📄 Įstatymo tekstas
The shareholder of the stock exchange, upon terminating his activities
as an intermediary in public turnover of 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
official translation
REPUBLIC OF LITHUANIA
LAW ON PUBLIC TRADING IN SECURITIES
January 16 1996 No. I-1169
(As amended by 11 July 1996)
Vilnius
1 CHAPTER
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 offering 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 connected with 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 manager (the head) 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 on its behalf or issues same;
stock 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 company means any enterprise engaged in the business of mediation in public trading in securities;
investment management and consulting enterprise 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 on its behalf acquired securities by the right of ownership or who holds securities;
controlled subject means an enterprise or organisation in which the natural or legal person being a shareholder (partner) personally has more than 1/3 of all votes or, according to the agreement with other shareholders ( 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 offering 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.
head 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 shares means 1/10 or a greater portion of the issuer's securities of the same class;
portfolio means the list of holdings in securities owned by a 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 companies, investment management and consulting companies 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 companies, investment management and consulting companies, 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 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 comply with the laws and other legal acts regulating the issue and circulation of these securities.
2 CHAPTER
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 stock company which is being founded or which is already operating, or an enterprise of any other type which is being reorganised into a stock 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 circulation.
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 connected with the issuer, as well as persons who are the issuer’s 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 principles of accounting.
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 APRs. 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 :
a) annual prospectuses -statements;
b) regular reports;
c) 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 principles of accounting.
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 stock 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 Stock 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 stock 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 essential event the issuer must compile a list of persons which alongside with the heads of the issuer shall have the right to get to know such information prior to its public disclosure. It shall be deemed that the heads of the issuer always know information concerning stock 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 stock events not subject to disclosure shall be held liable under laws.
Article 7. Primary Public Offering
1. Primary public offering 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 offering :
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 offering the data provided in the prospectus changes or a stock 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 offering 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 Offering
1. Secondary public offering shall be carried out only through intermediaries of public trading in securities.
2. Secondary public offering must be carried out on the stock exchange if:
1) the authorised capital of the issuer whose securities are listed is 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 secondary offering purchase and (or) sale (including exchange) transactions regarding 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 residents' pension insurance;
4) commercial banks;
5) other legal persons while purchasing or selling a block of shares.
5. The rules of the secondary public offering 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.
3 CHAPTER
ACQUISITION OF A BLOCK OF SHARES
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 direction.
2. Persons to whom the information disclosure requirements set out in paragraph 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 shares of the issuer.
3. The procedure for informing the public about the acquisition of the block of shares shall be decided on by the Securities Commission.
4 As used in this law, such persons shall be considered as acting in common 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 heads 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 common 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. Official Offer
1. Persons who intend to acquire a block of shares of the issuer may do so by means of an official offer. Official offer means the procedure for stating that a natural or legal person is willing to acquire a part or all securities of the issuer. Official offers shall be executed through the stock exchange.
2. Official offers to acquire the shares of the accountable issuer may be mandatory and voluntary. If a person, acting independently or jointly with other persons, acquires more than 50 percent of votes at the general meeting of shareholders of the issuer who has issued securities into open market, he must submit an official 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. Official offers shall be registered and the rules for their submission and execution shall be established by the Securities Commission.
4 CHAPTER
INTERMEDIARIES OF PUBLIC TRADING IN SECURITIES
Article 11. Prohibition to Engage in Mediation Activities in Public Trading in Securities or in Consulting on Issues 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 mediation activities in public trading in securities or to consult third parties on issues of direct investment. As used in this law the following activities performed for a fee shall be considered as consulting on issues of direct investment :
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 issues 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 company or of investment management and consulting company. 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 subsidiaries of brokerage companies or investment management and consulting companies. 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 Companies
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 mediation activities in the area of public trading in securities may be a brokerage company. A brokerage company may issue only registered shares.
2. Brokerage companies 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) keep in custody the securities of their clients,
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 companies shall be prohibited from engaging in other activities not specified in this Article .
4. Brokerage companies 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 companies shall be prohibited from establishing subsidiaries for carrying out activities not specified in this part.
Article 13. Duties of the Brokerage Companies
1. Brokerage companies must conduct separate accounting of their own securities and the securities and cash funds of their clients.
2. All contracts between brokerage companies and their clients must be executed in writing in compliance with the rules approved by the Securities Commission.
3. If a brokerage company 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 company 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 company shall be prohibited from giving knowingly misleading recommendations and information to its clients.
6. Brokerage companies 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 periodic 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 company 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 company must keep confidential information of its clients secret. The company 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 Companies
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 issues may be an investment management and consulting company. Investment management and consulting companies may issue only registered shares.
2. Investment management and consulting companies 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 companies 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 Companies
1. Management contracts under which an investment management and consulting company 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 company in which securities referred to in the contract are deposited. If a brokerage company accepts orders from an investment management and consulting company which are not in compliance with management contract, both companies shall be jointly liable for the consequences.
