Law on Open-Ended Investment Funds with Public Offer (Official Gazette No. 44/2016, 126/19, 110/21, 76/22, 152/24 and 13/26) - Unofficial Consolidated Text

Croatian Financial Services Supervisory 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 OPEN-ENDED INVESTMENT FUNDS WITH PUBLIC OFFER (Official Gazette No. 44/2016, 126/19, 110/21, 76/22, 152/24 and 13/26)

• Unofficial Consolidated Text

PART ONE GENERAL PROVISIONS

Article 1. This Law prescribes the conditions for establishing and operating open-ended investment funds with public offer (UCITS funds) and UCITS management companies, and regulates the manner of issuing and redeeming UCITS fund shares, trading in UCITS fund shares, delegation of activities to third parties, and supervision over the operation and business of UCITS funds, UCITS management companies, depositaries, and persons offering shares in UCITS funds.

Transposition of European Union Legislation Article 2. (OG 13/26) (1) The following European Union acts are transposed into Croatian legislation by this Law:

1. Directive 2009/65/EU of the European Parliament and of the Council of 13 July 2009 on coordinating laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast) (Text with EEA relevance) (OJ L 302, 17. 11. 2009.), as last amended by Directive (EU) 2024/2994 of the European Parliament and of the Council of 27 November 2024 amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk arising from exposure to central counterparties and counterparty risk for derivatives transactions cleared by a central counterparty (Text with EEA relevance) (OJ L, 2024/2994, 4. 12. 2024.) (hereinafter: Directive 2009/65/EU)
2. Articles 2 to 7, Articles 20 to 23 and Articles 26 to 29 of Commission Directive 2010/44/EU of 1 July 2010 on the implementation of Directive 2009/65/EU of the European Parliament and of the Council with regard to certain provisions relating to fund mergers or divisions, main and feeder fund structures and the notification procedure (Commission Directive 2010/44/EU)
3. Articles 9 to 12 of Commission Directive 2010/43/EU of 1 July 2010 on the implementation of Directive 2009/65/EU of the European Parliament and of the Council with regard to organisational requirements, conflicts of interest, operations, risk management and content of agreements between depositaries and management companies (Commission Directive 2010/43/EU)
4. Article 11 of Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EU, 2002/87/EU, 2003/6/EU, 2003/41/EU, 2003/71/EU, 2004/39/EU, 2004/109/EU, 2005/60/EU, 2006/48/EU, 2006/49/EU and 2009/65/EU as regards the powers of the European Supervisory Authorities (European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority) (Directive 2010/78/EU)
5. Article 2 of Directive 2013/14/EU of the European Parliament and of the Council of 21 May 2013 amending Directive 2003/41/EU on the activities and supervision of institutions for occupational retirement provision, Directive 2009/65/EU on coordinating laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) and Directive 2011/61/EU on alternative investment fund managers as regards the over-reliance on credit rating agencies
6. Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EU on coordinating laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary activities, remuneration policies and sanctions (Directive 2014/91/EU)
7. Article 30 of Directive 2002/87/EU of the European Parliament and of the Council of 16 December 2002 on supplementary supervision of credit institutions, insurance undertakings and investment firms in financial conglomerates and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/56/EEC, 93/6/EEC and 93/22/EEC and Directives 98/78/EU and 2000/12/EU of the European Parliament and of the Council
8. Article 2(22) of Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011 amending Directives 98/78/EU, 2002/87/EU, 2006/48/EU and 2009/138/EU as regards additional supervision of financial entities in a financial conglomerate
9. Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EU, 2009/65/EU, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (Text with EEA relevance) (OJ L 314, 5. 12. 2019.)
10. Directive (EU) 2023/2864 of the European Parliament and of the Council of 13 December 2023 amending certain directives as regards the establishment and functioning of a single European access point (Text with EEA relevance) (OJ L, 2023/2864, 20. 12. 2023.) (hereinafter: Directive (EU) 2023/2864). (2) The Croatian Financial Services Supervisory Agency is competent for the implementation and supervision of the application of European Union regulations adopted on the basis of the directives in paragraph 1 of this Article, which include:
11. Commission Regulation (EU) No 583/2010 of 1 July 2010 on the implementation of Directive 2009/65/EU of the European Parliament and of the Council with regard to key investor information and conditions for delivering key investor information or a prospectus on a durable medium that is not paper or via a website (Commission Regulation (EU) No 583/2010) and
12. Commission Regulation (EU) No 584/2010 of 1 July 2010 on the implementation of Directive 2009/65/EU of the European Parliament and of the Council with regard to the form and content of the standard notification and confirmation by UCITS, use of electronic communication between competent supervisory authorities for the purposes of notifications and direct supervision and investigative procedures, and exchange of information between competent authorities (Commission Regulation (EU) No 584/2010). (3) This Law ensures the implementation of the following European Union acts:
13. Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating the cross-border distribution of undertakings for collective investment and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (Text with EEA relevance) (OJ L 188, 12. 7. 2019.) (hereinafter: Regulation (EU) 2019/1156)
14. Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements for investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (Text with EEA relevance) (OJ L 314, 5. 12. 2019.) (hereinafter: Regulation (EU) 2019/2033). (4) Where this Law prescribes the power of the Croatian Financial Services Supervisory Agency to adopt regulations, such regulation shall be adopted by the Management Board of the Croatian Financial Services Supervisory Agency.

