REPUBLIC OF LITHUANIA LAW ON PUBLIC TRADING IN SECURITIES Chapter I GENERAL PROVISIONS Article 1. Objective of the Law The  objective of this Law is to provide legal  basis  for safe,  open  and  efficient functioning  of  the  securities market, seeking to maximise the security of the interests of all  investors  and  to ensure the competition  between  the market participants. Article 2. Definitions As used in this Law: secondary  trading  in securities means  an  offer  by  an investor  or  any  other person (who is not  an  issuer)  to acquire outstanding securities as well as their transfer  to other investors; a  person affiliated to the issuer means an enterprise  or organisation in which the issuer holds shares (units or  any other  shares of capital) which carry over 10% of all votes, the  subject  controlled by the issuer  or  the  controlling subject,  the executive of the issuer as well as the  person holding  the  issuer's securities carrying over  5%  of  all votes ; issue   means   the  issue  of  a  series  of   securities conferring  identical property and non- property  rights  to their owners; issuer  means  a legal or natural person who  proposes  to issue securities in its name or issues same; material  event means any event which might influence  the investor's  decision to buy or sell the issuer's  securities or which might affect the market price thereof; brokerage  firm  means  any  enterprise  engaged  in   the intermediary activity in public trading in securities; investment  management  and  consulting  firm  means   any enterprise  engaged  in the business of  consulting  on  the issues of investment into securities; investor  means a natural or legal person who has acquired in its name or holds securities by the right of ownership; controlled subject means an enterprise or organisation  in which  the  natural  or  legal person  being  a  shareholder (partner, member) personally has more than 1/3 of all  votes or,  according  to the agreement with other  shareholders  ( partners, members), is the sole controller of more than  1/3 of  all  votes,  or  has  the right to  elect  (select)  the majority  of  the Supervisory Board (Board) members  or  the Administration  heads,  or actually controls  the  decisions adopted by the subject; broker  means  a  person who offers,  purchases  or  sells securities  on  behalf of his client or the intermediary  of public trading in securities; primary trading in securities means the offer made by  the issuer  or  intermediary  of public  trading  in  securities acting on behalf of the issuer to acquire securities at  the time  of their issue and their transfer to the ownership  of investors; prospectus  means  a document intended for  investors  and the  general public, containing the basic information  about the issuer and the securities offered by it. executive  means  a member of the Supervisory  Board,  the Board,  the head of the Administration or his deputy,  chief financier as well as a person authorised by an enterprise to conclude transactions on its behalf; stock   exchange  means  an  enterprise  engaged  in   the activities of a stock exchange; activities  of  a  stock  exchange  means  the  activities whereby  by  technical  and  organisational  means  for  the meeting  (either  directly or by using technical  means)  of persons intending to buy or sell securities or transfer them in any other manner; Securities   Commission   means   an   institution   which regulates and supervises the securities market and  operates in compliance with the provisions of Chapter 7 of this Law; block  of  securities means 1/10 or a greater  portion  of the issuer's securities of the same class; portfolio of securities means all the securities owned  by a single natural or legal person; public  trading  in securities means offer,  allotment  or transfer    of   securities   carried   out   through    the intermediaries of public trading in securities and  (or)  by offering securities to the public through advertisements  or in  any other manner and (or) by offering securities to more than 50 persons; intermediaries  of  public  trading  in  securities  means brokerage firms, investment management and consulting firms, and commercial banks; Ethics  Code  of the Intermediaries of Public  Trading  in Securities means a set of ethics rules intended for ensuring honest  activities of brokerage firms, investment management and consulting firms, and brokers; and securities  means  the  means of  financing  issued  in  a series,  evidencing participation in share capital or  (and) the  rights arising from credit relations, and granting  the right  to  receive  dividends,  interest  or  other  income. Financial instruments which evidence the right or obligation to  buy  (sell)  the  means of financing specified  in  this definition are also securities. Article 3. Application of the Law 1.  The following shall not be treated as securities under this Law and shall not be regulated by it: 1)  obligations  of  commercial banks, credit  unions  and other  credit institutions operating under the laws  of  the Republic of Lithuania which are connected with the reception of deposits or other fixed-term financing if they arise when services  are provided to the clients directly  and  without any   intermediaries  and  are  not  the  object  of  public circulation; 2)   contracts   of  insurance  concluded   by   insurance organisations  operating according to the Law  on  Insurance under  which the insurance organisation obligates itself  to pay  a  specified amount of money (either once or at regular intervals)  provided that the contracts of  insurance  would have no effect of insurance on the fulfilment of obligations of another person, incidental to the securities held by him. 2.   The  provisions  of  this  Law  shall  not  apply  to securities which are: 1)  issued  under the Law on Cheques or Law  on  Bills  of Exchange; 2)  are  issued  into circulation under the law  providing non applicability of this Law. 3.  This  Law shall regulate the issue and circulation  of securities which evidence the debt of the state and (or) are issued   by  the  Bank  of  Lithuania,  provided  that   its provisions  do not contravene the laws and other legal  acts regulating the issue and trading in these securities. 4.  The  provisions of this Law shall  not  apply  to  the secondary trading in securities, carried out in an over  the county  market when privatising property under  the  Law  on Privatisation   of   State-Owned  and  Municipal   Property. (Amended 23 April 1996) Chapter II PUBLIC TRADING IN SECURITIES Article 4. Registration of Securities 1.  The  issuer  must  register its  securities  with  the Securities  Commission  if at least  one  of  the  following requirements is met: 1)  the  issuer is a public company which is being founded or which is already operating, or an enterprise of any other type which is being reorganised into a public company; 2)  according to the data of the end of the  last  day  of the preceding business year the number of owners of at least one class of securities exceeded 50; 3)  the  issuer  or  investor intends to issue  securities into public trading. 2.  