What is Decree No. 194 / 2011 Coll.?

Decree No. 194 / 2011 Coll., on a more detailed regulation of certain rules in collective investment — Decree on a more detailed regulation of certain rules in collective investment.

When it became Decree No. 194 / 2011 Coll. effectiveness?

Decree No. 194 / 2011 Coll. became effective 15.07.2011.

Is Decree No. 194 / 2011 Coll. still valid?

Yes, Decree No. 194 / 2011 Coll. is still valid and effective.

How many times was it Decree No. 194 / 2011 Coll. amended?

Decree No. 194 / 2011 Coll. has 2 time versions of the text.

Decree No. 194 / 2011 Coll. - Decree on a more detailed regulation of...

194

DECLARATION

of 27 June 2011

on more detailed arrangements for certain rules in collective investment

Pursuant to Article 139 (2) of Act No. 189 / 2004 Coll., on Collective Investment, as amended by Act No. 188 / 2011 Coll., ("the Act '), the Czech National Bank provides for the implementation of § 9 (6), § 23a (2), § 26 (3), § 27 (8), § 28 (11), § 30a (4), § 35a (6), § 35b (5), § 49b (7), § 55 (5), § 74a (8), § 75 (3), § 82 (4), § 89, § 100d (2), § 100o (2):

ČÁST PRVNÍ

BASIC PROVISIONS

§ 1

Subject matter

This decree implements the relevant European Unionregulations (1) and provides for more detailed provisions

(a) the rules governing the prudent exercise of the activities of an investment company or investment fund pursuant to Articles 9 (6) and 74a (8) of the Act;

(b) the rules governing the management of the assets of the collective investment fund pursuant to Articles 26 (3), 27 (8), 28 (11), 49b (7), 55 (5) and 82 (4) of the Act,

(c) the rules of conduct of the investment company or investment fund pursuant to Article 75 (3) of the Act;

(d) disclosure of information pursuant to § 89, § 100d (2) and § 100o (2) of the Act; and

(e) special provisions for the managing standard fund and subordinate standard fund and their depositories and auditors pursuant to § 23a (2), § 30a (4), § 35a (6) and § 35b (5) of the Act.

§ 2

Definition of terms

For the purposes of this decree:

(a) compliance with the obligations of an investment company or an investment fund under the law, other legislation and internal rules of an investment firm or investment fund, including the Statute, and contractual relations with the funds and depositories,

(b) an information system of a functional unit ensuring the acquisition, processing, transmission, sharing and storage of information in whatever form;

(c) the organisational body of the person or group of persons responsible for carrying out a particular activity of an investment company or investment fund;

(d) the operational risk is the risk of loss due to deficiencies or failures in internal processes, human factors or systems of an investment firm or investment fund or to external factors, including the risk of legal and documentation and the risk arising from deficiencies or failures in trading, settlement and valuation procedures carried out on behalf of the collective investment fund;

(e) a repo of the transfer of securities for cash with a current commitment to take over those securities at a specified date for an amount equal to the original funds and interest; repo also means selling with a simultaneous buy-back agreement or providing a loan of securities secured by cash,

(f) reverse repo of the acquisition of securities for cash with a current commitment to transfer those securities at a specified date for an amount equal to the transferred funds and interest; reverse repo also means purchase with a simultaneous repurchase agreement or acceptance of a loan of securities secured by cash,

(g) repos or reverse repos;

(h) liquidity risk risk of loss of ability to meet financial obligations at the time when they become due or risk of loss of ability to finance assets, including the risk that the position in the assets of an investment company or collective investment fund cannot be sold, liquidated or concluded with limited costs within a reasonably short period of time, thereby jeopardising the ability of the collective investment fund to comply with the obligation to purchase units;

(i) the counterparty's risk of loss arising from the default of the counterparty of the transaction before the final settlement of the cash flows under the transaction;

(j) a self-governing investment fund which does not have a contract for the management of assets;

(k) market risk risk risk of loss resulting from changes in market prices, interest rates and exchange rates, including risk arising from fluctuations in the market value of positions in the assets of an investment firm or collective investment fund which is due to changes in market variables, in particular interest rates, exchange rates, share and commodity prices or creditworthiness of the issuer;

(l) a recognised standard of recommendations and standards issued by ESMA or the European Commission;

(m) own funds of the collective investment fund, which shall be determined as the sum of the fair value of the assets of the collective investment fund's investment activity and the value of the other assets of the collective investment fund established under the accounting legislation, minus the sum of the fair value of the liabilities of the collective investment fund's investment activity and the value of other liabilities established under the accounting legislation;

(n) a public special fund, a special fund which collects money from the public;

(o) a highly liquid asset of an asset whose conversion into cash takes no more than five working days and the price achieved corresponds to the fair value of the asset.

