Disclosure Requirements - Latvia
Disclosure Category 2
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 18 June 2015 on Insurance and Reinsurance, as amended from time to time (the “Law on Insurance and Reinsurance”);
- The Law on Financial Instruments Market in cases of acquiring a financial qualifying holding in a regulated market organiser, the Nasdaq CSD or investment brokerage companies.
Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC with regard to the encouragement of long-term shareholder engagement (the second shareholder’s rights directive “SRD II”) has been transposed into Financial instruments market Law on 16 July 2019 (SDR II Law).
Customers are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, but not limited to the issuer or its agent) as their attorney-in-fact, under power of attorney, to collect from CBL such information as is required to be disclosed. Customers not willing to give this consent cannot hold such securities and/or financial instruments in their account with CBL.
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% or 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
Regulated market operators or investment brokerage companies are regulated separately. To acquire, directly or indirectly, 10% or more of a regulated market operator or investment brokerage company, 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 76 of the Law on Insurance and Reinsurance, 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 75(4) of the Law on Insurance and Reinsurance, 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, 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 94 (4) of Law on Insurance and Reinsurance) 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.
Shareholder identification as set out in the SRD II Law
The SRD II Law provides for the right for issuers to identify their shareholders.
Issuers can request intermediaries at each level of a custody chain to promptly provide relevant information to facilitate such identification.
In accordance with the SDR II Law as amended, an intermediary (in this case CBL) shall, upon receipt of the shareholder identification disclosure request, transmit a similar request to the next intermediaries in the custody chain (that is, CBL customers with holdings in the requested securities). A response to the shareholder identification disclosure request shall be sent by every intermediary in the custody chain directly to the recipient's address defined in the request and with CBL books only.
The Customers are hereby informed and acknowledge that, according to Article 59.7(6) of the SRD II Law, the intermediary that discloses information concerning the identity of shareholders for the purposes of the SRD II rules (including CBL) shall not be considered to be in breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision.