Law on the Implementation of Regulation (EU) No 1286/2014 on Key Information Documents for Packaged Retail and Insurance-based Investment Products (Official Gazette Nos. 112/18 and 123/23 – Unofficial Consolidated Text)

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Croatian Financial Services Agency, 10000 Zagreb, Franje Račkoga 6, P.O. Box 164, Croatia t: 01 6173 200, f: 01 4811 507, e: info@hanfa.hr, OIB: 49376181407, MB: 02016419, w: www.hanfa.hr LAW ON THE IMPLEMENTATION OF REGULATION (EU) NO 1286/2014 ON KEY INFORMATION DOCUMENTS FOR PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS (Official Gazette Nos. 112/18 and 123/23 – Unofficial Consolidated Text)

I. GENERAL PROVISIONS Subject of the Law Article 1. This Law establishes the competent authority, its scope of work and powers, and penalty provisions for the implementation of the European Union regulation referred to in Article 2 of this Law.

European Union Law Article 2. This Law ensures the prerequisites for the implementation of Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on packaged retail and insurance-based investment products (PRIIPs) key information documents (OJ L 352/1, 9. 12. 2014.) (hereinafter: Regulation (EU) No 1286/2014).

Definitions Article 3. (1) For the purposes of this Law, the following terms have the meanings set out below:

1. Agency means the Croatian Financial Services Agency, whose competences and scope of work are defined by the law governing the scope of work and competences of the Croatian Financial Services Agency, this Law, and other laws.
2. ESMA means the European Securities and Markets Authority, established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15. 12. 2010).
3. EIOPA means the European Insurance and Occupational Pensions Authority, established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EZ (OJ L 331, 15. 12. 2010).
4. EBA means the European Banking Authority, established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EZ (OJ L 331, 15. 12. 2010).
5. ESA is the collective term for the European supervisory authorities, namely: EIOPA, EBA and ESMA.
6. Total revenue means total annual revenue based on the most recent available annual financial statements obtained by the offender from carrying out its economic activity.
7. Annual financial statements mean annual financial statements in accordance with the law governing business accounting. (2) Other terms used in this Law have identical meanings to those used in Regulation (EU) No 1286/2014.

II. COMPETENT AUTHORITY, ITS POWERS AND SCOPE OF WORK Competent Authority Article 4. The competent authority for the implementation of Regulation (EU) No 1286/2014 and this Law is the Agency.

Subjects under the Agency's Supervision Article 5. The subjects under the Agency's supervision are PRIIP issuers and persons who advise on or sell PRIIPs, as determined by the laws governing the establishment and operation of these subjects.

Powers of the Agency Article 6. The Agency's powers for the purposes of implementing Regulation (EU) No 1286/2014 and this Law relate to:

1. conducting supervision regarding compliance with the provisions of Regulation (EU) No 1286/2014 and this Law by the subjects under supervision referred to in Article 5 of this Law;
2. imposing supervisory measures on the subjects under supervision referred to in Article 5 of this Law;
3. submitting prosecution proposals upon established breaches of the provisions of Regulation (EU) No 1286/2014 and this Law by the subjects under supervision referred to in Article 5 of this Law.

Scope of Work of the Agency Article 7. The Agency performs the following tasks for the purposes of implementing Regulation (EU) No 1286/2014 and this Law:

1. supervises the compliance of subjects under supervision referred to in Article 5 of this Law with obligations under Regulation (EU) No 1286/2014 and this Law;
2. monitors the market for insurance-based investment products placed on the market, distributed or sold in the Republic of Croatia or from the Republic of Croatia, in accordance with Article 15(2) of Regulation (EU) No 1286/2014;
3. publishes on its website a notice of each decision to impose a ban or restriction under Article 17(1) of Regulation (EU) No 1286/2014, in accordance with Article 17(5) of Regulation (EU) No 1286/2014, as well as a notice regarding the reasons for acting contrary to EIOPA's opinion in accordance with Article 18(3) of Regulation (EU) No 1286/2014;
4. exchanges information and cooperates with competent authorities of other Member States and EIOPA in accordance with Article 17(3) and (4) of Regulation (EU) No 1286/2014;
5. reports to the ESA on imposed sanctions and measures in accordance with Articles 27 and 29 of Regulation (EU) No 1286/2014;
6. publishes on its website each imposed sanction and other measure for breach of the provisions of Regulation (EU) No 1286/2014 in accordance with Article 29 of Regulation (EU) No 1286/2014, which includes data on received non-final penalty decisions, with a note that the decision is non-final, as well as agreements on conditions for acknowledging guilt and agreements on sanctions and measures concluded with the offender in accordance with the law governing penalty proceedings, and in the case referred to in Article 29(1)(c) of Regulation (EU) No 1286/2014 regarding unpublished imposed sanctions and other measures, informs the ESA.