ČÁST DRUHÁ

RULES OF REVIEW PERFORMANCE

HLAVA I

SUBJECT MATTER OF RULE MANAGEMENT AND MANAGEMENT

§ 3

Principles and procedures for management

[K § 74a (2) (a) (1) of the Act]

(1) An investment company or a self-governing investment fund shall ensure that the requirements laid down for the management and control system and procedures of an investment company or a self-governing investment fund for their implementation and in the conduct of other activities are reflected in the organisational arrangements and other internal principles and procedures (hereinafter referred to as "internal rules") of an investment company or a self-governing investment fund and within a regulated consolidation unit. An investment company or self-governing investment fund shall establish a procedure for the adoption, modification, introduction and application of internal rules.

(2) The investment company or the self-governing investment fund shall choose and reflect the recognised standards chosen by the investment company or self-governing investment fund in order to fulfil the assumption of good governance. The investment firm or the self-governing investment fund shall regularly verify whether internal rules and standards which they have chosen remain up to date and proportionate to the extent, nature and complexity of their activities.

(3) An investment company or a self-governing investment fund will ensure that all internal rules, approval and decision-making processes and control activities can be re-reconstructed. The information storage system established and maintained by the investment firm or the self-governing investment fund shall also be used to ensure this requirement.

§ 4

Ensuring that certain activities are carried out by another person

[K § 74a (2) (a) (1) of the Act]

(1) Where an activity which is not covered by Section 78 of the Act and which would otherwise be carried out or could be carried out by an investment company or a self-governing investment fund is carried out by another person on a contractual basis (hereinafter referred to as "outsourcing '), the investment company or the self-governing investment fund shall not be deprived of liability for any of its outsourcing activities.

(2) An investment company or self-governing investment fund shall ensure that, in the context of the negotiation or use of outsourcing:

(a) the activities which are the subject of outsourcing are in accordance with the relevant legislation, the rules of the collective investment fund and internal rules and have not been limited to their control by the investment company or the autonomous investment fund, the fulfilment of the information obligations to the Czech National Bank, the exercise of supervision, including, where appropriate, the control of the facts subject to supervision by the outsourcing provider, and the auditing of the accounts and other verifications provided for by the legislation;

(b) the conditions for the proper and prudent exercise of the activities of the investment company or the self-governing investment fund are not jeopardised;

(c) the rights of the collective investment fund, investors or holders of securities issued by the collective investment fund are not jeopardised; and

(d) rules are laid down for the control of outsourcing activities, including, where appropriate, for the control of outsourcing with its provider.

§ 5

Organisation

[K § 74a (2) (a) (2) of the Law]

(1) An investment company or a self-governing investment fund provides for the work of the organisational services to enable effective communication and cooperation at all levels and to promote sound, efficient and prudent management and the pursuit of other activities.

(2) An investment company or a self-governing investment fund shall ensure that the organisational bodies are provided with the powers and responsibilities at all levels so that procedures for the identification and management of conflicts of interest can be properly followed (Sections 17 to 19).

(3) An investment company or self-governing investment fund carries out independently of its own business in the assets of a collective investment fund

(a) the valuation of the assets and liabilities of the collective investment fund and the determination of the actual value of the security issued by the collective investment fund;

(b) checking the compliance of the data with the actual situation and the procedure for the elimination of the identified irregularities (reclassification) of transactions agreed on the financial markets;

(c) risk management;

(d) the approval and control of compliance with risk management limits; and

(e) the creation of quantitative and qualitative information on the risks to the Board of Directors of an investment company or an autonomous investment fund (hereinafter referred to as the Board).

(4) An investment company or self-governing investment fund shall ensure the independence of the exercise of internal control and avoid conflicts of interest in the provision of all control mechanisms.

Board of Directors

§ 6

[K § 74a (2) (a) (2) of the Law]

The Board shall ensure:

(a) the establishment and evaluation of the management and control system and the continued maintenance of its functionality and efficiency;

(b) adequate information and communication in the performance of the activities of an investment company or an investment fund;

(c) establishing an overall strategy, including sufficiently specific assumptions, principles and objectives for its implementation;

(d) the functioning of the internal control system;

(e) laying down rules which formulate and enforce ethical principles and envisaged models of conduct and behaviour of persons by which an investment firm or an investment fund carries out its activities;

(f) setting out the principles of human resources management, including the principles for the selection, remuneration, evaluation and motivation of the persons by which the investment firm or self-governing investment fund carries out its activities;

(g) the identification of the knowledge and experience requirements of the persons by which the investment firm or the self-governing investment fund carries out its activities, the way in which to demonstrate the required knowledge and experience and the way in which to verify whether the knowledge and experience of such persons remain proportionate to the nature, complexity and scope of the activities they carry out.

