CBL Disclosure Requirements - Iceland

16.04.2020

Disclosure Category 1

With regard to holdings in securities listed on the Icelandic marketplace, and/or registered in an Icelandic Securities Register, the custodian is under an obligation to disclose the identity and holdings of customers and the identity of final beneficial owners holding applicable positions.

Consent

Customers entering into any transactions in the Icelandic domestic market hereby consent and are deemed to consent to the disclosure and appointment of the requestor (for example, Fjármálaeftirlitið (the Financial Supervisory Authority – FSAI) or Ríkisskattstjóri (the Icelandic Tax Authorities – RSK) as their attorney-in-fact, under power of attorney to retrieve the required information from Clearstream Banking S.A. (CBL) for disclosure.

Background and legal basis

In the case of direct or indirect holdings of Icelandic securities in a nominee account with Nasdaq CSD Iceland (NCSD), the custodian is under an obligation to guarantee compliance with the rules on disclosure of information to FSAI and RSK. The FSAI and RSK may establish further rules on disclosure of information.

The legal basis for disclosing information is:

  • Regulation No 706/2008 on nominee registration and the custody of financial instruments in nominee accounts and, among others, Articles 2, 4, 6, 7, 8, 14 and 15 thereof;
  • Regulation No 45/1987 on the Withholding Tax Act (WTA) (Article 20 in particular);
  • Act No 108/2007 on Securities Transactions (the “Securities Transaction Act”) in accordance with Chapter IX, requires disclosure and notification of changes in significant proportions of voting rights to the FSAI and to the issuer;
  • Icelandic Act No 94/1996 on the Withholding of Tax on Financial Income (the WTA) and Act No 90/2003 respecting income tax (the "Icelandic Tax Act" or ITA) as amended in particular in Articles 90, 92 and 94 thereof.

Disclosure requirements of the book entry system and securities market

The Icelandic authorities are entitled to obtain information on the beneficial owners of any financial instrument held by the custodian in Iceland that is listed on the Icelandic marketplace, and/or registered in an Icelandic Securities Register.

As such, local laws and regulations require CBL to disclose securities trading and holding information, such as the identity of the ultimate beneficial owners of certain securities or transactions.

Therefore, CBL customers are only able to participate in the services offered by CBL in the Icelandic market if the CBL customer delivers full or partial customer information upon request by CBL. Such as information related to its clients and its clients' holding including, but not limited to:

  • The identity of the ultimate beneficial owner of financial instruments held in a nominee account;
  • The holdings of financial instruments and/or voting rights of the client beneficial owners;
  • The identity of the ultimate beneficiary of a specific transaction.

CBL customers must deliver the information as requested by the Icelandic authorities and collected by CBL within the requested timeframe.

If a customer does not provide such details, CBL reserves the right to disclose to the requesting authorities the identity and positions of the customers, as well as to exclude such customer from any services offered on the Icelandic market, and to take all necessary steps in relation thereto.

Tax disclosure requirements

In line with the WTA, and ITA,  all entities, including banks, savings banks and other financial institutions, securities markets and others that handle buying and selling, commission trading and other handling of shares, shall, of their own accord, supply the Director of Internal Revenue with a report of such transactions and parties thereto, for free, and in a form decided by the Director of Internal Revenue.

Banks, savings banks, other financial entities and other entities in accordance with Paragraph 1 of Article 3 of Act 94/1996 that accept deposits for the purpose of earning interest are of their own accord to give the tax authorities, for free, and in a form decided by the Director of Internal Revenue, information about paid or due interest in the year in accordance with Article 8 of this Act, as well as withheld taxes and deposits in bank accounts and any kind of securities- and investment funds. The same applies to any kind of loans to customers and interest payments from those loans.

Therefore, to comply with Icelandic disclosure and reporting requirements, CBL is requested to report the following information to the Icelandic Tax Authorities (RSK):

  • On a monthly basis, the name and transaction details of the CBL customer to the Icelandic tax authorities (RSK); and
  • Upon request, disclosure of the positions of the ultimate beneficial owners on a specified date in a given security, upon request, to the tax or any other relevant authorities in Iceland.

Therefore, CBL customers are only able to participate in the services offered by CBL in the Icelandic market if the CBL customer delivers full or partial customer information upon request by CBL.

If a customer does not provide such details, CBL reserves the right to disclose to the requesting authorities the identity and positions of the customers, as well as to exclude such customer from any services offered on the Icelandic market, and to take all necessary steps in relation thereto.

In the event that the identity of a beneficial owner of Icelandic securities (the "Instruments") is undisclosed for tax purposes, CBL may be requested to disclose to the Icelandic Tax Authorities details of the CBL customers holding Instruments on behalf of the beneficial owner in question (including the identity of the customer, details of holdings and all other information requested).

If CBL's customer is the beneficial owner, CBL may have to disclose details about the customer.

Additionally, in the event that details of transactions or the transaction beneficiary are requested by the Icelandic Tax Authorities, CBL customers are obliged to disclose the requested information within the specified timeframe and level of details.

Other reporting obligations

Obligation to report threshold crossings (“Changes in significant proportions of voting rights”)

The FSAI and the issuer must be notified in a verifiable manner if voting rights or holdings in the company reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 50%, 66⅔% or 90% of a listed company. In such events, the issuer itself shall make such notification public (usually through the stock exchange).

Exemption from the notification requirement applies in relation to shares acquired for the sole purpose of clearing and settling within the usual short settlement cycle, or when a party holds shares in the capacity of custodian (provided that such custodian is only able to exercise the voting rights attached to such shares under instructions given in writing or through electronic means).

The Securities Transaction Act can be found at: www.ministryoffinance.is/media/skjal/Act_No_108_2007_on_Securities_Transactions.pdf

Investment restrictions

Foreign investment is not allowed in any company involved in “fish operations” or the primary fish processing industry.

Only Icelandic citizens and other Icelandic entities, as well as individuals and legal entities domiciled in another member state of the EEA, are permitted to own energy exploitation rights for non-domestic use of waterfalls and geothermal energy. The same applies to enterprises that produce or distribute energy.

Positions held in Icelandic non-taxable debt securities by Clearstream Banking customers, may only be held by the following:

  • Non-resident beneficial owners; and
  • Clearstream Banking customers that are Icelandic intermediary banks complying with Article 3.2 of Act No 94/1996; or
  • Icelandic resident beneficial owners, if held via a Clearstream Banking customer, that is an Icelandic intermediary bank complying with Article 3.2 of Act No 94/1996.

Indemnity

Each customer hereby acknowledges and agrees to indemnify and hold harmless CBL from any and all expenses (including attorney fees), penalties, loss, damages, judgments, suits or any other liabilities whatsoever incurred by CBL due to the fact that it will have provided CBL with incomplete, untrue, misleading or inaccurate information or will not have provided CBL with the information requested in a timely manner.

Sanctions

The FSAI may impose administrative fines on any party that does not fulfil the disclosure requirements. Fines imposed on a legal person may range in amount from ISK 50,000 to ISK 50 million (which may change from time to time).

According to the Securities Transaction Act (Article 145), the violation of, among others, Articles 78 and 79 of the Securities Transaction Act is subject to fines or up to two (2) years imprisonment.

The sanctions in the event of violation of the ITA's disclosure rules are set out in the ITA, in particular in Article 109 thereof.