The  issuer  who intends to register  securities  must file the following documents with the Securities Commission: 1) an application; 2)  prospectus  (  If  the  securities  are  intended  for private  placement,  the  memorandum,  an  abridged  variant prospectus, may be submitted); 3)  if  the securities are registered for the first  time, copies  of  founding documents certified  by  a  notary,  or copies of amendments to the founding documents certified  by a   notary,  introduced  over  the  period  since  the  last registration of securities; 4)  copies  of  decisions certified by a  notary,  on  the basis  of  which the issuer has issued or intends  to  issue securities; 5)  reorganisation  project, if the securities  are  being registered by reason of the issuer's reorganisation. 3.  According  to  the rules approved  by  the  Securities Commission,  the  issuer  must  provide  in  the  prospectus (memorandum)  financial  statements,  disclose   information about  its  activities and the issued securities  and  those about  to be issued, about the managing bodies and contracts entered  into  by their members with the issuer,  about  the persons  affiliated to with the issuer, as well  as  persons who  are the issuer's business partners, and also any  other information  provided for by the rules. The prospectus  must also contain findings of an independent auditor acting under the   legal  acts  regulating  the  activities  of  auditors concerning  the  compliance of the  issuer'  accounting  and financial  accountability with the laws of the  Republic  of Lithuania and general accounting principles. 4.   The  Securities  Commission  may,  under  the   rules approved   in   advance,  set  different  requirements   for furnishing information, depending on the size of the issuer, the  type  of  activities, the type  of  already  issued  or planned  to be issued securities, as well as the  number  of holders of securities. 5.  The Securities Commission must within 30 days consider the   documents   filed  for  the  purpose   of   securities registration and give a written response to the issuer.  The Securities  Commission shall have the right to request  from the  issuer  additional information necessary to ensure  the protection  of  the  investors' interests,  as  well  as  to explain  or revise the furnished data. In such case the  30- day  period specified herein shall be calculated  anew  from the   moment  additional  information  or  explanations  and amendments  are  submitted. If the  data  presented  by  the issuer  is  not  in  conformity with the rules  set  by  the Securities  Commission, or if the issuer refuses to  present documents, data or explanations specified herein and in par. 2  and  3  of this Article, the Securities Commission  shall have  the  right  to refuse registration of securities.  The decision  concerning the refusal of securities  registration must   be   justified.   Upon  eliminating   the   specified deficiencies,  the issuer may repeatedly file the  documents for  the  second time. Documents filed for the  second  time shall be considered according to the general procedure.  The decision  to  refuse  registration  of  securities  may   be appealed to court. 6.  The  registration  of  securities  confirms  that  the information  furnished by the issuer is in  compliance  with the  rules  established by this Law  and  other  legal  acts regulating  the disclosure of information. The  registration of  securities  does  not confirm the  truthfulness  of  the disclosed  information, neither may it be  considered  as  a recommendation of the Securities Commission for investors. 7.  The Securities Commission must publish the data on the class,   volume  and  price  of  the  issue  of   registered securities  in the "Valstybës þinios" (Official gazette)  as well  as  provide  the  investors with  the  opportunity  to familiarise  themselves with the prospectus  (memorandum)  . The  issuer  must  provide  the opportunity  to  familiarise themselves with the documents filed for registration to  all the persons who are willing to do so. Article 5. Regular Disclosure of Information 1.  Upon  registering the securities with  the  Securities Commission,  the issuer shall be considered  an  accountable issuer.  The  accountable  issuer  must,  according  to  the procedure  and  at  time  intervals set  by  the  Securities Commission, prepare and submit to it : 1) annual prospectuses -statements; 2) regular reports; 3) reports on investors. 2.   The   annual  prospectus  -  statement  must  contain information analogous to that specified in par. 3 of Article 4  of  this Law. Annual financial accounts must be submitted alongside  with  the  findings  of  an  independent  auditor concerning  the compliance of the accounting  and  financial accounts  with  the laws of the Republic  of  Lithuania  and general accounting principles. 3.  Regular reports may be made each quarter or every  six months.  The regularity of the preparations of these reports shall  be established by the Securities Commission according to  the  rules approved in advance, depending on the  issuer and  the volume of turnover of the securities issued by  it. The  regular reports must disclose the data on the financial condition  of the issuer and information about the  material events which occurred during the accounting period. 4.  The  Board of the accountable issuer must disclose  to the  general meeting which approves annual reports the  data on  all  shareholders which, to its knowledge, have  by  the right of ownership or hold more than 5 % of all votes.  This information must state the full names of shareholders (names of  enterprises), the number of shares held by each of  them and  the percentage of votes. The data must be submitted and announced as annexes to the annual prospectuses-reports. 5.  The  accountable  issuer must provide  each  owner  of securities  issued by it with the opportunity to familiarise himself with all the reports specified in this Article  free of  charge  whereas  if the owner files a  written  request, provide  him with copies of these reports for a fee  set  in the Statutes. 6.  The  accountable issuer must submit reports  specified in  par.  1  hereof  to  the stock  exchange  on  which  its securities are listed within the same time period as for the Securities Commission. Article 6. Disclosure of Information Concerning Material Events 1.  The  accountable issuer must no later  than  within  5 working  days present to at least one national daily  paper, the   Securities  Commission  and  the  Stock  Exchange   an information  report  signed  by  its  manager  about   every material  event  with the exception of events  specified  in par.  3  hereof. The information report must state the  type and  short  description  of the  event.  The  title  of  the national daily paper in which information about stock events will be announced must be specified in the issuer's Statutes and the prospectus. 2.  If,  in  the  opinion of the accountable  issuer,  the issuer may incur financial or competition-related losses  by reason of the disclosure of information referred to in  par. 1 hereof, the accountable issuer may refrain from publishing the  information  report  provided  for  by  par.  1  hereof submitting  it  only  to the Securities  Commission  with  a marking "confidential information" and a written explanation of the reasons precluding the disclosure of information. 