Regulation on Criteria for Assessing Conditions for Membership in the Management and Supervisory Boards of UAIFs and Closed AIFs with External Managers

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 REGULATION ON CRITERIA FOR ASSESSING CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT AND SUPERVISORY BOARDS OF UAIFS AND CLOSED AIFS WITH EXTERNAL MANAGERS (Official Gazette Nos. 136/20 and 79/22 – unofficial consolidated text)

I. INTRODUCTORY PROVISIONS Article 1. (OG 79/22) This Regulation further prescribes:

1. criteria for assessing the conditions for performing the function of a member of the management board of a UAIF, including specific conditions related to the type of AIF managed or intended to be managed by the UAIF, the concept of sufficient time that a member of the management board of a medium and small UAIF devotes to performing the function, and the documentation attached to the application for issuing approval for performing the function of a member of the management board,
2. the content of the business management program of a UAIF, the conditions and criteria for evaluating the program and candidates for a member of the management board who presents the program, and the justified reasons for which Hanfa may issue approval for a term shorter than required,
3. the conditions that members of the supervisory board of a UAIF must fulfill,
4. criteria for assessing the conditions that members of the supervisory board of a closed AIF with legal personality managed by an external UAIF must fulfill.

II. CRITERIA FOR ASSESSING CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT BOARD OF A UAIF Article 2. (OG 79/22) (1) A member of the management board of a UAIF may be a person who permanently fulfills the conditions prescribed by Articles 42 and 43 of the Act and this Regulation. (2) Deleted. (2) A candidate for a member of the management board of a UAIF must have appropriate professional knowledge, competence, good reputation, and experience for managing the business of a UAIF. (3) When deciding on an application for issuing approval for performing the function of a member of the management board of a UAIF, Hanfa will take into account all elements that may influence the assessment of whether the candidate fulfills the prescribed conditions, with the aim of ensuring the continuous operation of the UAIF.

Professional Knowledge of Members of the Management Board of a UAIF Article 3. (OG 79/22) (1) The professional knowledge prescribed by Article 42(1)(1) of the Act, necessary for performing the function of a member of the management board of a UAIF, is possessed by a person who has completed one of the following studies: a) undergraduate and master university studies or integrated undergraduate and master university studies or professional studies and specialist master professional studies, by completing which they acquired at least 300 ECTS credits, or b) university undergraduate studies, by completing which they acquired high professional qualification, or professional undergraduate studies lasting at least four years, by completing which they acquired high professional qualification. (2) The provisions of paragraph 1, item b) of this Article apply to persons who completed their studies according to regulations that were in force before the entry into force of the Act on Scientific Activity and Higher Education ("Official Gazette" Nos. 123/03, 198/03, 105/04, 174/04, 2/07 Decision of the Constitutional Court of the Republic of Croatia, 46/07, 45/09, 63/11, 94/13, 139/13, 101/14, 60/15, and 131/17) 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 Degree ("Official Gazette" Nos. 107/07 and 118/2012), in accordance with Article 120(2) of the Act on Scientific Activity and Higher Education. (3) When assessing the professional knowledge of a candidate, in addition to the achieved level of education in accordance with paragraphs 1 and 2 of this Article, Hanfa may also verify the candidate's continuous professional development in the following areas: a) business of investment funds or other funds managed or planned to be managed by the UAIF during the term for which the application for candidate approval is submitted, b) financial markets, c) accounting framework, d) legal-regulatory framework, e) strategic planning and knowledge of business strategy, business plan, and its implementation, f) risk management (identification, measurement, monitoring, control, and mastering of the main types of risks of the UCITS and UAIF management company), g) corporate governance, including the internal control system, and h) analysis of financial data. (4) When assessing the candidate's competence for a member of the management board in the sense of Article 42(1)(1) of the Act, Hanfa may evaluate the ability for strategic thinking and creating short-term and long-term business plans, assessing and managing risks, organizing business and managing the UAIF, independence of opinion, and the candidate's ability and willingness for continuous learning and professional development. In the assessment, the area of responsibility for which the candidate is responsible, as well as the duties and abilities required by their position in the management board, are taken into account.