Authority of the Agency to Ensure Implementation of European Union Regulations, Regulatory and Implementing Technical Standards, and Guidelines of European Supervisory Authorities Article 3. (1) The Agency is competent and responsible for the implementation and supervision of this Law, European Union regulations under Article 2(2) of this Law, regulatory and implementing technical standards, as well as guidelines and other acts adopted by European supervisory authorities. (2) Guidelines adopted by European supervisory authorities in accordance with their powers are binding on the Agency and persons whose obligations are defined by provisions of this Law and relevant regulations, to the extent determined by the Agency's statement under point 1 of this paragraph, provided that the following conditions are met:

1. that in accordance with the procedure prescribed by regulations establishing European supervisory authorities, the Agency has stated its commitment to fully or partially comply with a specific guideline or that it intends to align itself with a specific guideline by a certain deadline;
2. that the Agency has published a notice on its website regarding the statement under point 1 of this paragraph, whereby entry into force and application are determined by the specific guideline, except when the Agency states its intention to align with a specific guideline by a certain deadline, in which case entry into force and application are determined within the aforementioned notice. (3) The Agency publishes on its website the texts of guidelines to which the Agency and/or supervised entities must fully or partially comply, or with which they intend to align by a certain deadline, together with a notice containing: a) the supervised entities to which the guideline applies; b) whether the guideline applies fully or partially; and c) the application start date of the guideline, with transitional periods, if applicable. (4) Supervised entities to which a guideline under paragraph 2 of this Article applies are obliged to take all necessary activities to align with that guideline, within the scope and timeframes determined in the Agency's notice under paragraph 2 of this Article.

Meaning of Certain Terms Article 4. (OG 13/26) (1) Certain terms, for the purposes of this Law, have the following meanings:

