LAWON INVESTMENT FUNDS("Official Herald of the Republic of Serbia", Nos. 46/2006, 51/2009, 31/2011 and 115/2014) |
Article 1
The present Law shall govern the following activities:
1) Organization and management of open-ended investment funds (hereinafter referred to as: open-ended fund);
2) Establishment and management of closed-ended investment funds (hereinafter referred to as: closed-ended fund);
3) Establishment and management of private investment funds (hereinafter referred to as: private investment fund);
4) Establishment, activities and business operations of investment fund management company (hereinafter referred to as: management company);
5) Assignments and duties of custody bank, in terms of the present Law;
6) Competence of the Securities Commission (hereinafter referred to as: the Commission);
7) Other issues significant for the investment funds field.
Article 2
In terms of the present Law, particular terms shall have the following meanings:
1) Management company - a company whose core business is the management of the investment fund in accordance with this law;
2) investment fund - collective investment institution that raises and invests monetary funds into different types of assets with the goal to make income and to lessen the investment risk;
3) custody bank - bank that maintains investment fund account and conducts other custody services for investment fund account, and in terms of investment fund funds it is the bank that follows management company’s orders which are in compliance with law and investment fund prospectus;
4) member, i.e. shareholder of investment fund - individual or legal entity with investment units and/or investment fund shares registered in their name;
5) investment unit - proportional accounting stake in investment fund entire net assets;
6) qualified participation - direct or indirect participation in the management company which represents at least 10% of the capital or of the voting rights or which enables realization of significant influence on management of the management company in which such participation exists. Provisions of the law governing capital market concerning significant participations shall apply in determination of voting rights in relation to this provision;
7a) summary prospectus - a short document containing key information for investors that are as such, clearly indicated in the summary prospectus. Key investor information must include adequate information on the most important characteristics of the fund, such as the type of investment and potential risks, and that enable investors to make an informed decision about the proposed investment;
8) board member shall be a director or member of the supervisory board in terms of the law governing companies;
9) portfolio of the fund shall consist of assets in which the investment fund invests in accordance with the provisions of this law.
Terms: close link, financial instrument, securities, regulated market, multilateral trading facility (MTF), OTC market, clearing, settlement and insider information; shall have the meaning as defined by the law governing capital market.
Ban to Use Term "Investment Fund"
Article 3
Legal entity and entrepreneur may not use term "investment fund", nor any term derived from that term, in their business names or titles, and/or names of their products or services, unless using those terms in compliance with the present Law.
Article 4
Management company shall be established only as a bicameral joint stock company other than a public company in terms of the law governing the capital market.
Provisions of law that governs business companies and the provisions of the law governing capital markets shall be applied to management companies, unless otherwise specified by the present Law.
The management company may not be a target company in terms of the law governing takeover of joint stock companies.
Management Company Business Activities
Article 5
The management company shall:
1) Organize and manage open-ended fund;
2) Establish and manages closed-ended funds;
3) Manage the private fund;
4) Perform other duties in accordance with the law regulating the capital market.
When the management company performs portfolio management for the client, in terms of the law governing the capital market, investing funds from the portfolio for the purchase of investment units of open-end fund managed by that company shall not be allowed without the prior consent of the client.
The management company may not engage in activities other than those referred to in paragraph 1 of this Article.
The management company manages the investment fund by making investment decisions and exercising administrative and marketing tasks and activities.
The management company may entrust the performance of administrative and marketing tasks and activities to other persons whereby the responsibility of the management company shall not be ruled out, under condition that:
1) It shall inform the Commission of the entrusting of tasks;
2) It shall ensure the measures of continuous supervision over so entrusted tasks;
3) The fund's prospectus shall contain the list of tasks and persons entrusted with them;
4) It shall meet other requirements prescribed by the relevant act of the Commission.
The management company may organize, establish and manage several investment funds.
The management company shall comply in its operations with the provisions of the law regulating the capital market, the rules of safe and good business, usage and disclosure of inside information.
The right to vote on account of shares that constitute the assets of the investment fund shall be realized by a management company that manages the investment fund.
Business Activities Limitations
Article 6
Unless otherwise provided by the present Law, management company may not participate in capital and management of other legal entities.
The management company may acquire investment units or shares of investment funds, at most up to 20% of net asset value of the fund.
Article 7
Pecuniary portion of the management company’s initial capital on the establishment day shall be no less than EUR 125,000 (hundred and twenty-five thousand) in dinar equivalent calculated in accordance with the National Bank of Serbia medium exchange currency rate valid on the payment day.
Pecuniary portion of initial capital shall be fully paid to temporary bank account before management company is registered in the Business Companies Registry.
When performing its business activities, management company shall ensure that pecuniary portion of company’s initial capital never goes under EUR 125,000 (hundred and twenty-five thousand) in dinar equivalent.
Management company may transfer its pecuniary portion of initial capital into securities issued by the Republic of Serbia (hereinafter referred to as: the Republic) or the National Bank of Serbia, with due date up to one year.
The Commission shall instruct the management company to eliminate deviations within a specified time period when an adequate amount of capital falls below the amount required by paragraph 3 of this Article.
The Commission shall prescribe in more detail the manner of calculating the capital adequacy of the management company, especially when there has been a significant change in the operations of the management company in the previous year, or when the management company has been operating for less than a year, as well as the manner and time periods for reporting to the Commission.
Organizational and Technical Ability
Article 8
Management company shall engage and permanently employ at least one portfolio manager.
Management of the management company shall issue decisions and other legal enactments by which it defines the investment policy and the investment objective of investment fund, while portfolio manager shall carry out the mentioned policy and/or objective, enact corresponding decisions on specific investments, and shall be responsible for his work to the company management.
Management company shall meet minimum conditions in terms of organizational, manpower and technical qualification prescribed by the Commission.
Provisions of law that govern the market of capital shall apply to issuing and revoking license for conducting activities of portfolio manager.
Article 9
Management company’s business name shall contain words "investment fund management company".
Legal entity which has not acquired the management company license may not use name "investment fund management company" or other similar name when conducting legal transactions.
Filing Application for Work License
Article 10
Entity that intends to establish management company shall file an application to the Commission to have the management company work license issued (hereinafter referred to as: work license).
Domestic and foreign individuals and legal entities may establish management company. One domestic and foreign individual and legal entity and closely related entities may not possess a qualified participation in more than one management company.
Domestic legal entity with majority capital owned by state, i.e. by society, or other closely related entity may not be the founder of management company.
Exceptionally from the provisions specified in paragraph 3 of the present Article, banks and insurance companies with majority capital owned by state, i.e. by society, may be the founders of management company.
Entities specified in paragraph 1 of the present Article which acquire qualified participation, either when being established or in the process of conducting management company’s business activities, shall meet conditions specified in the Article 11, paragraph 1, item 4) of the present Law.
The Commission shall decide on issuing work license and it shall keep the Management Companies Registry.
Entity shall submit the following documents along with an application to have the work license issued:
1) management company’s establishment enactment;
2) evidence of initial capital payment at bank’s temporary account;
3) evidence of initial capital origin;
4) management company’s Business Rules;
5) management company’s organizational diagram;
6) list of shareholders in terms of their family names, names and addresses for individuals, and/or copy from the Business Companies Registry for legal entities - management company’s shareholders, i.e. verified translation of a copy from the foreign legal entities registry;
7) evidence of organizational, staffing and technical ability;
8) list of nominated members of management.
When management company founders are banks, insurance companies, other financial institutions, and/or entities controlled by them, than entity filing documents specified in paragraph 7 of the present Article shall also file to the Commission the report on their safety and soundness issued by domestic, and/or foreign body in charge of controlling business activities of banks, insurance companies and other financial institutions.
Article 11
The Commission shall issue work license when it finds that requirements specified in the Article 10 of the present Law have been met and when it estimates the following:
1) that initial capital origin is clear and without any doubts, on the grounds of presented evidences;
2) that evidences specified in the Article 10 paragraph 7 of the present Law are convincing;
3) that structure of closely related entities is not preventing efficient supervision of business activities;
4) that on the grounds of received information it may be concluded that entities possessing the qualified participation are suitable and reliable.
The Commission shall render its decision on issuing work license within a period of 30 days starting from the day the application is filed, when it finds that conditions defined by the present Law have been met and that adequate protection of interests of members, and/or shareholders of the investment fund is provided.
When the Commission rejects the application for issuance of a license, it shall provide the applicant with a decision on rejection of the application for a license with a written explanation.