§ 7

(1) The Board approves and regularly evaluates:

(a) overall strategy;

(b) organisational arrangements;

(c) risk management strategy;

(d) an information system development strategy;

(e) the principles of the internal control system, including the principles for avoiding potential conflicts of interest and the principles for compliance; and

(f) security principles including security principles for the information system.

(2) The Board approves

(a) investment objectives and how to invest a collective investment fund;

(b) a set of limits which the investment company, in particular in relation to the collective investment fund managed or the self-governing investment fund will use to limit risks, in which case it will always use for market, operational, concentration, liquidity and counterparties; and

(c) the internal audit status and subject matter, the staff and technical assurance of its performance and the strategic and periodic internal audit plan.

(3) The Board shall evaluate at least once a year the overall functionality and effectiveness of the management and control system and shall ensure that any measures are taken to remedy the deficiencies thus identified.

(4) The Board of Directors shall properly and in a timely manner evaluate the regular reports as well as the exceptional findings, including the findings presented to it by the auditors), the supervisory authorities or other sources. On the basis of these evaluations, the Board shall take appropriate measures, which shall be implemented without undue delay.

§ 8

Supervisory Board

[K § 74a (2) (a) (2) of the Law]

(1) The Supervisory Board of the Investment Company or the Self-Management Fund (hereinafter referred to as the Supervisory Board) shall supervise and evaluate at least once a year the management and control system is operational and effective. As part of the fulfilment of this obligation, the Supervisory Board shall also regularly discuss matters relating to the overall strategy of the investment firm or the self-governing investment fund or to the investment objectives and the way in which the collective investment fund is invested and the risk direction to which the investment company or collective investment fund is or could be exposed.

(2) The Supervisory Board shall participate in the strategy, planning and evaluation of internal audit and compliance activities.

(3) The Supervisory Board shall give its views in advance on the Board's proposal to delegate a natural or legal person to carry out internal audit or compliance activities and on their appeal. Where more than one natural person is responsible for carrying out internal audit or compliance activities, the Supervisory Board shall comment only on the proposal for delegation or removal of their Head of Staff.

§ 9

Internal communication system

[K § 74a (2) (a) (2) of the Law and § 74a (4) (h) of the Law]

(1) An investment company or self-governing investment fund shall ensure that the relevant organisational bodies have up-to-date, reliable and comprehensive information available for their decision-making and other specified activities.

(2) The Board of Directors is informed without undue delay

(a) any facts that could significantly adversely affect the financial situation of the investment firm or collective investment fund, including the effects of changes in the internal or external environment; and

(b) any exceeding of the limits threatening compliance with the accepted market risk, counterparty risk and other significant risks, including liquidity risk.

(3) The Board shall be informed at least once a year of:

(a) compliance, internal audit and risk management activities, indicating in particular whether appropriate corrective actions have been taken in the event of deficiencies;

(b) compliance with the rules on the investment method of the collective investment fund and concentration risk;

(c) the degree of market and operational risk, counterparty risk and the liquidity situation;

(d) the overall extent of the risks involved; and

(e) compliance with capital requirements (Sections 69 and 70 of the Act).

Control and security measures for the processing and recording of information

§ 10

[K § 74a (2) (a) (2) and § 74a (2) (c) (3) of the Law]

(1) Investment company or self-governing investment fund

(a) lay down the conditions for the access of persons with whom they carry out their activities, the information system and the data recorded therein, the scope of access rights and the process for determining them, including the manner in which they decide on the extent of access rights of individual persons and their changes;

(b) lay down the conditions under which data related to the transactions and services carried out will be stored in the information system and their lawful adjustments, the conditions for handling such data and ensuring that their original content and modifications are easily detected;

(c) ensure protection of the information system from damage and from access and interference by unauthorised persons;

(d) ensure the ability to reconstruct data in the event of damage to data or information system; and

e) ensure the disclosure of information and records to the Czech National Bank, including the advances referred to in point (d), so that it can easily reconstruct all key stages of the processing of each transaction in the management of the assets of the collective investment fund and determine their original content before repairs or changes.

