Act on the Croatian Financial Services Supervisory Agency - Unofficial Consolidated Text

Unofficial Consolidated Text of the Act on the Croatian Financial Services Supervisory Agency (Official Gazette Nos. 140/05 and 12/12)

CHAPTER I. GENERAL PROVISIONS

Article 1. This Act regulates: – the legal status of the Croatian Financial Services Supervisory Agency (hereinafter: the Agency), – its internal organization, – the conditions for the appointment, term of office, and dismissal of the President and members of the Agency's Board of Directors, – the adoption of decisions, – the duty to preserve official secrets and liability for damages, – the conditions for the appointment, term of office, and functions of the Agency's Council, – the goals, principles, scope, and competence of the Agency, and – its financing and reporting.

Article 2. Certain terms in this Act have the following meanings:

1. Agency – means the Croatian Financial Services Supervisory Agency,
2. Supervised Entities – are all legal or natural persons engaged in providing financial services, advising on the financial market, selling, intermediating, or managing assets of users of financial services,
3. Supervisory Authority – is the Croatian Financial Services Supervisory Agency, whose scope and competence include the supervision of the financial market, supervised entities, and the financial services they provide,
4. Council – is the advisory body of the Agency,
5. Financial Services – are all services provided by supervised entities,
6. Financial Market – are regulated venues or computer networks intended for trading financial instruments,
7. Securities and Markets Commission of the Republic of Croatia – is a legal entity that performs supervisory tasks over the operations of stock exchanges and regulated public markets, authorized companies, issuers of securities, investment and privatization investment fund management companies, investment and privatization investment funds, the Fund of Croatian Veterans from the Homeland War and their family members, the Pension Fund, brokerage companies, brokers, and investment advisors, institutional investors, and the Central Depository Agency,
8. Pension Fund and Insurance Supervisory Agency – is a legal entity that performs supervision over the operations of pension companies, pension funds, pension insurance companies, and the Central Register of Insured Persons,
9. Insurance Companies Supervisory Directorate – is a legal entity that performs supervision over the operations of insurance companies and insurance representatives and intermediaries.

CHAPTER II. CROATIAN FINANCIAL SERVICES SUPERVISORY AGENCY Legal Status

Article 3. (1) The Agency is an independent legal person with public authority within its scope and competence prescribed by this and other laws, accountable to the Croatian Parliament. (2) The seat of the Agency is in Zagreb. (3) The internal organization and operations of the Agency are regulated by the Statute as the Agency's basic organizational act. The Agency adopts the Statute, and the Croatian Parliament confirms it. (4) The Agency adopts general acts establishing the internal organizational structure, employment conditions, and working conditions of employees in accordance with the Labor Act.

Internal Organization of the Agency

Article 4. (1) The Agency is managed by the Board of Directors, which consists of five members, one of whom is the President. (2) The Croatian Parliament appoints and dismisses the President and members of the Agency's Board of Directors upon the proposal of the Government of the Republic of Croatia. (3) The Agency is represented and managed by the Secretary General of the Agency, who organizes and conducts the work and operations of the Agency in accordance with this Act and the Agency's Statute. (4) The Board of Directors of the Agency appoints and dismisses the Secretary General of the Agency. The appointment of the Secretary General is conducted through a public competition, for a term of six years, and may be reappointed. (5) The Board of Directors represents the Agency vis-à-vis the Secretary General of the Agency. The detailed tasks, conditions for the appointment that the Secretary General must meet, and other relations between the Board of Directors and the Secretary General shall be prescribed by the Agency's Statute.

Conditions for Appointment, Term of Office, and Dismissal of the President and Members of the Board of Directors of the Agency

Article 5. (1) A citizen of the Republic of Croatia with higher education, appropriate professional knowledge, and work experience in the fields of finance, accounting, business management, actuarial science, or law, which makes them capable and worthy of being a member, may be appointed as President or member of the Board of Directors of the Agency. (2) The President and members of the Board of Directors of the Agency are appointed for a period of six years from the date of appointment and may be reappointed to the same position. (3) The President and members of the Board of Directors perform their duties at the Agency professionally. (4) The President and members of the Board of Directors of the Agency must behave in such a way as not to diminish their personal reputation or the reputation of the Agency, and not to call into question their independence and the independence of the Agency in the performance of their duties. (5) Any form of influence on the work of the Agency that could call into question the independence and autonomy established by law is prohibited.

