Securities Market Act

Part 1 GENERAL INFORMATION  

Chapter 1 GENERAL PROVISIONS  

§ 1.  Scope of application

  This Act regulates the public offer of securities and their admission to trading on regulated securities markets, the activities of investment firms, the provision of investment services, the operations of regulated securities markets and securities settlement systems as well as the exercising of supervision over the securities market and the participants therein.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 2.  Security

 (1) For the purposes of this Act, each of the following proprietary right or obligation or contract transferred on the basis of at least unilateral expression of will is a security, even without a document being issued therefor:
 1) a share or other similar tradable right;
 2) a bond, convertible security or other tradable debt obligation issued which is not a money market instrument;
 3) a subscription right or other tradable right granting the right to acquire securities specified in clause 1) or 2) of this subsection;
 4) an investment fund unit and share;
[RT I, 31.12.2016, 3 - entry into force 10.01.2017]
 5) a money market instrument;
 6) a derivative security or a derivative contract;
 7) a tradable depositary receipt.

 (2) For the purposes of this Act, a money market instrument is a low credit, unsecured, transferable and marketable debt obligation issued by an issuer for a term of up to one year which is traded on the money market, including a treasury bond, commercial paper, certificate of deposit and bill of exchange secured by a credit institution complying with the aforementioned characteristics.

 (3) For the purposes of this Act, a derivative instrument is a tradable security expressing a right or obligation to acquire, exchange or transfer, the underlying assets of which are securities specified in subsection (1) of this section or the price of which depends directly or indirectly on:
 1) the stock exchange or market price of the security;
 2) the interest rate;
 3) the securities index, other financial index or financial indicator, including the inflation rate, freight rate, emission allowance or other official economic statistics;
 4) currency exchange rates;
 5) credit risk and other risks, including climatic variables;
 6) the exchange or market price of a commodity, including precious metal.

 (4) For the purposes of this Act, a convertible security is:
 1) a convertible bond within the meaning provided for in § 241 of the Commercial Code;
 2) a convertible bond which may be exchanged only for a share of a subsidiary of the issuer – exchangeable debt security;
 3) a debt security with warrants consisting of a redeemable bond and the right to acquire a share to be issued (warrant).

 (5) For the purposes of this Act, an equity security is:
 1) any security specified in clause (1) 1) of this section;
 2) any freely transferable subscription right, convertible security or derivative security which grants the right to acquire securities specified in clause (1) 1) of this section by way of exchange or exercise of another right if the issuer of the security to be issued is the issuer of securities which are the underlying assets of the security or belongs to the consolidation group of the issuer.

 (6) For the purposes of this Act, a non-equity security is any other security not specified in subsection (5) of this section.

 (7) For the purposes of this Act, securities issued in a continuous or repeated manner means issues on tap or at least two separate issues of securities of a similar type in a period of 12 months.

 (8) For the purposes of this Act, bills of exchange, cheques and other means of payment, except bills of exchange secured by a credit institution deemed to be money market instruments, are not deemed to be securities.

 (9) Derivative securities and derivative contracts are derivative instruments.

 (10) For the purposes of this Act, a derivative contract is a contract providing for a right or obligation to acquire, exchange or transfer:
 1) which is assumable or non-assumable by a third person with the consent of a party;
 2) the underlyings of which are securities specified in subsection (1) of this section or the price of which depends directly or indirectly on the circumstances provided for in subsection (3) of this section.

 (11) In Parts III and IV of this Act, "security" includes only the following derivative contracts:
 1) option contracts, futures contracts, swaps, interest rate contracts and other derivative contracts related to a security, currency, interest rate, yields, derivative securities, derivative contracts, financial indices or financial indicators which may be performed in kind, in money or in money under the right of option or in the case of which performance in kind may be replaced by performance in money;
 2) option contracts, futures contracts, swaps, interest rate contracts and other derivative securities and derivative contracts related to commodities which shall be performed in money, in money under the right of option or the performance of which may be replaced by performance in money;
 3) option contracts, futures contracts, swaps and other derivative contracts related to commodities admitted to trading on a regulated securities market or an MTF which can actually be performed;
 4) option contracts, futures contracts, swaps, forwards contracts and other derivative contracts related to commodities which are not specified in clause 3) of this subsection and not established for commercial purposes, but which have features characteristic of derivative instruments, since, among other things, they are performed through a settlement system or they are subject to regular margin calls;
 5) derivative instruments for transfer of credit risks;
 6) contracts for difference;
 7) option contracts, futures contracts, swaps, interest rate contracts and derivative contracts related to climatic variables, freight rate, emission allowance, inflation rate, or other derivative contracts related to official economic statistics which shall be performed in money, in money under the right of option or the performance of which may be replaced by performance in money, also derivative contracts related to assets, rights, obligations, indices and circumstances not specified in this section which have features characteristic of derivative instruments, among other things, the fact that they are performed through a settlement system or they are subject to regular margin calls or which are admitted to trading on a regulated securities market or an MTF.

 (12) Detailed features of derivative instruments are provided for in Articles 38 and 39 of the Commission Regulation (EC) No 1287/2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading, and defined terms for the purposes of that Directive (OJ L 241, 2.09.2006, p.1-25).
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 3.  Regulated securities market

  For the purposes of this Act, a regulated securities market (hereinafter regulated market) is a multilateral system of organisational, legal and technical measures organised or managed in Estonia or in another Contracting Party to the EEA Agreement (hereinafter Contracting State) which is established for the purpose of enabling continuous and regular trade with securities admitted to trading there and where the non-simultaneous or simultaneous interests of different people for acquisition and transfer of securities are brought together under uniform conditions which result in a contract.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 4.  Securities market participant

  Issuers, bidders, investors, clients and professional securities market participants are securities market participants.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 5.  Issuer

 (1) For the purposes of this Act, an issuer is a legal person who has issued securities or has assumed an obligation to issue securities.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) For the purposes of Chapter 20 of this Act, an issuer shall mean in addition to provisions of subsection (1) of this section:
 1) a natural person or pool of assets of another Contracting State who has issued securities or has assumed an obligation to issue securities;
 2) in case of depositary receipts representing shares, the issuer of shares on the basis of which such depositary receipts are issued.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 5¹.  Offeror

  For the purposes of this Act, an offeror is a person who offers securities to the public.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 5².  Person asking for admission to trading

  A person asking for admission to trading for the purposes of this Act shall mean a person who applies for the admission of securities to trading on a regulated market or at whose request securities have been admitted to trading on a regulated market, including without the issuer's consent.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 6.  Investor

 (1) For the purposes of this Act, an investor is a person who owns a security or who has assumed an obligation to acquire securities.

 (2) For the purposes of this Act, each of the following is a qualified investor:
 1) a credit institution, investment firm, management company, investment fund, insurance undertaking and another financial institution subject to financial supervision;
 2) the Republic of Estonia, a foreign state, a local or regional government or the central bank of Estonia or a foreign state;
 3) an international institution or organisation, including the International Monetary Fund, the European Central Bank, and the European Investment Bank;
 4) a financial institution whose only business activity is investment in securities, a market trader in commodities and commodity derivatives;
 5) a large enterprise;
 6) another professional client not specified in clauses 1)–5) of this section or an eligible counterparty pursuant to the provisions of §§ 46 and 46¹ of this Act or a person who is considered a professional client or an eligible counterparty pursuant to the current legislation of another Contracting State, excluding the case when the client has applied for being treated as a retail client.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2¹) A large enterprise for the purposes of the Act is a company which meets at least two of the following conditions:
 1) the balance sheet total thereof is equal to or exceeds 20 million euros;
 2) the net turnover thereof is equal to or exceeds 40 million euros;
 3) the equity thereof is equal to or exceeds 2 million euros.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2²) For determining a qualified investor by an issuer or an offeror, investment firms and credit institutions shall provide the information concerning the treatment of their client as a professional client or an eligible counterparty to the issuer or the offeror at the request of the latter unless otherwise provided by the Personal Data Protection Act.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) [Repealed - RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (4) [Repealed - RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 6¹.  Market maker

  For the purposes of this Act, a market maker is a person who is permanently ready to deal in securities on own account for a price determined in its purchase and sales offer.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 7.  Professional securities market participant

 (1) Each of the following is a professional securities market participant:
 1) an investment firm;
 2) a credit institution;
 2¹) a management company;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 3) an operator of the regulated market;
 4) an operator of a securities settlement system;
 5) other persons prescribed by law.

 (2) [Repealed - RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 7¹.  Offering programme

  For the purposes of this Act, an offering programme means a plan of the issuer to issue non-equity securities, including warrants in any form, in a continuous or repeated manner during a specified issuing period.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 7².  Regulated information

  For the purposes of this Act, regulated information shall mean all information which the issuer or a person applying for admission to trading is required to disclose pursuant to the provisions of Chapter 20 or §§ 188⁷ and 188⁹ of this Act.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 8.  Supervision of securities market

  The Financial Supervision Authority (hereinafter Supervision Authority) shall exercise supervision over compliance with this Act and legislation established on the basis thereof on the basis of this Act and the Financial Supervision Authority Act.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 8¹.  Consolidation group

 (1) For the purposes of this Act, a consolidation group is formed by:
 1) a parent company with a subsidiary or subsidiaries;
 2) a parent company with a subsidiary or subsidiaries and a parent company or undertakings related to the subsidiaries thereof within the meaning of the holding specified in clause 8² (2) 1) of this Act;
 3) companies or other legal persons under a common management pursuant to the contract entered into or the provisions of the memorandum of association or the articles of association or whose majority of the membership of the directing or supervisory bodies is formed by the same persons until the consolidated annual financial report is approved.

 (2) For the purposes of this Act, a parent undertaking is a person who controls at least one company or other legal person (subsidiary) pursuant to § 10 of this Act. For the purposes of this Act, subsidiaries of subsidiaries of parent companies are deemed to be subsidiaries of the same parent company.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 8².  Control relationships and close links

 (1) In Part III and Chapters 14–18¹ of this Act ''control relationships'' means the relations between a parent company and a subsidiary provided for in § 8¹ of this Act.

 (2) In Part III and Chapters 14–18¹ of this Act ''close links'' means a situation where at least two persons are linked:
 1) by a holding where at least 20 per cent of the share capital or votes determined by shares is held in a company or other legal person;
 2) by a control relationship within the meaning of subsection 1 of this section.

 (3) A situation in which two or more persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 9.  Qualifying holding

 (1) For the purposes of this Act, a qualifying holding means any direct or indirect holding in the share capital of a company which represents 10 per cent or more of the share capital of the company, of all rights related thereto or of the voting rights in the company or which makes it possible to exercise a significant influence over the management of the company in which that holding subsists.

 (2) Holding is direct if a person holds or exercises it personally.

 (3) Holding is indirect if:
 1) a person holds or exercises it together with one or several controlled companies;
 2) it is held or exercised by one or several companies controlled by a person;
 3) it is held or exercised by a person or a company controlled by the person upon agreement with a third party;
 4) the voting rights arising therefrom are deemed to belong to a person.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 10.  Controlled company and ownership of voting rights

 (1) For the purposes of this Act, a company controlled by a person is a company which meets at least one of the following conditions:
 1) the person holds the majority of the votes represented by shares in the company or holds the majority of the votes as a general partner or limited partner;
 2) the person who is a general partner or limited partner of the company has the right to appoint or remove the majority of members of the supervisory board or management board of the company;
 3) the person who is a general partner, a limited partner, a partner or a shareholder of the company controls alone the majority of votes pursuant to the agreement entered into with other general partners, limited partners, partners or shareholders.
 4) a person exercises or has the power to exercise dominant influence or control over a company.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) Voting rights held by a controlled company and the right thereof to appoint or remove a majority of the members of the supervisory or management board of the company and the corresponding voting rights held on the account of the person or company controlled thereby, and held by a third person acting in its own name and the right thereof to appoint or remove the majority of members of the supervisory board or management board of the company are deemed to belong to the person upon application of clause (1) 2) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) Upon determination of voting rights, the following are deemed to belong to a person:
 1) votes held personally by the person;
 2) voting rights managed by a third party for the person in the person's own name;
 3) votes held by a company controlled by the person;
 4) votes held by a third party with whom the person has entered into an agreement which obliges the parties to use concerted voting to adopt a continuous common policy towards the management of the corresponding company;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 5) voting rights held by a third party and exercised on the basis of a written agreement providing for the temporary transfer of the voting rights to the person for a counter-performance, which is entered into by the third party;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 6) votes represented by shares used as collateral, except if the person who receives the collateral (temporary holder of shares) has the right to exercise voting rights arising from the shares and has not waived the right in favour of the person;
 7) votes represented by shares encumbered for the benefit of a third party, except if the person for whose benefit the shares are encumbered has the right to exercise voting rights arising from the shares and has not waived the right in favour of the person;
 8) votes represented by shares granted to the person as a collateral or encumbered for the benefit of the person, if the person has the right to exercise voting rights arising from the shares and the person has not waived the right;
 9) voting rights represented by issued shares which a person has the right to acquire irrevocably or under the right of option on the due date for the exercise of rights or performance of obligations arising from the securities held by him or her directly or indirectly and on the basis of a binding arrangement pursuant to the law applicable thereto;
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]
 9¹) voting rights represented by shares held by a person directly or indirectly and issued by an issuer and by securities with similar economic effect to holding or entitlements to acquire such shares;
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]
 10) voting rights represented by shares deposited with the person, which the person may exercise at the discretion thereof, unless the actual holders of the corresponding shares have given instructions for the exercise of voting rights;
 11) voting rights represented by shares encumbered with a commercial lease for the benefit of the person;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 12) voting rights, which the person may exercise at the discretion thereof and pursuant to authorisation issued to him or her, unless the shareholders have given specific instructions.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) For the purposes of subsection (3) of this section, the acquisition of votes represented by shares also includes:
 1) the exchange of a convertible security for a share granting voting rights;
 2) the right to acquire voting rights arising from the shares stated in the certificate of subscription upon acquisition of the shares;
 3) the acquisition of voting rights by an owner of preferred shares.

 (5) The securities specified in clauses (3) 9) and 9¹) of this section are deemed to be securities specified in clauses 2 (1) 1)–3), 6) and 7) of this Act and any contracts which may be performed in kind or in money.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 10¹.  Other terms used in the Act

  The terms not defined in this Act shall be used within the meaning of Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.06.2013, p. 1-337).
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

Part 2 OFFER OF SECURITIES  
[RT I 2005, 59, 464 - entry into force 15.11.2005]

Chapter 2 GENERAL PROVISIONS  

§ 11.  Offer of Securities

  For the purposes of this Act, the offer of securities means a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe to these securities.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 12.  Public offer of securities

 (1) Unless otherwise prescribed in subsection (2) of this section, the offer of securities is public.

 (2) An offer of securities is not deemed to be public in the case of:
 1) an offer of securities addressed solely to qualified investors, or
 2) an offer of securities addressed to fewer than 150 persons per Contracting State, other than qualified investors, or
 3) an offer of securities addressed to investors who acquire securities for a total consideration of at least 100,000 euros per investor, for each separate offer, or
 4) an offer of securities with the nominal value or book value of at least 100,000 euros per security, or
 5) an offer of securities with a total consideration of less than 100,000 euros per all the Contracting States in total calculated in a one-year period of the offer of the securities.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) Any subsequent resale of securities which were previously the subject of one or more of the types of offer provided for in subsection (2) of this section shall be regarded as a separate offer and it shall be decided each time whether that resale is an offer of securities to the public.

 (4) The subsequent resale or final offer of securities through financial intermediaries is not deemed to be a public offer of securities if a valid prospectus is available pursuant to the provisions of § 14³ of this Act and if an issuer or a person responsible for the preparation of such prospectus provides the consent for its use based on a written contract.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 13.  Issue of securities

 (1) For the purposes of this Act, an issue of securities is a pool of securities of the same type issued on the basis of a single decision by the issuer (hereinafter issue).

 (2) The issue of securities on the basis of a single decision but at different times (as a series) is deemed to be one issue. In the framework of one issue, non-equity securities may be issued as a series in such way that the total nominal value or book value of the issued or non-redeemable securities does not exceed the volume of the issue.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 13¹.  Home Contracting State

 (1) For the purposes of this Act, a home Contracting State shall mean:
 1) Estonia in the case of an issuer registered in Estonia;
 2) a Contracting State which is the registered office or, where appropriate, place of residence of the issuer of securities in the case of an issuer of another Contracting State;
 3) at the choice of the issuer, offeror or person asking for admission to trading of a foreign state which is not a Contracting State (hereinafter third country), Estonia or another Contracting State where the securities of a third country issuer are offered to the public for the first time or where securities are asked for admission to trading on a regulated market for the first time, or, upon publication of the regulated information, at the choice of the issuer one of the Contracting States where the securities of a third country issuer have been admitted to trading on a regulated market.

 (2) The issuer, offeror or person asking for admission to trading of non-equity securities may choose Estonia or another Contracting State which is the registered office or, where appropriate, place of residence of the specified issuer of non-equity securities or where these of non-equity securities have been admitted or are to be admitted to trading on a regulated market or these are offered to the public as the home Contracting State if one of the following conditions is met:
 1) the nominal value of a security included in an issue of non-equity securities is not less than 1000 euros or in another currency is approximately 1000 euros;
 2) securities included in an issue of non-equity securities shall grant the right to acquire another freely transferable security or receive a sum of money as a result of either an exchange of the securities or exercise of the rights arising therefrom provided that the issuer of the non-equity securities is not the issuer of securities which are the underlying assets of the non-equity securities or does not belong to one consolidation group with the issuer.

 (3) The issuer of non-equity securities specified in subsection (2) of this section may choose only one Contracting State as the home Contracting State and this choice shall remain valid for at least three years unless the securities of such issuer are no longer admitted to trading on the regulated market of any Contracting State or the provisions of subsection (1) or (4) of this section apply to this issuer within three years.

 (4) An issuer may choose a new home Contracting State from among the Contracting States where the issuer's securities have been admitted to trading on a regulated market or which is the registered office or, where appropriate, place of residence of such issuer, if one of the following conditions is met:
 1) the choice of the home Contracting State of a third country issuer was made by the offeror or person asking for admission to trading;
 2) the issuer's securities are no longer admitted to trading on the regulated market in the chosen home Contracting State, but the securities have been admitted to trading in one or several host Contracting States.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 13².  Host Contracting State

  For the purposes of this Act, a host Contracting State shall mean Estonia or another Contracting State where securities are offered to the public, asked for admission to trading on a regulated market or where the issuer's securities have been admitted to trading on a regulated market, unless the state is a home Contracting State.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 14.  Application of this Part

  The provisions of Chapters 3 - 6 of this Act regarding securities are not applicable with respect to the following securities:
 1) units or shares of a collective investment undertaking specified in Article 2 (1) (o) of Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64–89) (hereinafter Prospectus Directive);
[RT I 2008, 13, 89 - entry into force 15.03.2008]
 2) money market instruments specified in clause 2 (1) 5) of this Act which are issued by a credit institution of Estonia or a person of a foreign state;
 3) securities which are issued by the Guarantee Fund, the Estonian Unemployment Insurance Fund, the Estonian Health Insurance Fund or the Motor Insurance Fund specified in § 10 of the Motor Third Party Liability Insurance Act;
[RT I, 11.04.2014, 1 - entry into force 01.10.2014]
 4) deposit certificates specified in subsection 24 (3) of the Guarantee Fund Act, which are issued in a continuous or repeated manner, guaranteed by a deposit guarantee scheme of the Contracting State, which are not subordinated, convertible, replaceable, which do not grant the right to acquire or exchange securities of a different type and are not underlying assets for derivative instruments;
 5) derivative contracts.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 14¹.  Prospectus

 (1) A public offer prospectus of the securities (hereinafter in this Part prospectus) shall contain all information which is presented in an easily analysable and comprehensible form and, according to the particular nature of the issuer and of the securities offered to the public, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses, and prospects of the issuer and of any guarantor, and of the rights attaching to such securities.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) A prospectus may consist of one document or several separate documents. The prospectus shall consist of a registration document which contains information on the issuer, a securities note which contains information concerning the securities to be offered to the public and a summary provided for in subsection (3) of this section.

 (3) A prospectus consisting of one or several separate documents shall contain a summary in the same language as the prospectus, which shall provide the main information in a brief manner and in non-technical language. The summary together with the prospectus shall provide information concerning the main characteristics of the relevant securities helping the investors decide on investment in these securities. The summary of single format shall be prepared to facilitate the comparison between similar securities. The summary shall contain the following warnings:
 1) the warning that the summary should be read as an introduction to the prospectus and any decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor;
 2) the warning that in case a claim relating to the information contained in a prospectus is brought before a court, the plaintiff investor might, under the national legislation of the home Contracting State or host Contracting State, have to bear the costs of translating the prospectus before the legal proceedings are initiated;
 3) the warning that no civil liability shall attach to any person solely on the basis of the summary or the translation thereof, unless it is misleading, inaccurate or contradicting the other parts of the prospectus, or together with the other parts of the prospectus it does not convey the main information, which would help the investor decide on investment in these securities.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3¹) The main information is material and relevantly structured information, which shall be provided to the investors so that they would have the opportunity to understand the type of issuer, guarantor and the securities offered to them or admitted to trading on a regulated market and the risks related to these and so that the investors would have the opportunity to decide the offers of which securities have to be additionally considered without the limitation of the application of the provisions of clause (3) 1) of this section.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3²) The following material data shall be provided in the main information in regard to offers and securities:
 1) brief description of the risks and main features of the issuer and potential guarantor, including assets, liabilities and financial situation;
 2) brief description of the risk associated with the investment in the securities and the main features of the investment, including the rights accompanying the securities;
 3) general terms and conditions of offer, including the provisional expenses, which payment is demanded by the issuer or the offeror from the investor;
 4) details of admitting to trading;
 5) reasons for offer and use of received revenue.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (4) A prospectus, except a summary, may pursuant to the provisions of Article 28 of the Commission Regulation (EC) No 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (Text with EEA relevance) (OJ L 149, 30.04.2004, p. 1–137) (hereinafter Prospectus Regulation) set out information as references to one or several documents published earlier which are registered with the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer or which has been submitted to them for publication. The above requirements for incorporation by reference are also applied to data, in the submission of which the Prospectus Directive or Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38–57) was followed. If information has been submitted as references, the prospectus shall contain a list of references which allows investors to easily find the information. These data shall be the latest data at the issuer's disposal.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (5) More precise requirements for the information contained in prospectuses and the format of prospectuses shall be provided for in Chapters 2 and 3 of the Prospectus Regulation.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

 (6) The specific requirements towards the preparation of the prospectus of small or medium-sized companies ( SMEs) and companies with low market capitalization, based on the principle of proportionality, are provided in Article 26b of the Prospectus Regulation and Annexes 25–28 to the Regulation.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (7) For the purposes of this Act, a SME is a company which according to its last annual report or consolidated accounts meets at least two of the following criteria:
 1) its average number of employees during the financial year is less than 250;
 2) its annual balance sheet total does not exceed 43 million euros;
 3) its annual net turnover does not exceed 50 million euros.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (8) For the purposes of this Act, a company with low market capitalization is a company, which securities have been admitted to trading on a regulated market, and the average market capitalization of these securities has been throughout the three previous calendar years based on the year-end closing price or quotation less than 100,000,000 euros.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 14².  Base prospectus

 (1) A base prospectus may be drawn up instead of a prospectus if non-equity securities issued under an offering programme or covered bonds which meet the conditions provided for in subsection 115 (9) of the Investment Funds Act (hereinafter covered bonds) are offered to the public.
[RT I, 31.12.2016, 3 - entry into force 10.01.2017]

 (2) A base prospectus shall contain complete information on the issuer and the securities offered to the public and, at the choice of the issuer, on the final term of the offer which is supplemented, if necessary, with supplements provided for in § 23 of this Act.