When new entity intends to acquire qualified participation in the management company it must previously inform the Commission about it and the Commission shall than conduct estimation specified in paragraph 1 of the present Article and give its approval.
The provisions of the law regulating the capital markets shall apply mutatis mutandis to the acquisition of qualified participation in the management company.
The entity which acquired qualified participation contrary to provisions of the present Law and/or without consent of the Commission shall forfeit the right to vote on the ground of shares acquired in such a way.
The Commission shall prescribe closer conditions in order to determine criteria for suitability and reliability of entities acquiring qualified participation, and/or of management board members and management company director.
Article 12
Law that governs business companies shall apply to management company bodies, unless otherwise specified by the present Law.
A person who has not been effectively convicted for crimes against labour relations, business activities, property, judiciary, public order and legal transactions, line of duty, bribe and corruption, for crimes and corporate offences defined by laws that govern market of capital, privatization, insurance, banks and other financial organizations, may be appointed for the management company director and management board member posts.
Management company director and management board member shall not be the following persons:
1) management board member or employee of other management company;
2) management board member or employee of custody bank the management company has signed the contract with;
3) official, appointed and/or designated person or public servant;
4) person closely related with persons specified in items 1) and 2) of the present Article.
Members of the management of the management company must have a high school diploma, while the director and at least half of the management members must have at least three years of work experience in activities connected to securities in accordance with an act of the Commission.
Giving Consent to Appointing Management Company Management Board Member
Article 13
The Commission shall give its consent to appointing nominated management company director and management board members.
The Commission shall render its decision on giving consent to appointing nominated management board director and management board members on the basis of evidences that conditions specified in the Article 12 of the present Law have been met and when it estimates that nominated director and management board members are suitable and reliable.
In the case when the Commission makes a decision to grant a license to the management company, it shall, at the same time, make a decision to approve the election of a member of the management company’s management.
Revoking Consent to Appointing Management Company Management Board Member
Article 14
The Commission shall revoke its consent given to appointing management company director, and/or management board member, when it defines the following:
1) decision was rendered on the grounds of untrue and inaccurate data;
2) appointed person no longer meets conditions specified in the Article 12 of the present Law;
3) appointed person has harshly violated the provisions of the present Law, rules of business ethics, conscientious business activities and rules on managing the risk or has in some other way harshly jeopardized interests of investment fund members, and/or shareholders, the management company manages;
4) appointed person has been pronounced as not having a full working ability by effective court decision.
Director, and/or management board member shall not conduct any activity within the management company as of the day the decision on revoking the given consent is delivered to him/her.
Management company management board shall nominate new management board members, and/or director no later than in a period of 15 days after the decision specified in paragraph 2 of the present Article is delivered.
Article 15
Management company director and management board members, as employees of that management company and its related entities, shall keep it as a business secret and shall not reveal the following information:
1) information on investment fund or its management company that could create wrong image on business activities of that company, and/or investment fund;
2) information on management company’s future activities and business plans, except in cases specified by law;
3) information on accounts balance and transactions of investment fund and its members;
4) information on other data significant for investment fund business activities which they have come across when conducting management company business activities.
Exceptionally from the provisions of paragraph 1 of the present Article, data may be announced and placed at third party’s disposal in the process of supervising legality of business activities, on the grounds of the court, and/or competent body order, or if law stipulates so.
Management Company General Enactments
Article 16
Management company general enactments shall be the establishment act, Business Rules and other general enactments.
Article 17
Management company Business Rules shall govern the following business activities:
1) business activities conducted by management company, conditions and modes for conducting them;
2) mutual relations between management company and investment fund members, and/or shareholders;
3) conditions for management board members and management company employees to invest their own funds into investment funds managed by the management company;
4) administrative and accounting procedures;
5) controlling and safety measures for processing and filing data;
6) internal control system;
7) procedures for preventing the conflict of interests and measures for preventing management company to use investment fund assets for its own interests;
8) measures for preventing abuse of insider information;
9) other issues significant for management company business activities.
The Commission shall prescribe detailed regulations of business rules.
Amendments on General Enactments
Article 18
Management company shall inform all members, and/or shareholders of investment fund about amendments on Business Rules and other general enactments, within a period of 15 days before their application begins.
The Commission shall render its decision on giving consent to amended Business Rules and other general enactments once it finds amendments are not opposed to law and investment fund members’ and/or shareholders’ interests, within a period of 15 days starting from the day the request is received.
Article 19
Management company shall, within a period of 30 days starting from the day the decision on issuing work license and decision on giving consent to appointing director and management board members of management company is rendered, file an application to register itself, in compliance with law that governs the registration of business companies.
Management company shall deliver a copy of the registration file to the Commission within a period of eight days starting from the day the decision on registration is received.
Change of Business Name and Address
Article 20
Before filing an application to register the change of business name and address in the register, management company shall inform the Commission on those changes.
Keeping Business Books and Producing Financial Statements
Article 21
Bookkeeping, preparation and audit of financial statements of the management company and the investment fund shall be made in accordance with the laws governing accounting and auditing and with the by-laws of the Commission.
The management company shall be obliged to separately show, both in ledgers and financial statements, the data for each fund that it manages.
The management company shall be obliged to keep accounts and prepare financial statements for the investment fund it manages, separate from its own.
The management company shall be required to keep documentation and information recorded on electronic media relating to the members or shareholders of the investment fund, in accordance with the laws governing accounting and auditing.
The Commission regulates the content of the data in the report of the external audit, the chart of accounts and financial statements of the management company and the investment fund, the list of auditing firms that may perform the audits referred to in paragraph 1 of this Article, as well as the criteria that such an auditing firm must meet.
Article 22
The management company shall publicly disclose and submit to the Commission:
1) Separate annual financial statements for the company and the investment funds it manages, with the external auditor's report, by 30 April of the current year for the previous year;
2) Semi-annual reports for each investment fund separately, by 31 August of the current year for the previous six months.
Along with the annual financial report referred to in paragraph 1, item 1) of this Article the data on following shall be published and submitted to the Commission:
1) The assets and liabilities, in particular:
(1) Transferable securities,
(2) Balance of cash deposits,
(3) Other assets,
(4) Total assets,
(5) Obligations,
(6) Value of the net assets of the investment fund;
2) The number of investment units;
3) The individual value of investment units as at the last business day of the period for which the report is submitted, or the number of shares;
4) The structure of the portfolio of the investment fund per type of transferable securities with a description of changes in the composition of the portfolio in the stated period;
5) The changes in the value of assets of the investment fund during the stated period;
6) The total net asset value and net asset value per unit at the end of the year, comparatively for the last three years of business;
7) The undertaken obligations by type of transaction within the specified period in accordance with Article 31 of this law.
Semi-annual report referred to in paragraph 1, item 2) of this Article shall contain at least the information referred to in paragraph 2, items 1) to 4) of this Article.
The Commission shall prescribe the manner of public disclosure and content of the report defined in this Article, and may prescribe the obligation of submission of other reports, and deadlines for their submission.
The Management Company shall, upon the request and without compensation, enable the member of the fund insight into the prospectus and the last annual and semi-annual financial report.
The prospectus and summary prospectus may be submitted to a member of the fund on a durable medium, or be available on the website of the management company. A printed copy of the prospectus and summary prospectus shall be submitted to the fund upon request and without compensation.
The annual and semi-annual financial report shall be available to the fund in the manner specified in the prospectus and summary prospectus. Printed copy of the annual and semi-annual financial report shall be submitted to the member of the fund upon request and without d the laws governing foreign exchange operations.
Investment Fund Title and Business Name
Article 23
Open-ended fund shall have its title. Closed-ended fund and private fund shall have their business names. Title and business name shall not be opposed to investment fund’s chosen investment goal.
Open-ended fund title shall include the sign "open-ended investment fund" or abbreviation "o.i.f." or "oif".
Closed-ended fund business name shall include the sign "closed-ended investment fund" or abbreviation "c.i.f." or "cif".
Private fund business name shall include the sign "private investment fund" or abbreviation "p.i.f." or "pif".
Investing into Investment Funds
Article 24
Domestic and foreign individuals and legal entities may invest into investment funds, in compliance with the provisions of the present Law.
Investment Fund License
Article 25
Management company that intends to organize open-ended, and/or to establish closed-ended fund shall file an application to the Commission to have the license to organize open-ended, and/or to establish closed-ended fund issued.
The Commission shall render its decision on application specified in paragraph 1 of the present Article within a period of 30 days starting from the day the application is filed.