Article 6. (1) During the performance of their duties, the President and members of the Board of Directors of the Agency are entitled to a salary and other material benefits in accordance with the general acts of the Agency. (2) The President and members of the Board of Directors of the Agency have the right to publish professional or scientific papers and participate in the work of professional or scientific conferences. (3) The President and members of the Board of Directors of the Agency, and employees in the professional services of the Agency, during the term of office, must not accept any compensation, position, or employment, nor provide services in relation to: – supervised entities, and – persons considered related to them according to laws prescribing such relatedness. (4) Persons from paragraph 3 of this Article must not hold shares or ownership stakes in insurance companies, legal entities engaged in insurance intermediation, investment fund management companies, pension fund management companies, pension insurance companies, brokerage companies, authorized companies, legal entities engaged in leasing and factoring businesses, and related persons. (5) The President and a member of the Board of Directors of the Agency cannot be a person who is a representative in the Croatian Parliament, who performs another duty appointed by the Croatian Parliament or the Government of the Republic of Croatia, cannot be a member of the Government of the Republic of Croatia, and cannot be a person performing duties in local and regional (county) self-government bodies and in bodies of political parties and trade union organizations. (6) To prevent conflicts of interest between the President, members of the Board of Directors, and employees in relation to supervised entities and related persons, the Agency will adopt a specific Code of Conduct. (7) Information obtained by the President and members of the Board of Directors of the Agency and its employees in the performance of their duties and work must not be used for any form of material gain. (8) Persons from paragraph 3 of this Article must not accept membership in the management or supervisory board of supervised entities or related persons within a period of one year after the termination of their duty or employment at the Agency. (9) The President and members of the Board of Directors of the Agency are entitled to compensation in the amount of the last salary paid in the month before dismissal until new employment, for a maximum of one year from the date of termination of their duty.

Article 7. (1) The Croatian Parliament may dismiss the President and members of the Board of Directors of the Agency before the expiration of their term upon the proposal of the Government of the Republic of Croatia in cases: – if they request dismissal themselves, – if circumstances from Article 6, paragraphs 3, 4, and 5 of this Act occur after appointment, – if they permanently lose the ability to perform their duties, – upon a final conviction to imprisonment, – if they violate the duty to preserve official secrets in connection with the performance of their duties, and – if they perform a service or tasks incompatible with the duty of a member of the Board of Directors of the Agency, or if their negligent or irregular work causes significant damage or major disruptions to the Agency's work. (2) The Agency is obligated to inform the Government of the Republic of Croatia about the existence of grounds for dismissing the President and members of the Board of Directors of the Agency before the expiration of their term. (3) Before adopting a decision on the dismissal of the President or a member of the Board of Directors of the Agency, they must be given the opportunity to comment on the reasons for dismissal. (4) In the event of the fulfillment of the conditions from paragraph 1 of this Article, except for the condition of permanently losing the ability to perform duties, the provision of Article 6, paragraph 9 of this Act does not apply.

Adoption of Decisions

Article 8. (1) All decisions within the scope and competence of the Agency from Article 15 of this Act are adopted by the Board of Directors at meetings by a majority of at least three votes, with the President or a member of the Board of Directors of the Agency not being allowed to abstain from voting. (2) Three members of the Board of Directors of the Agency constitute the quorum necessary for adopting decisions, and the President or, in their absence, the deputy must be present at every meeting of the Board of Directors of the Agency. (3) General acts of the Agency are published on the Agency's website before entering into force. All individual acts of the Agency deciding on someone's rights or obligations are published on the Agency's website after they become final. (4) If the Agency assesses that the publication of an individual act would not significantly affect the interests of users of financial services, such an act does not need to be published or may be published only with its operative part.

Duty to Preserve Official Secrets

Article 9. (1) The President and members of the Board of Directors of the Agency and its employees are obliged to keep as official secrets documents and data they learn about in the performance of their duties and tasks, the disclosure of which to unauthorized persons would harm the reputation and interests of the Agency. (2) The duty to preserve official secrets continues after the termination of membership in the Board of Directors or employment at the Agency.

