Decree No. 303 / 2010 Coll.
Decree on more detailed arrangements for the provision of investment services
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Order
Effective from 01.01.2011
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01.01.2011
05.11.2010
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303
DECLARATION
of 14 October 2010
on more detailed arrangements for the provision of investment services
Pursuant to Article 199 (2) of the Act No. 256 / 2004 Coll., on the capital market business, as amended, (hereinafter "the Act '), the Czech National Bank provides for the implementation of § 12f (a), § 12f (c), § 15 (5), § 15a (3), § 15d (4), § 15h (4), § 15i (5), § 15l (6), § 15o (2), § 15q (2), § 15r (3), § 17 (8) and (c) of the Act:
GENERAL PROVISIONS
(1) This decree implements the relevant provisions of the European Union1) and provides for more detailed provisions
(a) the rules of activity in the provision of investment services pursuant to § 12f (a), § 12f (c), § 15 (5) and § 17 (4) of the Act;
(b) the rules governing the provision of investment services pursuant to Articles 15a (3), 15d (4), 15h (4), 15i (5), 15l (6), 15o (2), 15q (2) and 15r (3) of the Act.
(2) This decree further provides for certain rules of activity and conduct with clients of investment intermediaries in the provision of investment services pursuant to § 32 (8) (a) and (c) of the Act.
(3) The Decree applies to:
(a) a securities dealer; and
(b) investment intermediaries within the scope of Section 32.
(1) The securities dealer and the investment intermediary shall, to the extent provided for in Article 32, adapt the rules and procedures laid down in this Decree by internal law.
(2) The obligations in respect of a customer set out in Sections 10 to 27 are also fulfilled by a securities dealer in respect of a potential customer, with the exception of those laid down in Sections 18 and 24 (1).
For the purposes of this decree:
(a) the identification of the investment instrument by means of an international numbering system for securities identification (ISIN), where it has been assigned, otherwise the name of the instrument or a description of the features of the derivative contract, or at least the name of the contract and the date of its conclusion; and
(b) trade in securities financing trade in securities financing in accordance with the directly applicable regulation of the European Union implementing Directive of the European Parliament and of the Council regulating markets in financial instruments (2).
OPERATIONAL RULES FOR PROVISION OF INVESTMENT SERVICES
_
Accounting procedures
[K § 12f (c) (3) of the Act]
The accounting procedures of a securities dealer shall always regulate the accounting arrangements for the funds and investment vehicles of customers. The accounting system shall record:
(a) transactions in investment instruments entered into for customers separately from transactions in investment instruments entered into for the sole account of the securities dealer;
(b) the state of the money and investment instruments of the individual customers with which the securities dealer may dispose; and
(c) the claims and obligations of the securities dealer relating to the provision of investment services to individual customers.
Registration of customer's property
[K § 12f (c) (4) of the Act]
(1) The securities dealer in the internal registration system ensures the consistent and unambiguous identification of the investment instruments and funds of each customer so that he can at any time distinguish the assets held for one customer from those held for other customers and from his own assets. The internal records shall also include records of the account in which the individual investment vehicles and funds of each customer are held with a third party.
(2) Securities dealer
(a) ensure that data in internal records are checked for compliance with the actual state of the customer's funds and investment instruments held by a third party and that the procedure for the removal of irregularities detected (hereinafter referred to as "recovery") is at least monthly;
(b) it has an obligation to carry out recovery
1. on the basis of a document provided by a third party,
2. in a proven and documented manner, showing the course and outcome of the recovery;
(c) lay down rules for the monitoring of compliance with obligations relating to recovery and the frequency and method of recovery.
(3) Furthermore, the securities dealer shall introduce effective organisational measures that will minimise the risk of loss or impairment of the customer's assets or rights associated with such property as a result of misuse of the customer's assets, fraud, maladministration, lack of records or negligence.
(4) Where the customer's assets are located in a State whose legislation does not allow the requirements of paragraph 1 to be met, the securities dealer shall take measures as close as possible to those of paragraph 1.
