Decree No. 347 / 2004 Coll.
Order on how to comply with the rules on prudent business and the rules on the organisation of the internal operation of the investment firm and the investment fund
Valid
Order
Effective from 01.07.2004
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347
DECLARATION
of 5 May 2004
on how the rules on prudent business and the rules on the organisation of the internal operation of the investment firm and the investment fund are complied with
According to Section 139 (h) in conjunction with Sections 74 (3) and 76 (4) of Act No. 189 / 2004 Coll., on Collective Investment, hereinafter referred to as "the Act", the Securities Commission shall determine:
Subject matter
This decree regulates
(a) the content of the rules of organisation;
(b) administrative and accounting procedures;
(c) control and security measures for data processing and recording;
(d) the internal control system;
(e) procedures to limit the possibility of conflicts of interest in the provision of services;
(f) measures to prevent the use of economic assets for own-account transactions;
(g) measures to protect internal information; and
(h) measures to prevent market manipulation.
(1) An investment company or an investment fund shall adopt an organisational order in which it shall adjust, mutatis mutandis to the extent of the activity carried out, the organisational arrangements of the company, the authorisation, the obligations and the functional content of the management of the company and of the other employees of the company, which shall ensure:
(a) promotion of company services and products offered;
(b) the issue, registration or deposit, management and redemption of securities of a collective investment fund;
(c) performance of analytical activities;
(d) trading of investment vehicles on the company's own account;
(e) trading in the assets of the collective investment fund, including risk management;
(f) settlement of transactions, valuation of economic assets;
(g) keeping accounts;
(h) legal services;
(i) management of the information system;
(j) internal audit,
(k) communication with persons outside the company to whom an activity has been delegated;
(l) compliance activity.
(2) The Organisational Rules provide that the activities referred to in paragraph 1 (a) to (j) may be delegated, under the conditions laid down by law, to a third party, provided that, in the event of a delegation of all such activities, the performance referred to in paragraph 1 (k) and (l) of the head of the investment firm or investment fund is ensured.
Administrative procedures
(1) The investment company or investment fund shall, by its internal rules, lay down administrative procedures within the framework of the company's internal operations, in particular:
(a) the procedure for adopting or amending internal rules;
(b) internal control system (§ 6),
(c) the pursuit of activities by employees of an investment company or investment fund in relation to the management of assets in collective investment funds;
(d) the authorisation of employees of an investment company or investment fund to approve and sign documents in the framework of the company's activities;
(e) the process for the creation, processing, handling and retention of data and documents of an investment company or investment fund;
(f) the management and operation of an information system operated by an investment company or investment fund;
(g) the procedure for dealing with complaints and complaints by investors (1); and
(h) the procedure for carrying out obligations towards the depositary.
(2) Investment company or investment fund under the adjustment provided for in paragraph 1 (b). (c) the internal regulation also provides for the obligation of the staff member responsible for the trading of assets in the collective investment fund
(a) cooperate with the analytical service or, where appropriate, the investment committee;
(b) trade in the property of a collective investment fund in accordance with its Statute;
(c) comply with the limits and procedures set to limit the risk assumed;
(d) not to conduct transactions in investment vehicles entered in a special register pursuant to Article 7 (2) (h);
(e) document the way in which transactions are executed at least to the extent of the subject-matter of the transaction, the type of transaction, the date and time of the transaction, the place of the transaction, the parties involved,
f) document professional care under the law; and
(g) cooperate with the settlement service.
(3) Furthermore, an investment company or an investment fund shall, in the context of the adjustment referred to in paragraph 1 (a) (i). (c) the internal regulation also provides for the obligation of the staff responsible for the settlement of transactions
(a) to process in due time and in due time all the data transmitted by the employee responsible for trading in the assets of the collective investment fund;
(b) to check compliance with the limits and procedures to limit the risk assumed;
(c) to settle transactions in investment vehicles or other asset values;
(d) to check the accuracy and evidence of recorded data on transactions in investment vehicles;
(e) cooperate with the depositary in providing documentation to verify the accuracy of the calculation of the value of the assets of the collective investment fund; and
(f) send instructions (2) on the day on which they are submitted to the depositary.