3.   Upon   submitting  the  report   according   to   the requirements  referred to in par. 2 hereof, the  accountable issuer  must  specify  therein  the  date  until  which  the information  must  remain  confidential.  On  the  day   the confidentiality  of  the  information  expires  it  must  be disclosed in the manner set out in par. 1 hereof. 4.  Natural  and  legal  persons  who  are  aware  of  the information  which  has not been disclosed  to  the  public, shall  have no right to enter into transactions relative  to securities until this information is disclosed following the requirements set forth in par. 1 hereof. 5. Prior to each material event the issuer must compile  a list  of persons which alongside with the executives of  the issuer  shall have the right to get to know such information prior to its public disclosure. It shall be assumed that the executives  of the issuer always know information concerning material  events.  Persons, who by reason of  the  positions occupied by them or for some other lawful reasons are  aware of  the  information concerning the stock  event,  shall  be prohibited  from informing other persons thereof  until  its public disclosure. 6.  The  persons  who  have  concluded  transactions  with securities  by making use of the information about  material events not subject to disclosure shall be held liable  under laws. Article 7. Primary Public Trading in Securities 1.  Primary  public trading in securities may  be  carried out when the issuer offers securities on its own account  or under  the  securities offering contracts entered into  with the intermediaries of the public trading in securities. 2.  The  following rules must be observed  during  primary public trading in securities: 1)  it shall be prohibited to advertise securities and  to announce  subscription for them if they are  not  registered with   the   Securities  Commission.  The  issuer   or   the intermediary of public trading in securities acting  on  its behalf  shall  have the right to carry out  market  research prior to the registration of securities, creating conditions for  the potential investors to familiarise themselves  with the draft prospectus presented to the Securities Commission; 2)  each  potential  investor must be  provided  with  the opportunity  to  familiarise itself with the prospectus  and other   documents  on  the  basis  of  which  the   issuer's securities have been registered; 3)  only  information contained in the prospectus,  annual prospectus-statement  or regular  reports  may  be  used  in advertising offered securities; 4)  every  advertisement must state where and when  it  is possible  to  familiarise oneself with  the  prospectus  and accounts of the issuer; 5)   everyone   who  is  acquiring  securities   must   be guaranteed equal terms and conditions of acquisition. 3.  If during the primary public trading the data provided in  the prospectus changes or a material event occurs ,  the issuer must give notice thereof in the manner prescribed  by Article  6 of this Law. In such cases the persons  who  have already  subscribed for the securities of the  issuer  shall have  the  right  to renounce them within 5  days  from  the disclosure  of  new  information, whereas  the  issuer  must within 10 days return the contributions paid by them without making any deductions. 4.  If the issuer or the intermediary of public trading in securities who acts on its behalf does not comply  with  the rules  of primary public trading in securities provided  for in  this  Article,  or if it turns out  that  incomplete  or incorrect  data have been presented for the registration  of securities, the Securities Commission shall have  the  right to  suspend the registration of the issuer's securities  and to set the time limit for the elimination of the violations. If  the violations are not eliminated within the set period, the  Securities Commission shall cancel the registration  of securities.  It shall be prohibited to offer  securities  if the   Securities  Commission  suspends  or   cancels   their registration. Article 8. Secondary Public Trading in Securities 1.   Secondary  public  trading  in  securities  shall  be carried out only through intermediaries of public trading in securities. 2.  Secondary public trading in securities must be carried out on the Stock Exchange if: 1)  the  authorised capital of the issuer whose securities are listed is not less than 1 million litas; 2)  the  securities are on the Official List of the  Stock Exchange   compiled   in  accordance  with   the   procedure established in Chapter 5 of this Law. 3.  The provisions of par. 2 shall not apply if other laws prescribe a different procedure for trading in securities. 4.   The  transactions  of  the  secondary  trading,  i.e. purchase  or/and sale (including exchange) in the securities of   the  accountable  issuer  must  be  concluded,  through intermediaries of public trading in securities, by: 1) investment companies; 2) insurance companies; 3)   institutions  engaged  in  the  individuals'  pension insurance; 4) commercial banks; 5)  other  legal  persons while purchasing  or  selling  a block of shares. 5.  The rules of the secondary public trading outside  the boundaries of the Stock Exchange shall be established by the Securities Commission. 6.  Persons  who according to this Law in  the  course  of secondary  offering register outside the  Stock  Exchange  a transaction regarding the issuer's securities listed on  the Stock  Exchange  must,  in  the  cases,  according  to   the procedure  and  at  the date prescribed  by  the  Securities Commission, specify the number of securities transferred  by the transaction and the unit price. Chapter III ACQUISITION OF A BLOCK OF SECURITIES Article 9. Information Concerning the Acquisition of a Block of Shares 1.  A natural or legal person who, acting independently or together   with  other  persons,  acquires  shares   of   an accountable  issuer registered in the Republic of  Lithuania which award him in excess of 1/10, 1/5, 1/3, 1/2, or 2/3  of votes  must,  within  15 days from the moment  the  relevant limit is exceeded, inform the Securities Commission and  the issuer  about  the total number of its shares  belonging  to him.  The  provisions shall also apply in  cases  where  the specified limits are exceeded in the diminishing order. 2.    Persons   to   whom   the   information   disclosure requirements  set out in par. 1 hereof are  applicable  must also at the same time furnish data on the securities held by them,  entitling  them  to  vote in  future  and  (or)  hold securities of the issuer. 3.  The  procedure  for  informing the  public  about  the acquisition of the block of securities shall be  decided  on by the Securities Commission. 4.  As  used in this Law, such persons shall be considered as  acting  in concert who have agreed in writing to  pursue common  policy with regard to the issuer when  disposing  of property and non-property rights attaching to the shares. It shall be deemed that such an agreement always exists without written confirmation between: 1)  the  executives of the issuer, with the  exception  of persons  who are not members of the managing bodies  of  the issuer; 2) the issuer and the subjects controlled by it; 3) the subjects which are controlled by the same persons; 4)  spouses,  parents  and their  children,  brothers  and sisters. 