ACT ON BUSINESS ACTIVITIES ON THE CAPITAL MARKET (ALSO

ACT ON BUSINESS ACTIVITIES ON THE CAPITAL MARKET

(ALSO KNOWN AS THE CAPITAL MARKET

UNDERTAKINGS ACT)NOTE: THIS TRANSLATION IS

INFORMATIVE, I .E . NOT LEGALLY BINDING!

(T A BL E O F CO NT E NT S A DD E D )

TABLE OF CONTENTSPART ONEBASIC PROVISIONS..............................................................................................................12

Article 1...................................................................................................................................12Article 2Definitions...............................................................................................................................12

PART TWOINVESTMENT SERVICES....................................................................................................13

CHAPTER IBASIC PROVISIONS.................................................................................................................................13

Article 3Investment Instruments............................................................................................................13Article 4Investment Services.................................................................................................................14

CHAPTER IIINVESTMENT FIRM.................................................................................................................................15

Section 1Basic Provisions..........................................................................................................................15

Article 5...................................................................................................................................15Section 2Licence for the Business of an Investment Firm.......................................................................15

Article 6...................................................................................................................................15Article 7...................................................................................................................................16Article 8...................................................................................................................................16

Section 3Some Conditions for the Business Activities of an Investment Firm........................................16

Article 9Capital Adequacy of an Investment Firm................................................................................16Article 10Approval of a Director of an Investment Firm.........................................................................16Article 11Acquisition and Forfeiture of a Holding in an Investment Firm That Is Not a Bank...............17

Section 4Rules for Activities and Financial Management of an Investment Firm..................................18

Article 12Rules for Prudent Provision of Investment Services................................................................18Article 13Transactions and Orders Book of an Investment Firm.............................................................20Article 14Broker......................................................................................................................................20Article 15Conduct of an Investment Firm towards Clients .....................................................................21Article 16Disclosure Duties of an Investment Firm ................................................................................21Article 17Retention of Documents by an Investment Firm......................................................................22

Section 5Winding-up, Change in the Objects of Business or Conversion of an Investment Firm and Transfer, Pledge or Lease of the Business of an Investment Firm............................................22

Article 18Winding-up or Change in the Objects of Business of an Investment Firm..............................22

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Article 19Conversion of an Investment Firm...........................................................................................23Article 20Transfer, Pledge or Lease of the Business of an Investment Firm...........................................23

CHAPTER IIIPROVISION OF INVESTMENT SERVICES IN THE TERRITORIES OF MEMBER STATES OF THE EUROPEAN UNION.....23

Section 1Provision of Investment Services by an Investment Firm in another Member State of the European Union.........................................................................................................................23

Article 21.................................................................................................................................23Article 22.................................................................................................................................24Article 23.................................................................................................................................25

Section 2Provision of Investment Services in the Territory of the Czech Republic by a Foreign Person with a Registered Office in Another Member State of the European Union.............................25

Article 24Provision of Investment Services through an Organisational Unit...........................................25Article 25Provision of Investment Services without Establishing an Organisational Unit......................26Article 26Cooperation with the Commission of the European Communities..........................................26Article 27Co-operation between Supervisory Authorities of the Member States of the European Union27

CHAPTER IVAN ORGANISATIONAL UNIT OF A FOREIGN PERSON HAVING ITS REGISTERED OFFICE IN A STATE OTHER THAN A MEMBER STATE OF THE EUROPEAN UNION THAT PROVIDES INVESTMENT SERVICES IN THE CZECH REPUBLIC. .27

Article 28.................................................................................................................................28

CHAPTER VINVESTMENT INTERMEDIARY....................................................................................................................29

Article 29Basic Provisions......................................................................................................................29Article 30Registration of an Investment Intermediary.............................................................................29Article 31.................................................................................................................................30Article 32Obligations of an Investment Intermediary..............................................................................30

PART THREEPUBLIC AUCTION OF SECURITIES..................................................................................31

Article 33.................................................................................................................................31

PART FOUROFFER OF INVESTMENT SECURITIES TO THE PUBLIC AND SECURITY PROSPECTUS.........................................................................................................................32

CHAPTER IOFFER OF INVESTMENT SECURITIES TO THE PUBLIC...................................................................................32

Article 34Basic Provisions......................................................................................................................32Article 35Obligation to Publish a Prospectus..........................................................................................33

CHAPTER IISECURITY PROSPECTUS...........................................................................................................................34

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Article 36Content of a Security Prospectus.............................................................................................34Article 36aBase Prospectus.......................................................................................................................35Article 36bResponsibility for the Content of the Prospectus.....................................................................35Article 36cApproval of the Prospectus......................................................................................................36Article 36dFinal Price and Number of Securities......................................................................................37Article 36eOmission of Information from the Prospectus.........................................................................37Article 36fSecurities of Issuers Having their Registered Office in Another Member State of the European Union.......................................................................................................................................37Article 36gLanguage of the Prospectus.....................................................................................................38Article 36hPublication of the Prospectus...................................................................................................38Article 36iValidity of a Prospectus...........................................................................................................39Article 36jSupplement to the Prospectus..................................................................................................39Article 36kAdvertisements and Other Communications............................................................................40Article 36lCooperation Between Supervisory Authorities of Member States of the European Union......40

.................................................................................................................................................40

PART FIVEMARKET IN INVESTMENT INSTRUMENTS....................................................................40


Regulated Market in Investment Instruments..........................................................................40Article 37.................................................................................................................................40Article 38.................................................................................................................................41Article 39.................................................................................................................................41Article 40Free Market.............................................................................................................................41Article 41Disclosure Duty of a Regulated Market Operator....................................................................41Article 42Transaction Concluded on a Regulated Market.......................................................................41Article 43Publication of the Price of an Investment Instrument..............................................................42Article 44Conditions for Admission of a Security to Trading on an Official Market..............................42Article 45Licence to Print Listed Physical Securities..............................................................................45Article 46Registration of Securities Issued by a Collective Investment Fund on an Official Market......45Article 47Exclusion of a Security from Trading on an Official Market...................................................45

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Article 48Suspension of a Security from Trading and Removal of a Security from Trading on an Official Market.....................................................................................................................................46Article 49Decision not to Admit a Security to Trading or to Remove a Security from Trading..............46Article 50.................................................................................................................................46cancelled..................................................................................................................................46Article 51.................................................................................................................................46cancelled..................................................................................................................................46Article 52.................................................................................................................................47cancelled..................................................................................................................................47Article 53.................................................................................................................................47cancelled..................................................................................................................................47Article 54.................................................................................................................................47cancelled..................................................................................................................................47Article 55.................................................................................................................................47cancelled..................................................................................................................................47

CHAPTER IISECURITIES EXCHANGE...........................................................................................................................47

Article 56Basic Provisions......................................................................................................................47Article 57Licence for the Business of an Exchange.................................................................................47Article 58.................................................................................................................................48Article 59Incompatibility of Offices of a Director of an Exchange.........................................................48Article 60Winding-up of an Exchange or Change in the Objects of Business of an Exchange................49Article 61Conversion of an Exchange.....................................................................................................49Article 62Transfer, Pledge or Lease of the Business of an Exchange......................................................49Article 63Exchange Shares .....................................................................................................................49Article 64General Meeting......................................................................................................................50Article 65Exchange Chamber..................................................................................................................50Article 66Rights and Obligations of an Exchange Chamber....................................................................50Article 67Exchange Committees.............................................................................................................50Article 68General Director of an Exchange.............................................................................................51Article 69Exchange Transaction..............................................................................................................51Person Authorised to Conclude Exchange Transactions..........................................................51Article 70.................................................................................................................................51Article 71.................................................................................................................................52Article 72Exchange Court of Arbitration ................................................................................................52

CHAPTER IIIOFF-EXCHANGE MARKET........................................................................................................................52

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Article 73Basic Provisions......................................................................................................................52Article 74Licence for the Operation of an Off-Exchange Market............................................................52Article 75.................................................................................................................................53Article 76Incompatibility of Offices of a Director of an Off-Exchange Market Operator.......................54Article 77Winding-up or Change in the Objects of Business of an Off-Exchange Market Operator.......54Article 78Conversion of an Off-Exchange Market Operator...................................................................54Article 79Transfer, Pledge or Lease of the Business of an Off-Exchange Market Operator....................55Obligations of an Off-Exchange Market Operator...................................................................55Article 80.................................................................................................................................55Article 81.................................................................................................................................56

PART SIXSETTLEMENT SYSTEM.......................................................................................................56

Article 82Basic Provisions......................................................................................................................56Article 83Licence for the Operation of a Settlement System...................................................................57Article 84Winding-up or Change in the Objects of Business of a Settlement System Operator..............58Article 85Conversion of a Settlement System Operator..........................................................................59Article 86Settlement Order Finality.........................................................................................................59Article 87Disclosure Duties of a Settlement System Operator................................................................59Article 88Disclosure Duties Concerning Settlement System Participants...............................................60Article 89Reporting Duties of the Commission and a Settlement System Operator................................60Article 90.................................................................................................................................60

PART SEVENREGISTER OF INVESTMENT INSTRUMENTS................................................................61


Section 1Book-Entry Security...................................................................................................................61

Article 91.................................................................................................................................61Section 2Types of Registers of Investment Instruments...........................................................................61

Article 92Central Register of Securities..................................................................................................61Article 93Separate Register of Investment Instruments...........................................................................61

Section 3Principles of Maintaining Registers of Investment Instruments...............................................62

Article 94Types of Accounts...................................................................................................................62

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Article 95Entry in a Register of Investment Instruments.........................................................................63Article 96Effects of a Transfer of an Investment Instrument...................................................................63Article 97Suspension of the Exercise of the Right of an Owner to Dispose of a Book-Entry Investment Instrument................................................................................................................................64Article 98Correction of Errors in a Register of Investment Instruments..................................................65Article 99Extract from a Register of Investment Instruments..................................................................65Article 99a...............................................................................................................................65

CHAPTER IICENTRAL DEPOSITORY OF SECURITIES......................................................................................................65

Basic Provisions......................................................................................................................66Article 100...............................................................................................................................66Article 101...............................................................................................................................66Article 102...............................................................................................................................67Article 103Licence for the Business of the Central Depository.................................................................67Article 104Rules of Operation of the Central Depository..........................................................................68Article 104aAcquisition and Forfeiture of a Holding in the Central Depository.........................................68Article 104bDirector of the Central Depository...........................................................................................70Article 105Winding-up or Change in the Objects of Business of the Central Depository.........................70Article 106Conversion of the Central Depository......................................................................................70Article 107Transfer, Pledge or Lease of the Business of the Central Depository......................................71Article 107aBankruptcy of the Central Depository.....................................................................................71Article 108Disclosure Duties of the Central Depository............................................................................72Article 109Participant in the Central Depository.......................................................................................72Article 110Client Account.........................................................................................................................73Article 111Register of Issues of Book-Entry Securities............................................................................73Article 112...............................................................................................................................74Article 113...............................................................................................................................75Article 114...............................................................................................................................76

CHAPTER IVPROVISION OF DETAILS OF OWNERS OF INVESTMENT INSTRUMENTS.............................................................76

Article 115...............................................................................................................................76

PART EIGHTPROTECTION OF THE CAPITAL MARKET AND INVESTORS.....................................77

CHAPTER IOBLIGATIONS OF MARKET PARTICIPANTS..................................................................................................77

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Article 116Disclosure Duty of an Investment Firm, an Institutional Investor and a Regulated Market Operator...................................................................................................................................77Article 117Duty of Confidentiality............................................................................................................77Article 118Annual Report of an Issuer of a Listed Security......................................................................78Article 119Half-yearly Report of an Issuer of a Listed Security................................................................79Other Obligations of an Issuer of a Listed Security.................................................................80Article 120...............................................................................................................................80Article 121...............................................................................................................................81Article 122Notification of a Share in Voting Rights..................................................................................81Article 123Annual Report and Half-yearly Report of an Issuer of Securities Admitted to Trading on an Official Market of a Securities Exchange in another Member State of the European Union. . .82Protection of Inside Information..............................................................................................83Article 124...............................................................................................................................83Article 125...............................................................................................................................84Article 126Market Manipulation...............................................................................................................85Article 127...............................................................................................................................86

CHAPTER IIGUARANTEE FUND OF INVESTMENT FIRMS................................................................................................87

Article 128Basic Provisions......................................................................................................................87Article 129Payment of Contributions to the Guarantee Fund....................................................................88Article 129aControl of Payment of Contributions.......................................................................................88Provision of Compensation from the Guarantee Fund.............................................................88Article 130...............................................................................................................................88Article 131...............................................................................................................................90Article 132Release of Client Assets Following the Adjudication of Bankruptcy in Respect of Assets of an Investment Firm.......................................................................................................................90Article 133Payment of a Contribution to the Guarantee Fund by a Foreign Person..................................91Article 134Disclosure Duties and Co-operation........................................................................................91

PART NINESUPERVISION AND ADMINISTRATIVE OFFENCES....................................................91

CHAPTER ISUPERVISION ON AN INDIVIDUAL BASIS.....................................................................................................91

Section 1Basic Provisions..........................................................................................................................91

Article 135Persons Subject to Supervision................................................................................................92

Section 2Remedial Measures and Withdrawal of Licence........................................................................93

Article 136Basic Provisions......................................................................................................................93

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Article 137Suspension of Trading in Securities.........................................................................................93Forced Administration.............................................................................................................94Article 138...............................................................................................................................94Article 139...............................................................................................................................94Article 140...............................................................................................................................95Article 141...............................................................................................................................95Article 142...............................................................................................................................96Article 143...............................................................................................................................96Article 144Change in the Scope of a Licence............................................................................................96Article 145Withdrawal of a Licence, Consent or Registration..................................................................96

Section 3Supervision of a Foreign Person Providing Investment Services in the Czech Republic under a Licence Granted by the Supervisory Authority of Another Member State of the European Union..........................................................................................................................................97

Article 146...............................................................................................................................98Section 4Supervision of an Investment Firm Providing Services in Another Member State of the European Union.........................................................................................................................98

Article 147...............................................................................................................................98Section 5Supervision of an Exchange.......................................................................................................98

Article 148...............................................................................................................................98Article 149...............................................................................................................................99

CHAPTER IISUPERVISION ON A CONSOLIDATED BASIS..................................................................................................99

Article 150Basic Provisions......................................................................................................................99Article 151Definitions...............................................................................................................................99Exercise of Supervision on a Consolidated Basis..................................................................100Article 152.............................................................................................................................100Article 153.............................................................................................................................101Obligations of Persons Subject to Supervision on a Consolidated Basis................................101Article 154.............................................................................................................................101Article 155.............................................................................................................................101Article 156Remedial Measures................................................................................................................102

CHAPTER IIIADMINISTRATIVE OFFENCES..................................................................................................................102

Article 157Administrative Offences of an Investment Firm....................................................................102Article 158Administrative Offences of an Investment Intermediary.......................................................103Article 159Administrative Offences of a Person Using a Service of an Investment Intermediary...........103Article 160Administrative Offences of a Securities Exchange................................................................103Article 161Administrative Offences of an Off-Exchange Market Operator.............................................104Article 162Administrative Offences of a Settlement System Operator....................................................104

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Article 163Administrative Offences of a Settlement System Participant.................................................105Article 164Administrative Offences of the Central Depository...............................................................105Article 165Administrative Offences of a Participant in the Central Depository......................................105Article 166Administrative Offences of a Person Maintaining a Register Linked to the Central Register of Securities Maintained by the Central Depository...................................................................105Article 167Administrative Offences of a Person Maintaining a Separate Register of Investment Instruments............................................................................................................................106Article 168Administrative Offences of a Person Maintaining a Register Linked to a Separate Register of Investment Instruments..........................................................................................................106Article 169Administrative Offences of an Institutional Investor.............................................................106Article 170Administrative Offences of an Operator of a Printing House................................................106Article 171Administrative Offences of an Issuer.....................................................................................107Administrative Offences during an Offer of Investment Securities to the Public and during the Admittance of a Security to Trading on an Official Market...................................................107Article 172.............................................................................................................................107Article 173.............................................................................................................................107Article 173a...........................................................................................................................107Article 173b...........................................................................................................................107Article 174Administrative Offences of a Foreign Person Providing Investment Services in the Czech Republic under a Licence Granted by the Home State...........................................................108Article 175Administrative Offences of a Foreign Person Providing Investment Services in the Czech Republic through an Organisational Unit...............................................................................108Article 176Administrative Offences of a Person Subject to Supervision on a Consolidated Basis..........108Administrative Offences of an Insider...................................................................................109Article 177.............................................................................................................................109Article 178.............................................................................................................................109Administrative Offences of a Person who Manipulates the Market.......................................109Article 179.............................................................................................................................109Article 180.............................................................................................................................109Administrative Offences of a Person who Fails to Report Market Manipulation...................109Article 181.............................................................................................................................109Article 182.............................................................................................................................109Administrative Offences of a Person Involved in the Decision-Making of an Issuer that Fails to Report its Transactions in Investment Instruments............................................................109Article 183.............................................................................................................................110Article 184.............................................................................................................................110Administrative Offences of a Person who Fails to Report the Use of Inside Information......110Article 185.............................................................................................................................110Article 186...............................................................................................................................................110Article 186aViolation of the Duty of Confidentiality................................................................................110Further Administrative Offences...........................................................................................110

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Article 187.............................................................................................................................110Further Offences....................................................................................................................111Article 188.............................................................................................................................111Article 189.............................................................................................................................111Article 190.............................................................................................................................111Article 191.............................................................................................................................112Administrative Offences during the Provision of Investment Services Abroad.....................112Article 192Common Provisions...............................................................................................................112

PART TENRATING AGENCIES............................................................................................................112

Article 193.............................................................................................................................112

PART ELEVENCOMMON, TRANSITIONAL AND FINAL PROVISIONS...............................................113

Article 194Links to Other Legal Regulations..........................................................................................113Article 195.............................................................................................................................113Article 196.............................................................................................................................113Article 197.............................................................................................................................113Article 198List of Forced Administrators and Liquidators......................................................................114Article 199Authorisation.........................................................................................................................114Transitional and Final Provisions..........................................................................................115Article 200.............................................................................................................................115Article 201.............................................................................................................................116Article 202.............................................................................................................................117Article 202a...........................................................................................................................118Article 203.............................................................................................................................118Article 204.............................................................................................................................118Article 205.............................................................................................................................118Article 206Effect.....................................................................................................................................119

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256/2004 Coll.ACT

of 14 April 2004

on Business Activities on the Capital Market(Capital Market Undertakings Act)

(effective 1 May 2004)

as amended by with effect fromAct No. 635/2004 Coll. 16 January 2005Act No. 179/2005 Coll. promulgation (30 April 2005)Act No. 377/2005 Coll. promulgation (29 September 2005)Act No. 56/2006 Coll. promulgation (8 March 2006)Act No. 62/2006 Coll. promulgation (8 March 2006)

Parliament has passed this Act of the Czech Republic:

PART ONEBASIC PROVISIONS

Article 1

This Act incorporates the applicable regulations of the European Communities1) and regulates the provision of services in the capital market field and the offering of securities to the public.

Article 2Definitions

In this Act, the following terms shall have the following meanings:

a) “professional investor” shall mean:1. an investment firm,2. a bank,3. an insurance company,4. a reinsurance company,5. an investment company,6. an investment fund,7. a pension fund,8. a payment system operator,9. a settlement system operator,10. a person issuing and administering means of payment,11. a person providing financial leasing as part of their business activity,12. a person whose principal activity is acquisition of holdings in other companies,13. a person providing guarantees as part of their business activity,14. a business company that, pursuant to the latest annual report or consolidated annual report, meets at

least two of three criteria, such criteria being the total of its assets amounting in Czech crowns to at least EUR 20,000,000, its net annual turnover amounting in Czech crowns to at least EUR 40,000,000 or its equity amounting in Czech crowns to at least EUR 2,000,000,

15. a foreign person that corresponds to any of the persons referred to in clauses 1 to 14,16. a state or a member state of a federation,17. the Czech National Bank, a foreign central bank or the European Central Bank,18. an international financial institution,

b) “details” of a person (references in the text to persons should be understood as including both natural and

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legal persons) shall mean:1. in the case of a legal person, its commercial name or name, registered office and identification number

if assigned,2. in the case of a natural person, his name and surname, date of birth and permanent residence address;

in the case of an entrepreneur registered in the Commercial Register, his commercial name and, as the case may be, place of business, and identification number if assigned

c) “director” shall mean a member of the statutory body, the statutory body, the executive director or the procurator (in Czech “prokurista”) of a legal person or a person who otherwise actually manages the activities of the legal person,

d) “qualifying holding” shall mean any direct or indirect holding in the registered capital or the voting rights of a person, or the sum thereof, which represents at least 10% or allows a significant influence to be exercised over its management,

e) “indirect holding” shall mean a holding held through another person or a group of persons acting in concert,

f) “close links” shall mean relations between persons:1. where one person holds a direct or indirect holding in the registered capital or voting rights of another

person, which represents at least 20%,2. where one person controls another person, or3. where such persons are controlled by the same person,

g) “misleading information” shall mean information capable of resulting in a false idea about the thing concerned; misleading information shall also mean truthful information that, given the context in which it was used, may be misleading.

h) “client asset” shall mean cash funds and investment instruments entrusted to an investment firm for the purpose of provision of investment services and cash funds and investment instruments acquired in exchange for these values for the client. Client asset shall not refer to deposits pursuant to a law governing the activities of banks1a) which an investment firm that is a bank or a branch of a foreign bank keeps accounting records of.

PART TWOINVESTMENT SERVICES

CHAPTER IBASIC PROVISIONS

Article 3Investment Instruments

(1)Investment instruments are:

a) investment securities,

b) collective investment securities,

c) securities that are usually dealt in on the money market (money market instruments),

d) derivatives.

(2)Investment securities are:

a) shares or similar securities representing a share in a company, which shares or securities may be dealt in on the capital market,

b) bonds or similar securities representing a right to receive repayment of an outstanding amount, which bonds or securities may be dealt in on the capital market,

c) securities giving the right to the acquisition of the securities referred to in (a) or (b) above, which securities are regularly dealt in on the capital market, save for means of payment,

d) other securities that are usually dealt in on the money market, which securities give rise to the right to cash settlement, save for means of payment.

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(3)For the purposes of this Act, “derivatives” shall mean:

a) options relating to investment instruments referred to in paragraph 1(a) to (c),

b) financial future contracts (especially futures, forwards and swaps) relating to investment instruments referred to in paragraph 1(a) to (c),

c) contracts for differences and similar instruments for the transfer of interest rate or exchange rate risk,

d) instruments for the transfer of credit risk,

e) other instruments that give rise to the right to cash settlement and whose value is derived, in particular, from the price of an investment security, an index, an interest rate, an exchange rate or a commodity price.

(4)Identification pursuant to the international securities identification numbering system (ISIN) shall be assigned to an investment instrument for the purposes of trading on a regulated or free market by the central securities depository (hereinafter the “central depository”) on request.

(5)“Collective investment securities” shall mean unit certificates of a unit trust, investment fund shares and similar securities issued abroad.

Article 4Investment Services

(1)Investment services are core investment services and ancillary investment services provided to third parties as part of a business activity.

(2)Core investment services are:

a) the receipt and transmission of orders in relation to investment instruments,

b) execution of orders in relation to investment instruments for the account of another person,

c) dealing in investment instruments on own account,

d) management of assets of a client under a contract with the client, if an investment instrument is part of such assets,

e) underwriting or placing of issues of investment instruments.

(3)Ancillary investment services are:

a) administration of investment instruments,

b) safekeeping of investment instruments,

c) granting credit or a loan to a client to allow him to carry out a transaction in an investment instrument, where the provider of the credit or loan is involved in the transaction,

d) advice on capital structure, industrial strategy and related matters and advice and services relating to corporate transformation or business transfers,

e) advice on investments in investment instruments,

f) carrying out foreign exchange operations connected to the provision of investment services,

g) services related to underwriting of issues of investment instruments,

h) renting safe deposit boxes.

(4)The investment service of safekeeping of investment instruments shall also include the maintenance of a register linked to the central register of securities (Article 92) or the maintenance of a separate register of investment instruments or the maintenance of a register linked to the separate register of investment instruments (Article 93).

(5)A core investment service or an ancillary investment service pursuant to paragraph 3(a) may only be provided by an investment firm (Article 5) unless stipulated otherwise by law.

(6)A licence or registration shall not be required for the provision of an investment service if it is provided:

a) solely to persons who control a person providing an investment service, are controlled by a person providing an investment service, or to persons controlled by the same person as a person providing an investment service, or

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b) in connection with the performance of another professional activity the legal regulation of which explicitly permits the provision of investment services, especially by a notary, solicitor or judicial executor.

CHAPTER IIINVESTMENT FIRM

Section 1Basic Provisions

Article 5

An investment firm is a legal person that provides investment services under a licence for the business of an investment firm granted by the Czech National Bank.

Section 2Licence for the Business of an Investment Firm

Article 6

(1)The Czech National Bank shall grant a licence for the business of an investment firm only to a joint stock company:

a) that only issues book-entry shares or registered physical shares (i.e. registered to name), this being without prejudice to the provision of the special legal rule governing the form of preference shares issued by a bank,

b) whose registered office and actual office is situated within the territory of the Czech Republic,

c) the origin of whose registered capital is transparent and clean,

d) that submits a plan of business activities and a proposal for the organisational structure of the investment firm,

e) that has material, personnel and organisational prerequisites for the performance of the activities of an investment firm, in particular:1. its registered capital has been paid up,2. its directors meet the approval conditions pursuant to Article 10,

f) that submits draft rules for prudent provision of investment services and draft rules of conduct of the investment firm towards clients that meet the requirements of this Act,

g) in which a qualifying holding is held by persons who are suitable in terms of sound and prudent management of the investment firm,

h) whose close links with any other person do not prevent the effective exercise of supervision of the investment firm; in the event of close links with a person who has its registered office or actual office in a non-member state of the European Union, the law of such state and manner of application thereof, including the enforceability of law, may not prevent the effective exercise of supervision of the investment firm.

(2)In a licence for the business of an investment firm the Czech National Bank shall specify the core and ancillary investment services that the investment firm is authorised to provide and the investment instruments in respect of which the investment firm is authorised to provide such services. The licence must include at least one core investment service.

(3)The equity of an investment firm that is not a bank and is not restricted in providing investment services pursuant to paragraph 4 must amount, in Czech crowns, at least to the sum equivalent to EUR 730,000.

(4)The equity of an investment firm that is not a bank and is not authorised to provide any of the investment services specified in Article 4(2)(c) and (e) must amount, in Czech crowns, at least to the sum equivalent to EUR 125,000.

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(5)The objects of business of an investment firm that is not a bank may only comprise activities specified in the licence for the business of an investment firm.

(6)A licence for the business of an investment firm shall be granted for an indefinite period of time.

Article 7

An application for a licence for the business of an investment firm shall contain the details and the documents attached to it shall prove the facts referred to in Article 6(1). The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

Article 8

(1)Prior to granting a licence for the business of an investment firm, the Czech National Bank shall request the opinion of the supervisory authority of another Member State of the European Union if the applicant is:

a) controlled:1. by a person who holds a licence for the provision of investment services granted by the supervisory

authority of that Member State of the European Union,2. by a credit institution (Article 151(1)(l)) or a financial institution (Article 151(1)(k)) that has its

registered office in that Member State of the European Union, or3. by an insurance company that holds a licence granted by the supervisory authority of that Member

State of the European Union, or

b) controlled by the same person who controls the person referred to in (a) above.

(2)cancelled

Section 3Some Conditions for the Business Activities of an Investment Firm

Article 9Capital Adequacy of an Investment Firm

(1)An investment firm shall maintain capital adequacy on an individual basis. An investment firm that is a bank shall maintain capital adequacy pursuant to a law governing the activities of banks1a).

(2)Rules of capital adequacy on an individual basis applicable to an investment firm that is not a bank shall be set out in an implementing legal regulation.

Article 10Approval of a Director of an Investment Firm

(1)A director of an investment firm must have the prior consent of the Czech National Bank to the performance of his office; in the case of an investment firm that is a bank, the prior consent of the Czech National Bank shall only be required for the performance of office of a director responsible for the bank’s activities as an investment firm.

(2)The Czech National Bank shall grant its consent pursuant to paragraph 1 to a person:

a) who has reached the age of 18 years,

b) who is competent to carry out legal acts,

c) in respect of whom there are no circumstances preventing the carrying on of a trade pursuant to the act governing trades,

d) who is trustworthy,

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e) who is professionally qualified,

f) who meets the condition of incompatibility of offices pursuant to paragraph 3,

g) where no other activity of such person prevents the due discharge of office.

(3)A director of an investment firm may not be:

a) a member of the Chamber of Deputies or senator of the Parliament of the Czech Republic,

b) an employee of the Czech National Bank,

c) a member of the Bank Board of the Czech National Bank,

d) an investment intermediary or a director or employee of an investment intermediary, or a foreign person with similar objects of business or a director or employee of such foreign person; the same shall not apply if the investment firm and the investment intermediary or the foreign person with similar objects of business are part of the same concern,

e) a director or an employee of another investment firm or a foreign person with a licence for the provision of investment services; the same shall not apply if the investment firm and the other investment firm or the foreign person with a licence for the provision of investment services are members of the same concern, or

f) a director or an employee of an investment company or an investment fund or of a foreign person with a licence for collective investment; the same shall not apply if the investment firm and the investment company or the investment fund or the foreign person with a licence for collective investment are members of the same concern.

(4)An application for the consent pursuant to paragraph 1 shall contain the details and documents necessary for the examination of the facts referred to in paragraphs 2 and 3. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

Article 11Acquisition and Forfeiture of a Holding in an Investment Firm That Is Not a Bank

(1)A person or persons acting in concert must have the prior consent of the Czech National Bank:

a) to the acquisition of a qualifying holding in an investment firm that is not a bank unless such acquisition is to take place by way of passage of the ownership title to a security,

b) to the attaining or exceeding of a qualifying holding of 20%, 33% or 50% in an investment firm that is not a bank unless such attaining or exceeding of a qualifying holding is to take place by way of passage of the ownership title to a security, or

c) to become persons controlling an investment firm that is not a bank unless they become the same by way of passage of the ownership title to a security.

(2)For the purposes of the calculation of a holding pursuant to paragraph 1 in an investment firm, the voting rights attached to the following securities shall be included:

a) those held for the account of the person referred to in paragraph 1 by another person in their own name,

b) those that are at the disposal of a person controlled by the person referred to in paragraph 1,

c) those that are at the disposal of another person who has entered into an agreement with the person referred to in paragraph 1 or with a person controlled by it, in which agreement they undertook to pursue on a long-term basis a joint policy concerning the management of an investment firm by exercising the voting rights at their disposal in concert,

d) those held, under an agreement with the person referred to in paragraph 1 or with a person controlled by it, by another person if such agreement envisages that disposal of such voting rights will be temporarily granted to the person referred to in paragraph 1 or to a person controlled by it for a consideration,

e) those that have been provided as collateral by the person referred to in paragraph 1; the same shall not apply if disposal of such voting rights has been granted to a person who holds such securities in safekeeping, in administration or as part of its property and has published information in at least one national newspaper that it will exercise such voting rights; in such case, the voting rights attached to such

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securities shall be attributed to the person which holds such securities in safekeeping, in administration or as part of its property,

f) those in the ownership of another person, if such person exercises the voting rights attached to such securities in its own name pursuant to the instructions of the person referred to in paragraph 1 under an agreement on the exercise of voting rights.

(3)Where the person or persons acting in concert or the persons referred to in paragraph 2 have their registered office in a Member State of the European Union, are subject to supervision by the supervisory authority of this Member State and intend to acquire a holding referred to in paragraph 1, the Czech National Bank shall request the opinion of this supervisory authority prior to issuing a decision.

(4)An application for the consent referred to in paragraph 1 shall contain the details pursuant to paragraph 1 and the documents attached thereto shall prove the facts necessary to examine the suitability of the applicant from the point of view of sound and prudent management of the investment firm that is not a bank, and to assess whether close links of the applicant to the investment firm that is not a bank prevents the effective exercise of supervision of such investment firm. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(5)The Czech National Bank shall grant the consent referred to in to paragraph 1 if the applicant is a person suitable from the point of view of sound and prudent management of the investment firm that is not a bank and if the applicant’s close links to the investment firm that is not a bank do not prevent the effective exercise of supervision of such investment firm.

(6)If the Czech National Bank does not send a decision on the application for the consent referred to in paragraph 1 within 3 months of the date of its delivery, against such decision an objection can be lodged, the consent shall be deemed to have been granted. If the application proceedings are suspended, this time period shall not run.

(7)The consent referred to in paragraph 1 may be granted on an ex-post basis.

(8)A person who acquires or increases a qualifying holding pursuant to paragraph 1 by way of passage of the ownership title to a security shall notify the Czech National Bank of this fact without delay.

(9)A person or persons acting in concert or the persons referred to in paragraph 2 shall notify the Czech National Bank that:

a) they are ceasing to control an investment firm that is not a bank,

b) they are reducing their qualifying holding in an investment firm that is not a bank below 50%, 33% or 20% or that they are forfeiting the same, or

c) they are transferring a qualifying holding in an investment firm that is not a bank to another person.

(10)The notification pursuant to paragraph 9 shall contain the details of the notifying party, details of the investment firm and the size of the notifying party’s holding in the investment firm after the reduction; the notification pursuant to paragraph 9(c) shall also contain details of the person to whom the qualifying holding is being transferred.

(11)An acquisition of or increase in a holding pursuant to paragraph 1 in an investment firm without the consent of the Czech National Bank shall not render the relevant legal act invalid, but the voting rights attached to such holding may not be exercised until the consent is granted.

Section 4Rules for Activities and Financial Management of an Investment Firm

Article 12Rules for Prudent Provision of Investment Services

(1)An investment firm shall introduce:

a) administrative and accounting procedures,

b) control and security measures applicable to the processing and recording of data,

c) an internal control system; an investment firm that is a bank shall follow a special legal rule governing the activities of banks,

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d) a risk management system and a liquidity management system; an investment firm that is a bank shall follow a special legal rule governing the activities of banks,

e) procedures designed to restrict the possibility of a conflict of interests between the investment firm and its client or between the investment firm’s clients,

f) rules for concluding transactions by its employees for own account or for the account of persons closely associated with the investment firm pursuant to the Civil Code,

g) rules for pooling of client orders,

h) a mechanism of control of the activities of investment intermediaries used by the investment firm in the provision of its services,

i) measures for the protection of inside information,

j) measures to prevent market manipulation.

(2)An investment firm shall regulate its internal organisation (organisational rules) and the items mentioned in paragraph 1 by means of an internal regulation.

(3) An investment firm shall ensure the maintenance of a register:

a) of book-entry securities with whose owner it entered into an agreement on the safekeeping of investment instruments and that are entered in the central register of securities in a client account; this register shall be maintained in a register linked to the central register of securities maintained by the central depository (Article 92),

b) of book-entry securities with whose owner it entered into an agreement on the safekeeping of investment instruments and that are entered in the separate register of securities maintained by the Czech National Bank in a client account; this register shall be maintained in a register linked to the separate register of securities maintained by the Czech National Bank (Article 93),

c) of physical investment instruments entrusted to its safekeeping by clients; this register shall be maintained in the separate register of investment instruments (Article 93),

d) of foreign investment instruments entrusted to it by clients for the purposes of providing an investment service; this register shall be maintained in the separate register of investment instruments (Article 93),

e) of investment instruments entrusted to it by clients for the purposes of providing an investment service and that are not referred to under (a) to (d) above and whose nature so allows; this register shall be maintained in the separate register of investment instruments (Article 93).

(4)The registers referred to in paragraph 3 shall be maintained in electronic form.

(5)When handling client assets, an investment firm shall:

a) keep its own cash funds separate from cash funds entrusted to it by a client and keep accounts concerning client assets separate from the accounts concerning the investment firm’s assets,

b) introduce such measures so that client assets that consist of investment instruments cannot be used in a transaction for the account of a person other than that client except where the client has granted its written consent to the investment firm,

c) refrain from using client assets that consist of cash funds for a transaction for the account of a person other than that client,

d) ensure a clear identification of client assets.

(6)Details of compliance with the rules for prudent provision of investment services shall be set out in an implementing legal regulation.

(7)When providing investment services, an investment firm shall perform professional trading activities through an employee who holds a licence for the activities of a broker (Article 14) for the relevant specialisation. The types of professional trading activities that the investment firm must perform through a broker shall be set out in an implementing legal regulation.

(8)A broker may be an employee of only one investment firm.

