Decree No. 319 / 2017 Coll.
Ordinance on professional competence for distribution on the capital market
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Order
Effective from 03.01.2018
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319
DECLARATION
of 21 September 2017
on professional competence for capital market distribution
Pursuant to Article 199 (2) of Act No. 256 / 2004 Coll., on Capital Market Enterprise, as amended by Act No. 204 / 2017 Coll., ("the Act '), the Czech National Bank provides for the implementation of § 14h (a), (b), (f) to (h) of the Act:
Subject matter
This decree regulates
(a) the extent of professional knowledge and skills under Paragraph 14b (4) of the Act;
(b) the minimum scope of the requirements for the substantive, qualification, organisational and personnel requirements under Section 14c (3) (b) of the Act;
(c) requirements for the course, form, scope and method of evaluation and minimum standard of professional examination under Section 14f of the Act;
(d) the rules on the provision, treatment and updating of a set of test questions as referred to in Article 14f (1) of the Act to accredited persons; and
(e) the requirements for the examination procedure under § 14f (2) of the Act and the manner in which the Commission acts and the composition of the Commission under § 14f (3) of the Act.
Scope of expertise
[Paragraph 14b (4) (a) of the Law]
(1) The extent of the professional knowledge of the person referred to in Section 14a of the Act must correspond to the substantive activity of that person to negotiate with the customer in the context of the provision of investment services in order to ensure their qualified performance.
(2) A more detailed range of expertise under Section 14b (4) (a) of the Act is set out in the Annex to this Decree.
Skills range
[K § 14b (4) (b) of the Act]
The persons referred to in Section 14a of the Act must have professional skills for dealing with the customer in the context of the provision of investment services in the context of competence
(a) to obtain information from the customer on his professional knowledge and experience in the field of investment, on his financial background and investment objectives; in the case of a pan-European personal pension product, in order to be able to provide with professional care advice, personal recommendations and personalised projections of pension benefits,
(b) to provide information in a qualified and comprehensible manner when communicating with the customer in such a way that the client himself can assess whether the investment instrument offered corresponds to its financial background and investment objectives;
(c) duly evaluate the customer's expertise and experience in the field of investment, its financial background and investment objectives and offer him an appropriate investment instrument or investment service;
(d) to carry out on behalf of the customer the activities covered by the investment service provided; and
(e) to conclude properly contracts for a pan-European personal pension product; and
(f) to provide information to the customer in a qualified and comprehensible manner during the duration of the commitment to a pan-European personal pension product contract.
Substantial assumptions
[K § 14c (3) (b) of the Act]
(1) The accredited person must have at his disposal premises suitable for conducting professional examinations, with adequate number and capacity of test rooms.
(2) The accredited person must have at his disposal technical and programme means for the organisation of professional examinations.
Organisational assumptions
[K § 14c (3) (b) of the Act]
(1) The accredited person must have an organisational arrangement with a sound, transparent, clear and comprehensive definition of the activities and their associated scope and decision-making powers, which shall be laid down in the internal regulation.
(2) The accredited person in the internal rules shall at least:
(a) security and control measures for processing and recording information relating to professional examinations;
(b) the rules governing the appointment of the President of the Commission and other members of the Commission;
(c) the rules on remuneration of a member of the commission, which must not be derived from the success of the professional examinations.
(3) The accredited person shall ensure that at least one commission is set up at the time of professional examinations.
(4) The expert test is conducted under the direct supervision of the Commission.
Qualification and personnel assumptions
[K § 14c (3) (b) of the Act and § 14f (3) of the Act]
(1) The accredited person shall ensure that the commission is at least three members.
(2) A member of the Commission is trustworthy and has completed at least a university education in a Master's study programme1).
(3) Where an accredited person is an investment service provider or is another member of the business group2) whose member is also an accredited person, the majority of the members of the commission independent of the accredited person, the business group of which the accredited person is a member and other members of that business group shall be.
Test schedule
(K § 14f (2) of the Act)
(1) The accredited person shall have a test schedule which meets at least the following requirements:
(a) an objective and impartial approach for all tested; in the case of overcapacity, the examination of invitations to the test shall be selected in an objective and impartial manner;
(b) proper identification of the tested before the beginning of the professional examination;
(c) ensuring the protection of the personal data of the tested;
(d) the objective and impartial conduct of the professional examination;
(e) an objective and impartial selection of the test variant for the term and the method of setting up the test;
(f) confidentiality of the contents of each test variant;
(g) the thematic content of the professional examination;
(h) verifiable recording of the result of the expert examination and its verification by the commissions;
(i) the possibility and procedure for the appeal and examination of the outcome of the professional examination; and
(j) the possibility for the tested to consult and obtain a copy of the evaluation test or test report.