III. SUPERVISION Supervision Procedure Conducted by the Agency Article 8. (1) The Agency conducts supervision over the implementation of Regulation (EU) No 1286/2014 and subjects under supervision referred to in Article 5 of this Law within its competence, in accordance with the provisions of Regulation (EU) No 1286/2014, this Law, laws governing the establishment and operation of subjects under supervision referred to in Article 5 of this Law, and the law governing the scope of work and competences of the Agency. (2) The Agency conducts supervision referred to in paragraph 1 of this Article:

1. by monitoring, collecting and verifying published data and notices submitted to the Agency in accordance with the provisions of Regulation (EU) No 1286/2014, and by conducting supervision in accordance with the laws governing the establishment and operation of subjects under supervision referred to in Article 5 of this Law and the law governing the scope of work and competences of the Agency;
2. by imposing supervisory measures under Article 10 of this Law.

Powers of the Agency in Conducting Supervision Article 9. (1) If necessary for the purpose of supervising compliance with the provisions of Regulation (EU) No 1286/2014 and this Law, the Agency may require subjects under supervision referred to in Article 5 of this Law to provide access to any document in any form and to submit a copy thereof. (2) The Agency may also request all other documentation and information for the purpose of verifying the compliance of the subjects under supervision with Regulation (EU) No 1286/2014, this Law, regulations adopted on the basis of this Law and other relevant regulations. (3) If necessary for the purpose of supervising compliance with the provisions of Regulation (EU) No 1286/2014 and this Law, the Agency may conduct direct supervision with prior notice of supervision or without it.

Supervisory Measures of the Agency Article 10. (1) When the Agency, in accordance with its powers under Article 6 of this Law, establishes breaches of the provisions of Regulation (EU) No 1286/2014 and/or this Law, it is authorized to impose supervisory measures by decision:

1. order the publication of the key information document for retail investors on its website;
2. require amendment of an existing key information document for retail investors if it is inaccurate, untrue, unclear or ambiguous;
3. require alignment of the content of the key information document with all binding contractual documents, relevant parts of prospectuses and PRIIP terms;
4. ban or suspend promotional material that: a) includes statements contrary to the information contained in the key information document or which diminishes the significance of the key information document; b) does not state that the key information document is available and does not provide information on how and where it can be obtained, including the PRIIP issuer's website;
5. require revision of the key information document when changes are deemed necessary, prohibit delivery before changes are made and order publication of the revised version without delay;
6. order timely delivery of the key information document to retail investors before those retail investors are bound by any contract or offer relating to that PRIIP, except in the case referred to in Article 13(3) of Regulation (EU) No 1286/2014;
7. prohibit the charging of fees for delivery of the key information document to retail investors by a person who advises on or sells the PRIIP;
8. publicly publish a warning stating the person responsible for the breach and the nature of the breach of the provisions of Regulation (EU) No 1286/2014. (2) When the Agency establishes breaches of the provisions of Regulation No 1286/2014 or this Law by subjects under supervision referred to in Article 5 of this Law, the Agency may, subject to the conditions set out in Article 17 of Regulation (EU) No 1286/2014, in addition to the supervisory measures prescribed in paragraph 1 of this Article, by decision ban or restrict in the Republic of Croatia or from the Republic of Croatia:
9. advertising, distribution and/or sale of certain insurance-based investment products and/or insurance-based investment products with special characteristics; or
10. the type of financial activity and/or practice of an insurance company or reinsurance company. (3) The Agency may by decision order a subject under supervision referred to in Article 5 of this Law to directly notify the retail investor about the imposed sanction or other measure and the possibility of lodging a complaint or obtaining legal protection. (4) Against decisions of the Agency referred to in paragraphs 1, 2 and 3 of this Article, an appeal is not permitted, but administrative proceedings may be initiated.