Storage of client investment instruments
[K § 12f (c) (1) of the Act]
(1) A securities dealer may deposit client investment vehicles in an account with a third party if:
(a) in the context of its obligation to act with professional care, take into account the experience of that person, his reputation in the financial market and the legal requirements and market practices that govern the handling of client investment instruments with a third party and which could adversely affect the rights of the client; such rights include information on all fees associated with the deposit of investment instruments;
(b) the imposition of client investment instruments in a third State is subject to regulation and supervision, except where:
1. the nature of investment vehicles or investment services associated with such investment vehicles requires them to be deposited with a person in a State where the deposit of investment vehicles is not subject to regulation and supervision; or
2. a professional customer (3) requests in writing a securities dealer to deposit his investment vehicles with a person in the State concerned;
(c) ensure the separation of the client's investment instruments in third-party records from the investment instruments of the securities dealer and the persons with whom they are deposited by means of nominally identified accounts or other comparable means.
(2) The securities dealer verifies compliance with the requirements set for the deposit of client investment instruments in an account with a third party when selecting a third party, negotiating services and during their provision.
Depositing of customer funds
[K § 12f (c) (1) of the Act]
(1) The securities dealer only stores the customer's money for:
(a) central banks;
(b) credit institutions located in a Member State of the European Union;
(c) banks authorised to operate in a Member State of the European Union; or
(d) an MMF subject to supervision or authorisation to operate in a Member State of the European Union; and
1. Its main objective is to preserve the net value of assets in parity (without income) or to increase the amount of the investment by revenue;
2. in accordance with the objective set out in point 1, it shall invest exclusively in money market instruments with a maturity or residual maturity not exceeding 397 days with a weighted average maturity of 60 days or a regularly adjusted yield consistent with that maturity and with a weighted average maturity of not more than 60 days by which the credit rating agency, which regularly and professionally assigns credit ratings to money market funds and is the eligible credit rating agency (4), has assigned the highest possible credit rating. The condition of the highest possible credit rating shall be met for each credit rating agency that has allocated a credit rating to that MMF. The objective referred to in point 1 may also be achieved by additional investment in deposits with credit institutions,
3. Provides liquidity by settlement on the same or the following day.
(2) The funds of a customer referred to in paragraph 1 shall not be deposits received in connection with the activities of a bank which is also a securities dealer.
(3) Where a securities dealer imposes customer money on a person referred to in points (b) to (d) of paragraph 1, he shall proceed with caution and professional care and shall take into account the experience of that person, his reputation in the financial market and the legal requirements and market practices by which the handling of the customer's funds with a third party is managed and could adversely affect the rights of the customer. The first securities dealer shall verify compliance with the assumptions set out in the sentence of the first securities dealer when selecting a third party, when negotiating services and during their provision.
(4) The securities dealer will ensure that the funds of the customer and the securities dealer are held in separate accounts.
(5) A securities dealer shall only deposit the customer's money into the money market fund referred to in paragraph 1 (d) if the customer agrees.
Use of client investment instruments
[K § 12f (c) (2) of the Law]
(1) A securities dealer may use the client's investment instruments for trading on its own account or on the account of another customer, provided that the customer has previously and explicitly agreed to use the investment instruments under specified conditions. A customer who is not a professional customer (hereinafter referred to as "non-professional customer ') shall give his consent in writing or in another equivalent manner. Such consent shall be given on a separate instrument and, in the case of electronic contact, by a separate data message.
(2) Furthermore, a securities dealer may use client investment vehicles in a customer account held by a third party for trading on its own account or on the account of another client under the conditions set out in the preceding paragraph only if:
(a) each customer whose investment vehicles are held on a customer account has given prior approval in accordance with paragraph 1; or
(b) it has systems and control mechanisms which ensure that only investment vehicles of customers who have given their prior consent can be used in this way in the manner referred to in paragraph 1.
(3) For the purposes of the proper allocation of losses from transactions referred to in paragraph 1, the securities dealer's records shall include:
(a) any customer with the consent of whom investment vehicles have been used; and
(b) the number of investment vehicles used belonging to each customer with the consent of which the investment vehicles have been used.
