company holding an authorisation for the activities of the management company issued by the supervisory authority shall have the right to engage in the management company’s activities. A company holding such authorisation shall be referred to as the management company. Only management companies shall have the right to use the words ‘investment fund management company’, ‘management company of investment companies’ or other combinations or derivatives of these words in their names and advertisements. 2. The management of harmonised collective investment undertakings may also be carried out by a private or public limited liability company or an entity of other legal form holding an authorisation for the activities of the management company issued by the supervisory authority of another Member State, which grants the right to engage in the management of harmonised collective investment undertakings. 3. Only a public limited liability company holding an authorisation for the activities of the investment company with variable capital issued by the supervisory authority may engage in the activities of the investment company with variable capital. Only investment companies with variable capital may use in their name the words ‘investicinė kintamojo kapitalo bendrovė’ (investment company with variable capital) or the acronym IKKB. The use of the words ‘akcinė bendrovė (public limited liability company) or their acronym AB in the name of the investment company with variable capital shall be optional. 4. Only a public limited liability company holding an authorisation for the activities of a closed-ended type investment company issued by the supervisory authority may engage in the activities of a closed-ended type investment company. Only closed-ended type investment companies may use in their name the words ‘uždarojo tipo investicinė bendrovė’ (closed-ended type investment company) or their acronym UTIB. The use of the words ‘akcinė bendrovė (public limited liability company) or their acronym AB in the name of a closed-ended type investment company with variable capital shall be optional. 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 captured by this Law and provision of the following services, if they have been specified in the authorisation issued to the company and if the company engages in the principal activity: 1) management of other persons’ portfolios of financial instruments; 2) management of pension funds, if the management company complies with the requirements laid down by laws regulating the pension accumulation activities; 3) provision of auxiliary services: advising on issues relating to investment in financial instruments; safe-keeping and management of units or shares of collective investment undertakings. 2. A management company may not provide the auxiliary services indicated in Paragraph 1(3) of this Article, unless it is entitled to provide the services indicated in Paragraph 1 (1) and (2) of this Article. 3. An investment company may not manage the assets of other persons or engage in the activities not covered by this Law. 4. A management company managing at least one harmonised collective investment undertaking or pension fund may not engage in other activities not covered by this Law. 5. Chapter VII of this Law shall not apply to management companies which do not manage harmonised collective investment undertakings. 6. A management company authorised to pursue activities covered by Paragraph 1 (1), (2) and (3) of this Article mutandis mutandis shall be subject to the requirements set forth in Articles 13 and 22 of the Law on Markets in Financial Instruments and the implementing regulations of the supervisory authority. Requirements of the Law on Markets in Financial Instruments shall apply taking account of the provisions of Article 2(5) of the Law on Markets in Financial Instruments. 7. A management company which has obtained an authorisation for activities of a management company under this Law shall also have the right to manage collective investment undertakings established under the Law of the Republic of Lithuania on Collective Investment Undertakings for Informed Investors, provided that such right is stipulated in the authorisation for the activities of the management company. Article 5. Procedure of authorisation of a management company or an investment company 1. A public limited liability company or a private limited liability company intending to pursue activities of the management company or a public limited liability company intending to pursue activities of the investment company with variable capital or as a closed-ended type investment company shall file an application with the supervisory authority. The application shall be accompanied by a programme of operations envisaged, containing, inter alia, the description of areas of planned activities, the organisational chart of the company, particulars of the legal person, its participants, managers, activities, fulfilment of capital and other prudential requirements and other information specified in the authorisation rules approved by the supervisory authority, upon considering which the supervisory authority might conclude that the company complies with the requirements for the authorised activities laid down by this Law. The list of the required documents to be furnished for obtaining the authorisation and their submission procedure shall be set forth by the supervisory authority. 2. Upon request of the supervisory authority the state and municipal institutions and bodies must furnish all available information about the shareholders of the company applying for the authorisation, their financial condition, activities, identified infringements of laws and other legal acts, conclusions of performed inspections and other information relevant for the adoption of the decision on the authorisation. 