2013 brings further changes in laws governing the capital market | In Principle

A number of changes in two key laws governing the capital market—the Investment Funds Act and the Public Offerings Act—will go into effect in 2013.

1) Implementation of the UCITS IV Directive

On 28 December 2012, the President of Poland signed into law the Act Amending the Investment Funds Act, implementing the UCITS IV Directive (2009/65/EC) into Polish law. The key changes, which go into force 14 days after publication of the amending act, include:

• Streamlining of the procedure for passporting foreign UCITS funds to Poland and for passporting Polish UCITS funds (i.e. open investment funds) to other EU member states. A fund will be able to commence operations upon receipt of notice that the supervisory authority in the home jurisdiction has forwarded the notice of intent to commence operations to the supervisory authority in the host country. The range of documents required for the notification has also been revised.
• Introduction of legal institutions enabling Polish open investment funds to be administered by managers from other EU member states. In order to avoid a conflict with Polish law, which requires the authority of an open investment fund to be an investment fund association, the solution that was adopted is that a fund management company holding a licence issued in another EU member state may assume the management of an open investment fund established in Poland on the basis of a contract with the investment fund association, which will continue to be the authority of the fund.
• Introduction of Key Investor Information in place of the short-form prospectus of the fund. In order to provide investors proper access to information about open investment funds, in place of the short-form prospectus previously used, funds will publish Key Investor Information. This is intended to be a simpler and more accessible document, and thus more useful to investors.
• Expansion of the statutory rules on merger of investment funds. Introduction of regulations enabling cross-border merger of UCITS funds (through acquisition or creation of a new fund), and introduction of a requirement to prepare a merger plan and duties of the depositary to exercise oversight over the correctness of the merger.
• Change in regulation of main funds and affiliated funds (“master-feeder”). Recognition of “master-feeder” funds as UCITS funds and the permissibility of creating this type of structure on the basis of Polish law in situations where the master fund and the feeder fund are based in two different member states.
• Introduction of the institution of the assembly of investors in open investment funds. The assembly will take decisions on consenting to key matters for the fund, such as taking up or ceasing business as a feeder fund, a change of the master fund, or a domestic or cross-border merger of the fund with another fund.
• New regulations concerning the internal organisation of investment fund associations.

2) Implementation of changes made in the Prospectus Directive

Important changes will also be made in the Public Offerings Act in order to implement amendments to the Prospectus Directive (2010/73/EU). The bill designed to introduce these changes is currently at the stage of the first reading in the Sejm. The main features include:

• Revised definition of public offering. The minimum number of addressees of a public offering would be increased to 150. An offer to acquire securities free of charge would also constitute a public offering, and the construction of a “public proposal” to acquire securities would be abandoned.
• Changes in the exceptions to the prospectus requirement. The unit value of securities and the minimum value of securities acquired by a single investor in a public offering which does not require preparation of a prospectus or memorandum would be increased from EUR 50,000 to 100,000, and the list of exceptions is clarified.
• The concept of a “qualified investor” would be replaced by the concept of a “professional client” within the meaning of the Act on Trading in Financial Instruments.
• Introduction of the possibility of conducting a “cascade” offering of debt securities. On the basis of a single prospectus, debt securities could be acquired first by financial institutions, and then sold to other financial institutions in a private placement. At the last stage of the cascade, financial institutions would offer the securities to retail investors in a public offering. Specific participants in the cascade would be responsible like the seller for the information included in the prospectus (prepared by the issuer).
• A statutory prohibition on release to an issuer of funds paid by an investor for shares that are the subject of a public offering prior to registration of the increase in the share capital.
• A duty to notify the Polish Financial Supervision Authority of the intention to begin conducting a promotional campaign, in the case of a public offering conducted without providing a prospectus.
• Changes in where a prospectus is published—a duty to publish the prospectus online, at the website of the issuer or the investment firm offering the given securities, or of the exchange or the supervisory authority of the issuer’s home jurisdiction (when Poland is the host member state).

Marcin Pietkiewicz & Jakub Koziński, Capital Markets and Financial Institutions practices, Wardyński & Partners