(4) The securities dealer shall make available to the retail client his or her rules or principles for the use of the client's investment instruments for transactions for his or her own account or for the account of another client and the rules or principles for the provision of consent as referred to in paragraph 1.
Audit report
[K § 12f (c) (5) of the Act]
(1) A report on the adequacy of the measures taken to protect the client's assets under Section 12e (3) of the Act is submitted
(a) in the case of annual information, within 4 months of the end of the relevant accounting year; or
(b) without undue delay after the findings of the deficiencies in the report referred to in (a) or after the findings of the deficiencies at any time during the year.
(2) The report referred to in paragraph 1 (a) shall include an evaluation of the functionality and effectiveness of the measures taken to protect the customer's assets and identify the control mechanisms in place, in particular:
(a) information on the material and time range of areas audited by external auditors (5) or audit firms;
(b) an assessment of the compliance of the accounting principles and accounting procedures of the client's funds and investment instruments with the legislation;
(c) assessing the conformity of the management of the customer's assets in the internal registration system with the legislation;
(d) an assessment of whether the securities dealer carries out the recovery of the customer's assets appropriately frequently, in a conclusive manner and in accordance with the law and its internal law;
(e) verification of the correctness of the system and the functional setting of the process for the reclassification of all customer assets carried out by the securities dealer and the verification of the results of at least one reclassification of all customer assets in each month during the calendar year for which the report is processed;
(f) the result of the verification of compliance of investment vehicles and funds with the legislation of third parties;
(g) the result of the verification of the conformity of the use of investment vehicles provided for by the law and internal law of the securities dealer;
(h) other relevant information concerning the protection of the customer's assets by the securities dealer.
(3) Where deficiencies have been identified in the report referred to in paragraph 1 (a), the securities dealer shall ensure that an external audit firm (5) or an audit firm provides a specification of the missing internal control mechanisms and an evaluation of the severity of each deficiency.
(4) The report referred to in paragraph 1 (b) contains a description of the deficiencies identified. A securities dealer shall ensure that an external auditor (5) or an audit firm provides a specification of the missing internal control mechanisms and an assessment of the severity of each deficiency.
(5) The report referred to in paragraph 1 shall be submitted in electronic form with a guaranteed electronic signature (6) in the form of a data message to the data box of the Czech National Bank or to the e-mail office, possibly in paper form to the address of the Czech National Bank, with a clear indication of the information obligation.
PERSONAL TRADE, CURRENT INTEREST AND DISTRIBUTION
Rules on the closure of personal transactions
[K § 12f (a) and § 12b (1) (a) of the Act]
(1) For the protection of internal information pursuant to § 124 of the Act and the prevention of conflicts of interest between persons referred to in § 11 (1) of the securities dealer
(a) ascertains persons with a special relationship with a securities dealer under § 2 (1) (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 concerning customers or their transactions;
(b) take measures to prevent the person referred to in point (a) from entering into a personal transaction pursuant to Article 2 (1) (k) 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 any other obligation of the securities dealer 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 authorised to enter into a personal transaction under point (b);
2. the personal transaction concerned the person referred to in Paragraph 14 (1) (a);
3. information on the outstanding order of the client may have been used in this transaction,
(d) take measures to prevent any person with a special relationship with a securities dealer 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 such person 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 with a securities dealer are informed of restrictions in relation to their personal business;
(f) ensure that the persons referred to in (a) notify him of personal business without undue delay. In the case of a person through whom a securities dealer carries out his activities, he shall require that such person keep a record of personal transactions concluded by a person having a special relationship with a securities dealer and, upon request, provide that record to the securities dealer without undue delay,
(g) keep a record of:
1. the personal transactions notified or otherwise identified as referred to in point (f);
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 having a special relationship with a securities dealer, unless prior communication on trade has taken place between the securities dealer and the person having a special relationship with him;
(b) securities of a standard fund or other collective investment fund which invests in a comparable principle of spread of risk and is supervised in a Member State of the European Union, unless a person having a special relationship with a securities dealer is involved in the management or management of such a fund.