3. The supervisory authority shall grant the authorisation when the following conditions are met: 1) data (documents) comply with the established requirements, produced documents and data are complete and accurate, and the plan of intended activities is sufficiently justified; 2) the initial capital of a management company or an investment company applying for the authorisation, that has not designated a management company, or the authorised capital of a company applying for the authorisation of activities of a closed-ended type investment company is not smaller than the minimum amount set by the supervisory authority and the capital adequacy and other prudential requirements of the management company are complied with; 3) a management company or an investment company provides the information specified in the authorising rules about the shareholders of a management company or an investment company and the qualifying holdings directly or indirectly managed by them (including information about the size of these qualifying holdings); 4) there are no grounds to believe that holders of the qualifying holding of a management company or an investment company will not ensure the sound and transparent management of a management company or an investment company; 5) not a single employee of a management company or an investment company is an employee of the operator of the regulated market operating in the Republic of Lithuania and (or) of a multilateral trading facility whose functions are directly related to the operation of the regulated market and (or) of the multilateral trading facility, or an employee of the supervisory authority or the Central Securities Depositary of Lithuania; 6) heads of a management company or an investment company are of sufficiently good repute and have the qualification and work experience specified by the supervisory authority; 7) a management company or an investment company is incorporated and its permanent management body is seated in the territory of the Republic of Lithuania; 8) there is no close link between a management company or an investment company and another legal and natural person, which might prevent the supervisory authority from exercising effective supervisory functions; 9) there is no close link between a management company or an investment company and a person from any third country the legal acts of which regulating the activities of such person or the enforcement of such legal acts might prevent the supervisory authority from exercising effective supervisory functions; 10) the articles of association of a management company or an investment company do not specify that shares or the units of the collective investment undertaking to be established will not be marketed in the Republic of Lithuania; 11) the articles of association of a public limited liability company applying for the authorisation of the investment company with variable capital or of a closed-ended type investment company do not comply with the requirements of laws; 12) a management company, its heads or shareholders have been rated as eligible in accordance with the evaluation criteria laid down in Article 9(10) of this Law; 13) the risk management process of a management company or an investment company that has not designated a management company is adequate and effective. 4. The supervisory authority shall notify the applicant of its consent or refusal to issue the authorisation within six months from the filing of all documents, data and explanations. The time limit for considering an application shall be calculated from the filing of the last documents or data. A refusal to issue the authorisation shall be motivated in writing and may be appealed against in accordance with the procedure set by the Republic of Lithuania Law on Administrative Proceedings (hereinafter: ‘Law on Administrative Proceedings’). 5. The supervisory authority must seek the opinion of a supervisory authority of another Member State, if: 1) the applicant is a subsidiary of the management company, financial brokerage firm, credit institution or insurance company authorised in another Member State; 2) the applicant is a subsidiary of a parent company of the management company, financial brokerage firm, credit institution or insurance company authorised in another Member State; 3) the applicant is controlled by the same persons who control the management company, financial brokerage firm, credit institution or insurance company authorised in another Member State. 6. For the purpose of assessing the eligibility of owners of the qualifying holding of a management company or an investment company and the repute and experience of the heads of companies belonging to the same group, the supervisory authority must seek the opinion of the supervisory authority of another Member State referred to in Paragraph 5 of this Article. 7. The supervisory authority shall notify about the issuance, suspension or revocation of an authorisation of a management company or an investment company the registrar of the Register of legal entities, institutions specified in other legal acts and on the website of the supervisory authority. The supervisory authority shall notify the European Securities and Markets Authority about the issuance suspension or revocation of the authorisation of the management company. Article 6. Activities of a collective investment undertaking 1. No collective investment undertaking shall pursue activities unless a collective investment undertaking or its management company has been authorised beforehand by the supervisory authority to approve instruments of incorporation of a collective investment undertaking and a choice of depositary. Alongside the application for authorisation a collective investment undertaking or its management company shall submit to the supervisory authority instruments of incorporation, prospectus, key investor information document and information about managers (their representatives) of a depositary of a collective investment undertaking. 