IV. COOPERATION Cooperation Article 11. For the purposes of implementing Regulation (EU) No 1286/2014 and this Law, the Agency cooperates with other authorized bodies and exchanges data with them, in accordance with the provisions of Regulation (EU) No 1286/2014, relevant statutory provisions and cooperation agreements.

V. LANGUAGE, DELIVERY DEADLINES AND NOTICES PUBLICATION Delivery of the Key Information Document Article 12. (1) A PRIIP issuer from the Republic of Croatia or a person selling a PRIIP in the Republic of Croatia is obliged to deliver to the Agency the key information document for that PRIIP. (2) The Agency prescribes by regulation the deadlines and method of delivery of the key information document.

Language and Publication of Notices Article 13. (1) The key information document for a PRIIP distributed in the Republic of Croatia must be written or translated into Croatian in accordance with Article 7(1) of Regulation (EU) No 1286/2014. (2) By way of exception to paragraph 1 of this Article, the Agency may permit the use of another language in the key information document in cases where it is evident that this does not negatively affect the interests of retail investors to whom the product is distributed. (3) All notices that subjects under supervision referred to in Article 5 of this Law are obliged to deliver to the Agency and publish publicly in accordance with the provisions of Regulation (EU) No 1286/2014 and this Law are subject to the provisions on language of publication in laws governing the establishment and operation of subjects under supervision referred to in Article 5 of this Law, unless delegated acts of the European Commission or other implementing regulations adopted on the basis of Regulation (EU) No 1286/2014 prescribe explicit publication in a specific language in certain cases.

VI. MECHANISMS ENCOURAGING REPORTS OF POSSIBLE OR ACTUAL BREACHES OF REGULATION (EU) NO 1286/2014 Mechanisms Encouraging Reports of Possible or Actual Breaches of Regulation (EU) No 1286/2014 Article 14. (1) An employee's report to the Agency regarding a possible or actual breach of Regulation (EU) No 1286/2014 committed within their employer or made in good faith to the Agency regarding that suspicion does not constitute a justified reason for termination of the employment contract. (2) In case of dispute regarding placing an employee in a less favorable position than other employees due to the employee's report to the Agency regarding a possible or actual breach of Regulation (EU) No 1286/2014 committed within their employer or made in good faith to the Agency, which has led to a breach of one of the employee's rights under the employment relationship, if the employee proves that they were placed in a less favorable position and that one of their employment rights was breached, the burden of proof shifts to the employer, who must prove that the employee was not placed in a less favorable position than other employees or that their employment rights were not breached. (3) The Agency prescribes by regulation effective mechanisms for receiving and investigating reports of possible or actual breaches of Regulation (EU) No 1286/2014 and subsequent proceedings, including the establishment of secure communication channels for such reports, with the provisions of Article 28 of Regulation (EU) No 1286/2014 applied accordingly.

Powers of the Agency Article 15. The Agency prescribes by regulation, for the implementation of Regulation (EU) No 1286/2014, delegated acts and regulatory technical standards: – details of the procedure used to determine whether a PRIIP has specific environmental or social objectives, as adopted by the European Commission on the basis of Article 8(4) of Regulation (EU) No 1286/2014; – details regarding the content of information, risk and reward presentation and cost calculation methodology in the key information document, as adopted by the European Commission on the basis of Article 8(5) of Regulation (EU) No 1286/2014; – details regarding the procedure for reviewing information contained in the key information document by PRIIP issuers, as adopted by the European Commission on the basis of Article 10(2) of Regulation (EU) No 1286/2014; – details regarding the criteria for fulfilling requirements to ensure the key information document, as adopted by the European Commission on the basis of Article 13(5) of Regulation (EU) No 1286/2014; – details regarding criteria and factors that competent authorities should take into account when determining whether there is significant concern about investor protection or a threat to the orderly functioning and integrity of financial markets or commodity markets, as well as financial system stability, as adopted by the European Commission on the basis of Article 17(7) of Regulation (EU) No 1286/2014.

