Decree No. 38 of 21.05.2020 on Requirements for the Activity of Investment Intermediaries

DECREE No. 38 of 21.05.2020 on the Requirements for the Activity of Investment Intermediaries Pub. - State Gazette, No. 51 of 05.06.2020; amended, No. 48 of 08.06.2021; amended and supplemented, No. 68 of 17.08.2021; amended and supplemented, No. 26 of 01.04.2022, effective from 03.05.2022; amended and supplemented, No. 27 of 05.04.2022, effective from 05.04.2022; amended, No. 55 of 15.07.2022; amended and supplemented, No. 36 of 21.04.2023; amended and supplemented, No. 90 of 27.10.2023; amended and supplemented, No. 90 of 25.10.2024. Adopted by Decision No. 210-N of 21.05.2020 of the Financial Supervision Commission

Chapter One
GENERAL PROVISIONS

Art. 1. (Suppl. - State Gazette, No. 68 of 2021; amended, No. 27 of 2022, effective from 05.04.2022; amended, No. 55 of 2022; supplemented, No. 36 of 2023; amended and supplemented, No. 90 of 2024.) (1) This Decree regulates the requirements for investment intermediaries, as well as for investment holdings and mixed financial holdings, respectively, financial holdings and financial holdings with mixed activity, with the aim of protecting the interests of clients and ensuring transparency and stability of the financial instruments market, including requirements related to the conclusion and performance of contracts with clients, as well as internal organization. (2) (Amended and supplemented - State Gazette, No. 90 of 2024.) For banks - investment intermediaries, when they provide one or more investment services and/or carry out investment activities under Art. 6, para. 2 and 3 of the Law on the Markets in Financial Instruments (LMFI), Chapter Two, with the exception of Art. 38 regarding the head of the unit performing the compliance function (the compliance unit), and Chapter Three "a" shall not apply. (3) Chapter Four shall also apply to investment intermediaries and banks when they sell (offer) structured deposits or advise clients in connection with structured deposits. (4) (New - State Gazette, No. 68 of 2021; amended, No. 55 of 2022; supplemented, No. 36 of 2023.) For management companies providing services under Art. 86, para. 2, item 2-4 of the Law on the Activity of Collective Investment Schemes and Other Collective Investment Undertakings, and for persons managing alternative investment funds providing services under Art. 198, para. 5 of the same Law, Art. 40, paras. 1-4, Art. 41-46, 49-52, 58 and 73-97 shall apply respectively. (5) (New - State Gazette, No. 90 of 2024.) For non-financial counterparties under Art. 2, item 9 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ, L 201/1 of 27 July 2012), hereinafter referred to as "Regulation (EU) No 648/2012", which are not persons under Art. 1, para. 2, items 2 and 3 of the Law on the Financial Supervision Commission and which have decided to report data on their contracts with financial counterparties for OTC derivatives, Art. 57a shall apply respectively. (6) (New - State Gazette, No. 90 of 2024.) For non-financial counterparties under Art. 3, item 4 of Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on the transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ, L 337/1 of 23 December 2015), hereinafter referred to as "Regulation (EU) No 2015/2365", which are not persons under Art. 1, para. 2, items 2 and 3 of the Law on the Financial Supervision Commission, when concluding a securities financing transaction with financial counterparties, which in the balance sheet of the
non-financial counterparty exceeds the thresholds of at least two of the three criteria under Art. 19, para. 4 of the Accounting Law, Art. 57b shall apply respectively.