(2) The test schedule shall include at least:
(a) the development of the requirements referred to in paragraph 1 in specific procedures and model documentation;
(b) rules on the setting and publication of test dates; the accredited person shall ensure that at least one test date is held on a quarterly basis if at least 10 tested persons apply for that period;
(c) the content and scope of the professional examination;
(d) the number of members of the Commission and their decision-making methods;
(e) rules on the exclusion of the tested person from the professional examination and the possibility of reviewing the decision which excluded the tested person;
(f) an indication of the amount of remuneration associated with the professional examination;
(g) indicating whether the professional examination is written, oral or combined;
(h) rules governing the procedure for the prejudice of a member of the Commission; and
(i) rules governing the check-out and non-participation of the tested person.
Minimum standard of professional examination
(K § 14f of the Act)
(1) The professional examination for dealing with a customer in the framework of the provision of investment services relating only to investment vehicles referred to in Article 29 (3) of the Act takes a total of 135 minutes. A total of 60 test questions intended to check the expertise shall be submitted to the test. The skills tested shall be reviewed by 3 case studies; each of them contains 5 test questions aimed at demonstrating skills in accordance with Section 3.
(2) The professional examination for dealing with a customer in the framework of the provision of investment services concerning all investment vehicles referred to in Section 3 (1) of the Act takes a total of 180 minutes. A total of 92 test questions intended to check the expertise are asked. The skills tested shall be reviewed by 3 case studies; each of them contains 5 test questions aimed at demonstrating skills in accordance with Section 3.
(3) Each of the test questions has four possible alternative responses. Three quarters of test questions intended to check the expertise and all test questions intended to test skills have one correct response option. One quarter of the test questions intended to check the expertise shall have one or more correct answers; any incorrectly selected response option makes the entire test question incorrectly answered. The correct answers, which have one correct response option, are evaluated by one point and the correct answers, which have one or more correct answers, and the questions from the professional skills range are evaluated by two points.
(4) In order to pass the professional examination successfully, the tested shall obtain at least the following:
(a) three quarters of the available points of all test questions;
(b) three fifths of the points attainable from test questions concerning expertise; and
(c) three fifths of attainable points from test questions concerning professional skills.
Rules for updating, providing and handling issues to accredited persons
(K § 14f of the Act)
(1) A set of test questions shall be updated at least annually. The number of test questions prepared to check the expertise must not fall below 600 on updating, the number of case studies below 40. The professional examinations may be organised according to the text of the pre-update question file no longer than one month after the publication of this update by the Czech National Bank, unless the Czech National Bank provides for a longer deadline with regard to the scope of the update.
(2) A set of test questions with correct answers is published by the Czech National Bank on its website. A set of test questions with correct answers will be sent by the Czech National Bank to accredited persons using a data box every time it has changed.
(3) The accredited person creates individual test variants shortly before the professional examination. The order of correct answers for each test question shall be set at random for each test variant. Each tested shall receive their own test variant. The accredited person shall carry out all necessary measures to conceal each test variant.
Efficacy
This Decision shall enter into force on 3 January 2018.
Governor:
v. Ing. Hampl, MSc., Ph.D., v. r.
Vice-Governor
Annex to Decree No 319 / 2017 Coll.
Scope of expertise
I. The thematic areas of the necessary knowledge for dealing with a customer in the framework of the provision of investment services relating only to investment vehicles referred to in Section 29 (3) of the Act include:
(a) professional minimum on the financial market
1. the financial market, its definitions, role and importance;
2. the foundations of finance theory (time value of money, relationship between yield, risk and liquidity),
3. financial mathematics (interest),
4. financial market structure (primary and secondary markets, money and capital markets, stock market, bond market, financial derivatives market, commodity derivatives market);
5. financial market participants (issuers, investors, financial intermediaries),
6. regulation and supervision of the financial market,
(b) the structure, entities and functioning of the capital market
1. investment service providers (securities dealer, investment agent, investment company, tied agent, foreign person who provides investment services in the Czech Republic through a branch or without a branch location),
2. the settlement system operator, the CSD, the regulated market operator, the multilateral trading venue operator and the organised trading venue operator;
(c) regulation of the provision of investment services
1. capital market business legislation on investment services, market abuse protection and anti-legalisation measures and terrorist financing (AML);
2. the foundations of the related bond and capital market supervision rules;
3. the foundations of civil and commercial law,
(d) investment funds
1. investment funds (open and closed, with legal personality, mutual funds, standard funds, special funds, qualifying investor funds such as hedge funds, private equity, venture capital funds, real estate funds, Exchange- traded Fund),
2. Investment fund manager (investment company), investment fund administrator,
3. investment strategy, risk profile of the investment fund, method of distribution of revenue,
4. Basic rules for the activities of investment funds, eligible assets, risk diversification, portfolio management, portfolio performance and risk measurement;
5. the Statute of the Investment Fund, key investor information document, periodic investor information obligation,
6. securities issued by IFs (shares, units, shares), the mechanism for the issue and redemption of units and investment shares;
7. rules on the management and administrator's conduct on capital market distribution and rules on the management of investment funds' assets, depositary,
