LIETUVOS RESPUBLIKOS

LIETUVOS RESPUBLIKOS Official translation republic of lithuania LAW ON Collective Investment UNDERTAKINGS 3 July 2003 No IX-1709 (As last amended on 19 March 2009 – No XI-204) Vilnius CHAPTER I GENERAL PROVISIONS Article 1. Purpose and Scope of the Law 1. This Law shall regulate the activities of collective investment undertakings and the supervision of such activities by the State. The purpose of the Law shall be to ensure protection of interests of co-owners of investment funds, shareholders of investment companies with variable capital, and closed-end type investment companies. 2. This Law shall have the aim of harmonising regulation of collective investment undertakings with the legal acts of the European Union specified in the Annex to this Law. 3. The Law shall apply to the services provided by harmonised and special collective investment undertakings, with the exception of those whose units or shares are not offered in the Republic of Lithuania and other Member States, or, based on their instruments of incorporation, are offered exclusively in non-Member States. 4. The Law shall not apply to the services provided by management companies and collective investment undertakings to the State, the Bank of Lithuania, the ECB, Central banks or institutions of the EU Member States engaged in public debt management. 5. Management companies, investment companies with variable capital and closed-ended investment companies shall be subject to requirements of the Law on Companies to the extent the present Law does not provide otherwise. Article 2. Definitions 1. “Collective investment undertaking of the open-ended type” shall mean a collective investment undertaking whose units or shares are issued and redeemed upon a request of investors. 2. Subsidiary – as defined in the Law on Consolidated Accounts of Groups of Undertakings. 3. “Financial instrument” shall mean: 1) in respect of a harmonised undertaking for collective investment in transferable securities (hereinafter referred to as a “harmonised collective investment undertaking”) – as defined in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments; 2) in respect of a special collective investment undertaking – as defined in paragraph 4 of Article 3 of the Law on Markets in Financial Instruments. 4. “Financial instrument index” shall mean a statistical ratio showing the movement in the value of the financial instruments of which such index is composed. 5. “Financial instrument portfolio” shall mean the financial instruments portfolio as defined in the Law on Markets in Financial Instruments. 6. “Close links” shall be the links as defined in the Law on Markets in Financial Instruments. 7. “Net assets” shall mean the difference between the value of assets of the investment fund or the investment company and non-current and current liabilities of the investment fund or the investment company. 8. “Investment company” shall mean an investment company with variable capital or a closed-ended investment company. 9. “Investment company with variable capital” shall mean a company whose shareholders have the right to request at any time that their shares be redeemed and the amount of whose capital varies depending on the issue and redemption of shares. The investment company with variable capital may be of the open-ended type only. 10. “Investment instruments” shall mean: 1) in respect of a harmonised collective investment undertaking – the financial instruments indicated in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments, also deposits, the immovable and movable property necessary for the direct activities of an investment company with variable capital; 2) in respect of a special collective investment undertaking – the financial instruments indicated in paragraph 4 of Article 3 of the Law on Markets in Financial Instruments, also deposits, immovable property as well as the movable property and the installations necessary for the operations thereof. 11. “Investment fund” shall mean a type of activity whereby the assets managed by legal or natural persons by the right of common partial ownership under the trust right in accordance with the procedure and under the conditions established in this Law and the rules of the investment fund. The concept of the investment fund used for the purposes of this Law shall include investment funds of the open-ended and closed-ended types unless a specific Article of the Law specifies otherwise. 12. “Unit” shall mean a transferable security certifying the title of the co-owner of an investment fund to a part of the assets comprising the investment fund. 13. “Offering of units or shares” shall mean the offering of units or shares in the mass media, advertising or by other methods addressed to more than 100 persons. 14. “Derivative financial instruments” shall mean: 1) in respect of a harmonised collective investment undertaking – the financial instruments indicated in subparagraphs 1-4 of paragraph 4 of Article 3 of the Law on Markets in Financial Instruments the value whereof changes according to the interest rate, the price of transferable securities, a currency exchange rate or the financial index; 2) in respect of a special collective investment undertaking – the financial instruments indicated in subparagraphs 4-10 paragraph 4 of Article 3 of the Law on Markets in Financial Instruments the value whereof depends on the value of one or several financial instruments. 15. “Collective investment undertaking” shall mean an investment fund or an investment company the sole purpose of the incorporation whereof shall be, by offering the units or shares in accordance with the procedure laid down in Article 13 of this Law, accumulate personal funds and invest such funds collectively into the assets specified in this Law by complying with the investment requirements set forth by this Law. 16. “Participant in a collective investment undertaking” shall mean a co-owner of an investment fund or a shareholder of an investment company. 17. “Prospectus of a collective investment undertaking” shall mean the document providing to investors and the public the essential information about the offered transferable securities of a collective investment undertaking. 18. “A sub-fund of a collective investment undertaking” shall mean a part of the assets of an umbrella collective investment undertaking managed separately from other assets thereof. 19. “Control” shall mean a direct and/or indirect dominant influence on an undertaking as defined in the Law on Consolidated Accounts of Groups of Undertakings. 20. “Benchmark index” shall mean a ratio chosen by a management company or investment company the management of whose assets has not been delegated to a management company against the value of which the return on investment of a collective investment undertaking is measured. 21. “Persons of sufficiently good repute” shall mean the persons as defined in the Law on Markets in Financial Instruments. 22. Parent undertaking – as defined in the Law on Consolidated Accounts of Groups of Undertakings. 23. “Periodical report” shall mean a report addressed to investors and the public containing information on the performance of the management company and collective investment undertakings, their financial status and other major events of a certain period. 