2. Where the management of a harmonised collective investment undertaking established in the Republic of Lithuania is to be delegated to a management company authorised in another Member State, a collective investment undertaking may pursue its activities only when the management company has been authorised beforehand by the supervisory authority to approve the instruments of incorporation of a collective investment undertaking, a choice of depositary and an application of a designated management company for pursuing working day of management of that collective investment undertaking. When applying for the authorisation a management company shall provide to the supervisory authority instruments of incorporation of a collective investment undertaking, application of a management company for pursuing working day of management of a collective investment undertaking, prospectus, key investor information document and information about managers (their representatives) of a depositary. Article 7. Granting or refusing an authorisation to approve instruments of incorporation of a collective investment undertaking, a choice of depositary, application of a management company for pursuing working day of management of a harmonised collective investment undertaking 1. The supervisory authority shall grant the authorisation to approve the instruments of incorporation of a collective investment undertaking, a choice of depositary, the management company’s application for pursuing working day of management of a harmonised collective investment undertaking, if: 1) documents and information specified in Article 6 (1) or (2) of this Law have been submitted; 2) a collective investment undertaking and documents and information referred to in Article 6 paragraphs (1) or (2) of this Law comply with requirements of this Law and legal acts adopted on its basis; 3) the management company is authorised to manage a given collective investment undertaking; 4) managers of a collective investment undertaking’s depositary are of sufficiently good repute, possess required qualification and work experience; 5) there are no grounds to believe that the chosen depositary will not fulfil the duties imposed thereon by virtue of this Law; 6) the process of risk management of a collective investment undertaking and its management company is adequate and effective. 2. A management company or an investment company that has not designated a management company who have applied for authorisation shall be notified by the supervisory authority about its granting or refusal within two months of submission of all required documents, data and explanations to the supervisory authority. Article 8. Withdrawal of authorisation The supervisory authority may withdraw the authorisation issued to a management company or an investment company, if: 1) the authorisation holder has expressly renounced the authorisation in writing; 2) the authorisation holder does not make use of the authorisation within 12 months of the day of granting the authorisation or has ceased the activities more than six months previously; 3) the period of activities indicated in the investment company’s articles of association ends and the authorisation holder fails to apply in writing for the cancellation of the authorisation; 4) it appears that the authorisation holder had obtained the authorisation having submitted the documents or information which do not correspond to reality or for the purpose of obtaining the authorisation had acted in infringement of laws or other legal acts of the Republic of Lithuania; 5) the authorisation holder no longer fulfils the conditions for granting the authorisation of the management company or the investment company; 6) the authorisation holder has seriously and (or) systematically infringed the requirements laid down in this and (or) other legal acts regulating the activities of management companies or collective investment undertakings; 7) the authorisation holder no longer complies with the requirements provided for by this Law and (or) other legal acts or the available information shows that the authorisation holder will not be able to do that in future; 8) in other cases established by laws. Article 9. Management and managers of management companies and investment companies 1. A management company and an investment company that has not designated a management company shall have the board and the administration. 2. An investment company that has designated a management company shall not form any management bodies. A management company designated to manage an investment company shall be liable for the performance of actions covered by Article 2.82(3) of the Civil Code of the Republic of Lithuania (hereinafter: ‘the Civil Code’). 3. A general meeting of shareholders of an investment company may adopt resolutions irrespective of the number of voting rights awarded by shares held by the participating shareholders. 4. Managers of a management company or an investment company that has not designated a management company must be of sufficiently good repute and have sufficient work experience to ensure sound and transparent management of a management company or an investment company. 5. A management company or an investment company that has not designated a management company must notify in advance the supervisory authority about all pending changes of managers of a management company or an investment company concurrently providing the information requested by the supervisory authority for determining whether managers that have been newly elected or are planned to be elected comply with requirements of sufficiently good repute and sufficient work experience. The newly elected managers of a management company or an investment company that has not designated a management company may start working in their position only when their candidatures are approved by the supervisory authority. 6. The supervisory authority shall have the right to reject the newly nominated managers if they are not of sufficiently good repute, do not possess sufficient experience, or if there are other objective grounds to believe that planned changes of managers pose threat to sound and transparent management of the management company or the investment company. Detailed requirements for candidate managers and the procedure for coordination of their candidatures with the supervisory authority shall be laid down in legal acts of the supervisory authority. 