CFCL Investment regulation – Latvia

Regulatory structure

Please refer to the CBL Market infrastructure - Latvia for the complete information about the regulatory structure.

Holding restrictions – CSD Market – Latvia

The Government has powers to limit non-resident participation in key industries.

With regard to voting rights in Latvian companies, when the holding or proportion of the voting rights reaches, exceeds or falls below the 5%, 10%, 15%, 20% 25%, 30%, 50%, 75%, 90% or 95% threshold of voting rights, the underlying beneficial owner is obliged to notify both the issuer and the Financial and Capital Markets Commission (FKTK).

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 - Latvia

Disclosure Category: 2

Clearstream Fund Centre S.A. (“CFCL”) may be required under Latvia laws and regulations to disclose the identity and holdings of Clients and/or ultimate beneficial owners, upon request, in the case of holding investment funds in Latvia. Beneficial owner is obligated to report threshold crossing of 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.

Non-compliance may incur a fine in which the penalty amount will be dependent on the type of infringement.

Consent

In order to comply with the applicable legislation, clients with holdings in Latvian investment funds or entering into transactions in Latvia 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 the Latvian Money Laundering and Terrorist Financing Prevention Act, the fund manager or investment fund founded as a public limited company is required to perform AML/KYC checks. Pursuant to the EU Fourth Anti-Money Laundering Directive 2015/849, all corporate and other private legal entities (that is, public limited fund or limited partnership fund) incorporated within Latvia must also take reasonable steps to identify their ultimate beneficial owners and are entitled to request information from shareholders or members. Therefore, when requested, CFCL must submit the information to the relevant parties.

Background and legal basis

In the case of holding Latvian investment funds, CFCL is obliged under the following legislation to disclose the identity and holdings of clients, third parties and/or ultimate beneficial owners.

• Latvian Money Laundering and Terrorist Financing Prevention Act
• EU Fourth Anti-Money Laundering Directive 2015/849
• Latvian Securities Register Maintenance Act

Sanctions

Subject to changes in Latvian law, sanctions and other consequences may be applied to for non-compliance. Consequences for non-compliance with such requests for CFCL clients could be up to EUR 1,200 penalty for a shareholder or member of private legal person for not submitting the data of the beneficial owner or failure to report on a change of the data or for knowingly submitting false data and the obliged entity cannot take due diligence measures because of it. There is a penalty of EUR 32,000 for the same act committed by a legal person.

Please refer to Disclosure Requirements - Latvia for complete information on disclosure requirements.

Disclaimer

The information contained in the Disclosure Requirements is based on the legal opinion obtained by CBL acting as sub-custodian for CFCL that was issued on 24 January 2019. CBL 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 CBL 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.