Pursuant to the Act of the Financial and Capital Market Commission adopted on June 1 2000, a new state authority, the Financial and Capital Market Commission, will commence operations in Latvia in July 2001. The commission will regulate and supervise the operation of the financial and capital market and its participants. By June 30 2001 the Credit Institutions Supervision Department of the Bank of Latvia, the Securities Market Commission and the Insurance Inspectorate will be consolidated, and will no longer exist separately. The commission will be the legal successor to the rights, obligations and liabilities of the Securities Market Commission, the Insurance Inspectorate and the Investment Guarantee Fund Department, and the legal successor to the rights, obligations and liabilities of the Bank of Latvia in the sphere of the supervision of credit institutions.
The act will apply to all issuers of securities, investors, credit institutions, insurers, private pension funds, insurance brokers, stock exchanges, depositaries, broker companies, brokers, investment companies and investment advisors, who are all defined as participants in the financial and capital market.
In accordance with the act, the commission's functions will be as follows:
- to issue normative regulations and orders regarding (i) the operation of the financial and capital market and its participants, (ii) procedures for the calculation of indices characterizing such activity, and (iii) the submission of reports;
- to regulate the operation of the financial and capital market and its participants;
- to specify qualifications and eligibility for the participants of and officials working in the financial and capital market;
- to specify the procedure for the licensing and registration of participants in the financial and capital market. As of July 1 2001 the commission will issue licences for banking and insurance activities and for operations in the securities market. Licences (permits) and professional qualification certificates for operations in the financial and capital markets which were issued by the Securities Market Commission, the Insurance Supervision Inspectorate and the Bank of Latvia, and which are valid as at July 1 2001, will remain valid until the end of the terms of validity specified therein;
- to summarize, analyze and publish information relating to the financial and capital market;
- to analyze laws and regulations in the financial and capital market, and to prepare proposals regarding the improvement of laws and regulations and their harmonization with those of the European Union; and
- to cooperate with the foreign institutions which supervise financial and capital markets, and to participate in the work of international organizations supervising financial and capital markets.
As of July 1 2001 it will be necessary to apply to the commission in order to:
- obtain a permit to issue shares into public circulation;
- obtain a permit for the merger or acquisition of credit institutions;
- make a mandatory offer; and
- gain a major shareholding.
In performing its functions the commission will have extensive rights, including the right to monitor the eligibility of participants in the financial and capital market, and their compliance with the regulations, and to apply sanctions specified in laws and regulations. If the regulations are breached, the commission may:
- take part in the general meetings of participants;
- convene meetings of their management bodies; and
- specify the questions to be reviewed.
The commission is to be responsible for the stability and development of the financial and capital market, as well as the advancement of free competition within the market.
The commission will be managed by a council consisting of five members: the chairman, his deputy and three council members who will also be directors of the commission's departments. The chairman of the commission and his deputy are appointed by the Saeima (Parliament) of Latvia for a six-year term, pursuant to a joint nomination from the governor of the Bank of Latvia and the minister of finance.
On October 26 2000 the Saeima appointed the first chairman of the commission, who was previously president of the Riga Stock Exchange. His deputy was previously the head of the Credit Institutions Supervision Department of the Bank of Latvia.
The commission will be financed by payments made by the participants in the financial and capital market (the amounts remain to be determined by the council itself).
As a result of the establishment of the commission, other legislative acts have also been amended in order to replace mention of defunct institutions with reference to the commission.
For further information on this topic please contact Filip Klavins or Laine Skopina at Klavins & Slaidins by telephone (+371 703 5222) or by fax (+371 703 5252) or by email ([email protected] or [email protected]).
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