CFCL Investment regulation – Czech Republic

Regulatory structure

Please refer to the CBL Market infrastructure - Czech Republic for the complete information about the Regulatory structure.

Holding Restrictions

Disclaimer

The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 2 October 2020. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and Clients should seek advice from independent professional counsel. Clients are responsible for ensuring compliance with the holding restrictions and agree to indemnify and hold harmless, CFCL, for any loss, expense, liability, damage, or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.

Holding Restrictions – CSD Market 

Disclosure requirements

Introductory information and categories

This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements. Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.

Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.

For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.

In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.

In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.

The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.

Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.

In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.

N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.

Disclosure categories

Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:

Category 1

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;

Category 2

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;

Category 3

Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.

Disclosure requirements – CSD market

Disclosure Category: 2

Upon request from the regulator, Clearstream Fund Centre S.A. (“CFCL”) may fall under the obligation to disclose the identity and holdings of final beneficial owners.

Consent

In order to comply with the legislation as mentioned below, clients entering into transactions in the Czech market must consent and are hereby deemed to consent to disclosure. Such consent includes the appointment of the requestor (for example, the issuer or its agent) as attorney-in-fact of such clients, under power of attorney, to collect from CFCL such information as is required to be disclosed. Clients not willing to give this consent cannot hold such securities and/or financial instruments in their account with CFCL.

Background and legal basis

Disclosure requirements related to general meeting of shareholders of a Czech bank derives from Article 20a par. 3 of the Czech Act No. 21/1992 Coll., on Banks, as amended.
The obligation to report threshold crossings derives from Article 122 of the Czech Act on Conducting Business in the Capital Markets (256/2004), as amended, and falls on the final beneficial owner.

Disclosure requirements related to general meeting of shareholders of a Czech bank

In the case of holdings in Czech bank shares, CFCL can be under an obligation to disclose to banks in their capacity as issuers or to the Czech National Bank in its capacity as regulator, or being asked to disclose the identity of beneficial owners holding such securities in the following situations:
Before each general meeting of shareholders of a Czech bank, a bank shall submit to the Czech National Bank an extract of all shareholders from the bank’s share issue seven days before the day preceding the date of the general meeting.
The Czech National Bank shall approve the list of shareholders or indicate in a written opinion those shareholders whose shareholder rights have been suspended or whose shareholder rights it has newly found reason to suspend, and it shall return the extract, together with its opinion, to the bank.
CFCL may thus be requested by the bank or its agent to provide a list of final beneficial owners holding such securities.

Obligation to report threshold crossings

With respect to holdings in Czech companies whose shares are admitted for trading on public markets in the Czech Republic or on any stock exchange in any EU member state, any acquisition that causes the holding to cross the 1% (for companies with registered capital higher than CZK 500 million (or equivalent in foreign currency), 3% (if the registered capital of the issuer exceeds CZK 100 million), 5%, 10%, 20%, 25%, 30%, 40%, 50% or 75% threshold of the total voting rights must be reported to the issuer and to the Czech National Bank (CNB) within four business days after the date on which the voting rights in question were acquired and on which this fact was known or could have been known by the final beneficial owner. The calculation of voting rights includes call options embedded into existing securities.

Note: If a final beneficial owner fails to make disclosure in a due and timely manner, then he cannot formally acquire additional equity in the company. Although such a purchase is not invalid, any acquired voting rights should not be exercised until the situation has been remedied.
If such a final beneficial owner were to exercise the said voting rights, the company would be exposed to the risk of an action being brought against it to invalidate any resolutions adopted by the respective general meeting of shareholders, and the final beneficial owner himself would be liable for any damage incurred by the company through such action being brought.

Please refer to the Disclosure Requirements – Czech Republic for more information.

Disclaimer

The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 2 October 2020. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and Clients should seek advice from independent professional counsel. Clients are responsible for ensuring compliance with the holding restrictions and agree to indemnify and hold harmless, CFCL, for any loss, expense, liability, damage, or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.