Experience of a Member of the Management Board of a UAIF Article 4. (OG 79/22) (1) Experience in the sense of the provisions of Article 42(1)(1) of the Act, in addition to the experience from Article 42(2) of the Act for a member of the management board of a large and medium UAIF, or Article 42(8) of the Act for a member of the management board of a small UAIF, is considered other relevant experience, namely:

1. for a member of the management board of a large and medium UAIF, at least three years of experience as a deputy member of the management board, advisor to a member of the management board, proxy in a UAIF, and holder of a key function in a UAIF, a company managing open-ended investment funds with a public offer, a credit institution, or an investment company with its seat in the Republic of Croatia or in another Member State,
2. for a member of the management board of a large and medium UAIF, at least five years of experience in management or work in key positions with a high degree of autonomy in tasks that can be compared to the tasks of a management company, for which Hanfa assesses that they are of such a nature that by performing such tasks, the candidate could acquire the knowledge necessary for performing the function of a member of the management board of a management company in relation to financial markets, regulatory framework and requirements, strategic planning and linking business strategy, business plan, and its implementation, risk management, assessment of the effectiveness of supervision and control, and interpretation of financial data, identification of main problems based on these data, and appropriate controls and measures, which constitutes work experience in managing business at the management level or immediately below management, or in managerial or working positions with a high degree of autonomy, and proxy experience.
3. for a member of the management board of a small UAIF, at least five years of work experience in tasks that can be compared to the tasks of a management company, for which Hanfa assesses that they are of such a nature that by performing such tasks, the candidate could acquire the knowledge necessary for performing the function of a member of the management board of a UAIF. (2) Comparable tasks referred to in paragraph 1, item 3, imply experience in tasks closely related to the subject matter of business of financial sector entities and the scope and responsibilities of supervisory authorities, accounting-financial and legal tasks with a higher degree of autonomy in performing these tasks, audit tasks, and other tasks that are not exclusively in the category of support for basic business processes in other legal entities and state administration bodies, and other tasks that Hanfa assesses as comparable to UAIF tasks depending on the type of AIF managed by the small UAIF. (3) When assessing the duration of experience, Hanfa may take into account several short-term or temporary performances of tasks, if it establishes that together with other previous tasks performed, the candidate acquired at least three or five years of experience in tasks from paragraph 1 of this Article in the last ten years before submitting the application.