24. “Transferable securities” shall mean: 1) shares, units of a company and depository receipts for shares; 2) bonds and non-equity securities of other forms; 3) other transferable securities entitling to the acquisition of the transferable securities indicated in subparagraphs 1 and 2 of this paragraph by way of subscription or exchange. 25. “Money market instruments” shall mean: 1) in respect of a harmonised collective investment undertaking – the liquid instruments which are normally dealt in on the money market and whose value may be accurately determined at any time; 2) in respect of a special collective investment undertaking – the money market instruments defined in paragraph 5 of Article 3 of the Law on Markets in Financial Instruments whose value may be accurately determined at any time. 26. “Initial capital” shall mean the minimum amount of the equity capital that a management company or an investment company must accumulate. 27. “Professional investor” shall mean a professional client defined in the Law on Markets in Financial Instruments and a participant of a collective investment undertaking whose instruments of incorporation provide for a minimum investment amount of EUR 50,000 or more. 28. “Special collective investment undertaking” shall mean the collective investment undertaking whose units or shares cannot be distributed in another Member State in accordance with the procedure laid down in the legal acts indicated in the Annex to this Law and which is not subject to requirements of the European Union law. 29. “Instruments of incorporation” shall mean the rules of an investment fund or the articles of association of an investment company. 30. “Harmonised collective investment undertaking” shall mean the collective investment undertaking regulated under the European Union law, whose funds, for the purpose of risk spreading, are invested in transferable securities and/or other liquid assets provided for in Chapter VI of this Law, and whose transferable securities (units or shares) must be redeemed at any time upon a request of the holder thereof. 31. “Umbrella collective investment undertaking” shall mean an investment fund of the open-ended type or an investment company with variable capital whose assets are divided into separate sub-funds. 32. “Asset management” shall mean: 1) taking and execution of investment-related decisions; 2) accounting management, responding to customer inquiries, calculation of net assets, internal control of regulatory compliance, maintenance of the register of unit holders or shareholders, distribution of income, unit or share pricing, issuance and redemption thereof, contract settlements, keeping of record of the completed operations; 3) marketing; 4) other activities related to the activities indicated in subparagraphs 1, 2 and 3 of this paragraph. The concept of asset management as used in this Law shall also include the investment fund management on a fiduciary basis. 33. “Closed-ended investment company” shall mean a public limited liability company that issues a fixed number of the shares redeemed upon the expiry of the period of activity of the company provided for in the articles of association of the public limited liability company or another time specified in advance in its articles of association. 34. “Closed-ended investment fund” shall mean a collective investment undertaking whose units may be redeemed only upon the expiry of the period of activity of a public limited liability company provided for in the rules thereof or another time specified in advance in these rules. 35. “Foreign supervisory authority” shall mean shall mean an institution which in a foreign state performs the functions similar to those of the Securities Commission in the sphere of licensing and supervision of management companies and collective investment undertakings. 36. “Management company” shall mean any company the regular business of which is management of investment funds and investment companies. 37. Qualifying holding of a management company – a proportion of the authorised capital or voting rights of a management company which is managed directly or indirectly and represents at least 1/10 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.  When determining whether a proportion of the authorised capital or voting rights of the firm represents at least 1/10 of the authorised capital, account shall be taken of the duties and the procedure for calculating votes specified in Articles 23 and 24 of the Law on Securities. 38. “Member State” shall mean a European Union Member State or a State of the European Economic Area (EEA). CHAPTER II SECTION ONE LICENSING AND ACTIVITIES of A Management CompanY and Investment CompanY Article 3. Right to Engage in the Activities of a Management Company or Investment Company  1. Only a private or public limited liability company holding a licence for the activities of a management company issued by the Securities Commission shall have the right to engage in the management of common funds and/or investment companies with variable capital. A company holding such a licence shall be referred to as a management company. Only management companies shall have the right to use in their names and advertisements the words “investment fund management company”, “management company of investment companies” or other combinations or derivatives of these words. 2. Only a public limited liability company holding a licence for the activities of an investment company with variable capital issued by the Securities Commission may engage in the activities of an investment company with variable capital. Only investment companies with variable capital may use in their name the words “investment company with variable capital” or the acronym ICVC. In the name of an investment company with variable capital, the words “public limited liability company” or the acronym AB shall be optional. 3. Only a public limited liability company holding a licence for the activities of a closed-ended investment company issued by the securities commission may engage in the activities of a closed-ended investment company. Only closed-ended investment companies may use in their name the words “closed-ended investment company” or the acronym CEIC. The words “public limited liability company” or the acronym AB are optional in the name of a closed-ended investment company. Article 4. Activities of Management Companies and Investment Companies 1. A management company shall have the right to engage in the principal activities – management of investment funds and/or investment companies specified by this Law – and to provide the following auxiliary services on the condition that they have been provided for in the licence issued to the company and where it engages in the principal activity: 1) management of other persons' financial instrument portfolios; 2) management of the financial instrument portfolios of pension funds where the management company complies with the requirements set forth in the Law on Supplementary Voluntary Accumulation of Pensions and the Law on Accumulation of Pensions; 3) advising on issues relating to investment in financial instruments; 4) safe-keeping and management of units of the investment funds managed by other management companies or shares of investment companies. 