 (2¹) If the final terms and conditions of the offer of securities are neither included in the base prospectus nor supplements thereto, the final terms and conditions shall be communicated to the investors and submitted to the securities market supervisory agency of the home Contracting State in case of each public offer. If the issuer's home Contracting State is Estonia, the Supervision Authority shall communicate the final terms and conditions to the securities market supervisory agency of the host Contracting State as promptly as possible and, if possible, before the start of the public offer or admitting the securities to trading. The Supervision Authority shall forward the final terms and conditions of the offer of securities to the European Securities and Markets Authority. The final terms and conditions contain only the information concerning the description of the securities, and these are not used for supplementing the base prospectus. In the case specified in the previous sentence, the requirements provided for in subsection 17 (3) of this Act shall be applied.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (3) More precise requirements for the information contained in base prospectuses and the format of base prospectuses shall be provided for in Chapters 2 and 3 of the Prospectus Regulation.

 (4) The provisions of this Act regarding prospectuses apply to base prospectuses, unless otherwise provided for in this Act or the Prospectus Regulation.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 14³.  Validity of prospectus

 (1) A prospectus is valid for 12 months as of its registration, provided that the prospectus has been sufficiently supplemented with supplements provided for in § 23 of this Act.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) The registration document of a prospectus is separately valid for 12 months as of its registration with the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer, provided that it has been sufficiently supplemented with relevant information in connection with any material change or recent developments, which could affect the investors' assessment.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) A base prospectus is valid for twelve months in the case of an offering programme or, upon issue of covered bonds, until the end of the issue of the covered bonds.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

Chapter 3 PUBLIC OFFER PROSPECTUS  

§ 15.  Making prospectus public

 (1) Unless otherwise provided for in § 17 of this Act, a prospectus pertaining to the public offer of securities in Estonia, which complies with the requirements of this Act shall be made public in connection with the public offer.

 (2) The prospectus shall be made public no later than on the day on which the public offer of securities is announced.

 (3) A prospectus shall be made public taking account of the requirements provided for in Articles 29 and 30 of the Prospectus Regulation in one of the following manners:
 1) in at least one national daily newspaper;
 2) in a printed form to be made available, free of charge, to the public at the registered office of the issuer and at the offices of the financial intermediaries placing or reselling the securities, including intermediaries of payments made on the securities of the issuer (hereinafter paying agent);
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 3) on the website of the issuer or another person specified in clause 2) of this subsection;
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]
 4) on the website of the securities market supervisory agency of the home Contracting State of the issuer or another person or agency responsible for the registration of the prospectus (hereinafter in this Part securities market supervisory agency).

 (3¹) If the prospectus is made public in the manner provided for in clause (3) 1) or 2) of this section, it shall be also made public on the website of the issuer or, if necessary, the financial intermediaries placing or reselling the securities, including the paying agent of the issuer.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (4) In the case of a prospectus consisting of several separate documents or information presented as references, the documents and information in the prospectus may be made public and disseminated separately provided that all the specified documents are made publicly available free of charge according to the provisions of subsection (3) of this section. Each document shall contain a notation where other documents forming the remaining part of the prospectus can be examined.

 (5) Upon existence of a registration document valid according to the provisions of subsection 14³ (2) of this Act, only a securities note and a summary may be prepared and made public upon an offer of securities. In such case, the securities note shall contain the significant events and circumstances which usually must be presented in the registration documents, which may affect the assessments of investors and which occur after the registration of the registration document or a supplement to a prospectus in accordance with § 23 of this Act with the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer.

 (6) The content and format of a prospectus and supplements to a prospectus shall at all times be identical to the prospectus and its supplements registered with the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer and published on the website of the Supervision Authority.

 (7) Instead of a prospectus, a trading prospectus specified in subsection 132¹ (1) of this Act or listing particulars specified in § 157 of this Act may be made public.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 16.  Obligation to register or give notification

 (1) If the home Contracting State of the issuer of securities which are publicly offered is Estonia, a prospectus or, in the case provided for in subsection 15 (5) of this section, a securities note or a summary shall be registered with the Supervision Authority prior to being made public and the offer being announced.

 (2) A base prospectus shall be registered only before the first issue of securities.

 (3) If the host Contracting State of the issuer of securities which are publicly offered is Estonia, the European Securities and Markets Authority and the Supervision Authority shall be informed thereof prior to the prospectus being made public and the offer being announced through the securities market supervisory agency of the home Contracting State of the issuer, and the following documents shall be appended:
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]
 1) the registration certificate of the prospectus issued by the securities market supervisory agency of the home Contracting State of the issuer, which must contain a confirmation that the prospectus has been prepared pursuant to the requirements for prospectuses provided for in EU legislation and information concerning the exceptions made relating to the information contained in the prospectus in accordance with the provisions of EU legislation and the reasons for the specified exceptions;
 2) a transcript of the prospectus or, in the case provided for in subsection 15 (5) of this Act, a transcript of the securities note and summary of the prospectus in Estonian or English or, with the consent of the Supervision Authority, in another language;
 3) at the request of the Supervision Authority, a translation of the summary of the prospectus into Estonian.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

 (4) The Supervision Authority shall be entitled to request additional information regarding the prospectus specified in subsection (3) of this section from the securities market supervisory agency of the home Contracting State of the issuer.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

§ 17.  Exceptions

 (1) A prospectus need not be made public if the public offer of securities meets at least one of the following criteria:
 1) the issuer of the non-equity securities offered is a Contracting State, the central bank or a regional or local government of a Contracting State, the European Central Bank or an international organisation in which at least one Contracting State is a member;
 2) the offer concerns securities which are unconditionally and irrevocably guaranteed by a Contracting State or a local or regional government of a Contracting State;
 3) a credit institution offers non-equity securities which are issued in a continuous or repeated manner, which are not subordinated, convertible, replaceable, which do not grant the right to acquire or exchange securities of a different type and which are not underlying assets for derivative instruments, with a total consideration of less than 75,000,000 euros per all the Contracting States in total calculated in a one-year period of the issue or offer of the securities;
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 4) the offer concerns shares which are interchangeable with the already issued shares of the same type and of the same public limited company, provided that the offer does not result in an increase in the share capital of the public limited company;
 5) securities are offered in connection with a takeover by means of an exchange offer, provided that a document is available containing information which is regarded by the Supervision Authority to comply with the requirements established by this Act regarding prospectuses;
 6) securities are offered or allotted in connection with a merger or division, provided that a document is available containing information which is regarded by the Supervision Authority to comply with the requirements established by this Act regarding prospectuses and observes the requirements provided for in the legislation of the European Union;
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 7) shares are offered in connection with a bonus issue within the meaning of § 350 of the Commercial Code or, in the case of an issuer of a foreign state, dividends are paid out in the form of shares (share dividends), provided that a document is made available which contains relevant information on the number and nature of the shares and the reasons for and details of the offer;
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 8) shares are offered or allotted in connection with the increase in the share capital or, in other cases, free of charge to existing shareholders, provided that a document is made available which contains relevant information on the number and nature of the shares and the reasons for and details of the offer;
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 9) securities issued by an issuer or a company belonging to the consolidation group of the issuer are offered to existing or former members of the supervisory board or management board or employees of the issuer provided that the headquarters or the registered office of the company is in a Contracting State and a document is made available which contains relevant information on the number and nature of the securities and the reasons for and details of the offer.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (1¹) Clause (1) 9) of this section also applies to companies established in third countries, which securities are admitted to trading either on a regulated market or the market of the third country. In the latter case, the exception is applied in case the sufficient information, including the document specified in clause (1) 9) of this section, is available at least in English and if the European Commission has adopted a resolution which certifies the equivalence in respect to the market of the third country in question.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) Without prejudice to the adequate information of investors, where certain information required to be included in a prospectus according to the provisions of the Prospectus Regulation is inappropriate to the issuer's sphere of activity or to the legal form of the issuer or to the securities offered, the prospectus shall contain information equivalent to the required information.

 (3) Where the final offer price and amount of securities which will be offered to the public cannot be included in the prospectus or, in the case of a base prospectus, in the supplements to the prospectus, the prospectus, base prospectus or supplements to the base prospectus shall, if possible, contain at least the maximum price of securities and the criteria in accordance with which the amount and final offer price of securities will be determined. In such case, final information on the offer price and amount of securities which will be offered to the public shall be filed as soon as possible to the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer and shall be made public immediately pursuant to the requirements provided for in § 15 of this Act.

 (4) The minister responsible for the area shall establish by a regulation the specific requirements towards the public offer, trading prospectus and listing particulars of the securities which are subject to offer in the Contracting States with a total consideration of less than 5,000,000 euros calculated in a one-year period of the issue or offer of the securities.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (4¹) In case of offering the securities specified in subsection (4) of this section, the prospectus shall be prepared and made public pursuant to the requirements towards the prospectuses established by the Prospectus Regulation or the requirements towards the prospectuses established by the regulation of the minister responsible for the area specified in subsection (4) of this section.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (5) The minister responsible for the area may provide, by his or her regulation, the conditions under which and the procedure pursuant to which the Supervision Authority may make exceptions regarding the disclosure of information or the composition of information in a prospectus if:
 1) disclosure of such information in the prospectus would be contrary to the public interest; or
 2) disclosure of such information in the prospectus would be seriously detrimental to the issuer, provided that the omission would not be likely to mislead the public with regard to facts and circumstances essential for an informed assessment of the issuer, offeror or guarantor, if any, and of the rights attached to the securities offered/to which the prospectus relates; or
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 3) such information is of minor importance only for a specific offer and is not such as will influence the assessment of the financial position and prospects of the issuer, offeror or guarantor, if any.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (6) An issuer or an offeror has the right to offer the securities of an issuer whose home Contracting State is Estonia and which are specified in clauses (1) 1)-3) and subsection (4) of this section to the public pursuant to the provisions of § 391 of this Act in all host Contracting States only if a prospectus is made public regarding the securities pursuant to the requirements provided for in this Act and Chapters 2 and 3 of the Prospectus Regulation.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (7) An issuer or an offeror has the right to offer the securities of an issuer whose host Contracting State is Estonia and which are specified in clauses (1) 1)-3) and subsection (4) of this section to the public pursuant to the provisions of subsection 16 (3) of this Act in Estonia only if a prospectus is made public regarding the securities pursuant to the requirements provided for in this Act and Chapters 2 and 3 of the Prospectus Regulation.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (8) If the securities are guaranteed by the Contracting State, the issuer, offeror or person asking for admission to trading has the right not to make public in the prospectus the information concerning such Contracting State, and this applies also in case the prospectus is made public irrespective of the provisions of clause (1) 2) of this section.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

§ 18.  Application for registration

 (1) In order to register a prospectus with the Supervision authority, an application shall be submitted. If the home Contracting State of the issuer of offered securities is not Estonia, an application for the registration of a prospectus may be submitted to the Supervision Authority by the securities market supervisory agency of another Contracting State.

 (2) The prospectus and, if the issuer and the offeror have articles of association, copies thereof shall be appended to the application.

 (3) If the documents submitted upon filing the application do not meet the requirements prescribed by legislation, including a prospectus which, in the opinion of the Supervision Authority, does not include all the necessary information taking account of the interests of investors, the Supervision Authority shall demand that the documents be brought into compliance with the legislation or be amended within ten working days after the filing of the application.

 (4) In order to verify the information submitted upon application, the Supervision Authority may request that more specific information and documents be submitted, perform on-site inspections, order assessment or special audit, consult state databases and obtain oral explanations from the persons specified in subsection 24 (1) of this Act, their representatives and, in the event of justified need, third parties concerning the content of documents and facts which are relevant in the making of a decision on the registration of the prospectus.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 19.  [Repealed - RT I 2005, 59, 464 - entry into force 01.01.2011]

§ 19¹.  Transfer of registration

 (1) If necessary and with the agreement of the securities market supervisory agency of another Contracting State, the Supervision Authority may decide to transfer the registration or approval of a prospectus to the such agency, upon prior notification thereof of the European Securities and Markets Authority.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

 (2) The Supervision Authority shall inform the applicant of making a decision provided for in subsection (1) of this section within three working days after the corresponding decision is made, shall communicate the documents submitted upon application immediately to the securities market supervisory agency of another Contracting State and, if necessary, shall append the translations required by the securities market supervisory agency of the corresponding Contracting State.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 20.  Registration of prospectus

 (1) The Supervision Authority shall make a decision concerning registration of or refusal to register a prospectus within ten working days as of the submission of the application for registration or the submission of documents brought into compliance with the legislation or additional documents to the Supervision Authority or as of the receipt of documents communicated to the Supervision Authority by the securities market supervisory agency of another Contracting State upon transfer of the registration of the prospectus.

 (2) The Supervision Authority has the right to extend the term for making a decision provided for in subsection (1) of this section to up to twenty working days if the public offer involves securities issued by an issuer which does not have any securities admitted to trading on a regulated market and who has not previously offered securities to the public.

 (3) If registration is refused, the decision shall be reasoned and, upon registration of a prospectus, include the registration number.

 (4) The Supervision Authority shall immediately deliver a decision concerning registration or refusal to register a prospectus to the applicant.

 (5) If the Supervision Authority has not made a decision within a term provided for in subsections (1) or (2) of this section, a prospectus is not deemed to be registered.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

 (6) The Supervision Authority shall notify the European Securities and Markets Authority of the registration of the prospectus and supplements thereto at the same time when the applicant is notified thereof and simultaneously submit to the European Securities and Markets Authority a transcript of the prospectus and supplements thereto.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

§ 21.  Refusal to register

  The Supervision Authority has the right to refuse to register a prospectus if:
 1) the conditions of the offer are contrary to legislation in force or the articles of association of the issuer;
 2) the prospectus does not meet the requirements established by legislation and the deficiencies are significant;
 3) the issuer or the offeror does not, upon application, submit all the documents prescribed by legislation or the documents are contradictory with regard to each other, or the requirement prescribed in subsection 18 (3) of this Act has not been met.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 22.  [Repealed - RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 23.  Supplement to prospectus

 (1) Any new significant circumstances, mistakes or inaccuracies relating to the information included in the prospectus which is capable of affecting the assessment of the securities and which become known after the registration of the prospectus but before the final closing of the offer to the public or before starting the trading on a regulated market, depending on which event takes place later, shall be stated in a supplement to the prospectus. If necessary, the prospectus summary and its translations shall also be supplemented.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) A supplement to a prospectus shall be registered with the Supervision Authority or the securities market supervisory agency of the home Contracting State of the issuer and shall be made public in the same way and in accordance with at least the same arrangements as were applied when the prospectus to which the corresponding supplement is appended was made public. A supplement to a prospectus is an integral part of the prospectus.

 (3) The provisions of §§ 18-21 of this Act are applicable to proceedings regarding the registration of supplements to prospectuses with the Supervision Authority, and the term specified in subsection 18 (3) and 20 (1) is seven working days.

 (4) If the home Contracting State of the issuer is Estonia, the Supervision Authority has the right to request, by its precept, that the offeror or issuer make a prospect which complies with this section public.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 24.  Approval of prospectus

 (1) The correctness and completeness of information included in a prospectus shall be approved in the prospectus by the issuer and, upon existence, by the issuer or the offeror. The approval of the issuer shall be signed by all members of the management board of the issuer or of the body substituting therefor. The approval of the issuer or the offeror shall be signed by an issuer or an offeror who is a natural person or, in the case of a legal person, at least one member of the management board of the issuer or the offeror or of the body substituting therefor who has the right to represent the issuer or the offeror.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) An auditor shall confirm the accuracy of the information presented in the annual or semi-annual reports contained in the prospectus by his or her signature.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 25.  Obligation to compensate

 (1) If the prospectus contains information which is significant for the purpose of assessing the value of the securities and such information proves to be different from the actual circumstances, the issuer or the offeror shall compensate the owner of the security for damage sustained thereby due to the difference between the actual circumstances and the information presented in the prospectus, provided that the issuer or offeror was or should have been aware of such difference.

 (2) The provisions of subsection (1) of this section also apply if the prospectus is incomplete due to the omission of relevant facts, provided that the incompleteness of the prospectus results from the issuer or the offeror hiding of the facts.

 (2¹) The provisions of subsection (1) of this section applies to the summary of a separate prospectus, including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus.

 (3) The obligation to compensate for damage prescribed in subsection (1) of this section also rests with the issuer or offeror if a third party is the source of the information presented in the prospectus.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 26.  Level of compensation

 (1) A person who causes damage prescribed in § 25 of this Act has the right to compensate for the damage by acquiring the security from the person that sustained the damage for the price that the latter paid to acquire the offered security. By acquiring securities in this manner from the person that sustained the damage, the person causing the damage is released from the obligation to compensate for any other damage to the person that sustained the damage.

 (2) An issuer or offeror shall not have the obligation to compensate for damage on the basis of § 25 of this Act if the person that sustained the damage was aware, at the moment of acquiring the security, that the prospectus which was the basis for the offer was incomplete or contained inaccurate information. The same applies if a qualified investor that sustains damage should have realised, at the moment of acquiring the security and by exercising due care in its activities, that the information contained in the prospectus was inaccurate or incomplete, unless liability for the damage caused derives from intentional acts of the person causing the damage.

§ 27.  Limitation period

  The limitation period for a claim prescribed in § 25 of this Act is five years as of the beginning of the offer of the relevant security on the basis of a prospectus which contains inaccurate information or is incomplete.

§ 28.  Agreement to limit liability

  Any agreements which exclude, limit or reduce compensation or the limitation period prescribed in §§ 25-27 of this Act shall be null and void.

Chapter 4 ANNOUNCEMENT AND EXECUTION OF OFFERS  

§ 29.  Announcement of offer

 (1) Before a public offer begins, the issuer or the offeror shall announce the offer.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) The requirement provided for in subsection (1) of this section does not apply if, pursuant to the provisions of this Act, it is not required to make a prospectus public.

 (3) In order to announce an offer, the issuer or the offeror shall publish a relevant notice (hereinafter notice of offer) in at least one national daily newspaper pursuant to the procedure provided for in Article 31 of the Prospectus Regulation.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 30.  Notice of offer

  A notice of an offer shall contain the information required in Article 31 of the Prospectus Regulation.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 31.  Requirements for advertising

 (1) A notice of an offer and any other advertising pertaining to the offer disclosed orally or in writing, including information not disclosed for advertising purposes, may not be incorrect or misleading in character and may only contain information to be found in the prospectus.

 (2) Advertising pertaining to an offer shall comply with the requirements provided for in Article 34 of the Prospectus Regulation and the Advertising Act and contain information about places where the prospectus is made public and can be obtained.
[RT I 2008, 15, 108 - entry into force 01.11.2008]

 (3) A notice of an offer and any advertising materials pertaining to the offer shall be submitted to the Supervision Authority prior to being made public.

 (4) An offer may be advertised only after registration of the prospectus. The planned date of disclosure and the place or manner of making it available to the investor shall be indicated in the advertising published before the disclosure of the notice of offer.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (5) When according to the provisions of this Act making a prospectus public is not required, material information provided by an issuer or an offeror and addressed to qualified investors or special categories of investors, including information disclosed in the context of meetings relating to offers of securities, shall be disclosed to all qualified investors or special categories of investors to whom the offer is exclusively addressed. If the prospectus is made public, the specified information shall be included in the prospectus or a supplement to the prospectus provided for in § 23 of this Act.

 (6) If the home Contracting State of the issuer is Estonia, the Supervision Authority has the right, by its precept, to prohibit or suspend advertisements concerning a public offer for a maximum of ten consecutive working days on any single occasion if it has reasonable grounds for believing that the requirements provided for in this section have been infringed.

 (7) Upon suspension of the broadcast of advertising concerning a public offer, the Supervision Authority shall require, by its precept, the issuer or the offeror to eliminate the circumstances which were the bases for the broadcasting of advertising within the term specified in subsection (6) of this section. While eliminating such circumstances, the issuer or the offeror may continue to broadcast advertising with the permission of the Supervision Authority.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 32.  Language

 (1) A notice of an offer, the prospectus, supplements to the prospectus and other documents and notices pertaining to the issuer and the securities offered shall be prepared and published, in the case of a prospectus registered with the Supervision Authority, in Estonian or in English or, provided that the interests of investors are not damaged, in another language with the permission of the Supervision Authority. If the prospectus is not published in Estonian, the Supervision Authority may demand that the summary of the prospectus be translated into Estonian and be published.

 (2) In the case of a prospectus which is registered with the securities market supervisory agency of another Contracting State, a notice of an offer, the prospectus, supplements to the prospectus and other documents and notices pertaining to the issuer and the securities offered shall be published in English or, by agreement of the Supervision Authority, the home Contracting State of the issuer and the securities market supervisory agencies of other host Contracting States, in another language. If the prospectus is not published in Estonian, the Supervision Authority may demand that the summary of the prospectus be translated into Estonian and be published.