5.   Persons  acting  in  concert  shall  be  jointly  and severally   liable   for  the  fulfilment   of   obligations established in this Law and subordinate legislation. 6.  A  person  who  fails  to inform  the  issuer  or  the Securities  Commission about exceeding the limits  specified in  par.  1 hereof shall, for two years from the moment  the correct data is announced, loose at all general meetings  of shareholders held during that period all votes attaching  to the  shares  which he has acquired in excess  of  the  limit subject  to declaration. Moreover, all decisions adopted  in the  period between the acquisition of a block of shares and the  moment  of  disclosure of correct  information  may  be annulled  in  court in the event that the issuer's  managing bodies  have been changed or property or non-property rights of shareholders have been violated by the decisions. Article 10. Tender Offer 1.  Persons who intend to acquire a block of securities of the  issuer  may  do so by means of a tender  offer.  Tender offer  means  the procedure for stating that  a  natural  or legal  person is willing to acquire a part or all securities of  the issuer. Tender offers shall be executed through  the stock exchange. 2.  Tender offers to acquire the shares of the accountable issuer  may be mandatory and voluntary. If a person,  acting independently  or  in concert with other  persons,  acquires more  than  50  percent of votes at the general  meeting  of shareholders  of  the issuer who has issued securities  into public trading, he must submit a tender offer to buy up  the remaining  shares of the issuer at the price stated  in  the offer.  This  price shall be registered with the  Securities Commission and it must not be less than the weighted average of  prices  of the shares the offeror acquired over  a  year before exceeding the 50 percent limit. 3.  Tender  offers shall be registered and the  rules  for their  submission and execution shall be established by  the Securities Commission. Chapter IV INTERMEDIARIES OF PUBLIC TRADING IN SECURITIES Article 11. Prohibition to Engage in Intermediary Activity in Public Trading in Securities or in Consulting on Matters of Direct Investment without a Due Licence 1.  Only  enterprises which have a licence issued  by  the Securities Commission and commercial banks which  have  been issued  the licence by the Bank of Lithuania shall have  the right to engage in intermediary activities in public trading in  securities  or to consult third parties  on  matters  of direct  investment in securities. As used in  this  Law  the following activities performed for a fee shall be considered as  consulting on matters of direct investment in securities : 1)  consulting of other persons in assessing the value  of securities; 2)  advice  on  issues of investment in securities,  their purchase or selling; 3)   announcement  and  publishing  of  studies  providing specific   recommendations  on  matters  of  investment   in securities; 4)  management of investment portfolio of other natural or legal persons. 2.  The  licence for consulting third parties referred  to in par. 1 of this Article shall not be required: 1) for the State; 2) the Bank of Lithuania; 3)   governmental   services  and   agencies   established following the decision of the Government of the Republic  of Lithuania  for  the  purpose of  promotion  of  domestic  or foreign investments; 4)  mass  media  and  owners  and  employees  thereof  who announce  through the media financial and business news  for an  indefinite circle of persons and who do not use  in  the news  the  data about the investment portfolio of a specific person. 3.  One  person may be the owner (shareholder) or employee of  only one brokerage firm or of investment management  and consulting   firm.  If  a  person  becomes  the   owner   or shareholder of several enterprises of such type as a  result of  the  reorganisation or for some other reasons,  he  must immediately  inform  the Securities Commission  thereof  and take  measures to rectify the situation. Until the situation is  rectified,  such  person  may  not  participate  in  the management and activities of more than one enterprise. 4.  Commercial banks shall have the right to engage in the activities  specified in par. 1 hereof: set  up  specialised internal  structural divisions or establish brokerage  firms or   investment   management   and   consulting   firms   as subsidiaries   of   the  banks.  All  the  regulations   and requirements prescribed by this Law and other legal acts for other  intermediaries of public trading in securities  shall apply  to  the  operations  in  securities  carried  out  by commercial banks and to the supervision of said operations. Article 12 Brokerage Firms 1.  An  enterprise of any type determined by  the  Law  on Enterprises of the Republic of Lithuania which has obtained, in  the  manner  prescribed by Article 16  of  this  Law,  a licence  to engage in intermediary activities in the  sector of  public trading in securities may be a brokerage firm.  A brokerage firm may issue only registered shares. 2.   Brokerage   firms  may  engage   in   the   following activities: 1)  act as intermediaries in public trading in securities, being  members of one or several stock exchanges or  in  any other manner not prohibited by laws; 2)  buy  or sell securities in their own name or on behalf of  their clients and with their own or their clients' funds in compliance with the provisions set forth in Article 13 of this Law; 3)  provide  direct  consultations  to  investors  on  the issues  concerning  prices  of  securities,  investment   in securities as well as their buying or selling; 4)  manage their clients' investment portfolios and  funds allocated for operations in securities; 5) hold the securities of their clients in safekeeping; 6)  consult  the  issuers  on the matters  concerning  the issue of securities and on attracting investments, 7)  under an agreement with the issuer, arrange and  carry out the issue of its securities; 8)  conduct  the accounting of the securities  of  issuers and investors; 9)  in  accordance with the regulations  approved  by  the Securities  Commission, loan securities to  the  clients  as well as their own funds for the acquisition of securities. 3.  Brokerage firms shall be prohibited from  engaging  in other activities not specified in this Article. 4.  Brokerage  firms  shall have the  right  to  establish subsidiaries   only  for  carrying  out  or  servicing   the activities  provided  for in items 3 through  8  of  par.  2 hereof.   Brokerage   firms   shall   be   prohibited   from establishing  subsidiaries for carrying out  activities  not specified in this part. Article 13. Duties of the Brokerage Firms 1.  Brokerage  firms must conduct separate  accounting  of their  own securities and the securities and cash  funds  of their clients. 2.   All  contracts  between  brokerage  firms  and  their clients  must be executed in writing in compliance with  the rules approved by the Securities Commission. 3.  