CFCL Investment regulation – Finland

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 – Register Market – Finland

Restrictions on clients

Open-ended funds

For investment funds established under the Finnish Act on Mutual Funds, ultimate beneficial owners who are Finnish investors are not allowed to hold such mutual funds on the register market through CFCL. This restriction applies to all Finnish persons or entities regardless of their current place of residency. Finnish CFCL clients are allowed to use CFCL nominee services to invest in Finnish funds provided that the ultimate beneficial owners are not Finnish. It is the responsibility of the client to ensure compliance with the restriction.

Certain funds may impose other specific restrictions on investor domicile. Clients must refer to and abide by restrictions (if any) contained in the fund prospectus before entering into transactions.

Closed-ended funds

Finnish law does not contain restrictions on the residency of the limited partner in the limited partnership company. However, some limited partnership agreements may restrict nominee holdings and may contain restrictions on the residency of the ultimate beneficial owner as their limited partner. Clients must refer to and abide by restrictions (if any) contained in the fund prospectus and partnership agreements before entering into transactions.

Restrictions on U.S. persons

According to some nominee agreements signed with the fund managers, clients are advised that units of the funds must not be, directly or indirectly, marketed to, offered to, subscribed for, or purchased on behalf of U.S. Persons. Should client become aware of any investor having subscribed to the units of the Finnish funds qualify as U.S. Persons, client undertakes to inform CFCL thereof without any delay.

CFCL are advised that the Finnish fund manager reserves the right to reverse such subscriptions and reserves the right to reclaim any subscription fees and remuneration paid out or credited in connection with fund units for whom the subscriber is subsequently identified to be a U.S. Person.

Please refer to the List of fund managers, which will be only visible in the Attachments section of the Market Specifications – Investment Funds – Finland page if logged in as a Premium User.

The term “U.S. Person” means “U.S. Person” as defined in the Prospectus of the Funds from time to time based on definition of “U.S. Person” on Rule 902 of Regulation S and does not include any “Non-United States person” as used in Rule 4.7 under the U.S. Commodity Exchange Act, as amended.

Restrictions on settlement

Clients are advised that internal transfer between two accounts within CFCL is not allowed. Clients need to instruct CFCL to make the transfer through the fund manager / transfer agent. Certain funds may impose other settlement or transfer restrictions. Clients must refer to and abide by restrictions (if any) contained in the fund prospectus before entering into transactions.

Restrictions on non-financial rights

Pursuant to Section 57 e of the Act on Mutual Funds, a nominee can only exercise financial rights such as subscriptions, redemptions, and dividend entitlements. A nominee managing fund units has no right to participate in the General Meeting of the unitholders, and no certificate of participation is issued for fund units entered in the name of the nominees. Therefore, clients cannot exercise their voting rights through CFCL.

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 – Register Market - Finland

Disclosure Category: 1

Clearstream Fund Centre (“CFCL”) , as an authorized nominee in Finland, is under an obligation, on demand, to disclose the identity and holdings of clients and ultimate beneficial owners holding Finnish investment funds.

Consent

In order to comply with the applicable legislation, Clients with holdings in Finnish investment funds or entering into transactions in Finland market must consent, and are hereby deemed to consent, to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Clients who do not grant such authority cannot hold such investment funds / financial instruments in their accounts with CFCL.

Disclosure Requirement

Pursuant to Chapter 9a of the Finnish Act on Mutual Funds,

Section 57 a – Units owned by a foreign (that is, non-Finnish) national or a foreign organization or foundation may be entered in the unit register in the name of the nominee. A precondition for the registration of a unit under a nominee instead of the unit holder shall be the right of the fund manager to obtain information on the ultimate beneficial owner.

Section 57 c – The fund manager and the nominee must enter into a written contract that shall conclude that the nominee submits to the fund manager the information referred to in Section 53 relating to the respective unit holders, as well as other information required by the fund manager under the legislation on its operations.

Section 57 g – The Finnish Financial Supervisory Authority (FSA), prosecuting and pre-trial investigation authority and other authorities permitted by Finnish law may request the nominee to provide information such as, but not limited to, the name, home state and the number of units held by the unit holder. The FSA may, alternatively, require a written affirmation that the ultimate beneficial owner of the fund units is not Finnish.

Clients are required to inform CFCL if they are the ultimate beneficial owner of these Finnish fund units or not. If they are not the ultimate beneficial owner, clients need to ensure that CFCL, at all times, is allowed legal and practical access to information regarding the identity of the beneficial owner. Clients subject to provisions of confidentiality in their home country must obtain the necessary legal basis for disclosure through client agreements (prior consent). In instances where there are multiple levels or intermediaries between CFCL and the ultimate beneficial owner, clients must ensure that a legal basis exists requiring “clients at each level” to submit the identity of their respective clients upon request.

For Finnish funds subject to the Act on Mutual Funds, clients must affirm to CFCL in writing that the ultimate beneficial owner is not Finnish and any other residency restrictions that the specific fund may impose.

Therefore, if a client does not provide CFCL with this legal and practical access to the required beneficial owner information, CFCL may refuse the nominee assignment.

Background and legal basis

When holding Finnish investment fund units or shares, CFCL is obliged to disclose the identity and holdings of clients and ultimate beneficial owners in the following cases:

• Disclosure requirements under the Act on Mutual Funds (Sijoitusrahastolaki), also known as the Act on Common Funds (48/1999, as amended);
• Tax reporting obligations set down in the Finnish Tax Assessment Procedure Act (1558/1995, as amended) and other Finnish tax legislation. Where CFCL’s clients are subject to tax reporting obligations with the relevant tax authorities, they are required to proceed with the required reporting or contact CFCL for assistance, where such service is offered by CFCL;
• Obligation on CFCL as a nominee to fulfil any tax reporting requirements to relevant tax authorities relating to the holdings of our clients and ultimate beneficial owners;
• AML Disclosure requirements: In order for the fund managers to satisfy their obligations, to the extent required by the local legislation relating to the fight against money laundering and the financing of terrorism, as well as Know Your Client (KYC) requirements.

According to the terms and conditions stated in the nominee agreements that CFCL, in its capacity as a nominee, had signed with the respective fund managers in compliance with Section 57 c of the Act on Mutual Funds, clients are advised that CFCL as nominee is obliged to disclose information on CFCL clients and/or the ultimate beneficial owners / the end clients behind the whole custody chain, to the fund managers upon request within the time stipulated. Such information includes but not limited to the following: full name, address (street address, city, and country), date of birth, tax identification number (TIN), and the number of units held for each of the fund unit series. For funds units sold or redeemed, information required includes but not limited to the following: full name, address, date of birth, tax identification number (TIN), the number of funds units redeemed, redemption date, redemption price and fees associated with redemption (if any), subscription date, subscription price and fees associated with subscription (if any).

Sanctions

Failure to comply with the disclosure request from the fund managers, its agents, the regulators/authorities within the stipulated time frame may result in the blocking of holdings, freezing of accounts, or compulsory redemption of the fund units/shares imposed by the fund managers or regulators. CFCL may not accept the nominee assignment and clients need to transfer the relevant holdings out of CFCL. Non-compliance with the disclosure requirements may also result in fines, or the withdrawal of authorization for CFCL to act as a nominee.

Disclaimer

The information contained in the Disclosure Requirements is based on the legal opinion obtained by CBL acting as a sub-custodian for CFCL 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 Disclosure Requirements do not constitute legal advice and Clients should seek advice from independent professional counsel.

Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless, CBL, for any loss, expense, liability, damage, or claims, whether direct or indirect, against or incurred by CBL arising out of or resulting from such non-compliance.