Chapter Two
ADDITIONAL REQUIREMENTS AND SUITABILITY ASSESSMENT

Section I
Additional requirements for the management and supervisory bodies of the investment intermediary, the investment holding, the mixed financial holding, the financial holding and the financial holding with mixed activity.
Additional requirements for persons under Art. 68, para. 1 of LMFI. Suitability assessment by the investment intermediary (Title suppl. - State Gazette, No. 27 of 2022, effective from 05.04.2022)

Art. 2. (Amended and supplemented - State Gazette, No. 68 of 2021; supplemented, No. 26 of 2022, effective from 03.05.2022; amended, No. 55 of 2022.) (1) The assessments under Art. 64, para. 7 of LMFI shall be carried out by the candidate selection committee, when such a committee is established in the investment intermediary.
(2) (Supplemented - State Gazette, No. 68 of 2021; supplemented, No. 26 of 2022, effective from 03.05.2022; amended, No. 55 of 2022.) The assessments under Art. 64, para. 7 of LMFI shall be carried out by the supervisory body of the investment intermediary or by a commission composed as determined by the management or supervisory body of the investment intermediary, when a candidate selection committee is not established in the investment intermediary. Persons who have been assigned executive functions shall not participate in the commission referred to in the first sentence. (3) Employees in the units of the investment intermediary for compliance, human resources, risk management and legal services shall assist in carrying out the assessments under Art. 64, para. 7 of LMFI. (4) The initial assessment under Art. 64, para. 7 of LMFI shall be carried out before concluding a contract with the respective member of the management or supervisory body of the investment intermediary. (5) (New - State Gazette, No. 68 of 2021.) The assessment under Art. 64, para. 7 of LMFI of the collective suitability of the members of the management body shall also include the procurist of the company. (6) (Previous para. 5 - State Gazette, No. 68 of 2021.) When carrying out the assessments under Art. 64, para. 7 of LMFI, the internal rules, policies and procedures under Art. 14, para. 2, Art. 20, para. 1, Art. 22 and Art. 26, para. 1 shall be applied, adapted to the nature, scale and complexity of its activity and the type and scope of investment services and activities carried out by the investment intermediary.

Art. 3. (1) The assessment under Art. 64, para. 7 of LMFI may also be carried out after the election of a person as a member of the management or supervisory body of the investment intermediary, when:

1. the respective person is proposed as a member of the management or supervisory body at a general meeting of partners/shareholders, and the management body, respectively the supervisory body, has not been informed in a timely manner that a new member will be proposed for election, or
2. there is a need to appoint a new member because a member of the management or supervisory body has left, died or has been removed as unsuitable.
   (2) The investment intermediary shall provide in the management contract concluded with the respective member of the management or supervisory body that the performance of his functions shall be suspended immediately if he is assessed as unsuitable to perform the respective position.
   (3) In the cases under para. 1, the investment intermediary shall assess the suitability of the newly appointed member and the collective suitability of the management or supervisory body within 14 days from his appointment and submit an application for his approval under Art. 15 of LMFI within 7 days from the assessment. The investment intermediary shall immediately notify the respective member of the management or supervisory body if he is assessed as unsuitable.

Art. 4. (Amended and supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022.) (1) When carrying out the assessments under Art. 64, para. 7 of LMFI, all relevant information available to the investment intermediary shall be taken into account, and the risks that may arise if weaknesses are identified affecting the suitability of the members of the management body, respectively the members of the supervisory body, individually and collectively, including reputational risks, shall be considered. (2) When carrying out subsequent assessments under Art. 64, para. 7 of LMFI, the following shall be taken into account:

1. the performance of the members of the management body, respectively the members of the supervisory body, individually and collectively, and the situation or event that triggered the subsequent assessment and its impact on suitability;
2. the efficiency of the workflow of the management body, respectively the supervisory body, including the efficiency of information flows and the flow of information to the members of the management body, respectively the members of the supervisory body, based on information provided by the compliance unit, and when established - and by the risk management unit and the internal audit unit;
3. (supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022.) the efficiency and prudent management of the investment intermediary, including whether the management and supervisory bodies have acted in the best interest of the investment intermediary, as well as in connection with the prevention of money laundering and terrorist financing;
4. the ability of the management body, respectively the supervisory body, to focus on strategically important goals;
5. the adequacy of the number of meetings held, attendance, time devoted and activity of the members of the management body, respectively the members of the supervisory body, during meetings;
6. all changes in the composition of the management body, respectively the supervisory body, and all weaknesses regarding suitability, individually and collectively, taking into account the business model and risk strategy of the investment intermediary and changes therein;
7. the goals of the management body, respectively the supervisory body;
8. the goals of the investment intermediary;
9. the independence of the members of the management body, respectively the members of the supervisory body, including whether decision-making is influenced by a member, or a small group of members and whether the policy on conflict of interest is observed;
10. the degree of achievement of the goals set out in the policies and procedures under Art. 20, para. 1;
11. events that have a significant impact on the suitability of each member of the management body, respectively each member of the supervisory body, and collective suitability, including changes in the business model, strategies and organization of the investment intermediary.
12. (new - State Gazette, No. 26 of 2022, effective from 03.05.2022.) reasonable grounds for suspicion that money laundering or terrorist financing is being, has been or has been attempted, or that there is an increased risk of such actions, including as a result of adverse findings made by internal or external auditors or competent authorities regarding the adequacy of the systems and controls of the investment intermediary for the prevention of money laundering and terrorist financing.
    (3) (New - State Gazette, No. 26 of 2022, effective from 03.05.2022.) When carrying out a subsequent assessment under Art. 64, para. 7 of LMFI, the following shall also be taken into account:
13. the assigned duties and reporting processes within the investment intermediary, including if applicable within the group, to determine whether a change in the distribution of duties among the members of the management body, respectively the members of the supervisory body, is necessary, taking into account all relevant documentation;
14. the credibility and reliability of any information that led to the subsequent assessment, and the seriousness of all statements or actual violations by one or more members of the management or supervisory body.

Art. 5. (1) The investment intermediary shall ensure access for the candidate selection committee, and when such a committee is not established, for the supervisory body, respectively the commission under Art. 2, para. 2, to all information necessary for carrying out the assessments under Art. 64, para. 7 of LMFI.
(2) The investment intermediary shall ensure access for shareholders, respectively partners, to the results of any assessment under Art. 64, para. 7 of LMFI, as well as to relevant information regarding suitability at any time for the members of its management and supervisory bodies.
(3) The information under para. 2 shall be part of the materials for the general meeting for the election of the respective person as a member of the management or supervisory body of the investment intermediary.

Art. 6. (1) When carrying out an assessment of the collective suitability of the management body, respectively the supervisory body of the investment intermediary, the suitability assessments of each member of the management body, respectively each member of the supervisory body, individually shall be taken into account.
(2) When carrying out an assessment of the suitability of each member of the management body, respectively each member of the supervisory body of the investment intermediary, the assessment of the collective suitability of the management body, respectively the supervisory body shall be taken into account.
(3) When weaknesses in the collective suitability of the management body, respectively the supervisory body of the investment intermediary are identified, it shall be assessed whether any of the members of the management body, respectively the members of the supervisory body of the investment intermediary, is unsuitable.

Art. 7. (1) The investment intermediary shall continuously monitor compliance with the suitability requirements for its management and supervisory bodies, individually and collectively, including for the purpose of identifying cases where a subsequent assessment should be carried out.
(2) Subsequent assessments under Art. 64, para. 7 of LMFI shall be carried out at least once every 2 years, and for significant investment intermediaries - at least once a year.
(3) When a subsequent assessment under Art. 64, para. 7 of LMFI is imposed by a specific event or situation, the investment intermediary may limit its scope only to the event or situation that necessitated its carrying out.