 (3) If the documents and notices specified in subsection (1) of this section are compiled in Estonian and another language and if their wording differs or it is possible to interpret them differently, the wording of the relevant document in Estonian or its translation into Estonian takes precedence.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 33.  Obligations of issuer or offeror

  [RT I, 28.06.2012, 5 - entry into force 01.07.2012]
The issuer or the offeror has the obligation to ensure that:
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]
 1) all potential investors receive information on an equal basis;
 2) delivery of the printed prospectus free of charge to a professional securities market participant reselling the securities of the offeror or the issuer.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 34.  [Repealed - RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 35.  Obligation to repurchase

 (1) If an issuer or an offeror who offers securities to the public in Estonia makes a supplement to a prospectus public during the period of the offer, the issuer or the offeror is required:
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (1¹) The obligations provided for in subsection (1) of this section apply to issuers or offerors also if the registered and published prospectus does not include the final offer price and amount of securities and information provided for in subsection 17 (3) of this Act.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (2) A claim to cancel the subscription or repurchase the securities on the grounds prescribed in subsection 1 or 1¹ of this section shall be filed with the issuer or the offeror during the term of the offer prescribed in the notice of the offer which shall not be shorter than two working days as of making the supplement to the prospectus or final information on the offer price and amount of securities public if any new significant circumstances, mistakes or inaccuracies relating to the information included in the prospectus became known before the final closing of the offer to the public and the transfer of the securities. The issuer or the offeror may extend the term.
The final date of the right of cancellation shall be specified in a supplement to the prospectus.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) The funds received as a result of the subscription provided for in this section shall be returned or the securities shall be repurchased within ten working days as of the receipt of the claim specified in subsection (2) of this section. The issuer or the offeror shall notify the Supervision Authority of any claims filed against the issuer or the offeror or the return of the funds received as a result of the subscription or the repurchase of the securities within one working day. Any expenses related to the return of the repurchase shall be borne by the issuer or the offeror.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

§ 36.  Suspension of offer

 (1) If the home Contracting State of the issuer is Estonia, the Supervision Authority has the right to request, by its precept, that the public offer of securities be terminated or suspended if:
 1) the requirements of this Act and legislation established on the basis thereof or other legislation concerning the public offer are violated or there is reason to believe that the specified requirements are violated;
 2) the terms and conditions of the offer as prescribed in the prospectus have not been complied with;
 3) the information submitted upon registration of the prospectus has been rendered inaccurate to a significant extent.

 (2) When suspending an offer, the Supervision Authority shall issue a precept to oblige the issuer or the offeror to eliminate the circumstances causing the suspension of the offer. While eliminating such circumstances, the issuer or the offeror may resume the offer with the permission of the Supervision Authority.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) [Repealed - RT I 2005, 59, 464 - entry into force 15.11.2005]

 (4) With the prior consent of the Supervision Authority, the issuer or the offeror may suspend the offer.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (5) The offer shall be suspended for a term determined by the Supervision Authority but for a maximum of ten consecutive working days. If the offer is not resumed after this term, the issuer or the offeror is required to cancel the subscription and return the funds received as a result of the subscription to the subscribers within ten working days as of the expiry of the term.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (6) The issuer or the offeror shall immediately inform the public of the suspension or resumption of the offer or the cancellation of the subscription at least in the same national daily newspaper in which the notice of the offer was published. The Supervision Authority shall publish the precept specified in subsection (1) of this section and the consent specified in subsection (4) of this section on its website pursuant to the procedure provided on the basis of subsection 237 (3) of this Act.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

Chapter 5 OFFERS BY FOREIGN ISSUERS  

§ 37.  Application for registration

 (1) In order for a prospectus of a third country issuer to be registered with the Supervision Authority, the following documents shall be submitted to the Supervision Authority in addition to the documents provided for in subsections 18 (1) and (2) of this Act:
 1) a certificate of registration of the prospectus issued by a competent securities market supervisory agency of the home country of the issuer or another document permitting the prospectus to be made public or permitting trading on a regulated securities market or certifying the listing on the stock exchange, if the issue of such document is required;
 2) a copy of the audited annual report of the issuer for the previous economic year which, at the request of the Supervision Authority, is submitted together with translation of the report into Estonian;
 3) upon submission of a prospectus in a foreign language, a translation thereof into Estonian if the Supervision Authority so requests;
 4) an agreement with a professional securities market participant located in Estonia to carry out the issue;
 5) a description of the terms and conditions of the offer of securities.

 (2) The Supervision Authority has the right to request additional and specifying information about the legislation in force in the home country of the issuer and the offeror.

 (3) Notwithstanding the provisions of § 21 of this Act, the Supervision Authority may register a prospectus of a third country issuer which does comply with the requirements established in this Act regarding prospectuses if, in the opinion of the Supervision Authority, the following conditions are met:
 1) the prospectus has been drawn up in accordance with international standards set by international organisations of securities supervision authorities, including the IOSCO disclosure standards;
 2) the information requirements are equivalent to the requirements established in this Act and legislation established on the basis thereof and in the Prospectus Regulation regarding prospectuses.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 38.  [Repealed - RT I 2005, 59, 464 - entry into force 15.11.2005]

Chapter 6 OFFERS IN FOREIGN STATES  

§ 39.  Obligation to notify of offer in third country

 (1) The issuer registered in Estonia is required to notify the Supervision Authority of any offer of securities issued and offered thereby in a foreign state.

 (2) In order to perform the obligation specified in subsection (1) of this section, an issuer shall submit the following to the Supervision Authority:
 1) a copy of the document issued to the issuer in the state where the offer is carried out permitting publication of the prospectus, if such document is issued;
 2) a copy of the prospectus;
 3) copies of other documents submitted to the securities market supervisory agency of the state where the offer was carried out by the issuer in connection with the offer.

 (3) The documents prescribed in subsection (1) of this section shall be submitted to the Supervision Authority within ten days as of the beginning of the offer.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 39¹.  Offer in Contracting State

 (1) An issuer whose home Contracting State is Estonia has the right to offer securities to the public in all host Contracting States on the basis of a prospectus and supplements to the prospectus registered with the Supervision Authority on the condition that the European Securities and Markets Authority has been notified thereof.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

 (2) On the basis of a corresponding application of an issuer, the Supervision Authority is required, within three working days after the submission of the application or, if an application for the registration of a prospectus provided for in subsection 18 (1) of this Act has been submitted to the Supervision Authority together with the application, within one working day after the registration of the prospectus, to submit to the securities market supervisory agency of the corresponding host Contracting State the following documents:
 1) the registration certificate of the prospectus which must contain a confirmation that the prospectus has been prepared pursuant to the requirements provided for in this Act, legislation established on the basis thereof and the Prospectus Regulation and information concerning the exceptions made relating to the information contained in the prospectus on the basis of subsections 17 (2) and (5) of this Act and the reasons for the specified exceptions;
 2) a transcript of the prospectus in English or, by agreement of the Supervision Authority and the securities market supervisory agency of the corresponding host Contracting State, in another language;
 3) at the request of the securities market supervisory agency of the host Contracting State, a translation of the summary of the prospectus produced under the responsibility of the issuer into the official language of the corresponding host Contracting State.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

 (2¹) The registration certificate specified in clause (2) 1) of this section, simultaneously with the submission to the securities market supervisory agency of the corresponding host Contracting State, shall also be submitted to the issuer or a person responsible for the preparation of the prospectus.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) The Supervision Authority shall notify the European Securities and Markets Authority of the registration of the prospectus at the same time when it notifies thereof the securities market supervision agency of the host Contracting State.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

Part 3 INVESTMENT FIRMS  

Chapter 7 GENERAL PROVISIONS  

§ 40.  Investment firm

 (1) For the purposes of this Act, an investment firm is a public limited company whose permanent activity is the provision of one or more investment services to third parties or the performance of one or more investment activities on a professional basis. An investment firm is a financial institution within the meaning of § 5 of the Credit Institutions Act.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) An investment firm may engage in activities not specified in subsection (1) of this section only in cases prescribed by law or if such activities are directly necessary for the provision of investment services or non-core services.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

 (3) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) The reorganisation of credit institutions operating in several states provided for in Chapter 10¹ of the Credit Institutions Act shall apply also to investment firms, including their branches located in other Contracting State. An investment firm shall have the meaning of a credit institution provided for in Chapter 10¹ of the Credit Institutions Act.
[RT I, 19.03.2015, 3 - entry into force 29.03.2015]

§ 41.  Protection of name

  Only investment firms may use the word "investment firm" [investment firm] or derivatives or foreign language equivalents thereof in their business names.

§ 42.  [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 43.  Investment services and activities

 (1) For the purposes of this Act, investment services and activities (hereinafter investment services) are:
 1) reception and transmission of orders related to securities;
 2) execution of orders related to securities in the name of or for the account of the client;
 3) dealing in securities on own account;
 4) securities portfolio management;
 5) provision of investment advice;
 6) guarantee of securities or guarantee of the offer, issue or sale of securities;
 7) organising an offer or issue of securities;
 8) operation of a MTF where the interests of different people for acquisition and transfer of securities are brought together under uniform conditions which result is entry into a contract (hereinafter operation of a MTF).

 (2) The content of the investment service specified in clause (1) 2) of this section is performance of an act for entry to a contract or entry into a contract in the name of or for the account of the client in order to acquire or transfer securities.

 (3) The content of the investment service specified in clause (1) 3) of this section is conducting a securities transaction against proprietary capital.

 (4) The content of the investment service specified in clause (1) 4) of this section is management of a portfolio of securities separately for each client in accordance with a mandate given by the client.

 (5) The content of the investment service specified in clause (1) 5) of this section is making personal recommendations to clients concerning transactions related to securities.

 (6) A personal recommendation specified in subsection (5) of this section is a recommendation made to a person as an investor or to a representative of an investor. Recommendations made to a representative of an investor shall be deemed to be recommendations made to an investor. A recommendation is not personal, if it is intended only for publishing or making known or available through distribution channels to the public.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 44.  Ancillary services

  For the purposes of this Act, ancillary services are:
 1) safekeeping and administration of securities for a client and activities related thereto, including receipt of securities transfer and pledge orders and other orders related to the encumbrance of financial securities from clients and forwarding or execution thereof;
 2) grant of a credit or loan to an investor to conduct securities transactions on the condition that the creditor or lender itself is related to the transaction;
 3) provision of advice to undertakings on capital structure, business strategy and related matters and advice and service relating to mergers of undertakings and participation therein;
 4) provision of foreign exchange services where these are connected with the provision of investment services;
 5) preparation or provision of recommendations on investment and financial analysis or other general recommendations in connection with securities transactions;
 6) services related to the guarantee of the offer or issue of securities;
 7) provision of other investment and ancillary services in connection with the derivative instruments specified in clauses 2 (11) 2), 3), 4) or 7) of this Act, if the securities are connected with the provision of investment or ancillary services.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 45.  Provision of investment services

  Investment services may be provided as a permanent activity only by:
 1) an investment firm, a branch of a foreign investment firm or cross-border by a foreign investment firm pursuant to this Act;
 2) a credit institution or a branch of a foreign credit institution or cross-border by a foreign credit institution pursuant to this Act and the Credit Institutions Act;
 3) a management company, a branch of a foreign management company or cross-border by a foreign management company pursuant to this Act and the Investment Funds Act;
 4) an operator of a regulated market pursuant to this Act.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 46.  Client of investment firm

 (1) Within the meaning of Part III of this Act, a client of an investment firm is any person to whom an investment firm provides investment services or ancillary services. A person to whom it is wished to provide or offer investment or ancillary services, but with whom no contractual relations have been entered into is deemed to be a potential client of an investment firm (hereinafter potential client).

 (2) A professional client of an investment firm is a person specified in clauses 6 (2) 1)-5) of this Act.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (3) A person not specified in subsection (2) shall be deemed to be a retail client.
[ RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (4) A professional client may apply for being treated as a retail client, if the professional client finds that he or she is unable to assess or manage sufficiently the risks related to the services and transactions. In such case it is not presumed that he or she is as highly knowledgeable in the securities market as a professional client.

 (5) In order to treat a professional client as a retail client on the initiative of the client or the investment firm, the investment firm shall enter into a written contract with the client which shall set out with regard to which services, transactions or securities the professional client shall be treated as a retail client.

 (6) A retail client may apply for being treated as a professional client, if the retail client finds that he or she has sufficient experience, knowledge and expertise for making investment decisions and for adequate assessment of the risks related thereto. An investment firm is required to assess the abovementioned circumstances and upon assessment the investment firm shall take account of the nature of the planned transactions and services.

 (7) An investment firm may assess the expertise, experiences and knowledge of a client on the basis of the requirements set for the managers of credit institutions and other financial institutions subject to financial supervision. In case of companies which are not large enterprises for the purposes of this Act, the person holding the right of representation, which is necessary for the conclusion of transactions, shall be assessed pursuant to the provisions of this section.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (8) Upon the assessment specified in subsections (6) and (7) of this section at least two of following conditions shall be complied with:
 1) the client has on average concluded ten transactions of a significant size on securities markets per quarter over the last four quarters;
 2) the volume of the securities portfolio of the client exceeds 500,000 euros;
 3) the client works or has worked for at least one year in the financial sector in a position or office which requires knowledge of securities investment.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (9) An investment firm is required to take all necessary measures to guarantee that a retail client complies with the conditions specified in subsections (6)-(8) of this section before a decision is made to treat the retail client as a professional client and an retail client may be treated as a professional client only if all the following conditions are complied with:
 1) the client shall provide written confirmation to the investment firm that he or she wishes to be treated as a professional client generally or in connection with a concrete investment service or transaction or type of transaction or service;
 2) the investment firm shall present the client a written explanation concerning the rights which the client may lose when treated as a professional client;
 3) the client shall provide written confirmation that he or she is aware of the rights which he or she will lose as a result of being treated as a professional client.

 (10) If a client is already treated as a professional client on the basis of the characteristics specified in subsections (6) – (9) of this section and simultaneously on the basis of equivalent characteristics and procedure, the procedure arising from subsections (6) – (9) of this section does not affect the relationship between the client and the investment firm.

 (11) An investment firm is required to establish written procedures for treating clients.

 (12) A professional client is required to notify the investment firm of any changes which may affect the treatment of the client as a professional client. If it becomes known to the investment firm that a client treated as a professional client does not comply with the conditions provided for in this section any more, the investment firm shall apply the provisions of retail clients to the client in accordance with the changed circumstances.

 (13) An investment firm has the right, both on its own initiative and on the basis of an application made by the client, to treat the client who could be treated as an eligible counterparty pursuant to the provisions of § 46¹ of this Act as a retail client or professional client.

 (14) Non-compliance with the formal requirements provided for in this section shall not render a contract void.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 46¹.  Transactions with eligible counterparties

 (1) An investment firm holding an activity licence for the provision of investment services specified in clauses 43 (1) 1), 2), or 3) of this Act has the right to conclude transactions with an eligible counterparty and provide ancillary services thereto related to the specified transactions without applying clauses 85 5)–7) and 9) and §§ 86–87⁵, 89 and 89¹ of this Act, except the provisions prohibiting market abuse.

 (2) For the purposes of this Act, an eligible counterparty is a person specified in clauses 6 (2) 1), 2) and 3) and clauses 47 (1) 11) and 12) of this Act.

 (3) An investment firm may, with the consent of a professional client, treat the client as an eligible counterparty. In such case the investment firm shall explain the client thoroughly the consequences of such change in the status before the treatment of the professional client as an eligible counterparty by the investment firm.

 (4) An eligible counterparty has the right to demand that the investment firm treat the counterparty as another type of client generally or with regard to a concrete transaction. In such case, subsection (1) of this section does not apply to the investment firm and the client.

 (5) If pursuant to subsection (4) of this section an eligible counterparty applies for the treatment thereof as another type of client to whose relations with an investment firm the provisions of clauses 85 5)-7) and §§ 86–87⁶, 89 and 89¹ of this Act apply, but who does not expressly apply for being treated as a retail client and the investment firm consents to this application, the investment firm shall treat the eligible counterparty as a professional client.

 (6) If an eligible counterparty applies for being treated as a retail client, the provisions of § 46 of this Act apply with regard to the counterparty.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 47.  Application of this Part

 (1) Part III of this Act does not apply to:
 1) an insurance undertaking holding an activity licence of a Contracting State;
 2) a person providing investment services only to a person belonging to the same group;
 3) a person providing investment services where these services are provided in an incidental manner in the course of a professional activity and that activity is regulated by legislation or a code of ethics governing the profession which do not exclude the provision of an investment service;
 4) a person dealing on own account, unless the person is a market maker or deals regularly and frequently on own account outside the regulated market or MTF enabling access for third persons for conclusion of transactions;
 5) the Guarantee Fund or any other person providing an investment service confined to the management of a pension or compensation system with participation of the employees;
 6) a person providing investment services confined to the management of a pension or compensation system with participation of the employees and provision of an investment service only to a person belonging to the same group;
 7) Eesti Pank and other central bank of a Contracting State, the Ministry of Finance and the debt manager of a Contracting State, established under public law or other such type of person or agency;
 8) investment funds, including pension funds and a depositary of such funds and a management company in connection with the management of the investment fund, unless otherwise provided by law;
 9) a person trading securities in their own name or providing investment services to clients in commodity derivatives specified in clause 2 (11) 7) of this Act in connection with its main activity, provided that the person does not belong to a consolidation group which main activity is provision of an investment service within the meaning of this Act or provision of a financial service provided for in § 6 of the Credit Institutions Act or provision of other similar service and that the service provided by the person is deemed to be an ancillary activity to the main activity of the consolidation group and the service is provided only to a client with whom the person has initial contractual relationship or any other legal relationship through the transaction related to such main activity;
 10) a person providing investment advice in the course of providing another professional activity not regulated by this Act, provided that the provision of such advice is not specifically remunerated;
 11) a person whose main business consists of dealing on own account in commodities or commodity derivatives;
 12) a person dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deal for the accounts of other members of those markets or make prices for them and the execution of whose transactions is guaranteed by clearing members of the same markets;
 13) offers of units of a pension fund and the transactions and acts performed in relation to them.

 (2) Clause (1) 11) of this section shall not be applied if the person dealing on own account in commodities or commodity derivatives forms part of a consolidation group which main activity is provision of another investment service or provision of a financial service provided for in § 6 of the Credit Institutions Act.

 (3) The share capital requirement provided for in clause 93 (1) 1) of this Act shall be applied to a person provided for in clause (1) 12) of this section and to a person whose sole investment service is to provide investment advice or to forward orders for the acquisition or transfer of securities and which has no authority to acquire or possess the money or securities of the client when providing such investment services.

 (4) Sections 64, 65, 65¹, 69, 70, 70¹ and 236¹ apply to the person provided for in clause (1) 12) of this section.

 (5) The provisions of this Part relating to investment firms and the provision of investment services are applicable with respect to credit institutions, management companies and branches of foreign credit institutions and management companies in so far as this Act, the Credit Institutions Act and the Investment Funds Act do not provide otherwise.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

Chapter 8 RIGHT TO OPERATE  

Division 1 Activity Licences  

§ 48.  Activity licence

 (1) In order to operate as an investment firm, a person shall hold a relevant activity licence (hereinafter in this Part activity licence).

 (2) Activity licences are issued for an unspecified term.

 (3) Activity licences are not transferable, and the acquisition or use thereof by other persons is prohibited.

§ 49.  Scope of activity licences

 (1) An activity licence is issued for the provision of one or several investment services. An activity licence may include one or several ancillary services. No separate activity licence is issued to an investment firm for the provision of merely ancillary services.

 (2) An investment firm may provide only those investment services and ancillary services for the provision of which it has been granted an activity licence. In order to provide investment services and ancillary services not specified in the activity licence, an investment firm shall apply for an additional licence.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 50.  Activity licences of credit institution and management company

 (1) A company which holds an activity licence of a credit institution need not apply for a separate activity licence for the provision of investment services and ancillary services.

 (2) A company which holds an activity licence of a management company need not apply for a separate activity licence for the provision of a service provided for in clauses 43 (1) 4) and 5) and clause 44 1) of this Act pursuant to the procedure provided for in this Act.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 51.  Decision

 (1) An activity licence shall be issued or revoked by a decision of the Supervision Authority. Upon issue of an activity licence, the Supervision Authority may establish more favourable secondary conditions to the applicant which, if it is justified, permit the applicant to derogate from the circumstances on the basis of which the activity licence is obtained or to extend the term provided for in § 55¹ of this Act in the course of which the applicant shall bring itself into conformity with the requirements on the basis of which the activity licence is issued.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) A decision regarding an activity licence shall at least set out:
 1) the name and registry code of the person with regard to whom the decision is made;
 2) the type or types of investment services or ancillary services with regard to which the decision is made;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 3) the date on which the decision is made and the date on which it enters into force.

 (3) A decision refusing to grant or revoking an activity licence shall contain the justification therefor.

§ 52.  Notification regarding decision

 (1) The Supervision Authority shall immediately deliver a decision regarding the issue or refusal to issue an activity licence or the revocation of an activity licence to the investment firm.

 (2) The Supervision Authority shall publish a decision to issue, amend or revoke an activity licence on its website not later than on the working day following the day the decision is made.

 (3) In addition to the provisions of subsection (2) of this section, the Supervision Authority shall publish a decision regarding the revocation of an activity licence in at least one daily national newspaper.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 53.  Application for activity licence

 (1) In order to apply for an activity licence, the members of the management board of a company being founded or an operating company (hereinafter in this Division applicant) shall submit a corresponding application.

 (2) An application shall consist of a written application and the supplements specified in § 54 of this Act.