VII. PENALTY PROVISIONS Introductory Provisions Article 16. (1) If the offender, within the meaning of the law governing business accounting, is a parent company or a subsidiary of a parent company that is required to prepare consolidated financial statements, the total revenue under Articles 17, 18 and 19 of this Law is determined based on the consolidated financial statements approved by the governing body of the ultimate parent company. (2) If official annual financial statements for the year in which the breach was committed are not available at the time of imposing the monetary penalty, the basis for calculating the penalty amount for breaches under Articles 17, 18 and 19 of this Law shall be the last official annual financial statements preceding that year. (3) When determining the type of supervisory measure and when submitting prosecution proposals for established breaches of the provisions of Regulation (EU) No 1286/2014 and this Law, the Agency takes into account all relevant circumstances, particularly those specified in Article 25 of Regulation (EU) No 1286/2014.

Serious Breaches by PRIIP Issuers Article 17. (NN 123/23) (1) A legal entity, PRIIP issuer, shall be fined for a breach with a monetary penalty in an amount that is a multiple of 1,000, which shall not be less than 0.01% nor greater than 3% of the total revenue obtained by the PRIIP issuer in the year the breach was committed, as determined by official financial statements for that year, in case of a systematic and serious impact of the committed breach on the interests of retail investors if:

1. it does not prepare a key information document before the PRIIP becomes available to retail investors or does not publish it on its website in accordance with Article 5(1) of Regulation (EU) No 1286/2014;
2. it does not prepare a key information document in an accurate, true, clear and unambiguous manner in accordance with Article 6(1) of Regulation (EU) No 1286/2014;
3. it does not prepare a key information document in accordance with Article 6(1) of Regulation (EU) No 1286/2014 that provides key information; or
4. it prepares a key information document that is not aligned with all binding contractual documents, relevant parts of prospectuses and PRIIP terms contrary to Article 6(1) of Regulation (EU) No 1286/2014;
5. it prepares a key information document that is not independent or not clearly separated from promotional materials contrary to Article 6(2) of Regulation (EU) No 1286/2014;
6. it prepares a key information document containing cross-references to promotional materials contrary to Article 6(2) of Regulation (EU) No 1286/2014;
7. in cases where all information regarding the basic investment option cannot be provided in one concise, independent document, the key information document provides a generic description of basic investment options or states where and how more detailed pre-contractual information regarding investment products supporting the basic investment options can be found in accordance with Article 6(3) of Regulation (EU) No 1286/2014;
8. it does not prepare a key information document in accordance with Article 7(1) of Regulation (EU) No 1286/2014;
9. it does not prepare a key information document in accordance with Article 7(2) of Regulation (EU) No 1286/2014 in cases where the PRIIP is promoted in the Republic of Croatia via promotional materials;
10. it prepares a key information document that is not correctly titled or structured in accordance with Article 8(1) of Regulation (EU) No 1286/2014;
11. it prepares a key information document that does not contain the prescribed rationale in accordance with Article 8(2) of Regulation (EU) No 1286/2014;
12. it prepares a key information document that does not contain all prescribed information or does not contain any information or element in its form and content in accordance with Article 8(3) of Regulation (EU) No 1286/2014;
13. it prepares promotional content with information about PRIIPs whose data contradicts the data in the key information document contrary to Article 9 of Regulation (EU) No 1286/2014;
14. it prepares promotional content with information about PRIIPs whose data diminishes the significance of the key information document or does not contain a notice regarding the availability of the key information document contrary to Article 9 of Regulation (EU) No 1286/2014;
15. in respect of reviewing information contained in the key information document or revising that document, it does not act in accordance with Article 10(1) of Regulation (EU) No 1286/2014;
16. it does not establish effective and appropriate procedures and mechanisms that give retail investors all possibilities for effective complaint submission and effective legal protection proceedings in accordance with Article 19 of Regulation (EU) No 1286/2014. (2) For breaches under paragraph 1 of this Article, a legal entity, PRIIP issuer, shall be fined with a monetary penalty in the amount of 26,540.00 EUR to 99,540.00 EUR if the committed breach does not systematically and seriously affect the interests of retail investors, provided that this amount is not greater than the maximum prescribed amount in paragraph 1 of this Article. (3) By way of exception to paragraph 1 of this Article, if the monetary penalty determined on the basis of paragraph 1 of this Article is less than 66,360.00 EUR, the PRIIP issuer shall be fined for a breach under paragraph 1 of this Article with a monetary penalty in the amount of 66,360.00 EUR to 132,720.00 EUR. (4) In cases where the PRIIP issuer has obtained a benefit or prevented a loss due to a breach under paragraphs 1 and 2 of this Article, and the amount of such obtained benefit or prevented loss can be determined, it shall be fined for a breach under paragraphs 1 and 2 of this Article with a monetary penalty in an amount double the determined amount of such obtained benefit or prevented loss, if that amount is greater than the prescribed maximum monetary penalty in paragraph 1 or 2 of this Article. (5) For a breach under paragraph 1 of this Article, a responsible person in the PRIIP issuer shall also be fined in the amount of 2,650.00 to 700,000.00 EUR. (6) For a breach under paragraph 2 of this Article, a responsible person in the PRIIP issuer shall also be fined in the amount of 2,650.00 to 6,630.00 EUR. (7) For a breach under paragraph 1 of this Article, a physical person carrying out the registered activity as a PRIIP issuer shall be fined with a monetary penalty in the amount of 66,360.00 EUR to 700,000.00 EUR. (8) For a breach under paragraph 1 of this Article, a physical person carrying out the registered activity as a PRIIP issuer shall be fined with a monetary penalty in the amount of 1,320.00 EUR to 30,000.00 EUR if the committed breach does not systematically and seriously affect the interests of retail investors. (9) When a physical person referred to in paragraph 7 of this Article has obtained a benefit or prevented a loss, and the amount of such obtained benefit or prevented loss can be determined, the physical person referred to in paragraph 7 of this Article shall be fined for a breach under paragraphs 1 and 2 of this Article with a monetary penalty up to the amount double the determined amount of such obtained benefit or prevented loss, if that amount is greater than the prescribed maximum in paragraph 7 of this Article.