2. A management company may not provide the auxiliary services indicated in subparagraphs 3 and 4 of paragraph 1 of this Article, unless it is entitled to provide the services indicated in subparagraphs 1 and 2 of paragraph 1 of this Article. 3. An investment company may not manage the assets of other persons or engage in the activities not provided for under this Law. 4. A management company managing at least one harmonised collective investment undertaking may not engage in any activity other that provided for by this Law. 5. Chapter IX of this Law shall not apply to the management companies not managing any harmonised collective investment undertakings. 6. A management company that has the right to engage in the activities indicated in subparagraphs 1-4 of paragraph 1 of this Article shall be subject mutandis mutandis to the requirements set forth in Articles 13 and 22 of the Law on Markets in Financial Instruments and the implementing regulations of the Securities Commission. When applying the abovementioned requirements of the Law on Markets in Financial Instruments, account shall be taken of the provisions of paragraph 5 of Article 2 of the Law on Markets in Financial Instruments. Article 5. Procedure for Granting Licences for the Activities of a Management Company or Investment Company 1. A public limited liability company or a private limited liability company wishing to engage in the activities of a management company or a public limited liability company wishing to operate as an investment company with variable capital or a closed-ended investment company shall file an appropriate application with the Securities Commission. The application shall be accompanied by a programme of the activities to be performed (business plan) containing, inter alia, a description of areas of the activities to be performed, the organisational structure of the company, also information about the legal person, participants, heads thereof, activities, compliance with capital requirements, and other information specified in the licensing rules approved by the Securities Commission, upon considering which the Securities Commission could state that the company complies with the requirements of licensed activities. The list of the documents to be furnished for the acquisition of the licence for activities and the procedure for filing thereof shall be established by the Securities Commission. 2. The Securities Commission shall refuse to issue the licence where: 1) data (documents) do not conform to the established requirements, the documents and data presented are incomplete or false, or the company’s programme of activities is not adequately substantiated; 2) the initial capital of a company wishing to obtain the licence for activities of a management company or investment company with variable capital whose management has not been delegated to a management company or the authorised capital of a company seeking to obtain the licence for activities of a closed-ended investment company is below the minimum amount set by the Securities Commission, or management company capital adequacy requirements are not complied with; 3) the company has failed to furnish the information as provided for in the licensing rules about shareholders of the company and the qualifying holdings directly or indirectly managed thereby, as well as the size of these qualifying holdings; 4) there is a ground for believing that holders of the undertaking’s qualifying holding will not ensure a sound and transparent management of the company; 5) at least one employee of the company is an employee of the operator of the regulated market operating in the Republic of Lithuania, the Securities Commission or the Central Securities Depository of Lithuania; 6) members of the board of the company, the head of the administration or his deputies are not persons of sufficiently good repute, do not possess the qualification or work experience specified by the Securities Commission; 7) the company's registered office is outside the Republic of Lithuania; 8) a close link exists between the company and another legal or natural person which may prevent the Securities Commission from exercising effective supervision; 9) a close link exists between the company and a person from a non-EU Member State whose legal acts regulating this person's activities or the enforcement of such legal acts may prevent the Securities Commission from exercising effective supervision; 10) the company’s articles of association indicate that the shares or the units of the collective investment undertaking to be established will not be marketed in the Republic of Lithuania; 11) the articles of association of a public limited liability company seeking to obtain the licence of an investment company with variable capital or a closed-ended investment company do not comply with the requirements of laws; 12) the management company, heads or shareholders thereof have been rated as unsuitable according to the evaluation criteria indicated in paragraph 10 of Article 9 of this Law. 3. The Securities Commission shall notify an applicant of its consent or refusal to issue the licence within 6 months from the filing of all documents, data and clarifications. The time limit for the consideration of an application shall be calculated from the filing of the last documents or data. A refusal to issue the licence shall be motivated in writing. 4. The Securities Commission must refer to a foreign supervisory authority with a request to provide its opinion where: 1) the applicant is a subsidiary of a management company, financial brokerage firm, credit institution or insurance company licensed in another Member State; 2) the applicant is a subsidiary of the parent company of a management company, financial brokerage firm, credit institution or insurance company licensed in another Member State; 3) the applicant is controlled by the same persons who control the management company, financial brokerage firm, credit institution or insurance company licensed in another Member State. 5. For the purpose of assessing the suitability of owners of the qualifying holding of a management company or investment company and the repute and experience of heads of the companies belonging to the same group, the Securities Commission shall seek the opinion of the supervisory authority referred to in paragraph 4 of this Article. 6. The Securities Commission shall give notice of the issuance or revocation of a licence to the manager of the Legal Entities’ Register and publish it in the website of the Securities Commission. 7. Instruments of incorporation of a management company or investment company being established shall become invalid if they are not submitted to the Legal Entities’ Register within 9 months from the drawing up of the instruments of incorporation. Article 6. Management of Management Companies and Investment Companies and Heads Thereof 1. A management company and investment company the management of whose assets has not been delegated to a management company must have the board and the administration. 2. An investment company the management of whose assets has been delegated to a management company shall not form any management bodies. The management company which has been delegated the management of the investment company shall be responsible for the performance of the actions indicated in paragraph 3 of Article 2.82 of the Civil Code of the Republic of Lithuania.  