Besides filing an application for having the license specified in paragraph 1 of the present Article issued, an applicant shall also file the following documents:
1) draft of investment fund prospectus and shortened prospectus;
2) draft of closed-ended investment fund establishment act;
3) draft of contract with custody bank;
4) list of persons who shall conduct activities of portfolio manager of investment fund to be organized and/or established;
5) draft of contract on managing closed-ended fund.
The Commission may require other documents and information significant for investment fund’s work.
If the Commission finds application specified in paragraph 1 of the present Article to be incomplete or irregular, it shall determine additional period of time to complete or correct the irregularities.
If application to have the management company work license issued is filed simultaneously with application specified in paragraph 1 of the present Article, the Commission shall act simultaneously on both applications.
Investment fund license shall not be issued if management company work license is not issued.
The Commission shall give its consent on prospectus content and shortened prospectus content when issuing license to organize open-ended fund and license to establish closed-ended fund.
Investment fund may be established temporarily or permanently.
Article 26
The Commission shall issue a license under Article 25 of this Law when, taking into account the proposed investment objectives, size and other important characteristics of the investment fund, it determines that the management company meets the conditions provided by this law, and that the interests of the members of the Investment Fund shall be adequately protected.
The Commission shall issue a decision granting or refusing the application referred to in Article 25 of this law with a written explanation.
Organizing (Establishing) Investment Fund
Article 27
Investment fund shall be considered organized and/or established on the day of its registration within the Investment Funds Registry.
The Commission shall issue a copy of the certificate of registration within the Investment Funds Registry when the following conditions are met:
1) the Commission has issued license to organize open-ended fund, and/or license to establish closed-ended fund;
2) management company has signed contract with custody bank;
3) management company has delivered evidence on funds raised at custody bank account at the minimum amount being specified in Article 42 paragraph 3 and/or Article 61 paragraph 2 of the present Law, as well as evidence on respecting limitations in acquiring investment units being specified in Article 46 paragraph 3 of the present Law;
4) body, and/or organization in charge of keeping business companies registry has issued a copy of the registration certificate for closed-ended fund.
Investment Goal and Investment Policy
Article 28
Fund types, more detailed requirements for the classification by type of fund, as well as the ability to change the type of fund shall be regulated by the Commission regulates.
Investment fund’s investment policy shall contain the following:
1) mode to implement the investment goal and a way to manage risk;
2) the biggest and the smallest part of investment fund resources that can be invested into particular securities and immovables;
3) the biggest part of resources that can be kept at investment fund’s pecuniary account;
4) mode of changing the investment policy.
Investing Investment Fund Assets
Article 29
Investment fund assets may be invested in:
1) Transferable securities and money market instruments that are traded or that are involved in trading on a regulated market or a multilateral trading facility (MTF) in the Republic, EU member states, and the regulated markets of other states;
2) Units of open-ended funds in the Republic, in the EU member states, and in other states;
3) Cash deposits in banks in the Republic, in the EU member states, and in other states, or in credit institutions in EU Member States and other states;
4) Money market instruments or debt securities issued by the Republic, the National Bank of Serbia, territorial autonomy and unit of local government in the Republic, and other legal persons guaranteed by the Republic, in accordance with the law governing public debt, as well as money market instruments or debt securities issued by international financial institutions, EU member states and other states;
5) Derivative financial instruments traded on a regulated market, or MTF or OTC market, which are derived from or related to:
(1) Financial instruments referred to in items 1) to 4) of this Article,
(2) Financial indices,
(3) Foreign currencies and the exchange rates,
(4) Interest rates.
Limitations to Investing Investment Fund Assets
Article 30
Following restrictions shall apply to investment of assets referred to in Article 29 of this Law:
1) Up to 10% of investment fund assets may be invested in transferable securities and money market instruments of a single issuer. The sum of the individual values of investments in transferable securities and money market instruments of a single issuer which are greater than 5% of the fund's assets may not exceed 40% of the total assets of the Fund;
2) Up to 20% of investment fund assets may be invested in cash deposits in one bank or credit institution;
3) Up to 10% of the assets of the investment fund may be invested in derivative financial instruments traded on the OTC market when the other party in the transaction is a bank or a credit institution, or up to 5% of the assets of the investment fund when the other party in the transaction is another legal person;
4) Up to 20% of investment fund assets may be invested in a single fund, provided that the total value of such investments in investment funds that are not open-ended funds may not be greater than 30% of the fund’s assets.
Fund's total exposure to a single person may be at most 20% of fund’s assets.
Notwithstanding paragraph 1, item 1) of this Article, up to 35% of investment fund assets may be invested in transferable securities or money market instruments which are issued or guaranteed by the Republic, the National Bank of Serbia, units of local government, the EU member states, other states or international organizations to which the EU member states belong.
The assets of the investment fund may not be invested in securities and other financial instruments issued by the management company.
It shall be considered that one issuer, or a person in whose property the investments are made in terms of this Article, shall be also be a person closely linked to him.
The management company may not take short positions using the open-end fund assets, or it may not perform sale without coverage.
It is not allowed to invest assets of open-ended funds in precious metals or certificates of deposit relating to precious metals.
The Commission shall prescribe detailed requirements and manner of investments in financial instruments referred to in paragraph 1 of this Article, and may establish additional criteria for investing the assets of the investment fund.
Risk Management
Article 31
The management company shall establish a risk management system that allows monitoring and measuring risk positions and their contribution to the overall risk of the portfolio, which includes accurate and independent assessment of the value of derivative financial instruments that are traded on the OTC market.
Investment in derivative financial instruments shall only be permitted to reduce the risk and only if the investment fund has sufficient assets to satisfy the liabilities that may arise from the derivative financial instrument.
The Commission may prescribe detailed requirements and manner of identification, measurement and assessment of risks from this Article, as well as management of those risks.
Article 32
Limitations in investments may be overstepped within the first six months counting from the date of establishment of the investment fund.
The investment fund assets must be invested in compliance with investment limitations specified by the present Law and by investment fund prospectus.
In case there shall be deviations related to investment limitations specified in the present Law and in investment fund prospectus, caused by circumstances management company could not have predicted, and/or could not have had any influence on it, the management company shall immediately inform the Commission accordingly and shall harmonize investment fund assets structure with investment limitations within a period of three months starting from the deviation day.
The Commission may extend the time limit specified in paragraph 3 of the present Article in the event of market disturbances and/or in other circumstances on the ground of criteria to be specified by an act of the Commission.
In cases of deviations relating to investment limitations other than those specified in the provisions of the present Article, the Commission, immediately after learning those facts, shall undertake supervisory measures in compliance with the present Law.
Limitations to Disposing of Investment Fund Assets
Article 33
Investment fund assets shall be kept separately from management company assets and custody bank assets.
Investment fund assets shall not be subject to pledge, it shall not be included into management company’s or custody bank’s liquidation or bankruptcy estate, and it shall not be subject to coercive settlement for the purpose of settling receivables towards management company, investment fund and custody bank.
The assets of the investment fund must not be used for granting or guaranteeing loans to third parties.
Unless so prescribed by provisions of the present Law or an act of the Commission, management company and entities closely related with it may not sign contracts with the investment fund managed by that company.
Calculating Investment Fund Assets Net Value
Article 34
Investment fund assets value shall be the sum of values of securities from fund’s portfolio, value of immovables owned by fund, value of fund’s pecuniary deposits at banks and other assets.
Investment fund assets value shall be calculated in compliance with the market value.
Investment fund assets net value shall be assets value reduced by the obligations amount.
Management company shall calculate investment fund assets value and deliver it to custody bank where investment fund holds an account.
Custody bank shall conduct control and confirm investment fund assets net value calculation.
The Commission shall prescribe mode and frequency of calculating market values for particular assets categories and of calculating investment fund assets net value, in compliance with internationally recognized standards.
Calculating Investment Fund Income
Article 35
Management company shall announce investment fund income twice a year, on June 30th and December 31st of the current year.
Income shall be calculated for a period of last 12 months up to the announcement day, and/or cumulatively for a period of five years and from the beginning of business activities.
Income shall be calculated as a net income, i.e. after deducting expenditures and costs.
Exceptionally from the provisions of paragraph 1 of the present Article, investment income from the whole first year of business activities shall not be announced.
Income shall be announced on the management company’s internet page.
The Commission shall prescribe method of calculating investment fund income, including the principle of rounded off values.
3. Advertising Investment Fund
Investment Fund Prospectus
Article 36
The investment fund shall have a prospectus and summary prospectus, which the management company shall draft separately for each investment fund it manages.
