Regulation on the Procedure for Compensation of Damages to Members of the Mandatory Pension Fund and/or the Mandatory Pension Fund - Unofficial Consolidated Text (NN, No. 101/14 and 39/17)

UNOFFICIAL CONSOLIDATED TEXT NN 101/14 dated 20.08.2014. NN 39/17 dated 21.04.2017. (effective from 01.05.2017.) CROATIAN AGENCY FOR FINANCIAL SERVICES SUPERVISION Pursuant to Article 61, paragraph 5 of the Act on Mandatory Pension Funds (»Narodne novine« No. 19/2014), the Croatian Agency for Financial Services Supervision, at a meeting of its Management Board held on 14 August 2014, adopted the REGULATION ON THE PROCEDURE FOR COMPENSATION OF DAMAGES TO MEMBERS OF THE MANDATORY PENSION FUND AND/OR THE MANDATORY PENSION FUND I. INTRODUCTORY PROVISIONS Article 1. This Regulation governs the procedure for compensation of damages that a pension management company is obliged to reimburse to members of the mandatory pension fund and/or the mandatory pension fund in case of incorrect calculation of the value of the accounting unit and breach of investment limits within the meaning of Article 135, paragraph 4 of the Act on Mandatory Pension Funds (»Narodne novine« No. 19/2014). Article 2. Certain terms, within the meaning of this Regulation, have the following meanings:

1. Agency means the Croatian Agency for Financial Services Supervision.
2. Act means the Act on Mandatory Pension Funds (»Narodne novine« No. 19/2014).
3. Pension management company means a company managing the mandatory pension fund.
4. Pension fund means the mandatory pension fund. II. INCORRECT CALCULATION OF THE VALUE OF THE ACCOUNTING UNIT Article 3. (1) The value of the accounting unit in the pension fund is calculated in accordance with the Act and regulations adopted pursuant to Article 108, paragraph 4 of the Act. (2) An incorrect calculation of the value of the accounting unit exists when the initially calculated value of the accounting unit in the pension fund differs from the subsequently accurately determined value of the accounting unit for the same day. Material error in the calculation of the value of the accounting unit Article 4. (1) The compensation procedure for incorrect calculation of the value of the accounting unit prescribed by this Regulation is conducted when:
5. the difference between the initially calculated and subsequently accurately determined value of the accounting unit for the same day exceeds 1% (material error), and
6. more than one year has not elapsed since the occurrence of said calculation error, except in cases where an auditor, as part of the audit of financial statements for the current year regarding the previous year, determines an incorrect calculation of the value of the accounting unit. (2) The compensation procedure for material errors in calculating the value of the accounting unit consists of preparing a compensation plan, informing members about the compensation for damages incurred, and compensating damages by paying the determined amount to the affected members of the pension fund and/or the pension fund. (3) "Period of incorrect calculation" is the period during which a material error in calculating the value of the accounting unit existed. Calculation of a higher value of the accounting unit Article 5. (1) A calculation of a higher value of the accounting unit exists when the initially calculated value of the accounting unit is higher than the subsequently accurately determined value of the accounting unit for the same day. (2) In case of a material error leading to a calculation of a higher value of the accounting unit, the pension management company is obliged, via the Central Insurance Register, to ensure the implementation of corrections to the number of accounting units for members who acquired accounting units during the period of incorrect calculation. (3) In case of a material error leading to a calculation of a higher value of the accounting unit, the pension management company is obliged to compensate the resulting damage to the pension fund, if accounting units were redeemed during the period of incorrect calculation. The amount of compensation is equal to the difference between the initially calculated value and the subsequently accurately determined value of the accounting unit multiplied by the number of redeemed accounting units during the period of incorrect calculation. Calculation of a lower value of the accounting unit Article 6. (1) A calculation of a lower value of the accounting unit exists when the initially calculated value of the accounting unit is lower than the subsequently accurately determined value of the accounting unit for the same day. (2) In case of a material error leading to a calculation of a lower value of the accounting unit, the pension management company is obliged to compensate the resulting damage to members whose personal accounts in the pension fund were closed (who changed pension funds, transferred assets to a pension insurance company, or whose accounts were closed for other reasons) during the period of incorrect calculation, by paying monetary funds to the member's account in the new pension fund or pension insurance company, in accordance with standard monetary payment procedures to members. The amount of compensation is equal to the difference between the subsequently accurately determined value and the initially calculated value of the accounting unit multiplied by the number of redeemed accounting units during the period of incorrect calculation. (3) In case of a material error leading to a calculation of a lower value of the accounting unit, the pension management company is obliged, via the Central Insurance Register, to ensure the implementation of corrections to the number of accounting units for members who acquired accounting units during the period of incorrect calculation. (4) Compensation under paragraph 2 of this Article shall not be conducted for those members whose determined damage amount during the period of incorrect calculation is less than 100 kunas. New calculation of the value of the accounting unit Article 7. The pension management company is obliged to prepare a new calculation of the value of the accounting unit for each day of the period of incorrect calculation in accordance with the Act and regulations adopted pursuant to Article 108, paragraph 4 of the Act. Compensation plan Article 8. (1) In the cases specified in Article 4, paragraph 1 of this Regulation, the pension management company shall, without unnecessary delay and no later than within 60 days of becoming aware of the incorrect calculation, prepare a compensation plan and submit it to the Agency without delay, in the manner prescribed by Article 15a of this Regulation. (2) The compensation plan under paragraph 1 of this Article must contain:
7. the method and procedures by which it will compensate the incurred damage to the pension fund and/or members,
8. measures that will be or have been taken with the aim of eliminating identified material errors and compensating damages,
9. a new calculation of the value of the accounting unit for each day of calculation during the period of incorrect calculation,
10. the number of members who incurred damage and the individual and total amount of compensation to be paid to members of the pension fund and/or the pension fund,
11. the method and deadline by which members will be informed about the compensation plan in accordance with Article 9 of this Regulation. (3) For the purpose of determining the number of members who incurred damage and the individual and total amount of compensation to be paid to members of the pension fund under paragraph 2, point 4 of this Article, the Central Insurance Register is obliged, upon request by the pension management company, if it determines that damage has occurred, to make available to the pension management company data from Article 193 of the Act regarding members for the period of incorrect calculation. Informing members Article 9. (1) When, due to a material error in calculating the value of the accounting unit, there is an obligation of the pension management company to compensate damaged members of the pension fund, the pension management company is obliged to make information about the existence of a material error in calculating the value of the accounting unit available to members of pension funds via its website without delay after preparing the compensation plan. (2) The information under paragraph 1 of this Article contains the following:
12. what is the cause and nature of the material error in calculating the value of the accounting unit,
13. the obligation to compensate and the amount of damage,
14. deadlines and method of compensation. Implementation of the compensation procedure Article 10. (1) After the pension management company prepares a compensation plan in accordance with Article 8 of this Regulation, it shall without delay proceed to compensate damaged members of the pension fund and/or the pension fund. (2) Costs incurred for the implementation of the compensation procedure and measures for incorrect calculation of the value of the accounting unit are costs of the pension management company and cannot be charged to the pension fund or members of the pension fund. III. BREACH OF INVESTMENT LIMITS Article 11. (1) For the purposes of this Regulation, a breach of investment limits refers to breaches resulting from transactions concluded by the pension management company, which at the time of conclusion breached limits in accordance with Article 135, paragraph 4 of the Act. (2) The compensation procedure for breach of investment limits prescribed by this Regulation is conducted when:
15. the breach of investment limits exceeds 10% of the total permitted investments within the meaning of Article 135, paragraph 4 of the Act,
16. more than one (1) year has not elapsed since the occurrence of the breach of investment limits, except in cases where an auditor, as part of the audit of financial statements for the current year regarding the previous year, determines a breach of investment limits. (3) The compensation procedure for breach of investment limits consists of preparing a compensation plan, informing members about the compensation for damages incurred, and compensating damages by paying the determined amount to affected members of the pension fund and/or the pension fund. Compensation plan Article 12. (1) In the case specified in Article 11, paragraphs 1 and 2 of this Regulation, the pension management company shall, without unnecessary delay and no later than within 60 days of becoming aware of the breach of investment limits, prepare a compensation plan and submit it to the Agency without delay, in the manner prescribed by Article 15a of this Regulation. (2) The compensation plan under paragraph 1 of this Article must contain:
17. the method and procedures by which it will compensate the incurred damage to the pension fund and/or members,
18. information on the asset position relative to which the breach of investment limits occurred, duration and reasons for such exceedance,
19. measures that will be or have been taken with the aim of aligning investments and compensating damages,
20. the number of members of the pension fund who incurred damage and the individual and total amount of compensation to be paid to members of the pension fund and/or the pension fund, by paying a monetary amount to the fund and/or members,
21. the deadline by which members will be informed about the compensation plan in accordance with Article 13 of this Regulation. (3) For the purpose of determining the number of members who incurred damage and the individual and total amount of compensation to be paid to members of the pension fund under paragraph 2, point 4 of this Article, the Central Insurance Register is obliged, upon request by the pension management company, if it determines that damage has occurred, to make available to the pension management company data from Article 193 of the Act regarding members for the period of incorrect calculation. Informing members Article 13. (1) When, due to a breach of investment limits,