3. The general meeting of shareholders of an investment company may pass resolutions irrespective of the voting rights carried by the shares held by the participating shareholders.    4. Heads of a management company or an investment company shall be: a) the head of the administration; b) the deputy head of the administration; c) members of the board. 5. Heads of a management company or an investment company the management of whose assets has not been delegated to the management company must be persons of sufficiently good repute and possess sufficient experience to ensure a sound and transparent management of the company. 6. A management company or an investment company the management of whose assets has not been delegated to the management company must give advance notice to the Securities Commission of all future changes to the heads of the company along with submitting the information specified by the Securities Commission and needed to assess whether the new heads elected or planned to be elected comply with the requirements of sufficiently good repute and sufficient experience. The newly elected managers of a management company or an investment company the management of whose assets has not been delegated to the management company may assume office only upon approval of their candidatures by the Securities Commission. 7. The Securities Commission shall have the right not to approve the candidatures of newly elected heads where the elected heads are not of sufficiently good repute, do not possess sufficient experience, or where there are other objective grounds for believing that the planned changes to the heads of the company will pose a threat to the appropriate and transparent management of the company. Detailed requirements for candidate heads and the procedure for approving these candidates by the Securities Commission shall be established by the Securities Commission. 8. The Securities Commission shall take a decision on the suitability of candidatures of newly elected heads not later than within one month from the receipt of all required documents. Article 7. Requirements Applicable to Activities and Prudential Requirements 1. A management company or an investment company the management of whose assets has not been delegated to the management company must: 1) act honestly in the interests of participants in collective investment undertaking and integrity of the market; 2) act with due care, skill, and caution; 3) have and employ the arrangements and procedures necessary for its activities; 4) seek to obtain from the client information about his financial position, investment experience and the objectives pursued by him in making use of the services provided by the company, also take into account whether or not the client is a professional investor; 5) disclose to the client sufficient information relating to and necessary for him; 6) try to avoid conflicts of interests and, when they cannot be avoided, ensure fair treatment of participants in a collective investment undertaking; 7) ensure that it has sound management procedures and a sound system for keeping accounting records and accounting system and that each transaction may be reconstructed according to the parties thereto, the content, time and venue thereof and that the assets are invested under the terms and conditions provided for in instruments of incorporation and legal acts; 8) exercise internal control, control the transactions in financial instruments concluded by its head of the administration, deputy thereof, members of the board and employees; 9) keep documents of the effected operations for at least 10 years from the date of effecting of the operations, unless other legal acts provide for a longer time period of keeping of the documents; 10) have such an organisational structure as to avoid a conflict of interest between the managing company or investment company and its clients, conflict of interest between its clients, conflict of interest between participants in a collective investment undertaking and its clients or conflict of interest between participants in a collective investment undertaking; 11) ensure that the persons taking the decisions relating to asset management have the qualification and experience specified by the Securities Commission and are of sufficiently good repute; 12) have in place a description of procedures for taking investment decisions specifying, inter alia, the structure of a body taking the investment decisions, and comply therewith; 13) ensure that the investment decisions are recorded in writing and registered in the register of investment decisions. 2. A management company entitled to provide the services provided for in subparagraph 1 or 2 of paragraph 1 of Article 4 may invest client's funds into the investment funds or investment companies managed by itself only upon subject to a client's prior consent. 3. Liabilities to investors of a management company entitled to provide a service provided for in subparagraph 1 of paragraph 1 of Article 4 shall be insured in accordance with the procedure laid down in the Law on Insurance of Deposits and Liabilities to Investors Article 8. Right of the Securities Commission to Establish a Procedure for Discharging the Duties of a Management Company or an Investment Company The Securities Commission shall establish: 1) a procedure for protecting confidential information; 2) a procedure for organising and effecting the internal control of management companies and the investment companies the management of whose assets has not been delegated to the management companies; 3) the contents of and a procedure for publishing periodical reports, other reports, prospectuses, communications to the public and Securities Commission; 4) contents of and a procedure for publishing reports on the liquidation of an investment company and division of a unit; 5) requirements for the amount of net assets and a management company's capital adequacy; 6) capital requirements for management companies and investment companies; 7) a procedure for measuring counterparty risk when verifying compliance with diversification requirements; 8) a procedure for granting the authorisations and issuing the licences specified in this Law; 9) a procedure for using derivative financial instruments of collective investment undertakings and procedure for assessing related risks; 10) a procedure for merging investment funds; 11) a procedure for distributing units and shares of collective investment undertakings. Article 9. Right of an Management Company or Investment Company to Delegate a Part of its Functions to another Company 1. In aiming at a more efficient management, a management company or an investment company the management of whose assets has not been delegated to the management company shall have the right to delegate a part of its management functions to a company authorised to provide appropriate services and must forthwith notify the Securities Commission thereof. The notification of the delegation of a part of the management functions must indicate the name of the company whereto it has been delegated (the agent) and the list of the functions delegated. 