1. investment fund is an undertaking for collective investment whose sole purpose and objective is to raise funds through a public or private offer and invest those funds in various types of assets in accordance with a predetermined investment strategy of the investment fund, exclusively for the benefit of shareholders/participants in that investment fund.
2. UCITS fund is an open-ended investment fund with public offer: a) which has the exclusive objective of collectively investing assets raised through a public offer of shares in the fund into transferable securities or other forms of liquid financial assets under Article 252(1) of this Law, and which operates on the principles of risk diversification; b) whose shares are redeemed directly or indirectly from the assets of that fund upon the investor's request. Actions taken by the management company to ensure that the market value of shares does not materially deviate from the net asset value per share (share prices) are equalized with share redemption; and c) which is established in accordance with Part Ten of this Law, or regulations of a member state adopted on the basis of Directive 2009/65/EU.
3. alternative investment fund is an investment fund defined by the law governing the establishment and management of alternative investment funds.
4. open-ended investment fund is separate property, without legal personality, established by a management company and managed by the management company in its own name and for the common account of shareholders/participants in that property in accordance with the provisions of this Law, the prospectus and the rules of that fund. Shares in an open-ended investment fund are redeemed, directly or indirectly, from the assets of the open-ended investment fund upon the request of shareholders/participants. If the law of a member state or third country permits, an open-ended investment fund may have legal personality. 4.a UCITS ETF (English »Exchange-Traded Fund«) is an open-ended investment fund with public offer whose at least one class of shares is traded during the day on a regulated market or multilateral trading facility, with at least one market maker who takes appropriate actions to ensure that the market value of its shares does not significantly deviate from its net asset value and, where applicable, its indicative net asset value.
5. share represents a share in a UCITS fund.
6. investor is a shareholder/participant of a UCITS fund.
7. depositary is a credit institution or a branch of a credit institution to which the investment firm and the branch of an investment firm have entrusted activities prescribed by Articles 219, 220 and 221 of this Law.
8. management company is a legal entity with its seat in the Republic of Croatia which, on the basis of an approval from the Agency, carries out the activity of managing UCITS funds.
9. management company from another member state is a legal entity with its seat in another member state which, on the basis of approval from the competent authority of that member state, carries out the activity of managing UCITS funds.
10. management company from a third country is a legal entity with its seat in a third country which, on the basis of approval from the competent authority of that third country, carries out the activity of managing investment funds.
11. home member state of a management company is the member state in which the registered seat of the management company is located.
12. host member state of a management company is the member state that is not the home member state, in which the management company has a branch or directly provides services.
13. home member state of a UCITS fund is the member state in which the UCITS fund has received approval from the competent authority corresponding to that under Article 243 of this Law.
14. host member state of a UCITS fund is the member state that is not the home member state, in which shares of the UCITS fund are traded.
15. branch is a place of business that is part of the management company, has no legal personality and carries out service provision activities for which the management company has received approval to operate. For the purposes of this Law, any place of business established in the same member state by one management company with its seat in another member state is considered a single branch.
16. competent authority is: a) the authority of a member state which, on the basis of regulations of that state transposing provisions of Directive 2009/65/EU into the legal order, is competent for issuing approvals for establishment and operation, or supervision of investment funds and management companies; or b) the authority of a third country competent for issuing approvals for establishment and operation, or supervision of investment funds and management companies.
17. close linkage means a connection between two or more natural or legal persons, or entities, in one of the following ways: a) by way of participation; or b) by way of control.
18. participation means the involvement of a person in another legal entity when it has direct or indirect investments through which it participates with 20% or more of the share capital or voting rights in that legal entity.
19. control means a relationship between a parent company and a subsidiary or a similar relationship between any natural or legal person and an entity. A subsidiary of a subsidiary is also considered a subsidiary of the parent company at the head of those entities. Situations in which two or more legal or natural persons are permanently linked to the same person by way of control will be considered a close linkage relationship between those persons.
20. parent company is a parent company as defined by regulations governing business accounting and application of financial reporting standards.
21. subsidiary is a subsidiary as defined by regulations governing business accounting and application of financial reporting standards.
22. qualified shareholding is any direct or indirect shareholding in a management company that represents 10% or more of the share capital or voting rights, or a smaller shareholding that enables obtaining significant influence over the management of the management company. In calculating voting rights, provisions on information about changes in voting rights under the capital market law are applied accordingly.
23. durable medium is paper or another means that enables the investor to store information addressed personally to that investor in a way that ensures access to that information for future use, for a period appropriate to the purpose of that information, and enables reproduction of the stored information without alteration.
24. transferable securities are: a) shares and securities equivalent to shares; b) bonds and other debt securities; and c) any other transferable security that gives the right to acquire transferable securities under sub-items a) or b) of this item by subscription or exchange. Investment techniques and instruments described in Article 253(5) of this Law are not transferable securities.
25. money market instruments are financial instruments commonly traded on the money market, which are liquid and whose value can be precisely determined at any time, such as treasury bills, bank bills and commercial papers and certificates of deposit, except payment instruments.
26. third country is a state that is not a member state within the meaning of point 27 of this paragraph.