Liability for Damages

Article 10. The President, members of the Board of Directors, and employees of the Agency are not liable for damages arising during the performance of duties within their competence and laws applied, unless it is proven that they intentionally committed or omitted the specific act from which the damaging consequence occurred.

CHAPTER III. COUNCIL OF THE AGENCY Conditions for Appointment and Term of Office

Article 11. (1) The Agency has a Council. (2) The Council is the advisory body of the Agency consisting of nine members, three of whom are appointed by the Government of the Republic of Croatia, and the other five members are elected by representatives of supervised entities' associations at the Croatian Chamber of Economy, while the President of the Board of Directors of the Agency is a member ex officio. (3) A member of the Council must have higher education, be a respected expert in the fields of finance, accounting, management, actuarial science, or law. (4) The term of office of Council members is four years, and they may be reappointed to the Council. If a Council member ceases to perform their duty before the expiration of the term, another person under the same conditions is appointed to their place for the remainder of the term of the member they replace. (5) The material benefits of Council members are regulated by the Statute and other sub-law acts of the Agency. (6) The bodies from paragraph 2 of this Article will dismiss a Council member of the Agency before the expiration of the term: – if they request dismissal themselves, and – in the case of a final conviction to imprisonment. The President of the Board of Directors of the Agency will dismiss a member from the Council in the event of circumstances from Article 7 of this Act.

Function of the Council of the Agency

Article 12. The Council of the Agency gives opinions, professional, and scientific advice for the development of supervisory practice.

CHAPTER IV. GOALS, PRINCIPLES, SCOPE, AND COMPETENCE OF THE AGENCY Goals

Article 13. The fundamental goals of the Agency are: – promoting and preserving the stability of the financial system, and – supervising the legality of the operations of supervised entities.

Principles

Article 14. (1) In achieving its goals from Article 13 of this Act, the Agency will be guided by the principles: – transparency, – building trust among participants in the financial market, and – reporting to consumers. (2) The Agency will inform the public about the role and functioning of the financial system, including raising awareness of the benefits and risks associated with different types of investments and financial transactions. (3) The Agency will ensure fast and economical access to all types of information that may be of interest to users of financial services, investors, and the general public. (4) The Agency will perform the tasks from paragraphs 2 and 3 of this Article taking into account the level of regulatory costs for supervised entities.

Scope and Competence

Article 15. In performing public authorities, the Agency is authorized to:

1. adopt implementing regulations based on this Act, laws regulating the capital market, investment and other funds, takeover of joint-stock companies, pension insurance companies, insurance and reinsurance, and financial services, as well as other laws when authorized by those laws,
2. supervise the operations of supervised entities established in regulations from point 1 of this Article, and legal entities engaged in factoring businesses, except when performed by banks within their registered activities, and impose measures to eliminate identified illegalities and irregularities,
3. issue and revoke permits, approvals, licenses, and consents for which it is authorized based on special regulations from point 1 of this Article,
4. promote, organize, and monitor measures for the effective functioning of financial markets,
5. keep books, records, and registers in accordance with the provisions of this Act and special regulations from point 1 of this Article,
6. propose initiatives for the adoption of laws and other regulations and inform the public about the principles by which financial markets operate,
7. adopt sub-law acts to prescribe conditions, methods, and procedures for the unified performance of supervision within its scope and competence, and take other measures and perform other tasks in accordance with statutory authorities,
8. report to other supervisory, administrative, and judicial bodies on all matters directly or indirectly concerning their competence and scope, regarding proceedings conducted before those bodies in connection with proceedings within the scope and competence of the Agency,
9. give an opinion on the implementation of this Act and special regulations from point 1 of this Article upon request of parties in proceedings or persons who prove their legal interest.

Article 16. (1) The Agency and the Croatian National Bank (hereinafter: HNB) must, upon mutual request, provide each other with all data and information about supervised entities within their scope and competence, which are necessary for them in the process of conducting supervision and in proceedings related to the issuance of approvals. (2) Supervisory authorities from paragraph 1 of this Article must inform each other about irregularities they identify during the performance of supervision, if those findings are significant for the work of the other supervisory authority. (3) The exchange of data and information in accordance with this Article is not considered disclosure of official secrets, and the Agency and HNB are obliged to keep received data and information confidential and may use them exclusively for the purpose for which they were provided. (4) The scope of information exchange and coordination of procedures and activities in the supervision and regulation of financial institutions and groups will be regulated by a mutual cooperation agreement between the Agency and HNB.