2. Performance of a part of management functions may be delegated only in the case when: 1) this will not prevent supervision of a management company or investment company, also when this will not harm investors' interests; 2) the Securities Commission has concluded an agreement on the exchange of information with an appropriate supervisory authority of a non-Member State in which a part of the functions is delegated to a licensed management company; 3) heads of a management company or investment company may at any time monitor activities of the agent; 4) a management company or an investment company may at any time, when this is in the interests of participants in a collective investment undertaking, give additional instructions to the agent or withdraw the mandate; 5) the agent possesses the qualification specified by the Securities Commission and may perform the indicated functions; 6) the prospectus of an investment fund or investment company indicates the functions which have been allowed to be delegated to another company. 3. A management company or the investment company provided for in paragraph 1 of this Article shall not have the right to delegate its management functions to third parties to the extent that it essentially surrenders all the functions. Delegation of the function of investment decision-making and/or execution to a depository safe-keeping the assets comprising the investment funds of that management company or assets of investment companies or to third parties whose interests may conflict with those of the management company, the investment company or participants therein shall be prohibited. 4. Delegation of a part of functions to third parties shall not release a management company or an investment company from liability. Article 10. Acquisition and Transfer of Shares of a 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, the qualifying holding of a management company already held thereby (hereinafter referred to in this Article as the “acquirer”), where in consequence of a proposed acquisition of the company’s shares the proportion of the voting rights or of the authorised capital held would reach or exceed in the increasing order 20%, 33% or 50% or the company would become a subsidiary of that legal person (hereinafter referred to in this Article as the “proposed acquisition”), must obtain a decision of the Securities Commission not to oppose the proposed acquisition. A failure to comply with the requirement to obtain the decision of the Securities Commission not to oppose the proposed acquisition shall not invalidate a transaction, however it shall give rise to the consequences specified in paragraph 22 of this Article. The persons acting in concert as referred to this Article shall be two or more persons that, on the basis of a verbal or written agreement concluded explicitly between them or anticipated to be concluded, exercise or seek to exercise their rights granted by the qualifying holding of the management company held. 2. The acquirer must notify in writing the Securities Commission of a proposed acquisition indicating the size of the qualifying holding of a management company which he is seeking to acquire, also submit supporting documents as well as other information and data specified by the Securities Commission. 3. A person who has taken a decision to dispose of or reduce a qualifying holding in a management company held by him, where in consequence of a proposed loss of the management company’s share the proportion of the voting rights or of the authorised capital held by the person would reach or exceed in the decreasing order 20%, 33% or 50% or the company would cease to be a subsidiary of that legal person must notify in writing the Securities Commission indicating the size of the qualifying holding in the management company which he is seeking to transfer or reduce. 4. The Securities Commission shall establish a list of the documents and data submitted together with the notification of the proposed acquisition and required for the assessment of the acquirer and the proposed acquisition. The documents and data indicated in the list must be proportionate to and adjusted for 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 according to the criteria established in paragraph 9 of this Article. 5. The Securities Commission shall, promptly and in any event within two working days following receipt of the notification of the proposed acquisition, as well as following the subsequent receipt of the documents and data referred to in paragraph 7 of this Article, acknowledge receipt thereof in writing and notify the acquirer of the date of the expiry of the assessment period. 6.  The Securities Commission shall have a maximum of 60 working days as from the date of the written acknowledgement of receipt of the notification of the proposed acquisition and all documents and data indicated in the list referred to in paragraph 4 of this Article to carry out an assessment (hereinafter referred to in this Article as the “assessment period”). 7. The Securities Commission may, during the assessment period, if necessary, and no later than on the 50th working day of the assessment period, request any additional documents and data that are necessary to complete the assessment Such request shall be made in writing and shall specify the additional documents and data needed. For the period between the date of request to submit additional documents and data by the Securities Commission and the receipt of a response thereto by the acquirer, the assessment period shall be interrupted. The interruption of the assessment period may not exceed 20 working days.  Moreover, the Securities Commission may further request completion or clarification of the documents and data at its own discretion, but this may not result in an interruption of the assessment period. 8. The Securities Commission may extend the interruption of the assessment period referred to in paragraph 7 of this Article up to 30 working days if the acquirer is situated or regulated in a non-Member State or if the acquirer is not subject to supervision under the legal acts of the Member States regulating operation of management companies of harmonised collective investment undertakings, financial brokerage firms, credit institutions, insurance undertakings or reinsurance undertakings.   