Art. 8. (Amended and supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022.) (1) A suitability assessment of a member of the management body, respectively a member of the supervisory body, shall be carried out in the following cases:

1. when a person submits an application for obtaining a license to carry out activity as an investment intermediary under the conditions and procedure of LMFI;
2. when changes occur in the composition of the management body, respectively the supervisory body of the investment intermediary, including:
   a) when a new member of the management body, respectively a new member of the supervisory body, is appointed, including as a result of direct or indirect acquisition or increase of a qualified shareholding in the investment intermediary, in which case an assessment shall be carried out only for the new member; b) when a member of the management body, respectively a member of the supervisory body, is reappointed, if the requirements for holding the position have changed, or when a member of the management body, respectively a member of the supervisory body, is appointed to a different position in the same body of the investment intermediary, in which case an assessment shall be carried out only for the member whose position has changed and shall cover an analysis of the relevant aspects, taking into account all additional requirements for the position;
3. continuously in accordance with paras. 3 and 4.
   (2) When carrying out an assessment under para. 1, it shall be assessed whether the member of the management body, respectively the member of the supervisory body of the investment intermediary:
4. has a sufficiently good reputation;
5. possesses sufficient knowledge, skills and experience to perform his duties;
6. (supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022.) is capable of acting honestly, prudently and independently in order to make an accurate independent judgment and to challenge, when necessary, the decisions of the management body, respectively the decisions of the supervisory body, and to exercise effective control and supervision over the taking of management decisions;
7. is capable of devoting sufficient time to perform his duties in the investment intermediary.
   (3) A subsequent assessment of the suitability of each member of the management body, respectively each member of the supervisory body of the investment intermediary, shall be carried out in the following cases:
8. when there are doubts regarding the suitability of the members of the management body, respectively the members of the supervisory body, individually or collectively;
9. in the event of a significant impact on the reputation of a member of the management body, respectively a member of the supervisory body, including cases where members do not comply with the investment intermediary's policy on conflicts of interest;
10. (amended - State Gazette, No. 26 of 2022, effective from 03.05.2022.) when there are reasonable grounds for suspicion that money laundering or terrorist financing has been, is being or has been attempted, or that there is an increased risk of such actions related to the investment intermediary, and in particular in cases where available information suggests that the investment intermediary:
    a) has not introduced appropriate internal control mechanisms and procedures for limiting and effectively managing money laundering or terrorist financing risks, which has been established during current supervision; b) has been found to have violated its obligations to prevent money laundering or terrorist financing in the home member state or in the host member state, or in a third country; c) has substantially changed its activity or business model in a way that shows that its exposure to money laundering or terrorist financing risk has increased significantly;
11. in any case where the suitability of a member of the management body, respectively a member of the supervisory body, may be significantly affected in another way.
    (4) In cases where there are doubts regarding the suitability of a member of the management or supervisory body of an investment intermediary, an assessment shall be carried out on how the suitability of the respective member of the management or supervisory body is affected.
    (5) When carrying out the assessments under para. 1:
12. information on the suitability of the member of the management body, respectively the member of the supervisory body, shall be collected through various channels and means, including diplomas, certificates, recommendations, curricula vitae, interviews and questionnaires;
13. (supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022.) information regarding reputation, integrity, honesty and independence of the person being assessed shall be collected, including it shall be assessed whether there are reasonable grounds for suspicion that money laundering or terrorist financing is being, has been or has been attempted, or that the risk of such actions may increase;
14. (new - State Gazette, No. 26 of 2022, effective from 03.05.2022.) the independence of the person being assessed shall be evaluated;
15. (previous item 3 - State Gazette, No. 26 of 2022, effective from 03.05.2022.) a declaration from the member of the management body, respectively the member of the supervisory body, regarding the accuracy of the information provided by him shall be required;
16. (previous item 4 - State Gazette, No. 26 of 2022, effective from 03.05.2022.) a declaration from the member of the management body, respectively the member of the supervisory body, regarding actual and potential conflicts of interest shall be required;
17. (previous item 5 - State Gazette, No. 26 of 2022, effective from 03.05.2022.) verification shall be carried out, to the extent possible, of the information provided by the member of the management body, respectively the member of the supervisory body, in connection with the assessment.
    (6) (New - State Gazette, No. 26 of 2022, effective from 03.05.2022.) When there is a circumstance that raises doubts regarding the suitability of a member of the management or supervisory body, an assessment shall be carried out on how this doubt affects the suitability of that person. When carrying out this assessment, it shall be taken into account whether there are reasonable grounds for suspicion that money laundering or terrorist financing is being, has been or has been attempted, or that the risk of such actions may increase.