If a brokerage firm cannot execute all orders of their clients, it must first of all execute orders to sell at  the lowest  price  and  orders to buy at the highest  price.  If several  clients  offer the same price,  priority  shall  be given  to  the orders which have been sent first unless  the trading  rules of the stock exchange to which the  order  is sent provide otherwise. 4.  A  brokerage firm may carry out security  transactions on its own account only after the execution of the orders of all  its  clients to perform this operation or if it  offers better terms than the client : higher price when there is an order to buy , or lower price when there is an order to sell them. 5.  A  brokerage  firm  shall be  prohibited  from  giving knowingly misleading recommendations and information to  its clients. 6.  Brokerage firms must comply with the capital  adequacy requirements approved by the Securities Commission  as  well as  keep  accounting and other documents  according  to  the rules  approved by the Commission, present to their  clients documents certifying securities transactions, statements  of accounts, and reports on their financial position, keep  the securities  of their clients, prepare annual and  periodical reports on their activities and financial position. 7.  In  buying  or selling securities, consulting  on  the issues  of  their trading as well as in providing  portfolio management  services, a brokerage firm shall be  represented by a broker who has passed qualifications exams organised by the   Securities   Commission  or   who   has   some   other qualifications certificate recognised by the Commission. The Securities Commission may determine other operations for the performance  whereof  it is necessary  to  have  a  document certifying professional qualifications. 8.  A brokerage firm must keep confidential information of its  clients  secret. The firm must approve regulations  for keeping  confidential information secret, which shall  apply to  its  brokers,  members  of  managing  bodies  and  other employees. Article 14. Investment Management and Consulting Firms 1.  An  enterprise of any type specified  in  the  Law  on Enterprises  of  the Republic of Lithuania  which  has  been issued,  in  accordance  with the procedure  established  in Article  16 of this Law, a licence to consult third  parties on  investment  matters may be an investment management  and consulting firm. Investment management and consulting  firms may issue only registered shares. 2.  Investment  management and  consulting  firms  may  be engaged in activities specified in items 1 through 4 of par. 1 of Article 11 of this Law. 3.  Investment  management and consulting firms  shall  be prohibited  from  participating in the activities  of  other enterprises,  having a share in their capital, investing  in securities. Article 15. Duties of Investment Management and Consulting Firms 1.   Management   contracts  under  which  an   investment management  and consulting firm is authorised to  manage  an investment   portfolio  must  be  executed  in  writing   in compliance  with the rules set by the Securities Commission. A  copy  of such contract must be presented to the brokerage firm  in  which securities referred to in the  contract  are deposited.  If  a  brokerage firm  accepts  orders  from  an investment management and consulting firm which are  not  in compliance  with management contract, both  firms  shall  be jointly liable for the consequences. 2.  Investment management and consulting firms  must  keep the  accounting and other documents in compliance  with  the rules  approved  by  the Securities Commission,  present  to their   clients   documents  certifying  transactions   with securities,  statements  of  accounts,  reports   on   their financial  position, prepare annual and periodic reports  on their activities and financial position. 3.   In  giving  professional  consultations  or  managing portfolios  of  their clients, an investment management  and consulting  firm shall be represented by a  broker  who  has passed  qualifications  exams organised  by  the  Securities Commission  or who has some other qualifications certificate recognised by the Commission. 4.  Investment management and consulting firms  must  keep confidential information of their clients secret.  The  same requirement  shall  apply to brokers,  members  of  managing bodies  and  other  employees of investment  management  and consulting firms. Article 16. Licencing of Intermediaries of Public Trading in Securities 1.   An  enterprise  may  start  the  activities  of   the brokerage  firm or investment and consulting firm only  upon obtaining  a  licence  issued by the Securities  Commission. Brokerage  firms  and investment management  and  consulting firms  may reorganise themselves only with the prior consent of  the  Securities  Commission. The  Securities  Commission shall  have  the right to refuse giving its consent  to  the reorganisation of the firm if: 1)  after the reorganisation, the firm would not meet  the capital adequacy requirements prescribed by this Law and the rules approved by the Securities Commission; 2)  reorganisation threatens the security of the  clients' money and securities entrusted to the firm. 2.  The  decision of the Securities Commission  to  refuse giving its consent to the reorganisation of a brokerage firm or  an  investment  management and consulting  firm  may  be appealed to court. 3.  The  applicant for the licence of a brokerage firm  or an investment management and consulting firm shall file with the  Securities  Commission  an application  containing  the following information: 1)  the name of the firm and the address of its registered office; 2)   full  names  of  the  owners  (shareholders),   their addresses,  share  of  capital and  votes,  and  information concerning their participation in the activities and capital of other enterprises; 3)  the  activities  for  which  they  wish  to  obtain  a licence; 4)  full names of persons responsible for the organisation and  management  of activities referred to in  the  licence, their  addresses,  professional  qualifications,  employment history over the last five years; 5)  the  amount of its own and borrowed capital  which  is planned  to  be used for the organisation of the  activities referred  to  in  the licence, as well  as  the  sources  of borrowing; 6)  data  on  the  previous activities  of  the  firm  and reasons for which these activities have been terminated; 7)  the  list  of persons who have the right  to  conclude transactions  with securities on behalf of  the  firm  under Article 17 of this Law; 8)  information on the unserved sentence of  all  persons, referred  to in the application, for crimes against property , business conduct and finances. 4.  A  business plan describing how the firm is  going  to organise  and carry out its activities as well as  revealing other  data  on the firm as prescribed by the rules  of  the Securities  Commission must be attached to  application  for obtaining  the licence of a brokerage firm or an  investment management and consulting firm. 5.  The  Securities  Commission shall have  the  right  to establish requirements for the minimum amount of own capital and the maximum amount of borrowings provided for by item  5 of   par.   3   hereof,  as  well  as   for   premises   and telecommunications equipment. 