Accounting procedures
The investment firm or investment fund shall adapt the internal rules:
(a) accounting procedures;
(b) the method of calculating the value of the assets of the collective investment funds it manages;
(c) the way in which adjustments are made;
(d) principles for the accrual of costs and revenues and the creation of arbitrary items and reserves.
Control and security measures for data processing and recording
(1) An investment company or investment fund shall manage the information system of telecommunications and recording facilities, at least by one employee to whom it entrusts such activities, or by a third party under a written contract (hereinafter referred to as the administrator).
(2) The investment company or investment fund in the internal rules shall at least:
(a) the conditions for staff access to the information system and the data recorded therein, the scope of access (access rights) and the setting-up process, including the way in which to decide on the scope of access rights of individual employees or other persons, and decisions on their changes;
(b) the conditions under which data obtained in connection with the performance of the company's activities and changes thereto will be entered into the information system and the conditions under which such data will be handled;
(c) a procedure for dealing with situations where the functions of the information system, telecommunications means or recording equipment used by the investment firm or the investment fund are malfunctioning, including how the replacement operation of the information system, telecommunications and recording equipment is ensured;
(d) measures ensuring that data stored in the information system is regularly and properly backed up and stored for at least 10 years;
(e) protection of the information system from entry and interference by unauthorised persons and from damage;
(f) the data reconstruction procedure in the event of unauthorised interference under (e) or damage to the information system;
(g) measures to ensure that employees entrusted with the trading of property in mutual funds and the property of the investment fund use telecommunications equipment for the performance of this activity, for which the investment firm or investment fund ensures that communication records are made; in relation to a third party who provides the company with the activity referred to in the first sentence, the investment company or the investment fund shall ensure that these measures are adjusted by contract;
(h) rules on the use of telecommunications equipment, at least by reserving certain telephone lines or other telecommunications equipment, where appropriate, for activities related to the management of assets in units or investment funds, including communication between, and storage for at least 10 years, the investment company or investment fund, and the recording of communications on, such telephone lines or other telecommunications equipment;
(i) details of the alert referred to in point (h), which shall be at least the date and time of communication, the data identifying the consignor and the consignee, if available, and the content of the transmitted message; the investment firm or the investment fund shall ensure the possibility of obtaining complete records of communications on dedicated telephone lines and, where appropriate, other telecommunications equipment, and the possibility of obtaining an exit from the recording equipment;
(j) measures to ensure that the management of the recording equipment used to record the communication referred to in (h) is carried out exclusively by the controller; and
(k) measures to ensure that the records of the communication referred to in (h) cannot be subsequently altered in the recording equipment.
(3) Compliance with the obligations referred to in paragraph 2 (e) and (f) is ensured by an investment company or investment fund through the AIFM at least:
(a) regular checks on the basic functions of the technical and programming means of the information system;
(b) adequate regular updates of the technical and programming means of the information system; and
(c) using means of security.
(4) An investment company or investment fund shall adjust its internal rules or negotiate in a contract with the AIFM, if the AIFM is a third party, the obligation of the AIFM
(a) refuse unauthorised access to the information system by the employees of the investment company or investment fund or any other person;
(b) to implement urgent measures in the event of unauthorised access to the information system or damage to the information system; and
(c) inform of the procedure referred to in points (a) and (b) of the staff member responsible for compliance (Section 7) and the relevant manager or member of the statutory body of the investment firm or investment fund.
(5) An investment company or an investment fund shall establish a method of checking the conformity of the data entered in the records with the actual status and the procedure for the removal of detected irregularities (reclassification), proportionate to the scale and nature of the activity carried out by the investment firm or investment fund, the number of investors and the volume of funds or investment instruments entrusted, as the case may be, and the frequency of such checks, but not less than once a week, and shall determine the method of monitoring the fulfilment of those obligations.
Internal control system
(1) An investment firm shall establish an effective and effective internal control system, proportionate to the number of collective investment funds managed, the volume of the funds' assets managed, and to the extent and nature of the services provided, and shall ensure the establishment of an organisational structure that enables the effective operation of the internal control system.
(2) The internal control system shall include:
(a) checks carried out by each member of staff in the course of the work;
(b) the control carried out by the company's authorities and by the head of staff in the management activity;
(c) compliance activity (§ 7); and
(d) internal audit activities (Section 8).