 (3) If, during the processing of an application for an activity licence, there are changes in the information or documents specified in subsection 54 (1) of this Act, the applicant shall promptly submit the corresponding updated information and documents to the Supervision Authority.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 54.  Information submitted upon application

 (1) Upon application for an activity licence, the applicant shall submit the following information and documents:
 1) upon foundation of a company, a notarised transcript of the memorandum of association or foundation resolution;
 2) a copy of the articles of association and, in the case of an operating company, the resolution of the general meeting on amendment of the articles of association, and the amended text of the articles of association;
 3) a list of the shareholders of the applicant which sets out the name and the personal identification code or registry code of each shareholder, or the date of birth in the absence of a personal identification code or registry code, and information on the number of shares and votes to be acquired or owned by each shareholder;
 4) information specified in subsection 74 (1) of this Act relating to shareholders and other persons, with a qualifying holding in the applicant and information specified in subsection 55 (7) of this Act relating to the relationship with an investment firm, credit institution, insurance undertaking or other person subject to financial supervision holding an activity licence in a Contracting State;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 5) information on the members of the applicant's managers, including, for each person, the name and surname, personal identification code or, in the absence thereof, date and place of birth, educational background, a complete list of places of employment and positions held during the last five years and, for the members of the board of management, a description of their areas of responsibility and other documents certifying the managers' trustworthiness and conformity to the requirements of this Act which the applicant deems necessary to submit;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 6) information on companies in which the holding of the applicant or its manager exceeds 20 per cent, which also sets out the amount of share capital, a list of the areas of activity and the size of the holding of the applicant and each manager;
 7) information on the auditor and person(s) conducting the internal audit of the applicant, including the name, residence or seat, personal identification code or, in the absence of the identification code, the date of birth or registry code;
 8) the opening balance sheet of the applicant and an overview of the revenue and expenditure of the applicant or, in the case of an operating company, the balance sheet and income statement as at the end of the month prior to submission of the application and, if they exist, the last three annual reports;
 9) in the case of an operating company, documents certifying the amount of own funds together with the sworn auditor’s reports;
[RT I 2010, 9, 41 - entry into force 08.03.2010]
 10) if a credit institution, management company, investment fund, investment firm, insurance undertaking or another person subject to financial supervision of a third country has a qualifying holding in the applicant, confirmation from the supervision authority of the appropriate state to the effect that the specified person of a third country holds a valid activity licence and, according to the knowledge of the supervision authority, its activities are not contrary to legislation in force;
 11) the applicant's three-year business plan which sets out at least a description of the applicant's planned activities, organisational structure, places of business, information systems and other technical facilities, and a description of its economic indicators;
 12) the accounting policies and procedures and the internal policies specified in § 82 of this Act or their drafts;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 13) the rules of procedure specified in subsection 29 (1) of the Money Laundering and Terrorist Financing Prevention Act and the internal audit rules to monitor compliance therewith;
[RT I 2009, 61, 401 - entry into force 26.12.2009]
 14) a document by which the applicant assumes the obligation to pay the single contribution prescribed in the Guarantee Fund Act;
 15) certification to the Supervision Authority concerning payment of the administrative fee.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (1¹) An applicant or manager of an investment firm shall be a member of the supervisory board and management board. The Supervision Authority may consider an employee of an applicant or investment firm or any other person who makes independent management decisions concerning the development or business of the applicant or investment firm as manager.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The accuracy of information and documents submitted with regard to natural persons specified in clauses (1) 5) and 7) of this section shall be confirmed by the above-mentioned persons by their signatures.

 (3) Upon application for an additional activity licence, an investment firm shall submit the information and documents specified in clauses (1) 3), 9), 10), 12) 13) and 15) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 55.  Review of application

 (1) If an applicant has failed to submit all the information and documents specified in § 54 of this Act or if such information or documents are incomplete or have not been prepared in accordance with the requirements, the Supervision Authority shall demand elimination of the deficiencies by the applicant.

 (2) The Supervision Authority may demand the submission of additional information and documents if it is not convinced on the basis of the information and documents specified in § 54 of this Act as to whether the applicant has adequate facilities for the provision of investment services or whether it meets the requirements for investment firms prescribed by law or on the basis thereof.

 (3) In order to verify the information submitted by an applicant, the Supervision Authority may perform on-site inspections, order assessment and a special audit, consult state databases, obtain oral explanations from the managers and auditors of the applicant, their representatives and, in the event of justified need, third parties concerning the content of documents and facts which are relevant in the making of a decision on the issue of an activity licence.

 (4) The data referred to in subsections (1)-(3) of this section shall be submitted during a reasonable term determined by the Supervision Authority.

 (4¹) The Supervision Authority may refuse to review an application if the applicant has failed to eliminate the deficiencies specified in subsection (1) of this section within the prescribed term or has not submitted the information or documents requested by the Supervision Authority by the end of the term. Upon refusal to review the application, the Supervision Authority shall return the submitted documents.

 (5) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

 (6) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

 (7) Upon processing of an application for an activity licence, the Supervision Authority shall cooperate with the securities market or financial supervision authority of the corresponding Contracting State if:
 1) the applicant is a subsidiary of a credit institution, investment firm, insurance undertaking or another person subject to financial supervision holding an activity licence in a Contracting State;
 2) the applicant is a subsidiary of a parent undertaking of a credit institution, investment firm, insurance undertaking or another person subject to financial supervision holding an activity licence in a Contracting State;
 3) the applicant is supervised by a person or persons supervising an investment firm, credit institution, insurance undertaking or other person subject to financial supervision holding an activity licence in another Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (8) The Supervision Authority shall consult the securities market and financial supervision authorities of other Contracting States for assessment of the reputation, experience and suitability of the applicant and the persons having a qualifying holding and managers of a legal person belonging to the same consolidation group with such applicant. In the course of such a consultation the Supervision Authority shall forward only essential data concerning the reputation, experience and suitability of the applicant and the persons having a qualifying holding and managers of a legal person belonging to the same consolidation group with such applicant which are necessary for other securities market and financial supervision authorities related to granting an activity licence of a Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 55¹.  Issue of activity licence

 (1) The Supervision Authority shall issue an activity licence if the applicant has submitted all information required by legislation provided that no bases exist for refusal to issue an activity licence or for termination of an activity licence and if the doubt of the Supervision Authority expressed to the applicant concerning the fact that the applicant does not comply with the requirements arising from this Act or legislation issued on the basis thereof has been eliminated.

 (2) If there is justified reason for the Supervision Authority to believe that the applicant does not comply with the requirements arising from this Act or legislation issued on the basis thereof, the applicant is required to provide information to the Supervision Authority on its own initiative for the purpose of elimination of the doubt. The Supervision Authority shall specify beforehand which information and data are required for the elimination of the doubt.

 (3) The Supervision Authority shall make a decision to issue or refuse to issue an activity licence within two months after receipt of all the necessary information and documents, but not later than within six months after receipt of the application for the activity licence.

 (4) The Supervision Authority shall make a decision to issue or refuse to issue an additional activity licence within one month after receipt of the corresponding application and all the necessary information and documents, but not later than within six months after receipt of the application for the additional activity licence.

 (5) An investment firm holding an activity licence shall notify immediately the Supervision Authority of material changes in the circumstances submitted to the Supervision Authority by the applicant which were the basis for the issue of the activity licence upon becoming aware of them.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 56.  Refusal to issue activity licence

  The Supervision Authority shall refuse to issue an activity licence if:
 1) the information or documents submitted upon application for the activity licence do not meet the requirements provided for in this Act or legislation established on the basis thereof or are inaccurate, misleading or incomplete;
 2) the applicant fails, within the prescribed term, or refuses to submit the information and documents subject to submission upon application for a permit or as are requested by the Supervision Authority to the Supervision Authority;
 3) the applicant does not meet the requirements provided for in this Act or legislation established on the basis thereof;
 4) in the opinion of the Supervision Authority, the manager or person carrying out the duties of the internal audit unit of the applicant or a person having a qualifying holding in the applicant does not meet the requirements provided for in this Act;
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]
 5) the applicant has materially or repeatedly violated requirements provided for in legislation or the activities or omissions of the applicant are in contradiction with good business practices;
 6) close links between the applicant and another person prevent sufficient supervision over the investment firm, or the requirements arising from legislation or the implementation of legislation of the state which legal provisions are applied to the applicant or to the persons with whom the applicant has close links prevent sufficient supervision over the investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 57.  Termination of activity licence

  An activity licence terminates:
 1) if a decision is taken to dissolve the investment firm;
 2) if the activity licence is revoked;
 3) in the event of a merger of investment firms, if it is held by the firm being acquired;
 4) if the investment firm is declared bankrupt.

§ 58.  Revocation of activity licence

 (1) Revocation of an activity licence means total or partial deprivation of a right granted by the activity licence. An activity licence may be revoked completely or by individual investment services or ancillary services, whereupon the rights of which the holder of the activity licence is deprived of upon revocation of the activity licence shall be specified.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The Supervision Authority may revoke an activity licence if:
 1) the investment firm fails to commence activities or if an act by the founders of the investment firm indicates that the investment firm will be unable to commence activities within twelve months as of the issue of the activity licence, or if the investment firm has not provided investment services for more than six consecutive months;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 2) it has been established that the investment firm has submitted misleading or inaccurate information or misleading or falsified documents or, upon application for the activity licence, misleading or inaccurate information or misleading or falsified documents have been submitted to the Supervision Authority;
 3) the investment firm has violated repeatedly or to a material extent the provisions of legislation regulating the activities thereof, the investment firm or its manager has been punished for an economic offence, official misconduct, offence against property or offence against public trust if information concerning the punishment has not been expunged from the punishment register pursuant to the Punishment Register Act or the activities of the investment firm are not in compliance with good business practice;
 4) the investment firm does not meet the requirements in force with regard to the issue of activity licences;
 5) the circumstances provided for in clauses 56 (4) or 6) of this Act become evident;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 6) the investment firm has failed to implement a precept of the Supervision Authority within the term or to the extent prescribed;
 7) the amount of own funds of the investment fund does not comply with the requirements of this Act or legislation issued on the basis thereof;
 8) the investment firm is unable to perform the obligations it has assumed or if, for any other reason, its activities significantly damage the interests of investors or other clients or adversely affect the regular functioning of the securities market;
 9) the investment firm has been involved in money laundering or violates the procedure for preventing money laundering and terrorist financing established by legislation;
 10) the investment firm belongs to a consolidation group the structure of which prevents the receipt of information necessary for supervision on a consolidated basis, or if a company which belongs to the same consolidation group as the investment firm operates on the basis of legislation of a foreign state, which prevents the exercise of sufficient supervision;
 11) the investment firm fails to pay the contributions to the Investor Protection Sectoral Fund prescribed in the Guarantee Fund Act within the specified term or in full;
 12) the investment firm has published materially incorrect or misleading information or advertising concerning its activities or managers;
 13) according to the information submitted to the Supervision Authority by the securities market supervisory agency of the Contracting State, the investment firm has violated the requirements which are provided for in legislation of the Contracting State;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 14) the internal rules specified in § 82 of this Act are not sufficiently accurate or unambiguous for regulation of the activities of the investment firm;
 15) it becomes evident that the investment firm has chosen Estonia as the place for application for the activity licence and registration for the purpose of evading the stricter standards for the activities of investment firms in force in another Contracting State within whose territory it carries on the greater part of its activities.

 (3) An activity licence or an additional activity licence shall be revoked in full or in part on the application of the investment firm if the investment firm no longer wishes to provide investment services and if the legitimate interests of its clients are thereby adequately protected.

 (3¹) The Supervision Authority may refuse to revoke an activity licence on the basis of an application specified in subsection (3) of this section if there is good reason to believe that revocation of the activity licence may damage the interests of investors or other clients.

 (3²) An application specified in subsection (3) of this section shall be reviewed by the Supervision Authority and a decision to revoke in part or in full or to refuse to revoke the activity licence shall be made within two months as of the receipt of the application.

 (4) Prior to making a decision to revoke an activity licence on the basis of subsection (2) of this section, the Supervision Authority may issue a precept to the investment firm establishing a term for elimination of the deficiencies which are the basis for revocation of the activity licence.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 58¹.  Amendment of decision on issue of activity licence

 (1) Upon changes in the business name or registered office of an investment firm, the Supervision Authority shall make a decision on amendment of a decision on issue of an activity licence specified in subsection § 55¹ (3) of this Act.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The Supervision Authority shall decide on amendment of a decision on issue of an activity licence not later than within one month after the receipt of the changed information specified in subsection (1) of this section.

 (3) The Supervision Authority shall immediately deliver the decision on amendment specified in subsection (1) of this section to the investment firm.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

Division 2 Activities Abroad  

§ 59.  Subsidiary and branch abroad

 (1) If an investment firm registered in Estonia wishes to found a subsidiary or branch providing investment services in a third country or acquire a holding in a third country investment firm and as a result of that the latter becomes a subsidiary of the Estonian firm, relevant permission (hereinafter in this Division permission) shall be sought from the Supervision Authority.

 (2) In order to apply for permission, a written application and the following information shall be submitted to the Supervision Authority:
 1) the name of the state in which the subsidiary or branch is to be founded or in which the investment firm in which a holding is to be acquired is registered;
 2) the business name and address of the subsidiary or the name and address of the branch;
 3) the annual reports for the past two financial years of the investment firm of a third country in which a holding is to be acquired, accompanied by a translation into Estonian signed by the person submitting the reports;
 4) the business plan of the subsidiary or branch specified in clause 54 (1) 11) of this Act, accompanied by a description of the relationship with the founding investment firm;
 5) the information specified in clause 54 (1) 5) of this Act on the members of the directing bodies of the subsidiary or the director of the branch;
 6) the information specified in subsection 73 (2) of this Act on persons having a qualifying holding in the subsidiary.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 60.  Processing of application for permission

 (1) Unless otherwise provided in this Division, applications for permission and the processing thereof shall be subject to the provisions of §§ 51–53, 55 and 55¹ of this Act regulating activity licences and applications therefor.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The Supervision Authority shall inform the securities market supervisory agency of the relevant third country of the submission of an application for permission within two months as of the receipt of the application. If no co-operation agreement exists between the Supervision Authority and the securities market supervisory agency of the relevant third country, the Supervision Authority shall enter into an agreement with the agency regarding the exercise of supervision over the subsidiary or branch of the investment firm.

 (3) The Supervision Authority shall make a decision regarding the grant of or refusal to grant permission within two months as of submission of all the necessary information and documents, but not later than within six months as of submission of the application. Upon refusal to grant permission, the decision shall contain the justification for refusal.

 (4) The Supervision Authority shall immediately forward the decision regarding the grant of or refusal to grant permission to the applicant. The securities market supervisory agency of a relevant third country shall also be notified of the grant of permission.

 (5) An investment firm registered in Estonia which has a subsidiary or branch in a third country is required to notify the Supervision Authority and the securities market supervisory agency of the relevant country at least one month in advance if it intends to amend the information specified in clauses 59 (2) 2), 4) and 5) of this Act.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 61.  Refusal to grant permission

  The Supervision Authority may refuse to grant permission if:
 1) the information or documents submitted upon application for permission do not meet the requirements provided for in this Act or legislation established on the basis thereof or are inaccurate, misleading or incomplete;
 2) the applicant fails, within the prescribed term, or refuses to submit the information and documents subject to submission upon application for a permit or as are requested by the Supervision Authority to the Supervision Authority;
 3) the members of the directing bodies of the subsidiary or the director of the branch do not meet the requirements for members of the management board of an investment firm as established by this Act;
 4) persons having a qualifying holding in the subsidiary in which a holding is being acquired do not meet the requirements provided for in § 72 of this Act;
 5) the financial situation of the subsidiary or applicant is not sufficiently sound;
 6) foundation of the subsidiary or branch or acquisition of the holding or implementation of the business plan submitted by the applicant may damage the interests of investors the financial situation of the investment firm or its reliable activities in Estonia or in the relevant third country;
 7) no agreement specified in subsection 60 (2) of this Act has been entered into or the legislation of the relevant third country does not enable adequate supervision to be exercised and the data necessary therefor to be acquired.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 62.  Revocation of permission

 (1) The Supervision Authority may revoke a permission for the foundation of a branch granted to an investment firm in a third country if:
 1) the investment firm or its branch does not meet the requirements in force with regard to the issue of permissions for the foundation of a branch;
 2) the investment firm fails to submit reports on its branch as required;
 3) upon application for a permission for the foundation of the branch, the investment firm has submitted misleading or inaccurate information or misleading or falsified documents or, in other cases, has submitted misleading or inaccurate information or misleading or falsified documents regarding the branch to the Supervision Authority;
 4) the investment firm, its managers or the director of a branch has been punished for an economic offence, official misconduct, offence against property or offence against public trust and information concerning the punishment has not been expunged from the punishment register pursuant to the Punishment Register Act;
 5) the risks arising from the activities of the branch are significantly greater than risks arising from the activities of the investment firm;
 6) the activity licence of the investment firm has been revoked;
 7) the circumstances provided for in § 61 of this Act arise;
 8) the investment firm has failed to implement a precept of the Supervision Authority within the term or to the extent prescribed.

 (2) The Supervision Authority shall promptly inform the investment firm and the financial supervision authority of a third country of a decision to revoke a permission for the foundation of a branch.

 (3) After becoming aware of revocation of a permission for the foundation of a branch, the investment firm shall terminate provision of its services through the branch registered in the third country specified in subsection (2)of this section not later than by the due date specified by the Supervision Authority.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 63.  Opening of representative office abroad

 (1) An investment firm shall notify the Supervision Authority of the opening of a representative office abroad at least ten days prior to the opening of the representative office.

 (2) The list of information to be submitted in the event of the opening of a representative office and the procedure for the submission thereof shall be established by a regulation of the minister responsible for the area.

§ 64.  Specifications for opening of branch of investment firm in Contracting State

 (1) An investment firm which wishes to provide the investment services or ancillary services provided for in its activity licence and found its branch therefor in the territory of the specified other Contracting State shall notify the Supervision Authority of its intention and submit the following information and documents to the Supervision Authority:
 1) the name of the Contracting State where the investment firm wishes to found a branch;
 2) the business plan of the branch which shall contain information on all the investment services or ancillary services intended to be provided in the Contracting State and describe the organisational structure of the branch and the fact whether the branch intends to use investment agents and if the agent exists, the personal data of the agent;
 3) the address of the branch;
 4) the names of the managers of the branch.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) Documents specified in subsection (1) of this section shall be submitted in Estonian together with a translation made by a sworn translator or certified by a notary into the official language or one of the official languages of a Contracting State where the investment firm wishes to found a branch.
[RT I, 23.12.2013, 1 - entry into force 01.01.2014]
"(3) The Supervision Authority shall make a decision to forward or refuse to forward the information and documents specified in subsection (1) of this section to the securities market supervisory agency of the corresponding Contracting State on the bases provided for in subsection (5) of this section within two months after receipt of all the required information and documents, but not later than within three months after receipt of the corresponding application. The Supervision Authority shall immediately inform the investment firm of the decision to forward or refuse to forward the information and documents.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) The Supervision Authority may refuse to review the information and documents specified in subsection (1) of this section if:
 1) the information or documents submitted for forwarding do not comply with the requirements provided for in this Act or legislation issued on the basis thereof;
 2) the information or documents required by the Supervision Authority have not been submitted within the prescribed term.

 (5) The Supervision Authority shall make a decision to refuse to forward the information and documents specified in subsection (1) of this section if:
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 1) the financial situation, organisational structure or other resources of the investment firm are insufficient for the provision of services specified in the business plan in a Contracting State;
 2) the foundation of the branch or implementation of the business plan submitted by the investment firm may damage the interests of its clients, the financial situation or reliable activities of the investment firm;
 3) the information or documents submitted for forwarding are incorrect, misleading or incomplete;
 4) the investment firm wishes to provide only ancillary services.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (6) If the information and documents specified in subsection (1) of this section are forwarded, the Supervision Authority shall also submit information on the investor protection scheme applicable in Estonia to the securities market supervisory agency of the Contracting State.

 (7) An investment firm may found a branch in a Contracting State pursuant to the provisions of legislation of the other Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (8) An investment firm shall inform the Supervision Authority of changes in the information specified in subsection (1) of this section or changes in documents, if possible, at least one month before entry into force of the changes or immediately after entry into force of the changes. The Supervision Authority shall notify the securities market supervisory agency of the relevant Contracting State of the changes.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (9) The Supervision Authority shall inform the securities market supervisory agency of the Contracting State of any changes to the investor protection scheme applicable in Estonia, which have occurred in the corresponding Contracting State during the period when the investment firm has been operating through a branch, immediately after the changes occurred.

 (10) The Supervision Authority may prohibit provision of services by an investment firm through the branch founded in another Contracting State if:
 1) grounds provided for in subsection (5) of this section for refusal to forward information and documents exists;
 2) the securities market supervisory agency of the Contracting State has notified the Supervision Authority of a violation by the investment firm of legislation of a Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (11) The Supervision Authority shall immediately deliver the precept specified in subsection (10) of this section to the investment firm. The investment firm is required to terminate provision of its services through the branch founded in the Contracting State not later than by the due date specified by the Supervision Authority.

 (12) If an investment firm wishes to use an investment agent founded in another Contracting State, the use of an investment agent is deemed equal to foundation of a branch and the provisions regulating the foundation and activities of branches provided by this Act shall apply.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 65.  Provision of cross-border investment services

 (1) An investment firm who wishes to provide investment services and ancillary services in a foreign state to the extent provided for in the activity licence without founding a branch therefor shall notify the Supervision Authority of its intention to start providing cross-border investment services and submit the following information and documents to the Supervision Authority:
 1) the name of the state where it is intended to provide the investment and ancillary services;
 2) a business plan together with a description of the planned investment and ancillary services.

 (2) If an investment firm intends to provide cross-border services in a Contracting State, the information specified in (1) of this section shall be submitted together with a translation made by a sworn translator or certified by a notary into one or several official languages of the Contracting State.
[RT I, 23.12.2013, 1 - entry into force 01.01.2014]

 (3) If an investment firm intends to provide cross-border services in another Contracting State, the Supervision Authority shall make a decision to forward or refuse to forward the specified information to the securities market supervisory agency of the corresponding Contracting State. The Supervision Authority shall immediately inform the investment firm of the decision to forward or refuse to forward the information. If the Supervision Authority makes a decision to forward the information, the information shall be forwarded to the securities market supervisory agency of the corresponding Contracting State within one month after receipt thereof from the investment firm.

 (4) The Supervision Authority shall make a decision to refuse to forward the information specified in subsection (1) of this section if:
 1) the information or documents submitted do not meet the requirements provided for in this Act or are inaccurate, misleading or incomplete;
 2) the investment firm wishes to provide only ancillary services.

 (5) An investment firm may commence provision of cross-border services pursuant to the provisions of the legislation of another Contracting State.

 (6) An investment firm shall notify the Supervision Authority of changes in the information and documents specified in subsection (1) of this section at least one month before entry into force of the changes. The Supervision Authority shall inform the securities market supervisory agency of the relevant Contracting State of the changes.

 (7) The Supervision Authority may, by a precept, prohibit provision of cross-border services by an investment firm in a Contracting State if:
 1) grounds provided for in subsection (4) of this section for refusal to forward the information exist;
 2) the securities market supervisory agency of the Contracting State has notified the Supervision Authority of a violation by the investment firm of legislation of a Contracting State.

 (8) The Supervision Authority shall immediately deliver the precept specified in subsection (7) of this section to the investment firm. The investment firm is required to terminate provision of cross-border services in the Contracting State not later than by the due date specified by the Supervision Authority.