(9)An investment firm shall have material and personnel resources that are appropriate to the character and scope of services that it provides.

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Article 13Transactions and Orders Book of an Investment Firm

(1)“Transactions and orders book of an investment firm” shall mean a record of received orders to arrange the purchase, sale or other transfer of investment instruments and of transactions concluded on the basis of such orders.

(2)An investment firm shall maintain a transactions and orders book of an investment firm, in which it shall record, in particular:

a) received orders to arrange the purchase, sale or other transfer of an investment instrument,

b) transactions in investment instruments concluded for the account of a client,

c) transactions in investment instruments concluded by the investment firm for own account regardless of whether they have been concluded for the purpose of the provision of an investment service.

(3)A transactions and orders book of an investment firm shall be maintained in electronic form. For the purposes of maintaining a transactions and orders book of an investment firm, an investment firm is entitled to keep the birth certificate numbers of parties to transactions.

(4)The manner of maintenance and the essential elements of a transactions and orders book of an investment firm shall be set out in an implementing legal regulation.

Article 14Broker

(1)A broker is a natural person who, under a licence granted by the Czech National Bank, performs professional trading activity during the provision of an investment service.

(2)The Czech National Bank shall grant the licence for the activities of a broker on the basis of an application if the applicant has passed the broker examination, is not a person referred to in Article 10(3) and is trustworthy.

(3)The Czech National Bank may waive the requirement to pass the broker examination in respect of a person who:

a) proves that he/she has passed a similar examination before a domestic professional organisation grouping capital market participants where such examination verifies the knowledge needed to perform the activities of a broker comparably to the broker examination, or

b) proves that he/she has passed a similar examination abroad where such examination verifies the knowledge needed to perform the activities of a broker comparably to the broker examination, and proves the knowledge of legal regulations governing the capital market in the Czech Republic.

(4)An application for the licence for the activities of a broker shall contain the details and the documents attached to it shall prove the facts referred to in paragraph 2. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(5)The licence for the activities of a broker shall contain the type of professional specialisation of the broker. The licence shall be granted for an indefinite period of time.

(6)The broker examination shall include, in accordance with the broker’s specialisation, verification of the knowledge of investment instruments and dealing therein, knowledge of the internal regulations of operators of regulated markets and knowledge of the legal regulations governing the capital market, with emphasis on knowledge of the rules for prudent provision of investment services and conduct of an investment firm towards clients.

(7)The types of specialisation of a broker, including the professional trading activities which a broker with the relevant specialisation is entitled to perform, the method of taking the broker examination and the amount of the fee for the broker examination shall be set out in an implementing legal regulation.

(8)A person whose licence for the activities of a broker has been withdrawn by the Czech National Bank and who re-applies for such a licence shall re-pass the broker examination.

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Article 15Conduct of an Investment Firm towards Clients

(1)An investment firm shall:

a) provide investment services with professional care, consisting primarily in a professional, honest and fair conduct in the best interests of clients and proper functioning of the market,

b) request from a client, depending on the type and scope of the investment services requested by the client, information on the client’s economic situation, experience in the field of investment in investment instruments and on the goals to be achieved by the requested service,

c) inform the client fully, truthfully and in a comprehensible manner about every material fact related to the provision of the investment service, especially about potential risks,

d) request the client’s written consent to the provision of an investment service resulting in further financial obligations,

e) inform the client within the time limit agreed with him, although at the latest within the time limits stipulated in an implementing regulation, about the transactions which it has concluded for the client,

f) where a conflict of interests cannot be avoided, put the client’s interests above its own interests and, where a conflict of clients’ interests occurs, to act in a fair manner,

g) execute client orders under the best conditions and process them in the order in which it received them,

h) provide the client with detailed information about the conditions of compensation from the Guarantee Fund of Investment Firms (hereinafter the “Guarantee Fund”) and, at the client’s request, provide information on the manner of making claims for the payment of compensation,

i) shall use truthful information when promoting its investment services.

(2)An investment firm shall not:

a) provide misleading information,

b) misuse the Guarantee Fund,

c) conceal any important facts,

d) offer benefits the reliability of which it cannot guarantee.

(3)An investment firm shall observe the rules referred to in paragraphs 1 and 2 with special regard to the level of professional knowledge and experience of the client to whom it provides a service. An investment firm is not obliged to provide an explanation, advice or information to a client that is a professional investor where such professional investor explicitly declared that it was familiar therewith and did not require provision thereof.

(4)The detailed rules of conduct of an investment firm towards its clients (paragraphs 1 to 3) shall be laid down in an implementing legal regulation.

Article 16Disclosure Duties of an Investment Firm

(1)An investment firm shall submit to the Czech National Bank, no later than 4 months following the end of the accounting period, its annual report and its consolidated annual report pursuant to a special legal rule governing accounting, which reports shall include audited financial statements, and shall publish the same in a manner allowing remote access. If the general meeting of the investment firm fails to approve the financial statements or the consolidated financial statements within the said period of time, the investment firm shall send to the Czech National Bank and publish in a manner allowing remote access the reasons why the financial statements or the consolidated financial statements have not been approved and the manner of addressing the comments of the general meeting. This shall be without prejudice to the obligations of a joint stock company in publishing financial statements and annual report pursuant to special legal rules.

(2)No later than 1 month after the end of a calendar quarter, an investment firm shall notify the Czech National Bank:

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a) of its economic situation,

b) of the types and scope of investment services provided in this quarter,

c) of all regulated markets, including foreign ones, and of persons through whom it executed client orders in that quarter, stating the facts that affected the choice of such persons and any benefits received by the investment firm from such persons as remuneration for using their services,

d) of transactions it concluded or arranged, in the scope given in Article 13(2).

e) of the volume of client assets (Article 129(1)) as at the last day of each month in that quarter.

(3)An investment firm shall publish the information referred to in paragraph 2(a) and (b) within the time limit stipulated in an implementing regulation in a manner allowing remote access.

(4)An investment firm that is obliged to maintain equity pursuant to Article 6(3) shall inform the Czech National Bank within 20 days of the end of each calendar month of its compliance with the capital adequacy rules. Other investment firms shall fulfil this obligation within one month after the end of the calendar quarter.

(5)An investment firm shall submit to the Czech National Bank, once a year, no later than 1 month after its ordinary general meeting took place, a list of persons who had a qualifying holding in the investment firm or were closely linked therewith in the past year.

(6)An investment firm shall notify the Czech National Bank without undue delay of any changes in the facts upon which it was granted a licence for the business of an investment firm.

(7)The content of an investment firm’s disclosure duties according to paragraphs 1–5, the method of performance thereof and time limits referred to in paragraph 3 shall be laid down in an implementing legal regulation.

(8)The provisions of paragraphs 1, 4 and 5 shall not apply to an investment firm that is a bank. In this case, a special legal rule governing the activities of banks shall apply.

Article 17Retention of Documents by an Investment Firm

An investment firm shall retain:a) documents concerning a provided investment service for at least 10 years from the end of the calendar year

when the service was provided,b) records of communication with a client concerning a provided investment service for at least 5 years from

the end of the calendar year when the service was provided.

Section 5Winding-up, Change in the Objects of Business or Conversion of an Investment Firm and

Transfer, Pledge or Lease of the Business of an Investment Firm

Article 18Winding-up or Change in the Objects of Business of an Investment Firm

(1)If the general meeting of an investment firm decides to wind up the company with liquidation or to change the objects of business, the investment firm shall notify the Czech National Bank of this fact immediately upon the resolution of the general meeting.

(2)From the date of an investment firm’s entry into liquidation or from the date of a change in its objects of business, the person who entered into liquidation or changed its objects of business may not provide investment services and if it is not a bank it may only release client assets and settle its receivables and payables arising from provided investment services; such person shall be regarded as an investment firm until such receivables and payables are settled. The licence for the business of an investment firm shall expire upon entry into liquidation or change in the objects of business.

(3)An investment firm shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its winding-up or the change in its objects of business.

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(4)In the event of a change in the objects of business resulting from a change in the scope of a licence (Article 144), the provisions of paragraphs 1 to 3 shall not apply.

Article 19Conversion of an Investment Firm

(1)A merger of an investment firm that is not a bank with another investment firm, a division of an investment firm that is not a bank or a transfer of business assets of an investment firm that is not a bank to its shareholder or a transfer of business assets of another person to an investment firm that is not a bank shall require permission of the Czech National Bank.

(2)An application for permission for a merger of an investment firm that is not a bank with another investment firm, an application for permission for a division of an investment firm that is not a bank, an application for permission for a transfer of business assets of an investment firm that is not a bank to its shareholder or an application for permission for a transfer of business assets of another person to an investment firm that is not a bank shall contain details and documents necessary for assessing the reasons for the merger, division or transfer of business assets. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)A merger of an investment firm that is not a bank with a person that is not an investment firm shall not be permissible. This shall not apply in the case of a merger of an investment firm that has a licence only for the provision of investment services pursuant to Article 4(1)(d) with an investment company which has a licence to manage assets of a client pursuant to a special legislative act; the provisions of paragraphs 1 and 2 shall apply mutatis mutandis.

(4)An investment firm shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its conversion.

Article 20Transfer, Pledge or Lease of the Business of an Investment Firm

(1)The conclusion of an agreement on the transfer of the business or part thereof of an investment firm that is not a bank, an agreement on the pledge of the business or part thereof of an investment firm that is not a bank, or an agreement on the lease of the business or part thereof of an investment firm that is not a bank shall require permission of the Czech National Bank.

(2)An application for permission referred to in paragraph 1 shall contain details and documents necessary for assessing the reasons for the transfer, pledge or lease of the business or part thereof of the investment firm that is not a bank. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)An investment firm that is not a bank shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of the transfer or lease of the business or part thereof of the investment firm that is not a bank.

CHAPTER IIIPROVISION OF INVESTMENT SERVICES IN THE TERRITORIES OF MEMBER STATES OF THE EUROPEAN

UNION

Section 1Provision of Investment Services by an Investment Firm in another Member State of the

European Union

Article 21

(1)An investment firm that intends to provide investment services in another Member State of the European Union (hereinafter the “host state”) through an organisational unit of its business (hereinafter an “organisational unit”) shall notify the Czech National Bank of this fact in advance.

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(2)The notification referred to in paragraph 1 shall contain:

a) the host state where the organisational unit is to be located,

b) a business plan containing primarily the types and scope of the investment services to be provided in the host state,

c) the organisational structure of the organisational unit,

d) the address of the organisational unit where information and documents can be requested,

e) details of the head of the organisational unit.

(3)If the Czech National Bank does not have any objections to the location of the organisational unit of the investment firm in the host state, it shall, within 3 months of the date of delivery of the notification pursuant to paragraph 1, provide the supervisory authority of the host state with the details referred to in paragraph 2 and inform the same about the conditions for the provision of compensation from the Guarantee Fund. The Czech National Bank shall advise the investment firm, without undue delay, that the Czech National Bank has provided the supervisory authority of the host state with the said details.

(4)An investment firm may commence provision of investment services in the host state after the expiry of 2 months from the date when the supervisory authority of the host state received the details referred to in paragraph 2 from the Czech National Bank.

(5)If the Czech National Bank does not consider the location of the organisational unit of the investment firm in the host state suitable due to the organisational structure or the financial situation of the investment firm with regard to the business plan of the organisational unit, it shall send to the investment firm a decision on the refusal to provide the supervisory authority of the host state with the details referred to in paragraph 2 within 3 months of the date of delivery of the notification referred to in paragraph 1. No remedial measure is allowed against such a decision.

(6)An investment firm that has an organisational unit in the territory of the host state shall notify the Czech National Bank and the supervisory authority of the host state of any change in the details referred to in paragraph 2(b) to (e) no later than 1 month prior to execution of such change; if the investment firm cannot meet this deadline for objective reasons, it shall notify the change without undue delay. Paragraph 3 or 5 shall apply mutatis mutandis to the assessment of changes.

(7)The Czech National Bank shall, without undue delay, notify the supervisory authority of the host state of any change concerning the conditions for the provision of compensation from the Guarantee Fund.

(8)The procedure pursuant to paragraphs 1 to 7 shall not be followed if an investment firm that is a bank decides to follow a special legal rule governing the activities of banks; in such case, the Czech National Bank shall notify the supervisory authority of the host state of the conditions for the provision of compensation from the Guarantee Fund and of any changes concerning the conditions for the provision of compensation from the Guarantee Fund.

Article 22

(1)An investment firm that intends to provide investment services in the host state without establishing a organisational unit shall notify the Czech National Bank of this fact.

(2)The notification referred to in paragraph 1 shall contain:

a) the host state in which the investment firm intends to provide an investment service,

b) a business plan containing primarily the types and scope of investment services which the investment firm intends to provide.

(3)The Czech National Bank shall, within 1 month of the date of delivery of the notification pursuant to paragraph 1, pass on the details contained in this notification to the supervisory authority of the host state and inform the same about the conditions for the provision of compensation from the Guarantee Fund.

(4)An investment firm may commence provision of investment services in the host state as soon as the supervisory authority of this state receives the notification referred to in paragraph 1 from the Czech National Bank.

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(5)An investment firm that provides an investment service in the territory of the host state shall notify the Czech National Bank and the supervisory authority of the host state of any change in the details referred to in paragraph 2(b).

(6)The Czech National Bank shall, without undue delay, notify the supervisory authority of the host state of any change concerning the conditions for the provision of compensation from the Guarantee Fund.

(7)The procedure pursuant to paragraphs 1 to 6 shall not be followed if an investment firm that is a bank decides to follow a special legal rule governing the activities of banks; in such case, the Czech National Bank shall notify the supervisory authority of the host state of the conditions for the provision of compensation from the Guarantee Fund and of any changes concerning the conditions for the provision of compensation from the Guarantee Fund.

Article 23

The Czech National Bank shall, without undue delay, notify the supervisory authority of the host state of the withdrawal of a licence for the business of an investment firm.

Section 2Provision of Investment Services in the Territory of the Czech Republic by a Foreign

Person with a Registered Office in Another Member State of the European Union

Article 24Provision of Investment Services through an Organisational Unit

(1)A foreign person having its registered office in another Member State of the European Union and a licence for the provision of investment services granted by the supervisory authority of such state (hereinafter the “home state”) which intends to provide investment services in the Czech Republic through an organisational unit shall be:

a) advised by the Czech National Bank, without delay, that the Commission received details from the supervisory authority of the home state concerning the envisaged provision of investment services by such person in the Czech Republic,

b) notified by the Czech National Bank of the disclosure duties and rules of conduct towards clients within 2 months of the date of receipt of details concerning the envisaged provision of investment services in the Czech Republic from the supervisory authority of the home state.

(2)A foreign person having its registered office in another Member State of the European Union and a licence for the provision of investment services granted by the supervisory authority of such state may commence provision of investment services in the Czech Republic through an organisational unit on the date when it was notified by the Czech National Bank of the disclosure duties and rules of conduct towards clients or following the expiry of the time limit referred to in paragraph 1(b).

(3)The Czech National Bank shall notify a foreign person providing investment services in the Czech Republic pursuant to paragraph 2 of any change in the disclosure duties and the rules of conduct towards clients.

(4)A foreign person providing investment services in the Czech Republic pursuant to paragraph 2 shall notify the Czech National Bank, at least 1 month in advance, of any change:

a) in the information concerning the organisational unit,

b) in the organisational structure, or

c) in the business plan.

(5)If a foreign person cannot meet the time limit in paragraph 4 for objective reasons, it shall report the change without undue delay.

(6)The procedure in paragraphs 1 to 5 shall not be followed if the foreign person decides to proceed according to a special legal rule governing the activities of banks.

(7)A foreign person providing investment services in the Czech Republic pursuant to paragraph 2 or a foreign person having its registered office in another Member State of the European Union which is, under a

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single licence pursuant to a special legal rule governing the activities of banks, authorised to provide investment services in the Czech Republic:

a) shall fulfil the disclosure duties of an investment firm pursuant to this Act (Article 16) with the exception of duties in Article 16(4) to (6). The information referred to in Article 16(2)(b) to (e) shall be provided in relation to services which the said person provides through an organisational unit or in relation to clients to whom investment services are provided in this manner,

b) shall comply with the rules of conduct of an investment firm towards its clients (Article 15).

Article 25Provision of Investment Services without Establishing an Organisational Unit

(1)A foreign person having its registered office in another Member State of the European Union and a licence for the provision of investment services granted by the supervisory authority of such state which intends to provide investment services in the Czech Republic without establishing an organisational unit in the territory of the Czech Republic shall be immediately advised by the Czech National Bank that the Czech National Bank received details from the supervisory authority of the home state concerning the envisaged provision of investment services by such person in the Czech Republic.

(2)A foreign person having its registered office in another Member State of the European Union and a licence for the provision of investment services granted by the supervisory authority of such state may commence provision of investment services in the Czech Republic without an organisational unit on the date of receipt by the Czech National Bank from the supervisory authority of the home state of details concerning the provision of investment services by such person in the Czech Republic or following the expiry of 1 month from the date when such details were received by the supervisory authority of the home state.

(3)A foreign person providing investment services in the Czech Republic pursuant to paragraph 2:

a) shall fulfil the disclosure duties pursuant to Article 16(2)(b) to (e) in respect of investment services provided in the territory of the Czech Republic,

b) shall notify the Czech National Bank of each change in its business plan in advance,

c) shall comply with the rules of conduct of an investment firm towards its clients (Article 15).

(4)The procedure in paragraphs 1, 2 and 3(b) shall not be followed if the foreign person decides to proceed according to a special legal rule governing the activities of banks.

Article 26Cooperation with the Commission of the European Communities

(1)The Czech National Bank shall notify the Commission of the European Communities without delay that:

a) it has granted a licence for the business of an investment firm to a person that is controlled by a person that has its registered office in a state which is not a Member State of the European Union,

b) an investment firm has come under the control of a person that has its registered office in a state which is not a Member State of the European Union.

(2)The information referred to in paragraph 1 shall contain the details of the investment firm, the person controlling such investment firm and the form of their links. The Czech National Bank shall simultaneously send the information referred to in paragraph 1 to the Ministry of Finance (hereinafter the “Ministry”) for information.

(3)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities of the problems encountered by investment firms when providing investment services in states that are not Member States of the European Union.

(4)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities:

a) of the number and types of cases where the Commission has decided, pursuant to Article 21(5), to refuse to provide a supervisory authority of another Member State of the European Union with the details of an investment firm that wished to provide investment services in such state through an organisational unit,

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b) of remedial measures and sanctions that the Commission has imposed, in connection with the provision of investment services in the Czech Republic, on foreign persons that have their registered offices in another Member State of the European Union.

Article 27Co-operation between Supervisory Authorities of the Member States of the European Union

(1)The Czech National Bank shall provide the supervisory authority of the host state with the details necessary for the exercise of supervision of an investment firm, in particular:

a) details of each director of the investment firm or details of the head of the organisational unit of the investment firm located in the territory of the host state,

b) details of each person who has a share in the registered capital or voting rights of the investment firm.

(2)At the request of the supervisory authority of another Member State, the Czech National Bank shall, without undue delay, provide information concerning the protection of inside information (Article 124) and market manipulation (Article 126).

(3)If the Czech National Bank is unable to provide the information referred to in paragraph 2, it shall communicate a reason.

(4)The Czech National Bank may refuse to provide the information referred to in paragraph 2 if:

a) the provision thereof might have a negative impact on the sovereignty, security or public order in the Czech Republic,

b) a court action has been initiated in the Czech Republic in respect of the matter to which such information pertains and in relation to persons against which such court action is being conducted, or

c) a judgment against a person to whom such information pertains has become final and conclusive.

(5)The Czech National Bank shall notify the supervisory authority of another Member State of the European Union of each justified suspicion of the use of inside information or market manipulation in such Member State.

(6)The Czech National Bank may request that the supervisory authority of another Member State of the European Union carry out an investigation concerning its suspicion of the use of inside information or market manipulation. The Commission may request that its employees be present during such investigation.

(7)Should the Czech National Bank receive a notification of suspicion of the use of inside information or market manipulation in the Czech Republic from the supervisory authority of another Member State of the European Union, it shall impose a remedial measure or a fine on the person who committed such action and shall notify the notifying party thereof.

(8)Should the Czech National Bank receive a request from the supervisory authority of another Member State of the European Union to carry out an investigation concerning its suspicion of the use of inside information or market manipulation, it shall satisfy such request. The Czech National Bank shall also be obliged to satisfy the request of such supervisory authority that its employees be present during such an investigation.

(9)The Czech National Bank need not satisfy a request pursuant to paragraph 8 for reasons referred to in paragraph 4.

(10) When refusing a request pursuant to paragraph 4 or 9, the Czech National Bank shall notify the supervisory authority referred to in paragraph 2 of its reasons for refusing the request, including all available information on ongoing proceedings or decisions.

CHAPTER IVAN ORGANISATIONAL UNIT OF A FOREIGN PERSON HAVING ITS REGISTERED OFFICE IN A STATE

OTHER THAN A MEMBER STATE OF THE EUROPEAN UNION THAT PROVIDES INVESTMENT SERVICES IN THE CZECH REPUBLIC

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Article 28

(1)A foreign person that has its registered office in a state other than a Member State of the European Union may provide investment services in the Czech Republic provided that it holds a licence for the provision of investment services through an organisational unit granted by the Czech National Bank.

(2)The Czech National Bank shall grant a licence for the provision of investment services through an organisational unit if:

a) the registered office as well as the actual office of the applicant are in the same state,

b) the applicant holds a licence for the provision of investment services that are the subject of an application for a licence pursuant to paragraph 1 granted by the supervisory authority of the state in which it has its registered office,

c) the applicant’s registered office is in a state that guarantees at least the same protection of investors as the Czech Republic,

d) the applicant is trustworthy,

e) the applicant ensures that the organisational unit has funds corresponding to the scope of investment services provided in the Czech Republic and the origin of such funds is transparent and clean,

f) the nominated head of the organisational unit is trustworthy and professionally qualified,

g) the applicant proves material, organisational and personnel prerequisites of the organisational unit for the provision of the investment services specified in the application,

h) the applicant submits a business plan of the organisational unit supported by realistic economic calculations,

i) the applicant notifies the Czech National Bank of its participation in a guarantee scheme used to pay compensation to clients; if the applicant is a member of such a scheme, it shall also prove the amount of compensation paid to clients and the range of clients and volume of their assets backed by such a guarantee scheme, including the territory to which such a guarantee scheme applies,

j) the applicant submits draft rules for prudent provision of investment services and draft rules of conduct of the investment firm towards clients, such rules fulfilling the requirements of this Act,

k) persons suitable from the point of view of sound and prudent management of the investment firm with regard to the organisational unit have a qualifying holding in the applicant,

l) close links of the applicant to another person do not hinder effective performance of supervision.

(3)The application for a licence for the provision of investment services through an organisational unit shall contain the details and the documents attached to it shall prove the facts referred to in paragraph 2. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(4)The performance of office of the head of the organisational unit shall be subject to the prior consent of the Czech National Bank pursuant to Article 10 mutatis mutandis.

(5)In a licence for the provision of investment services through an organisational unit, the Czech National Bank shall state which investment services the organisational unit shall be authorised to provide and in relation to which investment instruments. In the licence, the Czech National Bank may define conditions which the organisational unit must meet before commencing the licensed activity or comply with during the performance of the licensed activity. The licence shall be granted for an indefinite period of time.

(6)A foreign person that has its registered office in a state other than a Member State of the European Union and that provides investment services in the territory of the Czech Republic through an organisational unit shall notify the Czech National Bank, without undue delay, of any changes in the details on the basis of which it was granted a licence for the provision of investment services through an organisational unit.

(7)A foreign person with a registered office in a state other than a Member State of the European Union that provides investment services in the Czech Republic through an organisational unit:

a) shall comply with the rules for prudent provision of services pursuant to Article 12 mutatis mutandis,

b) shall duly maintain a transactions and orders book of an investment firm pursuant to Article 13 mutatis mutandis,

c) shall comply with the rules of conduct towards clients pursuant to Article 15 mutatis mutandis,

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d) shall fulfil disclosure duties pursuant to Article 24(7)(a) mutatis mutandis,

e) shall retain documents pursuant to Article 17 mutatis mutandis,

f) shall comply with the rules for the organisation of a public auction of securities pursuant to Article 33 mutatis mutandis.

CHAPTER VINVESTMENT INTERMEDIARY

Article 29Basic Provisions

(1)An investment intermediary is a person who provides the investment service of receipt and transmission of orders relating to investment securities or collective investment securities but:

a) does not receive cash funds or investment instruments of clients,

b) transmits orders only to:1. a bank,2. an investment firm, 3. a foreign person that has its registered office in a Member State of the European Union and whose

objects of business corresponds to the activity of any of the persons referred to in (1) and (2) above,4. an organisational unit of a foreign person that has a licence pursuant to Article 28(1),5. an investment company,6. an investment fund, or7. a foreign person authorised to offer to the public and issue its securities of a collective investment fund

in the Czech Republic.

(2)The activity of an investment intermediary may only be carried out by a person registered with the Czech National Bank.

Article 30Registration of an Investment Intermediary

(1)An investment intermediary that is a legal person may carry out the activities in Article 29(1) only:

a) through its statutory body or a member of its statutory body,

b) through an employee,

c) through a member that is a natural person and is not a shareholder of such investment intermediary, or

d) through its member that is a natural person.

(2)The natural person referred to in paragraph 1(b) to (d) must be trustworthy, must have completed secondary education and must have appropriate experience with the capital market or must have completed a specialised course focused on the offering of investment instruments, including the provision of information on such investment instruments.

(3)An investment intermediary who is a natural person may carry out the activities in Article 29(1) by himself or through his employee who is trustworthy, has completed secondary education and has appropriate experience with the capital market or has completed a specialised course focused on the offering of investment instruments, including the provision of information on such investment instruments.

(4)The activities in Article 29(1) may also be carried out for an investment intermediary by another investment intermediary, which may not use yet another investment intermediary to carry out such activities.

(5)The Czech National Bank shall register as an investment intermediary a legal person that has submitted a certificate of its local tax authority confirming that no outstanding sums are recorded in respect of such person and whose statutory body or its members:

a) have reached the age of 18 years,

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b) are competent to carry out legal acts,

c) are trustworthy,

d) have completed secondary education,

e) have appropriate experience with the capital market or have completed a specialised course focused on the offering of investment instruments, including the provision of information on such investment instruments.

(6)The Czech National Bank shall register as an investment intermediary a natural person who:

f) has reached the age of 18 years,

g) is competent to carry out legal acts,

h) is trustworthy,

i) has submitted a certificate of his local tax authority confirming that no outstanding sums are recorded in respect of such person, provided that he/she

j) has completed secondary education,

k) has appropriate experience with the capital market or has completed a specialised course focused on the offering of investment instruments, including the provision of information on such investment instruments.

(7)The application for registration of an investment intermediary shall contain the details and the documents attached to it shall prove the facts stated in paragraph 5 or 6. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(8)The Czech National Bank shall, within 30 calendar days of delivery of the application, register the applicant and issue it with a certificate of registration. Where the applicant fails to prove fulfilment of the conditions laid down in paragraph 5 or 6, the Czech National Bank shall, within this time limit, open administrative proceedings and shall decide to refuse the application for registration if the applicant fails to prove fulfilment of the said conditions even in such proceedings.

(9)The Czech National Bank shall cancel the registration if the investment intermediary requests the Czech National Bank to cancel it in writing.

Article 31

A person who receives orders from an investment intermediary (Article 29(1)(b)) shall:

a) inform the investment intermediary, in detail and truthfully, about investment instruments to which the orders received and transmitted by the investment intermediary appertain,

b) provide necessary co-operation in ensuring the expertise of the persons referred to in Article 30(2) and (3),

c) notify the investment intermediary, without delay, of any change in the information provided pursuant to (a) above.

Article 32Obligations of an Investment Intermediary

(1)An investment intermediary shall:

a) keep records of received and transmitted orders relating to investment instruments; for the purposes of maintaining such records, an investment intermediary is entitled to keep the birth certificate numbers of parties to transactions,

b) comply with the rules of conduct towards clients and provide investment services with professional care,

c) introduce administrative procedures and an internal control mechanism necessary for the due performance of the activity of an investment intermediary.

(2)An investment intermediary shall inform a client about the person for whom it performs the activity referred to in Article 29(1), in particular the type of licence under which such person carries on its business

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activities and the scope within which it is subject to supervision. An investment intermediary shall also advise a client of any investment intermediary for whom it carries out the activity referred to in Article 29(1).

(3)An investment intermediary shall notify the Czech National Bank, without undue delay, of any changes in the facts on the basis of which it was registered with the Czech National Bank.

(4)The rules of conduct of an investment intermediary towards clients and the principles of keeping records of received and transmitted orders, administrative procedures and the internal control mechanism necessary for the due performance of the activity shall be set out in an implementing legal regulation.

(5)An investment intermediary shall retain records of received and transmitted orders pursuant to paragraph 1(a) for at least 10 years from the end of the calendar year when the service was provided.

PART THREEPUBLIC AUCTION OF SECURITIES

Article 33

(1)Public auctions of securities may only be organised by an investment firm holding a licence for the provision of the investment service referred to in Article 4(2)(b) (hereinafter the “auctioneer of securities”).

(2)A public auction of securities shall be subject mutatis mutandis to a special legal rule governing public auctions unless provided otherwise by this Act.

(3)The rules for organising a public auction of securities shall be stipulated by the auctioneer of securities in auction rules.

(4)The auction rules and any amendment thereto shall be approved by the Czech National Bank. If the Czech National Bank does not send a decision on the application for the approval of auction rules or an amendment thereto, against which an appeal can be lodged, within 30 days of the date of delivery of the application it shall be deemed that the auction rules or the amendment thereto have been approved. If the application proceedings are suspended, this time period shall not run.

(5)In the case of an involuntary public auction of investment securities, to determine the price of the auction subject it is necessary to draw up an expert’s opinion pursuant to a special legal rule governing the performance of experts’ activities; if the lowest bid is not more than the amount of CZK 100,000 the expert’s opinion on the price of the auction subject may be replaced by a record of the estimate of the price of the auction subject pursuant to a special legal rule governing public auctions. The auctioneer shall publish the expert’s opinion or the record of the estimate of the price in a manner allowing remote access for a period of at least one year. The auctioneer shall also send the auction decree containing the price of the auction subject by the due dates set out pursuant to a special legal rule governing public auctions to the Czech National Bank.

(6)Where the subject of a public auction of securities is a book-entry security, the person maintaining the register of securities shall register the passage of the security on to the purchaser at auction as at the moment of knock-down on the basis of a certificate confirming the acquisition of the ownership title on the instruction of the auctioneer or the purchaser at auction. In the case of a physical security to order, the auctioneer shall indicate the passage of the security on to the purchaser at auction on the basis of a certificate confirming the acquisition of the ownership title as at the moment of knock-down.

(7)Where the subject of a public auction of securities is physical bearer securities and the auctioneer of the securities does not know the owners of these securities, the auctioneer shall not have an obligation to send the auction decree and other documents to the owners.

(8)An involuntary public auction of securities may also be carried out:

a) if the petitioner proves that the owner of the security has defaulted on take-over, submission or hand-over of a physical security in spite of having been warned about a possible sale of the security in an auction, or

b) if a claim secured by a lien in respect of the security pursuant to a special legal rule governing securities has not been settled in a due and timely manner.

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PART FOUROFFER OF INVESTMENT SECURITIES TO THE PUBLIC AND SECURITY

PROSPECTUS

CHAPTER IOFFER OF INVESTMENT SECURITIES TO THE PUBLIC


(1)“Offer of investment securities to the public” (hereinafter an “offer to the public”) shall mean any communication to a wider group of persons containing information about offered securities and conditions for their acquisition which are sufficient so as to enable an investor to make a decision to purchase or subscribe to these investment securities.

(2)For the purposes of the provisions of this Act on an offer to the public, a security prospectus and on the conditions for admitting a security to trading on an official market:

a) “equity securities” shall mean investment securities pursuant to Article 3(2)(a) and transferable securities giving the right to acquire these investment securities, provided that these transferable securities are issued by the same issuer or by an issuer belonging to a group controlled by the same parent undertaking (hereinafter the “same group”) as the issuer of the investment securities to be acquired by transfer,

b) “debt securities” shall mean investment securities that are not equity securities,

c) “offering programme” shall mean a plan for the issuance of debt securities, including option warrants and similar securities to these debt securities, in a continuous or repeated manner during a specified issuing period,

d) “qualified investor” shall mean:1. a bank, a foreign person with similar objects of business, a savings and loan association or a foreign

person with similar objects of business,2. an investment firm and a foreign person with similar objects of business,3. a financial institution subject to supervision (Article 151),4. a person pursuant to Article 2(a)(12),(16)–(18),5. a legal person that, according to its last annual report or consolidated annual report, meets at least two

of the following three criteria: total assets having a Czech crown equivalent of more than EUR 43,000,000, an annual net turnover having a Czech crown equivalent of more than EUR 50,000,000 and an average number of employees during the financial year of 250 or more,

6. another legal person that, at its own request, has been entered by the Czech National Bank or by the supervisory authority of another Member State of the European Union in a list of qualified investors,

7. a natural person who meets at least two of three specified criteria and who, at its own request, has been entered by the Czech National Bank or by the supervisory authority of another Member State of the European Union in a list of qualified investors; the criteria are as follows: the carrying out of transactions of a significant size on regulated securities markets over the previous four calendar quarters at an average frequency of, at least, 10 per quarter, the size of the managed assets in investment instruments exceeding the equivalent of EUR 0.5 million and work experience of at least one year in the financial sector in a professional position which requires knowledge of investment in investment instruments.

(3)The provisions of this Act on an offer to the public and on a security prospectus shall, with the exemption given in paragraph 4, not apply to:

a) debt securities issued:1. by a Member State of the European Union,2. by the member state of a federation that is a Member State of the European Union,3. by a territorial self-governing unit of a Member State of the European Union,4. by the Czech National Bank, another central bank of a Member State of the European Union or the

European Central Bank,5. an international organisation whose members include at least one Member State of the European Union,

b) shares in the capital of a central bank of a Member State of the European Union,

c) securities unconditionally and irrevocably guaranteed by a Member State of the European Union or by a

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territorial self-governing unit of a Member State of the European Union,

d) securities issued by non-profit-making organisations with a view to obtaining the means necessary to achieve their non-profit-making objectives,

e) debt securities issued in a continuous or repeated manner by a bank, a foreign person with similar objects of business, a savings and loan association or a foreign person with similar objects of business which:1. are not subordinated or exchangeable,2. do not give a right to acquire another type of security except a coupon,3. are not linked to a derivative,4. constitute a right to the return of a deposit accepted by a bank,5. are covered by a deposit guarantee scheme pursuant to the law of the European Communities1b),

f) debt securities issued in a continuous or repeated manner by a bank, a foreign person with similar objects of business, a savings and loan association or a foreign person with similar objects of business which:1. are not subordinated or exchangeable,2. do not give a right to acquire another type of security,3. are not linked to a derivative,4. have a total selling price or issue price of less than the equivalent of EUR 50,000,000; this amount shall

be calculated for securities offered over a period of 12 months,

g) securities whose total offered selling price or issue price does not exceed the equivalent of EUR 200,000; this amount shall be calculated for securities offered over a period of 12 months,

h) non-fungible shares of capital whose main purpose is to provide the holder with a right to occupy an apartment or other form of immovable property and where the shares cannot be sold on without this right being given up,

i) bonds issued repeatedly by credit institutions in the Kingdom of Sweden whose main purpose is to grant mortgage loans, provided that the said bonds are from the same issue and are issued on tap during a specified issuing, their terms and conditions are not changed during the issuing period and the sums deriving from the issue of the said bonds, in accordance with the articles of association of the issuer, are placed in assets which provide sufficient coverage for the liabilities deriving from securities.

(4)In the case of the securities referred to in paragraph 3(a), (c), (f) and (g), an issuer or a person intending to offer securities to the public or asking for admission to trading on an official market may decide to draw up a prospectus and publish it in accordance with this Act.

Article 35Obligation to Publish a Prospectus

(1)Investment securities may only be offered to the public by a person who, at the latest at the start of the offer to the public, publishes a security prospectus (hereinafter the “prospectus”) approved by the Czech National Bank (Article 36c) or by a foreign supervisory authority (Article 36f).

(2)The obligation to publish a prospectus shall not apply to an offer of securities:

a) addressed solely to qualified investors,

b) addressed to a limited group of persons of fewer than 100 per Member State of the European Union, other than qualified investors,

c) if the lowest possible investment per investor is equal to or greater than the equivalent of EUR 50,000, or

d) if their denomination or price per unit is equal to at least the equivalent of EUR 50,000.