(2) The investment company or self-governing investment fund shall:

(a) the rules on the use of communication equipment, at least by reserving certain telephone lines or other communication equipment, where appropriate, for activities related to executed transactions and services, including communication between an investment company or an autonomous investment fund and a depositary, by another person pursuant to § 78 of the Act, an outsourcing provider pursuant to § 4, and the recording of communications on such telephone lines or other communication equipment, where appropriate;

(b) the details of the alert referred to in (a), which shall be at least the date and time of communication, the person (3) of the consignor and the consignee, if available, and the content of the transmitted message; the investment firm or the self-governing investment fund shall ensure the possibility of obtaining complete statements of the records of communications on dedicated telephone lines or other communication facilities, as appropriate, and of the possibility of taking out of the recording equipment.

(3) An investment company or self-governing investment fund shall keep records pursuant to Articles 15 (1) and 16 (1) for at least five years from the time of execution of the transaction or order; the same applies to the person whose authorisation to operate the investment firm or investment fund has been withdrawn or ceased to exist, as well as to his successor in title. The investment firm or the self-governing investment fund shall keep records of the communication referred to in paragraph 2 and the documents and information necessary to monitor compliance with the limits laid down by law for at least five years.

§ 11

(1) An investment company or self-governing investment fund shall establish and maintain a system for the creation, control and transmission of information to the Czech National Bank in such a way as to provide information in a timely, reliable and comprehensive manner.

(2) An investment company or an autonomous investment fund shall establish and maintain internal control mechanisms to ensure the completeness and correctness of all calculations, data, statements and other information provided to the Czech National Bank on a regular basis or at its request.

(3) An investment company or a self-governing investment fund shall ensure that the process of creating and providing information to the Czech National Bank pursuant to paragraph 2 is redesigned.

§ 12

Rules on the handling of complaints and complaints by investors

[K § 74a (2) (a) (3) and § 74a (4) (f) of the Act]

Investment company or self-governing investment fund

(a) establish, implement and maintain effective and transparent procedures for the proper, free and rapid handling of complaints and complaints by holders of collective investment securities;

(b) make available the rules on the handling of complaints and complaints to owners of securities issued by the collective investment fund free of charge in a way that allows remote access; and

(c) keep records of complaints received and complaints made by securities holders issued by the collective investment fund and measures taken on their basis.

§ 13

Personal transactions

[K § 74a (2) (a) (3) and § 74a (4) (c) of the Act]

(1) For the protection of internal information under Section 124 of the Capital Market Act and the prevention of conflicts of interest, in particular between persons referred to in Section 74a (1) (b) of the Act, an investment company or an autonomous investment fund

(a) ascertains persons with a special relationship to an investment company or investment fund under Section 74a (5) of the Act and other persons under Section 74a (4) (c) of the Act which:

1. carry out activities which may give rise to conflicts of interest;

2. obtain or may obtain inside information; or

3. have access to other confidential information on the collective investment fund or its business;

(b) take measures to prevent the person referred to in point (a) from entering into a personal transaction pursuant to Article 74a (4) (c) of the Act if, in the

1. be able to use inside or other confidential information or to make it unauthorised to disclose it; or

2. there may be a breach of another obligation of an investment company or an autonomous investment fund provided for by law;

(c) ensure that the person referred to in point (a) does not order or invite others to trade outside the scope of his or her duties if:

1. has not itself been entitled to enter into a personal transaction under subparagraph (b); or

2. information on the outstanding business of a collective investment fund or other customer may have been used in this transaction;

(d) take measures to prevent any person with a special relationship to an investment company or investment fund under Section 74a (5) of the Act from providing information or views to another person, in addition to the normal performance of his / her duties, if he / she knows or should normally know that he / she may:

1. use the information provided to close the personal trade referred to in (b) or (c) (1) or (2); or

2. to direct or invite another person to close the trade referred to in point 1;

(e) ensure that persons with a special relationship to an investment company or investment fund are informed in accordance with Section 74a (5) of the Restrictions Act in relation to their personal business;

(f) ensure that the persons referred to in (a) notify them of personal trade without undue delay; in the case of a person through whom an investment firm or a self-governing investment fund carries out its activities as outsourcing, require that such person to keep a record of personal transactions concluded by a person with a special relationship to an investment firm or investment fund and, upon request, to provide that record to an investment company or to a self-governing investment fund without undue delay; and

(g) keep a record of:

1. the notified or otherwise identified personal transactions referred to in point (f); and

2. any permits or prohibitions on personal transactions.