 (9) If an investment firm intends to use an investment agent in the territory of the Contracting State where the investment firm intends to provide its services, the investment firm shall submit the personal data of the investment agent to the Supervision Authority. On the basis of the corresponding application of the securities market supervisory agency of a Contracting State the Supervision Authority shall submit the specified information to the securities market supervisory agency of that Contracting State within a reasonable period of time.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 65¹.  Provision of cross-border MTF operation services

 (1) An investment firm intending to provide MTF operation services shall notify the Supervision Authority in which foreign state the investment firm intends to provide cross-border MTF operation services.

 (2) The Supervision Authority shall submit the information specified in subsection (1) of this section to the securities market supervisory agency of the corresponding Contracting State within one month after receipt of the specified information and shall immediately notify the investment firm thereof. An investment firm may commence provision of cross-border MTF operation services pursuant to the provisions of the legislation of another Contracting State.

 (3) An investment firm shall, upon the existence thereof, forward to the Supervision Authority also information on the participants and remote members of a MTF established in Estonia. On the basis of the corresponding application of the securities market supervisory agency of a Contracting State the Supervision Authority shall submit the corresponding information to the securities market supervisory agency of that Contracting State within a reasonable period of time.

 (4) The provisions of § 65 of this Act do not apply to cross-border provision of investment services provided for in this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

Division 3 Activities of Foreign Investment Firms in Estonia  

§ 66.  Application for permission to found branch of investment firm of a third country in Estonia

 (1) In order to found a branch in Estonia, an investment firm registered in a third country shall apply for the relevant permission (hereinafter in this Division permission) from the Supervision Authority.

 (2) The provisions of this Division shall not apply to the founding of a branch of a credit institution of a third country in Estonia which is providing investment services.

 (3) Upon application for permission, a written application and the following information and documents shall be submitted to the Supervision Authority:
 1) the name and address of the branch:
 2) information on the director of the branch pursuant to the provisions of clauses 387 10) and 11) of the Commercial Code;
 3) the information required in subsection 73 (2) of this Act on persons having a qualifying holding in the investment firm;
 4) the information and documents provided for in clauses 386 (2) 1), 3), 4) and 5) of the Commercial Code;
 5) the annual reports of the applicant for the past two financial years;
 6) the business plan of the branch as referred to in clause 54 (1) 11) of this Act, together with a description of its relationship with the founding investment firm.

 (4) In addition to the information specified in subsection (3) of this section, a third country investment firm shall submit the following to the Supervision Authority from the securities market supervisory agency of its home country:
 1) permission to open a branch in Estonia;
 2) confirmation to the effect that the investment holds a valid activity licence in its home country and that it pursues its activities in a correct manner and in accordance with good business practices;
 3) information on the financial situation of the applicant, including the size of its own funds, capital adequacy and solvency, and on the investor protection scheme in its home country.

 (5) The foreign language information and documents specified in this section shall be legalised by a third country investment firm pursuant to the procedure prescribed in the Consular Act and submitted together with a signed translation into Estonian.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 67.  Processing of application for permission and revocation of permission

 (1) Unless otherwise provided in this Division, applications for permission and the review, grant and revocation thereof shall be subject to the provisions of §§ 51-53, subsections 55 (1)–(4¹), §§ 55¹, 56 and 58 of this Act regulating the activity licences and applications therefor.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) In addition to the reasons provided for in § 56 of this Act, the Supervision Authority may refuse to grant permission if the legislation or the securities market supervisory agency of the home country of the applicant do not guarantee adequate supervision of the applicant or if no agreement specified in subsection 60 (2) of this Act has been entered into and co-operation between the Supervision Authority and the securities market supervisory agency of such country is insufficient.

 (3) An investment firm which is registered in a third country and which has a branch in Estonia is required to notify the Supervision Authority and the securities market supervisory agency of the relevant country of its intention to change the information listed in clauses 66 (3) 1), 2), and 6) of this Act at least one month in advance.

 (4) The Supervision Authority may revoke permission if circumstances provided for in § 58 of this Act or in subsection (2) of this section become evident.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 68.  Representative office of foreign investment firm

 (1) In the event that an investment firm registered in a foreign state intends to open a representative office in Estonia, it shall submit a relevant notice to the Supervision Authority together with the following information and documents:
 1) confirmation from the securities market supervisory agency of its home country to the effect that the investment firm holds a valid activity licence;
 2) an action plan for the representative office;
 3) an authorisation document certifying the authorisation of the representative;
 4) a document concerning the registration of the investment firm in its home country (an extract from the commercial register or a copy of the certificate of registration);
 5) the articles of association of the investment firm;
 6) the seat, address and telecommunications numbers of the representative office.

 (2) The documents specified in subsection (1) of this section shall be submitted to the Supervision Authority together with a notarised translation into Estonian.

§ 69.  Branch of investment firm of Contracting State in Estonia

 (1) An investment firm of a Contracting State which wishes to found a branch in Estonia shall inform the securities market supervisory agency of the Contracting State thereof and submit the following information and documents thereto:
 1) the business plan of the branch which shall contain information on all the investment services or ancillary services intended to be provided, the organisational structure of the branch and the fact whether the branch intends to use investment agents and if the agent exists, the personal data of the agent;
 2) the address of the branch;
 3) the names of the managers of the branch;
 4) the description of the investor protection scheme applicable in the Contracting State.

 (2) The information and documents specified in subsection (1) of this section which are in a foreign language shall be submitted together with a translation into Estonian made by a sworn translator or certified by a notary. With the consent of the Supervision Authority, the abovementioned information and documents may be submitted in English.
[RT I, 23.12.2013, 1 - entry into force 01.01.2014]

 (3) The Supervision Authority shall promptly inform the securities market supervisory agency of the Contracting State of receipt of the information and documents specified in subsection (1) of this section.

 (4) An investment firm of a Contracting State may found a branch and commence activities after receipt of a notice specified in subsection (3) of this section or two months after the date on which the information and documents specified in subsection (1) of this section were received by the Supervision Authority.

 (5) Confirmation from the Supervision Authority concerning receipt of the information specified in subsection (1) of this section shall be submitted upon the entry of a branch in the commercial register.

 (6) A branch of an investment firm of a Contracting State shall perform the obligations provided for in clauses 85 1)–12), §§ 86–87⁶, 88¹–88¹², 89¹, 90 and 91 of this Act and legislation established in order to specify thereof with respect to services provided in the territory of Estonia.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 70.  Provision of cross-border investment services in Estonia

 (1) For the purposes of this section and § 70¹ of this Act, cross-border investment services are investment or ancillary services provided to persons residing or located in Estonia by a person who is not or whose branch is not registered in Estonia.
[RT I 2010, 7, 30 - entry into force 26.02.2010]

 (2) An investment firm registered in a Contracting State may start providing cross-border investment services in Estonia after the Supervision Authority has received the information specified in subsection 65 (1) of this Act from the securities market supervisory agency of the corresponding Contracting State. The information and documents specified in this section which are in a foreign language shall be submitted together with translations into Estonian made by a sworn translator or certified by a notary. With the consent of the Supervision Authority, the abovementioned information and documents may be submitted in English.
[RT I, 23.12.2013, 1 - entry into force 01.01.2014]

 (3) Provision of cross-border MTF operation services may be commenced in Estonia after the Supervision Authority has received the relevant notice from the securities market supervisory agency of the corresponding Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) The Supervision Authority may submit an application to the securities market supervisory agency of the Contracting State in order to obtain the personal data of the investment agents of the investment firm of the corresponding Contracting State providing cross-border investment services in Estonia and to obtain information on the members and participants of the MTF of the investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (5) The Supervision Authority has the right to disclose the personal data of the investment agents of an investment firm of a Contracting State providing cross-border investment services in Estonia.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 70¹.  Provision of cross-border investment services in Estonia by investment firm of third country

 (1) For provision of cross-border services in Estonia, an investment firm of third country is required to apply for permission from the Supervision Authority (hereinafter in this section authorisation for the provision of cross-border services) and submit an application to which the following information and documents are appended:
 1) the name and address of the person;
 2) the scope of the activity licence issued to the person and information concerning the agency which issued the activity licence;
 3) the information and documents provided for in clauses 386 (2) 1), 3), 4) and 5) of the Commercial Code;
 4) information specified in clause 54 (1) 5) of this Act concerning the managers of the investment firm.
 5) the information and documents provided for in subsection 74 (1) of this Act relating to shareholders who have qualifying holdings in the investment firm;
 6) the audited annual reports of the person for the past two financial years;
 7) the business plan which meets the requirements provided for in clause 54 (1) 11) of this Act and sets out all services provided by the person in Estonia.

 (2) In addition to the information specified in subsection (1) of this section, a third country investment firm shall submit the following to the Supervision Authority:
 1) the permission of the financial supervision authority of the home state to provide cross-border services in Estonia;
 2) the confirmation of the financial supervision authority of the home state to the effect that the person holds a valid activity licence in its home state and that it pursues its activities in a correct manner and in accordance with good practices;
 3) information provided by the financial supervision authority of the home state on the financial situation of the applicant, including the amount of own funds, and the description of the investor protection scheme applicable to its clients in the home state;
 4) description of prudential requirements applied to investment firm in the home state, including information regarding capital and liquidity requirements and the investments guarantee system of the home state, and the confirmation regarding the fact that the above requirements are equivalent to the requirements established in the legislation of the European Union.

 (3) The information and documents specified in this section which are in a foreign language shall be submitted together with a translation into Estonian made by a sworn translator or certified by a notary. With the consent of the Financial Supervision Authority, the aforementioned information and documents may be submitted in another language.
[RT I, 23.12.2013, 1 - entry into force 01.01.2014]

 (4) Unless otherwise provided in this section, applications for authorisations, review of applications and the grant and revocation of authorisations shall be subject to the provisions of §§ 55-56 and 58 of this Act regulating the activity licences and applications therefor.

 (5) In addition to refusal on the bases provided for in § 56 of this Act, the Supervision Authority may refuse to grant an authorisation for the provision of cross-border services if the financial supervision authority of a third country does not guarantee adequate supervision of the applicant or the financial supervision authority of a third country has no legal basis, possibilities or readiness for sufficient and efficient cooperation with the Supervision Authority.

 (6) The Supervision Authority may revoke an authorisation for the provision of cross-border services if circumstances provided for in § 58 of this Act or in subsection (5) of this section become evident.

 (7) A third country investment firm which wishes to provide services in Estonia which are not specified in the business plan submitted upon application for an authorisation for the provision of cross-border services shall submit an application for amendment of the authorisation for the provision of cross-border services to the Supervision Authority.

 (8) In order to amend an authorisation for the provision of cross-border services, a person of a third country shall submit the information and documents specified in clauses (2) 1) 2) and 5) of this section to the Supervision Authority.

 (9) The provisions of §§ 55-56 of this Act apply to the processing of applications for the amendment of authorisations for the provision of cross-border services, verification of information and deciding on amendment of the authorisations.
[RT I 2010, 7, 30 - entry into force 26.02.2010]

Chapter 9 REQUIREMENTS FOR SUPERVISION OVER, MANAGEMENT AND ORGANISATIONAL STRUCTURE OF INVESTMENT FIRMS  
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 71.  [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 72.  Requirements for persons acquiring or having qualifying holding

  Qualifying holdings in an investment firm may be acquired, held and increased and control over an investment firm may be gained, held and increased by every person (hereinafter in §§ 72–78 of this Act person):
 1) who has impeccable business reputation and whose activities in connection with the acquisition comply with the principles of sound and prudent management of the investment firm;
 2) who after the acquisition or increase of the holding shall elect, appoint or designate only such persons as managers of the investment firm which comply with the requirements provided for in § 79 of this Act;
 3) whose financial situation is sufficiently secure to ensure regular and reliable operation of the investment firm, and in the case of a legal person if such financial statements exist, they allow for a correct assessment to be made of its financial situation;
 4) who is able to ensure that the investment firm is able to meet the prudential requirements provided for in this Act, in the case of a legal person above all the requirement that the consolidation group, which part the investment firm will form, has a structure which enables exercise of efficient supervision, exchange of information and co-operation between the financial supervision authorities;
 5) with regard to whom there is no justified reason to believe that the acquisition, holding or increase of a holding in or control over the investment firm is related to money laundering or terrorist financing or an attempt thereof or increases such risks.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 72¹.  Conditions and special rules of designation of holding

 (1) In designation of qualifying holding, in addition to the provisions of §§ 9 and 10 of this Act, the provisions of subsection 185⁴ (1) and clauses 187¹ (1) 1) and 2) and subsection (2) of the same section of this Act should also be taken into account.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (2) In designation of qualifying holding, there are not taken into account the voting rights related to the share capital which an investment firm or a credit institution may acquire or hold in relation with the provision of the service specified in clause 43 (1) 6) of this Act on the conditions that these rights shall not be exercised in any way to interfere in the management of this company and these rights shall be transferred within one year as of the acquisition.

 (3) In calculation of qualifying holding, there shall not be totalled in case of a management company of a UCITS and a parent undertaking of a management company of a UCITS of a Contracting State the holdings specified in subsection 185 (1) of this Act with the holdings which the management company manages by itself, provided that the management company exercises its voting rights independently from the parent undertaking.

 (4) In calculation of qualifying holding, there shall not be totalled in case of a parent undertaking of an investment firm of Estonia and a Contracting State the holdings specified in subsection 185 (1) of this Act with the holdings which this investment firm manages separately for each client, taking into account the terms and conditions provided for in subsection 187¹ (7) of this Act.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 73.  Giving notification of acquisition of holding

 (1) A person who intends to directly or indirectly acquire a qualifying holding in an investment firm or to increase such holding so that the proportion of the share capital of the investment firm or votes represented by shares exceeds 20, 30 or 50 per cent, or to conclude a transaction as a result of which the investment firm will become a company controlled thereby (hereinafter acquirer) shall notify the Supervision Authority of its intention beforehand and submit the information and documents provided for in subsection 74 (1) of this Act and the regulation established on the basis of subsection 74 (1¹) of this Act.

 (2) The provisions of this Chapter also apply if a person acquires a qualifying holding in an investment firm or increases such holding so that the proportion of the share capital of the investment firm or votes represented by shares exceeds 20, 30 or 50 per cent due to any other event or as a result of any other transaction or, due to the event or as a result of the transaction, the investment firm becomes a company controlled by the person. In such case, the person shall give notification to the Supervision Authority promptly after becoming aware of the control gained over the investment firm or the acquisition or increase of qualifying holding in the investment firm.

 (3) The Supervision Authority shall notify the acquirer in writing within two working days after receipt of the notice specified in subsection (1) or (2) of this section or the additional information and documents specified in subsection 74 (3) of this Act and the possible termination date of terms in proceedings provided for in § 74¹ of this Act.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 74.  Information submitted upon giving notification of acquisition of holding

 (1) The Supervision Authority shall be notified of the name of the company in which a qualifying holding is acquired or increased or which becomes controllable by the acquirer and the size of the holding acquired in this company, and the following information and documents shall be submitted:
 1) description of the company acquired which contains an extract of the share register, information on the type of shares and number of votes acquired or owned by the acquirer and other information if necessary;
 2) a curriculum vitae of the acquirer who is a natural person which contains, inter alia the name, residence, education, work and service experience and personal identification code of the acquirer or date of birth in the absence of a personal identification code;
 3) the name, registered office, registry code, authenticated copy of a registration certificate and a copy of the articles of association, if they exist, of the acquirer if the acquirer is a legal person or of the legal person administering the pool of assets;
 4) a list of the owners or members of the acquirer if the acquirer is a legal person and information on the number of shares held by or the size of the holding and number of votes of each owner or member;
 5) the information on the members of the management board and supervisory board of the acquirer if the acquirer is a legal person, including, for each person, the name and surname, personal identification code or date of birth in the absence of a personal identification code, education, work and service experience, and documents which prove the trustworthiness, experience, competence and impeccable reputation of such persons;
 6) the confirmation that the persons becoming managers of the investment firm as a result of acquiring a holding have not been punished for an economic offence, official misconduct or offence against property or offence against public trust and information concerning the punishment has been expunged from the punishment register pursuant to the Punishment Register Act. In the case of a citizen of a foreign state, a certificate of the punishment register or an equivalent document of a competent court or administrative authority of the country of origin of the person which has been issued less than three months earlier is accepted;
 7) a description of the business activities of the acquirer and a description of the economic and non-economic interests of persons connected with the acquirer;
 8) a confirmation that in the case of a person specified in clause 6 of this subsection no such circumstances have existed or exist which in accordance with law preclude his or her right to be a manager of an investment firm;
 9) the last three annual reports of the acquirer, if they exist. If more than nine months have passed since the end of the previous financial year, an audited interim report for the first six months of the financial year shall be submitted. The sworn auditor's report shall be added to the reports if preparation of the report is prescribed by legislation;
[RT I 2010, 9, 41 - entry into force 08.03.2010]
 10) if possible, the ratings required for assessing the financial situation of the acquirer who is a natural person and companies connected with the acquirer and reports intended for the public; in the case of the acquirer if the acquirer is a legal person the credit ratings issued to the acquirer and the consolidation group;
 11) if the acquirer is a company belonging to a consolidation group, a description of the structure of the group, data relating to the sizes of the holdings of the companies belonging to the group, and the last three annual reports of the consolidation group together with sworn auditor's reports;
[RT I 2010, 9, 41 - entry into force 08.03.2010]
 12) if the acquirer is a natural person, documents certifying the financial status of the person during the last three years;
 13) information and documents concerning the sources of monetary or non-monetary resources for which it is intended to acquire a qualifying holding or increase it or gain control;
 14) the circumstances related to the acquisition of holding pursuant to §§ 10 and 72¹ of this Act;
 15) the size of the qualifying holding owned by the person after acquisition of the holding and the circumstances related to the holding pursuant to §§ 10 and 72¹ of this Act;
 16) upon gaining control over an investment firm, the business plan and other circumstances related to the acquisition and execution of control pursuant to § 10 of this Act;
[RT I, 31.12.2016, 3 - entry into force 10.01.2017]
 17) a review of the strategy applied in the investment firm, provided the investment firm does not become a controlled company as a result of the acquisition.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (1¹) The minister responsible for the area may establish a regulation which specifies the information and documents to be submitted to the Supervision Authority and specified in subsection (1) of this section.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (1²) The information and documents submitted to the Supervision Authority shall be in Estonian. With the consent of the Supervision Authority, the above-mentioned information and documents may be submitted in another language.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (2) If a management company, investment firm, credit institution, insurance undertaking or investment fund of a third country or another person of a third country subject to financial supervision wishes to acquire a qualifying holding, confirmation from the relevant financial supervision authority of the third country to the effect that the person of the third country holds an activity licence and to the knowledge of the corresponding financial supervision authority observes the requirements established thereto shall also be submitted to the Supervision Authority in addition to the information and documents specified in subsection (1) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) The Supervision Authority may request in writing additional information or documents in order to specify or verify the documents specified in subsection (1) of this section. In such case it is specified which additional information shall be submitted to the Supervision Authority.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (4) The Supervision Authority may waive the demand for the information or documents specified in subsection (1) of this section in part or in full.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 74¹.  Legislative proceeding and term in proceeding

 (1) The Supervision Authority shall assess the compliance of the acquirer with the requirements provided for in § 44 of this Act and shall resolve on prohibition on acquisition of holding or granting authorisation for acquisition of holding within 60 working days (hereinafter time-limits of proceedings) as of submission of the notice provided for in subsection 45 (3) of this Act concerning receipt by the Supervision Authority of the information and documents required for the assessment.

 (2) The Supervision Authority has the right to demand the additional information and documents specified in subsection 74 (3) of this Act within 50 working days as of the beginning of the time-limits of proceedings.

 (3) The time-limits of proceedings shall suspend for the period between the first demand by the Supervision Authority of the additional information and documents specified in subsection (2) of this section and the receipt from the acquirer of the demanded additional information and documents. The suspension shall not last longer than 20 working days.

 (4) The time-limits of proceedings shall not suspend if additional information and documents are demanded.

 (5) If no financial supervises is exercised over the acquirer or a financial supervision authority of a third country exercises supervision over the acquirer, the Supervision Authority may extend the time-limits of proceedings specified in subsection (3) of this section to up to 30 working days.

 (6) During the time-limits of proceedings specified in this section, the Supervision Authority shall cooperate with the competent supervision authority of another Contracting State if a management company, credit institution, investment firm, investment fund, insurance undertaking, another person subject to financial supervision or a person belonging to the same consolidation group with a specified person, if registered in the Contracting State, is the acquirer.

 (7) The Supervisory Authority shall consult with the supervision authorities of other Contracting States in the framework of the co-operation specified in subsection (6 ) of this section. The Supervision Authority shall immediately forward to other financial supervision authorities all the information that is essential upon assessment of acquisition and increase of the qualifying holding and gaining control over the investment firm.

 (8) If more than one person wish to acquire a qualifying holding simultaneously, the Supervision Authority shall treat them equally under equal circumstances.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 75.  Conditions for acquisition of holding

 (1) The Supervision Authority has the right to specify a term for the acquirer during which the acquirer has the right to acquire or increase the qualifying holding or gain control over an investment firm. The Supervision Authority may extend the term prescribed but the term shall not exceed 12 months in total. The acquirer is required, within the specified term, to promptly give notification to the Supervision Authority of conclusion of a transaction or a decision not to conclude a transaction by which qualifying holding is acquired or increased or control is gained over an investment firm.