8. fees or other remuneration associated with investment in an investment fund (management fee, input premium, buy-back deduction, total cost indicator of the fund - TER),
(e) investment vehicles and their emissions
1. investment vehicles
1.1. Species and characteristics, concept of security and distribution of securities,
2. Bonds and comparable securities representing the right to repayment of the debt
2.1 types of bonds (state, municipal, corporate, mortgage security, priority, exchangeable, subordinate), form (name and owner), form (paper and library),
2.2 bond program, separation of bond yield rights, meeting of bond owners, collection bond,
2.3 comparable securities with bonds (e.g. option sheet, non-derivative investment certificate),
3. shares and comparable securities representing a share in the issuer
3.1 the concept of shares,
3.2. Similar securities representing a share of the issuer (e.g. provisional sheet, GDR),
4. derivatives
4.1 the concept of derivative, species,
4.2. Basic concepts of derivative trading, use of derivatives (speculation, hedge, arbitrage), leverage effect,
5. Basic characteristics concerning certain other types of investment instruments (such as money market instruments),
6. methods of valuation of securities
6.1. Method of valuation of bonds (nominal price, discount, premium), interest rates and the formation of their market prices, redemption before maturity, credit rating,
7. Basic tax issues related to investment in investment vehicles
7.1. Basic tax issues related to investment in investment vehicles referred to in Paragraph 29 (3) of the Act,
8. Securities issues
8.1 methods of placing securities on the market, public offer, sale to a small group of investors (private placement), primary issue,
8.2. The prospectus (its objectives, functions and structure), the emission conditions of bonds,
8.3. Information obligations of issuers of securities vis-à-vis investors,
(f) investment services
1. the receipt and transmission of orders, the execution of orders for the account of the customer, the trading on own account, portfolio management, investment advice, the operation of a multilateral trading venue, the operation of an organised trading venue, the placing or subscription of investment instruments;
2. additional investment services;
3. procedures for identifying and managing conflicts of interest;
4. measures to protect the customer's assets;
5. Rules on the creation of an investment instrument offered to a customer, offering an investment instrument created by another person;
6. the rules of conduct of the securities dealer, the investment intermediary and the tied agent in relation to the customer and between each other;
7. possibilities for resolving disputes arising from the provision of investment services (for example through complaints or financial arbitrators),
8. investor compensation scheme (securities dealers guarantee fund),
(g) investment, investment strategies and portfolio and related risks
1. investment strategy,
1.1. Basic investment strategy,
2. risk of investment vehicles;
2.1 the risks of investment vehicles referred to in § 29 (3) of the Act and the possibilities of securing against them;
3. basic information on alternative products (e.g. supplementary pension savings, capital and investment life insurance).
II. The thematic areas of the necessary knowledge for dealing with a customer in the framework of the provision of investment services related to all investment vehicles referred to in Section 3 (1) of the Act include:
(a) professional minimum on the financial market;
1. the financial market, its definitions, role and importance;
2. the foundations of finance theory (time value of money, relationship between yield, risk and liquidity),
3. financial mathematics (interest),
4. financial market structure (primary and secondary markets, money and capital markets, stock market, bond market, financial derivatives market, commodity derivatives market);
5. financial market participants (issuers, investors, financial intermediaries),
6. regulation and supervision of the financial market,
(b) the structure, entities and functioning of the capital market
1. investment service providers (securities dealer, investment agent, investment company, tied agent, foreign person who provides investment services in the Czech Republic through a branch or without a branch location),
2. the settlement system operator, the CSD, the regulated market operator, the multilateral trading venue operator and the organised trading venue operator;
(c) regulation of the provision of investment services
1. capital market business legislation on investment services, market abuse protection and anti-legalisation measures and terrorist financing (AML);
2. the foundations of the related bond and capital market supervision rules;
3. the foundations of civil and commercial law,
4. structure, entities and functioning of pan-European personal pension product
4.1 provider of pan-European personal pension product, distributor of pan-European personal pension product,
4.2. Contract for a pan-European personal pension product,
4.3. Basic information on registration of pan-European personal pension product,
4.4. Basic information on cross-border provision of pan-European personal pension product,
4.5 The portability of pan-European personal pension product,
4.6 rules on the distribution of pan-European personal pension product,
4.7. Pre-contractual information on the distribution of pan-European personal pension product,
4.8 advice on the distribution of pan-European personal pension product,
4.9 the provision of information during the duration of the commitment to a pan-European personal pension product,
4.10 basic information on investment rules for providers of pan-European personal pension product,
4.11 investment opportunities for customers of pan-European personal pension product,
4.12 investor protection,
4.13 change of provider of pan-European personal pension product,
4.14. Rules concerning the payment phase,
(d) investment funds
1. investment funds (open and closed, with legal personality, mutual funds, standard funds, special funds, qualifying investor funds such as hedge funds, private equity, venture capital funds, real estate funds, Exchange- traded Fund),
2. Investment fund manager (investment company), investment fund administrator,
3. investment strategy, risk profile of the investment fund, method of distribution of revenue,
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Regulation Information
| Citation | Decree No. 319 / 2017 Coll., on professional competence for distribution on the capital market |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 02.10.2017 |
|---|---|
| Effective from | 03.01.2018 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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