2. Investment management and consulting companies 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 company 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 companies must keep confidential information of their clients secret. The same requirement shall apply to the brokers, members of managing bodies and other employees of investment management and consulting companies.
Article 16. Licensing of Intermediaries of Public Trading in Securities
1. An enterprise may start the activities of the brokerage company or investment and consulting company only upon obtaining a licence issued by the Securities Commission. Brokerage companies and investment management and consulting companies 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 company if:
a) after the reorganisation, the company would not meet the capital adequacy requirements prescribed by this Law and the rules approved by the Securities Commission;
b) reorganisation threatens the security of the clients' money and securities entrusted to the company.
2. The decision of the Securities Commission to refuse giving its consent to the reorganisation of a brokerage company or an investment management and consulting company may be appealed to court.
3. The applicant for the licence of a brokerage company or an investment management and consulting company shall file with the Securities Commission an application which must state:
1) the name of the company 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 company 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 company under Article 18 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 company is going to organise and carry out its activities as well as revealing other data on the company as prescribed by the rules of the Securities Commission must be attached to application for obtaining the licence of a brokerage company or an investment management and consulting company.
5. The Securities Commission shall have the right to establish requirements for the minimum amount of the 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 companies, 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 company does not qualify for one or several types of activities specified in Article 12 of this Law or at the request of the company 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 company must notify in advance the Securities Commission about the changes in the composition of the owners (shareholders) of the brokerage company or investment management and consulting company.
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 licensed 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 company, investment management and consulting company or a broker if the holder of the licence:
1) applies in writing for the revocation of its licence;
2) fails to commence licensed 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 company or investment management and consulting company, its broker or any other employee violates this Law or other legal acts regulating securities circulation. 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 company 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 company 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 company or investment management and consulting company wherein said broker is employed only if the company 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 company or investment management and consulting company, for the supervision of the company's activities. After the appointment of the Administrator, mangers and brokers of the company must obtain his approval for all the decisions relative to the activities of the company. Other rights and duties of the Administrator shall be established by the Securities Commission.
7. Upon the revocation of the licence, the brokerage company or investment management and consulting company 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 companies and investment management and consulting companies 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 associations.
5. The Association of the Intermediaries of Public Trading in Securities may impose establish 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.
5 CHAPTER
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 special 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 company. 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 companies, commercial banks which have been licensed 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 companies 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 book 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 offering 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 pledge of no less than 10 brokerage companies 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) income 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 Law,
3) to make use of the services offered by the Exchange.
3. When realising his rights and performing his obligations on the Exchange, a member of the Stock Exchange must comply with this Law and the rules of the Exchange.
4. In the cases when a member of the Exchange violates the rules regulating the activities of the Exchange the Board of the Exchange shall have the right to suspend for up to 3 months his right to take part in the trading on the Exchange. The list of such violations shall be presented in the rules of trading on the Exchange. The decision concerning the suspension of the member’s participation in the trading on the Exchange shall be adopted by a 2/3 vote of all the members of the Exchange Board. If a member of the Exchange who has violated the rules regulating the activities of the Exchange participates in the management of the Exchange (either directly or through his representative), the Board of the Exchange may suspend his powers for the above-specified period or remove the member from the managing bodies. The sanctions provided for in this item may also be imposed on the brokerage companies operating on the Exchange which are not members of the Exchange.
5. If a member of the Exchange repeatedly commits violations specified in this Law, the Board of the Exchange may, on the decision of 1/2 of all the Board members, propose to the general meeting of the Exchange members (hereinafter referred to as the general meeting) to expel such a member from the Exchange, suspending until the meeting the member’s rights to participate in the trading on the Exchange. The Board of the Exchange shall suspend for the period the member’s (his representative’s) powers to take part in the management of the Exchange.
6. A natural or legal person who is expelled from the Exchange shall not be returned his contribution into the authorised capital of the Exchange, and the share owned by him shall be either sold to another intermediary of public trading in securities who aspires for membership of the Exchange, or cancelled. The losses inflicted on the Exchange by the expelled member shall be recovered in accordance with the procedure established by laws of the Republic of Lithuania.
7. The member of the Exchange may appeal to court against the decisions of the Board of the Exchange and the general meeting concerning the suspension or termination of membership. The filing of the appeal shall not reverse the decision of the Board of the Stock Exchange or the general meeting.
8. The Statute of the Exchange may also provide for other rights and obligations of the Exchange members provided that they are in compliance with the effective laws.
Article 23. Management of the Stock Exchange
1. The management of the Stock Exchange shall be organised in accordance with the Company Law of the Republic of Lithuania, taking into consideration the peculiarities provided for in this Law.
2. The functions of the Supervisory Board in the Stock Exchange shall be performed by the Council of the Stock Exchange. Its formation shall be mandatory. 1/3 of the members of the Council of the Stock Exchange must be persons proposed by the issuers, investors, their unions (associations, confederations, etc.) who have no property or labour relations with the inte …
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