The prospectus shall contain all information based on which an investor can make an informed decision on the proposed investment, particularly on the risks associated with such investment.
The prospectus shall contain clear and understandable explanation of the types of risks of the fund, which shall be shown separately from the instruments in which the fund invests.
When joining the investment fund, a person who joins shall sign a statement confirming that fully understands the prospectus, as well as the types of fees and methods of charging.
The summary prospectus must be truthful, clear and unambiguous and must match the contents of the prospectus.
The management company shall publicly publish on its website the prospectus and updated summary prospectus for each investment fund it manages.
Prospectus Content
Article 37
Investment fund prospectus shall consist of the following:
1) data on investment fund;
2) data on management company;
3) business name and location of custody bank;
4) data on expenditures and costs covered by investment fund;
5) date on issuing prospectus and the last update of data in the prospectus.
Data on investment fund shall be the following:
1) title of investment fund;
2) type of investment fund;
3) date of organizing, and/or establishing investment fund and a period of time it is organized for, and/or established for, providing it is organized, and/or established as a temporary investment fund;
4) time and place where inspection of investment fund’s financial statements may be conducted;
5) tax treatment of investment fund, and/or of investment fund members and shareholders - tax rates and tax basis and calculation modes;
6) description of a chosen investment goal, investment policy and major risks related to it;
7) criteria for forming and diversifying securities portfolio;
8) present structure of investment fund assets, as follows:
(1) proportional participation of securities in accordance with type of securities, title and location of issuer and title and location of market where those securities are being traded in, when such securities make more than 5 percent of the total investment fund assets value,
(2) proportional participation of pecuniary deposits in accordance with title and location of bank where pecuniary funds are deposited, when deposits in that bank make more than 5 percent of the total investment fund assets value,
(3) proportional participation of real estates in accordance with real estate type and location where immovables are situated;
9) investment fund net income in compliance with the Article 35 of the present Law;
10) data on amount of fees and expenditures, as follows:
(1) management company’s fees for conducting management in the previous year, expressed as a percentage of investment fund assets value,
(2) sum of expenditures when buying and selling securities, custody bank expenditures and external auditing expenditures covered by investment fund in the previous year, expressed as a percentage of investment fund assets value,
(3) indicator of entire expenditures calculated by dividing the total sum of management fees and expenditures covered by investment fund with investment fund assets value;
11) time and place where investment units may be purchased and bought out and price calculation mode in the process of buyout, and/or number and mode of closed-ended fund shares subscription;
12) time and place of income distribution, i.e. profit distribution, providing those are being distributed;
13) time and place where data on value of investment units and calculation mode, or net assets value per share of the closed-ended fund and its market price are being announced;
14) mode of informing investment fund members, and/or shareholders on investment policy changes;
15) mode of informing investment fund members on changes in the fees;
16) grounds for dissolving investment fund and details on dissolving, particularly in terms of investment fund members’, and/or shareholders’ rights.
Data on management company shall be the following:
1) business name, location and registration number of management company;
2) name and authorizations of management company director and management board members;
3) names and addresses of shareholders who posses qualified participation;
4) management company initial capital amount;
5) list and types of all investment funds, if management company manages several investment funds;
6) business name and location of audit company which conducts external auditing of management company and investment fund financial statements;
7) time and place where inspection of management company general enactments and financial statements may be conducted.
The Commission shall prescribe detailed content and standardized format of the prospectus and the shortened prospectus, including a text in which investors are warned about major investment risks.
Article 38
The prospectus and the shortened prospectus text shall not contain untrue data, and/or data that may create wrong picture in terms of investment fund assets value, investment units’ value and in terms of other facts related to investment fund business activities.
Management company that manages investment fund shall be liable for any damage caused by raising funds on basis of prospectus and shortened prospectus which contain data specified in paragraph 1 of the present Article.
Other entities who have participated in preparing prospectus and shortened prospectus shall be jointly liable for any damage caused by raising funds on basis of prospectus and shortened prospectus which contain data specified in paragraph 1 of the present Article, providing they knew, and/or had to know that data contain imperfections, taking into account the nature of business they are involved in.
Article 39
When such significant changes occur that data in the prospectus and the shortened prospectus no longer present the actual state, management company shall within a period of three days starting from the day such circumstances have occurred deliver to the Commission amended investment fund prospectus, in order to obtain an approval.
The Commission shall render its decision on approving the prospectus and the shortened prospectus within a period of 15 days, when it finds that conditions defined by law are met and that prospectus offers clear information on risks related to investing the investment fund assets.
Marketing
Article 40
For the purpose of invitation to join the investment fund, management company may directly or through intermediaries publicly advertise the investment fund it manages, and it may do so by publishing advertisements, public invitations and advertising materials, or in some other way.
Text of the advertisement, and/or invitation shall not contain untrue information, i.e. information which may create wrong picture about investment conditions and investment fund business activities.
Advertising by comparing shall be allowed only if it is concrete, objective, authentic and complete.
When comparing investment fund with another investment funds, management company shall give clear picture about the investment fund it advertises and other investment funds.
The Commission shall withdraw the advertisement if it finds it contains untrue information, i.e. information which may create wrong picture in terms of paragraph 2 of the present Article.
The Commission shall closely govern advertising of investment funds and standardized text when advertising.
Mediators
Article 41
Management company may provide sales services directly or through mediators.
Giving information on modalities and ways of investing into the investment fund, the division of prospectus and mediation in the process of purchasing, i.e. selling investment units shall be considered as sales services.
Mediators may be banks and brokerage houses as well other entities in compliance with an act of the Commission.
Both management company and mediators shall be liable for actions and damage caused by mediators in the process of providing sales services.
Concept
Article 42
Open-ended investment fund shall be an investment fund that is not a legal person, that is established by the management company, and whose assets are managed by the management company in its own name and for the joint account of fund members, in accordance with this law.
Open fund shall be established with the sole aim to invest the joint funds raised from the public in transferable securities or other financial assets in accordance with this law, based on the rules of risk dispersion, as well as on the principle of buying back the investment units from the fund's assets at the request of member of the fund.
Minimal pecuniary funds for having open-ended fund start its business activities may not be less than EUR 200.000 (two hundred thousand) in dinars equivalent calculated at the National Bank of Serbia middle exchange rate valid on the payment day and those pecuniary funds shall be paid to custody bank account within a period of three months starting from the day the public invitation for purchasing investment units is made.
Custody bank shall return raised pecuniary funds within a period of eight days if pecuniary funds specified in paragraph 3 of the present Article are not raised within a period of time given in that paragraph.
Open-ended fund assets shall be considered as the fund members’ property.
Limitations to Investing Open-ended Fund Assets
Article 43
Open-ended fund assets may be invested only in accordance with the provisions of Articles 29, 30 and 31 of the present Law.
Fees
Article 44
The open-end fund prospectus shall state all fees charged to the members of the open-ended fund and from the assets of the open-ended fund.
The management company may charge the members of the open-ended fund a fee for the purchase and reimbursement for the purchase of investment units.
The following may be charged from the assets of the open-ended fund:
1) Fee of the management company for the management of the fund's assets;
2) Costs of the purchase and sale of securities;
3) Costs of a custody bank;
4) Costs of an external audit;
5) Other costs in accordance with an act the Commission.
Fee of the management company and the custody bank shall be calculated and charged in the manner specified by the act of the Commission.
Other costs shall be borne by the management company.
The Commission may determine in more detail the type of fees and costs, their maximum amounts, the reporting of fees and costs, as well as procedures to prevent fees, costs and market prices manipulations.
Investment Unit
Article 45
Every working day the calculation of open-ended fund assets net value per investment unit shall be conducted and published on the internet page of management company.
The acquirer of the investment unit shall have the following rights:
1) right to proportional part of income;
2) right to buyout;
3) right to have open-ended fund assets proportional part in case of dissolving the fund;
4) other rights in compliance with the present Law.
Open-ended fund investment units shall provide same rights to fund members.
Investment units shall not be openly transferred to third parties, except on the grounds of inheritance and a gift agreement.
Management company shall keep files on investment units and it shall file every purchase and buyout of investment units.
Acquiring Investment Units
Article 46
One may acquire investment units only by paying money for it.
Investment unit price shall consist of open-ended fund assets net value per investment unit on the payment day, increased by purchase fees if management company charges for it.
Open-ended fund member may not acquire more than 20 percent of open-ended fund assets net value when acquiring investment units.
When acquiring investment units, management company shall issue a receipt to the open-ended fund member.