Article 17. In executing statutory goals and tasks, the Agency will cooperate with the Government of the Republic of Croatia and other state authorities and, within its competence, take measures to improve such cooperation.

Article 18. (1) The Agency may be a member of international organizations competent in the field of supervision or supervision of financial institutions and markets. (2) The Agency cooperates and exchanges information from supervision, operations of entities from Article 14, point 2, with similar foreign institutions that perform supervision or supervision of financial institutions and markets.

Article 19. (1) The provisions of the General Administrative Procedure Act apply to proceedings conducted by the Agency within its competence, unless otherwise prescribed by law. (2) Acts of the Agency are final, and an administrative dispute may be initiated against them.

CHAPTER V. FINANCING AND REPORTING Financing

Article 20. (1) The Agency is financed: – from state budget funds, – from fees from assets and income of supervised entities, and – from fees for services provided within the scope and competence of the Agency. (2) The Agency is obligated to prepare a revenue and expenditure plan for each calendar year and submit it to the Ministry of Finance. (3) For the financing of the Agency from paragraph 1, sub-paragraph 2 of this Article, the maximum fee may amount to 0.8‰ (per mille), with the Agency determining the calculation and amount of the fee, the method, and execution of fee collection by a special rulebook for each year. (4) Collected administrative fees from the Agency are paid to the benefit of the state budget of the Republic of Croatia. (5) Surplus of revenues over expenditures at the end of the budget year is paid into the state budget. (6) In cases where the collected fee in total revenues is insufficient to cover expenditures, the deficit of funds is compensated from planned revenues from the state budget.

Reporting

Article 21. The Agency is obliged to submit an annual report to the Government of the Republic of Croatia and the Croatian Parliament for the previous calendar year regarding its work and the state of financial institutions and markets within its scope and competence.

CHAPTER VI. PENAL PROVISIONS

Article 22. (1) For offenses prescribed by the Securities Market Act (Official Gazette, No. 84/02), the Investment Funds Act (Official Gazette, Nos. 107/95, 12/96, and 114/01), the Privatization Investment Funds Act (Official Gazette, Nos. 109/97 and 114/01), the Takeover of Joint-Stock Companies Act (Official Gazette, Nos. 84/02, 87/02, and 120/02), the Mandatory and Voluntary Pension Funds Act (Official Gazette, Nos. 49/99, 63/00, 103/03, and 117/04), the Act on Pension Insurance Companies and Payment of Pensions Based on Individual Capitalized Savings (Official Gazette, Nos. 106/99 and 63/00), the Insurance Act (Official Gazette, Nos. 9/94, 20/97, 46/97 – consolidated text, 116/99, and 11/02), and the Act on Insurance Intermediation and Representation (Official Gazette, No. 27/99), the statute of limitations expires: – for initiating misdemeanor proceedings within 3 years from the date of the commission of the offense, – for execution of imposed misdemeanor sanctions within 2 years from the finality of the decision. (2) The statute of limitations is interrupted by every act of the competent authority, but expires in any case when twice the time prescribed in paragraph 1 of this Article has elapsed.

CHAPTER VII. TRANSITIONAL AND FINAL PROVISIONS

Article 23. In the Securities Market Act (Official Gazette, No. 84/02), the Investment Funds Act (Official Gazette, Nos. 107/95, 12/96, and 114/01), the Privatization Investment Funds Act (Official Gazette, Nos. 109/97 and 114/01), the Takeover of Joint-Stock Companies Act (Official Gazette, Nos. 84/02, 87/02, and 120/02), the Act on the Fund of Croatian Veterans from the Homeland War and Their Family Members (Official Gazette, Nos. 163/03 and 112/04), the Act on the Pension Fund (Official Gazette, No. 93/05), the Mandatory and Voluntary Pension Funds Act (Official Gazette, Nos. 49/99, 63/00, 103/03, and 117/04), the Act on Pension Insurance Companies and Payment of Pensions Based on Individual Capitalized Savings (Official Gazette, Nos. 106/99 and 63/00), the Insurance Act (Official Gazette, Nos. 9/94, 20/97, 46/97 – consolidated text, 116/99, and 11/02), the Act on Insurance Intermediation and Representation (Official Gazette, No. 27/99), in other laws, and in all sub-law regulations, the names: "Securities and Markets Commission of the Republic of Croatia", "Pension Fund and Insurance Supervisory Agency", and "Insurance Companies Supervisory Directorate" are replaced, in the appropriate gender, number, and case, with the name: "Croatian Financial Services Supervisory Agency".