9. In assessing the notification of the proposed acquisition as provided for in paragraph 2 of this Article, the documents and data required for the assessment of the acquirer and the proposed acquisition as well as additional documents and data, the Securities Commission shall, in order to ensure the sound and transparent management of the management company in which an acquisition or increase of the qualifying holding is proposed, and having regard to the likely influence of the acquirer on the management company, appraise the suitability of the acquirer and the financial soundness of the acquisition against all of the following criteria: 1) the good repute of the acquirer; 2) the good repute and experience of any person who will direct the business of the management company as a result of the proposed acquisition. When appraising the good repute and experience of the person who will direct the business of the management company as a result of the proposed acquisition, the Securities Commission shall have regard to provisions of Article 6 of this Law; 3) the financial soundness of the acquirer, in particular in relation to the type of business pursued and envisaged in the management company in which the acquisition or increase of the qualifying holding is proposed; 4) whether the management company will be able to comply and continue to comply with prudential requirements and, in particular, whether the group of which the management company will become a part following the proposed acquisition has a structure that makes it possible to exercise effective supervision, effectively exchange information among the Securities Commission and supervisory institutions of other Member States and determine the allocation of responsibilities among the Securities Commission and the supervisory institutions of other Member States; 5) whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing within the meaning of the Law on Prevention of Money Laundering and Terrorist Financing is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof. 10. The Securities Commission may neither impose any prior conditions in respect of the size of the qualifying holding in a management company that must be acquired nor examine the proposed acquisition in terms of the economic needs of the market. 11. The Securities Commission may oppose the proposed acquisition only provided it can justify this by the criteria set out in paragraph 9 of this Article or if the documents and data specified in paragraph 4 or 7 of this Article and provided by the acquirer are incomplete. 12. The Securities Commission shall, prior to taking a decision on the proposed acquisition, work in consultation with the supervisory institution of the Republic of Lithuania and other Member States if 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 the parent undertaking or a person controlling any of these entities. 13. The Securities Commission shall, in consultation according to paragraph 12 of this Article, request other supervisory institutions to provide all information which is relevant for the assessment of suitability of the acquirer and the financial soundness of the proposed acquisition and shall communicate without delay to other supervisory institutions upon their request the information relevant for the assessment being conducted and shall communicate on its own initiative all information essential for the assessment being conducted. 14. If the Securities Commission does not take a decision on opposing the proposed acquisition within the assessment period indicated in paragraph 6 of this Article, it shall be deemed that the Securities Commission does not oppose the proposed acquisition. If the Securities Commission takes a decision not to oppose the proposed acquisition prior to expiry of the assessment period, it shall notify the acquirer thereof in writing within two working days from the taking of the decision. 15. Where the Securities Commission takes a decision not to oppose the proposed acquisition, it may lay down, and where necessary extent, a time limit for implementation of a person’s intention to acquire or increase the qualifying holding in a management company. 16. If the Securities Commission, upon completion of the assessment, decides to oppose the proposed acquisition, it shall, within two working days from the taking of the decision and not exceeding the assessment period, inform the acquirer thereof in writing and provide the reasons for that decision. 17. A decision of the Securities Commission on the proposed acquisition shall indicate all opinions and reservations received from other supervisory institutions following consultation according to paragraphs 12 and 13 of this Article. A decision of the Securities Commission to oppose the propose acquisition may be appealed against to court. The Securities Commission shall make the decision and reasons therefor accessible to the public regardless of whether the acquirer’s consent has been obtained.  The Securities Commission shall have the right not to make the decision and reasons for that decision accessible to the public when such a disclosure would incur damage to the market or would incur disproportionate damage to interested persons. 18. Where two or more proposals to acquire a qualifying holding in the same management company have been notified to the Securities Commission, the latter shall consider all notifications in accordance with the same procedure treating the acquirers in a non-discriminatory manner. 19. Where a management company becomes aware of the acquisition or disposal of its shares that cause the qualifying holdings held by shareholders of the management company to exceed the thresholds specified in paragraph 1 of this Article in the increasing or decreasing order, it must give notice thereof to the Securities Commission without delay. 20. A management company must, at least once a year, inform the Securities Commission of the shareholders of the management company that have a qualifying holding in the management company and the amounts of the qualified holdings held by them. 21. Where the influence exercised by the persons referred to in paragraph 1 of this Article poses a threat to the sound and transparent management of a management company, the Securities Commission must take measures to put an end to this situation. To this end, the Securities Commission shall have the right to issue compulsory instructions and impose the sanctions specified in this Law against the heads and other persons responsible for management of the management company. 22. All the shares held by a person who has acquired the qualifying holding in a management company or increased the qualifying holding exceeding the thresholds provided for in this Article without a decision of the Securities Commission not to oppose the proposed acquisition or prior to expiry of the time limit laid down on the basis of paragraph 6 of this Article (with the exception of the case when the Securities Commission takes a decision not to oppose the proposed acquisition prior to expiry thereof) shall be divested of the voting right at the general meeting of shareholders. The voting right shall be acquired anew upon receipt of a decision of the Securities Commission not to oppose the proposed acquisition or upon the expiry of the time limit laid down in paragraph 6 of this Article and where the Securities Commission fails to state opposition to the proposed acquisition within the assessment period. Article 11. Duty to Obtain an Authorisation of the Securities Commission 1. A prior authorisation of the Securities Commission shall be required in order to: 1) approve, amend or supplement instruments of incorporation; 2) select or replace a depository or management company; 3) transfer the assets comprising an investment fund to another management company; 4) conclude or amend a contract with the depository; 5) approve, amend or supplement a simplified or full prospectus; 6) approve, amend or supplement the summary instruments of incorporation; 7) merge the investment funds managed by a management company. 2. The Securities Commission may refuse an authorisation only where this would contradict legal acts or would prejudice the interests of participants in a collective investment undertaking. 