Investment Management Companies

This is an introductory stage, during which the Latvijas Banka organizes a meeting with an entrepreneur to discuss its planned activities. At this stage, the enterprise does not necessarily have to be established yet.

What does the entrepreneur do?

• Prepares information on the shareholder, stockholder and officials of the enterprise.
• Prepares general information on the type of capital financing and the origin of funds.
• Prepares a draft operational plan developed for at least three next years of operation, reflecting in detail the company's operational strategy (indicating also the none-core services which the company intends to provide in addition to the core activity), the financial forecasts for at least three next years of operation, a description of market research, and any other information that provides a clear and fair presentation of the operations planned by the IMC;
• The draft operational plan shall include general information on the planned operation of the fund, including a description of the investment strategy and policy, the main asset categories and sectors in which the fund plans to invest, the geographical focus, as well as a description of the planned investors;
• Prepares information on the planned business model: procedures for the provision of services, organizing payment flows, customers, countries in which the service will be provided.
• Starts drafting of necessary documents.

What does Latvijas Banka do?

• Provides advice regarding the applicable regulatory framework.
• Carries out an assessment of the initial business project and procedures.
• Assesses whether the authorization process can be continued.
• Provides advice on documents to be submitted

What should be taken into account?

• Please refer carefully to the regulatory requirements.
• Assess the need to attract qualified experts or consultants.
• By attracting consultants, the company shall actively participate in the process to ensure that the end result is in line with the business model and its risks.

Documents to be submitted:

• the CVs of the potential officials;
• the CVs of the major potential shareholders, information on funding for setting up the IMC, information on financial stability (summary of assets and liabilities), origin of wealth
• the draft action plan

Costs

Preparing for submission of the application and provision of advice by Latvijas Banka are free of charge.

The entrepreneur prepares and submits application for acquiring the licence.

What the entrepreneur does

• Submits the application and all necessary information and documents in accordance with the requirements of Chapter II of the Law;
• Receives information from Latvijas Banka about the commencement of the license application review process or about deficiencies that need to be addressed in the submitted application;
• Provides the necessary additional explanations and makes corrections to the submitted documents (if necessary).

What Latvijas Banka does

• Within 25 working days, carries out a completeness check of the application (The evaluation on the substance of the application has not yet begun);
• If the application is incomplete, Latvijas Banka sends a letter to the entrepreneur with information about the identified deficiencies that need to be addressed;
• If the application is complete, Latvijas Banka begins evaluating the license application;
• Latvijas Banka appoints the project manager for the licensing and provides the entrepreneur with access to the project management tool that will help to monitor the progress of the process.

What shall be taken into account

• Before submitting an application for licence, we invite you to use the consultations offered by Latvijas Banka;
• Please ensure that the submitted documents are complete and prepared with high quality;
• Please check whether all necessary documents have been submitted (see the list of documents to be submitted).

List of documents to be submitted

For the acquisition of IMC license the authorized person of the entrepreneur prepares and submits an application in accordance with the Section 10 paragraph 1 of the Law.

The following documents and information shall be attached to the application:

1. Information and documents on the company and its shareholders (stockholders):

1.1. A document confirming the payment of the initial capital in accordance with Section 10, paragraph two, clause 1 of the Law;

1.2. A list of shareholders (stockholders) in accordance with Article 10, paragraph two, clause 2 of the Law;

1.3. Information on shareholders (stockholders) - natural persons in accordance with Article 10, paragraph two, clause 2 subclause (a) of the Law;

1.4. Information on shareholders (stockholders) - legal persons in accordance with Article 10, paragraph two, clause 2 subclause (b) of the Law;

1.5. A notification on qualifying holdings and documents confirming that the company's shareholders (who have qualifying holding in the company) have the financial resources and the origin of such resources for them to be able to make contributions in the company's capital in accordance with Article 10, paragraph two, clause 2 subclause (c) of the Law. Specifies the percentage of each shareholder's acquired participation in percentage of share capital or voting shares, by adding the information provided in accordance with the Latvijas Banka's Regulation No 241.

1.6. Information about the manager's shareholders (members) - legal persons - owners (up to the natural person, in accordance with Article 10 paragraph two, clause 2, subclause (d) of the Law), by adding the information provided in accordance with the Latvijas Banka's Regulation No 241.

1.7. Information about each company official in accordance with Section 10(3) of the Law:

1.7.1. Notification filled out by each official indicating the following information – the IMC's name and the position that the official is running for, the official's name and surname (in Latvian and original language), year and date of birth, personal identification code (if any), citizenship, education (academic degree), professional development, whether there has been a criminal conviction, whether the right to engage in commercial activities has been revoked, previous employment for the last 10 years and a brief description of job duties. The veracity of the information provided shall be certified by the respective company official and the Chairman of the IMC's management board.

1.7.2. Copies of documents certifying the relevant education.

1.8. A list of stakeholders of the company in accordance with Section 10 paragraph five of the Law.

2. Information and documents on the operation of IMC in accordance with Article 10, paragraph 6 of the Law.

2.1. The organizational structure of the IMC;

2.2. Description of the management information system;

2.3. Accounting policy;

2.4. Risk management policy;

2.5. Information system protection regulations, and also regulations for the protection of a register for investment certificates of the fund and a database for the accounting of other financial instruments under management of a company;

2.6. Remuneration policy;

2.7. Policy for the prevention of conflicts of interest;

2.8. Description of the procedures for the examination of submissions and complaints (disputes) of fund investors regarding the provision of management services by the company;

3. The operation plan in accordance with Section 10 paragraph 7 of the Law;

The operational plan developed for at least three next years of operation and approved by the shareholders meeting of the company, reflecting in detail the company's operational strategy (indicating also the none-core services which the company intends to provide in addition to the core activity), and the financial forecasts including draft report disclosing the financial standing as at the end of the year for at least three next years of operation, draft financial performance report for at least three next years of operation, draft own funds calculation, and the recorded amount of annual expenditures to be added, a description of market research, and any other information that provides a clear and fair presentation of the operations planned by the company.