7. The supervisory authority shall decide on the eligibility of the newly elected managers no later than within one month of the receipt of all required documents. 8. Where an investment company that has designated a management company has a supervisory board, the requirements of Paragraphs 4, 5, 6 and 7 of this Article shall apply mutatis mutandis to the supervisory board. Article 10. Acquisition and disposal of a qualifying holding of the management company 1. A natural or legal person or persons acting in concert, who have taken a decision either to acquire, directly or indirectly, or to further increase, directly or indirectly, a qualifying holding of the management company already held by them (hereinafter: ‘the  acquirer’), if as a result of the planned increase of the company’s qualifying holding the proportion of the voting rights or of the authorised capital of a person would reach or exceed, in ascending order, 20%, 30% or 50%, or the company would become a subsidiary of that legal person (hereinafter: ‘proposed acquisition’), must obtain a decision of the supervisory authority not to oppose the proposed acquisition. Non-compliance with the requirement to obtain the decision of the supervisory authority not to oppose the proposed acquisition shall not invalidate a transaction; however it shall give rise to consequences specified in paragraph 21 of this Article. For the purpose of this Article ‘persons acting in concert’ shall mean two or more persons who on the basis of their explicit or implicit verbal or written arrangement exercise or seek to exercise their rights awarded by their qualifying holding in the management company. 2. The acquirer must communicate to the supervisory authority a written notification of a proposed acquisition indicating the size of the qualifying holding of the management company planned to be acquired and also submit the supporting documents and other information and particulars specified by the supervisory authority. 3. A person, who has taken a decision to directly or indirectly dispose of or reduce a qualifying holding in the management company held by him, if as a result of a planned loss of the management company’s shares the proportion of the voting rights or of the authorised capital held by a person would reach or exceed, in descending order, 20%, 30% or 50% or the company would cease being a subsidiary of that legal person, shall communicate to the supervisory authority a written notification indicating the size of the qualifying holding in the management company intended to be disposed or reduced. 4. The supervisory authority shall establish the list of documents and data enclosed with the notification of the proposed acquisition and necessary for the assessment of the acquirer and the proposed acquisition. The documents and data indicated in the list must be proportionate and adapted to the acquirer and the proposed acquisition. The list may not contain the documents and data which are not necessary for the assessment of the acquirer and the proposed acquisition in accordance with the criteria laid down in paragraph 9 of this Article. 5. Upon receipt of the acquirer’s notification about the proposed acquisition and of all documents and data indicated in the list specified in paragraph 4 of this Article and of the additional documents and data in accordance with paragraph 7 of this Article the supervisory authority shall without undue delay, no later than within two working days, acknowledge their receipt in writing and notify the acquirer about the date of expiration of the assessment period laid down in paragraph 6 of this Article. 6. The supervisory authority shall carry out the assessment no later than within 60 working days of sending a written acknowledgement of receipt of the notification about the proposed acquisition and of all documents and data indicated in the list referred to in paragraph 4 of this Article. 7. Where appropriate, during the assessment period, no later than on the fiftieth working day of the assessment period, the supervisory authority may request additional documents and data necessary for completion of the assessment. Such request shall be submitted in writing and shall specify the required additional documents and data. Calculation of duration of the assessment period shall be interrupted from the day on which the supervisory authority requests the additional documents and data and shall be resumed on the day on which the acquirer’s response to the request is received. Calculation of duration of the assessment period may be suspended for maximum 20 working days. Moreover, the supervisory authority shall have the right to repeatedly request, at its own discretion, the submission of additional documents and data or their adjustment, but this may not result in the interruption of calculation of the duration of the assessment period. 8. The supervisory authority may extend the interruption of the calculation of duration of the assessment period referred to in paragraph 7 of this Article for maximum 30 working days when the place of establishment or regulation of the acquirer’s activities is in a third country or when the acquirer is not subject to supervision under legal acts of other Member States regulating the activities of management companies of harmonised collective investment undertakings, financial brokerage firms, credit institutions, insurance undertakings or reinsurance undertakings. 