3. Where upon the receipt of an appropriate application, the Securities Commission fails to present a reasoned objection within 15 days, an authorisation shall be deemed to have been granted. Article 12. Audit of a Management Company, the Collective Investment Undertakings Managed by It or an Investment Company  Audit of a management company, the collective investment undertakings managed by it or an investment company shall be subject to the requirements set forth in the Law on Audit, the Law on Financial Institutions, and paragraph 6 of Article 22 of this Law. Article 13. Right to Transfer the Assets Comprising an Investment Fund or Owned by an Investment Company 1. The assets comprising an investment fund or owned by an investment company may not be transferred to a management company which manages the assets, the head of the administration of such a company, his deputy, members of the board and supervisory board and employees of the company (including their spouses). A management company on account of a collective investment undertaking managed by it or an investment company shall also be prohibited from acquiring assets of the persons provided for in this paragraph. 2. The prohibitions provided for in paragraph 1 of this Article in respect of an investment company shall also apply to its head of the administration, his deputy, members of the board and supervisory board and employees (including their spouses). 3. The assets comprising an investment fund or owned by an investment company may not be lent, pledged or given as guarantee or surety to secure other persons’ liabilities. The above shall not constitute a prohibition of acquisition of non-paid transferable securities, money market instruments or other instruments specified in subparagraphs 5, 7 or 8 of paragraph 1 of Article 57. 4. The assets of an investment fund or an investment company may not be used to conclude short-sale transactions in transferable securities, money market instruments or other investment instruments. 5. An investment company or a management company which manages the assets of an investment fund may not borrow, on the account of the investment fund, except for loans with a duration of 3 months in the amount of up to 10% of its net assets taken for maintaining the liquidity. This shall not constitute a prohibition to borrow foreign currency for the purpose of acquisition of transferable securities or money market instruments, provided the lender is submitted at least an equivalent amount in another currency in order to secure repayment of the loan. 6. The prohibitions stipulated in this Article shall apply to special collective investment undertakings and their management companies to the extent as has been defined in Chapter VII of this Law. Article 14. Approval of the Agreement with a Management Company and a Depository 1. An agreement on the management of assets of an investment company and an agreement with a depository shall be subject to approval by the general meeting of shareholders of the investment company. The general meeting of shareholders may take such a decision by the majority of at least 2/3 of votes of those present at the meeting. The company’s articles of association may require a larger majority for the taking of such a decision. 2. The general meeting of shareholders may delegate the right to take a decision provided for in paragraph 1 of this Article to the supervisory board, but for a period not exceeding 3 years, provided the company's articles of association stipulate the maximum fee payable to the management company and the depository. The supervisory board shall have the right to take the decision by the majority of 2/3 of votes of all members of the supervisory board. Article 15. Sanctions Imposed against Management Companies, Investment Companies, Their Heads and Depositories 1. The Securities Commission shall have the right to apply the following sanctions against management companies or investment companies: 1) to issue a warning regarding shortcomings and infringements of activities and set a deadline for their elimination; 2) to impose the penalties specified by this Law; 3) to revoke the licence; 4) to suspend the distribution or redemption or repurchase of units (shares); 5) to prohibit the conclusion of transactions for the acquisition of investment instruments on account of a collective investment undertaking for a period not exceeding 3 months;  6) to appoint a temporary representative of the Securities Commission for supervision of the activities; 7) to suspend the validity of the licence of the management company to provide one or several services. 2. The Securities Commission shall have the right to impose the sanctions provided for in the Code of Administrative Offences against heads of the administration, their deputies, members of the board or the employees of a management company or an investment company. 3. The Securities Commission shall have the right to impose against a depository the sanctions provided for in subparagraphs 1 and 2 of paragraph 1 of this Article. Article 16. Basis for Imposing Sanctions 1. The sanctions specified by this Law may be imposed where at lease one of the following infringements has been committed: 1) a management company, an investment company or the depository has supplied incorrect information to the Securities Commission; 2) the Securities Commission has not been provided with the information or the documents necessary for supervision; 3) the management company or the investment company no longer meets the requirements on the basis whereof the licence has been issued; 4) laws or other legal acts of the Republic of Lithuania have been violated; 5) the management company or the investment company is incapable of discharging obligations or there is evidence that it will not be able to do that in the future. 2. The choice of a sanction shall depend on the content of an infringement for which it is applied, the impact of the infringement and the sanction on a company and security of the financial system. The issue of imposition of sanctions shall be considered following prior notification of a management company, an investment company or a depository and providing them with an opportunity to present explanations. A failure of a representative to attend the consideration of the issue or to present explanations shall not prevent adoption of a decision concerning the imposition of sanctions. 3. A decision on the imposition of sanctions may be taken where not more than two years have lapsed from the commitment of an infringement, and in the case of a continuing infringement – not more than two years have lapsed from the carrying out of last actions. 4. The supervisory authorities of the states in which a management company or an investment company with variable capital is distributing units or shares shall be notified of the imposition of sanctions against the management company or the investment company. Article 17. Temporary Representative for the Supervision of Activities 1. In urgent cases and possessing data about an infringement of legal acts, the Securities Commission shall have the right to appoint a temporary representative for the supervision of activities of a management company or an investment company for the purpose of protection of investors' assets against depreciation or any other loss. An employee of the Securities Commission may be appointed the temporary representative. 