When providing sales services, directly or indirectly, the management company shall submit a summary prospectus to interested parties free of charge prior to the gaining of membership status in the fund.
Buyout of Investment Units
Article 47
Open-ended fund shall buy out investment units under procedure defined in the prospectus, no later than within a period of five workdays starting from the day the fund member has filed a request to buy out investment units.
Investment unit buyout price shall consist of open-ended fund assets net value per investment unit on the day the request specified in paragraph 1 of the present Article is filed, reduced by buyout fees if management company charges for it in compliance with the fund's prospectus.
Temporary Cessation of Investment Units Buyout
Article 48
Management company may instruct custody bank to temporarily cease the purchase and buyout of open-ended fund investment units in order to protect interests of fund members when due to extraordinary circumstances it becomes impossible to calculate fund assets net value, i.e. when investment units buyout requests made in one day exceed 10 percent of fund assets value.
Custody bank shall cease with purchase and buyout of investment units and immediately inform the Commission about it.
The Commission may require management company to deliver documents and information in order to evaluate the validity of a cessation decision.
If the Commission finds that cessation of open-ended fund investment units’ purchase and buyout jeopardizes fund members interests, it shall order custody bank to terminate temporary cessation of investment units' purchase and buyout and it shall inform management company about it.
The Commission shall closely prescribe conditions and procedure for cessation of investment units’ purchase and buyout.
Indebtedness
Article 49
Management company may, exclusively for the purpose of keeping the required level of the open-ended fund, take a loan on its own behalf and for the account of open-ended fund, with a payback period of 360 days, by concluding:
1) contracts of credit;
2) repo’s contracts with other investment funds and banks, whose subject-matter may be shares as well.
Total indebtedness specified in paragraph 1 of the present Article shall not exceed 10 percent of fund assets value.
Law governing foreign currency operations shall regulate loans taken for the account of investment fund abroad.
Transfer of Open-ended Investment Fund Management Rights
Article 50
Management company may transfer its right to manage open-ended fund to other management company, providing it does that in a form of a written contract and providing it obtains the Commission’s previous approval.
Management company to whom the management right has been transferred to shall take over all rights and duties the former management company had.
Management company shall inform fund members about transferring rights specified in paragraph 1 of the present Article two months before the actual transfer.
Merging of Open-ended Investment Funds
Article 51
Merging of open-ended funds may be done through merging with absorption and merging with organization.
Merging with absorption shall mean that one open-ended fund ceases to exist without dissolving itself by transferring its complete assets and payables to other open-ended fund in return for open-ended fund it absorbs to issuing investment units to members of open-ended fund that ceases to exist.
Merging with organization shall mean that two or more open-ended funds cease to exist without dissolving themselves by transferring their complete assets and payables to new open-ended fund in return for new open-ended fund issuing investment units to members of ceased open-ended funds.
The Commission shall give its consent to merging of open-ended funds.
Management company shall inform open-ended fund members about merging two months before actual merging.
Upon receipt of the notification referred to in paragraph 5 of this Article, the members of open-ended funds, which are merging, have the right to buy back the investment units or convert them to units of some other fund managed by the same management company, free of charge.
Legal, administrative or advisory costs related to the merger of open-ended funds may not be a compensated from the assets of funds that are merging, or from the funds’ members.
The Commission shall closely govern procedure for merging of open-ended funds.
Informing Fund Members
Article 52
Management company shall keep files for every open-ended fund member on the number of investment units it owns.
Management company shall deliver information to every open-ended fund member together with reports specified in the Article 22, paragraph 1, items 1) and 2) of the present Law, and such information shall contain the following:
1) number of investment units owned by a member and their individual value;
2) total amounts of fees with payment dates for a reporting period.
Following a request coming from open-ended fund member, management company shall deliver information specified in paragraph 2 of the present Article within a period of eight days starting from the day the request is filed.
Division of Income
Article 53
Open-ended fund shall make income by collecting interests, dividends and by accomplishing capital gains.
Management company shall indicate the mode of dividing income in open-ended fund prospectus.
Division of income shall be conducted merely in cash.
Conditions for Dissolving Open-ended Investment Fund
Article 54
Open-ended fund members shall not be entitled to request dissolving of the fund.
Open-ended fund shall be dissolved when management company work license is revoked, if new management company is not chosen within a period of three months.
Open-ended fund shall also be dissolved when period of time for a temporary fund expires.
When open-ended fund is dissolved because management company work license has been revoked, management company shall cover fees and other expenditures related to dissolving of the fund and buying out of investment units, and when this is not possible - those fees and expenditures shall be covered by open-ended fund.
When open-ended fund is dissolved because period of time for a temporary fund has expired, open-ended fund shall cover fees and expenditures specified in paragraph 3 of the present Article.
Revoking Management Company Work License
Article 55
Management company shall cease to manage open-ended fund when the Commission revokes that company work license.
If a case specified in paragraph 1 of the present Article takes place, custody bank the management company has signed contract with shall perform only urgent activities related to open-ended fund management, only until new management company is chosen, but not longer than for a period of three months.
Urgent activities mentioned in paragraph 2 of the present Article shall mean activities that need to be performed in order to prevent damage for open-ended fund. When the Commission revokes management company work license and until new management company is chosen, custody bank shall immediately stop selling and buying out investment units and it shall immediately inform fund members about it.
When revoking management company work license, the Commission shall immediately announce public invitation to choose new management company and it shall choose it within a period of two months.
If public invitation mentioned in paragraph 4 of the present Article fails, the Commission shall dissolve open-ended fund.
The Commission shall prescribe closer conditions for choosing the best offer mentioned in paragraph 4 of the present Article.
Dissolving Open-ended Fund if Management Company Work License is Revoked
Article 56
Upon receiving a decision on dissolving open-ended fund, custody bank shall inform public and fund members about it by placing it on its internet page, convert fund assets into cash and pay off fund members no later than within a period of six months after the decision on dissolving open-ended fund is made.
Custody bank shall convert open-ended fund assets at fund members’ best interest.
Custody bank shall submit a report on dissolving open-ended fund to the Commission, and the Commission shall erase that fund from the Investment Funds Registry on the grounds of such a report.
Custody bank shall keep business books and documentation of open-ended fund for at least five years after open-ended fund is dissolved, in compliance with regulations that govern archived materials.
The Commission shall closely govern procedure for dissolving open-ended fund.
Expiration of Time for Temporary Open-ended Fund
Article 57
When open-ended fund is established temporarily and defined period of time has expired, management company shall process the dissolving by converting assets into cash and by paying off fund members, in compliance with fund prospectus.
Management company shall deliver a report on dissolving open-ended fund to the Commission within a period of six months starting from the day open-ended fund stopped its activities.
5. Closed-ended Investment Fund
Article 58
Closed-ended fund shall be legal entity organized as public joint-stock company, within the meaning of the law governing companies.
Closed-ended fund shall raise pecuniary funds by selling shares through public offer.
Management company shall establish and manage closed-ended fund.
Management company shall be entitled to settle actual establishment expenditures from the closed-ended fund assets up to 2 percent of the initial capital value at the time when closed-ended fund was established.
Provisions of law that governs market of capital and provisions of law that governs business companies shall be applied to closed-ended funds, unless otherwise specified by the present Law.
Calculation of closed-ended fund assets net value per share shall be conducted at least once a month and announced on the internet page of management company.
Closed-ended fund may not be a purpose-based company in terms of the law governing the taking over of joint-stock companies.
Limitations to Investing Closed-ended Investment Fund Assets
Article 59
Assets of the closed-ended fund may be invested in accordance with the provisions of Articles 29-31 of this law and, depending on the type of fund, in shares of joint stock companies registered in the Republic, which are not traded on a regulated market or MTF, in shares of limited liability companies registered in the Republic, as well as in immovables located in the territory of the Republic, in compliance with an act of the Commission.
Closed-ended fund may not acquire more than 20% of the voting shares of a single issuer, which is a public joint-stock company, and its closely linked persons, in terms of the law governing the capital market.
The Commission shall determine the categorization of closed-ended funds, as well as more detailed business requirements for certain categories of closed-ended funds.
Article 60
Investing into immovables shall mean investing into land, buildings (business buildings, residential buildings, business-residential buildings, commercial buildings etc.) and separate parts of buildings (apartments, offices etc.) which are registered in public books on real estates and rights affiliated to it, which are not excluded from property transfer and which are not encumbered by pledge, right to usufruct, right of use, tenancy rights or right of real encumbrance.