9. Considering the notification about the proposed acquisition referred to in paragraph 2 of this Article, documents and data necessary for the assessment of the acquirer and proposed acquisition, the supervisory authority shall, in order to ensure the sound and transparent management of the management company the acquisition or increase of the qualifying holding of which is proposed, and having regard to the possibility of the acquirer’s influence on the management company, assess the eligibility of the acquirer and financial soundness of the acquisition against all of the following criteria: 1) sufficiently good repute of the acquirer; 2) sufficiently good repute and work experience of a person who will be the manager of the management company after the proposed acquisition. The supervisory authority shall assess the sufficiently good repute and work experience of the person who will be the manager of the management company after the proposed acquisition having regard to provisions of Article 9 of this Law; 3) the financial soundness of the acquirer, in particular in relation to the type of activity pursued or envisaged by the management company the acquisition or increase of the qualifying holding of which is proposed; 4) whether the management company will be able to comply on a regular basis with prudential requirements, whether the structure of the group the part of which the management company will become after the proposed acquisition facilitates the effective supervision, effective exchange of information between the supervisory authority and supervisory authorities of other Member States and define the distribution of responsibility of the supervisory authority and supervisory authorities of other Member States; 5) whether there are grounds to suspect that for the purpose of implementing the proposed acquisition, money laundering or terrorist financing acts within the meaning of the Republic of Lithuania Law on the Prevention of Money Laundering and Terrorist Financing are being or were perpetrated or attempted, or that the proposed acquisition is likely to increase the risk of such acts. 10. The supervisory authority shall have no right to establish any preconditions for size of the qualifying holding of the management company which must be acquired and shall not examine the proposed acquisition in terms of the economic needs of the market. 11. The supervisory authority may disagree with the proposed acquisition only on the basis of criteria set out in paragraph 9 of this Article or when the acquirer has provided not all documents and data specified in paragraph 4 or 7 of this Article. 12. The supervisory authority shall decide on the proposed acquisition after having consulted the supervisory authorities of other Member States, when the acquirer is a management company authorised in a Member State, a financial brokerage firm, a credit institution, an insurance undertaking, a reinsurance undertaking or a parent or controlling undertaking of any of these undertakings. For the purpose of consulting the supervisory authority shall request the supervisory authorities of other Member States to provide all information relevant for the assessment of eligibility of the acquirer and the financial soundness of the proposed acquisition and without undue delay shall communicate to the supervisory authorities of other Member States on their request the information relevant for the assessment being conducted and shall provide on its own initiative all information which is essential for the assessment being conducted. 13. If the supervisory authority does not decide to disapprove the proposed acquisition within the assessment period indicated in paragraph 6 of this Article, it shall be deemed that the supervisory authority has approved the proposed acquisition. Having decided to approve the proposed acquisition before expiration of the assessment period the supervisory authority shall notify the acquirer to the effect in writing within two working days. 14. If the supervisory authority decides to approve the proposed acquisition, it may establish and, where appropriate, extend the time limit for the implementation of the person’s intention to acquire or increase the qualifying holding of the management company. 15. Having decided to disapprove the proposed acquisition the supervisory authority shall, within two working days from adoption of such decision and without exceeding the assessment period, inform the acquirer to the effect in writing, specifying the motives of the decision. 16. The supervisory authority’s decision on the proposed acquisition shall contain all opinions and reservations received from supervisory authorities of other Member States after consultations under paragraph 12 of this Article. The supervisory authority’s decision to disapprove the proposed acquisition may be appealed against in accordance with the procedure set by the Law on Administrative Proceedings. The supervisory authority shall publicise the decision and its motives on its website irrespective of whether the acquirer’s consent has been obtained. The supervisory authority shall have the right not to publicise the decision and its motives on its website in those cases when such publicising would be detrimental to the market or cause disproportionate damage to the parties concerned. 17. If the supervisory authority receives more than one notification about the proposed acquisition in the same management company all notifications shall be examined in accordance with the same procedure without discriminating the acquirers. 18. If the management company becomes aware of the acquisition or loss of its shares as a result of which the qualifying holdings of shareholders of the management company exceed the thresholds specified in paragraph 1 of this Article in ascending or descending order, the management company must notify to the effect the supervisory authority without undue delay. 19. The management company must at least once a year communicate to the supervisory authority a notification specifying in it the management company’s shareholders who possess the qualifying holding of the management company and the size of their qualified holdings. The information shall be provided on the basis of data available on the day of the ordinary general meeting of shareholders and if the company’s shares are admitted to trading on a regulated market – in observance of requirements of legal acts applicable to the companies the securities of which are traded on a regulated market. 