6.  The  Securities Commission may issue special  licences for brokerage firms, entitling them to carry out only a part of functions specified in Article 12 of this Law, as well as refuse granting them the right to accept money for acquiring securities,  to  open cash accounts for the clients  and  to trade  on their own account. Special licences may be  issued if  a  firm  does  not qualify for one or several  types  of activities  specified in Article 12 of this Law  or  at  the request of the firm itself. 7.  The  Securities  Commission may refuse  to  issue  the licence if: 1)  the  application  does not meet the  requirements  set forth  in  par.  3  hereof or the data provided  in  it  are incomplete or not true; 2)  own funds available to the applicant are less than the minimum  amount established by the Securities Commission  or borrowed  funds  exceed  the  maximum  prescribed   by   the Commission; 3)  owners of the applicant or persons who directly run it have  a  bad  reputation  (there is  evidence  of  cases  of dishonesty   or  violations  of  financial  discipline,   or penalties have been imposed for the abuse of their  official position, or administrative penalties have been imposed  for the violation of legal acts regulating securities market, or they have been penalised for fraudulent bankruptcy); 4)  at  least  one  of  the owners (shareholders)  of  the applicant is an employee of the stock exchange; 5)  at  least one of the owners (shareholders) or managing body   members  of  the  applicant,  or  the  head  of   its administration  or its chief financier have not  served  out the  sentence for crimes against property, business  conduct or finances; 6)   the   applicant,  at  least  of  one  of  its  owners (shareholders), a member of its managing body, the  head  of the  administration,  a broker, or the chief  financier  has committed  gross  violation  of  the  Ethics  Code  of   the Intermediaries of Public Trading in Securities. 8.   Managers  of  a  firm  must  notify  in  advance  the Securities  Commission about the changes in the  composition of  the  owners  (shareholders) of  the  brokerage  firm  or investment management and consulting firm. 9.  The  Securities Commission must inform  the  applicant about  the consent or refusal to issue the licence within  3 months  from  the  filing  of all documents  and  data.  The Securities  Commission shall have the right to request  that the  applicant  present additional data or explanations.  In this   case   the  time  limit  for  the  consideration   of application shall be calculated from the date the last  data or  documents have been filed. Refusal to issue the  licence must be justified in writing and may be appealed in court. 10.  Commercial banks shall acquire the right to carry out operations  in  securities in accordance  with  the  licence issued by the Bank of Lithuania. When issuing the licence to a  commercial  bank,  the Bank of Lithuania  shall  restrict operations  in  securities if the commercial bank  fails  to present  the  Securities Commission's conclusion  concerning the  preparedness of the commercial bank to engage  in  such activities. Article 17. Brokers 1.  A  natural  person who is licenced by  the  Securities Commission  may  be a broker. The Securities Commission  may issue  a  general licence entitling a person to perform  all brokerage operations or a special licence entitling  him  to perform one or several specified brokerage operations. 2.  A  person who applies for a broker's licence must pass the  examinations organised by the Securities Commission  or present  to  the  Commission  a  qualifications  certificate recognised by it. The Securities Commission shall  have  the right  to  set  education or professional  requirements  for brokers. 3.  The  Securities  Commission shall have  the  right  to conduct from time to time but no more frequently than once a year  the  brokers' qualifications re-evaluation. A broker's qualifications  may  be re-evaluated on  the  basis  of  the clients'  justified complaints, as well as reports, findings and other documents of institutions empowered by this Law to check the activities of the intermediaries of public trading in   securities,  which  evidence  the  broker's  inadequate qualifications.   According  to   the   qualifications   re- evaluation   results  the  number  of   functions   to   the performance  whereof the broker is entitled may  be  reduced and  if it is established that the broker has entirely  lost his qualifications, his licence shall be revoked. Article 18. Suspension and Revocation of the Licence 1.  The  Securities  Commission shall have  the  right  to revoke  the  licence issued to a brokerage firm,  investment management and consulting firm or a broker if the holder  of the licence: 1) applies in writing for the revocation of its licence; 2)  fails to commence licenced activities within 12 months or stops such activities for more than 12 months; 3)   has   obtained   the  licence  by  presenting   false information or by other illegal means; 4)  no  longer meets the requirements on the basis whereof the licence has been issued; 5)  does  not meet capital adequacy requirements,  and  is unable  to  fulfil  its  obligations to  the  creditors  and particularly if this poses a threat to the security  of  the property entrusted to it/him; 6)  grossly violates the Ethics Code of the Intermediaries of the Public Trading in Securities; 7)  has  concealed  information about conviction  for  the acts referred to in item 5 of par. 7 of Article 16; 8)  does  not  comply  with this Law  and  the  rules  and decisions approved by the Securities Commission. 2.  The  revocation of the licence shall become  effective from  the  moment  such decision is passed, irrespective  of whether or not it is disputable. 3.  The  Securities Commission may suspend the licence  if the  brokerage firm or investment management and  consulting firm, its broker or any other employee violates this Law  or other  legal  acts  regulating trading  in  securities.  The licence  shall  be  suspended for no longer  than  3  months during  which the Securities Commission shall decide whether to  renew  or revoke the licence. The accounts of such  firm may be frozen during the suspension of the licence. 4.  Before  passing a decision to revoke  or  suspend  the licence, the Securities Commission must inform the  firm  or its  broker  regarding whom such decision may be passed  and provide them with an opportunity to give explanations. 5.  Upon  suspension or revocation of licence, the  broker shall   loose   the  right  to  continue  his   professional activities.  The  suspension or revocation of  the  broker's licence  shall  cause the suspension or  revocation  of  the licence  of the brokerage firm or investment management  and consulting firm wherein said broker is employed only if  the firm  no  longer qualifies for the licence that it has  been issued. 6.  The  Securities  Commission shall have  the  right  to appoint  the  Administrator for the period of suspension  of the  licence of the brokerage firm or investment  management and  consulting  firm,  for the supervision  of  the  firm's activities.  