Good Reputation of a Member of the Management Board of a UAIF Article 5. (1) When assessing the good reputation prescribed by Article 42(1)(4) of the Act, necessary for performing the function of a member of the management board, particular attention will be paid to: a) whether the candidate had the corresponding consent or approval for performing certain tasks withdrawn, revoked, or annulled due to non-compliance with regulations on financial services under the jurisdiction of Hanfa or another competent supervisory-regulatory authority, or whether a foreign supervisory-regulatory authority has withdrawn consent or imposed any measure prohibiting the performance of corresponding tasks in the fund industry, banking, or capital market, b) whether an investigation has been initiated against the candidate, whether criminal or misdemeanor proceedings are being conducted, or whether they have been finally convicted for acts prescribed by the Securities Market Act ("Official Gazette" Nos. 84/02 and 138/06), the Act on Criminal Offenses against the Capital Market ("Official Gazette" No. 152/08), the Capital Market Act ("Official Gazette" Nos. 88/08, 146/08, 74/09, 54/13, 159/13, 18/15, 110/15, 123/16, and 131/17), the Capital Market Act ("Official Gazette" Nos. 65/18, 17/20, and 83/21), the Mandatory Pension Fund Act ("Official Gazette" Nos. 19/14, 93/15, 64/18, 115/18, and 58/20), the Voluntary Pension Fund Act ("Official Gazette" Nos. 19/14, 29/18, and 115/18), the Open-Ended Investment Funds with Public Offer Act ("Official Gazette" Nos. 44/16, 126/19, and 110/21, or "Official Gazette" Nos. 16/13 and 143/14), the Alternative Investment Funds Act ("Official Gazette" Nos. 21/18, 126/19, and 110/21, or "Official Gazette" Nos. 16/13 and 143/14), the Insurance Act ("Official Gazette" Nos. 30/15, 112/18, 63/20, and 133/20), the Act on Prevention of Money Laundering and Financing of Terrorism ("Official Gazette" Nos. 108/17 and 39/19, or "Official Gazette" Nos. 87/08 and 25/12), and the Companies Act ("Official Gazette" Nos. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 152/11, 111/12, 68/13, 110/15, and 40/19), or for a foreign person, whether an investigation has been initiated against them, whether proceedings are being conducted, or whether they have been finally convicted for acts that correspond in description and consequences to the aforementioned acts, c) whether an investigation has been initiated against the candidate, whether criminal proceedings are being conducted, or whether they have been finally convicted for the following criminal offenses prescribed by Article 42(7) of the Act, d) whether an investigation has been initiated against the candidate, whether criminal proceedings are being conducted, or whether they have been finally convicted for criminal offenses from the Criminal Code ("Official Gazette" Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03 – Decision of the Constitutional Court, 105/04, 84/05, 71/06, 110/07, 152/08, and 57/11) that are in legal continuity with the aforementioned criminal offenses from item c) of this Article, or for a foreign person, whether an investigation has been initiated against them, whether proceedings are being conducted, or whether they have been finally convicted for acts that correspond in description and consequences to the aforementioned criminal offenses, e) the candidate's previous professional work and personal integrity, f) whether business results and/or financial stability endanger the person's reputation, g) whether there are other reasons to doubt the candidate's good reputation. (2) When assessing the conditions from paragraph 1, items a) to d) of this Article, Hanfa will take into account available information related to the type of judgment or decision, the stage at which the proceedings are located, legal remedies declared, the imposed sanction, existing circumstances, the significance of the criminal or misdemeanor offense, and the period that has elapsed since the time of the commission of the act and the person's behavior during that time. Hanfa will also pay attention to a larger number of lighter offenses that individually do not impair, but together may impair the good reputation of the person. (3) Additionally, when assessing the conditions from paragraph 1, item e) of this Article, Hanfa will analyze information indicating irresponsible or inappropriate behavior of the candidate in previous professional work, such as unprofessional and negligent conduct or failure to exercise due diligence, non-transparent conduct, and non-cooperation with competent authorities or failure to act on measures imposed by Hanfa or another competent authority, withdrawal or revocation of approval or license for performing managerial functions or performing professional occupations or activities, and, if available, will also analyze the reasons for termination of the employment contract, as well as the reasons for dismissal from a key or similar function and prohibition of managing business or representing a legal entity imposed by the competent authority, and all other data and evidence indicating that the candidate's actions are not in line with high standards of professional behavior. (4) When assessing the conditions from paragraph 1, item f) of this Article, Hanfa will take into account the financial and business results of the candidate, or the trading company in which the candidate has or had a significant share and/or managerial function, before a pre-bankruptcy settlement was conducted over the company, an open bankruptcy procedure was initiated, a decision on forced liquidation was made, or approval for work was withdrawn or revoked, which could affect the good reputation and integrity of the candidate. Hanfa will assess whether the candidate's actions influenced the occurrence of these events. (5) The establishment of the existence of circumstances from paragraph 1 of this Article does not call into question the application of the principle of presumption of innocence from the law governing criminal proceedings.

Commitment to Performing the Functions of a Member of the Management Board Article 5a. (OG 79/22) (1) When assessing whether a candidate for a member of the management board of a small and medium UAIF can devote sufficient time to fulfilling their duties, the following will be assessed:

1. the number of executive and non-executive functions or deputy functions performed simultaneously,
2. the type, size, scope, and complexity of tasks performed by the company in which the candidate has an executive or non-executive function or deputy function,
3. the geographical location of the company in which the candidate performs the function and the travel time required to perform that function,
4. the number of management board meetings held on average per year,
5. management board meetings held as needed with competent authorities and interested parties,
6. the position, responsibilities, and areas of responsibility covered by the candidate,
7. other professional, political, or other functions or relevant activities of the candidate,
8. the number of functions in organizations or entities not established primarily for the purpose of profit,
9. the time required for introductory and continuous education. (2) When assessing from paragraph 1 of this Article, functions of a member of the management board or supervisory board in organizations or entities not established primarily for the purpose of profit, such as associations, non-profit organizations, companies established exclusively for the purpose of managing the personal property of a member of the management board or persons connected to them, provided that the member of the management board does not have to manage them daily, and similar organizations or entities, are not taken into account. (3) The circumstances from paragraph 1 of this Article are determined in relation to individual circumstances and the nature, scope, and complexity of UAIF activities.

Application for Issuing Approval and Documentation Attached to the Application Article 6. (OG 79/22) (1) Before making a decision on the appointment of a member of the management board, the applicant must obtain approval from Hanfa in accordance with the provisions of the Act. The decision on the appointment of a member of the management board may also be made conditional on the entry into force of the issuance of Hanfa's approval. (2) The application for issuing approval for performing the function of a member of the management board must contain an explanation covering the essential reasons that influenced the submission of the application and the goals that are intended to be achieved by appointing the candidate to the management board of the UAIF. (3) The application from paragraph 2 of this Article must contain the proposed duration of the term, the function and responsibilities for which the candidate is appointed, an explanation of the decision on the selection of the candidate containing the criteria and procedures by which the UAIF guided itself in assessing the suitability of the candidate, and at least the following:

1. personal data of the person being appointed, including first and last name, maiden name, OIB (Personal Identification Number), place and date of birth, country of birth, residence or stay, citizenship, gender, father's and mother's first and last name,
2. information on education, including a chronological list of all levels of education with the year of completion, duration, and acquired academic title,
3. information on professional development, including a chronological list of all forms of professional development, specifying topics, organizers, and duration, years of passing professional exams, certificates, licenses, etc.,
4. for foreign citizens, information on the level of knowledge of the Croatian language,
5. information on work experience, including a chronological listing of all previous employers and job positions, or functions performed outside the job position, with indication of the periods in which individual functions were performed,
6. for job positions or functions where the candidate worked or held in the last ten years, the following is specified: – description of tasks performed by the candidate in that job position or function, – organizational structure of the employer or entity where the tasks were performed or function held at the time the candidate worked in that job position or function, – scope of responsibilities, decision-making powers, and responsibility, – number of subordinate employees,
7. information on whether proceedings are being conducted against the candidate or whether the candidate has been finally convicted for one or more criminal offenses listed in Article 42(7) of the Act or Article 5(1) of this Regulation, or for any other criminal offense,
8. information on whether the candidate has been finally convicted, whether a measure has been imposed against them, 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 regulations governing banking, financial, or insurance activities, or payment instruments, or providing financial services, or any other relevant regulations, which could cast doubt on the candidate's good reputation,
9. information on whether misdemeanor proceedings are being conducted against the candidate or whether the candidate has been finally convicted for a misdemeanor that constitutes a gross and/or repeated violation of regulations under the jurisdiction of Hanfa, the Croatian National Bank, or another competent regulatory authority, or for any misdemeanor that could negatively affect the candidate's financial stability and reputation,
10. information on whether bankruptcy proceedings have been opened over the candidate's property or over the company in which the candidate was a member of the supervisory board, member of the management board, or held another managerial position, whether bankruptcy proceedings have been opened or a decision on forced liquidation has been made, or whether approval for work has been annulled or revoked,
11. information on the candidate's financial status, including information on whether the candidate's assets call into question the fulfillment of their financial obligations in the future, whether the candidate is on the list of delinquent debtors (e.g., HROK, tax debtor list of the Ministry of Finance, "black list", credit register, etc.), and whether enforcement or bankruptcy proceedings have been initiated over the candidate's property,
12. information on the financial and business results of trading companies in which the candidate is or was a significant shareholder or in which the candidate has or had significant business shares, or in which the candidate performed the function of a member of the management board or another managerial function, including information on whether a pre-bankruptcy settlement was initiated over the company, bankruptcy proceedings were opened, a decision on forced liquidation was made, or approval for work was withdrawn,
13. information on whether the suitability assessment of the person has already been conducted by another competent authority (including data on that authority and evidence of the assessment results),
14. information on the result of the suitability assessment conducted by the UAIF and the explanation of the assessment,
15. information on whether a collaborator of the person convicted of a criminal offense prosecuted ex officio is involved.