Investment into one real estate shall not exceed 20 percent of closed-ended fund assets.
Closed-ended fund assets consisting of immovables shall be registered in books specified in paragraph 1 of the present Article as a fund ownership, with management company title stated, and all this shall be filed in custody bank.
Certified assessor shall evaluate the value of immovables where closed-ended fund assets are invested in. Immovables shall be insured against all risks.
Closed-ended fund shareholders shall not be entitled to preferred purchase.
Closed-ended fund may contract debts without limitations, providing that contracting debts abroad are conducted in compliance with law that governs foreign currency operations.
Closed-ended Investment Fund Initial Capital
Article 61
Closed-ended fund initial capital shall consist merely of money.
Closed-ended fund initial capital shall not be under EUR 200.000 (two hundred thousand) in dinar equivalent calculated in accordance with the National Bank of Serbia medium exchange rate valid on the payment day.
Closed-ended fund initial capital shall be fully paid to custody bank account, before fund is registered at the Investment Funds Registry.
Closed-ended Investment Fund Bodies
Article 62
Closed-ended fund bodies shall be the Assembly and the Supervisory Board.
Management company shall manage closed-ended fund.
Assembly
Article 63
Provisions of law that governs business companies shall accordingly apply in terms of scheduling closed-ended fund Assembly of shareholders, holding it and making decisions.
Management company shall have the powers in terms of scheduling and holding the Assembly of shareholders.
Closed-ended fund Assembly shall decide on signing and breaking of the management contract in compliance with the present Law, it shall approve with income division and new issue of shares, and it shall appoint fund Supervisory Board members.
Closed-ended Investment Fund Supervisory Board
Article 64
Closed-ended fund Supervisory Board shall supervise the execution of management company’s duty to accomplish investment goals and investment policy, and to respect investment limitations. When performing their roles, the Supervisory Board members may inspect business books and documents, and they may require additional explanations from management company.
If irregularities are discovered in the process of executing investment policy and respecting investment limitations, closed-ended fund Supervisory Board shall order management company to immediately remove those irregularities and it shall inform the Commission and shareholders about it.
Closed-ended fund Supervisory Board shall choose and sign contract with audit company.
Closed-ended fund Supervisory Board may schedule a session of closed-ended fund Assembly of shareholders if two thirds of all members vote so.
Closed-ended fund Supervisory Board member shall not be an employee of management company and/or custody bank or their management board member, or persons who are members of two or more bodies of other legal entities or entities closely related with them.
Closed-ended fund Supervisory Board shall adopt the Book of Rules which shall regulate work mode and other issues significant for fund Supervisory Board work.
Closed-ended Investment Fund Shares
Article 65
Shares of closed-ended fund shall be registered, indivisible and freely transferable.
The management company shall include the shares of the closed-ended fund on the regulated market or MTF in accordance with the law regulating the capital market, within 30 days from the date of inscription into the Register of Investment Funds.
Shares of a closed-ended fund shall be publicly offered with the approval of the publication of the prospectus.
Closed-ended fund may acquire its own shares only with the prior approval of the Commission and if it submits a notice to the public thereof, in written form, published at least 15 days in advance on the website of the management company.
The Commission shall prescribe the procedure and conditions under which a closed-ended fund may acquire its own shares and give approval referred to in paragraph 4 of this Article within 15 days of receipt of the request.
Closed-ended Investment Fund Shares Subscription
Article 66
The subscription and payment of shares of closed-ended fund shall be made with the custody bank.
Management
Article 67
Management company shall manage closed-ended fund on the basis of a signed contract.
Closed-ended fund Supervisory Board shall sign management contract on behalf of a closed-ended fund.
Management contract shall compulsorily contain the following:
1) management company duties;
2) types, amounts and calculation modes of service fees;
3) types of expenditures to be covered from fund assets, including administrative expenditures for operation of closed-ended fund bodies;
4) clauses whether management company is entitled to entrust administrative and marketing activities to other entities and under which terms;
5) grounds for breaking the contract, and management company and closed-ended fund rights and duties in case of breaking the contract;
6) duration of cancellation period in case of breaking the contract.
Agreement on Breaking Management Contract
Article 68
Closed-ended fund and management company may agree to break management contract.
Agreement on breaking management contract specified in paragraph 1 of the present Article shall come into force on the day when the Commission approves management contract with new management company.
Special Case of Breaking Management Contract
Article 69
Closed-ended fund may break management contract regardless of management contract clauses. Closed-ended fund Assembly shall decide with two thirds of votes of present shareholders on breaking management contract and on signing a new one.
Break of management contract specified in paragraph 1 of the present Article shall come into force on the day when the Commission approves management contract with new management company.
Revoking Work License to Management Company
Article 70
Management contract shall be considered broken under compulsion of law on the day when management company work license is revoked.
Management company shall transfer all activities related to management of closed-ended fund assets to custody bank on the day following the day of breaking the management contract.
If case specified in paragraph 1 of the present Article takes place, custody bank shall temporarily, but no longer than for a period of three months, conduct only urgent activities related to management of closed-ended fund, providing it previously consults closed-ended fund Supervisory Board.
Urgent activities specified in paragraph 3 of the present Article shall mean activities which must be conducted in order to prevent damage for a fund.
When breaking the management contract, the Supervisory Board shall in the shortest notice inform fund shareholders about it and it shall announce public invitation for collecting management companies offers for managing a closed-ended fund, and it shall propose the most convenient offer to fund Assembly.
Following the Supervisory Board’s proposal, closed-ended fund Assembly shall decide on signing management contract with new management company within a period of three months starting from the day when contract is broken. New management company shall immediately file a request to the Commission to approve management contract.
If the Commission fails to receive request to approve management contract within a period of time stipulated by paragraph 6 of the present Article, it shall order custody bank to initiate the procedure for dissolving that fund.
Termination Reasons
Article 71
Provisions of law that governs business companies related to termination of joint-stock companies shall accordingly apply to termination of closed-ended investment funds.
Reporting
Article 72
Management company shall at least once a month deliver reports to closed-ended fund Supervisory Board on purchased and sold securities, on assets and on fund business activities results.
Management company shall deliver special additional reports if required so by closed-ended fund Supervisory Board.
Management company shall deliver semi-annual and annual financial statements to all closed-ended fund shareholders.
Profit Distribution
Article 73
Management company shall propose to closed-ended fund Assembly the mode of distributing fund profit.
After producing financial statements and receiving external audit report, and after closed-ended fund Assembly making a decision on the mode of distributing fund profit, management company shall order custody bank how to distribute profit to fund shareholders.
Article 74
Private investment fund shall be legal entity organized as a limited liability company, in compliance with law that governs business companies.
Private fund member minimal pecuniary deposit shall be no less than EUR 50.000 in dinar equivalent calculated at the National Bank of Serbia medium exchange rate valid on the payment day.
Management company may participate, directly or through related entities, in the private fund capital managed by it.
Private fund shall not be subject to general provisions about investment funds in terms of issuing investment fund license, fund assets investments, limitations to fund assets investments, limitations to disposing of fund assets, calculation of investment fund income, issuance of prospectus, marketing, mediators.
Provisions of the present Law that govern custody services and keeping account at the custody bank, and provisions related to regular reporting to the Commission and investors, except delivering annual financial statement, shall not apply to private funds.
Private fund may contract debts without limitations, in compliance with its own Business Rules.
Management company shall be the only one to manage private investment fund, in accordance with management contract signed with private fund.
Management company shall deliver to the Commission the management contract specified in paragraph 6 of the present Article and Business Rules. The Commission shall register private investment fund into the Investment Funds Registry.
Provisions of law that governs business companies shall accordingly apply to private funds.
Business Rules
Article 75
Business Rules shall be private fund mandatory general enactment.
Private fund Business Rules shall consist of the following:
1) description of investment goals, investment policy and major risks related to it;
2) stake value;
3) rules on transferring stakes;
4) amount of minimal pecuniary deposit per member;
5) mode of calculating fund assets net value;
6) provisions on reporting to fund members;
7) period of time the fund is established for, if fund is established as a temporary investment fund;
8) procedure for dissolving fund;
9) other issues significant for fund business activities.
Business Rules shall be available to all interested investors.
Amendments and additions of Business Rules shall be allowed only if all private fund members agree to it in writing.
Amendments and additions of private fund Business Rules shall be delivered to the Commission.
Authorization for conducting custody bank activities
Article 75a
A Bank may provide custodian bank activities if permission for such activities is obtained from the Commission.