2. The head of the administration, his deputy, and members of the board of a management company or an investment company must obtain a consent of a temporary representative for the supervision of activities with regard to each decision relating to the activities of the company. Actions of the temporary representative may be subject to appeal in accordance with the procedure laid down in the Law on Administrative Proceedings. 3. A temporary representative shall be recalled in the following cases: 1) upon establishing that the company is capable of sound functioning; 2) when bankruptcy proceedings have been instituted against the company; 3) the licence of a management company, an investment company with variable capital or a closed-ended investment company has been revoked. Article 18. Revocation of the Licence The Securities Commission shall have the right to revoke the licence of a management company or an investment company where: 1) such a sanction is imposed in accordance with the procedure laid down in this Law; 2) the holder of the licence has himself applied in writing for the revocation of the licence; 3) the holder of the licence fails, within 12 months from the issuance of the licence, to commence the use of the licence or does not perform activities for a period over 6 months; 4) the period of activities as provided for in the articles of association of an investment company has expired, and the holder of the licence fails to apply in writing for the revocation of the licence. Article 19. Peculiarities of the Bankruptcy Proceedings of a Management Company or an Investment Company 1. Bankruptcy proceedings of a management company or an investment company may be heard solely by court. 2. The Securities Commission shall have the right to file a petition with a court for the institution of bankruptcy proceedings against a management company or an investment company. 3. Upon the receipt from the Securities Commission of a petition for the institution of bankruptcy proceedings, a court must, on the same day, freeze the bank accounts and investment instruments of a management company or an investment company. 4. Not later than within 15 days of the receipt of a petition, a court shall pass a ruling on the institution of or refusal to institute bankruptcy proceedings. 5. The administrator of a management company or an investment company shall repay the funds owned by participants in the collective investment undertakings managed by the management company or shareholders of the investment company or delegate the management of the collective investment undertakings managed by the management company to a different management company. Article 20. Reorganisation and Transformation of a Management Company. Liquidation of an Investment Company 1. A management company may not be reorganised or transformed into a company not subject to requirements of this Law. 2. The sale and redemption of shares of an investment company shall be terminated as from the moment of taking of a decision on the liquidation of the investment company. 3. The assets of an investment company under liquidation must be sold in accordance with the procedure laid down by the Securities Commission, and settlement with shareholders shall be made in cash. 4. The liquidator of an investment company must supply to the Securities Commission information about the progress of liquidation in accordance with the procedure laid down by the Securities Commission. SECTION TWO INFORMATION WHICH MUST BE COMMUNICATED TO THE PUBLIC BY A MANAGEMENT COMPANY OR AN INVESTMENT COMPANY Article 21. Duty to Draw up Prospectuses and Periodical Reports 1. A management company (for each investment fund it manages) and an investment company must publish: 1) a full prospectus; 2) a simplified prospectus; 3) a report for each financial year; 4) a report covering the first six months of each financial year (hereafter referred to as a “half yearly report”). 2. The requirement specified in subparagraph 2 of paragraph 1 of this Article shall not apply to a management company managing a closed-ended investment fund or a closed-ended investment company taking advantage of the right as granted by this Law not to draw up a simplified prospectus. 3. A management company of a hedge collective investment undertaking or a closed-ended investment company of a hedge collective investment undertaking, also the management company of a private capital collective investment undertaking whose participants, according to its instruments of incorporation, may include solely professional investors, or a private capital closed-ended investment company whose shareholders, according to its articles of association, may include solely professional investors shall not under an obligation to publish the documents listed in paragraph 1 of this Article. Article 22. Contents of Prospectuses and Periodical Reports 1. A full and a simplified prospectus must supply the information sufficient for an investor to be able to make an informed judgement of the investment proposed to him and associated risk. A full prospectus must explicitly and comprehensibly indicate the nature of risk. 2. The structure and layout of a simplified prospectus must be easily comprehensible to an average investor. The simplified prospectus of an investment fund managed by a management licensed in another Member State or of an investment company with variable capital may, translated into the Lithuanian language, be used in the Republic of Lithuania as promotional material not requiring any additional information. 3. An annual report must include the financial reports and other information specified by the Securities Commission which will enable investors to make an informed judgement of activities of an collective investment undertaking and their results. Where interim dividends are paid, they must be indicated in a half-yearly report. 4. Instruments of incorporation shall form annexes of a full prospectus. The instruments of incorporation need not be annexed to the prospectus where participants in a collective investment undertaking are informed that, upon their request, the instruments will be delivered to them in personal or they will be notified of the place in the territory of the Republic of Lithuania where they may access them. 5. In the event of any changes in the information published in a full or simplified prospectus, the prospectuses must be amended not later than within 7 days from the occurrence of the changes. The amendments may be published in annexes indicating specific changes. Incorrect information shall be clearly deleted in the old prospectus, or a new prospectus shall be provided. 6. The data provided in annual financial reports must be audited. The auditor's report, including any qualifications, and the report on audit must be annexed to the annual report. The report on audit must indicate whether the value of net assets has been calculated correctly, whether the assets have been invested in compliance with instruments of incorporation, also list all infringements of this Law and other legal acts. The auditor of a management company, the collective investment undertakings managed by it or an investment company the management of whose assets has not be delegated to the management company must file with the S …