Detection and management of conflicts of interest
[K § 12f (a) and § 12 (b) of the Act]
(1) When providing investment services, a securities dealer shall identify and manage conflicts of interest between him, including his or her managers, tied agents and employees or managers, tied agents of the person who controls the securities dealer, is controlled by a securities dealer or controlled by the same person as the securities dealer, and his or her customers or potential customers or potential customers of the securities dealer or potential customers of the securities dealer in connection with the provision of investment services.
(2) Where a securities dealer is a member of a business group, he shall identify and manage conflicts of interest in accordance with paragraph 1, also taking into account any foreseeable circumstances which may trigger a conflict of interest as a result of the structure of the business group and the subject matter of its members' business.
(3) Where, despite the measures taken pursuant to paragraph 1, it is not possible to reliably avoid the adverse effect of a conflict of interest on the interests of the client, the securities dealer shall, before providing the investment service to the client, provide information on the nature or source of the conflict of interest.
(4) A securities dealer shall provide the client with the information referred to in paragraph 3 on a durable medium of information pursuant to Article 15e of the Act in a manner and to the extent that it takes into account the nature of the customer and allows him to take due account of conflicts of interest relating to the investment service or other business activities of the securities dealer under Article 6a of the Act.
Detection of conflicts of interest
[K § 12f (a) and § 12 (b) of the Act]
(1) In identifying and assessing conflicts of interest in relation to the provision of services, the securities dealer shall take into account whether he, the person referred to in Article 11 (1), or the person having a special relationship with the securities dealer
(a) may obtain financial benefits or avoid financial losses at the expense of the customer;
(b) has a different interest in the outcome of the service provided to the customer or in the outcome of the transaction carried out on behalf of the client from that of the client;
(c) has an incentive to give priority to the interests of the customer over those of another customer;
d) does business in the same field as the customer,
(e) receives or receives an incentive from a person other than the customer (Section 15 (3) of the Act) in connection with the customer's service and this incentive does not constitute a normal remuneration for the service provided.
(2) Furthermore, the securities dealer
(a) identify circumstances which, in relation to specific services and activities provided by him or another person acting on his behalf, may lead to a conflict of interest which constitutes a material risk of damage to the interests of the customer ("material conflict of interest");
(b) specify in particular binding procedures and measures to manage material conflicts of interest;
(c) keep up-to-date records of the investment services provided which have created or may give rise to a material conflict of interest.
Management of significant conflicts of interest
[K § 12f (a) and § 12 (b) of the Act]
(1) The securities dealer shall ensure that persons with a special relationship with the securities dealer involved in the performance of services with which a material conflict of interest is involved carry out their activities with a degree of independence which is proportionate to the nature, scale and complexity of the activities of the securities dealer and the business group to which he belongs and to the seriousness of the risk of damage to the interests of customers.
(2) The procedures for the management of a material conflict of interest which will lead to the security of independence referred to in paragraph 1 include, where appropriate, the specific situation:
(a) effective procedures to prevent or control the exchange of information between persons with a special relationship with a securities dealer where the information is accompanied by a risk of conflict of interest and where the exchange of information could harm the interests of the customer;
(b) independent control of persons with a special relationship with a securities dealer involved in the performance of services for customers whose interests or interests the persons for whom they operate may conflict;
(c) the avoidance of any direct link between the remuneration of a person with a special relationship with a securities dealer principally engaged in an activity and the remuneration or income of another person with a special relationship with a different trader, where a conflict of interest may arise in relation to such activities;
(d) those measures which prevent the possibility of exercising an unjustified or unjustified influence on the way in which a person with a special relationship with a securities dealer ensures that investment services are carried out;
(e) measures to prevent or ensure the control of a person with a special relationship with a securities dealer from participating in the provision of an investment service in so far as there could be a threat to the sound management of conflicts of interest,
(f) other appropriate measures if the measures taken under points (a) to (e) do not ensure the necessary degree of independence under paragraph 1.