The Commission keeps a register of licenses granted for conducting custodian bank activities.
License for conducting custodian bank activities
Article 75b
Contents of the request for granting license for conducting custodian bank activities shall be prescribed by the Commission.
Along with the request referred to in paragraph 1 of this Article, the following shall be enclosed:
1) Proof that the bank is a member of the Central Registry;
2) Rules of operation of the custodian bank;
3) Proof that the bank has a separate organizational unit for performing the custodian bank activities;
4) Proof that the bank meets the conditions of staff and organizational training for performance of the custodian bank activities;
5) Proof that the bank meets technical requirements for a custodian bank, or has adequate information systems to perform these duties;
6) Other documents required by the Commission.
The Commission shall give prior consent to the appointment of a person who will manage the custodian bank.
Conditions of staff and organizational training and technical equipment for conducting custodian bank shall be prescribed by the Commission.
Legal entity or an entrepreneur, which have not obtained permission for conducting custodian bank activities in accordance with this law, cannot be inscribed into the Business Register, nor can they use the name of the custodian bank in legal transactions, or derived words, unless prescribed by other law.
Rules of operation of the custodian bank and signing of contracts
Article 75c
The custodian bank shall enact rules of operation in regard to the custodian operations, which shall be approved by the Commission.
Rules in paragraph 1 this Article shall particularly determine:
1) Types of custodian operations performed by the custodian bank;
2) Types of client orders and the manner of their execution;
3) Manner of handling of securities and the client's funds;
4) Rights and obligations of the custodian bank and its clients.
The Commission shall prescribe in more detail the content and manner of disclosure of the Rules referred to in Paragraph 1 this Article.
Custodian bank shall conclude a written contract with the client, which regulates their mutual rights and obligations in conducting custodian activities, in accordance with this law and the Rules from Paragraph 1 this Article.
Employees and members of the management of the bank conducting custodian activities shall safeguard, as a trade secret, the information about the state of and transactions in the securities accounts of customers, and other information that they learned in operation of a custodian bank and shall not be disclose them to third parties, nor use or allow third parties to use them.
Notwithstanding Paragraph 5 this Article, information from that Paragraph may be disclosed and made available to third parties:
1) Upon written approval of the client;
2) During supervision of legality of operations performed by the person authorized by the Commission;
3) By order of court or other competent state authority.
Article 76
Management company shall sign separate contracts with custody banks on providing custody services for each investment fund within a period of eight days starting from the day the license for organizing open-ended, i.e. for establishing closed-ended fund is issued.
By signing a contract specified in paragraph 1 of the present Article, custody bank shall contract itself to conduct activities in compliance with provisions of the Article 77 of the present Law, and management company shall contract itself to pay fees to custody bank.
One custody bank shall provide custody services for one investment fund.
Management company shall deliver a copy of a contract specified in paragraph 1 of the present Article to the Commission, including all additional amendments.
Article 77
The custodian bank performs the following custodian services:
1) Opens and manages accounts of securities that are assets of an open-end fund with the Central Securities Depository and Clearing House (hereinafter: Central Registry), in its name and on behalf of members of the open-end fund (custodial account);
2) Opens and manages accounts of securities that are assets of the closed-end fund with the Central Registry, in the name and on behalf of the closed-end fund;
3) Opens and manages securities accounts with the Central Registry in the name and on behalf of legal holders of Management companies (management account);
4) Opens and manages pecuniary account of an investment fund, collects payment of investment units, transfers funds during asset investment and makes payments in the purchase of investment units;
5) Executes the transfer orders of the rights from securities and orders for registration of third parties’ rights on securities and provides the transfer of rights from such securities;
6) Carries out the orders of the management company for the transfer of assets, settlement or payment and billing based on the purchase/sale of the assets of the investment fund, if not contrary to law and the fund's prospectus;
7) Informs the Management Company of executed orders and other performed activities related to assets of the investment fund;
8) Controls and confirms the calculated net asset value of open-end and closed-end fund, investment unit value, or net asset value per share;
9) Controls the calculation of open-ended fund income;
10) Charges receivables from issuers on the basis of matured securities, interest and dividends on behalf of lawful holders of those securities and ensures the achievement of other rights that belong to the lawful holders of securities who are its clients;
11) Authorized by client, it takes care of the client’s execution of tax liabilities in connection with the securities;
12) Notifies the Management Company of corporate activities related to the assets of the investment fund, or notifies the client whose property the Management Company manages;
13) Notifies the Commission of the observed irregularities in operations of the Management Company in connection with the management of the fund, immediately after such violations were observed;
14) Performs other duties in accordance with this law, the law governing voluntary pension funds and other laws.
When it performs services under paragraph 1 of this Article, the custodian bank is responsible to ensure that there are sufficient funds on the pecuniary or proprietary customer account or sufficient securities on the day of settlement.
When it performs services under paragraph 1 this Article, the custody bank shall keep separate records of securities and the persons on whose behalf such activities are performed, it shall keep such data from these records as business secret and protect them from unauthorized usage, alteration or loss.
Securities that are managed by the custodial account are not owned by the custodian bank and are not included in its assets, may not be included in the liquidation or bankruptcy estate, nor can they be used for payment of liabilities of this bank towards third parties.
The custodian bank may perform services for several investment funds, except that in this case it manages separate asset accounts for each fund.
The custodian bank may not be closely affiliated with the Management Company.
The custodian bank shall ensure that the sale, issuance and redemption of investment units shall be performed in accordance with law, rules of operation and investment policy of the investment fund.
The Commission shall prescribe in more detail the frequency, method and a standardized form of informing the Commission by the custodian bank, as well as the manner of coordination, in the event of any discrepancy between the calculated net value of the fund’s assets referred to in Paragraph 1 item 8) of this Article by the Management Company and custodian bank, or the calculated income of the fund under Paragraph 1 Item 9) of this Article by the Management Company and the custodian bank.
Breaking Contract with Custody Bank
Article 78
Party intending to break the contract specified in the Article 76 paragraph 1 of the present Law shall inform the other party about it three months in advance.
Broken contract shall be considered broken as of the day the contract is signed with new custody bank, but not before the period of time specified in paragraph 1 of the present Article has expired.
Custody bank shall inform the Commission about breaking the contract and about reasons for it.
After breaking the contract custody bank shall deliver all documents and archived materials to new custody bank on the day that follows the day of breaking the contract.
Article 79
In case custody bank work license or license for conducting activities is revoked, or in case bankruptcy procedure has been initiated against custody bank, management company shall immediately break the contract on providing custody services, it shall sign contract with new custody bank and inform the Commission about it.
Custody bank whose work license or license for conducting custody bank activities is revoked, or custody bank the bankruptcy procedure has been initiated against, shall immediately transfer investment fund assets to custody bank the management company has signed contract with.
In case management company does not act in compliance with paragraph 1 of the present Article, the Commission shall pick new custody bank.
The Commission may suggest to management company to change custody bank if custody bank conducts activities in such a way that interests of investment fund members, i.e. shareholders are significantly jeopardized.
Article 80
The Commission shall supervise implementation of the present Law, it shall adopt by-laws from its competence for the execution of the present Law and it shall keep the Management Companies Registry and the Investment Funds Registry.
The Commission shall make final decisions in the process of exercising its competence.
Dissatisfied party may initiate administrative dispute against decisions specified in paragraph 2 of the present Article.
Supervision of Business Activities
Article 81
The Commission shall supervise management companies and investment funds business activities, and custody banks custody services, in terms of the present Law.
If in the process of exercising its competence the Commission finds legal entities which are conducting management company activities or acting as investment funds, and they have no license, nor are registered under the provisions of the present Law, the Commission shall forbid those legal entities to run business activities that should be conducted only by management companies and investment funds in terms of the present Law, and it shall undertake other measures in compliance with law.
The Commission shall exercise direct supervision of business activities of management companies and investment funds, and custody services of custody banks, in business premises of companies, funds and banks at least once a year, and if necessary - more frequently.
The Commission’s authorized person may perform the following activities in the process of direct supervision:
1) it may inspect general enactments, business books, account statements and other documents of management company, investment fund and custody bank, and make copies of such documents;
2) it may require information on specific issues significant for business activities of management company, investment fund and custody bank.
A protocol shall be made on conducted direct supervision.
Article 82
In case the Commission in the process of exercising supervision of management companies, investment funds and custody banks finds illegalities, and/or irregularities in their business activities, it shall order that management company, investment fund and/or custody bank to remove discovered irregularities within a period of time not longer than 60 days starting from the day the order is received.