After  the  appointment of  the  Administrator, managers  and  brokers of the firm must obtain his  approval for  all  the  decisions relative to the activities  of  the firm. Other rights and duties of the Administrator shall  be established by the Securities Commission. 7.  Upon the revocation of the licence, the brokerage firm or  investment  management  and  consulting  firm  shall  be liquidated  or  reorganised  in  accordance  with  the  laws regulating the liquidation or reorganisation of the relevant type of enterprises and the rules approved by the Securities Commission concerning the management of securities and money accounts in the event of the revocation of the licence. The  Securities  Commission shall notify  the  appropriate Registrar responsible for the maintenance of the register of enterprises  about the revocation of the licence  and  shall announce  this  information in "Valstybës þinios"  (Official Gazette). 8.  The  reasons  specified in  par.  1  hereof  shall  be grounds  for  the  Bank  of Lithuania to  apply  enforcement measures to commercial banks. The enforcement measures shall be applied on the initiative of the Bank of Lithuania or the Securities  Commission.  The  enforcement  measures  applied because of the reasons stated in par. 1 hereof may be lifted only  with  the  consent of the Securities Commission.  When applying  enforcement measures the Bank  of  Lithuania  must follow the procedures provided for in par. 4 hereof. Article 19. Association of the Intermediaries of Public Trading in Securities 1.   Brokerage   firms  and  investment   management   and consulting firms may form associations of the intermediaries of public trading in securities. 2.  The  main  objectives  of the  Association,  as  self- regulating institution, must be as follows: 1)  to  express  the  attitude of  the  intermediaries  of public trading in securities belonging to the association to the problems of the functioning of securities market; 2)  to  prepare  the Ethics Code of the intermediaries  of public  trading  in securities belonging to the  association and to supervise compliance with the Code; 3)  to  apply  sanctions  provided  for  in  the  Statutes against association members for the non-compliance with  the rules  provided for in the Ethics Code of the Intermediaries of the Public Trading in Securities. 3.  The  procedure  and conditions of  membership  in  the Association  shall  be defined in its Statutes.  Association Statutes and any amendments thereto must be agreed with  the Securities Commission prior to their registration. 4.  Alongside  with the Statutes, the Association  of  the Intermediaries of Public Trading in Securities must  prepare and  submit  to the Securities Commission for  approval  the Ethics  Code of its members. An association which  is  being newly  formed may refrain from preparing its Ethics Code  if it passes a decision to recognise and comply with the Ethics Code of members of an already functioning association. 5.   The  Association  of  the  Intermediaries  of  Public Trading  in  Securities  may  impose  money  penalties   for violations of the Ethics Code of the Intermediaries  of  the Public  Trading  in  Securities  or  the  Statutes  of   the Association.  The  Association must  notify  the  Securities Commission of such violations. Chapter V STOCK EXCHANGE Article 20. The Concept and Purpose of the Stock Exchange 1.  Only the stock exchange which has the permit issued by the  Securities  Commission may  engage  in  stock  exchange activities. 2.  Stock  exchange is a non-profit specialised enterprise registered  in the Republic of Lithuania, which  is  engaged only  in the activities of a stock exchange, the purpose  of which is : 1) to concentrate the demand and supply of securities; 2)  to  organise  trading  in securities,  their  listing, quotation, safe and efficient transactions and settlements; 3)  to  promote fair trading in securities and to preclude manipulation of prices and other unfair actions; 4)  to spread unified information allowing to appraise the securities  quoted  on  the stock exchange  and  to  publish official bulletin that provides information on prices on the stock  exchange  and  on the issuers  whose  securities  are listed on the stock exchange; 5)  to  conduct  generalised studies of securities  market and to make the results available to the public. 3.  The  authorised  capital  of  the  Exchange  shall  be divided  into equal parts represented by shares not entitled to  dividend.  The Exchange is a legal entity  and  has  its name,  seal,  and a bank account. The name of  the  Exchange must  contain  the words "vertybiniø popieriø birþa"  (stock exchange)  (or  the  acronym VPB). The  name  of  the  stock exchange  must  meet the requirements of the regulations  of the names of enterprises, offices and organisations approved by  the  Government. Disputes concerning  the  name  of  the Exchange shall be settled in court. 4.  The Exchange is a limited liability firm. It shall  be liable  for  its  obligations  to  the  extent  of  all  its property.  Shareholders shall be liable for its  obligations only  to  the  extent of the amount that they must  pay  for their contributions to the authorised capital. Contributions to the authorised capital shall be represented by registered shares  not  yielding dividend, which entitle to participate in  the  trading and management of the stock  exchange.  One share  in  the  stock exchange shall carry one  vote.  Stock exchange  shares  may be acquired only by  brokerage  firms, commercial  banks  which have been licenced  in  the  manner prescribed   by   this  Law  to  carry  out  operations   in securities,  the  Ministry of Finance  of  the  Republic  of Lithuania and the Bank of Lithuania. Following the  decision of  the  regular meeting of shareholders, the Exchange  must issue  such  number of new shares as there are  applications for  the  acquisition thereof filed by brokerage  firms  and banks   possessing  a  licence  issued  by  the   Securities Commission prior to the day of the meeting. 5.  A  shareholder of the Stock Exchange, upon terminating his  activities  as  an intermediary in  public  trading  in securities, must no later than within 30 days sell the share of the Stock Exchange held by him to another person entitled to  be  a shareholder of the Stock Exchange. If he fails  to sell  the share within the specified period, the shareholder must  address  the  Stock Exchange which  shall  mediate  in selling the share held by him at the market price ruling  at the moment. In the event of failure to sell the share within a  year's period, the Stock Exchange shall repurchase it  at its   nominal  value.  The  shares  of  the  Stock  Exchange repurchased by it may account for no more than  10%  of  its authorised  capital. The shares which exceed the limit  must be cancelled in accordance with the procedure established by law and the authorised capital must be reduced. 6.  One shareholder, with the exception of the Ministry of Finance  of  the  Republic  of Lithuania  and  the  Bank  of Lithuania,  may  hold no more than one share  of  the  Stock Exchange. 7.  