(3) The investment company shall adapt the internal control system by means of an internal regulation specifying in particular:
(a) the obligation of the Supervisory Board to regularly evaluate the activities of the internal control system;
(b) the obligation on the staff member to carry out the check referred to in paragraph 2 (a);
(c) the obligation on the staff member to carry out the check referred to in paragraph 2 (b);
(d) the obligations of the compliance officer;
(e) the duties of the person responsible for carrying out the internal audit; and
(f) procedures to address the failure of the internal control system.
(4) The provisions of paragraphs 1 to 3 apply mutatis mutandis to the investment fund.
Compliance
(1) Compliance shall be exercised by an investment company or investment fund through at least one employee. The statutory body of the company shall decide on the entrustment of the employee through compliance and the appeal from compliance and shall be informed by the supervisory body of the company; where the performance of compliance is provided by more than one employee, the statutory body of the investment firm or investment fund shall entrust and withdraw only its head of staff.
(2) An investment company or an investment fund shall, by internal regulation, lay down the obligation of an employee in charge of compliance at least:
(a) to carry out checks on compliance of internal legislation with legislation, in particular with legislation governing collective investment, the provision of investment services, where this activity is provided, and measures against the legalisation of the proceeds of crime;
(b) coordinate the development of measures to ensure compliance of the activities of the investment company or investment fund and internal legislation and to check compliance of the proposed measures with the legislation;
(c) to check compliance with the rules on the transactions of employees of an investment company or investment fund concluded for their own account or for persons close to them (3) and to carry out checks on transactions carried out for their own account of the investment company or investment fund in respect of compliance with law and internal rules;
(d) following complaints submitted on the activities of the investment company or investment fund and on the results of their processing, coordinate the development of corrective measures and monitor compliance of the proposed measures with the legislation;
(e) keep a register of the orders eligible for market manipulation; the investment company or investment fund shall adapt internal rules for informing the Czech National Bank if it is suspected that internal information will be used when the transaction is closed, 4)
(f) keep and keep up-to-date the records of investment vehicles admitted to trading on a regulated market or their issuers, which the investment firm or investment fund has received information that is not publicly known; and
1. relates to this instrument or its issuer; or
2. concerns another fact if it is relevant to the development of the instrument's course or other price or yield;
and indicate in this register the content of this information (Watch List),
(g) evaluate, without undue delay, the information recorded in the register referred to in (f); a compliance officer shall assess whether the information entered in the register referred to in point (f) fulfils the internal information characteristics; (5) an internal regulation may provide that the compliance officer cooperates with other persons designated by this internal regulation for that purpose;
(h) enter in the Special Register (Restricted List) an investment instrument admitted to trading on a regulated market or its issuer, which the investment company or investment fund has learned about, and the content of, that information, and keep that record up-to-date;
(i) without delay draw the heads of staff responsible for trading in investment vehicles on the account of an investment company or collective investment fund to the registration of the investment instrument or issuer in the register referred to in point (h) and the deletion from that register;
(j) propose the manner in which employees of an investment firm or investment fund are regularly made aware of, and monitor compliance with, internal rules, procedures and legislation governing, in particular, collective investment;
(k) to control the arrangements for the use of inside information acquired by an investment company or investment fund;
(l) coordinate communication with public authorities and other public authorities;
(m) take action against misuse of information, data and documents acquired in the course of its activities;
(n) carry out the activities referred to in (a) to (m) professionally, independently, objectively and honestly; and
(o) maintain confidentiality of the facts which he has become aware of during or in connection with compliance.
(3) An investment company or an investment fund shall establish the frequency with which the compliance officer evaluates the information specified in the records referred to in points (f) and (h) and the transactions in investment instruments entered in those records and submit the conclusions of the evaluation to the statutory authority and supervisory board of the company, but at least every 6 months.
(4) The records referred to in paragraph 3 (f) and (h) shall contain at least:
(a) the date of receipt of the information;
(b) the date on which the information is entered in the register;
(c) the investment instrument or the identification of the issuer to which the information relates;
(d) a brief description of the information,
(e) identification of the persons who have become acquainted with the information; and
(f) the date on which the investment instrument is removed from the register.
(5) An investment company or an investment fund shall, by an internal rule, lay down the rules governing the keeping and control of the records referred to in points (f) and (h).