(2) The rules referred to in paragraph 1 shall not apply to personal transactions:

(a) carried out in the course of the management of the assets of a person with a special relationship with an investment company or an investment fund under Section 74a (5) of the Act, unless prior communication on trade has taken place between the portfolio manager and the person with a special relationship with an investment company or investment fund; or

(b) securities issued by a standard fund or other collective investment fund which invests in a comparable principle of risk distribution and is supervised in a Member State of the European Union, unless a person with a special relationship to an investment company under Section 74a (5) of the Act participates in the management of the assets of such a fund.

§ 14

Principles for the exercise of voting rights

[K § 74a (2) (a) (3) and § 74a (4) (g) of the Act]

(1) An investment company or a self-governing investment fund shall establish adequate and effective principles for the exercise of voting rights associated with the shares or similar securities held in a company or other legal person in such a way that such rights are exercised exclusively for the benefit of the collective investment fund concerned.

(2) The principles referred to in paragraph 1 include procedures for:

(a) monitoring important events in a company or other legal person;

(b) the exercise of voting rights in accordance with the investment objectives and the way in which the collective investment fund is invested; and

(c) the prevention or management of conflicts of interest arising from the exercise of voting rights.

(3) A summary description of the principles referred to in paragraph 1 shall be made available to the holders of securities issued by the collective investment fund in a manner that allows remote access and shall ensure that the details of the exercise of voting rights are accessible free of charge to the holders of securities issued by the collective investment fund at their request.

§ 15

Records on the issue, subscription and redemption of units issued by the mutual fund and the foreign standard fund

[K § 9 (2) (a) and § 74a (2) (a) (3) of the Act]

(1) The investment company shall record the details of the order immediately upon receipt of the order in the register pursuant to Article 9 (2) (a) of the Act.

(2) The record referred to in paragraph 1 shall contain, unless the nature of the matter so precludes, the following particulars:

(a) a trading firm, name and registered office of the holding fund or foreign standard fund;

(b) details of the person who gave the order for issue, subscription or redemption;

(c) details of the person who received the order for issue, subscription or redemption;

(d) the date and time of receipt of the order;

(e) payment terms and means of payment related to the order;

(f) the type of order;

(g) the date of execution of the order;

(h) the number of units issued, subscribed or purchased or securities issued by a foreign standard fund;

(i) the unit price at which the unit list or security issued by the foreign standard fund was issued, subscribed or repurchased;

(j) the total price at which units or securities issued by a foreign standard fund have been issued, subscribed or repurchased; and

(k) the value of the order in gross terms, including the premium linked to the issue or subscription of a unit sheet or security issued by a foreign standard fund, or the value of the order in net terms after deduction of the deduction of the deduction associated with the purchase of units or securities issued by a foreign standard fund.

§ 16

Records of transactions relating to the holdings of collective investment fund assets and foreign standard fund

[K § 9 (2) (b) and § 74a (2) (a) (3) of the Act]

(1) An investment company or self-governing investment fund shall immediately record the details of the order and the transaction executed in the register referred to in Article 9 (2) (b) of the Act.

(2) The record referred to in paragraph 1 shall contain, unless the nature of the matter so precludes, the following particulars:

(a) the trading firm, the name and registered office of the collective investment fund or the foreign standard fund;

(b) identification of the investment instrument or other assets which have been the subject of the order and the transaction executed;

(c) the quantity of investment vehicles or other assets;

(d) the type of order or transaction executed;

(e) the price of the order or transaction executed;

(f) in the case of an order, the date and time of its transmission and the details of the person to whom the order was transmitted;

(g) for the transaction executed, the date and time of the decision on its execution and the date and time of its execution;

(h) details of the person who transmitted the order or executed the transaction;

(i) in the case of an appeal, the grounds for its appeal; and

(j) for the transaction executed, details of the counterparty and the transfer point.

Citation	Decree No. 194 / 2011 Coll., on a more detailed regulation of certain rules in collective investment
Regulation Type	Order
Author	-
Collection	Code of Laws

Date of Promulgation	15.07.2011
Effective from	15.07.2011
Effective until	-
Status	Valid

Decree No. 194 / 2011 Coll.

Decree on a more detailed regulation of certain rules in collective investment

Contents

ČÁST PRVNÍ

§ 1

§ 2

ČÁST DRUHÁ

HLAVA I

§ 3

§ 4

§ 5

§ 6

§ 7

§ 8

§ 9

§ 10

§ 11

§ 12

§ 13

§ 14

§ 15

§ 16

Contents

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