Disclosure Requirements - Latvia
Disclosure Category: 3
Background and legal basis
The Latvian rules regarding disclosure of changes in shareholdings of listed shares are set by:
- The law of 20 November 2013 on financial instruments market, as amended from time to time, (the “Law on Financial Instruments Market”) regarding changes in holding of securities listed on the Latvian regulated market; and
- Respective laws on the operation of regulated companies; for example:
- The law of 5 October 1995 on credit institutions, as amended from time to time (the “Law on Credit Institutions”);
- The law of 18 December 1997 on investment management companies, as amended from time to time (the “Law on Investment Management Companies”);
- The law of 10 June 1998 on insurance companies, as amended from time to time (the “Law on Insurance Companies and their Supervision”);
- The Law on Financial Instruments Market in cases of acquiring a financial qualifying holding in a regulated market organiser, the Latvian Central Depository or investment brokerage companies.
Obligation to report threshold crossings
The obligation to report the crossing of thresholds falls on the beneficial owner (that is, the party eligible to vote) as follows.
Thresholds for securities listed on the Latvian regulated market
Article 61 of Law of The Financial Instruments Market provides that, when a beneficial owner is aware of a transaction that has caused his holding of the voting rights in an Latvian listed company to reach, exceed or fall below the 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% thresholds or reach, exceed or fall below the 90% and 95% thresholds for issuers with Latvia as state of origin, then such beneficial owner must notify the Financial and Capital Markets Commission (FCMC) and the issuer within four (4) business days after passing the thresholds.
Thresholds for Financial qualified holdings
Credit institutions, insurance institutions, brokerage companies and investment companies are regulated separately. To acquire, directly or indirectly, 10% or more of a credit institution, insurance institution, brokerage company, investment company, the regulated market organiser or the Latvian Central Depository, or to respectively reach, exceed or fall below 20%, 33%, 50% of the issuer's share capital or voting rights (for example, Article 29 of the Law on Credit Institutions, Article 7 of the Law on Investment Management Companies, Article 26 & 28 of the Law on Insurance companies and their Supervision, Article 9 of the Law on Financial Instruments Market), the beneficial owner must seek prior approval from the FCMC.
Investment funds, alternative investment funds and similar entities shall not be entitled to acquire a qualified holding in any of regulated companies above-mentioned. In the event of such acquisition of a qualified holding, penalties may be charged as in cases of failure to acquire prior permission of the FCMC (detailed in the “Sanctions” below), and the relevant authorities of country of origin of such entities should be informed about these actions.
The obligation to seek approval for qualified holdings must be fulfilled in advance. Notice of a qualified holding should contain in-depth information (as per instructions set out in the rules legislated by the FCMC) about beneficial owner's personality to determine whether the beneficial owner meets the criteria or not.
According to Article 7(4) of Law on Financial Instruments Market, Article 28(4) of Law on Credit institutions and Article 25(2) of the Law on Insurance Companies and their Supervision, if stock has been acquired without being granted prior approval by the FCMC, the shareholder shall not be entitled to exercise the voting rights attached to all his/her shares.
The documentation can be completed by the beneficial owner’s representative duly authorised to do so.
Failure to fulfil disclosure requirements (where such disclosure is set by law) by any person increasing or decreasing their holding in an issuer's share capital or voting rights (whether directly or indirectly) is currently punishable by a fine.
In the case of failure to report changes in substantial shareholding of securities listed on the Latvian regulated market or of acquiring a substantial shareholding of a regulated company without the prior permission of the FCMC, penalties may be charged as follows:
- Up to EUR 14,200 for failure to report changes for any securities listed on the Latvian regulated market (according to Article 148(3) of the Law on Financial Instruments Market);
- From EUR 1,400 to EUR 14,200 for acquiring or significantly increasing the shareholding of a regulated market organiser, the Latvian Central Depository or an investment brokerage firms (according to Article 148(11) of the Law on Financial Instruments Market) without prior approval of FCMC;
- From EUR 14,200 to EUR 142,300 for acquiring or significantly increasing the shareholding in an insurance company (according to Article 109 (1) of Law on Insurance Companies and their Supervision) without prior approval of FCMC;
- In cases of acquiring or significantly increasing/decreasing the shareholding in a credit institution:
- 10% of the net income of the legal entity, with a minimum of EUR 142,300; or
- Up to EUR 5,000,000 for natural persons; and additionally
- Double the amount of possible income or loss caused.