(6) An investment company or an investment fund shall, by internal regulation, provide for the authorisation of an employee responsible for compliance to at least:
(a) to enter and extract from the information system of the investment firm or investment fund the data necessary for compliance;
(b) to enter the individual sites of an investment company or investment fund;
(c) require all employees of an investment firm or investment fund to provide the information and documents necessary for compliance; in relation to third parties providing activities under points (a) to (j) of Article 2 (1) for the company, the investment company or the investment fund shall provide for an adjustment of the entitlement of the employee responsible for compliance to the same extent; and
(d) to report directly to the statutory authority and the supervisory board of the investment firm or investment fund on the relevant matters relating to compliance.
Internal audit
(1) The internal audit shall be carried out by an investment firm or an investment fund through at least one employee (hereinafter referred to as "the internal auditor '), except in the case referred to in paragraph 2. The statutory body of the company shall decide on the delegation of the staff member to carry out the internal audit and the appeal from the internal audit, with the prior agreement of the supervisory board of the company. In the event that the internal audit is carried out by more than one employee, the statutory body of the company shall, subject to the prior approval of the supervisory board of the company, delegate and revoke only their head of staff.
(2) For an investment company or investment fund, an internal audit may be carried out by a third party on a contractual basis. The statutory body of the company shall decide on the selection of the person and shall be informed by the supervisory body of the company. Where a depositary carries out an order check after its execution, only the depositary may carry out an internal audit to the extent that the assets in the collective investment fund are managed.
(3) The Head of the Internal Audit Service shall inform the Supervisory Board and the statutory body of the investment company or investment fund of the facts identified and, in the event of findings which may adversely affect the management of the funds' assets, shall initiate an extraordinary meeting of the Supervisory Board.
(4) An investment company or investment fund shall, by internal rules, provide for an obligation for an internal auditor to verify and evaluate at least:
(a) the functionality of the company management system;
(b) the effectiveness of the internal control system;
(c) a risk management system;
(d) the completeness, evidence and accuracy of the keeping of records, including the keeping of accounts;
(e) the effectiveness of information flows;
(f) compliance with the obligations laid down by the internal rules of the investment firm or investment fund and the legislation; and
(g) compliance performance.
(5) The internal auditor is required to carry out verifications and evaluations within the time limits set by the internal regulation according to the risk profile of the areas verified and evaluated in accordance with paragraph 4 but at least once a year.
(6) Furthermore, an investment company or investment fund shall, by means of an internal regulation, at least adapt the internal auditor's obligation to:
(a) carry out monitoring, verification and evaluation of the procedures for carrying out the individual activities of the investment firm or investment fund and identify the risks arising therefrom (internal audit);
(b) notify employees or third parties who, on a contractual basis, provide the investment firm or investment fund with certain activities under Article 2 (1) (a) to (j), before carrying out an internal audit, of its launch, unless this jeopardises the purpose of the internal audit;
(c) to request written opinions on the outcome of the internal audit;
(d) draw up an internal auditor's report containing information on the internal audit carried out and a draft recommendation and submit it to the competent management staff, statutory authority and supervisory board of the investment firm or investment fund;
(e) verify whether the measures taken on the basis of the proposed recommendations have been implemented within the deadlines and in what way;
(f) develop a methodology for carrying out internal audit and ensure its ongoing updating;
(g) develop a detailed internal audit activity plan for a period of at least one calendar year;
(h) regularly, in accordance with the control plan, process the internal auditor's activity report and submit it to the Supervisory Board and the statutory body of the investment firm or investment fund;
(i) to notify the competent management staff or, where appropriate, the supervisory board of an investment company or investment fund of any facts which might raise doubts as to its unbiased nature;
(j) take action against the misuse of information, data and documents acquired in its activities;
(k) carry out the activities referred to in (a) to (j) professionally, independently, objectively and honestly; and
(l) maintain confidentiality regarding the facts which he has learned in or in connection with the internal audit.