The  Stock  Exchange shall have no  right  to  acquire securities in its own name except in cases when: 1)  the  Stock  Exchange repurchases its  own  shares  for reasons provided in par. 5 hereof; 2)  the  issuer  whose shares are acquired  by  the  Stock Exchange  performs the functions of trading,  settlement  or other  functions directly connected with the purpose of  the Stock  Exchange, which are provided for in the trading rules of  the Stock Exchange, and the issuer's securities are  not listed on the Exchange; 3)  the  Stock Exchange invests its temporarily free  cash funds  in  the  securities issued on behalf  of  the  state, purchasing  a certain amount thereof at primary  trading  in securities  and keeping the securities until their  maturity date. Article 21. Establishment and Registration of the Stock Exchange 1.  Stock Exchanges may be founded only on the decision of the Government. 2.  The  founders of a Stock Exchange may  be  natural  or legal persons who meet the requirements of par. 4 of Article 20 of this Law and who have concluded the founding agreement in a notarised form. 3.  The Stock Exchange may not commence and carry out  its activities  if it has no permit of the Securities Commission and   has  not  been  registered  with  the  Commission   in accordance   with  this  Law  and  subordinate   legislation regulating  the procedure of registering Stock Exchanges.  A Stock  Exchange may be reorganised or liquidated  only  with the prior consent of the Securities Commission. 4.  Willing  to obtain a permit for the foundation  of  an Exchange,  its  founders must file the  following  documents with the Securities Commission: 1)  an  application  stating the purpose  of  founding  an Exchange,   its   name,   registered   office,   information concerning  the  founders and other persons responsible  for the founding of the Exchange and its activities; 2) the founding agreement; 3)  economic,  financial and technical  substantiation  of the Exchange activities (business plan); 4) the Statute of the Exchange; 5) rules of trading on the Exchange; 6)  the  commitment of no less than 10 brokerage firms  to operate on the Stock Exchange which is being founded. 5.  The  Statute  of the Stock Exchange must  contain  the following data: 1)  the name of the Stock Exchange and the address of  the registered office; 2)   the  authorised  capital  of  the  Exchange  and  its structure; 3) the procedure for changing the rules of trading; 4) the structure of the Exchange management; 5)  the competence of the meeting of the Exchange members, the procedure for calling the meeting and adopting decisions as well as conditions of invalidity thereof; 6)  the  formation  of the Exchange Board,  principles  of representation and definition of the functions of the Board; 7)   revenue   of  the  Exchange  and  the  procedure   of distribution thereof; 8)  the term of operation of the Exchange, conditions  and procedure of its liquidation. 6.  The  rules  of  trading  on the  Stock  Exchange  must regulate: 1) the principles of listing of securities; 2)  the methods and procedure of settling disputes arising because of the Exchange transactions; 3) types of transactions concluded on the Exchange; 4)   the  procedure  of  trading  in  securities  on   the Exchange; 5)  procedure  and conditions of including  securities  in the Official List and removing from it; 6)  the  days and hours of organising trading sessions  of the Exchange; 7)  the rights and duties of persons participating in  the trading on the Exchange; 8)  the procedure for determining and announcing the price of securities; 9) information system of the Exchange; 10)  the  system  of Exchange transactions accounting  and settlements. 7.   Upon  receiving  all  the  required  documents,   the Securities Commission must within 3 months issue a permit to establish   an  Exchange  or  present  to  the  founders   a substantiated written refusal. The Securities Commission may request  that  the  founders of the Stock  Exchange  present additional information or explain the data already filed. In this  case the counting of the 3-month period shall commence anew from the filing of appropriate data or explanations. 8.  The  Securities  Commission shall refuse  to  issue  a permit to establish an Exchange if : 1)  the  Statute or founding agreement of the Exchange  or other  submitted  documents are not in compliance  with  the laws  of  the  Republic  of  Lithuania,  decisions  of   the Government  of  the Republic of Lithuania or the  Securities Commission; 2) the submitted documents contain incorrect information; 3)  the  presented economic substantiation of the Exchange activities is insufficient for it to adequately perform  its functions; 4)  the rules of trading on the Exchange do not correspond to the requirements of the Securities Commission. 9.  When  issuing  a  permit for the establishment  of  an Exchange,  the Securities Commission shall at the same  time register  the  Statute  of  the  Exchange.  Amendments   and supplements  to  the Statute and rules  of  trading  on  the Exchange shall come into effect from the day of registration thereof with the Securities Commission. 10.  The  Board  of  the  Exchange shall  lodge  with  the Commission an application for registration of the Exchange: 1) after all subscribed for shares have been paid up; 2)  after  the statutory meeting of shareholders has  been held; 3)  when the Board may dispose of the funds obtained  from the payment for shares. 11.  The following documents shall be filed together  with the application for the registration of the Exchange: 1)  the  statutory  report  and  the  conclusions  of  the auditing  committee of the Exchange concerning  the  report; and 2)  documents regarding the premises (buildings) rented or possessed by the right of ownership by the Exchange. 12. The Exchange shall be refused registration if: 1)  the  procedure  for  founding  an  Exchange  has  been violated; 2)   the   statutory  report  of  the  Exchange   contains incomplete or incorrect information; 3)  the valuation of non-monetary (property) contributions does   not   correspond   to  the  actual   value   of   the contributions; 4)   documents  specified  in  this  Law  have  not   been presented. 13.  Upon eliminating the reasons set out in par. 12 which precluded the registration of the Exchange, the founders  of the  Exchange or the Board shall have the right  to  address the   Securities   Commission  one  more   time   requesting registration.  Disputes concerning the registration  of  the Exchange shall be disposed of by court. 14.  The Stock Exchange shall acquire the rights of  legal person from the day of its registration. Article 22. Members of the Stock Exchange 1.  The shareholders of the Stock Exchange shall be called its members. Only persons specified in par. 4 of Article  20 of  this Law may be members of the Stock Exchange, with  the exception of cases provided for in par. 3 of Article 41. 2.  Members of the Stock Exchange shall have the following rights: 1)  to  participate in the management of the Exchange  and to   obtain   information  concerning  the  activities   and financial position thereof; 2)  to take part in the trading on the Exchange upon being issued   the   licence  of  the  Securities  Commission   in accordance with the procedure established by this …