 (2) A qualifying holding may be acquired or increased or the investment firm may be turned into a controlled company if the Supervision Authority does not prohibit, by a precept, acquisition or increase of a qualifying holding or turning of the investment firm into a controlled company based on the provisions of § 74¹ and subsection 76 (1) of this Act.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 76.  Bases for prohibition on acquisition of holding and decision on acquisition

  [RT I 2009, 37, 250 - entry into force 10.07.2009]

 (1) The Supervision Authority may prohibit, by a precept, acquisition and increase of the qualifying holding and gaining control over the investment firm if:
 1) the acquirer does not conform to the requirements provided for in § 72 of this Act;
 2) the acquirer fails to submit the information or documents provided for in this Act or requested pursuant to this Act to the Supervision Authority;
 3) The information or documents submitted to the Supervision Authority do not comply with the requirements provided by legislation or are incorrect, misleading or incomplete or based on the information and documents submitted the Supervision Authority cannot exclude reasonable doubt with respect to unsuitability of the acquisition and with respect to that the acquisition does not comply with the requirements provided for in this Act;
 4) the investment firm would become a company controlled by a person residing or located in a third country and sufficient supervision is not exercised over the person in the country of residence or location of the person or the financial supervision authority of the third country has no legal basis or possibility to co-operate with the Supervision Authority.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (2) The Supervision Authority shall submit a decision to the acquirer concerning the authorisation to acquire the qualifying holding or a prohibiting precept within two working days after adoption of the corresponding decision but prior to the expiry of the time-limits of proceedings. If financial supervision over the acquirer is exercised by the financial supervision authority of another Contracting State, its assessment of the acquisition or increase of the qualifying holding or gaining conrol over the investment firm must be inter alia indicated in the decision.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (3) If the circumstances specified in subsection (1) of this section become evident after acquisition or increase of qualifying holding or gaining control over the investment firm, the Supervision Authority may issue a precept according to which acquisition of qualified holding or gaining control over the investment firm is deemed to be contrary to this Act.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (4) Each time, the Supervision Authority has the right to prohibit or restrict, by its precept, the acquirer or a person who holds a qualifying holding in an investment firm or who controls an investment firm to exercise voting rights or other rights enabling control regarding the investment firm if circumstances provided for in subsections (1) or (3) of this section exist. The Supervision Authority may issue a precept regardless of issue of a precept provided for in subsection (1) or (3) of this section. The Supervision Authority may publish the precept on its website, and the acquirer may also demand publication of the precept.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (5) If an acquirer or a person who holds a qualifying holding in an investment firm or who controls an investment firm is a credit institution, management company, investment fund, investment firm, insurance undertaking, another person subject to financial supervision or a person belonging to the same consolidation group with a specified person, if registered in another Contracting State, the Supervision Authority shall inform the competent financial supervision authority of the Contracting State of issue of a precept specified in subsection (3) or (4) of this section.

 (6) Compliance with a precept provided for in subsections (1), (3) and 4) of this section is also mandatory for an investment firm, the person maintaining its share register or another similar person who organises the exercise of voting rights.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 77.  Consequences of illegal acquisition of holding

 (1) As a result of a transaction by which a qualifying holding is acquired or increased, the person shall not acquire the voting rights determined by the shares, and the votes represented by the shares shall not be included in the quorum of the general meeting if:
 1) the transaction is contrary to a precept issued by the Supervision Authority;
 2) the Supervision Authority has issued a precept specified in subsection 76 (3) or (4) of this Act;
 3) the Supervision Authority has not been informed of the transaction pursuant to the procedure provided for in §§ 73 and 74 of this Act;
 4) the transaction is conducted after the expiry of the term specified in subsection 75 (1) of this Act or before acquisition of qualifying holding is permitted pursuant to this Act;
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (2) If any of the circumstances specified in subsection (1) of this section exist with regard to a transaction, the person who conducted the transaction does not have any rights arising from the transaction which would entitle the person to gain control over the investment firm.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

 (3) If voting rights representing a qualifying holding acquired or increased by such a transaction, in the case of which any of the circumstances specified in subsection (1) of this section exist, are included in the quorum of the general meeting and influence the adoption of a resolution of the general meeting, the resolution of the general meeting shall be void. A court may declare the resolution of the general meeting invalid on the basis of a petition of the Supervision Authority, a shareholder or a member of the management board or supervisory board, if the petition is submitted within three months as of the adoption of the resolution of the general meeting.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (4) Upon exercise of the rights enabling control arising from a transaction by which an investment firm is turned into a company controlled by a person and in the case of which any of the circumstances specified in subsection (1) of this section exist, a court may declare the exercise of the rights null and void on the basis of a petition of the Supervision Authority, a shareholder or a member of the supervisory board or management board of the company, if the petition is submitted within three months as of the exercise of the rights.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

§ 78.  Giving notification of changes in holding

 (1) If a person intends to transfer shares in an amount which would result in the person losing a qualifying holding in an investment firm or if the person reduces the holding thereof such that it falls below one of the limits specified in subsection 73 (1) of this Act or foregoes control over the investment firm, the person is required to inform the Supervision Authority of the intention immediately and indicate the number of shares which the person owns and transfers and holds after the transaction.
[RT I 2009, 37, 250 - entry into force 10.07.2009]

 (2) The provisions of subsection (1) of this section also apply if a person loses control over an investment firm or qualifying holding in an investment firm due to any other event or as a result of any other transaction or if the holding of the person is reduced such that it falls below one of the limits specified in subsection 73 (1) of this Act. In such case, the person shall inform the Supervision Authority promptly after becoming aware of the loss of qualifying holding or control or the reduction of holding.

 (3) Upon becoming aware of transactions specified in § 73 of this Act and subsections (1) and (2) of this section, an investment firm is required to promptly inform the Supervision Authority thereof.

 (4) An investment firm shall, together with its annual financial report, submit to the Supervision Authority information concerning shareholders who have a qualifying holding in the investment firm as at the end of the financial year and shall set out the size of holding owned by the shareholders.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 78¹.  Seat and place of business of investment firm

  The seat and the principal place of business of an investment firm entered in the commercial register in Estonia shall be in Estonia.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 79.  Managers of investment firms

 (1) Only persons who have the education, experience and professional qualifications necessary to manage an investment firm and who have an impeccable reputation may be elected or appointed managers of investment firms.

 (2) The management board of an investment firm shall consist of at least two members.

 (3) Members of the management board of an investment firm shall have completed higher education or education equivalent thereto, and the experience necessary for managing an investment firm.

 (4) The following shall not be managers of an investment firm:
 1) persons whose act or omission has resulted in the bankruptcy or compulsory liquidation of a company or the revocation of the activity licence of a company;
 2) persons whose activities have shown that they are not capable of organising the management of a company such that the interests of the shareholders, members, creditors and clients of the company are sufficiently protected;
 3) bankrupts or persons who are subject to a prohibition on business or from whom the right to engage in economic activity has been taken away pursuant to law;
 4) persons who have been punished for an economic offence, official misconduct or offence against property or offence against public trust and information concerning the punishment has not been expunged from the punishment register pursuant to the Punishment Register Act.

 (5) The managers and employees of an investment firm are required to act with the prudence and competence expected of them and according to the requirements for their positions and the interests of the investment firm and its clients.

 (6) The managers of an investment firm shall guarantee that the organisational structure of the investment firm is transparent, the areas of responsibility are clearly delineated and procedures for the establishment, measurement, management, constant monitoring and reporting of risks have been established and that such procedures are sufficient and proportional taking into account the nature, extent and level of complexity of the operation of the investment firm.

 (7) In order to keep themselves informed or familiarise themselves the managers of an investment firm shall review on a regular basis this Act and the regulations and other rules of procedure established for compliance with legislation issued on the basis thereof by evaluating the efficiency thereof and take appropriate measures to eliminate the deficiencies.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 79¹.  Requirements for managers and employees of investment firm and principles of remuneration of management board members and employees

  [RT I, 09.05.2014, 2 - entry into force 19.05.2014]
The managers and employees of investment firm, including their remuneration, shall be governed by the provisions of subsections 49 (1¹)–(1⁴), §§ 52, 55, 57¹–57⁴ and 58¹, subsections 59 (3) and (4³), § 62, clause 63 (2) 5¹) and subsection § 92² (4) of the Credit Institutions Act, if it is appropriate and proportionate, taking into account the nature, extent and level of complexity of the activity of the investment firm.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 80.  Giving notification of officers and auditor

 (1) Upon the election or appointment of a manager of an investment firm, the person to be elected or appointed shall present the following to the investment firm:
 1) the information specified in clauses 54 (1) 5) and 6) of this Act;
 2) confirmation that no circumstances exist which, according to this Act, would preclude the management of an investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) An investment firm is required to inform the Supervision Authority of the election or appointment of managers and an auditor, and of their resignation or the initiation of their removal before the expiry of their term of office within ten days as of the relevant decision being made or the relevant application being received.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) Upon the election or appointment of a manager, an investment firm shall submit to the Supervision Authority the information and manager's confirmation specified in subsection (1) of this section and upon the election or appointment of an auditor the auditor's name and confirmation concerning the absence of any circumstances regarding the manager or the auditor which preclude the right to be a manager or an auditor of an investment firm.
[RT I 2010, 2, 3 - entry into force 22.01.2010]

§ 81.  Removal of manager

 (1) The Supervision Authority may issue a precept to an investment firm to remove a manager if:
 1) the manager does not meet the requirements provided for in this Act;
 2) misleading, incomplete or incorrect information or documents have been submitted in connection with his or her election or appointment;
 3) the activities of the manager of an investment firm have shown that he or she is not capable of sound and prudent management of the investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) If an investment firm fails to comply with a precept specified in subsection (1) of this section in full or within the prescribed term, the Supervision Authority has the right to demand the removal of the manager by a court.

§ 81¹.  General organisational requirements

 (1) An investment firm is required to:
 1) establish the procedure for making decisions and establish an organisational structure which shall set out the reporting arrangements and professional or official functions and duties;
 2) ensure that each relevant person is aware of the requirements which he or she shall observe for appropriate performance of his or her duties;
 3) engage employees with adequate skills, expertise and competence for the performance of professional or official functions;
 4) create, implement and store internal reporting and exchange of information of the investment firm at all the required levels of the investment firm;
 5) store systematically information concerning its business activities and internal policies and other decisions concerning the management of the organisation;
 6) ensure that the performance of several duties does not prevent and will not prevent reliable, honest and professional performance of any concrete duty by a relevant person.

 (2) Upon the performance of the duties specified in subsection (1) of this section, an investment firm shall take into account the nature, extent and level of complexity of the business activities, including the investment services provided by and the investment operations of the investment firm.

 (3) An investment firm shall establish, implement and maintain the rules and systems which ensure the security, integrity and confidentiality of information taking into account the nature and content of such information.

 (4) An investment firm shall establish, implement and maintain legal, technical and organisational measures in order to ensure sustainable and regular provision f investment services. The objective of the abovementioned measures is to ensure in the case of an interruption to their systems and procedures, the preservation of essential data and functions, and the maintenance of investment services and activities, or, where that is not possible, the timely recovery of such data and functions and the timely resumption of the investment services and activities.

 (5) An investment firm shall monitor and, on a regular basis, evaluate the adequacy and effectiveness of the procedures and systems established and implemented in accordance with subsections (1) – (4) of this section. If deficiencies become evident, an investment firm shall eliminate them.

 (6) Written reports concerning the areas provided for in §§ 83–83² of this Act shall be submitted to the managers of an investment firm on a regular basis but not less frequently than once a year.

 (7) It shall become evident from a report specified in subsection (6) of this section whether, upon the existence of deficiencies, appropriate measures have been taken to eliminate the deficiencies in the area covered in the report.

 (8) For the purposes of this Act, relevant person is:
 1) manager of an investment firm and its investment agent;
 2) manager of an investment agent of an investment firm;
 3) an employee of an investment firm and its investment agent who is involved in the provision of investment or ancillary services or performance of investment operations;
 4) a natural person who is involved in the provision of investment services by the investment firm and whose services are placed at the disposal and under the control of the investment firm or its investment agent;
 5) a natural person who provides the relevant services to an investment firm or its investment agent under a contract for transfer of operations.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82.  Policies and procedures

 (1) An investment firm shall establish and apply rules of procedure regulating the activities of the investment firm and its managers and employees (hereinafter in this Chapter and Chapters 10 and 11 internal policies), which ensure that legislation regulating the activities of the investment firm is complied with and that decisions taken by the directing bodies thereof are duly observed.

 (2) The internal policies established and implemented by an investment firm shall ensure legitimate and regular provision of investment services. An investment firm shall regularly assess the effectiveness correspondence to reality of the internal policies and adjust the internal policies such that the best protection of interests of clients is ensured.

 (3) Among other matters, the internal policies shall determine:
 1) the procedure for the communication of information and movement of documents within the investment firm, including requirements for submission and forwarding of information;
 2) the procedure for the provision of investment services and ancillary services, including a plan for determination of a risk of interruption of business, for managing or prevention of the risk thereof;
 3) criteria for selection of employees, professional or official functions, relationships of subordination, reporting lines, the procedure for reporting and the delegation of rights, and shall provide the separation of functions upon assumption of obligations in the name of the investment firm, the recording of services for accounting and reporting purposes and the assessment of risks;
 4) the procedure for maintaining databases and processing of data;
 5) internal rules of procedure for imposing international sanctions established on the basis of the International Sanctions Act and application of the Money Laundering and Terrorist Financing Prevention Act, and the code of conduct for verification of compliance therewith;
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82¹.  Risk management

 (1) An investment firm is required to:
 1) establish, implement and maintain the procedure for risk management policy and implementation thereof for identifying the risks related to its activities, the applied processes and systems and to determine the risk tolerance level of the investment firm in the relevant area by the internal policies;
 2) establish and implement legal, technical and organisational measures by internal policies in order to ensure sustainable and regular provision f investment services for the management of the risk of interruption of business by the internal policies;
 3) manage the risks related to its activities, the applied processes and systems proceeding from the determined risk tolerance level.

 (2) An investment firm is required to verify:
 1) the adequacy and effectiveness of the risk management policy and the implementation thereof;
 2) compliance of the investment firm and its related persons with the policies and procedure established and applied pursuant to clauses (1) 1) and 2) of this section;
 3) the adequacy and effectiveness of the policy, implementation of the policy, processes and systems and the measures taken to address any deficiencies in the application thereof, including the adequacy and effectiveness of the measures taken for disregarding the policy, implementation of the policy, processes or systems or failure to perform thereof in any other way the by a relevant person.

 (3) If it is appropriate and proportionate proceeding from the nature, extent and complexity of the business activities, including the provided investment services and investment operations of the investment firm, the investment firm shall establish an independent risk management function which shall perform the following functions:
 1) application of the policy and implementation procedure specified in subsections (1) and (2) of this section;
 2) advising of managers and submission of reports to them pursuant to subsection 81¹ (6) of this Act.

 (4) If an investment firm has not established an independent risk management function specified in subsection (3) of this section, the investment firm shall be able to prove that the policy established pursuant to subsections (1) and (2) of this section and the implementation thereof comply with the requirements provided for in this section and that they are applied regularly and efficiently.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82².  Ensurance of capital adequacy

 (1) All the essential risks of an investment firm including the risks not mentioned in subsection 103 (2) of this Act must at all times be adequately covered by own funds.

 (2) An investment firm must have reliable, effective and all-inclusive strategies and corresponding procedures established by internal policies in order to continuously maintain an adequate level and structure of own funds, and an adequate division of the own funds between structural units and activities based on the level of the risks assumed by the investment firm or of potential risks.

 (3) The corresponding strategies and procedures must be regularly updated in order to guarantee that they continue to be proportional to the nature, extent and level of complexity of the operation of the investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82³.  Personal transaction by manager, employee or other connected persons of investment firm

 (1) An investment firm shall set out by internal policies the procedure for conclusion of personal securities transactions of the persons associated with the investment firm and ensure the protection of the interests of clients and lawful and regular operation of the market.

 (2) A relevant person, and the spouse, a dependent child, stepchild, foster-child and a person who has shared the same household as that relevant person for at least one year on the date of the transaction concerned (hereinafter in this section the person close) is deemed to be a connected person specified in subsection (1) of this section.

 (3) The conclusion of a personal securities transaction specified in subsection (1) of this section means the conclusion of a securities transaction by or for a relevant person if:
 1) upon entry into a transaction the relevant person acts outside his or her normal duties or authority;
 2) a transaction is entered into on account of the relevant person or a person close to the relevant person;
 3) a transaction is entered into on account of a person, who has close links with the relevant person;
 4) a transaction is entered into on account of a person whose contractual relationship with the relevant person is such that the relevant person has material interests in the outcome of entry into the transaction, other than a fee or commission for the execution of the trade.

 (4) An investment firm shall establish a procedure by internal policies aimed at preventing the following activities in the case of any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information to other confidential information relating to clients:
 1) entering into a personal transaction if it is prohibited pursuant to § 188⁶ of this Act or the transaction involves misuse of confidential information or the transaction conflicts or is likely to conflict with this Act;
 2) if entry into a personal transaction is accompanied by providing recommendations to a third person for the conclusion of a securities transaction not related to the performance of the normal duties of or provision of investment services by the relevant person and if such activity would be covered by the provisions of clause 82⁵ (5) 1) and subsection 87⁵ (6) of this Act;
 3) taking into account the provisions of clause 188⁶ (1) 2) of this Act, if the relevant person discloses information to a third person in the course of activities not related to the performance of his or her normal duties or the provision of investment services and if the relevant person knows, or reasonably ought to know, that as a result of that disclosure that third person will enter into a securities transaction which would be covered by the provisions of subsection (1) of this section, clause 82⁵ (5) 1) or 2) or subsection 87⁵ (6) of this Act or advises or procures a third person to enter into such a transaction.
[RT I, 24.03.2011, 1 - entry into force 03.04.2011]

 (5) An investment firm is required to take appropriate measures to ensure that:
 1) each relevant person is aware of the procedure established on the basis of subsection (4) of this section and the restrictions contained therein and obligation of disclosure upon entry into personal transactions;
 2) a system is applied on the basis of which the investment firm is informed promptly of any personal transaction entered into by a relevant person or which enables the investment firm to identify such transactions. Upon transfer of operations related to investment services to a third person, an investment firm shall ensure that the third person stores information on personal transactions entered into by relevant persons and provides that information to the investment firm promptly on request;
 3) all information on personal transactions, including any authorisation or prohibition of the transactions, is stored. A separate record shall be kept of the above-mentioned information.

 (6) Subsections (4) and (5) of this section shall not apply to the following personal transactions:
 1) personal transactions effected under the provision of a securities portfolio management service where there is no prior communication in connection with the transaction between the investment firm and the relevant person or other person for whose account the transaction is executed;
 2) personal transactions in units or shares of UCITS provided for in the Investment Funds Act or units or shares of other investment funds if the Supervision Authority or a financial supervision authority of another Contracting State exercises supervision over the investment fund and requirements for risk spreading in the investment of their assets equivalent to UCITS are applied and the relevant person and any other person for whose account the transactions are effected are not involved in the management of that investment fund.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82⁴.  Managing and avoiding conflicts of interests

 (1) An investment firm shall establish and implement legal, technical and organisational measures to identify, manage or prevent conflicts of interests in the investment firm upon the provision of investment and ancillary services, a conflict of interests of a person having a control relationship with the investment firm, conflicts of interests between the investment firm and a client or between clients and the adverse effect thereof on the interests of its clients. The abovementioned measures shall take into account the size and structure of the investment firm and the nature, scale and complexity of the business of the investment firm. An investment firm shall specify the abovementioned procedure by internal policies.

 (2) The measures provided for in subsection (1) of this section shall include at least relevant persons in case of a conflict of interests in the investment firm and if the investment firm belongs to a consolidation group, any circumstances shall be taken into account of which the investment firm is or should be aware and which may give rise to a conflict of interests arising as a result of the structure and business activities of other members of the consolidation group.

 (3) For the purposes of identifying the types of conflicts of interests that arise in the course of providing investment and ancillary services and whose existence may damage the interests of a client, investment firms shall take into account, by way of minimum criteria, the question of whether a relevant person or the investment firm, or a person who is in a control relationship with the firm, is in any of the following situations, whether as a result of providing investment or ancillary services or otherwise:
 1) the investment firm or that person is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
 2) the investment firm or that person has an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of the client, which is distinct from the client's interest in that outcome;
 3) the investment firm or that person has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;
 4) the investment firm or that person carries on the same business as the client;
 5) the investment firm or that person receives or will receive from a person other than the client a benefit in relation to a service provided to the client, in the form of money, commodity or service, other than the standard commission or fee for that service and which is not permitted pursuant to § 85² of this Act.

 (4) An investment firm shall notify a client of the general nature or source of conflicts of interest before the provision of investment or ancillary services if the measures taken by the investment firm specified in subsection (1) of this section do not guarantee avoiding damage to the interests of clients.

 (5) The procedure for avoiding conflicts of interests established pursuant to subsection (1) of this section shall define:
 1) the circumstances related to the specific investment services and ancillary services carried out by or on behalf of the investment firm, which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of one or more clients;
 2) specified rules to be followed and processes and measures to be applied in order to resolve conflicts of interests.

 (6) The rules and measures specified in clause (5) 2) of this section shall ensure that the persons engaged in business activities involving a conflict of interests specified in clause (5) 1) of this section carry on those business activities in a way which manages the risk of damage to the interests of clients to the maximum possible extent. If an investment firm belongs to a consolidation group, the abovementioned rules and measures shall take into account the size and the extent of the activities of the consolidation group.

 (7) The rules and measures specified in clause (5) 2) of this section shall include such of the following as are necessary and appropriate for the firm to ensure the requisite degree of independence of the investment firm:
 1) procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interests where the exchange of that information may harm the interests of its clients;
 2) the separate control of persons whose principal functions involve acting on behalf of, or providing services to clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the investment firm;
 3) the removal of any direct link between the remuneration of relevant persons engaged in different activities or the revenues generated by them, where a conflict of interest may arise in relation to those activities;
 4) procedures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person provides or carries out investment or ancillary services;
 5) procedures to prevent or control the simultaneous or sequential involvement of a relevant person in separate investment or ancillary services where such involvement may impair the proper management of conflicts of interests.

 (8) The notification of clients provided for in subsection (4) of this section shall be made in a durable medium and include sufficient detail, taking into account the type of the client.

 (9) "Durable medium" means any instrument which enables a client to store information addressed personally to that client in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored.

 (10) An investment firm shall keep and regularly update a record of the kinds of investment or ancillary services carried out or provided through the investment firm in which a conflict of interest entailing a material risk of damage to the interests of one or more clients has arisen or may arise.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82⁵.  Additional organisational requirements to investment firms producing and disseminating investment research

 (1) For the purposes of this Act, "investment research" means research or other information intended for distribution channels or for the public concerning the present or future value or price of securities recommending or suggesting an investment strategy concerning a security or the issuer of securities on the following conditions:
 1) the information is labelled or described as investment research or in similar terms, or is otherwise presented as an objective or independent explanation;
 2) if a certain recommendation is made by an investment firm to a client, it does not constitute the provision of investment advice for the purposes of clause 43 (1) 5) of this Act.

 (2) The investment research provided for in this section is a type of investment recommendations provided for in § 188¹⁸ of this Act.

 (3) In addition to investment research, the provisions of §§ 188¹⁸–188²⁷ of this Act shall be applied, unless otherwise provided in this section or § 82⁴ of this Act.

