It is now possible to set up umbrella funds in Slovakia.
An umbrella fund is a collective investment scheme with several distinct sub-funds that are traded as individual investment funds, and treated separately for accounting purposes.
The umbrella fund structure makes it cheaper for investors to move from one sub-fund to another. It is also cheaper to run as it removes regulatory duplication.
It is only necessary to prepare one set of statutes containing provisions for the umbrella fund, all sub-funds and for specific sub-funds.
The management company is required to set up mechanisms to identify and manage risk, including a compliance, internal audit and risk management function, investor complaint handling and personal business.
The functions are set up to:
- monitor and regularly evaluate the adequacy and efficiency of the management company’s measures and procedures, including those for performance improvement
- draft, enforce and follow a plan for auditing the adequacy and efficiency of the management company’s internal control mechanisms and internal acts
- issue recommendations based on the results of its activities
- verify compliance with its recommendations
- submit an internal audit report.
The risk management and internal audit functions only need to be set up where reasonably required by the character and the scope of the activity. Management companies:
- must have registered capital of at least €125,000 (there is no longer an initial capital requirement, to bring them into line with financial institutions in other sectors). They are also subject to capital adequacy requirements
- may employ independent and tied financial agents to find investors for the sub-funds, as long as they are registered with the National Bank of the Slovak Republic
- must ensure that their employees have the necessary professional training to deal with non-professional clients and investors or shareholders
- must abide by the ‘full passport’ rules governing cross-border activities (and the activities of foreign management companies), which give them unrestricted business access to any country in the EU where they establish a branch office without having to pay to provide their services. All they have to do is notify the supervisory authority in the relevant country and provide them with the information required by the law of the country where they have their seat. Those with their seat in the Slovak Republic may organise and manage European funds in other EU countries that comply with the laws of those countries, just as foreign management companies may do the same in in the Slovak Republic in compliance with its laws.
The structure of master feeder funds is also established in the new law:
- a ‘feeder fund’ may be a standard common fund (or sub-fund of a standard umbrella common fund) or a European fund or sub-fund, where at least 85% of the asset value is invested in the units or securities of the master fund
- feeder fund property does not have to be reinvested on the principle of restriction and risk distribution
- a ‘master fund’ may be a standard common fund (or sub-fund of a standard umbrella common fund) or a European fund or sub-fund, where at least one of its shareholders is a feeder, it is not itself a feeder and does not hold any units of a feeder in it assets.
Investors are entitled to receive from the management company for each common fund:
- key information
- a prospectus
- an annual report
- a biannual report
Instead of a simplified prospectus, investors must now receive key information, which must be true, clear and not misleading and comply with the relevant parts of prospectus. It must also include information enabling the investor to gain correct understanding of the nature and risks of the common fund.
The prospectus must contain all information necessary to enable investors to form a correct opinion on the investment possibilities on offer and the risks attaching to them. The legislation also prescribed certain information which must be included. It must also explain the risk profile for lay investors clearly and comprehensibly (unless it is a prospectus for special common funds aimed at professional investors).
Law: Act No 203/2011 Coll. on collective investment implementing Directive 2009/65/EC