(7) An investment company or an investment fund shall, by internal regulation, lay down, in particular, the authorisation of an internal auditor
(a) to enter and obtain from the information system of an investment company or investment fund the data necessary for carrying out an internal audit;
(b) to enter the various sites of an investment company or investment fund, where this is necessary to carry out an internal audit;
(c) require all employees of an investment company or investment fund to provide the information and documents necessary for carrying out an internal audit activity; in relation to third parties which, on a contractual basis, provide activities for the company under Article 2 (1) (a) to (j), the investment firm or the investment fund shall ensure that the internal auditor's authorisation is adjusted contractually;
(d) require the responsible staff of the investment firm or investment fund to report on the removal of deficiencies identified by the internal auditor; and
(e) to report directly to the statutory authority and supervisory board of the company on the relevant matters relating to the internal audit.
Procedures to limit the possibility of conflicts of interest in the provision of services
(1) An investment company or investment fund shall, by internal regulation, adjust the conditions under which an investment company or investment fund employee may enter into trade in an investment vehicle on his or her behalf or on behalf of persons close to him.3)
(2) An investment company or investment fund may make the conclusion of a transaction referred to in paragraph 1 subject to prior approval, permit the conclusion of a transaction after a certain period of time or prohibit the conclusion of specific transactions. The conditions for giving prior consent and the way in which prior consent is granted shall be laid down in an internal regulation.
(3) The internal regulation referred to in paragraph 1 shall further adjust at least the manner and time limit for compliance with the obligation to report the subject-matter of the transaction, its volume, price, place, time and manner of closure and settlement to the staff responsible for compliance. An employee in charge of compliance shall keep records of the employees' transactions with investment vehicles, requests for consent and consent granted.
(4) In the event that securities issued by a collective investment fund are held by one investment company and the assets of both funds, that investment company shall, by internal law, prohibit the funds held by the collective investment fund for which securities are subject from being invested in securities issued by another collective investment fund whose assets are managed by that investment company.
(5) An investment company provides for an internal regulation prohibiting the inclusion in the base for the calculation of the farm fee of the cultivated collective investment fund, where it is determined from the equity value, the actual value of the investment of the collective investment fund in another collective investment fund managed by it.
(6) An investment company provides for a prohibition on the conclusion of transactions in investment vehicles or other assets by an internal rule
(a) between the collective investment fund and its shareholders, unless it is a sale or redemption of units;
(b) between the collective investment fund and the operator; This does not apply to the purchase or redemption of investment company units in the case of the holding fund it manages,
(c) between collective investment funds managed by the same investment company;
(d) between a collective investment fund and customers whose individual portfolios it manages, unless otherwise provided for in this decree; and
(e) between the collective investment fund and the members of the board, the supervisory board and the employees of the managing investment company; the internal regulation may allow the employees of an investment firm to purchase or buy back the units of an open holding fund managed by that investment firm if the method of setting the price for the sale and redemption does not allow an accurate estimate of that price based on the evolution of the value of the assets of the collective investment fund on that day.
(7) Furthermore, an investment company or an investment fund provides for a ban on the conclusion of transactions in investment instruments or other assets held by a collective investment fund with a person forming a group with that investment firm or investment fund, unless otherwise provided for in that decree.
(8) An investment company may provide for an exemption from the prohibition of trading provided for in paragraphs 6 and 7 by internal rules, provided that:
(a) a written intention is drawn up for the transaction, showing the effectiveness of the transaction;
(b) the transaction cannot be executed under the same or more favourable conditions with a third party;
(c) trade is in the interest of protecting the assets of the collective investment fund against impairment, trade is demonstrably advantageous to the collective investment fund; and
(d) the transaction is carried out with the agreement of the board of directors.
(9) An investment company will prohibit an employee by means of an internal regulation
(a) in the case of a collective investment fund, the agent responsible for the trading of the assets in the collective investment fund has simultaneously traded on behalf of an investment company, unless the conditions of paragraph 8 are met, or has been entrusted with the settlement of transactions;
(b) in charge of trading on behalf of an investment company, it is also responsible for settlement of transactions;
(c) in charge of the management of the customer's assets, it is also responsible for trading the assets of the collective investment fund;
(d) in charge of trading in the property of a collective investment fund, it has concluded transactions on its investment paper account or assets to be traded on a regulated or similar market for a collective investment fund;
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Regulation Information
| Citation | Decree No. 347 / 2004 Coll., on how the rules of prudent business and the rules of the organisation of the internal operation of the investment company and the investment fund are implemented |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 07.06.2004 |
|---|---|
| Effective from | 01.07.2004 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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