Management of conflicts of interest in relation to investment opportunity analyses
[K § 12f (a) and § 12 (b) of the Act]
(1) A securities dealer carrying out analysis of investment opportunities shall take measures which:
(a) prevent persons who, in the context of the performance of their employment, profession or function, produce material content of the investment opportunity analysis, conduct personal transactions pursuant to Article 2 (1) (k) of the Act, or participate in the provision of investment services pursuant to Article 4 (2) (a) to (d) and (g) of the Investment Facility Analysis Act, or related investment instruments, if this would be the case in the temporal or material context of the investment opportunity analysis, the results of which cannot be easily derived from publicly available information and the addressees of which they did not have an adequate opportunity to take into account in their investment decisions; This does not apply if:
1. Doing so in good faith as market maker,
2. this is common in the course of the activity of the market maker; or
3. it does so when executing an unsolicited client order;
(b) prevent the persons referred to in point (a) from carrying out the personal transactions referred to in point (a) in contravention of the applicable recommendation, unless exceptional circumstances are concerned and the personal trade has been agreed by an organisational unit ensuring the ongoing monitoring of compliance with the legal and internal rules of the securities dealer (compliance);
(c) prevent the receipt of an incentive from a person interested in the subject matter of the analysis of investment opportunities, including those referred to in (a);
(d) prevent the issuer from promising a favourable outcome of the analysis of investment opportunities and prevent such promise from being made available to the persons referred to in point (a);
(e) prevent an issuer, a person with a special relationship with a securities dealer and another person other than those referred to in point (a) from considering a draft investment opportunity analysis, unless it is a verification of compliance with the issuer's legal obligations in the case of an investment opportunity analysis containing an investment recommendation or target price.
(2) The rules referred to in paragraph 1 need not be complied with in respect of the dissemination of the analysis of investment opportunities created by another person to the public or to customers where the securities dealer:
(a) does not belong to the same business group as the person who created the investment opportunity analysis;
(b) does not substantially alter the analysis of investment opportunities;
(c) it does not give the impression that it is an analysis of the investment opportunity it has created,
(d) verify that the person who created the investment opportunity analysis is subject to comparable requirements as regards the creation and prevention of conflicts of interest in the context of the investment opportunity analysis.
(3) The related investment instrument referred to in paragraph 1 (a) means an investment instrument the price of which substantially affects or determines the price of the investment instrument to which the analysis of the investment opportunity relates.
Acceptance of the incentive
(Paragraph 15 (5) of the Law)
(1) The incentive is permissible within the limits of § 15 (1) and (3) of the Act if:
(a) is paid by the customer, per customer or is paid to the customer;
(b) it is paid to a third party or to a third party or to a third party; and
1. prior to the provision of the main or ancillary investment service, the customer has been clearly, clearly understood and fully informed of the existence and nature of the incentive and the amount or value of the incentive or method of calculation, unless it can be ascertained in advance;
2. the incentive contributes to improving the quality of the service provided; and
3. the incentive is not contrary to the obligation of the securities dealer to act in the best interests of the customer.
(2) An incentive is permitted which allows the provision of investment services or which is necessary for that purpose and whose nature is not contrary to the obligation of the securities dealer to act in a qualified, fair and fair manner and in the best interests of the customer.
(3) The securities dealer may provide the information referred to in paragraph 1 (b). (b) point (1) shall provide incentives in the form of a summary description of the main conditions, but shall, at the request of the customer, always provide details.
ARRANGEMENT AND STORAGE OF RECORDS
[K § 12f (a), § 12b (2) (a) and § 17 (4) of the Act]
In order to keep records of communication with the customer in connection with the provision of investment services pursuant to § 4 (2) (a) to (e) of the Act, securities dealer
(a) use and operate a communication device in the event of remote communication with the customer;
1. by means of specifically identified communication equipment including a specific telephone line and e-communications address,
2. procure and store communication records on communication devices and store them in their original form;
3. it has the possibility to obtain a complete authentic communication output from these devices,
(b) capture, in writing or in any other conclusive way, the data referred to in (c) where communication with the customer takes place in a manner other than that referred to in (a);
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Regulation Information
| Citation | Decree No. 303 / 2010 Coll., on a more detailed regulation of certain rules in the provision of investment services |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 05.11.2010 |
|---|---|
| Effective from | 01.01.2011 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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