(3)The obligation to publish a prospectus shall not apply to an offer to the public:

a) of securities offered in connection with an offer of a takeover by means of an exchange for other securities, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office in respect of which the Czech National Bank decides that it contains information equivalent to that in the prospectus; if the Czech National Bank does not send a decision on the said document to the issuer within 15 working days of delivery of the document, it shall be deemed that it regards the information as being equivalent to that in the prospectus; if the proceedings concerning the document are suspended, this time period shall not run,

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b) of securities offered in connection with a conversion of company, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office in respect of which the Czech National Bank decides that it contains information equivalent to that in the prospectus; if the Czech National Bank does not send a decision on the said document to the issuer within 15 working days of delivery of the document, it shall be deemed that it regards the information as being equivalent to that in the prospectus; if the proceedings concerning the document are suspended, this time period shall not run,

c) of shares offered free of charge to existing shareholders and shares allotted as a form of dividends, where such shares are of the same type as the shares from which such non-monetary dividends are paid, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information on the number and nature of the shares and the reasons for and details of the offer.

d) of securities issued by an employer which has securities already admitted to trading on an official market or by a company controlled by or controlling it or by a company controlled by the same person as the employer and offered by existing or former employees or directors of the employer, where such securities are of the same type as the securities admitted to trading on an official market and provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information on the number and nature of the securities and the reasons for and details of the offer, or

e) of shares issued in substitution for shares of the same type already issued, if the issuing of such shares does not involve any increase in equity capital.

(4)Any subsequent resale of securities which were previously the subject of an offer pursuant to paragraph 2 shall be regarded as a separate offer. If the subsequent offer is an offer to the public, this offer shall be subject to the obligation to publish a prospectus unless stipulated otherwise by this Act.

CHAPTER IISECURITY PROSPECTUS

Article 36Content of a Security Prospectus

(1)The prospectus shall contain all information which, according to the particular nature of the issuer and of the securities offered to the public or in respect of which admission to trading on an official market is requested, is necessary to enable investors to make an informed assessment of the offered security and the rights attaching thereto and of the assets and liabilities, financial position, profit and losses, and the future evolution of the business activity and financial position of the issuer and of any third party guaranteeing repayment of the securities (hereinafter the “guarantor”). The prospectus shall be presented in an easily analysable and comprehensible form.

(2)The prospectus shall contain information concerning the issuer and the securities which will be offered to the public or admitted to trading on an official market. It shall also include a summary. The prospectus need not contain a summary of the prospectus in the case of a request for admission to trading on an official market of a debt security having a denomination or price per security equal to at least the equivalent of EUR 50,000.

(3)The information1c) in the prospectus may be given by reference to one or more previously or simultaneously published documents that have been approved by the Czech National Bank or to the document referred to in Article 120(6). The prospectus shall make reference only to the latest documents, which must be made available to the public for the entire period of publication of the prospectus, and shall contain a reference list.

(4)The summary shall, in a comprehensible and brief manner, convey the essential characteristics and risks associated with the issuer of the security and any guarantor, in the language in which the prospectus was drawn up. The procedure laid down in paragraph 3 may not be followed for the summary of the prospectus. The summary shall contain a warning that:

a) it should be read as an introduction to the prospectus;

b) any decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor;

c) where a claim relating to the information contained in a prospectus is brought before a court, the plaintiff investor might have to bear the costs of translating the prospectus before the legal proceedings are initiated, unless stipulated otherwise in accordance with legal rules; and

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d) the persons who has drawn up the summary of the prospectus, including any translation thereof, is liable for the correctness of the information contained in the summary of the prospectus, but only if the summary of the prospectus is misleading or inaccurate when read together with the other parts of the prospectus.

(5)The prospectus shall be draw up by the issuer or the person who intends to offer the securities to the public or who is asking for the admission to trading on an official market. Where two or more persons jointly intend to offer the securities to the public or who are asking for the admission to trading on an official market, such persons shall draw up the prospectus jointly; if, however, one of these persons is the issuer, the issuer shall draw up the prospectus.

(6)The prospectus may be drawn up as a single document or as composed of separate documents. A prospectus composed of separate documents shall be divided into a registration document, a securities note and a summary of the prospectus. The registration document shall contain the information relating to the issuer. The securities note shall contain the information concerning the securities offered to the public or to be admitted to trading on an official market.

(7)An issuer which already has a registration document approved by the Czech National Bank may draw up only the securities note and the summary of the prospectus when securities are offered to the public or admitted to trading on an official market. In this case, the securities note shall provide information that would otherwise be provided in the registration document if there has been a material change which could affect investors’ assessments since the latest approval of the registration document or any supplement to the prospectus. The securities note and the summary of the prospectus shall be subject to separate approval by the Czech National Bank.

Article 36aBase Prospectus

(1)For the following types of security, the prospectus may be drawn up as a base prospectus, which need not contain the final terms relating to individual issues of a security:a) debt securities issued under an offering programme, or

b) debt securities issued in a continuous or repeated manner by a bank, a foreign person with similar objects of business, a savings and loan association or a foreign person with similar objects of business, where1. the sums deriving from the issue of the said securities are placed in assets which provide sufficient

coverage for the liabilities deriving from the securities until their maturity date; and2. in the event of the insolvency of the related bank, foreign person with similar objects of business,

savings and loan association or foreign person with similar objects of business, the said sums are intended, as a priority, to repay the capital and interest falling due.

(2)If, in the course of an offering programme or in the course of continuous or repeated issuance of securities, there are material changes in the information given in the base prospectus, the person who drew up the prospectus shall supplement this information in a supplement to the prospectus in accordance with Article 36j.

(3)If the final terms of the offer are not included in either the base prospectus or a supplement to the prospectus, the final terms shall be made public and filed with the Czech National Bank soon as possible and not later than at the beginning of the offer to the public, if possible. The provisions of Article 36(1)(a) shall be applicable mutatis mutandis in any such case.

Article 36bResponsibility for the Content of the Prospectus

(1)Responsibility for the correctness and completeness of the information given in a prospectus shall attach to the person who drew up the prospectus pursuant to Article 36(5) and to the guarantor, if a guarantor is mentioned in the prospectus and has vouched for the correctness of the information. Where the prospectus has been drawn up jointly by two or more persons, each of these person shall be responsible for the content of the prospectus. Information on the persons responsible for drawing up the prospectus correctly shall be given in the prospectus, as well as declarations by them that, to the best of their knowledge, the information contained in the prospectus is correct and that the prospectus makes no omission likely to affect its import.

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(2)Responsibility for the correctness of the information given in the summary of a prospectus shall attach to the person referred to in paragraph 1 only if the summary of the prospectus is misleading or inaccurate when read together with the other parts of the prospectus.

Article 36cApproval of the Prospectus

(1)The Czech National Bank shall approve the prospectus of a security issued by an issuer having its registered office in the Czech Republic, at the request of the person who drew up the prospectus (Article 36(5)), with the exception given in paragraph 4.

(2)The Czech National Bank shall approve the prospectus of a security issued by an issuer having its registered office in a non-member state of the European Union, at the request of the person who drew up the prospectus (Article 36(5)), with the exception given in paragraph 4, where the Czech Republic is the first Member State of the European Union where the securities of such issuer will be offered to the public or admitted to trading on a regulated market.

(3)The Czech National Bank shall approve the prospectus of a security issued by an issuer having its registered office in another Member State of the European Union or in a non-member state of the European Union, where the person who drew up the prospectus has requested the Czech National Bank’s approval, such security has been or will be admitted to trading on an official market or offered to the public in the Czech Republic and such debt security:

a) has a denomination or price per unit equal to at least the equivalent of EUR 1,000, or

b) gives the right to acquire any transferable securities or to receive a cash amount as a consequence of their being converted or the rights conferred by them being exercised, provided that the issuer of the debt securities is not the issuer of the underlying securities or an entity belonging to the same group as the issuer of the underlying securities.

(4)The person who drew up the prospectus of a security issued by an issuer having its registered office in the Czech Republic or by an issuer referred to in paragraph 2 may request approval of the prospectus by the supervisory authority of another Member State of the European Union where such securities will be admitted to trading on a regulated market or offered to the public, provided that the security is a debt security pursuant to paragraph 3(a) or (b).

(5)The Czech National Bank shall decide in the first instance on applications pursuant to paragraphs 1, 2 or 3 within 10 working days of receipt of the application if the application includes documents proving that the issuer of the security given in the prospectus has previously had securities admitted to trading on a regulated market or has previously offered securities to the public. This time limit shall be extended to 20 working days if the issuer of the security given in the prospectus does not have any securities admitted to trading on a regulated market and has not previously offered securities to the public.

(6)The following documents shall be enclosed with the application for approval of the prospectus:

a) two copies of the draft prospectus;

b) in the case of a physical security, also a specimen print of the security and information concerning the printing house that printed it;

c) the document referred to in paragraph 5.

(7)The Czech National Bank shall request that the prospectus be completed if the documents submitted are incomplete or that supplementary information is needed. The time limit for issuing a decision shall recommence from the date on which the Czech National Bank receives the supplementary information requested.

(8)The Czech National Bank shall approve any prospectus containing all the information required under this Act.

(9)The Czech National Bank may approve the prospectus of a security issued by an issuer having its registered office in a non-member state of the European Union which has been drawn up in accordance with the legal rules of such state, provided that:

a) the requirements of such state concerning the content of the prospect are equivalent to the requirements laid down in this Act, and

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b) the prospectus has been drawn up in accordance with international standards laid down by international organisations of competent supervisory authorities.

(10)The Czech National Bank may transfer an application for the approval of a prospectus to the supervisory authority of another Member State of the European Union, subject to the agreement of that foreign supervisory authority. The Czech National Bank shall notify the person who drew up the prospectus of this fact within three working days from the date of transfer of the application. The time limit referred to in paragraph 5 shall recommence from the date of transfer of the application.

(11)The Czech National Bank may decide to agree to the proposal of a supervisory authority of another Member State of the European Union to transfer an application for the approval of a prospectus to the Czech National Bank. When approving the prospectus, the Czech National Bank shall proceed in accordance with this Act.

Article 36dFinal Price and Number of Securities

(1)Where the final price and number of securities which will be offered to the public are not known as of the date of approval of the prospectus, the Czech National Bank may approve the prospectus, provided that:

a) the maximum price, or the criteria or the conditions in accordance with which the final price and number of securities will be determined, is disclosed in the prospectus; or

b) the acceptances of the purchase or subscription of securities may be withdrawn for not less than two working days after the final price and number of securities which will be offered to the public have been published.

(2)The final price and number of securities shall be notified to the Czech National Bank and published in the manner described in Article 36h.

Article 36eOmission of Information from the Prospectus

The Czech National Bank may authorise the omission of certain information from the prospectus provided that such omission does not make the prospectus misleading and provided that:

a) such information is not essential for an offer to the public or for admission to trading on a market and for the assessment of the asset and financial position and prospects of the issuer, offeror or guarantor or for the assessment of the security issued by the issuer;

b) disclosure of such information would be contrary to the public interest; or

c) disclosure of such information would be seriously detrimental to the issuer and the omission would not mislead the public with regard to facts essential for the assessment of the security and of the rights attached to the security, the issuer and the offeror.

Article 36fSecurities of Issuers Having their Registered Office in Another Member State of the European Union

(1)For an offer to the public of the security of an issuer having its registered office in another Member State of the European Union or for an application for admission of such security to trading on an official market, the prospectus approved by the supervisory authority of the issuer’s home state shall be valid, provided that this authority has provided the Czech National Bank with a certificate of approval attesting that the prospectus has been drawn up in conformity with the law of the European Communities and with a copy of the said prospectus in the Czech language or the English language.

(2)The procedure laid down in paragraph 1 shall be followed mutatis mutandis for an offer to the public of the security of an issuer having its registered office in the Czech Republic or an issuer having its registered office in a non-member state of the European Union or for an application for admission of such security to trading on

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an official market, provided that the prospectus of such security has been approved by the supervisory authority of another Member State of the European Union.

Article 36gLanguage of the Prospectus

(1)Where the Czech National Bank is approving a prospectus of an offer to the public or for admission of a security to trading on a regulated market in the Czech Republic only, the prospectus shall be drawn up in the Czech language.

(2)Where the Czech National Bank is approving a prospectus of an offer to the public or for admission of a security to trading on a regulated market in the Czech Republic and simultaneously in one or more other Member States of the European Union, the prospectus shall be drawn up in the Czech language and also either in a language accepted by the competent supervisory authority of such Member State or in the English language, at the choice of the person drawing up the prospectus.

(3)Where the Czech National Bank is approving a prospectus of an offer to the public or for admission of a security to trading on a regulated market in one or more Member States of the European Union excluding the Czech Republic, the prospectus shall be drawn up either in a language accepted by the competent supervisory authority of such Member State or in the English language, at the choice of the person drawing up the prospectus. For the purpose of scrutiny by the Czech National Bank, the prospectus shall also be drawn up either in the Czech language or in the English language, at the choice of the person drawing up the prospectus.

(4)Where the Czech National Bank is approving a prospectus of a debt security whose denomination or price per unit is equal to at least the equivalent of EUR 50,000, for admission to trading on a regulated market in one or more Member States of the European Union the prospectus shall be drawn up either in the Czech language and in a language accepted by the competent supervisory authority of another Member State or in the English language, at the choice of the person drawing up the prospectus.

(5)In the cases where this Act requires the prospectus to be drawn up in the Czech language, the Czech National Bank may, at the request of the person seeking approval of the prospectus and after assessing the specific circumstances, allow the prospectus to be drawn up in the English language only, where this is in investors’ interest. The summary of the prospectus, however, must always be drawn up in the Czech language.

Article 36hPublication of the Prospectus

(1)The prospectus shall be made available to the public without undue delay following approval pursuant to Article 36c or following receipt of the certificate of approval pursuant to Article 36f in full in one or more of the following ways:

a) in a manner allowing remote access on the issuer’s website and, if applicable, on the website of the investment firm placing or selling the securities;

b) in full in at least one newspaper circulated nationally and simultaneously in the manner described in (a) above;

c) in the form of a brochure to be made available, free of charge, to the public at the registered office and premises of the operator of the regulated market on which the securities are being admitted to trading, or at the registered office of the issuer and at the registered office and premises of the investment firm placing or selling the securities, and simultaneously in the manner described in (a) above;

d) in a manner allowing remote access on the website of the operator of the regulated market where the admission to trading is being sought; or

e) in a manner allowing remote access on the offeror’s website, if the securities are being offered to the public by a person other than the issuer.

(2)In the case of a prospectus comprising several documents or incorporating information by reference, the documents and information making up the prospectus may be published and circulated separately subject to

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compliance with the procedure in paragraph 1 for all separate documents and references. Each document shall indicate where the other constituent documents of the full prospectus may be obtained.

(3)Where the prospectus is published in a manner allowing remote access, a paper copy must be delivered to the investor, upon his request and free of charge, by the issuer, the offeror, the person asking for admission to trading on an official market or the investment firm placing or selling the securities.

(4)For an offer to the public in the territory of the Czech Republic, the prospectus shall be published either in the Czech language or in the English language; the summary of the prospectus shall be published in the Czech language.

(5)Where the prospectus is to be published in a manner allowing remote access, it shall be published by the issuer, the investment firm or the regulated market operator on its website in the manner in which it usually discloses information on its activities. It shall ensure at least that:

a) the website is easily accessible to the public via the Internet and that it can be easily located in the usual manner by the commercial name of the issuer and that the content of the website is provided free of charge by the issuer;

b) the prospectus being published takes the form of a downloadable data file in a commonly used format;

c) the prospectus being published is accessible in the said manner continuously over a period of 5 years in the case of admission of a security to trading on an official market or over a period of 12 months in the case of an offer of a security to the public.

Article 36iValidity of a Prospectus

(1)A prospectus shall be valid for 12 months after its first publication for an offer to the public and admission of a security to trading on an official market. In the cases referred to in Article 36j, this time limit shall only apply if the prospectus is completed by any approved and published supplements to the prospectus.

(2)In the case of an offering programme, the base prospectus shall be valid for a period of up to 12 months from publication.

(3)In the case of debt securities referred to in Article 36a(1)(b), the prospectus shall be valid until no more of the securities concerned are issued in a continuous or repeated manner.

(4)A registration document, as referred to in Article 36(6), previously approved and published, shall be valid for a period of up to 12 months provided that it has been updated in accordance with Article 36j. The registration document accompanied by the approved and published securities note and the summary of the prospectus shall be jointly considered to constitute a valid prospectus.

Article 36jSupplement to the Prospectus

(1)In the event of any significant change in any of the facts given in the prospectus or any material inaccuracy which is capable of affecting the assessment of the securities and which arises or is noted between the time when the prospectus is approved and the final closing of the offer to the public or the time when trading on an official market begins, the person who drew up the prospectus shall submit a supplement to the prospectus to the Czech National Bank for approval and, following approval, shall publish it in the same way as the published prospectus. The Czech National Bank shall decide to approve the supplement within seven working days of receipt of the request for approval of the supplement to the prospectus.

(2)The person who drew up the prospectus shall, if necessary, supplement the summary of the prospectus, and any translations thereof, in accordance with the approved supplement to the prospectus.

(3)An investor who has already agreed to for the securities before the supplement to the prospectus is published shall have the right, exercisable within a time limit of two working days after the publication of the supplement, to withdraw from the purchase or subscription.

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Article 36kAdvertisements and Other Communications

(1)Any advertisement relating either to an offer to the public or to an admission of a security to trading on a regulated market subject to the obligation to draw up a prospectus shall contain information stating that a prospectus has been or will be published and indicating where investors are or will be able to obtain it. An advertisement disseminated together with any other communication shall be clearly distinguishable and separated in a suitable way from the other communication.

(2)Any advertisement and other announcement in an oral or written form concerning the offer to the public or the admission of the security to trading on a regulated market subject to the obligation to draw up a prospectus shall be consistent with the information contained in the prospectus and may not contain information which contradicts its content or which is misleading.

(3) In the case of an offer to the public or the admission of a security to trading on an official market which is not subject to the obligation to draw up a prospectus, material information provided by an issuer or an offeror and addressed to qualified investors or special categories of investors (Article 35(2) and (3)) shall be disclosed to all qualified investors or special categories of investors to whom the offer is addressed.

Article 36lCooperation Between Supervisory Authorities of Member States of the European Union

The Czech National Bank shall, at the request of the issuer or the person responsible for drawing up the prospectus and within three working days following receipt of that request or, if the request is submitted together with the draft prospectus, within one working day after the approval of the prospectus, provide the competent authority of another Member State of the European Union with a certificate of approval of the prospectus attesting that the prospectus has been drawn up in accordance with the laws of the European Communities, and will also provide it with a copy of the said prospectus. The same procedure shall be followed for any supplement to the prospectus. The Czech National Bank shall attach to the certificate a translation of the summary of the prospectus produced by the person who drew up the prospectus, if the issuer or the person responsible for drawing up the prospectus so requests.

PART FIVEMARKET IN INVESTMENT INSTRUMENTS


Regulated Market in Investment Instruments

Article 37

(1)“Regulated market in investment instruments” (hereinafter “regulated market”) shall mean a market:

a) which has defined rules for admission of investment instruments to trading,

b) on which trading takes place regularly,

c) which has defined rules for the formation of prices of investment instruments,

d) which regularly publishes prices of investment instruments attained during trading,

e) which is subject to supervision by the supervisory authority of the state in which it has its registered office and actual office,

f) included in the list of regulated markets published in the Official Journal of the European Union, which the Czech National Bank shall make public pursuant to a special legal rule.

(2)A regulated market may be organised in the Czech Republic by an exchange or an operator of an off-exchange (OTC) market in investment instruments (hereinafter “off-exchange market”).

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Article 38

According to the conditions for admission of an investment instrument to trading, a regulated market can be divided into:

a) an official market in securities (hereinafter “official market”) which can be divided into more parts in accordance with the internal regulations of a regulated market operator,

b) a special market in investment instruments that are not securities (hereinafter “special market”).

Article 39

(1)Conditions for admission of shares, securities representing shares and bonds to trading on an official market and disclosure duties of the issuer related to their admission to trading on an official market shall be set out in this Act (Articles 44, 118 to 121 and 125). The regulated market operator may set out further conditions or disclosure duties in its general business terms and conditions.

(2)Conditions for admission of securities other than those referred to in paragraph 1 to trading on an official market shall be set out by the regulated market operator in its general business terms and conditions. Disclosure duties related to their admission to trading on an official market shall be set out in this Act (Articles 118 to 121 and 125) and, as the case may be, also by the regulated market operator in its general business terms and conditions.

(3)Conditions for admission of investment instruments that are not securities to trading on a special market shall be set out by the regulated market operator in its general business terms and conditions. Disclosure duties related to their admission to trading on the special market shall be set out in this Act (Article 125) and, as the case may be, also by the regulated market operator in its general business terms and conditions.

Article 40Free Market

(1)A regulated market operator may also organise a free market. A free market is a market in investment instruments for which conditions for admission of investment instruments to trading, conditions for removal of investment instruments from trading, conditions for suspension of investment instruments from trading and possible disclosure duties related to the admission of investment instruments to trading shall be set out by the regulated market operator in its general business terms and conditions.

(2)A regulated market operator shall make public, in a manner allowing remote access and in its registered office at a place accessible to the public, a prospectus of a security admitted to trading on a free market.

Article 41Disclosure Duty of a Regulated Market Operator

A regulated market operator shall send to the Czech National Bank information and documentation needed for the performance of supervision. Due dates for sending the information and documents, details of their content, form, classification and the manner of their sending shall be set out in an implementing legal regulation.

Article 42Transaction Concluded on a Regulated Market

(1)A transaction concluded on a regulated market shall be the conclusion of a contract on the purchase and sale of an investment instrument on a regulated market:

a) the material aspects of which were agreed upon by the parties through an automated trading system of the regulated market operator in accordance with the internal regulations of the regulated market operator, or

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b) that was concluded outside the automated trading system of the regulated market operator and subsequently included among contracts concluded through the automated system in accordance with the internal regulations of the regulated market operator.

(2)Settlement of transactions concluded on a regulated market shall be ensured by the regulated market operator.

Article 43Publication of the Price of an Investment Instrument

(1)A regulated market operator shall publish:

a) the current price of an investment instrument traded on the market organised by that operator,

b) the closing price of an investment instrument traded on a market organised by that operator; the closing price shall be published in the price list following the end of the trading day.

(2)The form, timing and manner of publication of prices of investment instruments admitted to trading on a regulated market shall be set out in an implementing legal regulation.

(3)If an investor can, prior to concluding a transaction on a regulated market, obtain information on the prices of investment instruments and volumes of transactions in investment instruments that can be concluded on such market, the regulated market operator shall ensure that:

a) such information is available on the market throughout the period of time when it is possible to conclude a transaction,

b) an investor is able to conclude a transaction in an investment instrument at the reported price for the reported volume.

Article 44Conditions for Admission of a Security to Trading on an Official Market

(1)A listed security is a security admitted to trading on an official market.

(2)A regulated market operator may admit shares or bonds to trading on an official market:

a) if a prospectus of such shares or bonds has been published and at least 1 day has elapsed from its publication,

b) if the legal status of the issuer of such shares or bonds is in compliance with the law of the state where the issuer has its registered office,

c) if the price of the share or its expected price multiplied by the number of issued shares amounts to a sum in Czech crowns equivalent to at least EUR 1,000,000; if it is not possible to estimate the expected price, the equity of the issuer of the shares shall amount at least to the said sum; the minimum amount condition need not be met if the issuer has already issued shares of the same class and such shares have been admitted to trading on the regulated market where admission of shares to trading is being sought or if problem-free trading in such shares will be ensured,

d) if the total nominal value of a bond issue amounts to a sum in Czech crowns equivalent to at least EUR 200,000; the minimum total nominal value condition need not be met if problem-free trading in such bonds will be ensured,

e) if the issuer of such shares or bonds published its financial statements according to a special legal rule governing accounting for at least 3 successive accounting periods preceding the accounting period when the application for admission of the security to trading on the regulated market is filed; the condition of the publication of financial statements for 3 successive accounting periods need not be met if the issuer has been in existence, according to the entry in the relevant register, for less than 3 years and the admission of the shares or bonds to trading on the official market is in the interest of the issuer or investors and if investors have sufficient information necessary to assess the issuer and the security,

f) if such shares or bonds meet the requirements of the law of the state under which they have been issued,

g) if transferability of such shares or bonds is not excluded or restricted; shares may also be admitted to trading on an official market if their transferability is only restricted by the requirement of a consent by the

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company’s bodies and if their admission to trading does not interfere with the trading on such market,

h) if the issue price of such shares or bonds has been paid in full; the issue price need not be paid in full if a special legal rule so permits and if problem-free trading in such securities is ensured and if their prospectus explicitly states that the issue price has not been paid and describes measures adopted in this respect,

i) if at least 25% of the shares which are to be admitted to trading on the official market are owned by the public of the Member States of the European Union or if at least such a percentage of shares is owned by the public of the Member States of the European Union that ensures problem-free trading on the official market; the same shall not be required if:1. the ownership of the shares by the public of the Member States of the European Union is to be ensured

only through trading on such market and the regulated market operator concludes that the required ownership by the public shall be achieved within a short period of time after the admission of the shares to trading, or

2. shares of the same issuer and class have been admitted to trading on a similar official market of a non-member state of the European Union and the volume of shares owned by the public in such state ensures problem-free trading on the official market,

j) if the application for admission to trading applies to all bonds from the same issue or to all shares of the same class; the application for admission to trading need not include shares held for the purpose of controlling the issuer or shares which cannot be traded, under an agreement, for a certain period of time provided that trading in only a part of shares of the same class does not result in any disadvantages for investors; it shall be explicitly stated in the prospectus, together with the relevant reasons, that the application for admission to trading on the official market only applies to a part of shares of the same class,

k) if shares or bonds that are physical securities are printed in accordance with the requirements for the printing of physical securities according to the law of the state in which the issuer has its registered office; if such requirements do not reach the standard of the requirements for the printing of physical securities in the Czech Republic, this fact shall be explicitly stated in the prospectus; if no prospectus is published, such information shall be made public in a manner allowing remote access,

l) if the issuer of such shares or bonds is a person having its registered office in a non-member state of the European Union and such shares or bonds have not been admitted to trading on the official market of an exchange in the state in which the issuer has its registered office and its actual office or in the state where the largest portion of such shares or bonds is owned by the public, but the operator of the regulated market where admission is applied for believes that the reason why the securities have not been admitted to trading is not the protection of investors,

m) if they are convertible bonds, priority bonds or bonds with an option warrant that are to be exchanged for shares and shares of the same class have already been admitted to trading on an official market, or all information necessary for the assessment of the value of such shares is available to investors,

n) if the issue of such shares or bonds has been issued in the same form and all its items have the same nominal value and the same identification pursuant to the international securities identification numbering system,

o) if the issuer of such shares or bonds does not have its registered office and actual office in a state that is a member of the Organisation for Economic Cooperation and Development and:1. it has been rated by a rating agency (Article 193) included in the list of rating agencies maintained by

the Czech National Bank, or2. the shares are traded in on a foreign regulated market included in the list of regulated markets

maintained by the Czech National Bank,

p) if the regulated market operator has no knowledge of any circumstances that could lead to a detriment to investors, to a threat to their interests or to a threat to important public interests if such shares or bonds were admitted to trading on the official market.

(3)Shares or bonds that are physical securities and whose issuer’s registered office is situated in the Czech Republic and that are to be admitted to trading on an official market must be printed in a printing house authorised to print securities and must comply with essential elements of technical layout of a physical security. The issuer’s obligation to have a security printed in a printing house that is authorised to print securities shall not apply to a collective bond.

(4)The obligation to publish a prospectus pursuant to paragraph 2(a) shall not apply to:

a) securities referred to in Article 34(3);

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b) shares representing, over a period of 12 months, less than 10 per cent of the total number of shares of the same class already admitted to trading on the same official market;

c) securities offered in connection with an offer of a takeover by means of an exchange for other securities, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information which the Czech National Bank decides is equivalent to that in the prospectus; if the Czech National Bank does not send the issuer a decision on this document within 15 working days from the date of receipt of the document, it shall be deemed to regard the information as being equivalent to that in the prospectus; if the proceedings on the document are suspended, this time period shall not run;

d) securities offered in connection with the conversion of a company, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information which the Czech National Bank decides is equivalent to that in the prospectus; if the Czech National Bank does not send the issuer a decision on this document within 15 working days from the date of receipt of the document, it shall be deemed to regard the information as being equivalent to that in the prospectus; if the proceedings on the document are suspended, this time period shall not run;

e) shares offered free of charge to existing shareholders, and dividends paid out in the form of shares of the same class as the shares in respect of which such non-monetary dividends are paid, provided that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information on the number and nature of the shares and the reasons for and details of the offer;

f) securities issued by an employer whose securities have been admitted to trading on a regulated market, or companies controlled by it or controlling it or companies controlled by the same entity as the employer, and offered to existing or former employees or directors of the employer, provided that the said securities are of the same class as the securities admitted to trading on the regulated market and that a document is delivered to the Czech National Bank and is available at the issuer’s registered office containing information on the number and nature of the securities and the reasons for and details of the offer;

g) shares issued in substitution for other shares of the same class already admitted to trading on the same official market, if the subscribed registered capital is not thereby increased;

h) shares acquired in exchange for another security or the exercise of the right conferred by another security, provided that the said shares are of the same class as the shares already admitted to trading on the same official market;

i) securities already admitted to trading on another regulated market in a Member State of the European Union, provided:1. that these securities, or substitutable securities, have been admitted to trading on the other regulated

market for more than 18 months;2. that, for securities first admitted to trading on a regulated market after 31 December 2003, the

admission to trading was associated with an approved prospectus made available to the public in conformity with the law of the European Communities1d);

3. that, for securities admitted to trading on another regulated market after 30 June 1983 and not fulfilling the conditions in (2), the requirements of the law of the European Communities for the admission of a security to trading on an official market (listing)1e) were fulfilled;

4. that the securities continue to fulfil the conditions for trading on that other regulated market;5. that the person seeking the admission of a security to trading on an official market draws up a summary

document in the Czech language containing the summary of the prospectus pursuant to Article 36(4) and information on where the most recent prospectus can be obtained and where the financial information published by the issuer is available; this document shall be made available to the public in the manner set out in Article 36h.

(5)Securities representing shares may be admitted to trading on an official market if:

a) the issuer of the represented shares meets the conditions pursuant to paragraph 2(b) and (e) and fulfils the disclosure duties, in respect of the represented shares, of an issuer of shares admitted to trading on an official market,

b) they meet the conditions pursuant to paragraph 2(f), (g), (i) to (k) and paragraph 7,

c) the represented shares meet the condition pursuant to paragraph 2(c).

(6)Where an application for admission to trading on an official market concerns securities to which a right to acquire securities constituting a share in a company with a registered office in another Member State of the European Union is attached and the securities constituting a share in the company are admitted to trading on an

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official market of an exchange in the state in which their issuer’s registered office is situated, the regulated market operator shall, prior to making a decision on the application, request an opinion of the authority that decided to admit them to trading.

(7)If shares or bonds are subscribed for on the basis of an offer to the public, the trading in them can be opened following the expiry of the period of time for subscription specified in the offer to the public; the same shall not apply if no such period of time was specified.

(8)The conditions for admission of securities to trading on an official market pursuant to paragraph 2(a) to (f), (h), (i) and (l) to (p) shall not apply to government bonds issued by the Czech Republic, a Member State of the European Union or a member state of the Organisation for Economic Cooperation and Development, municipal bonds or bonds issued by entities that are subject to international law.

Article 45Licence to Print Listed Physical Securities

(1)A licence to print listed physical securities shall be granted to the operator of a printing house by the Czech National Bank.

(2)The essential elements of an application for a licence to print listed physical securities and the annex thereto as well as essential elements of the technical layout of a listed physical security shall be set out in an implementing legal regulation.

(3)The Czech National Bank shall grant a licence to print listed physical securities to the operator of a printing house which has its registered office in the Czech Republic which has the material, organisational, personnel and security prerequisites necessary to print listed physical securities.

Article 46Registration of Securities Issued by a Collective Investment Fund on an Official Market

(1)A security issued by a collective investment fund that is not a listed security may be registered on an official market for the purpose of the publication of its value.

(2)Conditions for the registration of a security issued by a collective investment fund and the method of determining its value shall be defined by the regulated market operator in its internal regulation.

Article 47Exclusion of a Security from Trading on an Official Market

(1)An issuer that has made a decision to exclude a participating security from trading on an official market pursuant to Article 186a of the Commercial Code, or a shareholder or, as the case may be, persons acting in concert, who hold at least 95% of the voting rights in a company, where they have decided to make a buyback offer which will lead, on discharge of the obligations arising from such buyback offer, to exclusion of the participating security from trading on an official market pursuant to Article 183h(3) of the Commercial Code, shall, without delay:

a) notify the Czech National Bank and the operator of the regulated market where the security has been admitted to trading of this fact,

b) make the same public in a manner allowing remote access.

(2)Persons referred to in paragraph 1 shall send an application for the exclusion of a security from trading on an official market to the regulated market operator without undue delay after discharging all their obligations arising under Articles 183h and 186a of the Commercial Code. In the case of a mandatory public offer of a mandatory public offer of a contract to buy back participating securities pursuant to Article 186a of the Commercial Code, the discharge of obligations to shareholders who did not vote in favour of exclusion or did not attend the general meeting shall be deemed discharged obligations; the discharge of obligations to shareholders who voted in favour of exclusion of the participating securities from trading on the official market pursuant to Article 186a(7) of the Commercial Code shall not be required. Attached to the application shall be a

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document proving that the issuer or another authorised person decided to exclude the security from trading on the official market in accordance with the Commercial Code and that the Commission was notified of this fact, and a document concerning the discharge of all the obligations arising under Articles 183h and 186a of the Commercial Code. In the case of bonds, the procedure laid down in a special legal rule governing bonds shall be followed.

(3)The regulated market operator shall exclude the security from trading on the official market without undue delay after receiving the application referred to in paragraph 2 with all attachments.

(4)The regulated market operator shall notify the central depository and the Czech National Bank of the exclusion of a security from trading on the regulated market without delay.

(5)The regulated market operator shall incorporate the exclusion of participating securities from trading on the official market into the relevant lists pursuant to Article 183n of the Commercial Code without undue delay after receiving written notification from the issuer.

Article 48Suspension of a Security from Trading and Removal of a Security from Trading on an Official Market

(1)A regulated market operator shall suspend the trading in a security on the official market:

a) if the orderly functioning of the market is temporarily jeopardised, or

b) in the interest of protection of investors.

(2)A regulated market operator shall remove a security from trading on the official market if:

a) it has been proven to such operator that it is no longer possible to maintain regular trading in such security, or

b) the security or its issuer ceased to comply with the conditions for admission of a security to trading on the official market.

Article 49Decision not to Admit a Security to Trading or to Remove a Security from Trading

(1)A decision not to admit a security to trading on an official market or to remove a security from trading on an official market shall be issued in an administrative proceedings. The proceedings shall be commenced by the issue of the decision.

(2)The Czech National Bank shall decide on a remedial measure against the decision of a regulated market operator referred to in paragraph 1.

(3)A decision not to admit a security to trading on an official market shall be issued within 6 months of the date of filing of the application for admission of such security to trading or provision of additional information for such application.

Article 50

cancelled

Article 51

cancelled

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Article 52

cancelled

Article 53

cancelled

Article 54

cancelled

Article 55

cancelled

CHAPTER IISECURITIES EXCHANGE


(1)An exchange is a legal person that operates a market in investment instruments for persons authorised to conclude exchange transactions.

(2)The business of an exchange shall require a licence granted by the Czech National Bank.

(3)The commercial name of an exchange shall contain the designation “securities exchange”. A person who does not have a licence for the business of an exchange may not use the designation “securities exchange”.

Article 57Licence for the Business of an Exchange

(1)The Czech National Bank shall grant a licence for the business of an exchange only to a joint stock company:

a) that issues only registered shares,

b) whose registered office and actual office is situated in the territory of the Czech Republic,

c) whose registered capital amounts at least to CZK 100,000,000,

d) the origin of whose registered capital is transparent and clean,

e) that has material, personnel and organisational prerequisites for the performance of the activities of an exchange, in particular:1. its registered capital has been paid up2. its directors meet the conditions for approval of persons as defined in Article 10,

f) in which qualifying holdings are held by persons who are suitable from the point of view of sound and prudent management of the exchange,

g) whose close links with any other person do not hinder the effective exercise of supervision of the exchange; in the event of close links with a person that has its registered office and actual office in a non-member state

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of the European Union, the laws and method of application thereof, including the enforceability of law, may not hinder the effective exercise of supervision of the exchange,

h) that submits draft exchange regulations that contain, in particular, the structure of the markets operated by the exchange, conditions for the admission of investment instruments to trading on individual markets and disclosure duties connected with the admission of investment instruments to trading on individual markets; the Czech National Bank’s approval shall not be required for the draft exchange regulations.