 (4) An investment firm which produces, or arranges for the production of investment research that is intended to be disseminated to clients of the investment firm or to the public shall ensure the implementation of the measures and procedure provided for in subsections 82⁴ (7) and (8) of this Act in relation to the persons involved in the production of the investment research (hereinafter financial analysts) and other connected persons whose responsibilities or business interests may conflict with the interests of the persons to whom the investment research is disseminated.

 (5) Investment firms covered by subsection (4) of this section shall implement a procedure the aim of which is to ensure that the following conditions are satisfied:
 1) financial analysts and other relevant persons must not undertake personal transactions or trade on behalf of any other person, including the investment firm, in securities to which investment research relates, or in any related securities, with knowledge of the likely timing or content of that investment research which is not publicly available or available to clients and cannot readily be inferred from information that is so available, until the recipients of the investment research have had a reasonable opportunity to act on it;
 2) persons involved in the production of investment research must not undertake personal transactions in securities to which the investment research relates, or in any related securities, contrary to current recommendations, except in exceptional circumstances and with the prior approval of the person performing the conformity inspection function of the investment firm;
 3) persons involved in the production of the investment research must not accept benefits in cash or in kind from those with a material interest in the subject-matter of the investment research;
 4) persons involved in the production of the investment research must not promise issuers research coverage which is more favourable than the real terms;
 5) issuers and any other persons other than financial analysts, are not, before the dissemination of investment research, permitted to review a draft of the investment research for the purpose of verifying the accuracy of factual statements made in that research, or for any other purpose other than verifying compliance with the investment firm's legal obligations, if the draft includes a recommendation or a target price.

 (6) The provisions of clause (5) 1) of this section shall not be applied if a financial analyst or any other connected person undertakes transactions as a market maker acting in good faith and in the ordinary course of market making or in the execution of an unsolicited client order.

 (7) For the purposes of subsection (5) of this section, "related security" means a security which price is closely affected by the price or price changes of another security which is the subject of investment research, and includes a derivative on that other security.

 (8) If an investment firm disseminates investment research produced by a third person to the public or to its clients, the investment firm shall be exempt from complying with the requirements provided for in subsection (4) of this section if the following criteria are met:
 1) the person that produces the investment research is not a member of the consolidation group to which the investment firm belongs;
 2) the investment firm does not substantially alter the recommendations within the investment research;
 3) the investment firm does not present the investment research as having been produced by it;
 4) the investment firm verifies that the producer of the research is subject to requirements equivalent to the requirements under this Act in relation to the production of that research, or has established a policy setting such requirements.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82⁶.  Outsourcing of operations related to investment services

 (1) For the better performance of its duties, an investment firm has the right to outsource operations related to investment services to third parties (hereinafter in this section outsourcing).

 (2) An investment firm shall establish the outsourcing procedure by internal policies and the outsourcing shall meet the following conditions:
 1) it must not damage the interests of the clients of the investment firm or the investment firm;
 2) it must not prevent the activities of the investment firm or sufficient supervision over the investment firm;
 3) the outsourcing must not result in the delegation by the managers of the investment firm of its responsibility;
 4) the relationship and obligations of the investment firm towards its clients must not be altered due to such outsourcing;
 5) the third party to whom the operations are outsourced has the necessary qualifications and the ability to perform the functions assumed thereby and the investment firm has the right to supervise the operations of the third person which are related to the provision of investment services;
 6) the outsourcing must not undermine the conditions with which the investment firm must comply in order to be authorised in accordance with this Act and to remain so;
 7) the outsourcing must not remove or modify any other conditions subject to which the authorisation was granted to the investment firm;
 8) other requirements arising from and established on the basis of this Act are met.

 (3) Upon outsourcing of operational functions or any other operations related to investment services an investment shall remain fully responsible for the performance of an outsourced function or the compliance of the outsourced activities under this Act and legislation established on the basis thereof.

 (4) An important operational function or operation is an operation the failure to perform or inadequate performance of which would materially impair the compliance of the investment firm with the requirements prescribed by this Act, the requirements of legislation issued on the basis thereof or with the conditions and obligations of its authorisation, or its financial performance, or the soundness or the continuity of its investment services.

 (5) The following functions or operations shall not be considered as important:
 1) the provision to the investment firm of advisory services, and other services which do not form part of the investment business of the investment firm, including the provision of legal advice to the investment firm, the training of personnel of the investment firm, submitting and handling bills and the security of the firm's premises and personnel;
 2) the purchase of standardised services, including market information services and the provision of price feeds.

 (6) An investment firm shall exercise due skill, care and diligence when entering into, performing or terminating any contract for outsourcing of operations related to important functions or investment services.

 (7) An investment firm shall take measures for outsourcing to ensure that the following conditions are satisfied:
 1) the provider of the outsourced service (hereinafter service provider) must have the ability, capacity and any authorisation required by legislation to perform the functions, provide the services or perform the activities reliably and professionally;
 2) the service provider shall carry out the services effectively, and the investment firm shall establish methods for assessing the standard of performance of the service provider and measure the performance of the service provider on the basis of it;
 3) the service provider shall sufficiently supervise the provision of the outsourced services, and adequately manage the risks associated with the activities;
 4) the investment firm shall take appropriate measures for proper performance of the outsourced operations, if the service provider does not perform its functions as required;
 5) the investment firm must retain the necessary expertise to supervise the outsourced services effectively and manage the risks associated with the service provider and the investment firm shall supervise those services and manage those risks;
 6) the service provider shall notify the investment firm of any circumstances that may have a material impact on its ability to carry out the outsourced functions effectively and in compliance with the requirements;
 7) the investment firm has the right to terminate the contract for outsourcing where necessary giving reasonable advance notice, without detriment to the continuity and quality of its provision of services to clients;
 8) the service provider shall cooperate with the Supervision Authority or a securities market supervisory agency of another state in connection with the provision of services, if necessary;
 9) the investment firm, its auditors and the Supervision Authority or a securities market supervisory agency of another state shall have access to data related to the outsourced operations, as well as to the business premises of the service provider; and the Supervision Authority or a securities market supervisory agency of another state shall be able to exercise those rights of access;
 10) the service provider shall protect any confidential information relating to the investment firm and its clients;
 11) the investment firm and the service provider shall implement legal, technical and organisational measures to ensure continuity and regularity in provision of investment services by taking into account the nature of the outsourced operations, establish, implement and maintain a business continuity plan prescribing periodic testing of backup processes and systems.

 (8) Upon outsourcing of operations to an undertaking belonging to the same consolidation group, the investment firm may, for the purposes of complying with the requirements of this section, take into account the extent to which the investment firm controls the service provider or has the ability to influence its actions.

 (9) If an investment firm wishes to outsource the provision of securities portfolio management services provided to retail clients to a service provider of a third country, the investment firm shall ensure that, in addition to the requirements set out in this section, the following conditions are satisfied upon outsourcing:
 1) the service provider shall be authorised or registered in its home country to provide that outsourced service and shall be subject to sufficient prudential supervision;
 2) a cooperation agreement is entered between the Supervision Authority and the third country supervisory authority of the service provider.

 (10) If the conditions mentioned subsection (9) of this section are not satisfied, an investment firm may outsource the provision of investment services to a service provider located in a third country only if the investment firm gives prior notification to the Supervision Authority about the outsourcing arrangement and the entry into contract and the Supervisory Authority does not object to that arrangement within 30 days following receipt of that notification.

 (11) The Supervision Authority shall publish on its website a list of the supervisory authorities in third countries with which they have cooperation agreements enabling sufficient supervision over the service provider.

 (12) The Supervision Authority has the right to issue a precept in order to demand termination of the outsourcing of operations related to investment services to a specific person, or to demand termination of all contracts entered into between the investment firm and third parties for the outsourcing of operations.

 (13) The Supervision Authority may issue the precept specified in subsection (12) of this section, if:
 1) the third party lacks the qualifications needed for the conduct of the operations related to the activities of the investment firm;
 2) the legitimate interests of clients of the investment firm are violated or there is a danger of such violation;
 3) the securities market supervisory agency of a third country which exercises supervision over a person of a third country has no legal basis or possibilities for cooperation with the Supervision Authority;
 4) a third party to which the operations of the investment firm are outsourced does not comply with the requirements necessary for the performance of the operations outsourced thereto;
 5) other conditions specified in this section are violated.

 (14) The Supervision Authority shall publish guidelines providing the principles of permissible service outsourcing practices on the basis of subsection (10) of this section which shall set out examples of cases where the Supervision Authority does not object to such outsourcing. The guidelines shall include an explanation of why outsourcing in such cases does not impair the ability of the investment firm to perform the obligations provided for in this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82⁷.  Settlement of client complaints

  An investment firm shall establish a well functioning and transparent procedure for reasonable and expeditious settlement of complaints received from retail clients and potential retail clients, and register and store the complaints and the information concerning the action taken for the settlement of the complaints.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 82⁸.  General conditions for submission of information to clients and procedure for communication of information

 (1) If pursuant to this Act an investment firm is required to provide information in a durable medium, the information shall be submitted on paper, unless:
 1) the provision of information in another medium is appropriate taking into account the context of business between the investment firm and the client and the provision of investment and ancillary services;
 2) the client chooses the provision of information in a data medium other than on paper.

 (2) Submission of information in a format which can be reproduced in writing is considered appropriate if the investment firm can assume that the client has regular access to the Internet. An investment firm can assume that the client has regular access to the Internet, if before the provision of investment or ancillary services or at the time of entry into the relevant contract the client provides the investment firm with his or her e-mail address.

 (3) If an investment firm submits information to the client provided for in subsection 87⁴ (7) of this Act by means of a website and the information is addressed to the general public, the following requirements shall be met:
 1) the provision of information on a website shall comply with the business between the client and the investment firm and the provision of investment and ancillary services;
 2) the client shall consent to the provision of the relevant information only on a website;
 3) the client shall be notified of the address of the website in a format which can be reproduced in writing;
 4) the information shall be up to date;
 5) the information concerning the best compliance with earlier and valid client orders shall be accessible continuously by means of that website for such period of time as the client may reasonably need to inspect it.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 83.  Internal control mechanisms

  An investment firm shall have in place adequate internal control mechanisms which aim is to ensure the compliance of its activities with applicable rules and adopted resolutions at all the management and operation levels of the investment firm. The internal control mechanisms shall include at least the conformity inspection function and, if it exists, the activities of an internal audit unit.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 83¹.  Conformity inspection function

 (1) An investment firm shall establish and implement legal, technical and organisational measures in order to carry out independent conformity inspection in connection with the investment operations and the provision of investment services.

 (2) In order to carry out conformity inspection, an investment firm shall establish principles of action and rules for identifying, managing or prevention of the legal risks of failure to perform obligations arising from this Act and legislation issued on the basis thereof and other risks related thereto in connection with investment operations and provision of investment services. The nature, scale and complexity of the business of the investment firm and the extent and nature of the provided investment services shall be taken into account upon the establishment of the abovementioned principles of action and rules.

 (3) The principles of action and rules specified in subsection (2) of this section shall enable the Supervision Authority to perform efficiently the functions of supervisory control provided for in this Act.

 (4) An investment firm shall prescribe the conformity inspection function which shall be performed consistently and effectively by an independent conformity inspection body who shall:
 1) monitor and evaluate regularly the appropriateness and efficiency of the measures taken for elimination of deficiencies upon the implementation of the principles of action and rules established pursuant to subsection (2) of this section and the performance of the obligations of the investment firm;
 2) advise the relevant persons responsible for the provision of investment services and investment operations in the issues related to the performance of the obligations provided for in this Act;
 3) submit reports pursuant to subsection 81¹ (6) of this Act.

 (5) The management board of an investment firm shall ensure that the conformity inspection body has the rights and working conditions necessary to perform its duties and access to the information required for the performance of the conformity inspection function, including the right to obtain explanations and information from the managers of the investment firm and to observe the elimination of any deficiencies discovered and compliance with any precepts issued.

 (6) A conformity inspection body is required to forward any information concerning the investment firm which becomes known to it and which indicates a violation of law or damage to the interests of clients to the managers of the investment firm and to the Supervisory Authority.

 (7) A conformity inspection body shall not provide services or perform operations, over which the conformity inspection body exercises supervision and the bases and procedure for the remuneration of the conformity inspection body shall not compromise its objectivity.

 (8) The obligations provided for in subsection (7) of this section need not be complied with if the investment firm can prove that the above-mentioned obligation is not proportional taking into account the nature, scale and level of complexity of its business and the nature and scale of the investment services and operations and that the performance of the conformity inspection functions of the investment firm is effective in practice without the performance of the relevant obligation.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 83².  Internal audit unit

  [RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (1) An investment firm shall establish legal, technical and organisational measures for carrying out the duties of the internal audit unit and implement these, if it is necessary and proportionate taking into account the nature, extent and complexity of the activities of the investment firm. An investment firm shall determine by the internal rules for internal auditing the procedure for carrying out the duties of the internal audit unit.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]
( 2) The person carrying out the duties of the internal audit unit and the conditions of the contract to be entered into with such person shall be specified by the supervisory board of the investment firm. The person carrying out the duties of the internal audit unit shall be governed by the requirements and the legal bases for the activities established for a certified internal auditor internal in the Auditors Activities Act.
[RT I 2010, 9, 41 - entry into force 01.01.2015 (entry into force amended RT I, 23.12.2013, 4)]

 (3) The primary duty of the person carrying out the duties of the internal audit unit is to:
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]
 1) establish and implement an internal audit programme for the examination and assessment of the appropriateness and efficiency of the processes and systems of the investment firm, including the internal audit system;
 2) give recommendations based on the results of the work performed pursuant to clause 1) of this subsection and observe compliance with the recommendations;
 3) submit reports to the managers of the investment firm pursuant to subsection 81¹ (6) of this Act.

 (4) The management board of an investment firm shall ensure that the person carrying out the duties of the internal audit unit has the rights and working conditions necessary to perform his or her duties, including the right to obtain explanations and information from the managers of the investment firm and the right to observe the elimination of any deficiencies discovered and compliance with any precepts issued.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (5) The person carrying out the duties of the internal audit unit is required to forward any information concerning the investment firm which becomes known to him or her and which indicates a violation of law or damage to the interests of clients to the managers of the investment firm and the Supervision Authority.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

Chapter 10 REQUIREMENTS FOR ACTIVITIES OF INVESTMENT FIRMS  

§ 84.  Application of this Chapter

 (1) The requirements for investment firms established in this Chapter also apply to investment firms registered in a foreign state which provide investment services to persons whose place of residence or location is in Estonia unless otherwise provided for in this Act concerning investment firms registered in a Contracting State.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The requirements for investment firms established in this Chapter do not apply to investment firms registered in a Contracting State specified in subsection (1) of this section who provide investment services solely in a foreign state and whose investment services are not offered to persons in Estonia.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) Investment services are deemed as being offered to persons in Estonia if the services are advertised in Estonia or if the manner of the offer or the contents thereof, including the language of the offer, enable the conclusion to be made that the offer is aimed at persons whose residence or location is in Estonia.

§ 85.  General obligations of investment firms

 (1) Upon the provision of investment services and ancillary services, an investment firm is required to:
 1) provide services lawfully with due professionalism, precision and care, proceeding primarily from the best interests of the client;
 2) to take the reliable and regular operation of the securities market into consideration when pursuing its activities;
 3) comply with the provisions of his Act and legislation established on the basis thereof and its internal policies;
 4) determine the client’s experience for operating in securities market and knowledge of financial market and the intended investment services by classifying clients on the basis of the provisions of §§ 46 and 46¹ of this Act;
 5) inform the client sufficiently of the nature of the investment services and the risks relating thereto;
 6) assess the suitability and appropriateness of the client to consume the desired investment service;
 7) execute the client's order in the best manner and handle the client’s order pursuant to the provisions of this Act and legislation established on the basis thereof;
 8) hold and protect the client’s money and securities deposited with or placed at the disposal of the investment firm;
 9) regularly provide information to the client concerning the provision of investment services;
 10) register and store the information collected upon the provision of investment services and required to be registered and stored by this Act and legislation established on the basis thereof and by Commission Regulation 1287/2006/EC;
 11) settle the client’s complaints concerning the provision of investment services as expeditiously and transparently as possible;
 12) ensure the continuous existence of financial resources necessary for the activities of the investment firm;
 13) apply effective organisational and administrative measures in order to avoid a conflict of interests in connection with production and dissemination of investment recommendations, including investment research, and publish these on its website;
 14) publish on its website, each quarter, the proportion of the recommendations for acquisition, transfer and custody of securities and other similar investment recommendations separately in all investment recommendations provided during the same period, and the proportion of issuers to whom the investment firm has, to a material extent, provided investment services or ancillary services specified in clauses 43 (1) 6) and 7) and 44 3)-6) of this Act (hereinafter investment banking services) during the last twelve months in each aforementioned category of investment recommendations.
[RT I, 24.03.2011, 1 - entry into force 03.04.2011]

 (2) If an investment firm provides recommendations in the framework of investment advice regarding a unit-linked life insurance contract, investment deposit or units of voluntary pension fund or if an investment firm operates in offering a unit-linked life insurance contract, investment deposit or units of voluntary pension fund as insurance intermediary or on behalf of a credit institution, management company or account administrator, the investment firm shall provide the necessary information and assess the suitability of the contract, deposit or aforementioned units for the client and potential client pursuant to the provisions of the Insurance Activities Act, the Credit Institutions Act or the Funded Pensions Act.
[RT I, 24.03.2011, 1 - entry into force 01.08.2011]

§ 85¹.  Provision of investment services through the medium of another investment firm

  An investment firm may rely on the recommendations and advice provided to the client by another investment firm in respect of a service or transaction if the other investment firm has authorised the investment firm to provide investment or ancillary services to a client or on behalf of a client. The investment firm which provides information to the client shall be responsible to the client for the accuracy, precision and completeness of the information and the appropriateness and correctness of the recommendations or advice, except for the accuracy and precision of information and the appropriateness and correctness of the recommendations or advice provided to him or her by the other investment firm.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 85².  Payment for investment services

 (1) An investment firm shall not provide investment services to a client in such a manner that the investment firm pays or receives monetary or non-monetary remuneration upon the provision of investment or ancillary services:
 1) otherwise than directly from the client or the client’s representative;
 2) other than those strictly necessary for the provision of the investment services;
 3) which by their nature or proceeding from their functions creates a conflict of interests between the investment firm and the client.

 (2) An investment firm has the right to pay remuneration to or receive remuneration from a third person or the representative of a third person in connection with the provision of investment or ancillary services to a client in the case specified in clause (1) 1) of this section if:
 1) the investment firm informs the client of the existence, nature and amount of or, if the amount is not specified, the methods for calculation of the remuneration, in an understandable, correct, precise and complete manner before the provision of the relevant investment or ancillary service;
 2) such a remuneration improves the quality of the service provided to the client and does not damage the client’s interests.

 (3) Fees which enable to provide investment services or which are required for the provision of investment services, in particular, fees related to the safekeeping and administration of securities, settlement and transfer fees, fees related to regulated market, supervision fees, state fees, legal fees and other fees similar to those specified which proceeding from their nature do not cause a conflict of interests between the client and the investment firm upon honest, professional provision of investment services proceeding from the best interests of the client shall not be deemed to be remuneration provided for in subsection (1) of this section.

 (4) The information provided for in clause (2) 1) of this section may be presented to a client as a summary. At the request of a client, an investment firm is required to disclose also further details of the remuneration.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 85³.  Retail client agreement

 (1) Upon the provision of investment or ancillary services to a retail client, except in the case of provision of investment advice, an investment firm shall enter into an agreement with a retail client in writing or in a format which can be reproduced in writing (hereinafter retail client agreement). The retail client agreement shall provide the general principles for relationship between the investment firm and the client, the procedure for communication between the investment firm and the client and general conditions for transactions and operations between the investment firm and the client. The retail client agreement shall prescribe, among other matters, the procedure for and terms of resolution of disputes between the investment firm and its client and the contact details of competent supervision authority, to which the client may file a complaint regarding the activity of the investment firm. The rights and obligations of the parties may be incorporated in the retail client agreement by reference to other documents or provisions of legal acts.
[RT I, 24.03.2011, 1 - entry into force 03.04.2011]

 (2) A retail client agreement shall also be entered into if a professional client or an eligible counterparty is treated as a retail client.

 (3) Failure to comply with a formal requirement provided for in subsection (1) of this section shall not render the agreement void.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 86.  Notifying client

 (1) A client of an investment firm has the right to access all information subject to mandatory disclosure and the investment firm is required to present such information to the client at the request thereof.

 (2) The information presented to a client and potential client by an investment firm shall be understandable, timely, precise and complete.

 (3) Information concerning the investment service provided and the nature and risks of the securities related to it shall be presented in a form enabling a client or potential client to make a carefully considered investment decision, whereas it is not permitted to emphasise any potential benefits of an investment service or security without clear indication of any risks related to that investment service or security. Upon the presentation of information, a client or potential client shall be allowed sufficient time for the examination of the information.

 (4) An investment firm shall provide the relevant information in a durable medium.

 (5) At the request of a client or potential client, an investment firm is required to provide information to the client:
 1) on shareholders having a qualifying holding in the investment firm (with regard to legal persons at least the business name and the registry code if applicable; with regard to natural persons at least the given name and surname, and personal identification code or date of birth in the absence of a personal identification code) and the size of their holding in the share capital of the investment firm;
 2) on the legal form, organisational structure and accessibility of the annual financial report of the investment firm;
 3) on managers of the investment firm (given name and surname, personal identification code or date of birth in the absence of a personal identification code, educational background, and a complete list of places of employment and positions held during the last five years);
 4) on the functions of the members of the management board of the investment firm;
 5) on the investment and ancillary services provided.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87.  Notification upon provision of services

  Upon the provision of services, an investment firm is required:
 1) to inform the client or potential client of belonging to a certain type of clients and request information from its clients or potential clients regarding their knowledge of or experience in investment services and ancillary services, and regarding the goals and circumstances related to these services;
 2) to submit to its clients or potential clients all relevant information pertaining to transactions which are being contemplated and risks related thereto, taking into account the interests and expertise of the client or potential client and the type and volume of the transactions which are being contemplated without hiding or reducing the important components, confirmations and warnings of the information;
 3) to submit to its clients or potential clients information on the securities and the proposed investment strategy related to the provision of investment and ancillary services, including guidance on and warnings of the risks;
 4) to submit to its clients or potential clients information on execution venues of orders;
 5) to submit to its clients or potential clients information on costs and charges associated with the service;
 6) to notify the client or potential client of the investor protection scheme applicable;
 7) to inform the client of any situation where the client is the other party to a transaction conducted on the basis of the client's transaction order, unless the investment firm and the client have expressly agreed otherwise in writing;
 8) upon the request of the client, to provide the client at least once every three months with information regarding the transactions conducted with the assets of the client when managing the securities portfolio, and regarding the value of the assets, the composition of the securities portfolio and other circumstances related to the provision of services.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87¹.  Assessment of suitability and appropriateness of investment services

 (1) An investment firm shall assess the suitability and appropriateness of the relevant service and security to a client or a potential client before the provision of investment services.