20. Where the influence exercised by acquirers poses threat to the sound and transparent management of the management company, the supervisory authority must take measures to rectify the situation. To that end the supervisory authority shall have the right to issue compulsory instructions and impose sanctions specified in this Law on managers and other persons responsible for the management of the management company. 21. All shares held by a person who has acquired or increased the qualifying holding of the management company exceeding the thresholds specified in this Article without having obtained the supervisory authority’s decision to approve the proposed acquisition or before expiration of the time limit laid down in paragraph 6 of this Article (save as in cases when the supervisory authority’s decision to approve the proposed acquisition has been made earlier) shall lose the voting right at the general meeting of shareholders. The voting right shall be resumed on the day on which the decision of the supervisory authority not to oppose the proposed acquisition is received or if the supervisory authority does not decide on the disapproval of the proposed acquisition within the assessment period. Article 11. Operating conditions and prudential requirements 1. A management company or an investment company that has not designated a management company must at all times comply with the following requirements: 1) act honestly and fairly in conducting its working day activities in the best interests of the collective investment undertaking and its participants and the integrity of the market; 2) act with due skill, care and diligence; 3) have and employ the resources and procedures that are necessary for the working day activities; 4) disclose to the client sufficient information related and necessary to the client; 5) have sound administrative and accounting procedures, control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including, in particular, rules for personal transactions by its employees or for the holding or management of investments in financial instruments in order to invest on its own account and ensuring that each transaction involving the collective investment undertaking managed by the management company may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it was effected and that the assets are invested according to the requirements set by the collective investment undertaking’s instruments of incorporation and the legal provisions in force; 6) ensure that data, documents and information of adopted investment decisions, concluded transactions, applications filed by investors for the acquisition or redemption of units or shares, or of other performed operations are kept for at least 10 years of the day of adoption of an investment decision, completion of a transaction, filing of a respective application or performance of an operation, unless other legal acts establish a longer term for the keeping of documents; 7) have in place the organisational structure which allows avoiding the conflicts of interest between the management company or the investment company and its clients, between several clients of the management company or the investment company, between the collective investment undertaking managed by the management company and its clients or between several collective investment undertakings; 8) ensure that persons who make investment management decisions possess the qualification and experience specified by the supervisory authority and are of sufficiently good repute; 9) have in place the description of procedures for making investment decisions which, inter alia, establishes  the structure of a body making investment decisions, and comply with the requirements of the description of procedures; 10) ensure that investment decisions are recorded in writing and registered in the register of investment decisions; 11) comply with the capital requirements, prudential requirements and other requirements applicable to working day activities set by the supervisory authority; 12) approve and implement the employee remuneration policy conforming to requirements set by the supervisory authority; 13) fulfil instructions of the supervisory authority. 2. The management company authorised to render the services referred to in Article 4(1)(1) or (2) of this Law may invest the clients’ funds in the investment funds or investment companies managed by the management company only with due regard to the requirements for the management of the conflicts of interest laid down by this Law and legal acts of the supervisory authority implementing it and having obtained from the client an advance and explicit written consent. 3. Liabilities to investors of the management company authorised to render the service referred to in Article 4(1)(1) of this Law shall be insured in accordance with the procedure laid down by the Republic of Lithuania Law on Insurance of Deposits and Liabilities to Investors. Article 12. Duty to implement investment decisions acting in best interests for the collective investment undertaking 1. The management company on account of a collective investment undertaking managed by it, or the investment company that has not designated a management company, when implementing itself the investment decision made or delegating its implementation to another undertaking must act in the best interests of the collective investment undertaking. 2. The management company on account of a collective investment undertaking managed by it, or the investment company that has not designated a management company, when implementing itself the investment decision made or delegating its implementation to another undertaking must act so as to achieve the best possible outcome for the collective investment undertaking, considering the price of investment objects, the costs and speed of implementation of the investment decision, the probability of implementation of the investment decision and the probability of settlements, the amount and nature of the investment decision and other circumstances relevant for the implementation of the investment decision. 