4. Documents needed for the development of the AML and sanction risk management internal control system (elements of the internal control system can be included into one or several policies and procedures depending on the size of the organization, the specifics of the operation and risk exposure levels).

5. Information and documents on the registration and the operations of the IMC in accordance with Section 23 of the Law:

5.1. the fund prospectus (two original copies);

5.2. key investor information (two original copies);

5.3. the fund rules (two original copies);

5.4. the custodian bank agreement;

5.5 list of employees of the custodian bank who will be responsible for the performance of functions of the custodian bank (indicating the employee's given name, surname, personal identity number, and work experience within the last three years).

Documents listed above shall be submitted in general case. However, in case of some additional circumstances that the IMC is aware of – for instance, planned outsourcing and other special circumstances listed in the law, the IMC shall submit relevant documents about those circumstances as well.

Costs

1422 euro for the review of documents submitted for the registration of investment fund.

426 euro for the review of prospectus of the fund submitted for the registration or amendments in management rules.

(the payment must be paid before the submission is officially made)

Terms of review of application

60 days from the moment when all documents listed in the Law as mandatory for the decision making.

Latvijas Banka performs essential evaluation of application

What entrepreneur does?

• Follows evaluation process of application by virtue of the project management tool
• As soon as possible provides answers to requests for additional information from Latvijas Banka
• Implements changes to documents submitted – in accordance with the guidance of Latvijas Banka
• Participates in meetings organized by Latvijas Banka

What Latvijas Banka does?

• Evaluates the application and submitted documents in essence.
• Communicates with the contact person of the entrepreneur in case any deficiencies are detected.
• Prepares a letter to the entrepreneur in case of deficiencies in the application submitted.
• Continues to review application taking into account changes/corrections implemented by entrepreneur.
• Closes the evaluation of application.

What shall be taken into account

• Follow the progress of the review of application;
• Provide additional explanations and implement changes/corrections as soon as possible;
• We ask that representatives of the entrepreneur would also be present at the meetings organized by Latvijas Banka instead of only consultants (if they are involved).

Costs

In the stage of the review of application there are no additional costs, related to the review of documents.

Latvijas Banka completes the evaluation of the application and adopts a decision to issue or refuse the license.

What the entrepreneur does:

• Prepares to receive the license and start operations in accordance with the business plan.
• Formalizes users for the Latvijas Banka Data Reporting System for future communication with Latvijas Banka and for submitting reports.

What Latvijas Banka does:

• Prepares a decision on whether to issue or refuse the license.
• Informs the entrepreneur about the decision made.
• Publishes the information on the website and registers it in the registry of European Securities and Markets Authority.

What to consider:

• Familiarize yourself with the information provided by Latvijas Banka on access to the Data Reporting System!
• Familiarize yourself with the information related to the requirements and procedures for providing operational reports and information!
• Prepare to start operations in accordance with the approved business plan and procedures!

Costs

There are no additional costs associated with obtaining a license in the license acquisition stage.

Latvijas Banka performs supervision of IMC operations in accordance with the requirements of the Law.

What the entrepreneur does:

• Gets acquainted with the IPAS curator appointed by Latvijas Banka.
• Informs Latvijas Banka about any changes in the information and documents submitted for obtaining a license.
• Prepares reports in accordance with the regulations on report preparation – FCMC Regulation No 155, FCMC Regulation No 181, and Regulation No 296 (binding in certain cases);
• Provides responses to requests from Latvijas Banka.

What Latvijas Banka does:

• Appoints curator for the IMC.
• Evaluates compliance of IMC's operations with the requirements of regulatory acts.
• Requests additional information about IMC's operations and its indicators.
• Evaluates submitted reports and supervision information.
• Organizes periodical meetings with IMC's management to ensure and promote active and effective communication and cooperation.

What to consider?

In case of any questions or uncertainty, contact the IMC's curator appointed by Latvijas Banka. Provide reports and requested supervision information on regular basis. Report changes in the investment fund management process, as well as changes in the information and documents submitted for obtaining a license, including in cases of changes in officials or participants.

Costs

• IMC, which has received a license from Latvijas Banka, pays up to 0.132 % including the average assets of the funds managed by it in a quarter for the financing of Latvijas Banka activities, but no less than 3557 euros per year;
• In case IMC carries out activities listed in the Section 5 paragraph two and three of the Law it pays up to 1% of the gross income from the investment services referred to in Section 5, Paragraphs two and three of the Law provided by a branch in a quarter, but not less than 711 euros a year;
• A company licensed in another Member State which has registered an investment fund in Latvia shall pay to Latvijas Banka for the supervision of the activity of the investment fund registered in Latvia up to 0. 52 % of the average amount of assets of such investment fund in a quarter, but not less than 1422 euros a year;
• If an IMC performs the management of investment funds and alternative investment funds, it shall pay to Latvijas Banka up to 0.132 % of the average amount of assets of investment funds and alternative investment funds under the management thereof in a quarter, but not less than 3557 euros a year.

Every year Latvijas Banka determines the amount of payments of supervised financial market participants as  well as the procedure for making payments thereof.