Article 24. (1) The Government of the Republic of Croatia will propose to the Croatian Parliament the appointment of the President and members of the Board of Directors of the Agency no later than within 15 days from the date of entry into force of this Act. (2) The bodies authorized for appointment from Article 11, paragraph 2 of this Act will, within 90 days from the date of entry into force of this Act, appoint members of the Council of the Agency. (3) The Agency will adopt the Statute and submit it to the Croatian Parliament for confirmation within 60 days from the date of application of this Act. (4) Until the entry into force of the Agency's Statute, the Agency will apply the provisions of the Statute of the Securities and Markets Commission of the Republic of Croatia, except in parts that are contrary to this Act. (5) The Agency is obliged to adopt acts prescribed by this Act within six months from the date of entry into force of the Statute. (6) Until the adoption of acts from paragraph 5 of this Article, the Agency will regulate issues significant for its operations by its decisions.

Article 25. With the beginning of the application of this Act, the following cease to be valid:

1. Provisions of Articles 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, and 17 of the Securities Market Act (Official Gazette, No. 84/02),
2. Provisions of Articles 91, 92, 92.a, 95, 96, 97, 98, 99, 100, 101, 102, and 103 of the Mandatory and Voluntary Pension Funds Act (Official Gazette, Nos. 49/99, 63/00, 103/03, and 117/04),
3. Provisions of Article 92 and Article 94, paragraph 5 of the Act on Pension Insurance Companies and Payment of Pensions Based on Individual Capitalized Savings (Official Gazette, Nos. 106/99 and 63/00),
4. Provisions of Articles 56, 57, 58, 59, and 60 of the Insurance Act (Official Gazette, Nos. 9/94, 20/97, 46/97 – consolidated text, 116/99, and 11/02),
5. Provisions of Article 5, paragraph 2, Article 7, paragraph 3, Article 17, paragraph 2, Article 21, paragraph 2, Article 27, paragraph 1, and Article 29 of the Act on Insurance Intermediation and Representation (Official Gazette, No. 27/99).

Article 26. (1) With the beginning of the application of this Act, the term of office of the President and members of the Board of Directors of the Agency begins. (2) With the beginning of the application of this Act, the term of office of the President and members of the Securities and Markets Commission of the Republic of Croatia, the Director, Deputy Director, Assistant Directors, and members of the Council of the Pension Fund and Insurance Supervisory Agency, and the Director and members of the Management Board of the Insurance Companies Supervisory Directorate, ceases.

Article 27. With the beginning of the application of this Act:

1. The Agency begins work.
2. The Securities and Markets Commission of the Republic of Croatia, the Pension Fund and Insurance Supervisory Agency, and the Insurance Companies Supervisory Directorate cease work.
3. All sub-law regulations cease to be valid, except for the Statute from Article 24, paragraph 4 of this Act, which regulate the internal organization, internal organizational structure, and job classification, salaries and other material benefits, work and other rights of the Securities and Markets Commission of the Republic of Croatia, the Pension Fund and Insurance Supervisory Agency, and the Insurance Companies Supervisory Directorate.
4. Employees of the Securities and Markets Commission of the Republic of Croatia, the Pension Fund and Insurance Supervisory Agency, and the Insurance Companies Supervisory Directorate are transferred to the Agency by applying the provision of Article 136 of the Labor Act (Official Gazette, No. 137/04 – consolidated text) until the adoption of an act establishing the internal organizational structure, employment conditions, and work of employees of the Agency.
5. The Agency takes possession, ownership, and use of office premises and equipment, all other immovable and movable property, and all other rights of the Securities and Markets Commission of the Repub