Minor Breaches by PRIIP Issuers Article 18. (NN 123/23) (1) A legal entity, PRIIP issuer, shall be fined for a breach with a monetary penalty in an amount that is a multiple of 1,000, which shall not be less than 0.01% nor greater than 1.5% of the total revenue obtained by the PRIIP issuer in the year the breach was committed, as determined by official financial statements for that year, if it frequently:

1. does not act in accordance with Article 6(4) of Regulation (EU) No 1286/2014 regarding the form and manner of preparing the key information document;
2. does not act in accordance with Article 6(5) of Regulation (EU) No 1286/2014 because it uses colors in the key information document that diminish the understandability of information;
3. does not act in accordance with Article 6(6) of Regulation (EU) No 1286/2014 because it uses corporate branding or its logo in a manner that diverts the retail investor's attention from information contained in the document, or makes the text in the document unclear;
4. does not act in accordance with Article 12 of this Law because it does not deliver or fails to deliver within the prescribed deadline a notice under Article 12 of this Law to the supervisory authority. (2) For a breach under paragraph 1 of this Article, a legal entity, PRIIP issuer, shall be fined with a monetary penalty in the amount of 9,950.00 EUR to 26,540.00 EUR if the conduct under paragraph 1 of this Article is not established as frequent. (3) By way of exception to paragraph 1 of this Article, if the monetary penalty determined on the basis of paragraph 1 of this Article is less than 26,540.00 EUR, the PRIIP issuer shall be fined for a breach under paragraph 1 of this Article with a monetary penalty in the amount of 26,540.00 EUR to 66,360.00 EUR. (4) In cases where the PRIIP issuer has obtained a benefit or prevented a loss due to a breach under paragraphs 1 and 2 of this Article, and the amount of such obtained benefit or prevented loss can be determined, it shall be fined for a breach under paragraphs 1 and 2 of this Article with a monetary penalty in an amount double the determined amount of such obtained benefit or prevented loss.