If management company or custody bank does not act in compliance with order specified in paragraph 1 of the present Article, the Commission may undertake one or more measures, as follows:
1) it may pronounce public warning;
2) it may initiate proceedings before the competent body;
3) it may withdraw its consent to appointing management board members, and/or director;
4) it may forbid issuance of investment units for a period of up to three months;
5) other measures in accordance with the law regulating the capital market.
Revoking Work License to Management Company
Article 83
The Commission shall revoke work license to management company in the following cases:
1) if it does not file a registration application within a period of 30 days, in compliance with law that governs registration of business companies;
2) if it does not use a license for a period of 12 months, expressly refuses license, or if it ceased to carry out activity envisaged in this law more than six months ago;
3) if license was issued on the grounds of untrue data;
4) (deleted)
5) if no longer meets conditions prescribed for acquiring work license;
6) if it harshly violates provisions of the present Law and provisions of law that governs market of capital;
7) if management company does not obey a ban order specified in the Article 82 paragraph 2 of the present Law;
8) if management company delivers to the Commission information on its intention to terminate conducting business activities and files an application to be erased from the Registry;
9) if bankruptcy or liquidation proceedings have been initiated against it.
VI FOREIGN MANAGEMENT COMPANIES AND INVESTMENT FUNDS
Article 84
Foreign management companies and investment funds intending to raise funds in the Republic shall register themselves and conduct business activities in compliance with the present Law.
Article 85
(Deleted)
Advertising Prospectus with Untrue Data
Article 86
If person, with intention to deceive an investor, announces untrue data on legal or financial status of investment fund or its business capabilities or other untrue data relevant for reaching investment decision in investment fund prospectus, shortened prospectus, annual or semi-annual report, or if he/she announces incomplete data on those facts - such a person shall be sentenced to imprisonment of up to three years.
If person, with intention to deceive an investor, does not announce addition in prospectus or in report on important events which may substantially influence investor’s decision - such a person shall be sentenced to imprisonment of up to three years.
2. Economic criminal acts of the Management Company or other legal entities
Article 87
A fine of 500.000 to 3.000.000 dinars shall be imposed on a legal entity for an economic violation that:
1) Uses the term investment fund contrary to the provisions of Article 3 of this law;
2) Acts contrary to Article 6 of this law with regard to participation in the equity or assets owned by other legal entities;
3) Performs the activity for which it is not licensed under Article 10 Paragraph 6 and Article 25 of this law;
4) Does not comply with the investment restrictions of Art. 29, 30 and 31 of this law;
5) Disposes of investment fund assets contrary to Article 33 of this law;
6) Charged fees in contrary to Article of 44 this law;
7) Prevents the Commission’s authorized person to perform supervision.
For the acts referred to in paragraph 1 of this Article, the responsible person in the legal entity shall be fined for an economic offense with a fine of 50.000 to 200.000 dinars.
Article 88
A fine of 300.000 to 2.000.000 dinars shall be imposed on the Management Company if:
1) A person nominated for the general manager or the member of the management does not meet the requirements of Article 12 of this law;
2) It acts contrary to Article 18, Para. 1 and 2 of this law relating to notification of changes to Rules of operation;
3) It fails to separately keep books, does not prepare financial statements and does not send the reports to the Commission in accordance with Art. 21 and 22 of this law;
4) It does not respect the rules regarding the investment objective and investment policy of the investment fund, in compliance with Article 28 of this law;
5) It does not offer to members of the investment fund to sign a declaration from Article 36 Paragraph 4 of this law, during the purchase of investment units;
6) During redemption, it does not calculate the price of investment units of open-end fund in the manner specified in the prospectus, pursuant to Article 37 Paragraph 2 Item 11) of this law;
7) It does not submit to the Commission, due to the occurrence of significant changes, the revised prospectus for granting the approval in accordance with Article 39 Paragraph 1 of this law;
8) It temporarily suspends the redemption of investment fund units of the open-ended fund, contrary to Article 48 of this law;
9) It does not inform the members of the Investment Fund on the transfer of controlling right over open-ended fund within the time period specified in Article 50 Paragraph 3 of this law;
10) It does not hire a certified appraiser in accordance with Article 60 Paragraph 4 of this law;
11) It does not provide the Commission a copy of the executed contract and subsequent amendments thereof, in line with Article 76 Paragraph 4 of this law.
For the acts referred to in paragraph 1 of this Article the responsible person in the Management Company shall be fined from 10.000 to 150.000 dinars.
Article 89
A fine of 300.000 to 2.000.000 dinars shall be imposed on the custodian bank if:
1) In the case of Management Company’s license revocation and dissolution of the investment fund, does not take measures pursuant to the provisions of Art. 55, 56 and 70 of this law;
2) Without the consent of the Commission, it makes a decision on appointing a person who manages the operations of the custody bank (Article 75b, paragraph 3);
3) It does not obtain approval from the Commission on the Rules of operation with securities (Article 75c);
4) It does not execute a contract with the client in writing (Article 75c Paragraph 4);
5) It does not provide services in accordance with Article 77 Paragraph 1 Items 5) to 13) of this law;
6) It fails to comply with Article 77 Paragraph 2 of this law in relation to settlement;
7) It does not keep separate records on securities and persons in whose name it opens and manages securities accounts (Article 77, paragraph 3).
Items 8) and 9) (deleted)
For the acts referred to in Paragraph 1 of this Article, the responsible person in the custodian bank shall be fined in the range of 10.000 to 150.000 dinars.
Article 90
(Deleted)
VIII TRANSITIONAL AND FINAL PROVISIONS
Article 91
Legal entities which were conducting activities management companies or investment funds are supposed to do in terms of the present Law, or legal entities which were using title "investment fund" before the present Law entered into force, shall harmonize their business activities and general enactments with the provisions of the present Law, i.e. they shall obtain from the Commission management company work license, and/or license to organize open-ended fund or to establish closed-ended fund, and/or to register as private fund, within a period of six months starting from the day the present Law started applying.
Article 92
Regulations for implementing the present Law shall be enacted within a period of six months starting from the day the present Law is entered into force.
Article 93
The present Law shall enter into force on the eighth day after its publication in the "Official Herald of the Republic of Serbia" and it shall start applying within a period of six months starting from the day the present Law entered into force.
Independent Articles of the Law on Amending the Law on Investment Funds
("Official Herald of the Republic of Serbia", No. 51/2009)
Article 21
The Securities Commission shall bring into accord its enactments with the present Law within the period of 30 days starting from the day of entering into force of the present Law.
Article 22
The Securities Commission shall enact regulations it is authorized to enact on the ground of the present Law within the period of 60 days starting from the day of entering into force of the present Law.
Article 23
Provisions of Article 1, Article 2 paragraph 1, Article 7 paragraph 1, Article 8 paragraph 1, Article 9, in the part relating to authority of the Securities Commission to prescribe the time limit for bringing into accord the structure of investment fund assets with the investment limitations, Article 13, Article 14 paragraph 1 and articles 15 and 16 of the present Law, shall apply from 28 March 2009.
Article 24
The present Law shall enter into force on the day following the day of its publication in the "Official Herald of the Republic of Serbia".
Independent Articles of the Law on Amending the Law on Investment Funds
("Official Herald of the Republic of Serbia", No. 31/2011)
Article 18
Securities Commission shall harmonize its documents with this law within 30 days from the date of this law’s entry into force.
Article 19
Securities Commission shall adopt regulations for which it is authorized under this law, within 60 days from the date of this law’s entry into force.
Article 20
This Law shall enter into force on the eight day after publication in the "Official Gazette of the Republic of Serbia".
Independent Articles of the Law on Amending the Law on Investment Funds
("Official Herald of the Republic of Serbia", No. 115/2014)
Article 45
The proceedings that were not finalized prior to the entry into force of this law shall be completed in accordance with the provisions of the Law on Investment Funds ("Official Herald of RS", No. 46/06, 51/09 and 31/11).
Article 46
The Securities Commission shall issue regulations under Articles 3, 4, 8, 11, 12, 15, 17, 25, 33 and 37 of this law, within 60 days from the day this law enters into force.
Existing management companies shall harmonize their documents with the provisions of this law and the corresponding acts of the Commission, within 90 days from the day this law enters into force.
Existing management companies shall harmonize their business and operations of the managed fund with the provisions of this law and the corresponding acts of the Commission, within six months from the day this law enters into force.
Article 47
This Law shall enter into force on the eight day after its publication in the "Official Herald of the Republic of Serbia".