Regulation on Conditions for Membership in the Management Board and Supervisory Board of a Pension Company Managing Mandatory Pension Funds (NN, Nos. 52/14, 39/17, 112/19 and 51/24)

UNOFFICIAL CONSOLIDATED TEXT (Narodne novine Nos. 52/14, 39/17, 112/19, 51/24) REGULATION ON CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF A PENSION COMPANY MANAGING MANDATORY PENSION FUNDS

INTRODUCTORY PROVISIONS Article 1. This Regulation further regulates:

1. the conditions for performing the function of a member of the management board of a pension company and the documentation attached to the application for approval to perform that function,
2. the content of the business management program of a pension company, the procedure and criteria for evaluating the program and candidates presenting it, as well as justified grounds on which Hanfa may issue approval for a mandate shorter than requested,
3. the conditions for performing the function of a member of the supervisory board of a pension company and the criteria for assessing them, as well as the content of the application for approval to perform the function of a supervisory board member.

Article 2. Certain terms, within the meaning of this Regulation, have the following meanings:

1. Hanfa is the Croatian Financial Services Supervisory Agency.
2. The Act is the Act on Mandatory Pension Funds (Narodne novine Nos. 19/2014, 93/2015, 64/2018, 115/2018, 58/2020 and 156/2023).
3. A pension company is a pension company managing mandatory pension funds.
4. A pension fund is a mandatory pension fund.

CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT BOARD OF A PENSION COMPANY Article 3. (1) A member of the management board of a pension company may be a person who permanently fulfills the conditions prescribed by Article 31 and Article 32 of the Act and this Regulation. (2) When deciding on an application for approval to perform the function of a management board member, Hanfa shall consider all elements that may affect the assessment of whether the candidate meets the prescribed conditions, with a view to ensuring the continuous operation of the pension company.

Professional Qualifications of Management Board Members Article 4. (1) A person who has completed one of the following studies possesses the professional qualifications prescribed by Article 31(1)(1) of the Act necessary for performing the function of a management board member: a) university pre-graduate and graduate studies or integrated university pre-graduate and graduate studies or professional graduate studies and university specialist studies, having obtained at least 300 ECTS points upon completion, b) pre-graduate and graduate university studies or integrated pre-graduate and graduate university studies or professional and specialist graduate professional studies, having obtained at least 300 ECTS points upon completion, or c) university undergraduate studies having obtained a high professional qualification, or professional undergraduate studies of at least four years' duration having obtained a high professional qualification. (2) The provisions of paragraph 1, points b) and c), apply to persons who completed their studies under the legislation in force prior to the entry into force of the Act on Higher Education and Scientific Activity (Narodne novine No. 119/22) and have the right to use the corresponding academic or professional title or academic degree established by the Act on Academic and Professional Titles and Academic Degrees (Narodne novine No. 123/23), in accordance with Article 15 of the Act on Academic and Professional Titles and Academic Degrees. (3) When assessing a candidate's professional knowledge, Hanfa may, in addition to the achieved level of education under paragraphs 1 and 2, also verify continuous professional development in the following areas: a) operation of pension funds, b) financial markets, c) accounting framework, d) regulatory framework, e) strategic planning and knowledge of business strategy, business plan and its implementation, f) risk management, g) corporate governance, including the internal control system, and h) financial data analysis. (4) When assessing a candidate's capability as a management board member under Article 31(1)(1) of the Act, Hanfa may evaluate strategic thinking and the ability to create short-term and long-term business plans, risk assessment and management, organizational capabilities and company leadership, independence of opinion, as well as the candidate's ability and willingness for continuous learning and professional development.

Experience of Management Board Members Article 5. (1) The experience necessary for managing a pension company, within the meaning of Article 31(1)(1) of the Act, is considered to be:

1. experience in the management board and/or leading organizational units of a pension company,
2. experience as an authorized signatory (prokurist) in a pension company. (2) Experience in managing activities comparable to those of a pension company, within the meaning of Article 31(2) of the Act, is considered to be leadership primarily in financial institutions or legal persons/public authorities, where financial activities are core business or constitute their main activity, for which Hanfa deems that performing such activities enabled the candidate to acquire knowledge about pension company operations and capital market functioning. (3) When assessing the duration of experience, Hanfa may take into account multiple short-term or temporary positions if it establishes that, together with other previous activities performed by the candidate, they amount to at least three or five years of continuous experience in the activities specified in paragraphs 1 and 2.