(2)An application for a licence for the business of an exchange shall contain the details and the documents attached to it shall prove the facts stated in paragraph 1. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)In a licence for the business of an exchange, the Czech National Bank:

a) shall identify the investment instruments for which the exchange may operate a market,

b) may define conditions which the applicant must meet before commencing the operation of a market in investment instruments or comply with during its operation.

(4)A licence for the business of an exchange shall be granted for an indefinite period of time.

(5)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities, without undue delay, that it has granted a licence for the business of an exchange. The exchange regulations shall be attached to such a notification. In addition, the Czech National Bank shall notify any change in the details of an exchange, change in the exchange regulations or withdrawal of a licence for the business of an exchange.

Article 58

(1)The objects of business of an exchange may only comprise activities specified in the licence for the business of an exchange and related activities.

(2)An exchange may:

a) provide services through another regulated market, including a foreign one,

b) allow another regulated market operator, including a foreign one, to provide services through its market.

(3)An exchange shall notify the Czech National Bank, without undue delay, of any changes in the facts on the basis of which it was granted a licence for the business of an exchange.

(4)The performance of duties of a director of an exchange shall be conditional upon the prior consent of the Czech National Bank as defined in Article 10.

(5)An exchange shall send information on any change to the exchange regulations to the Czech National Bank for its information.

(6)An exchange shall provide services with professional care.

Article 59Incompatibility of Offices of a Director of an Exchange

A director of an exchange may not be:

a) a member of the Chamber of Deputies or a senator of the Parliament of the Czech Republic,

b) a member of the Bank Board of the Czech National Bank, or

c) a director or an employee of another regulated market operator or of a foreign person with a similar objects of business; the same shall not apply if the exchange and the other regulated market operator or a foreign person with similar objects of business are part of the same concern.

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Article 60Winding-up of an Exchange or Change in the Objects of Business of an Exchange

(1)If the general meeting of an exchange decides to wind up the company with liquidation or to change the objects of business, the exchange shall notify the Czech National Bank of this fact immediately after the resolution of the general meeting.

(2)From the date of entry of an exchange into liquidation or from the date of change in its objects of business, the person that entered into liquidation or changed the objects of business may not operate a market in investment instruments and may only settle its receivables and payables arising from the operation of a market in investment instruments; until such receivables and payables are settled, such person shall be regarded as an exchange.

(3)An exchange shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its winding-up or change in its objects of business.

Article 61Conversion of an Exchange

(1)A merger of an exchange with another regulated market operator or a settlement system operator, a transfer of business assets of an exchange to its shareholder or a transfer of business assets of another person to an exchange shall require permission of the Czech National Bank.

(2)An application for permission for a merger of an exchange, an application for permission for the transfer of business assets of an exchange or an application for permission for the transfer of business assets of another person to an exchange shall contain the details and documents necessary for an assessment of the consequences of the merger. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)Division of an exchange or a merger of an exchange with a person who is not a regulated market operator or a settlement system operator shall not be permitted.

(4)An exchange shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its conversion.

Article 62Transfer, Pledge or Lease of the Business of an Exchange

(1)The conclusion of a contract on the transfer of the business of an exchange or a part thereof, a contract on the pledge of the business of an exchange or a part thereof or a contract on the lease of the business of an exchange or a part thereof shall require permission of the Czech National Bank.

(2)An application for permission referred to in paragraph 1 shall contain details and documents necessary for an assessment of the reasons for the transfer, pledge or lease of the business of the exchange or a part thereof. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)An exchange shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of the transfer or lease of the business of the exchange or a part thereof.

Article 63Exchange Shares

Exchange shares shall be transferable to another person only with the prior consent of the exchange chamber.

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Article 64General Meeting

(1)The General Director of an exchange and a representative of the Czech National Bank may attend the general meeting with an advisory vote.

(2)The general meeting shall approve the rules of the exchange court of arbitration and changes therein, including the tariff of fees for proceedings before such court.

(3)At a general meeting, a shareholder of an exchange shall have a voting right in accordance with the nominal value of his/its shares, but of no more than 20% of the total number of votes.

Article 65Exchange Chamber

(1)An exchange chamber is the statutory body of an exchange and plays the role of the board of directors.

(2)At least half of the members of the exchange chamber shall be present at a meeting of the exchange chamber. The exchange chamber shall decide by a simple majority of votes. When the chairman or the vice-chairman of the exchange chamber is elected or removed, when exchange regulations or a proposal for a change therein, draft rules of the exchange court of arbitration or a proposal for a change therein are discussed, and when the General Director is appointed or removed, at least two thirds of the members of the exchange chamber shall be present and the decision shall be approved by at least a two-thirds majority of the votes of the members present.

Article 66Rights and Obligations of an Exchange Chamber

(1) An exchange chamber shall:

a) approve exchange regulations and any changes therein,

b) announce a competitive selection process for the position of the General Director of an exchange, and appoint and remove the General Director of an exchange,

c) grant prior consent to the transfer of exchange shares,

d) decide on the admission of investment instruments to an exchange transaction,

e) grant and withdraw membership in the exchange,

f) decide on the imposition of measures against persons authorised to conclude exchange transactions and against issuers whose securities have been admitted to trading on the exchange regulated market; an exchange chamber may delegate decision-making on the implementation of measures to an exchange committee.

(2)An exchange chamber shall hold meetings at least once every 2 months.

(3)The Administrative Procedure Code shall not apply to the procedure for imposing measures pursuant to paragraph 1(f). The obligations in respect of the breach of which an exchange chamber may implement measures pursuant to paragraph 1(f), the types of such measures and the procedure for implementing them shall be governed by the exchange regulations.

Article 67Exchange Committees

(1)An exchange chamber may establish exchange committees for the performance of activities associated with the operation of a market in investment instruments, which committees shall be bodies of the exchange.

(2)When making a decision to establish an exchange committee, the exchange chamber shall approve its charter at the same time.

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(3)The chairman and members of an exchange committee shall be appointed and removed by the exchange chamber.

(4)An exchange committee shall be standing or temporary.

(5)An exchange committee shall adopt its rules of procedure.

Article 68General Director of an Exchange

The General Director of an exchange shall:

a) adopt measures aimed at the prevention of any jeopardy to the activity of the exchange or interests of its shareholders and capital market participants; in particular, he/she shall make changes to the time schedule of the exchange day and suspend trading on the exchange in part or in full, unless stipulated otherwise by this Act,

b) appoint his deputy who shall stand in for the General Director and adopt measures referred to in (a) above.

Article 69Exchange Transaction

(1)An exchange transaction shall be a transaction pursuant to Article 42 concluded at the exchange. In the case of a transaction pursuant to Article 42(1)(b), at least one of the contracting parties must be, subject to the conditions set out in the exchange regulations, a person authorised to conclude exchange transactions.

(2)An exchange transaction concluded pursuant to the previous paragraph may not wind up the exchange.

Person Authorised to Conclude Exchange Transactions

Article 70

(1)Exchange transactions may be concluded by:

a) a member of the exchange,

b) the Czech National Bank,

c) the Czech Republic acting through the Ministry,

d) the Czech Consolidation Agency,

e) a person permitted to do so by the exchange regulations provided that the other party to the transaction is a person referred to in (a) to (d) above and that the exchange transaction is concluded outside the automated trading system of the exchange.

(2)An investment firm or a foreign person with a licence for the provision of investment services that meets the conditions defined by the exchange regulations and has paid the fee for the acquisition of membership may be a member of the exchange.

(3)A person authorised to conclude exchange transactions, save for a person referred to in paragraph 1(e):

a) shall observe the exchange regulations; the Czech National Bank shall observe the exchange regulations to the extent to which the obligations arising from membership in the European System of Central Banks and the obligations ensuing from pursuing the primary objective laid down in a special legal rule governing the activities of the Czech National Bank are not affected,

b) may conclude off-exchange transactions in investment instruments admitted to trading on an official or special market of the exchange only to the extent permitted by the exchange chamber and shall notify the exchange of such transactions,

c) may not intentionally disseminate untrue information that may influence the price of an investment

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instrument.

(4)The Czech National Bank may conclude off-exchange transactions in investment instruments admitted to trading on an official or special market of an exchange without permission of the exchange chamber; it shall not be obliged to notify the exchange of such transaction. Permission of the exchange chamber to conclude such transaction shall not be required from the other party to such transaction, and the other party shall not be authorised to notify the exchange of such transaction without the consent of the Czech National Bank.

(5)The Czech Republic, acting through the Ministry, may conclude off-exchange transactions in investment instruments admitted to trading on an official or special market of an exchange without permission of the exchange chamber; it shall not be obliged to notify the exchange of such transaction. Permission of the exchange chamber to conclude such transaction shall not be required from the other party to such transaction, and the other party shall not be authorised to notify the exchange of such transaction without the consent of the Czech Republic acting through the Ministry.

Article 71

An exchange shall ensure, for persons authorised to conclude exchange transactions, equal access to the services provided by the exchange under the terms and conditions defined by the exchange regulations, and it shall ensure availability of the same information significant for the development of prices of investment instruments at the same time.

Article 72Exchange Court of Arbitration

(1)The exchange court of arbitration shall decide on disputes arising from exchange transactions, unless agreed otherwise by the parties.

(2)The exchange court of arbitration shall be established by the exchange.

(3)The exchange court of arbitration may also decide on disputes arising from other transactions in investment instruments, disputes arising from business activities on the capital market, money market, insurance market and supplementary pension insurance market, if the parties so agree.

(4)The exchange court of arbitration shall be subject to a special legal rule governing arbitration proceedings and execution of arbitral awards, unless stipulated otherwise by this Act.

CHAPTER IIIOFF-EXCHANGE MARKET


(1)An off-exchange market operator shall operate a market in investment instruments.

(2)The operation of an off-exchange market shall require a licence granted by the Czech National Bank.

Article 74Licence for the Operation of an Off-Exchange Market

(1)The Czech National Bank shall grant a licence for the operation of an off-exchange market only to a joint stock company:


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b) whose registered office and actual office is situated in the Czech Republic,

c) whose registered capital is at least CZK 10,000,000,

d) the origin of whose registered capital is transparent and clean,

e) that has material, personnel and organisational prerequisites for the operation of an off-exchange market, in particular:1. its registered capital has been paid up,2. its directors meet the conditions for approval of persons pursuant to Article 10,

f) that submits draft rules for prudent provision of services of an off-exchange market operator and draft rules of conduct of an off-exchange market operator towards clients which comply with this Act,

g) in which qualifying holdings are held by persons who are suitable in terms of sound and prudent management of an off-exchange market operator,

h) whose close links with any other person do not hinder the exercise of supervision of the off-exchange market operator; in the event of close links with a person that has its registered office and actual office in a non-member state of the European Union, the laws and method of application thereof, including the enforceability of law, may not hinder effective exercise of supervision of the regulated market operator,

i) that submits draft rules of trading on the off-exchange market that contain, in particular, the structure of the markets operated by the off-exchange market operator, conditions for the admission of investment instruments to trading on individual markets and disclosure duties connected with the admission of investment instruments to trading on individual markets.

(2)An application for a licence for the operation of an off-exchange market shall contain the details and the documents attached to it shall prove the facts referred to in paragraph 1. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)In a licence for the operation of an off-exchange market, the Czech National Bank:

a) shall identify the investment instruments for which the off-exchange market operator may operate a market,

b) shall approve the rules of trading on the off-exchange market,

c) may define conditions which the applicant must meet before commencing the operation of a market in investment instruments or comply with during its operation.

(4)A licence for the operation of an off-exchange market shall be granted for an indefinite period of time.

(5)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities, without undue delay, that it has granted a licence for the operation of an off-exchange market. The rules of trading on the off-exchange market shall be attached to such a notification. In addition, the Czech National Bank, acting through the Ministry, shall notify any change in the details of an off-exchange market operator, change in the rules of trading on an off-exchange market or withdrawal of a licence for the operation of an off-exchange market.

Article 75

(1)The objects of business of an off-exchange market operator may only comprise activities specified in the licence for the operation of an off-exchange market and related activities.

(2)An off-exchange market operator shall notify the Czech National Bank, without undue delay, of any changes to the facts on the basis of which it was granted a licence for the operation of an off-exchange market.

(3)Any change to the rules of trading on an off-exchange market shall be approved by the Czech National Bank in advance.

(4)The Czech National Bank shall send a first-instance decision on the approval of a change in the rules of trading on an off-exchange market within 30 calendar days of the date of delivery of the application or supplementation of the application. If the Czech National Bank does not send the decision within this period of time, the change in the rules of trading on an off-exchange market shall be deemed approved.

(5)Rules of trading on an off-exchange market and amendments thereto shall become effective upon their publication, unless a later date is specified by the off-exchange market operator.

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(6)An off-exchange market operator shall adhere to the rules of trading on the off-exchange market.

(7)The performance of duties of a director of an off-exchange market operator shall be conditional upon the prior consent of the Czech National Bank as defined in Article 10.

(8)An off-exchange market operator may:

a) provide services through another regulated market, including a foreign one,

b) allow a regulated market operator, including a foreign one, to provide services through its market.

Article 76Incompatibility of Offices of a Director of an Off-Exchange Market Operator

A director of an off-exchange market operator may not be:

a) a member of the Chamber of Deputies or a senator of the Parliament of the Czech Republic,

b) a member of the Bank Board of the Czech National Bank, or

c) a director or an employee of another regulated market operator or of a foreign person with a similar objects of business; the same shall not apply if the off-exchange market operator and the other regulated market operator or the foreign person with similar objects of business are part of the same concern.

Article 77Winding-up or Change in the Objects of Business of an Off-Exchange Market Operator

(1)If the general meeting of an off-exchange market operator decides to wind up the company with liquidation or to change the objects of business, the off-exchange market operator shall notify the Czech National Bank of this fact immediately after the resolution of the general meeting.

(2)From the date of entry of an off-exchange market operator into liquidation or from the date of change in its objects of business, the person that entered into liquidation or changed the objects of business may not operate a market in investment instruments and may only settle its receivables and payables arising from the operation of a market in investment instruments; while carrying out such activity, such person shall be regarded as an off-exchange market operator.

(3)An off-exchange market operator shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its winding-up or change in its objects of business.

Article 78Conversion of an Off-Exchange Market Operator

(1)A merger of an off-exchange market operator with another regulated market operator or a settlement system operator, a transfer of business assets of an off-exchange market operator to its shareholder or a transfer of business assets of another person to an off-exchange market operator shall require permission of the Czech National Bank.

(2)An application for permission for a merger of an off-exchange market operator, an application for permission for the transfer of business assets of an off-exchange market operator to its shareholder or an application for permission for the transfer of business assets of another person to an off-exchange market operator shall contain details and documents necessary for an assessment of the consequences of the merger. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)Division of an off-exchange market operator or a merger of an off-exchange market operator with a person who is not a regulated market operator or a settlement system operator shall not be permitted.

(4)An off-exchange market operator shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its conversion.

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Article 79Transfer, Pledge or Lease of the Business of an Off-Exchange Market Operator

(1)The conclusion of a contract on the transfer of the business of an off-exchange market operator or a part thereof or a contract on the pledge of the business of an off-exchange market operator or a part thereof or a contract on the lease of the business of an off-exchange market operator or a part thereof shall require permission of the Czech National Bank.

(2)An application for permission referred to in paragraph 1 shall contain details and documents necessary for an assessment of the reasons for the transfer, pledge or lease of the business of the off-exchange market operator or a part thereof. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)An off-exchange market operator shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of the transfer or lease of the business of the off-exchange market operator or a part thereof.

Obligations of an Off-Exchange Market Operator

Article 80

(1)An off-exchange market operator shall introduce:

a) control and security measures applicable to the processing and recording of data,

b) an internal control system and

c) rules for concluding transactions by its employees for own account and for the account of persons close to it.

(2)An off-exchange market operator shall regulate its internal organisation (organisational rules) and the items mentioned in paragraph 1 by means of an internal regulation.

(3)The rules of trading on an off-exchange market shall ensure:

a) orderly functioning of the market,

b) restriction of the possibility of a conflict of interests between individual clients,

c) honest, professional and fair treatment of clients’ orders for the carrying-out of transactions on the market in investment instruments operated by it.

(4)Cash funds and investment instruments entrusted to an off-exchange market operator for the purpose of carrying out a transaction on the market in investment instruments operated by it and cash funds and investment instruments acquired for the client for these values shall not be assets of the off-exchange market operator or part of its bankruptcy estate. In the event of bankruptcy, the bankruptcy trustee shall release these assets to the clients without undue delay; Article 132 applies mutatis mutandis to the release of such assets.

(5)When handling assets referred to in paragraph 4, an off-exchange market operator shall:

a) keep its own cash funds separate from cash funds entrusted to it by a client and keep accounts concerning client assets separate from the accounts concerning its own assets,

b) refrain from using such assets for a transaction for the account of a person other than the client which entrusted such assets to it or, as the case may be, for which such assets were acquired, and

c) ensure a clear identification of such assets such that the cash funds of clients are kept on a separate bank account, and, by means of an internal regulation, provide for handling of the cash funds of clients separately from handling of its own cash funds.

(6)An off-exchange market operator shall:

a) operate the off-exchange market with professional care in compliance with the rules of trading on the off-exchange market,

b) inform a client fully, truthfully and in a comprehensible manner about material facts related to the carrying-out of transactions on the market operated by it, in particular by informing the client that the off-exchange

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market operator does not evaluate whether the investment instruments with which the client intends to carry out transactions on the off-exchange market or the services provided or offered by the off-exchange market operator are suitable for the client, that rules of conduct towards clients do not apply to the carrying-out of such transactions on this market or to the provision of such services as they do in the case of an investment firm, and that investing on the capital market can be risky; the off-exchange market operator may provide this information in standardised form,

c) inform a client about transactions carried out on the off-exchange market on the basis of the orders of such client in the manner and within the time limits stipulated in the rules of trading on the off-exchange market, and

d) use truthful information when promoting its services.

(7)An off-exchange market operator shall submit to the Czech National Bank:

a) no later than 4 months following the end of the accounting period, its annual report and its consolidated annual report pursuant to a special legal rule governing accounting, where it is obliged under such rule to compile such report, which reports shall include audited financial statements,

b) no later than 1 month after the end of a calendar quarter, its financial results for the past quarter and

c) once a year, no later than 1 month after its ordinary general meeting took place, a list of persons who, as of the date of the general meeting or as of the date preceding the date of filing of the list, had a qualifying holding in it and who were closely linked to it as of such date, if they are known to it.

(8)An off-exchange market operator shall make public the reports and information referred to in paragraph 7(a) and (b) without undue delay after submitting them to the Czech National Bank in a manner allowing remote access.

Article 81

The current version of the rules of trading on an off-exchange market shall be made public in a manner allowing remote access and shall be available for inspection at the registered office of the off-exchange market operator and at all its places of business during business hours.

PART SIXSETTLEMENT SYSTEM


(1)In this Act, “settlement of transactions in investment instruments” shall mean the settlement of mutual claims and obligations arising from transactions in investment instruments.

(2)In this Act, “settlement system” shall mean a system:

a) which ensures the settlement of transactions in investment instruments provided that it has at least three participants as referred to in paragraph 4, other than investment companies, and is operated according to rules agreed upon between the settlement system operator (Article 83(9)) and its participants (hereinafter “rules of the settlement system”),

b) whose participants have agreed that their relations arising from participation in the system are governed by Czech law, and

c) whose existence and name have been notified to the Commission of the European Communities.

(3)In this Act, “settlement order” shall mean an order of a settlement system participant on the basis of which the obligations and claims of the settlement system participant arising from its transactions in investment instruments shall be settled, in accordance with the rules of the settlement system, by transfer of investment instruments or cash funds.

(4)A settlement system participant may only be:

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a) a bank,

b) a savings and loan association,

c) an investment company for the purposes of settling transactions in investment instruments that it manages as client assets,

d) an investment company that manages client assets,

e) a public law person or a person with the guarantee of a public law person if permitted by the regulations under which the same have been established,

f) a foreign person whose objects of business correspond to the activity of any of the persons referred to in (a) to (d) above,

g) the Czech National Bank, a foreign central bank or the European Central Bank.

(5)A settlement system participant may also be a person who:

a) receives settlement orders issued by settlement system participants where such person is their exclusive mediator in the settlement of transactions (hereinafter the “central counterparty”),

b) maintains accounts on which settlement orders issued by settlement system participants or their central counterparties are cleared (hereinafter the “settlement agent”), or

c) carries out the clearing of mutual claims and obligations arising from settlement orders issued by settlement system participants, their central counterparties or settlement agents (hereinafter the “clearing institution”).

(6)Participation in a settlement system shall become established by way of an agreement. A settlement system operator shall be a participant in the settlement system that it operates.

(7)A settlement system participant may also ensure more than one of the activities referred to in paragraph 5. An activity referred to in paragraph 5 may also be ensured by more than one settlement system participant.

(8)A settlement system participant pursuant to paragraph 4 shall be responsible for the discharge of financial obligations arising from its participation in the settlement system.

Article 83Licence for the Operation of a Settlement System

(1)A settlement system operator shall be a legal person that ensures the settlement of transactions in investment instruments between settlement system participants.

(2)The operation of a settlement system shall require a licence granted by the Czech National Bank.

(3)The Czech National Bank shall grant a licence for the operation of a settlement system only to a joint-stock company:


b) that may be a settlement system participant (Article 82(4) and (5)),

c) whose registered office and actual office is situated in the territory of the Czech Republic,

d) that has material, organisational and personnel prerequisites for the settlement of transactions in investment instruments, in particular:1. its registered capital has been paid up,2. its directors are qualified and trustworthy,

e) that submits a proposal for a risk management system that is appropriate to the scope of services provided,

f) that submits draft rules of the settlement system and a specimen draft agreement with a settlement system participant.

(4)An application for a licence for the operation of a settlement system shall contain the details and the documents attached to it shall prove the facts referred to in paragraph 3. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(5)In a licence for the operation of a settlement system, the Czech National Bank:

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a) shall identify the investment instruments for which the settlement system operator may settle claims and obligations arising from trading,

b) shall approve the rules of the settlement system,

c) may define conditions which the settlement system operator must meet before commencing its activities or comply with when carrying out its activities.

(6)A licence for the operation of a settlement system shall be granted for an indefinite period of time.

(7)Any change to the rules of the settlement system shall be approved by the Czech National Bank in advance.

(8)The Czech National Bank shall send a first-instance decision on the approval of a change to the rules of the settlement system within 30 working days of the date of delivery of the application or supplementation of the application. If the Czech National Bank does not send the decision within this period of time, the change shall be deemed approved and the decision shall be deemed to have become legally effective.

(9)The rules of the settlement system shall specify, in particular:

a) the terms and conditions for participation in the settlement system,

b) the rights and obligations of settlement system participants,

c) the terms and conditions for the settlement of claims and obligations arising from transactions in investment instruments,

d) the method and the terms and conditions for securing obligations arising from transactions in investment instruments,

e) the essential elements of settlement orders and the terms and conditions and method of their entry into the settlement system,

f) the operating hours during which the settlement system receives settlement orders,

g) the moment in time at which a settlement order is deemed to have been received by the settlement system,

h) the time schedule for the settlement process, including the schedule for the individual phases of settlement,

i) the procedure applicable to a change in the rules of the settlement system,

j) the method of ensuring the finality of a settlement order entered into the settlement system,

k) a risk management system.

(10)An up-to-date version of the rules of the settlement system shall be published in a manner allowing remote access and shall be available to the public for inspection at the registered office of the settlement system operator during its business hours.

(11)The settlement system operator and settlement system participants shall adhere to the rules of the settlement system.

(12)Cash funds or investment instruments that have been entrusted to a settlement system operator for its administration or as collateral security of an obligation arising from a transaction in investment instruments to be settled shall not be part of the assets of the settlement system operator. A settlement system operator shall keep accounting records of such entrusted assets separately from its own assets.

(13)A settlement system operator shall provide its services with professional care.

Article 84Winding-up or Change in the Objects of Business of a Settlement System Operator

(1)If the general meeting of a settlement system operator decides to wind up the company with liquidation or to change its objects of business, the settlement system operator shall notify the Czech National Bank of this fact immediately after the general meeting resolution.

(2)From the date of entry of a settlement system operator into liquidation or from the date of a change in its objects of business, the person that entered into liquidation or changed its objects of business may not operate a settlement system and may only release the assets of the participants and settle the orders of participants in the

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settlement system received prior to the date of entry into liquidation or change in the objects of business, and settle all its obligations and claims in respect of settlement system participants; until such claims and obligations are settled, such person shall be regarded as a settlement system operator.

(3)A settlement system operator shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its winding-up or change in its objects of business.

Article 85Conversion of a Settlement System Operator

(1)A division or merger of a settlement system operator shall require permission of the Czech National Bank.

(2)An application for permission for a division or merger of a settlement system operator shall contain the details and the documents attached to it shall prove the facts necessary for the assessment of the reasons for the division or merger. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)A settlement system operator shall send to the Czech National Bank for information an invitation to its general meeting the agenda of which includes a discussion of its conversion.

Article 86Settlement Order Finality

(1)A settlement system participant or a third party may not unilaterally revoke a settlement order after the moment defined by the rules of the settlement system.

(2)An adjudication of bankruptcy in respect of the assets of a settlement system participant or the adoption of another measure of a public authority directed at the assets of a settlement system participant which imposes an obligation to stop or restrict transfers of investment instruments or cash funds of such participant or another obligation concerning such investment instruments or cash funds shall be without prejudice to the obligation to execute settlement orders or to the validity, effectiveness or enforceability of such orders if such orders are settlement orders that were received by the settlement system in accordance with its rules:

a) prior to the adjudication of bankruptcy or prior to the imposition of another measure,

b) at the time of the adjudication of bankruptcy or the imposition of another measure or after the adjudication of bankruptcy or the imposition of another measure and which were settled on the date of the adjudication of bankruptcy or the imposition of another measure provided that all settlement system participants pursuant to Article 82(5) prove that they had not been notified of the adjudication of bankruptcy or the imposition of another measure by the Czech National Bank or were not otherwise aware of the same.

(3)An adjudication of bankruptcy in respect of the assets of a settlement system participant or the imposition of another measure of a public authority directed at the assets of a settlement system participant shall be without prejudice to the right to collateral security provided by such participant:

a) to another settlement system participant in connection with its participation in such system,

b) to the Czech National Bank, a central bank of a Member State of the European Union or the European Central Bank.

Article 87Disclosure Duties of a Settlement System Operator

A settlement system operator shall send to the Czech National Bank information and documentation necessary for the exercise of supervision. The due dates for sending the information and documentation and details of their content, form and the manner of sending shall be set out in an implementing legal regulation.

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Article 88Disclosure Duties Concerning Settlement System Participants

(1)A settlement system operator shall notify the Czech National Bank without undue delay of any change in the composition of settlement system participants or any change in the details of a settlement system participant.

(2)A settlement system participant shall notify the settlement system operator of any change in its details pursuant to Article 2(b).

(3)A settlement system participant shall provide a person who proves a legal interest, on request, with information on the settlement systems in which it participates and on their main rules.

(4)A person that has its registered office in the Czech Republic and is a settlement system participant operated under the law of another Member State of the European Union shall:

a) provide a person who proves a legal interest, on request, with information on the settlement systems in which it participates and on their main rules,

b) notify the Czech National Bank, without delay, of a change in its registered office,

c) notify the Czech National Bank, without undue delay, of the start and end of its participation in each such settlement system.

Article 89Reporting Duties of the Commission and a Settlement System Operator

(1)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities of settlement systems pursuant to this Act, of participants in such settlement systems, of changes in the details of settlement system participants, of changes in the settlement system participants or of the withdrawal of a licence for the operation of a settlement system.

(2)Should the Czech National Bank receive information on the adjudication of bankruptcy in respect of the assets of a settlement system participant or on the fact that a measure was imposed on a participant in such settlement system, such measure imposing an obligation to stop or restrict transfers of investment instruments or cash funds or another obligation concerning such investment instruments or cash funds, it shall notify the operator of such settlement system without delay, and the operator of the settlement system shall notify other settlement system participants without delay.

(3)Should the Czech National Bank receive information on the adjudication of bankruptcy in respect of the assets of a settlement system participant operated under the law of another Member State of the European Union if such participant’s registered office or place of business is situated in the Czech Republic, or information on the imposition of a measure on such participant in such settlement system, such measure imposing an obligation to stop or restrict transfers of investment instruments or cash funds or another obligation concerning such investment instruments or cash funds, it shall notify, without delay, the competent authority of the Member State of the European Union whose law governs such settlement system.

Article 90

(1)A settlement system pursuant to this Act shall also be a system for the settlement of transactions in securities operated by the Czech National Bank under a special legal rule.

(2)The rules of the settlement system referred to in paragraph 1 shall be set out by the Czech National Bank in accordance with Article 83(9).

(3)Articles 82, 83(10) to (12), 86 and 88 shall apply to the settlement system referred to in paragraph 1.

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PART SEVENREGISTER OF INVESTMENT INSTRUMENTS


Section 1Book-Entry Security

Article 91

Substitutable physical securities may be replaced by a record entered in the central register of securities, in the case of units of an open-ended unit trust in a separate register or a register of the Czech National Bank pursuant to a special legal rule governing the activity of the Czech National Bank (hereinafter “book-entry security”).

Section 2Types of Registers of Investment Instruments

Article 92Central Register of Securities

(1)The central register of securities shall be the register of all book-entry securities issued in the Czech Republic save for:

a) book-entry units of an open-ended unit trust if entered in a separate register (Article 93),

b) book-entry securities entered in the register of the Czech National Bank pursuant to a special legal rule governing the activity of the Czech National Bank.

(2)The central register of securities shall be maintained by the central depository and persons authorised to maintain a register linked to the central register of securities maintained by the central depository.

(3)A register linked to the central register of securities maintained by the central depository may be maintained by:

a) an investment firm whose licence covers the investment service safekeeping of investment instruments,

b) an investment company whose licence covers the investment service safekeeping of investment instruments,

c) the Czech National Bank,

d) a foreign person whose objects of business correspond to the activities of the persons referred to in (a) and (b) above and that is authorised to provide investment services in the Czech Republic,

e) a foreign central depository or a foreign person authorised to maintain a register of investment instruments.

Article 93Separate Register of Investment Instruments

(1)The following may be entered in a separate register of investment instruments:

a) book-entry units of an open-ended unit trust,

b) physical investment instruments in safekeeping,

c) foreign investment instruments entrusted to an investment firm for the purpose of provision of an investment service,

d) investment instruments that are not referred to in (a) to (c) above and whose nature so allows.

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(2)A separate register of investment instruments may be maintained by the central depository and, depending on the licence granted, also by:



c) a settlement system operator where such operator keeps such register for investment instruments referred to in Article 93(1)(b) to (d) in respect of which it is entitled to settle claims and obligations arising from transactions,

d) a bank whose banking licence covers the investment service safekeeping of investment instruments,

e) a foreign person whose objects of business correspond to the activities of any of the persons referred to in (a), (b) and (d) above and that is authorised to provide investment services in the Czech Republic.

(3)A register linked to a separate register may be maintained by:



c) a settlement system operator where such operator keeps such register for investment instruments referred to in Article 93(1)(b) to (d) in respect of which it is entitled to settle claims and obligations arising from transactions,

d) a bank whose banking licence covers the investment service safekeeping of investment instruments,

e) a foreign person whose objects of business correspond to the activities of any of the persons referred to in (a), (b) and (d) above and that is authorised to provide investment services in the Czech Republic,

f) a foreign central depository or a foreign person authorised to maintain a register of investment instruments.

(4)The method of maintaining a separate register of investment instruments and a register linked to a separate register of investment instruments by persons referred to in paragraphs 2 and 3 shall be set out in an implementing legal regulation.

(5)A separate register of investment instruments shall also be a register of securities maintained by the Czech National Bank under a special legal rule governing the activity of the Czech National Bank. The rules of operation for the maintenance of such register and changes therein shall be published by the Czech National Bank in the Bulletin of the Czech National Bank and in a manner allowing remote access.

(6)A person who maintains a separate register of investment instruments shall send to the Czech National Bank information and documentation needed for the exercise of supervision. The due dates for sending the information and documentation and details of their content, form and manner of sending shall be set out in an implementing legal regulation.

Section 3Principles of Maintaining Registers of Investment Instruments

Article 94Types of Accounts

(1)An asset account may be maintained:

a) for the person who is the owner of the investment instruments registered in such account (hereinafter “owner account”), or

b) for a person who is not the owner of the investment instruments registered in such account and who maintains a register linked to the central depository’s register or to a separate register (hereinafter “client account”).

(2)An asset account shall contain the details of the person for which the account is maintained and, in the case of a natural person, also the birth certificate number. Registered in an asset account shall be at least investment instruments, separately transferable rights attached to such investment instruments, a lien on investment instruments and a suspension of the exercise of the right of an owner to dispose of book-entry investment instruments. The details of the person entitled to exercise such rights and the details of the person

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who is a pledgee shall also be registered. In the case of a natural person entitled to exercise such rights and in the case of a natural person who is a pledgee, the birth certificate number shall also be registered. Where a natural person has not been assigned a birth certificate number, his date of birth shall be registered. In the case of securities, restrictions on the exercise of the right to dispose of a security stipulated by the issuer shall also be registered. The rules of operation of the central depository (Article 104) in the case of the central register and the implementing legal regulation (Article 93(4)) in the case of a separate register shall set forth in more detail what information shall be registered in individual types of owner accounts.

(3)The owner of investment instruments registered in an owner account shall be the person for whom the owner account has been established unless proven otherwise.

(4)Only investment instruments that their owners entrusted to the owner of the account may be registered in the client account.

(5)The central depository shall maintain a central register of securities in owner accounts or client accounts.

(6)A person maintaining a register linked to the central register of securities maintained by the central depository shall maintain such register using owner accounts.

(7)A person maintaining a separate register of investment instruments shall maintain such register using owner accounts or client accounts. However, a register of book-entry units of an open-ended unit trust may only be maintained using owner accounts.

(8)A person maintaining a register linked to a separate register of investment instruments shall maintain such register using owner accounts.

(9)The central register of securities maintained by the central depository, the separate register of book-entry units of an open-ended unit trust and the separate register of securities maintained by the Czech National Bank shall also be maintained in a register of issues. Details of the issuer and details of the individual securities shall be entered in the register of issues pursuant to paragraph 2. The register of issues shall be maintained on the basis of an agreement with the issuer. The legal relations between the issuer and the person who maintains the register of issues shall be governed by the Commercial Code unless stipulated otherwise by this Act. The Czech National Bank shall lay down rules for the maintenance of a register of issues in the rules of operation published pursuant to Article 93(5).

Article 95Entry in a Register of Investment Instruments

(1)The decisive data for the exercise of rights attached to a book-entry investment instrument shall be the data entered in the owner account as at the end of the day defined by the rules of operation of the central depository (Article 104), the implementing legal regulation in the case of a separate register (Article 93(4)) or the rules of operation for the maintenance of a register of securities by the Czech National Bank (Article 93(5)). This shall be without prejudice to the provisions of Article 99(3).

(2)An entry in a register of investment instruments shall be made on the basis of an instruction given by an authorised person. The entry shall be made immediately on receipt of the instruction unless the authorised person specifies a later time of entry.

(3)If a person gives an instruction for entry in the register of investment instruments maintained by the central depository through a participant in the central depository (Article 109), the participant in the central depository shall verify the authority of such person to give the instruction. In other cases, the authority of a person to give an instruction for entry in a register of investment instruments shall be verified by the person maintaining such register.

Article 96Effects of a Transfer of an Investment Instrument

(1)In the event of a transfer of a book-entry investment instrument to a new owner, the transfer of ownership title shall occur at the time of entry in the client account. The owner of the client account shall enter such change in the owner account without delay, but no later than by the end of day; the change shall be entered at the time of entry in the client account.

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(2)In the event of a transfer of a book-entry investment instrument where the change is not entered in the client account, the transfer of ownership title shall occur at the time of entry in the owner account; the change shall be entered immediately, but no later than by the end of day.