27. member state is a member state of the European Union or a state that has signed the Agreement on the European Economic Area.
28. Agency is the Croatian Financial Services Supervisory Agency.
29. approval is a decision of the Agency accepting a submitted application, which is always required and issued prior to undertaking a specific action or concluding a transaction.
30. without delay and/or immediately means undertaking an action or transaction no later than the next working day.
31. public offer is any announcement given in any form and using any means, which contains sufficient information about the terms of the offer and the offered shares in investment funds such that an investor can decide to subscribe to those shares based on them.
32. auditor is an independent external authorized auditor defined by regulations governing auditing.
33. relevant person in relation to a management company is: a) a person in a managerial position in the management company, a person who is a member of the company, a member of the supervisory board or an authorized signatory of the management company; b) a person in a managerial position or a member of the company in every legal entity authorized for distribution of UCITS fund shares; c) a person in a managerial position in the legal entity to which the management company has delegated its activities; d) an employee of the management company, an employee of a legal entity to which the management company has delegated its activities, or an employee of a legal entity authorized for distribution of shares in UCITS funds, who is involved in activities carried out by the management company; and e) any other natural person whose services are made available and fall under the responsibility of the management company, who is involved in activities carried out by the management company.
34. a person related to a relevant person is: a) the spouse of the relevant person or any person considered equivalent to a spouse under national law; b) a dependent child or nephew/niece of the relevant person; and c) any other relative of the relevant person who has lived in the same household as the relevant person for at least one year on the date of the relevant personal transaction.
35. relevant person in relation to a UCITS fund is: a) the depositary of the UCITS fund; and b) the auditor of the UCITS fund.
36. financial instrument is a financial instrument as defined by the law governing capital markets.
37. portfolio rebalancing is a material change in the structure of the portfolio.
38. synthetic risk and return indicators are synthetic indicators within the meaning of Article 8 of Commission Regulation (EU) No 583/2010 of 1 July 2010 on the implementation of Directive 2009/65/EU of the European Parliament and of the Council regulating key investor information and conditions to be met when delivering key data to investors or delivering a prospectus on a durable medium that is not paper or via a website.
39. senior manager is a member of the management board or a person who actually conducts the business of the management company.
40. supervisory function is a supervisory board or another function in the management company responsible for overseeing senior managers, as well as assessing and periodically confirming the appropriateness and effectiveness of risk management, and policies, measures and procedures prescribed in accordance with this Law.
41. FATCA Agreement is an agreement between the Government of the Republic of Croatia and the Government of the United States of America to improve tax compliance internationally and implement FATCA, which prescribes rules for identifying and exchanging information on accounts of residents of both states located in financial institutions of those states, for the purpose of identifying financial accounts, reporting taxable income in the state of residence, or avoiding tax evasion.
42. total annual revenue earned in the financial year includes revenue which a management company, or a commercial entity acting as a depositary for which the Agency has established that it breached provisions of this Law and/or regulations adopted on the basis of this Law, earned in the year of the breach, as determined by official annual financial statements for that year approved by the management body of the entity, after deducting value added tax and other taxes directly related to the activity.
43. official annual financial statements are audited annual financial statements in accordance with the law governing business accounting and application of financial reporting standards.
44. financial sector entity is an entity as defined by Article 4(1)(27) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Text with EEA relevance) (OJ L 176, 27. 6. 2013.) (hereinafter: Regulation (EU) No 575/2013).
45. securitization is securitization as defined by Article 2(1) of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 on establishing a general framework for securitization and creating a specific framework for simple, transparent and standardised securitization, amending Directives 2009/65/EU, 2009/138/EU and 2011/61/EU, and amending Regulations (EC) No 1060/2009 and (EU) No 648/2012 (hereinafter: Regulation (EU) 2017/2402).
46. servicer is an entity to which the daily active management of a portfolio included in securitization has been delegated in accordance with Article 2(13) of Regulation (EU) 2017/2402.
47. distribution is the sale or advice regarding shares in UCITS funds carried out by a management company or persons under Article 164 of this Law.
48. candidate's collaborator for the position of a management board member of a management company is: a) any natural person who is a member of the management or supervisory board in a legal entity where the candidate for a management board member of a management company holds a managerial position or is an actual owner of the legal entity; b) any natural person who is an actual owner of a legal entity where the candidate for a management board member of a management company holds a managerial position; c) any natural person who jointly with the candidate for a management board member of a management company holds actual ownership of a legal entity.
49. persons acting in concert are: a) natural or legal persons who cooperate with each other or with the management company on the basis of an agreement, express or implied, oral or written, whose purpose is acquiring shares or business interests with voting rights or jointly exercising voting rights; or b) legal entities that are interconnected in the sense of provisions of the law governing the establishment and organization of commercial companies.
50. related persons are two or more legal or natural persons and members of their closer family who, unless proven otherwise, constitute one risk for the management company because: a) one of them has direct or indirect control over another or others; or b) they are interconnected such that there is a high probability that due to deterioration or improvement of the economic and financial status of one person, there will be a corresponding deterioration or improvement in the economic and financial status of one or more other persons, especially if there is a possibility of transferring losses, profits, creditworthiness between them or if difficulties in funding sources or meeting obligations of one person may cause difficulties in funding sources or meeting obligations of one or more other persons.
51. group