3. For the purpose of fulfilling the duty laid down in paragraph 2 of this Article a management company or an investment company that has not designated a management company, shall approve and introduce the effective measures, including the investment decisions’ implementation policy allowing to achieve the best possible result for the collective investment undertaking in implementing the investment decision on account of the undertaking and also to have in place and use the effective measures aimed at the realisation of the policy of investment decisions. 4. The undertakings to which the implementation of investment decisions with regard to the respective financial instruments may be delegated shall be specified in the investment decisions’ implementation policy near each class of financial instruments. A management company or an investment company that has not designated a management company may delegate the implementation of investment decisions only in observance of all requirements laid down in this Article. 5. Before starting to implement investment decisions on account of a collective investment undertaking, a management company shall seek from the investment company managed by it an advance approval of the investment decisions’ implementation policy. 6. A management company or an investment company that has not designated a management company must: 1) ensure that the investment decisions’ implementation policy and all essential changes thereof are available to the participants of a collective investment undertaking; 2) monitor on a regular basis the effectiveness of the applied measures and the investment decisions’ implementation policy, the quality of investment decisions of other undertakings, which are specified in the policy and implement investment decisions, and having identified any weaknesses of the applied measures and (or) the investment decisions’ implementation policy – rectify them without delay; 3) revise the investment decisions’ implementation policy at least once a year and after each essential change, which is likely to affect the ability of a management company or an investment company that has not designated a management company to achieve the best result for the collective investment undertaking; 4) act in the manner which allows proving at any time that an investment decision on the account of the collective investment undertaking has been implemented or that its implementation has been delegated to another undertaking in accordance with the investment decisions’ implementation policy. Article 13. Requirements for risk management 1. A management company or an investment company that has not designated a management company, taking account of the nature, scope and complexity of the pursued working day activities and of the managed collective investment undertaking must: 1) approve, implement and maintain due and effective measures, processes and methods guaranteeing the continuous calculation and management of risks to which a  collective investment undertaking managed by a management company or an investment company that has not designated a management company is or might be exposed; 2) approve, implement and maintain due and documented risk management policy, providing for the types of risks to which a collective investment undertaking managed by a management company or an investment company that has not designated a management company is or might be exposed; 3) appoint (form) a hierarchically and functionally independent person or subdivision performing the risk management function and ensure that his (its) functions are duly fulfilled and that he (it) possesses the requisite competence and has the right to obtain all information necessary for the proper functioning. 2. A management company or an investment company that has not designated a management company must without undue delay notify the supervisory authority in writing about all essential changes of the risk management process. Article 14. Accounting and audit of a management company, collective investment undertakings managed by it or of an investment company that has not designated a management company 1. Financial accounting and reporting of the management company shall be carried out in accordance with laws and other legal acts of the Republic of Lithuania and the international accounting standards. 2. Financial accounting and reporting of a collective investment undertaking shall be carried out in accordance with laws and other legal acts of the Republic of Lithuania. 3. The procedure of appropriation of the management company’s profit shall be regulated by the Republic of Lithuania Law on financial institutions (hereinafter: ‘Law on Financial Institutions’). 4. The audit of the set of financial statements and of the set of consolidated financial statements of a management company, collective investment undertakings managed by it or of an investment company that has not designated a management company and the procedure of such audit shall be subject to requirements laid down in the Republic of Lithuania Law on audit (hereinafter: ‘Law on Audit’), the Law on Financial Institutions and this Article. 5. The data of the set of annual financial statements of the management company, collective investment undertakings managed thereby or of the investment company that has not designated a management company must be audited. An audit firm which audits the set of annual financial statements of the collective investment undertaking shall issue an auditor’s opinion on such set of annual financial statements and a report on audit thereof. An auditor shall specify in the collective investment undertaking’s audit report all infringements of this Law and other legal acts identified in the course of …