(3)Unless stipulated otherwise by a special legal rule, the person to whom a book-entry security is being transferred shall become the owner of such security even if the transferor did not have the right to transfer the book-entry security; the same shall not apply if the person to whom a book-entry security is being transferred knew or must have known that the transferor did not have such right at the time of transfer. In cases of doubt, good faith shall be presumed.

(4)The investment firm that arranged the transfer of an investment instrument shall give, without delay, an instruction for entry of the change arising from such transfer in the relevant register.

(5)If a transfer of an investment instrument takes place on a regulated market, the instruction for entry of the change arising from such transfer in the relevant register shall be given by the regulated market operator or by the settlement system operator.

Article 97Suspension of the Exercise of the Right of an Owner to Dispose of a Book-Entry Investment Instrument

(1)An instruction for entry of a suspension of the exercise of the right of an owner to dispose of a book-entry investment instrument (hereinafter “suspension of disposal of an investment instrument”) in a register of investment instruments shall be given by:a) a regulated market operator or a settlement system operator if the book-entry investment instrument is to be

sold,

b) a competent court or administrative authority if the same is necessary in connection with the issuing of a preliminary measure or for other purposes of court or administrative proceedings or if a special legal rule so stipulates,

c) the central depository if the same is necessary in connection with settlement or other services of the central depository pursuant to Article 100,

d) a depositary of a collective investment fund pursuant to a special legal rule governing collective investment,

e) the issuer where an extract from the register of issues is requested or where an entry of a change in the register of issues is requested,

f) a third party if such third party gives the instruction in its own favour and has been granted the owner’s consent.

(2)An instruction for the entry of a suspension of disposal of an investment instrument shall specify the period of time for which disposal of the investment instrument is suspended. Disposal of an investment instrument pursuant to paragraph 1(e) may be suspended for no longer than 7 days.

(3)Suspension of disposal of an investment instrument shall expire:

a) upon the expiry of the period of time for which disposal of the investment instrument was suspended,

b) on the instruction of the person who gave the instruction for entry of the suspension of disposal of the investment instrument, or

c) on the instruction of a person who proves that it has the authority to cancel the entry of the suspension of disposal of the investment instrument.

(4)An administrative authority authorised to give an instruction for the entry of the suspension of disposal of an investment instrument pursuant to paragraph 1(b) may also give an instruction to cancel a suspension of disposal of an investment instrument that was ordered by another person.

(5)During the period of suspension of disposal of an investment instrument, it shall not be possible to enter a change in owner in a register of investment instruments by means of a transfer of such investment instrument or to enter a contractual lien relating to such investment instrument.

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Article 98Correction of Errors in a Register of Investment Instruments

(1)A person maintaining a register of investment instruments shall correct an error in its register:

a) upon an objection raised by an owner of an account, an issuer, a participant in the central depository, a regulated market operator or a settlement system operator, which objection it recognises as justified,

b) upon a final decision of a court or another authority,

c) on its own initiative, or

d) upon a correction made in a register of investment instruments maintained by another person if it was asked to correct the error by the other person and if it recognises such request as justified.

(2)A person maintaining a register of investment instruments shall correct an error in its register as at the date when the error occurred in the register unless stipulated otherwise by law or a decision of a court or another authority. If this date cannot be determined, the error shall be corrected as at the date when the error was ascertained.

(3)A person maintaining a register of investment instruments shall also maintain documentation on corrected errors.

(4)A person maintaining a register of investment instruments shall send to the person in whose account it corrected an error a statement of his account indicating the reason for the change, and shall do so without any delay after correcting the error.

(5)Persons maintaining registers of investment instruments shall co-operate so that any error in the details contained in a register of investment instruments is eliminated as soon as possible.

Article 99Extract from a Register of Investment Instruments

(1)A person maintaining a register of investment instruments shall issue an extract from the register to the owner of an account maintained in such register or to the issuer of an investment instrument maintained in such register. The central depository shall issue the extract to the owner of the account through a participant in the central depository.

(2)An extract from the register of investment instruments shall prove the facts recorded in such register as at the end of the day defined by the rules of operation of the central depository (Article 104), the implementing legal regulation in the case of a separate register (Article 93(4)) or the rules of operation for the maintenance of a register of securities by the Czech National Bank (Article 93(5)) as of which it was issued and shall be effective in respect of all persons unless the contrary is proven.

(3)If the details in the extract from the register of issues differ from the details in the extract from the asset account, the details in the extract from the register of issues shall be conclusive.

Article 99a

(1)A person maintaining a register of investment instruments shall store such register and all documents relating to the information entered in such register for a period of 12 years from the end of the calendar year in which the information was entered in the register.

(2)A person maintaining a register of investment instruments may provide information from such register and documents stored pursuant to paragraph 1 without the consent of the person for whom the asset account was opened only where this Act or a special legal rule so provides and in cases where it is filing a report on the commission of a crime.

CHAPTER IICENTRAL DEPOSITORY OF SECURITIES

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Basic Provisions

Article 100

(1)The central depository shall be a legal person that:

a) maintains the central register of securities in the Czech Republic,

b) assigns identification numbers to securities according to the international securities identification numbering system (ISIN),

c) operates a settlement system and is subject, mutatis mutandis, to the provisions of Article 82(4) to (8), Article 83(7) to (13), and Articles 86 to 88.

(2)The central depository may also maintain a separate register of investment instruments.

(3)The central depository may also, if the same is specified in its licence for the business of the central depository:

a) arrange payment for securities, return of securities or payment of yields on securities,

b) ensure safekeeping and administration of investment instruments for the issuer and for its participants,

c) grant credit or loans to its participants, if duly secured, or broker such credit or loans, for the purpose of the settlement of a transaction in investment instruments through its settlement system,

d) grant to its participants loans of securities maintained in the central register of securities, if duly secured, or broker such loans,

e) administer cash funds and investment instruments deposited as collateral security for the performance of obligations arising from transactions in investment instruments to be settled,

f) open, for its participants, client accounts with foreign persons having a scope of activity similar to that of the central depository,

g) perform clearing of transactions executed on commodity exchanges pursuant to a special legal rule governing commodity exchanges,

h) arrange, for its participants, other activities related to the activities of the central depository pursuant to this Act.

(4)The central depository shall be liable for damage it causes to persons for which it maintains client accounts or a register of issues as a consequence of errors or omissions in such accounts or in such register. An owner of a client account shall be liable for damage caused by an error or omission in details that the central depository received from the owner of the client account pursuant to Article 111(3) to (5).

Article 101

(1)The central depository shall have registered capital of at least CZK 100,000,000. At least one third of the issue price of its shares must be paid with financial contributions.

(2)The commercial name of the central depository shall contain the designation “central depository of securities”. A person who does not have the licence for the business of the central depository may not use the designation “central depository of securities”.

(3)The central depository may not issue preference shares.

(4)Only the following may be shareholders of the central depository:

a) an investment firm,

b) a bank,

c) a regulated market operator,

d) a settlement system operator,

e) the Czech Republic acting through the Ministry,

f) a Member State of the European Union,

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g) the Czech National Bank,

h) a central bank of a Member State of the European Union,

i) the European Bank for Reconstruction and Development,

j) the European Central Bank,

k) a central depository whose registered office is situated abroad,

l) a person whose registered office is situated abroad and that performs any of the activities of the persons referred to in (a) to (d) above in the territory of the Czech Republic.

(5)Shares in the central depository shall only be transferable subject to the consent of the board of directors of the central depository.

Article 102

The central depository shall be entitled to keep records of personal data of account owners pursuant to a special legal rule governing the protection of personal data.

Article 103Licence for the Business of the Central Depository

(1)The activities of the central depository shall require a licence granted by the Czech National Bank.

(2)The Czech National Bank shall grant the licence for the business of the central depository if:

a) the applicant is a joint-stock company whose registered office is situated in the Czech Republic and which issues registered shares only,

b) the applicant proves that it is prepared to maintain the central register of securities for all book-entry securities, including the documentation for such register, which it is obliged to store pursuant to Article 99a,

c) the applicant satisfies the conditions stated in Article 101(1) and (3) to (5),

d) the applicant satisfies the conditions pursuant to Article 6(1)(c),(g) and (h) mutatis mutandis,

e) the applicant has material, organisational and personnel prerequisites for the performance of the activity of the central depository, in particular a plan of business activities and a proposed organisational structure.

(3)An application for the licence for the business of the central depository shall contain the details and the documents attached to it shall prove the facts necessary for the assessment of the material, organisational and personnel prerequisites for the business of the central depository. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(4)In the licence for the business of the central depository, the Czech National Bank:

a) may specify conditions which the central depository must meet before starting to maintain the central register of securities or must comply with while maintaining it,

b) shall specify which of the activities referred to in Article 100(3) the central depository is authorised to carry on and in what scope,

c) shall approve the rules of operation of the central depository.

(5)The licence for the business of the central depository shall be granted for an indefinite period of time. There is no statutory right to the licence.

(6)The objects of business of the central depository may only be the activities referred to in Article 100(1) and the activities specified in the licence for the business of the central depository.

(7)The central depository shall notify the Czech National Bank, without undue delay, of any changes in the facts on the basis of which it was granted the licence for the business of the central depository.

(8)The central depository shall provide its services with professional care.

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Article 104Rules of Operation of the Central Depository

(1)The rules of operation of the central depository shall contain, in particular:

a) a list of services provided by the central depository and the terms and conditions and manner of provision of such services,

b) the method of opening and closing asset accounts,

c) the method of submitting instructions to make changes in asset accounts,

d) the elements necessary for the maintenance of the register of asset accounts at the central depository,

e) the elements necessary for the maintenance of the register of issues at the central depository,

f) the rules governing participation in the central depository,

g) the details provided by a participant in the central depository to the central depository for the fulfilment of its duties and the method of providing such information,

h) the sorts of measures which the central depository may take against its participant and the procedure for taking such measures,

i) the method of maintaining a register in a client account, and the procedure for starting and ending the maintenance of such register,

j) a definition of the end of day,

k) the types of extracts from the register of investment instruments, the essential elements thereof and the method of delivery thereof.

(2)The central depository is obliged to notify the Czech National Bank of any change in its rules of operation. The Czech National Bank may, within 10 working days of receipt of the notification of a change in the rules of operation of the central depository, open administrative proceedings regarding the approval of such change; the central depository shall be the only party to the administrative proceedings. If the Czech National Bank does not open administrative proceedings within this period of time, the change shall be deemed approved and the decision shall be deemed to have become final.

(3)An up-to-date version of the rules of operation of the central depository shall be published in a manner allowing remote access and shall be made available to the public for inspection at the registered office of the central depository during its business hours. If the central depository establishes any business premises, the rules of operation shall also be made available to the public for inspection at such premises.

(4)The rules of operation of the central depository or any change thereto shall become effective upon publication unless the central depository specifies a later date. A change to the rules of operation may not be published before the decision of the Czech National Bank to approve such change becomes final pursuant to paragraph 2.

(5)The central depository, participants in the central depository and persons maintaining a register linked to the central register of securities shall comply with the rules of operation of the central depository. When providing information pursuant to Article 115, the rules of operation of the central depository shall also be binding on persons maintaining a separate register of investment instruments.

Article 104aAcquisition and Forfeiture of a Holding in the Central Depository

(1)A person or persons acting in concert must have the prior consent of the Czech National Bank:

a) to the acquisition of a qualifying holding in the central depository unless such acquisition is to take place by way of passage of the ownership title to a security,

b) to the attaining or exceeding of a qualifying holding of 20%, 33% or 50% in the central depository unless such attaining or exceeding of a qualifying holding is to take place by way of passage of the ownership title to a security, or

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c) to become persons controlling the central depository unless they become the same by way of passage of the ownership title to a security.

(2)For the purposes of the calculation of a holding of a person referred to in paragraph 1 in the central depository, the voting rights attached to the following securities shall be included:

a) those held for the account of the person referred to in paragraph 1 by another person in their own name,

b) those that are at the disposal of a person controlled by the person referred to in paragraph 1,

c) those that are at the disposal of another person who has entered into an agreement with the person referred to in paragraph 1 or with a person controlled by it, in which agreement they undertook to pursue on a long-term basis a joint policy concerning the management of the central depository by exercising the voting rights at their disposal in concert,

d) those held, under an agreement with the person referred to in paragraph 1 or with a person controlled by it, by another person if such agreement envisages that disposal of such voting rights will be temporarily granted to the person referred to in paragraph 1 or to a person controlled by it for a consideration,

e) those that have been provided as collateral by the person referred to in paragraph 1; the same shall not apply if disposal of such voting rights has been granted to a person who holds such securities in safekeeping, in administration or as part of its property and has publicly declared that it will exercise such voting rights; in such case, the voting rights attached to such securities shall be attributed to the person which holds such securities in safekeeping, in administration or as part of its property,

f) those in the ownership of another person, if such person exercises the voting rights attached to such securities in its own name pursuant to the instructions of the person referred to in paragraph 1 under an agreement on the exercise of voting rights.

(3)Where the person or persons acting in concert or the persons referred to in paragraph 2 have their registered office in a Member State of the European Union, are subject to supervision by the supervisory authority of this Member State and intend to acquire a holding referred to in paragraph 1, the Czech National Bank shall request the opinion of this supervisory authority prior to issuing a decision.

(4)An application for the consent referred to in paragraph 1 shall contain the details pursuant to paragraph 1 and the documents attached thereto shall prove the facts necessary to examine the suitability of the applicant from the point of view of sound and prudent management of the central depository and to assess whether close links of the applicant to the central depository prevents the effective exercise of supervision of such central depository. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(5)The Czech National Bank shall grant the consent referred to in to paragraph 1 if the applicant is a person suitable from the point of view of sound and prudent management of the central depository and if the applicant’s close links to the central depository do not prevent the effective exercise of supervision of such central depository.

(6)If the Czech National Bank does not send a decision on the application for the consent referred to in paragraph 1 within 3 months of the date of its delivery, against such decision an objection can be lodged, the consent shall be deemed to have been granted. If the application proceedings are suspended, this time period shall not run.

(7)The consent referred to in paragraph 1 may be granted on an ex-post basis.

(8)A person who acquires or increases a qualifying holding pursuant to paragraph 1 by way of passage of the ownership title to a security shall notify the Czech National Bank of this fact without delay.

(9)A person or persons acting in concert or the persons referred to in paragraph 2 shall notify the Czech National Bank that:

a) they are ceasing to control the central depository,

b) they are reducing their qualifying holding in the central depository below 50%, 33% or 20% or that they are forfeiting the same, or

c) they are transferring a qualifying holding in the central depository to another person.

(10)The notification pursuant to paragraph 9 shall contain the details of the notifying party, details of the central depository and the size of the notifying party’s holding in the central depository after the reduction; the

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notification pursuant to paragraph 9(c) shall also contain details of the person to whom the qualifying holding is being transferred.

(11)An acquisition of or increase in a holding pursuant to paragraph 1 in the central depository without the consent of the Czech National Bank shall not render the relevant legal act invalid, but the voting rights attached to such holding may not be exercised until the consent is granted.

(12)The provisions of paragraphs 1 to 11 shall not apply in the case of the acquisition of a holding by a person referred to in Article 101(4)(e) to (h) or (j).

Article 104bDirector of the Central Depository

(1)The director of the central depository may not be:

a) a member of the Chamber of Deputies or senator of the Parliament of the Czech Republic,

b) an employee of the Czech National Bank,

c) a director or an employee of another central depository or a foreign central depository; the same shall not apply if the central depository and the other central depository or foreign central depository are members of the same concern,

d) a director or employee of another settlement system operator or a foreign person with similar objects of business; the same shall not apply if the central depository and the other settlement system operator or the foreign person with similar objects of business are part of the same concern.

(2)The prior consent of the Czech National Bank shall be required for the performance of office of director of the central depository. The provisions of Article 10 shall apply mutatis mutandis.

Article 105Winding-up or Change in the Objects of Business of the Central Depository

(1)The resolution of the general meeting to wind up the central depository with liquidation shall become effective no earlier than on the date when the Czech National Bank’s decision to withdraw the licence for the business of the central depository becomes final.

(2)Upon the central depository’s entry into liquidation, the Czech National Bank shall withdraw the licence for the business of the central depository at the central depository’s request if the performance of all its activities is ensured by another central depository and a complete take-over of all the registers and documents stored by the central depository pursuant to Article 99a takes place.

(3)The central depository shall send to the Czech National Bank for information an invitation to the general meeting the agenda of which includes a discussion of its winding-up with liquidation.

(4)The objects of business of the central depository may consist solely of the activities referred to in Article 100.

Article 106Conversion of the Central Depository

(1)A merger of the central depository with a settlement system operator or a transfer of business assets of another person to the central depository shall require permission of the Czech National Bank.

(2)An application for permission of a merger of the central depository with a settlement system operator or application for permission of a transfer of business assets of another person to the central depository shall contain the details and documents necessary for the assessment of the reasons for the merger or transfer of business assets. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

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(3)The central depository shall send to the Czech National Bank for information an invitation to the general meeting the agenda of which includes a discussion of the merger of the central depository.

(4)A division of the central depository, a change in its legal form, a transfer of assets of the central depository to a shareholder, a merger of the central depository with a person who is not a central depository or a settlement system operator shall not be permissible.

Article 107Transfer, Pledge or Lease of the Business of the Central Depository

(1)The conclusion of a contract on the transfer of the business of the central depository or a part thereof, a contract on the pledge of the business of the central depository or a part thereof or a contract on the lease of the business of the central depository or a part thereof shall require permission of the Czech National Bank.

(2)An application for permission referred to in paragraph 1 shall contain the details and documents attached to it shall prove the facts necessary for the assessment of the reasons for the transfer, pledge or lease of the business of the central depository or a part thereof. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(3)The central depository shall send to the Czech National Bank for information an invitation to the general meeting the agenda of which includes a discussion of the transfer or lease of the business of the central depository or a part thereof.

Article 107aBankruptcy of the Central Depository

(1)If the central depository has its licence withdrawn as a result of an adjudication of bankruptcy in respect of its assets, the bankruptcy trustee shall ensure the performance of the activity of the central depository until the performance of such activity is ensured by another central depository or by the state and until another central depository or the state takes over all the registers and documents stored by the central depository pursuant to Article 99a. A licence for the business of the central depository shall not be required for such activity.

(2)The bankruptcy trustee shall, without undue delay following the withdrawal of the licence for the business of the central depository, make a proposal for the conclusion of an agreement for the sale of things, rights and other assets serving the operation of the business of the central depository1f), including the registers and documents stored by the central depository pursuant to Article 99a.

(3)The proposal for the conclusion of an agreement pursuant to paragraph 2 must be made to a person who has a licence for the business of the central depository. If no such person exists, or if the agreement is not concluded within 3 months from the date on which the proposal was made, the proposal for the conclusion of an agreement pursuant to paragraph 2 must be made to the state, represented by the Ministry.

(4)If the proposal for the conclusion of an agreement pursuant to paragraph 2 is made to the state, it shall not contain a purchase price. The purchase price shall be determined on the basis of an expert’s assessment. If the bankruptcy trustee and the state fail to agree on the person of the expert within 15 days from the date on which the proposal for the conclusion of an agreement pursuant to paragraph 2 was made to the state, a court of law shall appoint the expert at the proposal of one of them. If two proposals for the appointment of the expert are filed, the court shall combine the two cases in joint proceedings.

(5)The court shall not be bound by the proposal of the person of the expert. If the court-appointed expert commits a serious breach of his obligations, the court shall, at the proposal of the state or the bankruptcy trustee, dismiss him and appoint someone else.

(6)The parties to the proceedings on the appointment or dismissal of the expert shall be the state, the bankruptcy trustee and the expert. The competent court shall be the regional court within whose district the general court of the central depository is situated. The court shall decide on the proposal to appoint or dismiss the expert within 15 days of delivery of the proposal. It shall decide by resolution.

(7)The remuneration for preparing the assessment shall be paid by the state and the amount thereof shall be set by agreement. If the state, the bankruptcy trustee and the expert fail to agree on the amount of the

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remuneration, the court that appointed the expert shall determine it at the proposal of one of them. The expert’s remuneration shall be deducted from the purchase price to be paid to the central depository by the state.

(8)If the proposal for the conclusion of an agreement pursuant to paragraph 2 was made to the state, the state shall accept it within 30 days of the issuing of the expert’s assessment pursuant to paragraph 4.

(9)The bankruptcy trustee shall not need the consent of the court or the opinion of the creditors’ committee to conclude the agreement pursuant to paragraph 8.

(10)If the agreement pursuant to paragraph 8 was concluded with the state, the state shall perform the activity of the central depository until the performance of such activity is ensured by another central depository and until another central depository takes over all the registers and documents stored by the central depository pursuant to Article 99a. The state shall not require a licence for the business of the central depository to perform such activity.

(11)The state, represented by the Ministry, shall transfer the securities registers it maintains pursuant to paragraph 10 to a person who has a licence for the business of the central depository. The provisions of Article 202(2) and (3) shall apply mutatis mutandis.

Article 108Disclosure Duties of the Central Depository

(1)The central depository shall send to the Czech National Bank information and documentation needed for the exercise of supervision. The due dates for sending the information and documentation, the details of their content and form and the manner of sending shall be set out in an implementing legal regulation.

(2)The central depository shall:

a) send to the Czech National Bank an invitation to the general meeting the agenda of which includes a discussion of:1. the winding-up of the central depository,2. a reduction or increase in the registered capital of the central depository,

b) notify the Czech National Bank without delay:1. of any transfer or passage of shares in the central depository to another person,2. of any change in a participant in the central depository or the suspension of participation in the central

depository,3. of the filing a petition for bankruptcy in respect of the assets of the central depository or a petition for

composition.

Article 109Participant in the Central Depository

(1)A participant in the central depository shall be a person who gives the central depository an instruction:

a) to open or close an asset account,

b) to make a change in an asset account,

c) to carry out a service.

(2)Without an instruction from a participant the central depository shall make an entry in the securities register only:

a) on the instruction of an issuer that has entered into an agreement with the central depository pursuant to Article 111(1), where related to an entry in the register of issues,

b) on the instruction of a person referred to in Article 115(1), where such person is authorised to do so pursuant to a special legal rule.

(3)A participant in the central depository may be:

a) a bank,

b) an investment firm,

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c) an investment company,

d) a regulated market operator,

e) a foreign person with a similar scope of activity as the persons referred to in (a) to (d) above,

f) a foreign central depository,

g) the Czech Republic acting through the Ministry,

h) the Czech Consolidation Agency,

i) the Czech National Bank,

j) the central bank of another state,

k) the European Central Bank.

(4)Participation in the central depository shall be established by way of an agreement.

(5)The central depository shall publish an up-to-date list of its participants in a manner allowing remote access.

(6)A participant in the central depository may not be a person:

a) in respect of whose assets bankruptcy has been adjudicated; the same shall apply for 5 years following the conclusion of the bankruptcy proceedings,

b) in respect of which composition has been permitted; the same shall apply for 5 years following the conclusion of the composition proceedings,

c) in respect of which a bankruptcy petition has been rejected due to a lack of assets, the same shall apply for 5 years following the rejection of the petition.

(7)The activities referred to in paragraph 1 shall be carried out by a participant in the central depository either directly or through a regulated market operator, a settlement system operator or a foreign person with a similar scope of activity.

(8)Legal relations between an owner of an investment instrument and a participant in the central depository shall be governed by the Commercial Code unless stipulated otherwise by this Act.

(9)Legal relations between the central depository and its participant shall be governed by the Commercial Code unless stipulated otherwise by this Act.

Article 110Client Account

(1)Only investment instruments with whose owner the owner of a client account has concluded a contract on safekeeping of investment instruments may be registered in such client account. This contract may be replaced by a contract on safekeeping of investment instruments concluded with a person pursuant to Article 92(3).

(2)The central depository shall open a client account for a person authorised to maintain a register linked to the central register of securities maintained by the central depository under the conditions stipulated by the rules of operation of the central depository. If such person is not a participant in the central depository, it shall handle its account through a participant in the central depository.

(3)The owner of a client account shall register investment instruments kept in the client account separately from its own assets.

(4)The owner of a client account may not transfer a pledged security registered on this account to a new owner without the consent of the pledgee.

Article 111Register of Issues of Book-Entry Securities

(1)The central depository shall maintain a register of issues of book-entry securities.

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(2)The central depository shall provide the issuer with an extract from the register of issues upon the issue or cancellation of an issue of a security or at the issuer’s request; an extract from the register of issues shall contain details of the owner of the account in which the security is registered, the number of securities and other details as set out in the rules of operation. Information received by the central depository from the owner of a client account pursuant to paragraphs 3 to 5 shall also be included in the extract by the central depository.

(3)For the purposes of an extract from the register of issues, the owner of a client account shall provide the central depository, through a participant in the central depository, with details of the owner of the owner account and other details as set out in the rules of operation.

(4)The central depository shall provide the Czech National Bank, at its request, with an extract from the register of issues of shares in a bank. Based on such a request, the central depository shall invite, through participants in the central depository, all owners of client accounts to provide the central depository with details of the owners of shares registered in client accounts and shall include such details in the extract from the register of issues.

(5)At the request of an authorised packaging company pursuant to a special legal rule governing packaging management for an extract from the register of issues, the central depository shall invite, through participants in the central depository, all owners of client accounts to provide the central depository with details of the owners of shares in that company registered in such accounts. It shall include such details in the extract from the register of issues.

CHAPTER IIITRANSFORMATION OF THE FORM OF A SECURITY

Article 112

(1)An issuer that has decided to transform a physical security into a book-entry security shall publish such decision in the Commercial Bulletin without undue delay and shall publish such decision in a manner allowing remote access, including the deadline for the return of such physical security to the issuer by the owner of the security; such deadline may be no less than 2 months and no more than 6 months after the date of publication of the decision on the transformation. An issuer that is obliged to maintain a register of owners of securities by a special legal rule shall send to the person specified in such register a notification of the transformation of such security into a book-entry security; such notification shall be sent to the address of the registered office or permanent residence as shown in the register of owners of securities.

(2)If an owner of a security is in default in returning physical securities, the issuer shall extend the deadline for their return. Following the expiry of such deadline, the issuer shall declare invalid any securities that have not been returned. The issuer shall give warning of this at the time of extending the deadline.

(3)An owner of a security whose issuer has decided to transform a physical security into a book-entry security shall advise the issuer, upon the return of the physical security, of the number of the asset account in which the book-entry security is to be registered.

(4)After the expiry of the deadline referred to in paragraph 1 or prior to the expiry of such deadline if all physical securities have been returned to the issuer, or after the expiry of the deadline pursuant to paragraph 2, the issuer shall request that the central depository register the securities in the central register in a similar manner as for the issue of a book-entry security, and shall advise the central depository of the asset accounts in which the securities are to be registered. It is not possible to trade in the security on a regulated market from the time that the issuer submits the request to register the security in the central register up to the registration of the entire issue.

(5)The central depository shall maintain a special register of physical securities which have not been returned; the same shall not apply if the maintenance of such register is entrusted to another person by a special legal rule.

(6)The central depository shall register physical securities which the issuer has decided to transform into book-entry securities and which have not been returned in a special technical account of unknown securities owners, the owner of which account shall be the issuer; these securities shall become transformed upon their registration in such special account.

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(7)The right to the payment of a yield on a security referred to in paragraph 6 for the period of time that has elapsed since the last day of the period allowed for the return of the physical security pursuant to paragraph 1 shall not become established until the return of the physical security to the issuer.

(8)After physical securities have been declared invalid pursuant to paragraph 2, the issuer shall sell the book-entry securities from the account referred to in paragraph 6 through an investment firm. If securities are to be sold in a public auction, the issuer shall make public the place, time and subject matter of the auction at least 2 weeks in advance.

(9)Proceeds from the sale of securities pursuant to paragraph 8 shall be paid by the issuer without undue delay after the set-off of receivables arising in connection with the declaration of the securities as invalid and with their sale, to the person whose securities have been declared invalid, or shall be put into official custody by the issuer.

(10)Paragraphs 1 to 7 shall apply mutatis mutandis to physical units of an open-ended unit trust that are transformed into book-entry units maintained in a separate register.

Article 113

(1)An issuer that has decided to transform a book-entry security into a physical security shall, without undue delay:

a) publish this decision in the Commercial Bulletin and publish the same in a manner allowing remote access,

b) give notice of this decision to the central depository and the operator of the regulated market where such security is admitted to trading.

(2)The central depository shall, within 30 days of receipt of the notification made by the issuer concerning the transformation of a book-entry security into a physical security, provide the issuer with an extract containing:

a) details of the issue of the security,

b) details of the owners of the securities, showing details of suspension of disposal of the security and details of a pledge of the security, including details of the pledgee.

(3)The owner of a client account shall provide the central depository with the details referred to in paragraph 2(b).

(4)From the time of the execution of an extract pursuant to paragraph 2, neither the central depository nor the owner of a client account may make any entries in their registers concerning the security the form of which is being transformed.

(5)The central depository shall cancel the register of the issue of the book-entry security that is being transformed into a physical security following the execution of the extract referred to in paragraph 2(a) as at the date specified by the issuer, but no earlier than as at the date of the execution of the extract referred to in paragraph 2. No more than 30 calendar days may elapse from the execution of the extract to the cancellation of the register of the issue of the book-entry security.

(6)The central depository shall give notice of the cancellation of the register of an issue of a book-entry security:

a) to the operator of the regulated market where such securities were admitted to trading,

b) to participants in the central depository, who shall notify the securities owners of this fact; the owner of the client account shall cancel the register of the securities on the same day as the central depository.

(7)As at the date of cancellation of the register of an issue of a book-entry security, the owner of the transformed security shall become entitled to the release of the physical security by the issuer.

(8)If, as at the date of the cancellation of the register of an issue of a book-entry security, disposal of the security is suspended on the instruction of a person referred to in Article 97(1)(a) and (c) to (f), the owner of such security shall only become entitled to the release of the physical security after the expiry of the period of suspension of disposal of the security or before the expiry of such period at the moment when a person authorised to cancel the suspension of disposal of the security grants its consent to the release of the physical security to the issuer.

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(9)If, as at the date of cancellation of the register of an issue of a book-entry security, disposal of the security is suspended by order of a court or a state authority, such court or state authority shall become entitled to release the physical security.

(10)If, as at the date of cancellation of the register of an issue of a book-entry security, the security is pledged, the effects of the pledge shall remain unaffected and the pledgee shall become entitled to release the physical security. The issuer shall also discharge the obligation to release the physical security by placing the physical security, with the consent of the pledgee, into custody (safekeeping) and by providing the custodian with an original or certified copy of the pledge contract. In the case of transformation of a physical security to order, a declaration on the pledge of the security shall be attached to the security by the issuer on behalf of the owner.

(11)A security that has been transformed into a physical security may not be traded in on a regulated market unless the Czech National Bank approves a specimen copy of the physical security.

(12)Without undue delay following the cancellation of the registration of an issue of a book-entry security, the issuer shall publish, in the Commercial Bulletin and in a manner allowing remote access, an invitation addressed to the owners of such security to collect the physical security within the period of time specified in accordance with Article 112(1). In the case of a registered security or a security to order, the issuer shall also send an invitation to collect the physical security to the owner to the address of his registered office or permanent residence as shown in the register of securities owners.

(13)If an owner fails to collect the physical security even by an extended deadline, the issuer shall sell the same through an investment firm.

(14)Article 112(8) on the announcement of a public auction and Article 112(9) shall apply mutatis mutandis.

(15)Paragraphs 1 to 14 shall apply mutatis mutandis to units of an open-ended unit trust maintained in a separate register.

Article 114

(1)The transformation of the form of a security shall not be a new issue. In the event of transformation of a book-entry security into a physical security which must bear the signature of a member or members of the board of directors, the physical security must bear the signature or a copy of the signature of a member or members of the board of directors authorised to act on behalf of the company as at the date of the cancellation of the register of book-entry securities.

(2)The provisions of the Commercial Code on the change in the form of shares shall remain unaffected.

CHAPTER IVPROVISION OF DETAILS OF OWNERS OF INVESTMENT INSTRUMENTS

Article 115

(1)The central depository and a person maintaining a separate register of investment instruments shall provide details from the register and documents that they are required to store pursuant to Article 99a(1) to:

a) a court for the purposes of court proceedings,

b) an executor for the purposes of execution proceedings to which the owner of the investment instrument is a party,

c) bodies active in criminal proceedings for the purposes of criminal proceedings,

d) a tax administrator for the purposes of administration of the taxes of the owner of the investment instrument,

e) the Czech National Bank for the purposes of:1. supervision of the financial market,2. the bank information system pursuant to a special legal rule governing the activity of the Czech

National Bank,

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3. compilation of the balance of payments of the Czech Republic according to the Foreign Exchange Act,

f) a bankruptcy trustee for the purposes of bankruptcy proceedings to which the owner of the investment instrument is a party,

g) a composition trustee for the purposes of composition proceedings to which the owner of the investment instrument is a party,

h) the Security Information Service for the purposes of performance of tasks pursuant to a special legal rule governing the activities of the Security Information Service,

i) the Ministry when fulfilling the reporting duty pursuant to a special legal rule on the fight against money laundering or a special legal rule on the implementation of international sanctions in order to maintain international peace and security, protect fundamental human rights and combat terrorism.

(2)A person maintaining a register linked to the central register of securities shall provide the central depository, at its request, with details from the register and documents that it is required to store pursuant to Article 99a(1).

(3)A person maintaining a separate register of investment instruments may provide details pursuant to paragraph 1 through the central depository under the conditions stipulated by an agreement concluded with the central depository and by the rules of operation of the central depository.

(4)A person maintaining a register linked to a separate register of investment instruments shall provide the person maintaining the separate register of investment instruments, at its request, with details from the register and documents that it is required to store pursuant to Article 99a(1).

(5)When providing information to persons referred to in paragraph 1, the central depository and a person maintaining a separate register shall be entitled in respect of such persons to the reimbursement of costs incurred. The method of determining the amount of material costs incurred and the method of reimbursement thereof shall be set out in an implementing legal regulation.

PART EIGHTPROTECTION OF THE CAPITAL MARKET AND INVESTORS

CHAPTER IOBLIGATIONS OF MARKET PARTICIPANTS

Article 116Disclosure Duty of an Investment Firm, an Institutional Investor and a Regulated Market Operator

(1)An investment firm or an institutional investor shall notify the Czech National Bank of transactions in investment instruments admitted to trading on a regulated market which they concluded outside the regulated market on own account or on the account of another person; the disclosure duty shall not apply to transactions concluded with the Czech National Bank or the Czech Republic.

(2)A regulated market operator shall notify the Czech National Bank of transactions in investment instruments concluded on the regulated market it operates.

(3)The manner in which an investment firm, an institutional investor or a regulated market operator notifies the Czech National Bank of transactions in investment instruments admitted to trading on a regulated market, the time limits for reporting such transactions and the types of transactions thus reported shall be set out in an implementing legal regulation.

(4)Summary details of transactions in investment instruments admitted to trading on a regulated market shall be published by the Czech National Bank in a manner allowing remote access.

Article 117Duty of Confidentiality

(1)A person who is or was a director, forced administrator, liquidator, trustee, bankruptcy trustee, composition trustee or employee of the central depository or another person authorised to maintain a register of

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investment instruments, an employee of a regulated market operator, an investment firm, a foreign person providing investment services in the Czech Republic, an investment intermediary, a settlement system operator, an operator of a printing house authorised to print listed securities or a person that is subject to supervision on a consolidated basis carried out by the Czech National Bank shall keep confidential any information that may be significant for the assessment of capital market trends or that may be seriously detrimental to a person who uses services provided on the capital market and that has not been published.

(2)Unless stipulated otherwise by law, the persons referred to in paragraph 1 shall be exempt from the duty of confidentiality for the purposes of:

a) civil court proceedings,

b) administrative court proceedings,

c) criminal proceedings,

d) administration of taxes and fees,

e) supervision of the financial market,

f) providing the Ministry of Finance with information when fulfilling duties pursuant to a special legal rule on the fight against money laundering or a special legal rule on the implementation of international sanctions in order to maintain international peace and security, protect fundamental human rights and combat terrorism,

g) the bank information system of the Czech National Bank pursuant to a special legal rule governing the activity of the Czech National Bank,

h) the balance of payments of the Czech Republic compiled by the Czech National Bank,

i) execution proceedings,

j) bankruptcy proceedings,

k) the control and imposition of sanctions by a regulated market operator,

l) provision of information to the Security Information Service when performing tasks pursuant to a special legal rule governing the activities of the Security Information Service.

(3)The duty of confidentiality shall survive the termination of activities of the persons referred to in paragraph 1.