Good Reputation of Management Board Members Article 6. (1) When assessing the good reputation prescribed by Article 31(1)(2) of the Act necessary for performing the function of a management board member, Hanfa shall particularly consider: a) whether the candidate's relevant consent or approval for performing certain activities has been revoked due to non-compliance with regulations under the jurisdiction of Hanfa or another competent authority, or whether a foreign supervisory authority has revoked consent or imposed a prohibition measure on performing relevant activities in the fund industry, banking, or capital markets; b) whether proceedings have been initiated against the candidate, criminal proceedings are ongoing, or the candidate has a final conviction for offenses prescribed by the Act on Securities Market (Narodne novine Nos. 84/02 and 138/06), the Act on Criminal Offenses against the Capital Market (Narodne novine No. 152/08), and the Act on Companies (Narodne novine Nos. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22, 18/23 and 130/23), or, for foreign persons, whether proceedings have been initiated, are ongoing, or result in a final conviction for acts corresponding to the aforementioned criminal offenses; c) whether proceedings have been initiated, are ongoing, or result in a final conviction for the following criminal offenses prescribed by the Criminal Code (Narodne novine Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18, 126/19, 84/21, 114/22 and 114/23): − criminal offenses against property (except unauthorized use of another's movable property and damage to another's property), where proceedings are initiated ex officio, − criminal offenses against humanity and human dignity, − criminal offenses against the economy, − criminal offenses of forgery, − criminal offenses against official duty, − criminal offenses against the judiciary, − criminal offenses against employment relations and social insurance, or, for foreign persons, whether proceedings have been initiated, are ongoing, or result in a final conviction for acts corresponding to the aforementioned criminal offenses; d) whether proceedings have been initiated, are ongoing, or result in a final conviction for criminal offenses from the Criminal Code (Narodne novine Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03 - Constitutional Court decision, 105/04, 84/05, 71/06, 110/07, 152/08 and 57/11) that are in legal continuity with the offenses specified in point c), or, for foreign persons, whether proceedings have been initiated, are ongoing, or result in a final conviction for acts corresponding to the aforementioned criminal offenses; e) the candidate's previous professional work and personal integrity; f) whether business results and/or financial stability affect the person's reputation, with Hanfa considering the financial and business results of the company where the candidate holds a significant share and/or executive position; g) whether other reasons exist to doubt the candidate's good reputation. (2) When assessing the conditions under paragraphs 1(a)-(d), Hanfa shall consider all available information regarding the type of judgment, procedural stage, stated legal remedies, imposed sanction, existing circumstances, significance of the offense or misdemeanor, period elapsed since the act, and the person's behavior during that time. Hanfa shall also account for multiple minor offenses that individually do not impair but collectively may affect the person's good reputation. (3) Additionally, when assessing the condition under paragraph 1(e), Hanfa shall analyze information indicating improper conduct by the candidate in previous professional work, such as non-transparent handling, lack of cooperation with competent authorities, or failure to comply with measures imposed by Hanfa or another competent authority.

Documentation Attached to the Application for Approval of Management Board Membership Article 7. (1) Before deciding on the appointment of a management board member, the applicant must obtain Hanfa's approval in accordance with the Act. (2) Along with the application for approval to perform the function of a management board member, a written consent from the supervisory board (or competent appointment body) is submitted, containing: − key reasons influencing the application and objectives sought by appointing the candidate to the management board, − the function and competencies for which the candidate is nominated, along with a reasoned decision on candidate selection containing criteria and procedures followed by the pension company in assessing the candidate's suitability. (3) The application under paragraph 2 must contain at least the following data:

1. personal data of the appointed person, including first name, surname, maiden name, OIB (Personal Identification Number), place and date of birth, residence or domicile, citizenship, and other personal details;
2. education information, including a chronological list of all degrees with completion year, duration, and obtained academic title;
3. professional development information, including a chronological list of all forms of continuous education, specifying topics, organizers, duration, years of passing professional exams, certificates, licenses, etc.;
4. for foreign citizens, information on knowledge of the Croatian language;
5. work experience information, including a chronological list of all previous employers and positions/functions held outside employment, with periods for each function;
6. for positions or functions held in the last ten years, details include: − description of duties performed at that position or function; − organizational structure of the employer where activities were performed or functions held at the time, unless the candidate declares it would breach confidentiality obligations; − scope of competencies, decision-making powers, and responsibilities; − number of subordinate employees.
7. information on whether proceedings are ongoing against the person or if the candidate has a final conviction for one or more criminal offenses listed in Article 6(1) of this Regulation, or any other criminal offense;
8. information on whether the candidate has a final conviction, whether sanctions have been imposed, and whether competent courts or authorities are conducting proceedings against the candidate for irregularities or non-compliance with the Act and subordinate regulations, or any other regulations governing banking, financial, or insurance activities, payment instruments, or financial services, which may cast doubt on the candidate's good reputation;
9. information on whether proceedings are ongoing against the candidate or if the candidate has a final conviction for certain misdemeanors that could negatively affect financial stability and reputation;
10. information on whether the candidate or a company they lead has become a debtor in bankruptcy or similar proceedings;
11. information on the candidate's financial status, including whether the candidate's assets ensure future financial obligations, whether the candidate is on the list of delinquent debtors (e.g., HROK, Ministry of Finance tax debtor list, "black list", credit register), and whether enforcement, bankruptcy, pre-bankruptcy settlement, or personal bankruptcy proceedings have been initiated against the candidate's assets;
12. information on financial and business results of companies where the candidate is or was a significant shareholder, holds significant business shares, or served as a management board member or other executive position, unless the candidate declares it would breach confidentiality obligations, including information on whether pre-bankruptcy settlement was conducted, bankruptcy proceedings opened, forced liquidation decision issued, or approval for operation revoked;
13. information on whether another competent authority has already conducted a suitability assessment (including data on that authority and evidence of assessment results);
14. information on the suitability assessment result conducted by the supervisory board (or competent appointment body), with reasoning.

Article 8. (1) Along with the application for approval to perform the function of a management board member, the following documentation is attached: a) notarized copy of ID card or passport, or for foreign citizens, a notarized copy of ID/travel document in accordance with laws governing entry, movement, stay, and work of foreigners in the Republic of Croatia; b) notarized copy of proof of completed relevant education level; c) document on recognition of foreign higher education qualification issued by the competent authority in the Republic of Croatia, where applicable; d) CV with detailed data on education, professional development, and work experience; e) relevant document proving the candidate's length of service; f) employer certificates on previous work experience (company name, period, job description and duties), related to Article 31(2) of the Act; g) for foreign citizens, relevant document required to establish an employment relationship in accordance with laws governing foreigners' entry, movement, stay, and work (e.g., residence and work permit, EU Blue Card, etc.); h) if the candidate is a foreign citizen, confirmation from the competent authority on knowledge of Croatian language; i) certificate that no criminal proceedings are pending against the candidate, issued by a competent authority of the Republic of Croatia, or for foreign citizens, a certificate from the competent authority of their home country (not older than 3 months); j) business management program for the pension company for the mandate period; k) electronically completed Form No. 1 - Questionnaire for Candidates for Management Board Functions (published on Hanfa's website), forming an integral part of this Regulation, with a notary-certified signature, not older than one month from the application submission date; l) results of the suitability assessment conducted by the supervisory board (or competent appointment body), with reasoning; m) proof of paid fee; n) additional documentation upon Hanfa's request. (2) Foreign documents under this article are submitted translated into Croatian by a sworn court interpreter, and foreign documents under paragraph 1(a), (b), and (e) are also notarized in accordance with domestic law and international regulations (Apostille - Hague Convention of 5 October 1961 on abolishing the requirement of legalization for foreign public documents). (3) When the same person is reappointed to the management board, the application does not need to attach documents listed under points (b), (c), (f), and (h) of paragraph 1. (4) In addition to the documents under paragraph 1, other documents confirming good reputation, professional knowledge, capability, and experience may be attached to the application. (5) Hanfa may request additional documents, data, and information from the applicant to prove that the candidate meets the prescribed conditions.