Article 7. (OG 79/22) (1) The following documentation must be attached to the application for issuing approval for performing the function of a member of the management board of a UAIF: a) decision on the appointment of the selected candidate as a member of the management board conditional on obtaining Hanfa's approval, or decision on the selection of the candidate for a member of the management board, b) certified copy of personal ID or passport, or for a foreign citizen, certified copy of personal ID or travel document issued based on the provisions of the Act on Aliens ("Official Gazette" No. 133/20, hereinafter: Act on Aliens), c) certified copy of proof of completed corresponding level of education, d) document on recognition of foreign higher education qualification issued by the competent authority in the Republic of Croatia, e) curriculum vitae with detailed data on education, professional development, and work experience, f) corresponding document proving the candidate's work seniority, g) confirmation from employers about previous work experience (company name, period of work, description of tasks and duties), related to the provision of Article 42(2) or (8) of the Act, or exceptionally, when confirmation from the employer cannot be obtained because the employer no longer exists, other document or documents confirming such relevant experience, the authenticity of which Hanfa can assess, h) for a foreign citizen, corresponding document necessary for establishing an employment relationship in accordance with the provisions of the Act on Aliens (e.g., residence and work permit, residence approval, EU Blue Card, etc.), i) in the case where all candidates for members of the management board are foreign citizens, at least one of them must have confirmation from the competent authority on knowledge of the Croatian language, j) certificate of no criminal or misdemeanor proceedings issued by the competent authority of the Republic of Croatia, or for a foreign citizen, certificate from the competent authority of the country of which they are a citizen (not older than 3 months), k) business management program of the UAIF for the term, l) electronically filled Candidate Questionnaire for Performing the Function of a Member of the Management Board of a UAIF (Appendix 1 published on Hanfa's website) which is an integral part of this Regulation, with signature certified by a notary public, not older than one month from the date of submission of the application for issuing approval for performing the function of a member of the management board, m) declaration by the candidate on whether criminal or misdemeanor proceedings are being conducted against the candidate and on whether the candidate has been finally convicted of a criminal offense or misdemeanor (Appendix 2), with signature of the candidate for a member of the management board of a UAIF certified by a notary public, not older than one month from the date of submission of the application for issuing approval for performing the function of a member of the management board of a UAIF, n) list of the candidate's collaborators in the sense of Article 4, item 63 of the Act, which list, in relation to Croatian citizens, besides the data on the first and last name of the collaborator, also contains data on OIB, maiden name, gender, citizenship, father's and mother's first and last name, date of birth, place and country of birth, residence, and for foreign citizen collaborators, proof that they have not been finally convicted of criminal offenses prosecuted ex officio and criminal offenses from Article 42(7) of the Act (in the case where the corresponding competent authority of the country of which the collaborator is a citizen does not issue such proof, a declaration by the candidate (Appendix 3) with signature of the candidate for a member of the management board of a UAIF certified by a notary public, not older than one month from the date of submission of the application for issuing approval for performing the function of a member of the management board of a UAIF, is accepted as a substitute), o) results of the suitability assessment conducted by the UAIF with explanation, p) proof of payment of the fee payable with the application for issuing approval for performing the function of a member of the management board of a UAIF prescribed by Hanfa's Act on the type and amount of fees, r) additional documentation upon request by Hanfa. (2) Documentation prescribed by this Regulation is delivered in original or certified copy. Foreign documents from this Article are delivered translated into Croatian by a sworn court interpreter, and foreign documents from paragraph 1, items b), c), and f) of this Article are delivered and certified in accordance with the law and...

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