Article 118Annual Report of an Issuer of a Listed Security

(1)An issuer of a listed security shall publish, in a manner allowing remote access, its annual report and consolidated annual report no later than 4 months following the end of the accounting period or within the time limit set out in the law of the state in which the issuer has its registered office, and send one hard copy and one electronic copy of the same to the Czech National Bank in the Czech language; an issuer whose registered office is situated abroad may publish its annual report and consolidated annual report in a manner allowing remote access and send it to the Czech National Bank in the English language only.

(2) The annual report shall contain audited financial statements. The consolidated annual report shall contain audited consolidated financial statements.

(3)The annual report or consolidated annual report shall provide investors with a true and fair picture of the financial position, business activities and economic results of the issuer for the past accounting period and of their prospects. In addition to the essential elements laid down in a special legal rule governing accounting, the annual report and the consolidated annual report shall contain:

a) information on the economic results, financial position and business activities for the past accounting period within the scope of the details included in a prospectus,

b) information on the expected economic and financial situation in the following accounting period,

c) information on all monetary income and income in kind received by directors and members of supervisory boards from the issuer and from persons controlled by the issuer during the accounting period, in total for all members of the board of directors, in total for all other directors and in total for all members of the supervisory board,

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d) information on the number of shares issued by the issuer that are owned by the statutory bodies or members thereof, by other directors of the issuer and members of the supervisory board, including persons close to such persons, information on option and similar agreements where the underlying assets are participating securities issued by the issuer and where the contractual parties are the above persons or which have been entered into on behalf of the above persons; the information shall be provided in total for all members of the board of directors, in total for all other directors, in total for all members of the supervisory board and in total for persons close to such persons; the said persons shall provide the issuer with the required details,

e) the principles of remuneration of the issuer’s directors and members of its supervisory board,

f) information on remuneration paid to auditors over the accounting period broken down by individual types of services and shown separately for the issuer and for the consolidated unit.

(4)If the financial statements or consolidated financial statements are not audited within 4 months of the end of the accounting period, the issuer shall publish the audit report in a manner allowing remote access and send one hard copy and one electronic copy of the same to the Czech National Bank without undue delay after the report has been consulted with the statutory and supervisory body of the issuer pursuant to a special legal rule governing the activities of auditors.

(5)If the general meeting does not approve the financial statements or consolidated financial statements or if a court decides that the general meeting that approved the financial statements or consolidated financial statements is invalid, the issuer shall notify the Czech National Bank of such circumstances without undue delay and publish the same in a manner allowing remote access; it shall also include the method of addressing the comments of the general meeting in such information.

(6)The Czech National Bank may permit an issuer that is obliged to compile both financial statements and consolidated financial statements to publish only one of the above while discharging its obligation pursuant to paragraph 1.

(7)An implementing legal regulation shall set out the form of the annual report of an issuer of a listed security, the manner of its sending to the Czech National Bank and the specific rules for its publication.

Article 119Half-yearly Report of an Issuer of a Listed Security

(1)An issuer of a listed security shall, within 2 months after the end of the first 6 months of the accounting period, prepare its half-yearly report, publish the same in a manner allowing remote access and send the same to the Czech National Bank in electronic form in the Czech language; an issuer whose registered office is situated abroad may publish its half-yearly report in a manner allowing remote access and send the same to the Czech National Bank in the English language only. The numerical data and information contained in the descriptive part of the half-yearly report shall provide investors with a true and fair picture of the financial position, objects of business and economic results of the issuer for the past six-month period and of the prospects for the above indicators. A half-yearly report shall be published in consolidated or unconsolidated form.

(2)A half-yearly report shall contain:

a) numerical data within the scope of the balance sheet and the profit and loss account,

b) data for the corresponding period of the preceding year for each of the data referred to in (a) above,

c) an audit report if the data referred to in (a) above are audited,

d) a descriptive part containing, within the scope necessary for an accurate and correct assessment of the development of the issuer’s business activities and its economic results:1. a description of the issuer’s business activities and economic results for the six-month period covered

by the half-yearly report together with an indication of any significant factors which have influenced the issuer’s business activities and economic results,

2. a comparison with the corresponding period of the preceding year,3. the expected future development of the issuer’s business activities and its economic results.

(3)The Czech National Bank may permit abridgement of the content of a half-yearly report provided that such abridgement does not render the half-yearly report misleading and that disclosure of the omitted information is:

a) contrary to the public interest, or

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b) may be seriously detrimental to the issuer provided that such abridgement is not necessary for the assessment of facts important for the trading in the security.

(4)An implementing legal regulation shall set out the form of the half-yearly report of an issuer of a listed security, the manner of its sending to the Czech National Bank and the specific rules for its publication.

Other Obligations of an Issuer of a Listed Security

Article 120

(1)An issuer of a listed security shall:

a) ensure equal treatment for all owners of securities issued by the issuer that have the same position arising from the ownership of such securities; the same shall not be required if a bond is redeemed prior to its maturity date in accordance with the issue conditions,

b) ensure payment of yield on the security issued by the issuer; the issuer shall either pay such yield by itself or through a financial institution or a post office,

c) publish, without any delay and in a manner allowing remote access, any change in a right related to a listed security,

d) submit to the operator of the regulated market where the relevant security is listed a proposal for any amendment to its statutes (by-laws) or any draft decision to reduce or increase its registered capital; this obligation shall apply to an issuer of securities other than shares only if the proposed amendment affects the right of the owner of such security,

e) notify, without delay, the operator of the regulated market on which the security is listed of any fact important for the protection of investors or for the orderly functioning of the market and publish the same in a manner allowing remote access.

(2)An issuer of listed shares shall also:

a) publish, in a manner allowing remote access, and send to the Czech National Bank in electronic form all information on the convening of its general meeting, decision on the payment of a dividend, decision on the issue of new shares, decision on the exercise of a right arising from convertible or priority bonds and exercise of the subscription right,

b) file, for newly issued shares of the same class as shares issued by the issuer and admitted to trading on an official market, within 1 year of their issue, an application for admission to trading on such market unless the same are admitted without an application.

(3)An issuer of listed bonds shall also publish, without delay and in a manner allowing remote access, and send to the Czech National Bank in electronic form all information:

a) on the convening of a meeting of bond holders, on the exercise of a right arising from a convertible or priority bond, on the payment of a yield or on the redemption of a bond,

b) on a received loan or credit and on the method of securing the same or any other fact that may substantially influence the issuer’s ability to perform its obligations arising from bonds issued by such issuer,

c) on a change in a right related to shares that can be acquired on the basis of convertible or priority bonds.

(4)If securities are admitted to trading on more than one official market, including foreign markets, the issuer shall publish the same information on all such markets.

(5)The issuer shall ensure mechanisms allowing shareholders to exercise their shareholder rights.

(6)An issuer of a listed security shall publish at least once a year, without undue delay following publication of its financial statements, and send to the Czech National Bank in electronic form a document that contains or refers to all the information published by the issuer over the previous 12 months in the Czech Republic when performing obligations pursuant to this Act, the Commercial Code and the act regulating accounting or in one or more other Member States of the European Union or in another state when performing its obligations arising from the law of the European Communities1g) and national legal rules governing business on the capital market. If the document merely refers to published information, the issuer shall also state where such information can be obtained. This obligation shall not apply to issuers only of debt securities whose

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denomination or price per unit is equal to at least the equivalent of EUR 50,000. Article 34(2) shall apply to this provision mutatis mutandis.

Article 121

When fulfilling its disclosure duties, an issuer may not:

a) use untrue, false or misleading data,

b) conceal information important for the decision-making of investors,

c) offer benefits the reliability of which it cannot guarantee,

d) provide inaccurate details of its economic situation.

Article 122Notification of a Share in Voting Rights

(1)A person whose share in all the voting rights of an issuer having its registered office in the Czech Republic whose shares are admitted to trading on an official market in the Czech Republic or an official market of an exchange in another Member State of the European Union reaches or exceeds 3%, if the issuer’s registered capital exceeds CZK 100,000,000, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50% or 75%, or who reduces his share in all the voting rights below such limits, shall notify the issuer and the Czech National Bank. The same obligation shall apply to a person whose share in the voting rights of a company having its registered office in the Czech Republic whose shares have been admitted, for the first time, to trading on an official market in the Czech Republic or on an official market of an exchange in another Member State of the European Union reaches at least 5%.

(2)For the purposes of discharge of the notification duty pursuant to paragraph 1, voting rights referred to in Article 11(2) shall analogously be considered voting rights arising from a holding in an issuer, as shall voting rights arising from securities:

a) that can be acquired by the notifying party or another person referred to in Article 11(2) by a one-sided expression of will, which expression of will they are entitled to make under an agreement; the period allowed for the discharge of the notification duty shall commence on the date of conclusion of the agreement,

b) that are administered or managed by or deposited with the notifying party under a contract on the deposit of securities if no instructions concerning voting have been given to the notifying party by the owner; the notifying party may discharge its notification duty by notifying the issuer of its share in the voting rights no later than 21 days prior to the general meeting.

(3)A person who has come to have the notification duty referred to in paragraph 1 shall give notice of having reached, exceeded or reduced the share referred to in paragraph 1 within 3 working days after it became or could have become aware of the fact that establishes the notification duty pursuant to paragraph 1.

(4)The acquisition of or increase in a holding in an issuer without the discharge of the notification duty pursuant to paragraph 1 shall not render the legal act invalid, but the voting rights attached to such holding may not be exercised until the notification duty has been discharged.

(5)The notification pursuant to paragraph 1 shall contain:

a) details of the notifying party,

b) details of the issuer,

c) the size of the notifying party’s share in the voting rights of the issuer broken down pursuant to paragraphs 1 and 2,

d) the date when the notifying party reached or exceeded the defined share in the voting rights or when the notifying party’s share in the voting rights fell below the defined threshold.

(6)The Czech National Bank shall publish the facts reported to it pursuant to paragraph 5 in a manner allowing remote access.

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(7)The notification duty pursuant to paragraph 1 shall also apply to a person who increases or reduces his share in the voting rights as a result of an increase or reduction in the registered capital.

(8)The duty pursuant to paragraph 1 shall arise regardless of the fact that the person does not, for whatever reason, exercise the voting rights. A change in the share in the voting rights pursuant to paragraph 1 of this person or any other person shall not be a consequence of the fact that the person does not exercise the voting rights. This shall be without prejudice to the provisions of paragraphs 10 and 11.

(9)If a share in the voting rights as referred to in paragraph 1 is acquired or disposed of by persons acting in concert, their shares in the voting rights shall be added up for the purposes of discharge of the notification duty; this shall be without prejudice to the duty of an individual person pursuant to paragraph 1. The notification duty shall also apply to a change in the distribution of shares in the voting rights among persons acting in concert in the scope that establishes the notification duty. The notification duty may be discharged on behalf of persons acting in concert by one of the persons acting in concert; such person shall provide, in the notification, the stipulated details of the other persons acting in concert and their shares in the voting rights.

(10)The notification duty pursuant to paragraph 1 shall not apply to:

a) a person on behalf of which the notification duty has been discharged by a person who controls the same,

b) a person who is an owner of book-entry shares and whose share in the voting rights can be found out from the register of the central depository and who has entered into a contract with the central depository under which the central depository will discharge its notification duty in relation to the issuer and the Czech National Bank; in these cases the central depository shall have the notification duty,

c) an investment firm in cases where it is exempted from this duty by the Czech National Bank,

d) an owner of shares in an investment fund.

(11)The Czech National Bank may exempt an investment firm from the notification duty pursuant to paragraph 1 if such investment firm:

a) is a member of an exchange in the Czech Republic or in another Member State of the European Union,

b) acquires or disposes of shares, even on a short-term basis, with the intention of taking advantage of the difference between the purchase price and the selling price, and

c) declares that it will not exercise the voting rights attached to such shares and shall notify the issuer thereof.

(12)An investment firm may not exercise the voting rights attached to shares pursuant to paragraph 11 for the period of time when such shares are owned by the investment firm.

(13)The Czech National Bank shall publish, in a manner allowing remote access, information on a share in the voting rights received in a notification pursuant to paragraph 1 without undue delay, but no later than 7 calendar days after the delivery of the notification or after the date when it became aware thereof by itself. An issuer shall notify the public in the Member State of the European Union in which the security issued by the issuer has been admitted to trading on an official market of an exchange, of the share in the voting rights in the manner laid down in the law of such Member State.

(14)The Czech National Bank need not publish information on a share in the voting rights and may exempt an issuer from the duty to report a share in the voting rights in another Member State of the European Union where the security has been admitted to trading on an official market of an exchange if so requested by the issuer and if the publication of the notification is:

a) contrary to the public interest, or

b) may be seriously detrimental to the issuer and does not have any influence on the assessment of the value of the shares by the public.

(15)The manner of discharging the notification duty pursuant to paragraph 1 shall be set out in an implementing legal regulation.

Article 123Annual Report and Half-yearly Report of an Issuer of Securities Admitted to Trading on an Official

Market of a Securities Exchange in another Member State of the European Union

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(1)An annual report or a half-yearly report of an issuer of listed securities shall be delivered to the Czech National Bank in the Czech or English language no later than on the date of the first publication in any other Member State of the European Union.

(2)If an annual report or a half-yearly report is to be published in the Czech Republic and in another Member State of the European Union, the Czech National Bank shall co-operate with the supervisory authority of such Member State to allow the issuer to publish the same text of the report in both states, namely the text required in the Member State in which its securities have been admitted to trading on an official market of an exchange for the first time. If the securities have been admitted to trading on an official market of an exchange in both states simultaneously, the Czech National Bank shall co-operate with the supervisory authority of the other Member State to allow the text that meets the requirements of the Member State in which the issuer’s registered office is situated to be recognised as the single text of such report. If the issuer’s registered office or actual office is situated in a non-member state of the European Union, the Czech National Bank shall co-operate with the supervisory authority of the other Member State in order to adopt a single text of such report.

Protection of Inside Information

Article 124

(1)For the purposes of this Act, “inside information” shall mean information of a precise nature relating, directly or indirectly, to an investment instrument admitted to trading on a regulated market of a Member State of the European Union or the admission of which to trading on a regulated market of a Member State of the European Union has been applied for (hereinafter a “financial instrument”), to another instrument which has not been admitted to trading on a regulated market of a Member State of the European Union and whose value is derived from a financial instrument, to the issuer of such financial instruments or to another fact significant for the development of the price of such an investment instrument or the yield thereon, where such information is not publicly known and could, after becoming publicly known, have a significant effect on the price of or yield on such financial instrument or other instrument whose value is derived from such financial instrument.

(2)Inside information shall also mean the information referred to in paragraph 1 conveyed by a client on the transmission of an order to provide an investment service.

(3)An insider shall be a person who obtains inside information in connection with the performance of his employment, profession or position, in connection with his share in the issuer’s registered capital or share in the issuer’s voting rights, in connection with the discharge of his obligations or in connection with a crime. An insider shall also be a person who obtains inside information in another manner and is or may be aware of such information being inside information.

(4)An insider:

a) may not use inside information by acquiring or disposing of, or by trying to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, a financial instrument to which the inside information relates; the same shall not apply where the insider discharges his obligation arising from an agreement concluded before he obtained the inside information,

b) may not, either directly or indirectly, recommend another person to acquire or dispose of a financial instrument to which the inside information relates,

c) shall keep inside information confidential and shall prevent any other person from accessing such information unless the disclosure of such information is part of his normal activity, duties or employment; the duty of confidentiality shall survive the termination of the position of the insider; the provisions of Article 117(2) shall apply mutatis mutandis.

(5)An investment firm, a bank, an electronic money institution, a credit union and an institutional investor that reasonably suspects the use of inside information in the conclusion of a transaction shall notify the Czech National Bank without undue delay. Such persons shall keep this notification confidential.

(6)The provisions of paragraphs 1 to 4 shall not apply to transactions carried out by the Czech National Bank, the central bank of a Member State of the European Union, the European Central Bank or another competent authority in pursuit of monetary or exchange rate policy or in the management of public debt.

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(7)The provisions of paragraphs 1 to 4 shall not apply to actions relating to the buy-back of own investment instruments or to the price stabilisation of an investment instrument under the terms and conditions laid down in the directly applicable legal rule of the European Communities implementing the Directive of the European Parliament and of the Council on market abuse.1h)

Article 125

(1)An issuer of a financial instrument shall immediately make public in a manner allowing remote access and send to the Czech National Bank in electronic form all inside information which directly concerns him; the information made public must be understandable and must not be distorted. The obligation in the first sentence shall not apply to an issuer of a financial instrument that has not applied for the admission of the financial instrument onto the regulated market or has not agreed to the admission.

(2)An issuer may delay the public disclosure of inside information, as referred to in paragraph 1, for serious reasons provided that such omission does not mislead the public and provided that the issuer is able to ensure the confidentiality of that information. The issuer shall, without delay, inform the Czech National Bank of the delay in the public disclosure of inside information, stating the reasons for the delay and the content of such inside information.

(3)If an issuer, or a person acting on his behalf or on his authority, discloses inside information to a third party, the issuer shall simultaneously publish such information in a manner allowing remote access. If the issuer could not have envisaged the disclosure of such information, it shall publish such information without delay following its disclosure. The issuer shall not be obliged to publish the information if the third party is bound by a duty of confidentiality arising from legal rules or a contractual arrangement.

(4)An issuer shall ensure the maintenance of a list of persons who have access to inside information of the issuer and shall ensure that this list is provided to the Czech National Bank on request without undue delay. The obligation in the first sentence shall not apply to an issuer that has not applied for the admission of the financial instrument onto the regulated market or has not agreed to the admission

(5)A director of an issuer and a person who is a member of the supervisory board of an issuer, his spouse, his dependent children, other relatives who have been living with him in a joint household for at least one year, and other persons who have a family or similar relationship to the director of the issuer or the member of the supervisory board of the issuer and have been living with him in a joint household for at least one year and where harm suffered by one such person would reasonably be felt by the other as harm to himself, or legal persons in which such persons are directors or members of the supervisory board, which are controlled by such persons or whose economic interests are substantially equivalent to the economic interests of such persons, shall send to the Czech National Bank notification of each transaction conducted on their own account in securities issued by that issuer, or in financial instruments derived from such securities, within 5 days from the date of execution of the transaction. The Czech National Bank shall publish such notification, without undue delay, in a manner allowing remote access.

(6)Persons who, in connection with the exercise of their profession or business activities, produce or disseminate investment recommendations, or persons associated with them, shall take reasonable care to ensure that the information given is fairly expressed and presented and to be able, at the request of the Czech National Bank, to prove that a investment recommendation is justified. They shall also indicate or disclose their interests or conflicts of interests concerning the financial instruments to which the investment recommendation relates. For the purposes of this Act, “investment recommendation” shall mean:

a) information from an investment firm, a bank, another person whose main business activity is the production of investment recommendations, or a natural person working for him under a contract of employment or otherwise, where such information either directly or indirectly recommends a specific investment decision concerning a financial instrument or an issuer of a financial instrument,

b) information from persons other than persons referred to in letter (a) which directly recommends a specific investment decision concerning a financial instrument,

including an opinion on the present or future value or price of such financial instruments, if it is intended for the public or its public disclosure can reasonably be expected.

(7)An implementing legal regulation shall set out, in accordance with the law of the European Communities2), more detailed rules for:

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a) publicly disclosing inside information and sending it to the Czech National Bank,

b) delaying the public disclosure of inside information, including a definition of the reasons for delaying public disclosure and the manner of ensuring the confidentiality of inside information,

c) fairly expressing and presenting an investment recommendation pursuant to paragraph 6,

d) disclosing interests and conflicts of interests, including the manner of publication and a definition of the types of interests and conflicts of interests,

e) maintaining a list of persons who have access to inside information, including details about which persons are to be included in such list,

f) notifying transactions to the Czech National Bank pursuant to paragraph 5, including the manner of sending such notification to the Czech National Bank and a more specific definition of the types of transaction to which the notification duty applies,

g) the definition of inside information,

h) notifying the Czech National Bank of a reasonable suspicion of the use of inside information or market manipulation, including the manner of sending such notification to the Czech National Bank.

Article 126Market Manipulation

(1)For the purposes of this Act, “market manipulation” shall mean conduct by a person that might:

a) distort the idea of capital market participants about the value of, supply of or demand for a financial instrument, or

b) otherwise distort the price of a financial instrument.

(2)Market manipulation shall not mean:

a) an order to trade or the carrying out of a transaction if the person issuing the order or the person carrying out that transaction proves that he has a legitimate reason for such order or transaction and such order or transaction conforms to accepted market practices on the regulated market,

b) actions consisting in the dissemination of untrue, false or misleading information, where the person disseminating the information cannot know that it is untrue, false or misleading,

c) dissemination of information by a journalist when he acts in his professional capacity, where he is acting in compliance with the rules governing his profession and does not derive, directly or indirectly, any advantage benefit beyond the usual remuneration in connection with the dissemination of the information in question,

d) dissemination of information by a person carrying out research concerning an investment instrument market or issuers, or a person recommending an investment strategy, provided that such information or such recommendation is disseminated using publicly available means and provided that such persons act fairly while carrying out such activities and simultaneously disclose any conflict of interest they may have,

e) actions relating to the buy-back of own financial instruments or to the price stabilisation of a financial instrument under the terms and conditions laid down in the directly applicable legal rule of the European Communities implementing the Directive of the European Parliament and of the Council on market abuse,1h)

f) actions of the Czech National Bank, the central bank of another Member State of the European Union, the European Central Bank or another competent authority in pursuit of monetary or exchange rate policy or in the management of public debt.

(3)The Czech National Bank, acting through the Ministry, shall notify the Commission of the European Communities, without undue delay after the implementing legal regulation referred to in paragraph 6 becomes effective, of the procedure applicable to the dissemination of information and the disclosure of a conflict of interests by persons referred to in paragraph 2(d).

(4)Market manipulation shall be prohibited.

(5)An investment firm, a bank, an electronic money institution, a credit union and an institutional investor that reasonably suspects that a transaction might constitute market manipulation shall notify the Czech National Bank of such suspicion without undue delay. Such persons shall keep this notification confidential.

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(6)An implementing legal regulation shall set out, in accordance with the law of the European Communities, more detailed rules for the assessment of market manipulation.

(7)The Czech National Bank shall accept the market practices referred to in paragraph 2(a) and issue an opinion on the same. Before issuing its opinion on the acceptance of a market practice, the Czech National Bank shall consult its opinion with representatives of issuers, investment services providers, investors, the Ministry, supervisory bodies and regulated market operators.1i)

(8)When accepting a market practice pursuant to paragraph 7, the Czech National Bank shall take into account the structural characteristics of the relevant market, in particular whether the relevant market is regulated or not, the types of financial instruments traded on the relevant market and the type of market participants in the relevant market, including retail investors’ participation in the relevant market. When accepting a market practice pursuant to paragraph 7, the Czech National Bank shall further take into account in particular whether:

a) the market practice under assessment is sufficiently transparent for the whole market,

b) the market practice under assessment will endanger the operation of market forces, in particular the forces of supply and demand; the Czech National Bank shall analyse in particular the impact of the market practice under assessment against the main market parameters, such as the specific market conditions before carrying out the market practice under assessment, the weighted average price of the relevant financial instrument over a single trading day or the daily closing price,

c) the market practice under assessment endangers the liquidity and efficiency of the relevant market,

d) the market practice under assessment takes into account the usual trading mechanisms of the relevant market and enables market participants to react properly and in a timely manner to the market situation created by the market practice under assessment,

e) the market practice under assessment endangers the integrity of all directly or indirectly related markets of Member States of the European Union on which the relevant financial instrument is traded, whether regulated or not,

f) the market practice under assessment has been assessed by the competent authorities of a Member State of the European Union, and with what outcome, in particular whether the market practice breached rules or regulations to prevent market abuse or other codes of conduct, be it on the relevant market or on other markets in Member States of the European Union related directly or indirectly to the relevant market.

(9)The use of new market practices shall not be deemed market manipulation simply because those market practices have not been accepted in advance by the Czech National Bank.

(10)The Czech National Bank shall review regularly the accepted market practices, in particular taking into account significant changes to the market environment, such as a change to trading rules or to market infrastructure.

(11)The Czech National Bank shall disclose in a manner allowing remote access its opinions regarding the acceptance of market practices, including descriptions of such market practices and the factors referred to in paragraph 8 which it took into account in its decision-making. The Czech National Bank shall transmit its opinions regarding the acceptance of market practices without unnecessary delay to the Committee of European Securities Regulators.

(12)If administrative proceedings have been opened concerning a market practice, the Czech National Bank may suspend the consultation procedure set out in paragraph 7 concerning such market practice until the end of such proceedings.

(13)A market practice which was accepted in accordance with paragraphs 7 to 12 may not be changed without using the procedure set out in paragraphs 7 to 12.

Article 127

A regulated market operator shall monitor and assess trading on the market it operates and adopt measures preventing market abuse. If it reasonably suspects that a transaction has been concluded with the use of inside information or that a transaction might be considered market manipulation, it shall notify the Czech National Bank of this fact without delay. The manner of notifying the Czech National Bank shall be set out in an implementing legal regulation.

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CHAPTER IIGUARANTEE FUND OF INVESTMENT FIRMS


(1)The Guarantee Fund is a legal person that operates a guarantee scheme under which compensation is paid to the clients of an investment firm that is unable to discharge its obligations in relation to its clients.

(2)The Guarantee Fund shall:

a) accept contributions from investment firms,

b) notify the Czech National Bank of the amounts of contributions paid by individual investment firms to the Guarantee Fund for the relevant calendar year and publish such information in a manner allowing remote access by 30 April of the following year,

c) ensure verification of claims for the payment of compensation from the Guarantee Fund,

d) ensure payment of compensation from the Guarantee Fund.

(3)The Guarantee Fund is a legal person that is registered in the Commercial Register.

(4)The Guarantee Fund is not a state fund. Special legal rules governing insurance shall not apply to the Guarantee Fund.

(5)The Guarantee Fund shall be managed by a five-member management board, which shall be its statutory body. The Chairman, Vice-Chairman and other members of the management board of the Guarantee Fund shall be appointed and removed by the Minister of Finance. Members of the management board of the Guarantee Fund shall be appointed for a term of 5 years and may be re-appointed. At least one member shall be appointed from among the employees of the Czech National Bank and shall be nominated by the Bank Board of the Czech National Bank.

(6)If the membership of the management board of any of the members of the management board of the Guarantee Fund terminates before the expiry of his term of office, a new member of the management board shall be appointed in his place and such new member’s term of office shall expire as at the same date when the term of office of his predecessor would have expired.

(7)A member of the management board shall carry out his duties with due management care.

(8)In the event of a breach of his duties pursuant to paragraph 7, a member of the management board shall be liable for the damage he caused:

a) in full in the case of intentional action,

b) up to CZK 100,000 in the case of negligence for his entire term of office.

(9)Each investment firm shall pay a contribution to the Guarantee Fund.

(10)The source of assets of the Guarantee Fund shall be contributions of investment firms, fines imposed on investment firms under this Act, fines imposed on investment companies for breaches of provisions concerning the management of clients’ assets and revenues from invested cash funds. The Guarantee Fund may also accept credit or repayable financial assistance.

(11)Resources of the Guarantee Fund may be used for:

a) compensation arising from the inability of an investment firm to discharge its obligations consisting in the release of clients’ assets to such clients for a reason directly related to its financial situation,

b) repayments of loans or repayable financial assistance,

c) payment of the costs of the activities of the Guarantee Fund.

(12)Cash funds of the Guarantee Fund may be invested only in a safe manner.

(13)The manner of providing for the activities of the Guarantee Fund, the manner of investing cash funds of the Guarantee Fund and payment of the costs of the activities of the Guarantee Fund shall be thoroughly

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governed by the statutes of the Guarantee Fund to be issued by the management board following prior consent by the Ministry. The Ministry’s consent shall also be required for any amendment to the statutes of the Guarantee Fund.

Article 129Payment of Contributions to the Guarantee Fund

(1)An investment firm shall pay an annual contribution to the Guarantee Fund equal to 2% of the volume of fees and commissions received for the investment services provided over the past year.

(2)The annual contribution shall be at least CZK 10,000, regardless of the number of months in which the investment firm performed its activities.

(3)A contribution to the Guarantee Fund shall be payable by 31 March every year, for the preceding calendar year.

Article 129aControl of Payment of Contributions

(1)The Guarantee Fund shall notify the Czech National Bank, without delay following the expiry of the time limit referred to in Article 129(3), of the amount of the contributions paid by each investment firm for the elapsed period.

(2)The Czech National Bank shall compare the amount of contributions actually paid pursuant to paragraph 1 with the volume of fees and commissions received for the investment services provided over the past year determined from the audited data received from the investment firm pursuant to Article 16(1) multiplied by the applicable percentage rate referred to in Article 129(1). If it finds any difference, the Czech National Bank shall take an appropriate remedial measure. The Czech National Bank shall notify the Guarantee Fund of any differences found and of any remedial measures taken.

Provision of Compensation from the Guarantee Fund

Article 130

(1)The Czech National Bank shall notify the Guarantee Fund, without undue delay, that:

a) an investment firm is unable, due to its financial situation, to discharge its obligations consisting in the release of assets to clients and is not likely to discharge the same within 1 year, or

b) a court has adjudicated bankruptcy in respect of the assets of an investment firm or issued another decision as a result of which clients of the investment firm cannot effectively claim release of their assets from the investment firm.

(2)The Guarantee Fund shall publish in a suitable manner, without delay and in agreement with the Czech National Bank, a notification containing:

a) information that the investment firm is unable to discharge its obligations,

b) the place, manner and deadline for the registration of claims for compensation and commencement of the payment of compensation from the Guarantee Fund, and

c) any other information associated with the registration of claims.

(3)The time period allowed for the registration of claims may be no less than 5 months from the date of publication of the notification referred to in paragraph 3. The fact that this time period has elapsed may not be invoked to refuse payment of compensation from the Guarantee Fund.

(4)None of the following shall be entitled to compensation from the Guarantee Fund:

a) the Czech Consolidation Agency,

b) a territorial self-governing unit,

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c) a person who, during the course of the 3 years preceding the notification referred to in paragraph 3:1. has carried out an audit or participated in an audit of an investment firm, the clients of which are being

paid compensation from the Guarantee Fund,2. has been a director of an investment firm, the clients of which are being paid compensation from the

Guarantee Fund,3. has been a person having a qualifying holding in an investment firm, the clients of which are being paid

compensation from the Guarantee Fund,4. has been a person close to the person referred to in points 1 to 3 above as stipulated in the Civil Code,3)

5. has been a person belonging to the same business group as an investment firm, the clients of which are being paid compensation from the Guarantee Fund,

6. has carried out an audit or participated in an audit of a person belonging to the same business group as an investment firm, the clients of which are being paid compensation from the Guarantee Fund,

7. has been a director of a person belonging to the same business group as an investment firm, the clients of which are being paid compensation from the Guarantee Fund,

d) a person in which an investment firm, the clients of which are being paid compensation from the Guarantee Fund, or a person having a qualifying holding in such investment firm holds a share exceeding 50% of the registered capital or the voting rights,

e) a person who, in connection with money laundering, entrusted funds obtained through a crime to an investment firm, the clients of which are being paid compensation from the Guarantee Fund,

f) a person who caused, through a crime, an investment firm, the clients of which are being paid compensation from the Guarantee Fund, to be unable to discharge its obligations in relation to clients.

(5)The Guarantee Fund shall suspend payment of compensation:

a) in respect of client assets where it is apparent from the course of criminal proceedings that they may be assets referred to in paragraph 5(g), or

b) to a person suspected of committing a crime that caused an investment firm to be unable to discharge its obligations in relation to clients; payment shall be suspended for the period of the criminal proceedings conducted against such person.

(6)The Guarantee Fund shall suspend the payment of compensation pursuant to paragraph 6 without undue delay after becoming aware of the above facts.

(7)Compensation shall be provided from the Guarantee Fund for client assets which could not be issued to the client for reasons directly linked with the financial condition of the investment firm. To calculate the compensation, the values of all components of the client assets which could not be issued to the client for reasons directly linked with the financial condition of the investment firm, including any co-ownership interest of the client in assets in co-ownership with other clients, save for the value of any cash funds entrusted to an investment firm that is a bank or a branch of a foreign bank and administered by it on accounts insured pursuant to a special legislative act governing the activities of banks1a), shall be added up as at the date of receipt by the Guarantee Fund of the Czech National Bank’s notification referred to in paragraph 1. The resulting sum shall be reduced by any sums payable by the client to the investment firm as at the date of receipt by the Guarantee Fund of the Czech National Bank’s notification referred to in paragraph 1.

(8)The fair values of investment instruments as at the date of receipt by the Guarantee Fund of the Czech National Bank’s notification pursuant to paragraph 1 shall be decisive for the purposes of calculation of compensation pursuant to paragraph 8. When calculating the compensation, the Guarantee Fund may also take into account any contractual arrangements between the investment firm and the client, if they are regular, especially the actual accrued interest or other yields to which the client became entitled as at the date of receipt by the Guarantee Fund of the Czech National Bank’s notification referred to in paragraph 1.

(9)Compensation shall be paid to a client in the amount of 90% of the sum calculated pursuant to paragraphs 8 and 9, but no more than a Czech crown equivalent of 20,000 euros shall be paid to one client of one investment firm.

(10)Compensation from the Guarantee Fund shall be paid within 3 months of the verification of the registered claim and calculation of the amount of such compensation. In exceptional cases, the Czech National Bank may, at the request of the Guarantee Fund, extend this time limit by no more than 3 months.

(11)An investment firm shall provide the Guarantee Fund at its request, within the time limit defined by the Guarantee Fund, with documents necessary for the calculation of compensation pursuant to paragraphs 8 and 9. Where forced administration has been imposed on the investment firm, the forced administrator shall have such

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duty, and where bankruptcy has been adjudicated in respect of the assets of the investment firm, the bankruptcy trustee of this investment firm shall have such duty. Another person having such documents shall have such duty where the Guarantee Fund requests it to do so.

(12)The documents referred to in paragraph 11 shall contain the following information in particular for each client:

a) the currency and amount of funds and the type, number and clear identification of the investment instruments which comprise the assets of the client and which could not be released by the procedure laid down in Article 132,

b) the amount of the client’s claims against the investment firm arising under contractual provisions, in particular the actual accrued interest or other yields to which the client became entitled,

c) the amount of the investment firm’s claims against the client that can be set off.

Article 131

(1)Upon the payment of compensation from the Guarantee Fund, the Guarantee Fund shall become a creditor of the investment firm to the extent of such compensation payment. Where a claim has already been declared in bankruptcy proceedings in respect of the assets of the investment firm, the Guarantee Fund shall, at the same moment and to the same extent, become a bankruptcy creditor of the investment firm in bankruptcy in place of the client. At the request of the Guarantee Fund, the bankruptcy trustee shall record such change without undue delay in the list of declared claims.4)

(2)A client’s right to receive a compensation payment from the Guarantee Fund shall lapse upon the expiry of 5 years from the due date of the client’ claim to payment of compensation from the Guarantee Fund.

(3)If the resources of the Guarantee Fund are not sufficient for the payment of compensation, the Guarantee Fund shall raise the necessary cash funds on the financial market. The Guarantee Fund shall make sure that the terms on which cash funds are provided to the Guarantee Fund are as favourable for the Guarantee Fund as possible. If the Guarantee Fund fails to obtain the credit referred to in the first sentence, the state may provide it with repayable financial assistance of the necessary amount.

(4)Bankruptcy may not be adjudicated in respect of the assets of the Guarantee Fund.

Article 132Release of Client Assets Following the Adjudication of Bankruptcy in Respect of Assets of an Investment

Firm

(1)Client assets shall not be part of the bankruptcy estate of an investment firm and the bankruptcy trustee shall release them to the clients without undue delay. The costs associated with the release of client assets shall constitute a claim against the bankruptcy estate and shall be satisfied in the same order as the costs associated with the maintenance and administration of the bankruptcy estate.

(2)If investment instruments of the same class comprising client assets that are mutually substitutable are sufficient for the full satisfaction of all clients entitled to their release, such investment instruments shall be released to clients. The same shall apply to cash funds comprising client assets.

(3)If investment instruments of the same class comprising client assets that are mutually substitutable are not sufficient for the satisfaction of all clients entitled to their release, an appropriate share in the investment instruments or an equivalent amount of cash shall be released to clients. If cash funds are not sufficient to satisfy all clients entitled to their release, clients’ claims shall be satisfied proportionately.

(4)A claim to release client assets that was not satisfied by the procedure under paragraph 2 or 3 is a receivable, the satisfaction of which shall be governed by a special legal rule governing bankruptcy proceedings and the bankruptcy trustee shall register such receivable in the bankruptcy proceedings.