Content of the Business Management Program of a Pension Company Article 9. (1) The business management program for the pension company for the mandate period under Article 34(9) of the Act is submitted to Hanfa in written and electronic form on appropriate durable media and must contain: − a brief description of the current state in the pension company and its organizational scheme with the number of employees per organizational unit (to the extent relevant data are available to the candidate); − a description of the operating environment and the pension company's position relative to the entire sector in which it operates, as well as relative to competitors (preferably noting identified strengths and weaknesses compared to comparable groups); − a detailed description of planned activities during the mandate period (preferably noting the planned implementation schedule), including planned significant changes relative to the current state; − projections of financial statements for the pension company for the mandate period, prepared on prescribed forms and submitted with the program in written form, as well as electronically on appropriate durable media (forms are available on Hanfa's official website); − a description of assumptions and facts considered during program preparation; − a detailed description of activities supporting planned core activities, all aimed at effectively identifying, measuring, and managing all risks arising from undertaken activities; description of the risk management system (strategies, policies, procedures, risk management measures, risk measurement techniques, and division of responsibilities regarding risk management); description of activities to improve the current state in the pension company; − a description of anticipated decision-making procedures and delineation of competencies among management board members, highlighting changes relative to the current state; − a description of the anticipated policy for preventing conflicts of interest; − a plan for handling pension company insolvency; − a description of the anticipated procedure for monitoring declines in the value of assets under management, including thresholds for asset value declines that must be reported to the management board; − a description of the anticipated internal audit system, and internal control and compliance systems ensuring alignment with statutory and subordinate regulations; − a review of supervisory measures possibly imposed by Hanfa and compliance with them; − a description of the plan for delegating tasks to third parties, where applicable; − a conclusion summarizing all the above points. (2) When preparing the program under paragraph 1, the candidate for management board member must particularly detail points in the business management program that are crucial for realizing and impacting planned activities within their future scope of work and responsibilities.

Procedure and Criteria for Assessing Candidates and Their Programs, and Grounds for Issuing Approval for a Shorter Mandate Article 10. (1) If Hanfa, during the approval procedure for a management board member function, requests that the candidate present a business management program, it shall invite the candidate to present the program and may instruct the applicant to participate in the presentation. (2) Hanfa evaluates the business management program, particularly considering: − the realism of program assumptions; − objectives and strategies for achieving them; − planned activities during the mandate period, and − alignment of planned activities with set objectives and best practices. (3) Hanfa evaluates the capability and professionalism of candidates presenting the business management program, particularly considering: − professional reputation and work experience; − knowledge of regulations applicable to pension company operations and capital markets; − understanding of risks and risk management methods to which the pension company is exposed; − knowledge of vision, strategy, objectives, and business processes; − understanding of the internal audit system and internal control systems; − knowledge of operations of pension funds managed by the pension company and understanding of the economic environment. (4) Hanfa may issue approval for performing the function of a management board member for a mandate shorter than requested in cases:

1. when the candidate applies for the first time as a management board member, having met all necessary conditions under the Act and this Regulation, but did not sufficiently demonstrate during program presentation that they possess professional knowledge of pension company business processes, though it is estimated they will gain this experience in the near future;
2. when the candidate applies for a new mandate period in the same pension company, and during the previous mandate supervisory measures were imposed on the pension company which it has not fully complied with, and deadlines for compliance have not yet expired;
3. when the candidate applies for a new mandate period in the same pension company, and the pension company faces difficulties maintaining capital adequacy;
4. if findings and information from supervisory procedures conducted by Hanfa reveal irregularities or inconsistencies affecting the stability and functioning of the pension company, relating to management structures, organizational requirements fulfillment, or establishment of control functions, requiring intensified monitoring of the pension company's compliance with regulatory requirements;
5. if data available to Hanfa reveal non-compliance and inconsistencies in the pension company's reporting obligations to Hanfa;
6. when the candidate applies for a new mandate period in the same pension company, and key points of the previous business management program were not achieved, without presenting objective reasons for non-achievement;
7. if other circumstances regarding the candidate or pension company may affect the decision to issue approval for a shorter mandate.