Art. 9. (Amended and supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022; amended, No. 27 of 2022, effective from 05.04.2022; amended, No. 36 of 2023.) (1) An assessment of the collective suitability of the management body, respectively the supervisory body, shall be carried out in the following cases:

1. when a person submits an application for obtaining a license to carry out activity as an investment intermediary under the conditions and procedure of LMFI;
2. when changes occur in the composition of the management body, respectively the composition of the supervisory body of the investment intermediary, including:
   a) in the cases under Art. 8, para. 1, item 2; b) when members of the management body, respectively members of the supervisory body, cease to be members of the respective body;
3. continuously in accordance with para. 2.
   (2) A subsequent assessment of the collective suitability of the management body, respectively the supervisory body, shall also be carried out in the following cases:
4. when there is a substantial change in the business model of the investment intermediary, the intentions for taking risk and its strategy or structure at an individual or group level;
5. when it is established during the review under Art. 69, para. 3 of LMFI that it is necessary;
6. (new - State Gazette, No. 26 of 2022, effective from 03.05.2022.) when there are reasonable grounds for suspicion that money laundering or terrorist financing has been, is being or has been attempted, or that there is an increased risk of such actions related to the investment intermediary, and in particular in cases where available information suggests that the investment intermediary:
   a) has not introduced appropriate internal control mechanisms and procedures for limiting and effectively managing money laundering or terrorist financing risks, which has been established during current supervision; b) has been found to have violated its obligations to prevent money laundering or terrorist financing in the home member state or in the host member state, or in a third country; c) has substantially changed its activity or business model in a way that shows that its exposure to money laundering or terrorist financing risk has increased significantly;
7. (previous item 3 - State Gazette, No. 26 of 2022, effective from 03.05.2022.) in any case where the collective suitability of the management body, respectively the supervisory body, may be significantly affected in another way.
   (3) When carrying out a subsequent assessment of the collective suitability of the management body, respectively the supervisory body of the investment intermediary, the following shall be taken into account:
8. the relevant changes in the activity, strategies and risk profile of the investment intermediary;
9. the distribution of functions within the management body, respectively the supervisory body, and their impact on the required collective knowledge, skills and experience of the management body, respectively the supervisory body.
   (4) The collective suitability of the management body and the collective suitability of the supervisory body of the investment intermediary shall be assessed separately, by comparing the composition of the respective body with the collective knowledge, skills and experience of that body and the requirements for collective suitability.
   (5) (Supplemented - State Gazette, No. 26 of 2022, effective from 03.05.2022; amended, No. 27 of 2022, effective from 05.04.2022.) When an assessment of the suitability of a member of the management body, respectively a member of the supervisory body of the investment intermediary is carried out within the same period, the collective suitability of the respective body shall also be assessed. In the cases under Art. 61a, para. 1 of LMFI, it shall also be assessed whether the overall composition of the committees under Art. 61a, para. 1 of LMFI is appropriate. In the cases under the first and second sentences, an assessment shall be carried out regarding the knowledge, skills and experience with which a person contributes to the collective suitability of the management body, respectively the supervisory body, and whether the full composition of the respective body shows a sufficiently wide range of knowledge, skills and experience regarding the activity of the investment intermediary and the main risks. (6) (New - State Gazette, No. 26 of 2022, effective from 03.05.2022.) When assessing the collective suitability of the management or supervisory body, the investment intermediary...