(5)For activities pursuant to paragraphs 1 to 4 the bankruptcy trustee is entitled to the reimbursement of his cash expenditure and to remuneration, which shall be claims against the bankruptcy estate; in the event that the bankruptcy estate is not sufficient for the payment of the reimbursement of the cash expenditure and the remuneration, it will be paid by the state. The manner of determining the reimbursement of the cash expenditure

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and the remuneration of the bankruptcy trustee, their maximum amount payable by the state and the manner of payment shall be laid down in an implementing legal regulation. The Czech National Bank may petition a competent court of law to remove the bankruptcy trustee from office. In such case, the court shall proceed mutatis mutandis in accordance with the provisions on the removal of a bankruptcy trustee at the petition of a participant in bankruptcy proceedings under the act governing bankruptcy and composition.5)

Article 133Payment of a Contribution to the Guarantee Fund by a Foreign Person

(1)A foreign person that provides investment services in the Czech Republic and is a participant in a guarantee scheme of persons providing investment services in the state in which its registered office and its actual office are situated need not participate in the guarantee scheme operated by the Guarantee Fund.

(2)A foreign person that provides investment services in the Czech Republic and is not a participant in a guarantee scheme of persons providing investment services in the state in which its registered office and its actual office are situated shall participate in the guarantee scheme operated by the Guarantee Fund on the same terms as an investment firm. A contribution shall be paid to the Guarantee Fund and compensation shall be paid in respect of client assets entrusted to the foreign person during the provision of investment services in the Czech Republic.

(3)A foreign person that provides investment services in the Czech Republic and is a participant in a guarantee scheme of persons providing investment services in the state in which its registered office and its actual office are situated, where compensation provided under such guarantee scheme is lower or the scope of compensation provided under such guarantee scheme is narrower than under the Guarantee Fund, may take out additional insurance for client assets with the Guarantee Fund. Client assets entrusted to a foreign person during the provision of investment services in the Czech Republic shall be additionally insured in such a way that the total compensation provided to such client and the scope of coverage correspond to compensation provided from the Guarantee Fund.

(4)cancelled

Article 134Disclosure Duties and Co-operation

(1)An investment firm shall notify the Guarantee Fund of its participation in a similar foreign guarantee scheme.

(2)The Czech National Bank shall notify a foreign guarantee scheme under which an investment firm has taken out additional insurance of client assets if the investment firm is unable to discharge its obligations consisting in the release of assets to clients for a reason directly related to its financial situation and is not likely to be able to discharge the same within 1 year.

(3)The Guarantee Fund shall co-operate with a foreign guarantee scheme under which an investment firm has taken out additional insurance of client assets, especially in providing compensation from both such guarantee schemes.

PART NINESUPERVISION AND ADMINISTRATIVE OFFENCES

CHAPTER ISUPERVISION ON AN INDIVIDUAL BASIS

Section 1Basic Provisions

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Article 135Persons Subject to Supervision

(1)Supervision of compliance with the rights and obligations set out in this Act and the conditions set out in a decision issued pursuant to this Act shall be performed by the Czech National Bank. The following shall be subject to supervision by the Czech National Bank:

a) an investment firm,

b) a broker,

c) a foreign person with a licence for the provision of investment services that provides services in the Czech Republic through an organisational unit,

d) an investment intermediary,

e) a person using the services of investment intermediaries,

f) an issuer of a security,

g) an exchange,

h) an off-exchange market operator,

i) a settlement system operator,

j) a settlement system participant,

k) the central depository,

l) a participant in the central depository,

m) a person who maintains a register linked to the central register of securities,

n) a person who maintains a separate register of investment instruments,

o) a person who maintains a register linked to a separate register of investment instruments,

p) an operator of a printing house that holds a licence for printing listed physical securities,

q) an institutional investor,

r) a person whose registered office is situated in the Czech Republic and who is a participant in a settlement system operated under the law of another Member State of the European Union,

s) a forced administrator of an investment firm that is not a bank and a forced administrator of an exchange, an off-exchange market operator, a settlement system operator and the central depository,

t) a person who offers securities to the public,

u) an insider (Article 124(3)),

v) a person whose actions might constitute market manipulation (Article 126(1)),

w) a person who is obliged to notify the Czech National Bank of a suspicion of market manipulation (Article 126(5)),

x) a person who is involved in the decision-making of an issuer and is obliged to notify the Czech National Bank of its transactions in investment instruments (Article 125(5)),

y) a person who is obliged to notify the Czech National Bank of a suspicion of the use of inside information (Article 124(5)),

z) a person who applies for admission of a security to trading on an official market.

(2)Issuance of securities by the Czech National Bank, maintenance of a register of securities by the Czech National Bank, operation of a settlement system by the Czech National Bank and trading of the Czech National Bank in investment instruments and securities that are not investment securities shall not be subject to supervision.

(3)While performing supervision of the activities of an investment firm in a host state, the Czech National Bank may:

a) request that the supervisory authority of the host state carry out an inspection of such investment firm’s activities carried out in the territory of the host state, indicating the scope of the requested inspection, or

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b) carry out an inspection in the host state following prior notification of the supervisory authority of the host state.

(4)The Czech National Bank shall:

a) at the request of the supervisory authority of the home state of a foreign person that provides investment services in the Czech Republic, carry out an inspection of the activities of such foreign person in the territory of the Czech Republic within the scope specified in the request, or

b) based on a notification of the supervisory authority of the home state of a foreign person that provides investment services in the Czech Republic, allow the supervisory authority of the home state of the foreign person to carry out, by itself or through another authorised person, an inspection of such foreign person.

Section 2Remedial Measures and Withdrawal of Licence


(1)The Czech National Bank may impose a measure to remedy an ascertained insufficiency on a person who is subject to supervision and who has violated this Act or a decision issued pursuant to this Act, which measure shall correspond to the nature and gravity of the violation. In addition, the Czech National Bank may:

a) order an extraordinary audit,

b) order a change of auditor,

c) suspend an activity that is subject to supervision for no longer than one year,

d) prohibit an activity that is subject to supervision,

e) suspend trading in securities,

f) introduce forced administration,

g) change the scope of a licence granted pursuant to this Act,

h) withdraw a licence granted pursuant to this Act,

i) prohibit or suspend the offering of securities to the public or the admission of a security to trading on an official market for no longer than 10 working days,

j) prohibit or suspend a promotion or announcement concerning an offer to the public or the admission of a security to trading on a regulated market.

(2)A person on whom the Czech National Bank has imposed a remedial measure pursuant to paragraph 1 shall notify the Czech National Bank of the elimination of the shortcoming and the remedial method applied.

(3)The Czech National Bank shall prohibit a person or persons acting in concert to whom it has granted its consent to the acquisition of a holding in an investment firm pursuant to Article 11 and who no longer meet the conditions for the granting of such consent from exercising voting rights relating to the investment firm or from otherwise exercising a significant influence over its management.

Article 137Suspension of Trading in Securities

(1)The Czech National Bank may suspend, for no longer than 6 months, trading in all investment instruments on a regulated market, trading in investment instruments on a part of a regulated market or trading in a certain investment instrument on a regulated market. Proceedings on the suspension of trading may be initiated by way of issuing a decision. The decision shall be enforceable by way of delivery to the regulated market operator. An appeal filed against such decision shall not have suspensory effect.

(2)The Czech National Bank shall suspend trading pursuant to paragraph 1 only if there is no other way of preventing large economic losses or a serious threat to the interests of investors. Trading may be suspended pursuant to paragraph 1 repeatedly.

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(3)A decision to suspend trading pursuant to paragraph 1 shall define the duration and scope of such suspension. If the grounds for the suspension no longer exist, the Czech National Bank shall lift the suspension.

(4)The Czech National Bank may, concurrently with a decision to suspend trading in a certain investment instrument pursuant to paragraph 1, require a regulated market operator to assess, within a specified period of time, whether the conditions for the removal of such investment instrument from trading on the regulated market operated by such operator have been met and to notify the Czech National Bank of the result.

(5)The parties to the proceedings pursuant to paragraph 1 shall be the regulated market operator and the owners of investment instruments, trading in which on the regulated market has been suspended. If trading in a specific investment instrument has been suspended, the issuer of such investment instrument shall also be a party to such proceedings.

(6)A decision to suspend trading pursuant to paragraph 1 shall be delivered by the Czech National Bank to the owners of the investment instruments, trading in which on the regulated market has been suspended, by way of a public decree.

Forced Administration

Article 138

(1)The Czech National Bank may impose forced administration on an investment firm that is not a bank, or a settlement system operator that is not a bank, and forced administration on an exchange, an off-exchange market operator or the central depository if:

a) such person has committed a repeated or material violation of this Act or has failed to meet a condition set out in a decision made pursuant to this Act, or

b) if the interests of persons who are provided with services by such person are jeopardised and there is a danger of delay.

(2)The provisions of a special legislative act governing the activities of banks shall apply to forced administration of an investment firm that is a bank, or a settlement system operator that is a bank.

Article 139

(1)A decision to impose forced administration shall contain:

a) the reason for the imposition of forced administration,

b) the appointment of the forced administrator and the details thereof,

c) the amount of the remuneration of the forced administrator or the method of determining such remuneration and the due date thereof,

d) any restrictions on the activities of the person on which forced administration is being imposed,

e) any obligations of the forced administrator, including deadlines for the performance thereof.

(2)Proceedings on the imposition of forced administration may be opened by way of issuing a decision to impose forced administration.

(3)A decision to impose forced administration shall be delivered to the company on which forced administration is being imposed and to the forced administrator. The decision shall be enforceable by delivery to the forced administrator. An appeal filed against such decision shall not have suspensory effect.

(4)A decision to impose forced administration shall be published by the Czech National Bank in a manner allowing remote access.

(5)As a result of imposition of forced administration:

a) the discharge of the offices of members of the company’s board of directors shall be suspended; this shall be without prejudice to the right of the members of the board of directors to file a complaint against the decision to impose forced administration pursuant to a special legal rule governing administrative justice,

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b) the powers of the board of directors shall pass to the forced administrator, save for the right to file a complaint against the decision to impose forced administration.

(6)Only those restrictions on the powers of the board of directors as set out by law shall apply to a forced administrator.

(7)A forced administrator shall:

a) adopt, without delay, measures to remedy the shortcomings identified in the activities of the person on which forced administration has been imposed,

b) ensure protection of the rights of persons using the services of the person on which forced administration has been imposed,

c) convene a general meeting of the person on which forced administration has been imposed, such meeting to take place within 6 months of the imposition of forced administration, and:1. submit to the general meeting a motion for the removal of the existing persons and election of new

persons to bodies elected by the general meeting and a motion for measures to remedy the shortcomings identified in the activities of the person on which forced administration has been imposed, or

2. propose the winding-up of the company.

(8)For reasons worthy of consideration, the time limit for convening the general meeting pursuant to paragraph 7(c) may be extended by the Czech National Bank to up to 1 year at the proposal of the forced administrator.

(9)Costs associated with the performance of forced administration, the remuneration of the forced administrator and cash expenditure of the forced administrator shall be paid from the assets of the company on which forced administration has been imposed.

(10)If the company’s assets are not sufficient for the payment of the remuneration of the forced administrator and the reimbursement of his cash expenditure, they shall be paid by the state.

(11)The method of determining the reimbursement of cash expenditure and the remuneration of the forced administrator, maximum amount thereof paid by the state and the method of payment shall be set out in an implementing legal regulation.

Article 140

(1)Discharge of the office of a forced administrator shall be terminated:

a) by resignation of the forced administrator,

b) by removal of the forced administrator,

c) on termination of the forced administration,

d) by deletion from the list of liquidators and forced administrators, or

e) on the death of the forced administrator.

(2)A forced administrator shall notify the Czech National Bank of his resignation at least 30 days in advance.

(3)The Czech National Bank shall remove a forced administrator especially if he has committed a material or repeated breach of his obligation or has ceased to meet the requirements for the discharge of this office.

(4)A remedial measure against a decision to remove a forced administrator shall not have suspensory effect.

(5)If discharge of the office of a forced administrator terminates pursuant to paragraph 1(a), (b), (d) and (e), the Czech National Bank shall appoint another forced administrator without undue delay.

Article 141

Forced administration shall be terminated:

a) on the date stated in the decision of the Czech National Bank to terminate the forced administration,

b) upon adjudication of bankruptcy in respect of the assets of the company on which forced administration has

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been imposed, or

c) on the date of appointment of a liquidator of the company on which forced administration has been imposed.

Article 142

(1)The following shall be entered in the Commercial Register:

a) the date of imposition of forced administration,

b) details of the forced administrator,

c) restrictions on the activities of the person on which forced administration has been imposed,

d) the date of termination of forced administration.

(2)A petition for permission to enter the imposition of forced administration, the appointment of a forced administrator or restrictions on the activities of a person on which forced administration is being imposed in the Commercial Register shall be filed by the forced administrator without undue delay following the imposition of forced administration.

(3)A petition for permission to enter the termination of forced administration in the Commercial Register shall be filed by the forced administrator without delay following the termination of forced administration; if the forced administrator does not do so, the petition for permission shall be filed by the board of directors of the company whose forced administration is terminating.

(4)A petition for permission to enter the deletion of an existing forced administrator and to enter a new forced administrator in the Commercial Register shall be filed by the newly appointed forced administrator without delay following the delivery of the decision to appoint him.

Article 143

A forced administrator may only be a natural person entered in the list of liquidators and forced administrators maintained by the Czech National Bank:

a) whose interests are not in conflict with the interests of the person on which forced administration is being imposed, or with the interests of persons using the services of such person,

b) who does not have any qualifying holding in the person on which forced administration is being imposed or who is not closely linked to such person,

c) who has not carried out or participated in an audit of the person on which forced administration is being imposed during the last 3 years.

Article 144Change in the Scope of a Licence

(1)The Czech National Bank may withdraw permission for a specific activity referred to in a licence granted pursuant to this Act if it ascertains:

a) a material violation of the law during the performance of such activity, or

b) a material or repeated failure to comply with the prerequisites under which the licence was granted.

(2)The Czech National Bank shall change the scope of a licence pursuant to paragraph 1 or change the scope of a licence on request by way of issuing a new decision cancelling the existing licence and specifying the new range of permitted activities.

Article 145Withdrawal of a Licence, Consent or Registration

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(1)The Czech National Bank shall withdraw a licence granted pursuant to this Act from a person:

a) in respect of whose assets bankruptcy has been adjudicated, a petition for bankruptcy has been rejected due to a lack of assets or composition has been permitted, or

b) whose activities have been prohibited by a court or an administrative authority.

(2)The Czech National Bank may withdraw a licence granted pursuant to this Act if:

a) the person granted it did not commence the licensed activity within 12 months of the granting of the licence,

b) the person granted it has not performed the activity for which the licence was granted for more than 6 months,

c) the licence was granted on the basis of untrue or incomplete information,

d) the person granted it has committed a repeated or material breach of the obligations set out in this Act,

e) a material change has occurred in the circumstances on the basis of which the licence was granted, or

f) it is not possible to achieve the purpose of the forced administration through the continuation thereof.

(3)From the date of withdrawal of a licence for the business of an investment firm, the person whose licence has been withdrawn may not provide investment services and shall release client assets to clients. If the person whose licence has been withdrawn is not a bank, it may only settle its receivables and payables arising from investment services provided. Until such receivables and payables are settled, the person whose licence has been withdrawn shall be regarded as an investment firm.

(4)A person whose licence granted pursuant to this Act has been withdrawn may not apply for a new licence of the same kind before the expiry of 10 years from the date of the decision to withdraw the previous licence becoming final and unappealable. The provision of the first sentence shall not apply to the withdrawal of a licence at the person’s own request or to the withdrawal of a licence on the grounds referred to in paragraph 2(a) or (b).

(5)The Czech National Bank may withdraw a consent or registration granted pursuant to this Act if there has been a material change in a fact on the basis of which the consent or registration was granted.

(6)An appeal filed against a decision to withdraw a licence, consent or registration granted pursuant to this Act shall not have suspensory effect, except in the case of a withdrawal of a licence, consent or registration at one’s own request.

(7)The Czech National Bank shall cancel a registration made pursuant to this Act in respect of a person:

a) in respect of whose assets bankruptcy has been adjudicated, a petition for bankruptcy has been rejected due to a lack of assets or composition has been permitted, or

b) whose activities have been prohibited by a court or an administrative authority.

(8)The Czech National Bank may cancel a registration made pursuant to this Act if:

a) the person registered did not commence the activity for which it was registered within 12 months of the date of registration,

b) the person registered has not performed the activity for which it was registered for more than 6 months,

c) the registration was made on the basis of untrue or incomplete information,

d) the person registered has committed a repeated or material breach of the obligations set out in this Act,

e) a material change has occurred in the circumstances on the basis of which the registration was made.

Section 3Supervision of a Foreign Person Providing Investment Services in the Czech Republic under a Licence Granted by the Supervisory Authority of Another Member State of the

European Union

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Article 146

(1)A foreign person providing investment services in the Czech Republic under a licence of its home state which fails to comply with the disclosure duties of an investment firm or the rules of conduct towards clients pursuant to this Act shall be notified of such failure by the Czech National Bank and shall be requested to arrange rectification.

(2)If the person referred to in paragraph 1 fails to arrange rectification, the Czech National Bank shall notify the supervisory authority of the home state.

(3)If measures adopted by the supervisory authority of the home state in respect of the person referred to in paragraph 1 did not lead to rectification, the Czech National Bank may, having notified the supervisory authority of the home state, impose a remedial measure pursuant to Article 136 or a sanction pursuant to Article 174.

(4)In the event of a possible danger to the interests of investors, the Czech National Bank may impose a remedial measure on the person referred to in paragraph 1 without prior notification. The Czech National Bank shall notify the relevant supervisory authorities of other Member States of the European Union and, acting through the Ministry, the Commission of the European Communities of the imposition of a remedial measure without undue delay. If the Commission of the European Communities, after consultation with the relevant supervisory authorities of other Member States of the European Union, decides that the imposed remedial measure is to be changed or cancelled, such decision shall be binding on the Czech National Bank.

(5)A person referred to in paragraph 1 whose licence for the provision of an investment service has been withdrawn by the supervisory authority of the home state may not provide such service in the territory of the Czech Republic; the Czech National Bank shall publish such information in a manner allowing remote access.

(6)The Czech National Bank may, instead of the procedure in paragraphs 1 to 4, impose a remedial measure pursuant to Article 136 or a sanction pursuant to Article 174 on a foreign person that provides investment services in the Czech Republic under a licence of its home state and fails to comply with the disclosure duties of an investment firm or the rules of conduct towards clients pursuant to this Act.

Section 4Supervision of an Investment Firm Providing Services in Another Member State of the

European Union

Article 147

The Czech National Bank may impose on an investment firm providing investment services in a host state, on the basis of a notification of the supervisory authority of the host state, a remedial measure pursuant to this Act for a breach of the rules of conduct or disclosure duties under the legal regulations of the host state. The Czech National Bank shall notify the supervisory authority of the host state of the imposed remedial measure without undue delay.

Section 5Supervision of an Exchange

Article 148

(1)Supervision of the activities of an exchange shall be performed by the Czech National Bank.

(2)An employee of the Czech National Bank who performs supervision of the activities of an exchange may not be a member of the exchange chamber or the supervisory board of the exchange.

(3)While performing supervision of an exchange, the Czech National Bank shall be entitled to:

a) inspect an exchange transaction in terms of its compliance with the legal rules and exchange regulations; it

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shall notify the exchange chamber of any violation of a legal rule or the exchange regulations ascertained,

b) attend meetings of the exchange chamber and exchange committee,

c) suspend the execution of a decision of the exchange chamber or a decision of the exchange committee for no longer than 7 calendar days if such decision is contrary to a legal rule or the exchange regulations,

d) request that the exchange chamber or exchange committee eliminate any identified shortcomings within a specified period of time,

e) request, from exchange bodies, information and documents related to an exchange transaction,

f) request, from exchange bodies, information on exchange transactions concluded by persons authorised to conclude exchange transactions.

(4)The Czech National Bank’s powers under the other provisions of this Act or under special legal rules shall remain unaffected by the provisions of paragraph 3.

(5)An exchange shall notify the Czech National Bank of any suspicion of a violation of this Act by a person authorised to conclude exchange transactions.

Article 149

The Czech National Bank shall make a decision on a decision of the exchange chamber or exchange committee suspended by the Czech National Bank within 7 calendar days of the date of such suspension. The proceedings shall be opened by the issuing of a decision.

CHAPTER IISUPERVISION ON A CONSOLIDATED BASIS


(1)Supervision on a consolidated basis pursuant to this Act shall mean the monitoring and regulation of risks in consolidated groups containing an investment firm that is not a bank, in order to limit the risks to which such investment firm is exposed based on its membership of the consolidated group.

(2)Supervision on a consolidated basis shall not mean supervision of the individual persons belonging to a consolidated group, nor shall it substitute for supervision of the activities of investment firms on an individual basis pursuant to this Act or for supervision of banks and financial institutions pursuant to a special legal rule.

Article 151Definitions

(1)For the purposes of this Act:

a) “consolidated group” shall mean a parent investment firm group, a financial holding entity group or a mixed-activity holding entity group, such consolidated group consisting of at least two persons,

b) “parent investment firm” (controlling investment firm) shall mean an investment firm that is not a bank which has at least one subsidiary or affiliate which is an investment firm, a bank or a financial institution,

c) “financial holding entity” shall mean a financial institution other than an insurance or reinsurance company the subsidiaries of which are either exclusively or mainly investment firms, banks or financial institutions, one at least of such subsidiaries being an investment firm that is not a bank, and which is not a mixed-activity financial holding entity pursuant to a special legal rule on the supplementary supervision of financial conglomerates,

d) “mixed-activity holding entity” shall mean a parent undertaking (controlling person), other than a bank, financial holding entity or investment firm or a mixed-activity financial holding entity pursuant to a special

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legal rule on the supplementary supervision of financial conglomerates, the subsidiaries of which include at least one investment firm that is not a bank,

e) “parent investment firm group” shall mean a group which consists of a parent investment firm and its subsidiaries and affiliates,

f) “financial holding entity group” shall mean a group which consists of a financial holding entity and its subsidiaries and affiliates,

g) “mixed-activity holding entity group” shall mean a group which consists of a mixed-activity holding entity and its subsidiaries and affiliates,

h) “affiliate” shall mean a person in which another person exercises a significant influence, which shall mean such significant influence over the management or operation of the business activities of such entity which is other than control and other than only temporary in nature and the purpose of which is to participate in the business activities of such entity; a direct or indirect holding treated separately or totalling 20% or more of the capital or of the voting rights shall be always considered a significant influence unless it is a case of control,

i) “financial institution” shall mean a person other than an investment firm or a bank, the principal or major activity of which is to acquire or hold holdings in legal persons or to carry on one or more of the activities that may be performed by a bank, with the exception of receiving deposits or other repayable funds from the public, or an investment company, investment fund, pension fund, insurance company or reinsurance company which carries on activities pursuant to special legislative acts, all including any foreign entities carrying on similar activities.

(2)If it is not possible to determine unambiguously the parent undertaking of a consolidated group pursuant to paragraph 1(b) to (d), the Czech National Bank shall be entitled to designate the parent undertaking or the type thereof following consultation with the competent foreign authority responsible for supervising banks, persons who hold a licence for the provision of investment services or financial institutions.

(3)cancelled

Exercise of Supervision on a Consolidated Basis

Article 152

(1)Supervision on a consolidated basis shall be performed by the Czech National Bank, unless stipulated otherwise by this Act or a special legal rule.

(2)Supervision on a consolidated basis need not cover a person that is part of a consolidated group and:

a) whose registered office or actual office is situated in a state where there are obstacles to the transfer of information,

b) whose significance in the consolidated group is negligible, or

c) whose inclusion in the consolidated group is not suitable or might distort the results of supervision on a consolidated basis.

(3)When exercising supervision on a consolidated basis, the Czech National Bank shall co-operate with foreign authorities responsible for supervising banks, persons who hold a licence for the provision of investment services or financial institutions, and shall exchange information with such authorities.

(4)For the purposes of supervision on a consolidated basis, the Czech National Bank shall be entitled to:

a) request information and documents from a person belonging to a consolidated group,

b) carry out an inspection in a person belonging to a consolidated group; in the case of a foreign person subject to supervision, it shall notify the competent foreign supervisory authority of the commencement, purpose and results of the on-site examination,

c) request an inspection in a person belonging to a consolidated group to be carried out by a competent foreign supervisory authority, stating the reason for such request,

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d) carry out an inspection in a person belonging to a consolidated group at the request of a competent foreign supervisory authority; it shall notify the competent foreign supervisory authority of the commencement and results of such inspection.

Article 153

(1)The Czech National Bank may waive the exercise of supervision on a consolidated basis of a consolidated group under this Act which is subject to banking supervision on a consolidated basis or other comparable supervision; if such supervision is performed in another country it shall do the same following agreement with the competent foreign supervisory authority. However, the Czech National Bank shall exercise supervision on a consolidated basis of each and every parent investment firm group whose registered office is situated in the Czech Republic.

(2)Save as agreed otherwise with the competent foreign supervisory authority, the Czech National Bank shall not exercise supervision of a financial holding entity group whose registered office is situated in another Member State of the European Union if the members of such group include an investment firm that is not a bank and whose registered office is situated in the Czech Republic and:

a) a person holding a licence for the provision of investment services whose registered office is situated in the state where the registered office of the financial holding entity is situated, or

b) a person holding a licence for the provision of investment services whose registered office is situated in a Member State other than the state where the registered office of the financial holding entity is situated and the investment firm has a smaller balance-sheet total than such holder of a licence for the provision of investment services or both persons have the same balance-sheet total if the investment firm obtained its licence at a later date.

Obligations of Persons Subject to Supervision on a Consolidated Basis

Article 154

(1)A parent investment firm or a financial holding entity the consolidated groups of which are subject to supervision by the Czech National Bank on a consolidated basis shall comply with the rules of capital adequacy on a consolidated basis; this shall be without prejudice to Article 9(1). The rules of capital adequacy on a consolidated basis for a parent investment firm and a financial holding entity shall be set out in an implementing legal regulation.

(2)A person belonging to a consolidated group shall supply the Czech National Bank, either directly or via its parent undertaking or via an investment firm which is a member of that consolidated group and has been designated by the Czech National Bank, with all the information necessary for exercising supervision on a consolidated basis.

(3)The scope of information to be supplied by a person included in supervision on a consolidated basis, including the manner and frequency of submission of such information, shall be set out in an implementing legal regulation.

(4)Persons belonging to a consolidated group shall allow an inspection referred to in Article 152 to be carried out and shall provide the Czech National Bank with all necessary assistance.

Article 155

(1)Persons comprising a consolidated group shall create adequate control mechanisms ensuring the correctness of information supplied for the purposes of supervision on a consolidated basis. The scope and details of internal control mechanisms shall be set out in an implementing legal regulation.

(2)The parent undertaking shall notify the Czech National Bank of the auditor that will audit the persons comprising the consolidated group.

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Article 156Remedial Measures

(1)In the event of a shortcoming in the activity of a person belonging to a parent investment firm group, the Czech National Bank may impose on the parent investment firm a remedial measure aimed at eliminating the identified shortcoming if such shortcoming may have a negative effect on the activity of an investment firm that belongs to the parent investment firm group. The Czech National Bank may further:

a) order an extraordinary audit of a person that belongs to the parent investment firm group, at the expense of the parent investment firm,

b) prohibit or restrict the execution of transactions in investment instruments with persons that belong to the parent investment firm group.

(2)In the event of a shortcoming in the activity of a person belonging to a financial holding entity group, the Czech National Bank may impose on the financial holding entity a remedial measure aimed at eliminating the identified shortcoming if such shortcoming may have a negative effect on the activity of an investment firm that is not a bank and that belongs to the group of the financial holding entity. The Czech National Bank may further:

a) order an extraordinary audit of a person that belongs to the financial holding entity group, at the expense of the financial holding entity,

b) prohibit or restrict the execution of transactions in investment instruments with persons that belong to the financial holding entity group.

(3)A person that belongs to a consolidated group and that is not an investment firm shall execute transactions in investment instruments in a manner which is not detrimental to the interests of the clients of an investment firm that belongs to the same consolidated group and which does not endanger its financial stability or interfere with the transparency of the financial market.

CHAPTER IIIADMINISTRATIVE OFFENCES

Article 157Administrative Offences of an Investment Firm

(1)An investment firm shall commit an administrative offence if it:

a) provides an investment service in a host state without notifying the Czech National Bank in advance (Article 21(1) and Article 22(1)),

b) provides an investment service in a host state despite the Czech National Bank’s refusal to pass on details to the supervisory authority of the host state (Article 21(5)),

c) fails to notify the Czech National Bank or the supervisory authority of the host state of changes (Article 21(6) and Article 22(5)),

d) carries out a public auction of securities in contravention of this Act or violates the auction rules (Article 33),

e) violates the obligations laid down in a special legal rule6) for entering into financial services agreements concluded remotely,

f) fails to pay a contribution to the Guarantee Fund within the specified period of time (Article 129(5)),

g) performs an activity in conflict with its licence as granted (Article 6(5)),

h) fails to maintain capital adequacy on an individual or consolidated basis (Article 9, Article 154(1)),

i) violates the rules for prudent provision of investment services (Article 12),

j) violates the obligation to duly maintain a transactions and orders book of an investment firm (Article 13),

k) violates the rules of conduct towards clients (Article 15),

l) fails to comply with the disclosure duty (Article 16),

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m) violates the obligation to retain documents and records (Article 17), or

n) fails to take a remedial measure within the required period of time (Article 136).

(2)The following fines shall be imposed for an administrative offence of an investment firm:

a) up to CZK 10,000,000 in the event of administrative offences referred to in paragraph 1(a) to (f),

b) up to CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(g) to (n).

Article 158Administrative Offences of an Investment Intermediary

A fine of up to CZK 5,000,000 shall be imposed on an investment intermediary that:

a) performs activities of an investment intermediary through persons who do not meet the requirements of Article 30,

b) violates the obligation to duly keep records of received and transmitted orders (Article 32(1)(a)),

c) violates the rules of conduct towards clients (Article 32(1)(b)),

d) violates the obligation to introduce administrative procedures and an internal control mechanism (Article 32(1)(c)),

e) violates the obligation to inform a client about the person for whom it performs the activity of an investment intermediary (Article 32(2)),

f) fails to notify the Czech National Bank of a change (Article 32(3)), or

g) violates the obligations laid down in a special legal rule6) for entering into financial services agreements concluded remotely.

Article 159Administrative Offences of a Person Using a Service of an Investment Intermediary

A fine of up to CZK 5,000,000 shall be imposed on a person using a service of an investment intermediary (Article 29(1)(b)) who:

a) violates the obligation to inform the investment intermediary, in detail and truthfully, about investment instruments to which orders received and transmitted by the investment intermediary appertain (Article 31(a)),

b) fails to provide the investment intermediary with the necessary co-operation (Article 31(b)), or

c) violates the obligation to notify the investment intermediary of changes (Article 31(c)).

Article 160Administrative Offences of a Securities Exchange

(1)An exchange shall commit an administrative offence if it:

a) fails to comply with the disclosure duty (Article 116),

b) violates the obligation to provide services with professional care (Article 58(6)),

c) fails to notify the Czech National Bank of a change (Article 58(3)),

d) performs an activity in conflict with its licence as granted (Article 58(1)),

e) violates the obligation to publish the price of an investment instrument (Article 43),

f) admits to trading on an official market a security that does not meet the conditions for admission to trading on an official market (Article 44),

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g) fails to meet the obligation to exclude or remove a security from trading on an official market or to suspend trading in a security on an official market (Articles 47 and 48),

h) fails to ensure equal access to services and availability of the same information (Article 71),

i) violates the obligation to monitor trading on the market, assess trading on the market or adopt measures preventing market abuse (Article 127), or

j) fails to take a remedial measure within the required period of time (Article 136).

(2)The following fines shall be imposed for an administrative offence of an exchange:

a) up to CZK 10,000,000 in the event of administrative offences referred to in paragraph 1(a) to (c),

b) up to CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(d) to (j).

Article 161Administrative Offences of an Off-Exchange Market Operator

(1)An off-exchange market operator shall commit an administrative offence if it:

a) fails to comply with the disclosure duty (Article 116),

b) violates the rules of trading on an off-exchange market (Article 75(6)),

c) fails to notify the Czech National Bank of a change (Article 75(2)),

d) fails to publish the rules of trading on the off-exchange market or an amendment thereto (Article 81),

e) violates the obligation to publish the price of an investment instrument (Article 43),

f) fails to ask the Czech National Bank for approval of a change to the rules of trading (Article 75(3)),

g) admits to trading on an official market a security that does not meet the conditions for admission to trading on an official market (Article 44),

h) fails to meet the obligation to exclude or remove a security from trading on an official market or to suspend trading in a security on an official market (Articles 47 and 48),

i) performs an activity in conflict with its licence as granted (Article 75(1)),

j) fails to comply with the rules for prudent provision of services and the rules of conduct towards clients or fails to meet the disclosure duty (Article 80),

k) violates the obligation to monitor trading on the market, assess trading on the market or adopt measures preventing market abuse (Article 127), or

l) fails to take a remedial measure within the required period of time (Article 136).

(2)The following fines shall be imposed for an administrative offence of an off-exchange market operator:

a) up to CZK 10,000,000 in the event of administrative offences referred to in paragraph 1(a) to (d),

b) up to CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(f) to (l).

Article 162Administrative Offences of a Settlement System Operator

(1)A settlement system operator shall commit an administrative offence if it:

a) fails to ask the Czech National Bank for approval of a change to the rules of the settlement system (Article 83(7)),

b) violates the reporting duty (Article 88),

c) fails to provide information necessary for the exercise of supervision (Article 87),

d) performs an activity in conflict with the licence (Article 83(2)),

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e) violates the rules of the settlement system (Article 83(11)), or

f) fails to take a remedial measure within the required period of time (Article 136).

(2)The following fines shall be imposed for an administrative offence of a settlement system operator:


b) up to CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(d) to (f).

Article 163Administrative Offences of a Settlement System Participant

A fine of up to CZK 10,000,000 shall be imposed on a settlement system participant that:

a) fails to notify the settlement system operator or the Czech National Bank of a change (Article 88(2) and (4)(b)),

b) fails to provide information on the settlement systems in which it participates (Article 88(3) and (4)(a)),

c) violates settlement order finality (Article 86), or

d) fails to take a remedial measure within the required period of time (Article 136).

Article 164Administrative Offences of the Central Depository

(1)The central depository shall commit an administrative offence if it:

a) fails to notify the Czech National Bank of a change to the rules of operation (Article 104(2)),

b) fails to meet the disclosure duty (Articles 108 and 115),

c) fails notify the Czech National Bank, without undue delay, of any changes in the facts on the basis of which it was granted the licence for the business of the central depository (Article 103(7)),

d) performs an activity in conflict with the licence (Article 103(1) and (6)),

e) violates the rules of operation of the central depository (Article 104(5)),

f) fails to take a remedial measure within the required period of time (Article 136), or

g) violates the obligation to store a register of investment instruments and documents relating to the information entered in such register (Article 99a).

(2)The following fines shall be imposed for an administrative offence of the central depository:


b) up to CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(d) to (g).

Article 165Administrative Offences of a Participant in the Central Depository

A fine of up to CZK 10,000,000 shall be imposed on a participant in the central depository that:

a) violates the rules of operation of the central depository (Article 104(5)), or

b) fails to take a remedial measure within the required period of time (Article 136).

Article 166Administrative Offences of a Person Maintaining a Register Linked to the Central Register of Securities

Maintained by the Central Depository

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A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur maintaining a register linked to the central register of securities that:

a) violates the rules of operation of the central depository (Article 104(5)),

b) fails to meet the disclosure duty (Article 115),

c) fails to take a remedial measure within the required period of time (Article 136), or

d) violates the obligation to store a register of investment instruments and documents relating to the information entered in such register (Article 99a).

Article 167Administrative Offences of a Person Maintaining a Separate Register of Investment Instruments

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur maintaining a separate register of investment instruments that:

a) maintains a register of investment instruments in conflict with the implementing legal regulation (Article 93(4)),


c) fails to take a remedial measure within the required period of time (Article 136) , or


Article 168Administrative Offences of a Person Maintaining a Register Linked to a Separate Register of Investment

Instruments

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur maintaining a register linked to a separate register of investment instruments that:

a) maintains a register of investment instruments in conflict with the implementing legal regulation (Article 93(4)),


c) fails to take a remedial measure within the required period of time (Article 136) , or


Article 169Administrative Offences of an Institutional Investor

A fine of up to CZK 10,000,000 shall be imposed on an institutional investor that:

a) fails to meet the disclosure duty (Article 116), or

b) fails to take a remedial measure within the required period of time (Article 136).

Article 170Administrative Offences of an Operator of a Printing House

A fine of up to CZK 10,000,000 shall be imposed on an operator of a printing house that prints listed securities without a licence (Article 45(1)).

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Article 171Administrative Offences of an Issuer

A fine of up to CZK 10,000,000 shall be imposed on an issuer of a security that:

a) fails to comply with the rules for the compilation or publication of an annual report or fails to deliver the same to the Czech National Bank (Articles 118 and 123),

b) fails to comply with the rules for the compilation or publication of a half-yearly report or fails to deliver the same to the Czech National Bank (Article 119 and 123),

c) fails to meet an obligation pursuant to Articles 120 and 121,

d) fails to publish or send to the Czech National Bank inside information, publishes or sends to the Czech National Bank incomprehensible inside information or publishes distorted inside information (Article 125(1)),

e) fails to meet the obligation to maintain a list of persons with access to inside information (Article 125(4)), or

f) fails to take a remedial measure within the required period of time (Article 136).

Administrative Offences during an Offer of Investment Securities to the Public and during the Admittance of a Security to Trading on an Official Market

Article 172

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur who:

a) offers securities to the public without publishing a prospectus (Article 35),

b) fails to comply with the rules for advertisements and other announcements relating either to an offer to the public or to the admission of a security to trading on an official market pursuant to Article 36k,

c) fails to comply with the conditions for publishing a prospectus and a supplement to the prospectus pursuant to Article 36h, or


Article 173

(1)A natural person shall commit an offence if he:

a) offers securities to the public without publishing a prospectus (Article 35),

b) fails to comply with the rules for advertisements and other announcements relating either to an offer to the public or to the admission of a security to trading on an official market pursuant to Article 36k,

c) fails to comply with the conditions for publishing a prospectus and a supplement to the prospectus pursuant to Article 36h, or


(2)A fine of up to CZK 10,000,000 may be imposed for an offence referred to in paragraph 1.

Article 173a

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur who draws up a prospectus in contravention of the rules for drawing up a prospectus (Articles 36 to 36b, Article 36g and Article 36j) and publishes such prospectus.

Article 173b

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(1)A natural person shall commit an offence by drawing up a prospectus in contravention of the rules for drawing up a prospectus (Articles 36 to 36b, Article 36g and Article 36j) and publishes such prospectus.


Article 174Administrative Offences of a Foreign Person Providing Investment Services in the Czech Republic under

a Licence Granted by the Home State

A fine of up to CZK 10,000,000 shall be imposed on a foreign person providing investment services in the Czech Republic under a licence granted by its home state that:

a) fails to meet the disclosure duty (Article 24(7) and Article 25(3)), or

b) fails to comply with the rules of conduct towards clients or a measure adopted in the public interest (Article 24(7) and Article 25(3)).

Article 175Administrative Offences of a Foreign Person Providing Investment Services in the Czech Republic

through an Organisational Unit

(1)A foreign person providing investment services in the Czech Republic through an organisational unit shall commit an administrative offence if it:

a) fails to notify the Czech National Bank of a change (Article 28(6)),

b) carries out a public auction of securities in contravention of this Act or violates approved auction rules (Article 28(7)(f)),

c) fails to pay a contribution to the Guarantee Fund within the specified period of time (Article 128(9) and Article 133(2) to (4)),

d) performs an activity in conflict with its licence as granted (Article 28(1)),

e) violates the rules for prudent provision of investment services (Article 28(7)(a)),

f) violates an obligation to duly maintain a transactions and orders book of an investment firm (Article 28(7)(b)),

g) violates the rules of conduct towards clients (Article 28(7)(c)),

h) fails to meet the disclosure duty (Article 28(7)(d)),

i) violates the obligation to retain documents (Article 28(7)(e)), or

j) fails to take a remedial measure within the required period of time (Article 136).

(2)The following fines shall be imposed for an administrative offence of a foreign person providing investment services in the Czech Republic through an organisational unit:

a) CZK 10,000,000 in the event of administrative offences referred to in paragraph 1(a) to (c),

b) CZK 20,000,000 in the event of administrative offences referred to in paragraph 1(d) to (k).

Article 176Administrative Offences of a Person Subject to Supervision on a Consolidated Basis

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur who is subject to supervision on a consolidated basis that:

a) fails to provide information for the purposes of supervision on a consolidated basis (Article 154(2)),

b) violates the obligation to set up appropriate control mechanisms (Article 155(1)),

c) violates the obligation to report its auditor (Article 155(2)), or

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Administrative Offences of an Insider

Article 177

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur who violates the obligation set out in Article 124(4).

Article 178

(1)A natural person shall commit an offence by violating the obligation set out in Article 124(4).


Administrative Offences of a Person who Manipulates the Market

Article 179

A fine of up to CZK 20,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur who manipulates the market (Article 126(4)).

Article 180

(1)A natural person shall commit an offence by manipulating the market (Article 126(4)).


Administrative Offences of a Person who Fails to Report Market Manipulation

Article 181


a) violates the obligation to report a suspicion of market manipulation (Article 126(5)), or

b) fails to keep confidential a notification of a suspicion of market manipulation (Article 126(5)).

Article 182

(1)A natural person shall commit an offence by:

a) failing to report a suspicion of market manipulation (Article 126(5)), or

b) failing to keep confidential a notification of a suspicion of market manipulation (Article 126(5)).


Administrative Offences of a Person Involved in the Decision-Making of an Issuer that Fails to Report its Transactions in Investment Instruments

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Article 183

A fine of up to CZK 10,000,000 shall be imposed on a legal person or on a natural person who is an entrepreneur involved in the decision-making of an issuer or a person who forms a business group together with such person and who fails to report its transaction in an investment instrument (Article 125(5)).

Article 184

(1)A natural person involved in the decision-making of an issuer or a person close to such person shall commit an offence by failing to report his transaction in an investment instrument (Article 125(5)).


Administrative Offences of a Person who Fails to Report the Use of Inside Information

Article 185


a) violates the obligation to report the use of inside information (Article 124(5)), or

b) fails to keep confidential a notification of a suspicion of the use of inside information (Article 124(5)).

Article 186

(1)A natural person shall commit an offence by:

a) failing to report a suspicion of use of inside information (Article 124(5)), or

b) failing to keep confidential a notification of a suspicion of the use of inside information (Article 124(5)).


Article 186aViolation of the Duty of Confidentiality

(1)A natural person referred to in Article 117 shall commit an offence by failing to keep confidential information that may be significant for the assessment of capital market trends or that may be seriously detrimental to a person who uses services provided on the capital market and that has not been published.

(2)A fine of up to CZK 500,000 may be imposed for an offence referred to in paragraph 1.

Further Administrative Offences

Article 187


a) performs an activity that requires a licence or registration pursuant to this Act (Article 5, Article 28(1), Article 29(2), Article 45(1), Article 56(2), Article 73(2), Article 83(2), Article 103(1)) without a licence or registration,

b) fails to apply for consent to the acquisition of a holding in an investment firm (Article 11(1)) or the central depository (Article 104a(1)),

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c) fails to report the acquisition of securities by way of passage of title or the forfeiture of a holding in an investment firm (Articles 11(8) and (9)) or the central depository (Article 104a(8) and (9)),

d) uses, in an unauthorised manner, the designation “securities exchange” (Article 56(3)),

e) uses, in an unauthorised manner, the designation “central depository of securities” (Article 101(2)),

f) fails to report a share in voting rights (Article 122),

g) produces or disseminates investment recommendations in contravention of the rules for fairly expressing and presenting investment recommendations, the rules for proving that they are justified or the rules for disclosing interests and conflicts of interests (Article 125(6)), or

h) fails to meet the obligation to provide documents necessary for the calculation of compensation from the Guarantee Fund pursuant to Article 130(12).

Further Offences

Article 188

(1)A broker shall commit an offence if he carries out professional trading activity for which he does not hold a licence (Article 14(1)).


Article 189

(1)A forced administrator of an investment firm, an exchange, an off-exchange market operator, a settlement system operator or the central depository shall commit an offence if he:

a) acts in contravention of this Act (Article 139(7)),

b) fails to request the Czech National Bank’s prior consent to his decision (Article 139(8)), or

c) violates Article 139(6).

(2)A bankruptcy trustee shall commit an offence if he fails to take steps towards the release of client assets (Article 80(4) and Article 132).

(3)A fine of up to CZK 5,000,000 may be imposed for an offence referred to in paragraphs 1 and 2.

Article 190

(1)A natural person shall commit an offence if he:

a) performs an activity that requires a licence or registration pursuant to this Act (Article 5, Article 14(1), Article 28(1), Article 29(2), Article 45(1), Article 56(2), Article 73(2), Article 83(2), Article 103(1)) without a licence or registration,

b) fails to meet the obligation to apply for consent to the acquisition of a holding in an investment firm (Article 11(1)),

c) fails to meet the obligation to report the forfeiture of a holding in an investment firm (Article 11(9)),

d) fails to meet the obligation to report a share in voting rights (Article 122),

e) performs the duties of a director or head of an organisational unit and does not meet the condition of incompatibility of offices (Article 10(3), Article 28(4), Article 59, Article 76 and Article 104b(1)) or has not been granted the Czech National Bank’s prior consent to the performance of such duties (Article 10(1), Article 28(4), Article 58(4) Article 75(7) and Article 104b(2)),

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f) provides an untrue detail or conceals any fact in background documents or papers for an application for prior consent to the performance of duties of a director or head of an organisational unit of a foreign person (Article 10(1), Article 28(4), Article 58(4) and Article 75(7)),

g) produces or disseminates investment recommendations in contravention of the rules for fairly expressing and presenting investment recommendations, the rules for proving that they are justified or the rules for disclosing interests and conflicts of interests (Article 125(6)), or

h) fails to meet the obligation to provide documents necessary for the calculation of compensation from the Guarantee Fund pursuant to Article 130(12).


Article 191

Administrative Offences during the Provision of Investment Services Abroad

(1)A fine of up to CZK 10,000,000 shall be imposed, on the basis of a notification by the supervisory authority of a host state, on an investment firm that provides investment services in the host state and that violates the rules of conduct or disclosure duty pursuant to the legal rules of the host state.

(2)The Czech National Bank shall notify the supervisory authority of the host state of a fine imposed pursuant to paragraph 1 without undue delay.

Article 192Common Provisions

(1)A legal person shall not be liable for an administrative offence if such legal person proves that it made every effort that could have been required to prevent the breach of its legal duty.

(2)The gravity of the administrative offence, particularly the manner in which it was committed and its consequences and circumstances, shall be taken into account when determining the amount of the fine to be imposed on a legal person,.

(3)A legal person shall cease to be liable for an administrative offence if the Czech National Bank fails to open proceedings on the administrative offence within 1 year of the date the offence came to its knowledge, but no later than 5 years from the date the offence was committed.

(4)Administrative offences under this Act shall be heard by the Czech National Bank.

(5)Liability for an administrative offence which occurred during or directly in connection with the business activities of a natural person shall be subject to the provisions of the act on liability and punishment of a legal person.

(6)Fines for administrative offences under this Act imposed by the Czech National Bank shall be collected and enforced by the revenue authority having territorial competence. Revenue from fines imposed on investment firms under this Act shall constitute Guarantee Fund revenue, and revenue from other fines under this Act shall constitute state budget revenue.

(7)cancelled

PART TENRATING AGENCIES

Article 193

(1)A person whose objects of business consist in the rating (assessment) of the quality of an investment instrument or a capital market participant (hereinafter a “rating agency”) may apply to the Czech National Bank for entry in the list of rating agencies recognised by the Czech National Bank.

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(2)The Czech National Bank shall enter a rating agency in the list of rating agencies if such rating agency has the prerequisites for qualified assessment of an investment instrument or a capital market participant, especially:

a) material, organisational and personnel facilities,

b) in the case of a natural person, such person is trustworthy and qualified, or in the case of a legal person, its directors are trustworthy and qualified,

c) criteria for the assessment of the quality of an investment instrument or a capital market participant.

(3)The Czech National Bank shall delete from the list of rating agencies a rating agency that no longer meets the prerequisites for qualified assessment of an investment instrument or a capital market participant.

(4)The Czech National Bank shall issue a decision on the refusal of an application of a rating agency for entry in the list or a decision on the deletion of a rating agency from the list.

PART ELEVENCOMMON, TRANSITIONAL AND FINAL PROVISIONS

Article 194Links to Other Legal Regulations

(1)Proceedings under this Act shall be subject to the regulations governing administrative proceedings unless stipulated otherwise by this Act.

(2)Proceedings on offences shall be subject to the act on offences.

(3)The legal relations of an investment firm, an exchange, an off-exchange market, a settlement system operator and the central depository shall be governed by the Commercial Code unless stipulated otherwise by this Act.

Article 195

Where this Act refers to a Member State of the European Union, it shall also mean other states constituting the European Economic Area.

Article 196

(1)Where this Act requires information to be made public in the territory of the Czech Republic, such information shall be made public in the Czech language unless stipulated otherwise by this Act. The Czech National Bank may, after assessing the particular circumstances, allow certain information to be made public in the English language where this is in investors’ interest.

(2)When information is made public in a manner allowing remote access, such information shall be made public in this manner for a period of at least 3 years unless stipulated otherwise by this Act.

Article 197

“Final netting” shall mean a contractual arrangement under Czech or foreign law:

a) which can be proven in writing or by means of some other record allowing the storage of information,

b) which concerns the mutual claims of the contracting parties, including interest and charges relating to such claims, arising from transactions the subject of which is exclusively cash funds, investment instruments, rights attaching to investment instruments or commodities, including contingent claims and claims which are to, or should, arise (hereinafter the “mutual claims of the parties”), and

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c) under which the occurrence of an agreed event occurs gives rise to termination and replacement, or to set-off of previously non-due, and, as the case may be, due mutual claims of the parties such that the result will be a single claim equal to the difference between the total amount of the estimated present values of the mutual claims of the parties; the method for estimating the present values of the mutual claims of the parties, the moment in time as of which the estimate must be performed, and the settlement method and date shall be agreed in the contractual arrangement on final netting and shall not conflict with the usual practices on the relevant financial markets.

Article 198List of Forced Administrators and Liquidators

(1)The Czech National Bank shall maintain a list of persons who can be appointed as:

a) the forced administrator of an investment firm that is not a bank, of an investment company, an investment fund, an exchange, an off-exchange market operator, a settlement system operator or the central depository,

b) the liquidator of an investment company or an investment fund.

(2)The Czech National Bank shall enter a person on the list of liquidators and forced administrators if such person so requests, is capable of performing legal acts, has professional qualification, is trustworthy and has not been deleted from the list during the last 5 years.

(3)An application for entry on the list of liquidators and forced administrators shall contain details and documents necessary for the assessment of the facts referred to in paragraph 1. The essential elements of the application and the annex thereto shall be set out in an implementing legal regulation.

(4)The Czech National Bank shall delete from the list of liquidators and forced administrators a person who:

a) without any material reasons has resigned from the office of liquidator or forced administrator to which he was appointed by the Czech National Bank,

b) has committed a material or repeated breach of obligations arising from the office of liquidator or forced administrator to which he was appointed by the Czech National Bank,

c) has ceased to meet the prerequisites for entry on the list,

d) has requested to be deleted from the list, or

e) has died.

(5)An administrative decision shall be issued in respect of non-entry in the list or deletion from the list.

Article 199Authorisation

(1)The Ministry shall set out in a decree method of determining the amount of material costs incurred and the method of reimbursement thereof in the provision of information by the central depository and a person maintaining a separate register (Article 115(5)).

(2)The Czech National Bank shall set out in a decree:

a) the essential elements of and annexes to applications pursuant to Article 7, Article 10(4), Article 11(4), Article 14(4), Article 19(2), Article 20(2), Article 28(3), Article 30(7), Article 45(2), Article 57(2), Article 61(2), Article 62(2), Article 74(2), Article 78(2), Article 79(2), Article 83(4), Article 85(2), Article 103(3), Article 104a(4), Article 106(2), Article 107(2) and Article 198(3),

b) capital adequacy rules for an investment firm that is not a bank (Article 9(2)) on an individual and consolidated basis, capital adequacy rules for a financial holding entity on a consolidated basis (Article 154(1)), the scope and details of internal control mechanisms (Article 155(1)) and the scope of information to be supplied by a person included in supervision on a consolidated basis, including the manner and frequency of submission of such information (Article 154(3)),

c) details of observing rules for the prudent provision of services pursuant to Article 12(7),

d) the essential elements and manner of maintaining a transactions and orders book of an investment firm (Article 13(4)),

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e) the types of professional trading activities to be carried out by an investment firm through a broker, the types of specialisation of a broker, the method of taking the broker examination and the amount of the fee for the broker examination (Article 12(8) and Article 14(7)),

f) detailed rules of conduct of an investment firm towards clients pursuant to Article 15(4),

g) the content of the disclosure duties of service providers on the capital market, and the due dates, form and method of performance thereof (Article 16(7), Article 41, Article 87, Article 93 (6) and Article 108(1)),

h) the rules of conduct of an investment intermediary towards clients and the principles for keeping records of received and transmitted orders, administrative procedures and the internal control mechanism necessary for the due performance of activity pursuant to Article 32(4),

i) the form, timing and manner of publication of the price of an investment instrument admitted to trading on a regulated market (Article 43(2)),

j) the essential elements of technical layout of a physical security (Article 45(2)),

k) the method of maintaining a separate register of investment instruments and a register linked to a separate register of investment instruments (Article 93(4)),

l) the types of transactions in investment instruments reported to the Czech National Bank by an investment firm, an institutional investor or a regulated market operator, and the manner of and time limits for reporting thereof (Article 116(3))

m) the form of an annual report and half-yearly report of an issuer of a listed security, the manner of their sending to the Czech National Bank and the specific rules for their publication (Article 118(7) and Article 119(4)),

n) the manner of discharging the notification duty pursuant to Article 122(15),

o) the rules for handling inside information (Article 125(7)),

p) the rules for the assessment of market manipulation (Article 126(6)),

q) the manner of notifying the Czech National Bank of the use of inside information and market manipulation (Article 127),

r) the manner of determining the remuneration of a forced administrator and bankruptcy trustee, the reimbursement of their cash expenditures, the maximum amount thereof paid by the state and the method of payment (Article 132(5) and 139(11)),

s) the rules for fairly presenting information pursuant to Article 125(6) and the rules for disclosing interests and conflicts of interests (Article 125(7)).

Transitional and Final Provisions

Article 200

(1)A licence for the business of an investment firm pursuant to Act No. 591/1992 Coll., on Securities, as amended by Act No. 89/1993 Coll., Act No. 331/1993 Coll., Act No. 259/1994 Coll., Act No. 61/1996 Coll., Act No. 152/1996 Coll., Act No. 15/1998 Coll., Act No. 70/2000 Coll., Act No. 307/2000 Coll., Act No. 362/2000 Coll., Act No. 239/2001 Coll., Act No. 259/2001 Coll., Act No. 501/2001 Coll. and Act No. 308/2002 Coll., the judgment of the Constitutional Court promulgated under No. 476/2002 Coll., and Act No. 88/2003 Coll., (hereinafter the “previous Act”) shall be deemed a licence for the business of an investment firm pursuant to this Act within the scope of the investment services specified in the licence.

(2)The Guarantee Fund of Investment Firms under the previous Act shall be the Guarantee Fund under this Act; claims for the payment of compensation from the Guarantee Fund under the previous Act shall remain. Average values of client assets pursuant to Article 129 shall be calculated commencing on 1 July 2004.

(3)Permission to establish a branch of a foreign investment firm under the previous Act shall be a licence for the provision of investment services through an organisational unit pursuant to this Act.

(4)A licence for the activities of a broker under the previous Act shall be a licence for the activities of a broker pursuant to this Act within the scope of the professional specialisation of the broker as specified in the licence.

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(5)A licence for the organisation of an over-the-counter market under the previous Act shall be a licence for the operation of an off-exchange market pursuant to this Act within the scope as set out in the licence.

(6)A licence for the establishment of an exchange under the previous Act shall be a licence for the business of an exchange pursuant to this Act within the scope as set out in the licence.

(7)A licence for the settlement of transactions in investment instruments under the previous Act shall be a licence for the operation of a settlement system pursuant to this Act within the scope as set out in the licence.

(8)Registration pursuant to Article 45a of the previous Act shall be registration of an investment intermediary pursuant to this Act.

(9)A licence to print physical securities under the previous Act shall be a licence to print physical securities pursuant to this Act.

(10)As at the date following the date when the central depository takes over the register of book-entry securities maintained by the Securities Centre pursuant to the previous Act, the licence for the maintenance of a part of the register of the Securities Centre and for the performance of its other activities pursuant to the previous Act shall be terminated.

(11)Consent to the election or appointment of a member of the board of directors of an investment firm under the previous Act shall be consent to the performance of the office of a director of an investment firm pursuant to this Act.

(12)A director who is now newly subject, pursuant to this Act, to the obligation to acquire prior consent of the Commission to the discharge of his office shall apply for the Commission’s consent within 6 months of this Act becoming effective; if he does not apply for the consent within this period of time or if the Commission does not grant its consent, the authorisation to perform the office shall expire.

(13)Consent to the acquisition of a holding in an investment firm under the previous Act shall be consent to the acquisition of a holding in an investment firm pursuant to this Act.

(14)Approval of the auction rules of an investment firm under the previous Act shall be approval of auction rules pursuant to this Act.

(15)A security prospectus approved under the previous Act shall be a security prospectus approved pursuant to this Act.

(16)An abridged security prospectus approved under the previous Act shall be a security prospectus approved pursuant to this Act.

(17)Forced administration imposed under the existing act that was not terminated before this Act becoming effective shall be forced administration pursuant to this Act.

(18)Permission to publish only financial statements or only consolidated financial statements pursuant to the existing act shall be permission to publish only financial statements or only consolidated financial statements pursuant to this Act.

(19)Registered securities pursuant to the previous Act shall be listed securities pursuant to this Act.

Article 201

(1)An investment firm is obliged to bring its status into compliance with this Act by 31 December 2004.

(2)An exchange is obliged to bring its status into compliance with this Act by 31 December 2004.

(3)An off-exchange market operator is obliged to bring its status into compliance with this Act by 30 June 2005.

(4)A settlement system operator is obliged to bring its status into compliance with this Act by 31 December 2004.

(5)A person who is obliged to maintain capital adequacy on a consolidated basis shall bring its capital adequacy into compliance with this Act by the 31 December 2006 at the latest.

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Article 202

(1)Until the central depository takes over the register of book-entry and immobilised securities maintained by the Securities Centre:

1. the provisions of this Act governing the activities of the central depository shall not apply,

2. the Securities Centre shall maintain the register of book-entry and immobilised securities and the register of the Commission’s decisions and shall fulfil the disclosure duties pursuant to the previous Act,

3. identification pursuant to the international securities identification numbering system shall be assigned by the Commission pursuant to the previous Act.

(2)The Czech Republic, acting through the Ministry, shall transfer the registers of the Securities Centre to the central depository in return for a consideration. The amount of the consideration shall be determined on the basis of the valuation of one expert in the field of economics, branch of prices and valuations, with the relevant specialisation, under an agreement between the Ministry and the central depository.

(3)The Czech Republic, acting through the Ministry, shall transfer the registers of the Securities Centre to the central depository, except for the register of the Commission’s decisions and the register of reporting duties, without undue delay after the conclusion of a contract on transfer of such registers between the Czech Republic, acting through the Ministry, and the central depository. The contract on transfer of the registers shall be entered into no later than 2 months after the date when the central depository obtains the licence for its activities.

(4)As at the date when the central depository takes over the register of book-entry and immobilised securities maintained by the Securities Centre and starts to perform its activities pursuant to this Act, the Securities Centre shall cease to perform its activities under the previous legal rules. The Ministry shall publish notice of this date in the Collection of Laws.

(5)The rights, obligations and liabilities of the Securities Centre shall not pass on to the central depository.

(6)An error in the register of book-entry and immobilised securities that the central depository takes over from the Securities Centre shall be corrected by the central depository in accordance with this Act. This shall be without prejudice to the liability of the state for any damage thereby incurred.

(7)An issuer of book-entry securities listed in the register maintained by the Securities Centre as at the date when the central depository takes over that register shall enter into an agreement pursuant to Article 94(9) for each issue of book-entry securities. The issuer shall enter into such agreement no later than 1 month from the date when the central depository starts to perform its activities pursuant to this Act. If the issuer fails to enter into the agreement within this time limit, the central depository shall not be obliged to issue an extract from the register of issues to the issuer or to make an entry in the register of issues at its request. Within the same period of time, the central depository shall assign an ISIN to each issue of investment instruments which it has taken over into its register and which has not yet been assigned an ISIN.

(8)The central depository shall open discussions on the conclusion of an agreement pursuant to paragraph 7 no later than 1 month from the date when the licence to perform its activities comes into force. If the central depository fails to open discussions on the conclusion of the agreement within this time limit, the time limit within which the issuer is, pursuant to paragraph 7, obliged to enter into such agreement shall be extended to 6 months. In such case, the central depository shall open discussions on the conclusion of an agreement pursuant to Article 94(9) without undue delay after starting to perform its activities pursuant to this Act.

(9)An issuer of book-entry units of an open-ended unit trust listed in the part of the Securities Centre register maintained under licence from the Commission by another legal person may, with the consent of that legal person, notify the Securities Centre and the Commission that such units will henceforth be listed in a separate register of investment instruments to be maintained by the person who hitherto maintained the relevant part of the Securities Centre register. On the date of delivery of the notification of the issuer of book-entry units to the Securities Centre, or on a later date as specified in such notification, the relevant part of the Securities Centre register shall be converted into a separate register of investment instruments maintained by the person who hitherto maintained the relevant part of the Securities Centre register. The issuer may make the notification pursuant to this provision no later than by the date of transfer of the Securities Centre register to the central depository.

(10)An issuer of book-entry units of an open-ended unit trust listed directly by the Securities Centre register may notify the Securities Centre and the Commission that such units will henceforth be listed in a separate

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register of investment instruments to be maintained by a person designated by the issuer of such book-entry units who is authorised to maintain a separate register pursuant to this Act. The Securities Centre shall provide the person designated by the issuer with an extract pursuant to Article 113(2) mutatis mutandis. As from the time such extract is made out, the Securities Centre may not make any entry in its register concerning the units referred to in such extract. On the date of takeover of the extract, the Securities Centre shall cancel the registration of the security in its register and the register of units shall become a separate register pursuant to this Act. On the date following takeover of the extract of the issue, the securities shall be entered on the asset accounts and in the register of issues in the separate register. The issuer may make the notification pursuant to this provision no later than by the date of transfer of the Securities Centre register to the central depository.

Article 202a

The central depository will provide the following services for owners of investment instruments whose accounts maintained in the Securities Centre register have been taken over by the central depository pursuant to Article 202 and who have not yet entered into an agreement with a participant in the central depository:

1. maintenance of a register of investment instruments on an asset account in the scope laid down in this Act,

2. entry of changes in the register of issues at the request of the issuer.

Article 203

(1)Proceedings on the imposition of a remedial measure or a sanction opened before the date of effect of this Act shall be completed in accordance with the previous Act. The remedial measure or sanction shall be imposed pursuant to the previous Act.

(2)Violations of the previous Act or decisions of the Commission issued pursuant to the previous Act shall be judged in accordance with the existing act.

(3)Licence, registration or approval proceedings opened before the date of effect of this Act shall be completed pursuant to this Act; time periods that commenced pursuant to the previous Act shall re-commence on the date of effect of this Act.

(4)Proceedings on consent to the granting of a concession for the assessment of the quality of an investment instrument and a capital market participant (rating) opened before the date of effect of this Act shall be discontinued on the date of effect of this Act.

Article 204

The Czech National Bank shall provide the Commission of the European Communities, as at the date of effect of this Act, with a list of regulated markets holding licences granted by the Commission. The internal regulations of the recognised regulated markets shall be attached to the notification.

Article 205

The following shall be repealed:1. Act No. 214/1992 Coll., on the Securities Exchange,2. Act No. 251/2000 Coll. amending Act No. 214/1992 Coll., on the Securities Exchange, as amended,3. Decree No. 88/1993 Coll., on the details of the technical layout of publicly tradable physical

securities,4. Decree No. 82/2001 Coll., setting out the minimum essential elements of a security prospectus and an

abridged security prospectus,5. Decree No. 105/2001 Coll., on the reporting of transactions in investment instruments concluded

outside a public market,

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6. Decree No. 305/2001 Coll., on broker examination,7. Decree No. 375/2001 Coll., amending Decree No. 88/1993 Coll., on the details of the technical layout

of publicly tradable physical securities,8. Decree No. 17/2002 Coll., setting out the form, timing and manner of publication of prices of capital

market instruments,9. Decree No. 178/2002 Coll., on detailed rules for the discharge of the obligation to report a share in

voting rights,10. Decree No. 466/2002 Coll., setting out detailed rules of organisation of internal operation of an

investment firm and detailed rules of conduct of an investment firm towards clients,11. Decree No. 467/2002 Coll., on the scope of professional trading activities of an investment firm

carried out through a broker and on types of specialisation of a broker,12. Decree No. 468/2002 Coll., amending Decree No. 305/2001 Coll., on broker examination,13. Decree No. 64/2003 Coll., on capital adequacy of an investment firm that is not a bank or a branch of

a foreign bank on an individual basis,14. Decree No. 73/2003 Coll., on the reporting of capital adequacy of an investment firm that is not a

bank or a branch of a foreign bank.

Article 206Effect

This Act shall take effect on the date the Treaty of Accession of the Czech Republic to the European Union enters into force.

Zaorálek

Klaus

Špidla

Footnotes:1) Council Directive 93/6/EEC (31993L0006) of 15 March 1993 on the capital adequacy of investment firms

and credit institutions, as amended by Directives 98/31/EC (31998L0031) and 98/33/EC (31998L0033).Council Directive 93/22/EEC (31993L0022) of 10 May 1993 on investment services in the securities field, as amended by Directives 95/26/EC (31995L0026), 97/9/EC (31997L0009) and 2000/64/EC (32000L0064).Directive 97/9/EC (31997L0009) of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemesDirective 98/26/EC (31998L0026) of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems.Directive 2000/12/EC (32000L0012) of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, provisions of Article 2(2).Directive 2001/34/EC (32001L0034) of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities, as amended by Directive 2003/6/EC (32003L0006).Directive 2003/6/EC (32003L0006) of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse).Directive 2003/71/EC (32003L0071) of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (32001L0034).

1a) Article 20 of Act No. 21/1992 Coll., on banks, as amended.1b) Directive 94/19/EC (31994L0019) of the European Parliament and of the Council of 30 May 1994 on

deposit-guarantee schemes.1c) Commission Regulation (EC) No 809/2004 (32004R0809) of 29 April 2004 implementing Directive

2003/71/EC (32003L0071) of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements.

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1d) Directive 2003/71/EC (32003L0071) of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (32001L0034).

1e) Directive 2001/34/EC (32001L0034) of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities, as amended by Directive 2003/6/EC (32003L0006).Council Directive 80/390/EEC ) 31980L0390) of 17 March 1980 coordinating the requirements for the drawing up, scrutiny and distribution of the listing particulars to be published for the admission of securities to official stock exchange listing.

1f) Article 27a of Act No. 328/1991 Coll., on bankruptcy and composition, as amended by Act No. 74/1994 Coll., Act No. 94/1996 Coll. and Act No. 105/2000 Coll.

1g) Regulation (EC) No 1606/2002 (32002R1606) of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards.Directive 2001/34/EC (32001L0034) of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities, as amended by Directive 2003/6/EC (32003L0006).Fourth Council Directive 78/660/EEC (31978L0078) of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies, as amended by Council Directives 83/349/EEC (31983L0349), 84/569/EEC (31984L0569), 89/666/EEC (31989L0666), 90/604/EEC (31990L0604), 90/605/EEC (31990L0605), 94/8/EC (31994L0008), 1999/60/EC (31999L0060) and Directive 2001/65/EC (32001L0065) of the European Parliament and of the Council.Seventh Council Directive 83/349/EEC (31983L0349) of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts, as amended by Council Directives 89/666/EEC (31989L0666), 90/604/EEC (31990L0604), 90/605/EEC (31990L0605) and Directive 2001/65/EC (32001L0065) of the European Parliament and of the Council.

1h) Article 8 of Directive 2003/6/EC (32003L0006) of the European Parliament and of the Council.Commission Regulation (EC) No 2273/2003 (32003R2273) of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.

1i) Articles 1 and 2 of Commission Directive 2004/72/EC (32004L0072) of 29 April 2004 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers’ transactions and the notification of suspicious transactions.

2) Article 6(10) and Article 16 of Directive 2003/6/EC (32003L0006) of the European Parliament and of the Council.

3) Articles 1 and Article 16(5) of Directive 2003/6/EC (32003L0006) of the European Parliament and of the Council.

4) Article 20(5) of Act No. 328/1991 Coll., on bankruptcy and composition, as amended.5) Article 8(6) of Act No. 328/1991 Coll., as amended by Act No. 105/2000 Coll.6) The Civil Code

Note:

Section XXIX of Act No. 57/2006 Coll.

Section XXIXTransitional Provisions

1. Decrees issued by the Commission under Act No. 256/2004 Coll., on capital market undertakings, in the version effective until the date of effect of this Act, shall be deemed decrees issued by the Czech National Bank pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act. Wherever these decrees refer to the Commission, they shall mean the Czech National Bank, and wherever these decrees refer to oversight or state oversight, they shall mean supervision.

2. Certificates of registration issued by the Commission before this Act takes effect pursuant to the previous legal regulation shall be deemed certificates of registration issued by the Czech National Bank, and the right and obligations arising therefrom shall not be affected.

3. A member of the management board of the Guarantee Fund of Investment Firms appointed at the proposal of the Presidium of the Commission pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the

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version effective until the date of effect of this Act, shall be deemed appointed at the proposal of the Bank Board of the Czech National Bank pursuant to Article 128(5) of Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act.

4. The Czech National Bank may propose the dismissal of a bankruptcy trustee even in respect of bankruptcy proceedings of investment firms opened before the date of effect of this Act.

Section II of Act No. 56/2006 Coll.

Section IITransitional Provisions

1. The provisions of Article 115(5) of Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act, shall apply to the Securities Centre until the date when the central depository commences activity.

2. A security prospectus and an abridged security prospectus approved before the date of effect of this Act shall be deemed a security prospectus approved pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act, and the provisions of Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act, shall apply to a change thereto.

3. A bond programme prospectus approved before the date of effect of this Act shall be deemed a base prospectus approved pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act.

4. A security prospectus and an abridged security prospectus published before the date of effect of this Act shall be deemed a security prospectus published pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act.

5. A security prospectus and an abridged security prospectus approved before the date of effect of this Act, and not yet published, shall be published pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act.

6. Proceedings on the approval of a security prospectus, an abridged security prospectus or a supplement thereto opened before the date of effect of this Act shall be completed pursuant to Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act.

7. Contributions to the Guarantee Fund of Investment Firms (hereinafter the “Guarantee Fund”) for 2006 shall be calculated pursuant to Article 129(1) of Act No. 256/2004 Coll., on capital market undertakings, in the version effective as from the date of effect of this Act; contributions to the Guarantee Fund for 2005 shall be calculated pursuant to the previous legal rules.

8. The time limits for the payment of compensation from the Guarantee Fund for claims registered before the date of effect of this Act shall be governed by the previous legal rules.

9. The regulation of the provision of documents for the calculation of compensation from the Guarantee Fund in the version effective as from the date of effect of this Act shall also apply to claims registered before the date of effect of this Act in respect of which full compensation has not been paid.

10. The Securities Commission may propose the dismissal of a bankruptcy trustee even in respect of bankruptcy proceedings of investment firms opened before the date of effect of this Act.

11. If the period of limitation for a client’s right to payment of compensation from the Guarantee Fund commenced before the date of effect of this Act, the commencement and course of such period shall be governed by the previous legal rules.

12. If a client registered his claim against an investment firm in bankruptcy proceedings in respect of the assets of such investment firm before the date of effect of this Act, the Guarantee Fund shall become the bankruptcy creditor of the bankrupt investment firm in place of the client as from the date of effect of this Act to the extent to which it has paid compensation to that client by that time. At the request of the Guarantee Fund, the bankruptcy trustee shall mark this change without undue delay in the list of registered claims.

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