 (2) In order to recommend an investment service or security suitable for the client or potential client upon provision of investment advice or securities portfolio management, an investment firm shall obtain necessary information concerning the knowledge and experience of the person in connection with the specific type of service and security and the financial situation and investment objectives of the person before providing the service. The information is necessary for an investment firm to understand the specifications arising from the classification of a client and to have a reasonable basis for believing, giving due consideration to the nature and extent of the investment service provided, that the specific transaction to be recommended, or entered into in the course of providing a securities portfolio management service, satisfies the following criteria:
 1) the client has the necessary experience and knowledge in order to understand the risks involved in the transaction or in the management of his or her securities portfolio;
 2) the client’s financial capability complies with the investment objectives and investment risks related to the transaction;
 3) the transaction meets the investment objectives of the client.

 (3) Upon the provision of investment services other than provision of investment advice or securities portfolio management an investment firm when assessing the appropriateness is required to determine whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or investment service offered or demanded by the client. In order to assess it, an investment firm shall request the client or potential client to submit information regarding the client's or potential client's knowledge and experience in the investment field related to the specific type of investment services offered or demanded.

 (4) Pursuant to the provisions of clause (2) 1) and subsection (3) of this section, the information received by an investment firm regarding the client's or potential client's knowledge and experience in the investment field shall comprise information on the type of the client, the nature and extent of the investment service to be provided, the type of product or transaction envisaged including their complexity and the risks involved and include the following:
 1) the types of services, transactions and securities with which the client is sufficiently familiar;
 2) the nature, volume, and frequency of the client's earlier transactions in securities and the period over which they have been carried out;
 3) the level of education, and profession or relevant former profession of the client or potential client.

 (5) Pursuant to the provisions of clause (2) 2) of this section, the information regarding the financial capability of the client or potential client shall include, where possible, primarily information on the source and amount of his or her regular income, his or her assets, including liquid assets, investments and real property, and his regular financial commitments.

 (6) Pursuant to the provisions of clause (2) 3) of this section, the information required for determining the investment objectives of the client or potential client shall include, where possible, primarily information on the length of time for which the client wishes to hold the investment, his or her preferences regarding risk tolerance, his or her risk profile, and the purposes of the investment.

 (7) Where an investment firm provides an investment advice or securities portfolio management service to a professional client it shall be entitled to assume that, in relation to the products, transactions and services for which it is so classified, the client has the necessary level of experience and knowledge specified in clause (2) 1) of this section.

 (8) Where that investment service consists in the provision of investment advice to a professional client, the investment firm shall be entitled to assume for the purposes of clause (2) 2) of this section that the client is able financially to bear any risks related to investment services consistent with the investment objectives of that client.

 (9) Upon the assessment of the appropriateness of investment services other than provision of investment advice or securities portfolio management service the investment firm shall be entitled to assume that a professional client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the client is classified as a professional client.

 (10) An investment firm shall not recommend investment services or securities to a client or potential client if upon the provision of investment advice or securities portfolio management service the investment firm does not receive information from the client or potential client concerning the following circumstances which would enable the investment firm to recommend to the client or potential client the investment services and securities suitable for him or her:
 1) the client's or potential client's knowledge and experience related to the specific type of product or service;
 2) the financial capability of the client or potential client;
 3) the investment objectives of the client or potential client.

 (11) An investment firm shall warn the client of the unsuitability of an investment service or security if the investment firm finds on the basis of the received information that the product or service is not appropriate for the client.

 (12) An investment firm shall warn the client in case of failure to submit or submission of incomplete information of the difficulty or impossibility of the investment firm to determine whether a proposed investment service or security is appropriate for the client.

 (13) An investment firm shall not encourage a client or potential client not to provide information required for the assessment of the suitability or appropriateness of an investment service or security or favour such failure to submit the information.

 (14) An investment firm shall be entitled to rely on the information provided by its clients or potential clients upon the assessment of the suitability or appropriateness of an investment service or security unless the investment firm is aware or ought to be aware that the information is manifestly out of date, inaccurate or incomplete.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87².  Failure to assess the suitability and appropriateness in case of certain investment services

 (1) An investment firm need not perform the duties provided for in § 87¹ of this Act upon the provision of investment services provided for in clause 43 (1) 1) or 2) of this Act together with or without the provision of ancillary services, if all the following conditions are complied with:
 1) the provision of investment or ancillary services is connected with money market instruments, bonds not embedding derivatives or other forms of securitised debt, UCITS units or shares, shares admitted to trading on a regulated market or on an equivalent third country market and other non-complex securities;
 2) the investment or ancillary service is provided at the initiative of the client or potential client;
 3) an investment firm has clearly informed the client or potential client that in the provision of the investment service the investment firm is not required to assess the suitability of the security or investment or ancillary service provided or offered and that therefore the interests of the client may be less protected.

 (2) A regulated third country market specified in clause (1) 1) of this Act is a market which complies with requirements equivalent to those established under Part IV of this Act.

 (3) A non-complex security specified in clause (1) 1) of this section is a security which meets the following conditions:
 1) it is a security, except a convertible security, not provided for in clauses 2 (1) 3) and 6) of this Act;
 2) the security may be transferred, redeemed or otherwise realised within a sufficiently short period of time at the market price publicly available to market participants or at the price made available by the valuation systems independent of the issuer of securities;
 3) the security does not involve any liability for the client which value exceeds the price of the security at the moment of acquiring the security;
 4) comprehensive information on the characteristics of the security is publicly available and is readily understood so as to enable the average retail client to make a carefully considered judgment as to whether to enter into a transaction in that security.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87³.  Best execution of client orders

 (1) An investment firm shall establish and implement legal, technical and organisational measures for best execution of client orders. An investment firm shall determine the procedure and rules for best execution of client orders by internal policies.

 (2) An investment firm shall execute a client order in the best possible manner for the client pursuant to rules for best execution of client orders applied in the investment firm by taking into account the price, costs, speed, likelihood of execution and settlement, size, nature or any other circumstances relevant to the execution of the order. If there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.

 (3) At the request of a client, an investment firm is required to prove to the client that the investment firm has executed the client’s order in compliance with the rules for best execution of client orders applied in the investment firm.

 (4) When executing client orders, an investment firm shall take into account the following information for determining the importance of the factors referred to in subsection (2) of this section:
 1) the characteristics of the client including the categorisation of the client as retail or professional;
 2) the characteristics of the client order;
 3) the characteristics of securities that are the subject of that order;
 4) the characteristics of the execution venues to which that order can be directed.

 (5) For the purposes of this Act, "execution venue" means a regulated market, an MTF, a systematic internaliser, or a market maker or other liquidity provider or a third country person that performs a similar duty or function to the duties or functions performed by any of the foregoing persons.

 (6) An investment firm shall perform its obligation under subsection (2) of this section by taking all reasonable steps to obtain the best possible result for a client upon execution of an order or a specific aspect of an order by following specific instructions from the client relating to the order or the specific aspect of the order.

 (7) Where an investment firm executes an order on behalf of a retail client, the best possible result shall be determined in terms of the total consideration, representing the price of the security and the costs related to execution, which shall include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, settlement fees and any other fees paid to third parties involved in the execution of the order.

 (8) If there are several competing venues to execute an order, the investment firm shall compare and assess the results for the client that would be achieved on each of the execution venues listed in the investment firm's rules for best execution of client orders that is capable of executing that order. Upon the comparison and assessment of execution venues an investment firm shall take into account the firm's own commissions and costs for executing the order on each of the execution venues.

 (9) It is not permitted for an investment firm to group or structure or charge their commissions in such a way as to discriminate unfairly between execution venues.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87⁴.  Rules for best execution of client orders

 (1) The rules for best execution of client orders shall include, in respect of each class of securities information on the different regulated markets and other execution venues where the investment firm executes its client orders and the circumstances determining the choice of execution venue.

 (2) An investment firm shall disclose the rules for best execution of client orders to the client or potential client. An investment firm shall notify a client of any material changes in the rules for best execution of client orders.

 (3) An investment firm shall inform clearly its clients about the possibility to execute client orders outside a regulated market or an MTF if the rules for best execution of client orders provide for such a possibility.

 (4) An investment firm may accept a client’s order for execution only after obtaining of consent from the client with respect to the rules for best execution of client orders.

 (5) The client’s consent specified in subsection (4) of this section may be obtained each time before the execution of an order or be included in the contract entered into with the client.

 (6) An investment firm shall review the rules for best execution of client orders at least once a year and amend and update them if deficiencies become evident. In addition, these shall be reviewed each time a substantial change takes place which damages the ability of the investment firm to achieve the best possible results upon the execution of client orders by using the execution venues prescribed by the procedure for execution of orders. Upon reviewing and determination of the need therefor the quality with which the persons provided in the rules perform their functions shall also be assessed.

 (7) An investment firm shall provide retail clients with the following data and information on the rules for best execution of client orders within a reasonable period of time prior to the provision of the service:
 1) an account of the relative importance the investment firm assigns, in accordance with the criteria specified in subsection 87³ (4) of this Act, to the factors referred to in subsection 87³ (2) of this Act, or the process by which the firm determines the relative importance of those factors;
 2) a list of the execution venues on which the firm places significant reliance in meeting its obligation to take all reasonable steps to obtain on a consistent basis the best possible result for the execution of client orders;
 3) a clear and prominent warning that any specific instructions from a client may prevent the investment firm from taking the steps that it has designed and implemented in its rules for best execution of client orders to obtain the best possible result for the execution of those orders in respect of the elements covered by those instructions.

 (8) The information specified in subsection (7) of this section shall be provided in a durable medium, or by means of a website.

 (9) An investment firm is required, taking account of the provisions of §§ 86–87² and 89¹ and subsection 90 (1) of this Act, to act in compliance with the best interests of the client when transmitting orders with third persons for execution if the investment firm provides an investment service of reception and transmission of an order related to securities or if an order is placed for execution upon the provision of securities portfolio management service and on the basis of the decision to perform a transaction with securities on behalf of the client.

 (10) Upon compliance with the provisions of subsection (9) of this section, an investment firm shall establish and implement the measures provided for in subsections (12) – (14) of this section.

 (11) An investment firm shall take all reasonable steps to obtain the best possible result for its clients taking into account the factors referred to in subsection 87³ (2) of this Act. The relative importance of these factors shall be determined by reference to the criteria set out in subsection 87³ (4) of this Act and, for retail clients, to the requirements under subsections 87³ (7) and (8) of this Act.

 (12) An investment firm is not required to take and implement the steps mentioned in subsection (11) of this paragraph when it follows specific instructions from its client when placing an order with, or transmitting an order to, a third person for execution.

 (13) The rules for best execution of client orders shall enable the investment firm to comply with the obligations provided for in subsection (11) of this section. The rules shall identify, in respect of each class of securities, the persons with whom the orders are placed or to whom the investment firm transmits orders for execution. The persons identified must have execution arrangements that enable the investment firm to comply with its obligations under this section when it places or transmits orders to that entity for execution.

 (14) The provisions of subsections (9) – (13) of this section shall not apply when the investment firm that provides the service of securities portfolio management or reception and transmission of orders itself executes the orders received from the client upon the provision of the above-mentioned investment services. In those cases, the provisions of § 87³ of this Act apply.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87⁵.  Handling client orders

 (1) An investment firm shall establish and implement legal, technical and organisational measures for expeditious and impartial execution of client orders as compared to other client orders or the trading interests of the investment firm. An investment firm shall establish the procedure for ensuring it by internal policies.

 (2) An investment firm shall execute otherwise comparable client orders in accordance with the time of their reception for execution by the investment firm.

 (3) An investment firm shall apply increased care for managing the risks of damage to the interests of clients upon aggregation and allocation of client orders.

 (4) An investment firm shall satisfy the following conditions when carrying out client orders:
 1) it must ensure that orders executed on behalf of clients are promptly and accurately recorded and allocated;
 2) it must carry out otherwise comparable client orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the client require otherwise;
 3) it must promptly inform a retail client about any material difficulty relevant to the proper carrying out of orders.

 (5) Where an investment firm is responsible for overseeing or arranging the settlement of an executed order, it shall take all reasonable steps to ensure that any client securities or client funds received in settlement of that executed order are promptly and correctly delivered to the account of the appropriate client.

 (6) An investment firm shall not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of its relevant persons.

 (7) An investment firm is not permitted to carry out a client order or a transaction for own account in aggregation with another client order unless the following conditions are met:
 1) it is unlikely that the aggregation of orders and transactions will work overall to the disadvantage of any client whose order is to be aggregated;
 2) it must be disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular order;
 3) an investment firm shall establish and implement order allocation principles, providing in sufficiently precise terms for the fair allocation of aggregated orders and transactions, including how the volume and price of orders determines allocations and partial executions.

 (8) Where an investment firm aggregates an order with one or more other client orders and the aggregated order is partially executed, it allocates the related trades in accordance with its order allocation principles.

 (9) Investment firms which have aggregated transactions for own account with one or more client orders shall not allocate the related trades in a way that is detrimental to a client.

 (10) Where an investment firm aggregates a client order with a transaction for own account and the aggregated order is partially executed, it allocates the related trades to the client in priority to the investment firm.

 (11) If the investment firm is able to demonstrate that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, it may allocate the transaction for own account proportionally, in accordance with its order allocation principles referred to in clause (7) 3) of this section.

 (12) An investment firm shall, as part of the order allocation principles referred to in clause (7) 3) of this section establish rules designed to prevent the reallocation, in a way that is detrimental to the client, of transactions for own account which are executed in combination with client orders.

 (13) An investment firm is required to retain the records which set out the respective rights and obligations of the investment firm and the client under a contract to provide investment or ancillary services, or the terms on which the investment firm provides the services to the client for at least the duration of the contractual relationship or other legal relationship related to the provision of investment or ancillary services with the client.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 87⁶.  Disclosure of limit orders

 (1) An investment firm shall promptly disclose to other market participants client limit orders in respect of each share that is admitted to trading on a regulated market that are not immediately executable under existing market conditions unless the client provides other instructions.

 (2) Articles 31 and 32 of Commission Regulation (EC) No 1287/2006 apply to disclosure of information regarding the part not regulated by subsection (1) of this section.

 (3) The Supervision Authority has the right to exempt an investment firm from the obligation provided for in subsection (1) of this section for one or several times or permanently if pursuant to Articles 20 and 33 of Commission Regulation (EC) No 1287/2006 and in the opinion of the Supervision Authority, the limited order is large in scale for the market as compared to normal order.

 (4) A limited order is an order for purchasing or selling securities where the volume and price of the securities or the minimum accepted price is determined by concrete numerical indices.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88.  General requirements for maintenance and protection of assets of client

  [RT I 2007, 58, 380 - entry into force 19.11.2007]

 (1) An investment firm is required to keep the assets of the client entrusted to it separate from its own assets and those of other clients of the investment firm, unless the investment firm and the client have expressly agreed otherwise in writing. The express written agreement of the client is also necessary to hold the securities of the client in a nominee account.

 (2) An investment firm is required to take adequate measures to protect assets belonging to the client and the rights of the client and to ensure that the assets of the client are maintained and invested in accordance with the agreed conditions.

 (3) An investment firm is not permitted to use securities belonging to a client in its own interests, excluding the case when the client has expressly agreed to this in writing. The client's money may be used in own interests exclusively for the account and in the name of a credit institution in accordance with the provisions of subsections 4 (1) and (2) of the Credit Institutions Act.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (4) An investment firm may pledge assets of a client in its own name only with the express written agreement of the client.

 (5) An investment firm which keeps the assets of clients in a nominee account or in a securities account or bank account opened in the name of the investment firm is required to keep separate account of the assets of each client.

 (6) Assets of clients managed and maintained by an investment firm, including assets of clients maintained in the name of the investment firm as well as assets acquired on account of such assets, belong to the respective clients and shall not be included in the bankruptcy estate of the investment firm, nor shall the claims of the creditors of the investment firm be satisfied on account of such assets.
[RT I, 28.06.2012, 5 - entry into force 01.07.2012]

 (7) An investment firm shall establish the principles for the maintenance and protection of the assets of client by internal policies. An investment firm shall submit its auditor’s report regarding the functioning of the above-mentioned principles in the investment firm to the Supervision Authority at least once a year.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88¹.  Safeguarding of client’s securities and funds

  For the purposes of safeguarding clients’ interests in relation to securities and funds belonging to them, an investment firm is required to:
 1) preserve information, keep such records and accounts as are necessary to enable it at any time and without delay to distinguish assets held for one client from assets held for any other client, and from its own assets;
 2) preserve information, maintain their records and accounts in a way that ensures their accuracy and their correspondence to the securities and funds held for clients;
 3) conduct, on a regular basis, reconciliations between their internal accounts, information and records and those of any third parties by whom those assets are held;
 4) ensure that any client securities deposited with a third party, are identifiable separately from the securities belonging to the investment firm and from the securities belonging to that third party, by means of differently titled accounts on the books of the third party or other equivalent measures that achieve the same level of protection;
 5) take the necessary steps to ensure that client funds are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm;
 6) take adequate organisational measures to manage the risk of the loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor administration, inadequate record-keeping or negligence.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88².  Depositing client securities

 (1) An investment firm is permitted to deposit securities on behalf of their clients into an account or accounts opened with a third party provided that the investment firm exercises all due skill, prudence and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding of those securities. An investment firm shall take into account the expertise and reputation of the third party as well as any legal requirements or market practices related to the holding of those securities that could adversely affect clients’ rights.

 (2) If the safekeeping of financial instruments for the account of another person is subject to specific requirements and supervision in a jurisdiction where an investment firm proposes to deposit client securities with a third party, the investment firm is not permitted to deposit those securities in that jurisdiction with a third party which is not subject to such requirements and supervision.

 (3) It is prohibited for an investment firm to deposit securities held on behalf of clients with a third party in a third country that does not regulate the holding and safekeeping of securities for the account of another person unless one of the following conditions is met:
 1) the nature of the securities or of the investment services connected with those securities requires them to be deposited with a third party in that third country;
 2) where the securities are held on behalf of a professional client and that client provides the investment firm with a written consent to deposit them with a third party in that third country.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88³.  Depositing client funds

 (1) An investment firm is required, upon receiving any client's money, to promptly transfer the money to one or more accounts opened with a credit institution that has been granted an authorisation in a central bank or a Contracting State or a third country or, based on agreement with the client, to invest the money in the shares or units of the relevant money market fund.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (2) The money market fund provided for in subsection (1) of this section shall comply with the requirements of the Investment Funds Act or other equivalent requirements of legislation of a Contracting State on the basis of which supervision is exercised over the money market fund and it shall comply with the following requirements:
 1) the primary investment objective of the fund must be to maintain the value of its assets;
 2) in order to achieve the investment objective specified in clause 1) of this subsection, the assets of the fund must be invested exclusively in deposits with credit institutions or high quality money market instruments with the redemption or maturity date of up to 397 days, and with the weighted average maturity date of the securities and deposits belonging to the assets of the fund of 60 days;
 3) the fund must provide liquidity through same day or next day settlement.

 (3) For the purposes of clause (2) 2) of this section, a money market instrument shall be considered to be of high quality if it has been awarded the highest available credit rating by at least one rating agency which has rated that instrument. If a money market instrument has been rated by several rating agencies, a money market instrument shall be considered to be of high quality if it has been awarded the highest available credit rating by each rating agency.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (4) If an investment firm does not deposit client funds with a central bank, it must exercise all due skill, care and diligence in the selection and periodic review of the credit institution or money market fund where the funds are placed and the arrangements for the holding of those funds. Investment firms shall take into account the expertise and reputation of such credit institutions or money market funds or management companies managing thereof with a view to ensuring the protection of clients’ rights, as well as avoiding any legal requirements or market practices related to the holding of client funds that could adversely affect clients’ rights.

 (5) Clients have the right to prohibit the placement of their funds in the units or shares of a money market fund.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁴.  Use and disposal of client securities

 (1) It is prohibited for an investment firm to conclude securities financing transactions with securities held by it on behalf of a client, or otherwise use such securities for their own account or the account of another client of the investment firm. An investment firm may use the securities specified above only if the following conditions are met:
 1) the client must have given his or her prior consent to the use of the securities on specified terms, whereas a retail client shall give his or her consent in writing and such a consent may be contained in the contract for provision of services entered into with the retail client;
 2) the use of that client's securities must be restricted to the specified terms.

 (2) It is prohibited for an investment firm to conclude securities financing transactions with securities which are held on behalf of a client in an omnibus account of a third party or any other equivalent account, or otherwise use or dispose of the client’s securities held in such an account for their own account or for the account of another client of the investment firm except in all the cases specified if, in addition to the conditions set out in subsection (1) of this section, at least one of the following conditions is met:
 1) each client whose securities are held together in an omnibus account or an equivalent account must have given prior consent in accordance with clause (1) 1) of this section;
 2) the investment firm must have in place systems and controls which ensure that only securities belonging to clients who have given prior consent in accordance with clause (1) 1) of this section are so used.

 (3) An investment firm must keep records of the details of the clients on whose instructions the use of the securities has been effected, as well as the number of securities used belonging to each client who has given his or her consent, so as to enable the correct allocation of any loss.

 (4) Securities financing transaction means the transaction provided for in paragraph (10) of Article 2 of Commission Regulation (EC) No 1287/2006.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁵.  Obligation to disclose trading information

 (1) An investment firm which, either on own account or on account or on behalf of clients, conclude transactions in shares admitted to trading on a regulated market outside a regulated market or MTF, shall disclose the volume and price of those transactions and the time at which they were concluded in a manner which is easily accessible to other market participants. An investment firm has the right to receive a reasonable fee from other market participants for disclosure of that information.

 (2) Articles 27-30 and 32-34 of Commission Regulation (EC) No 1287/2006 apply to disclosure of information regarding the part not regulated by subsection (1) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁶.  Application of obligations of systematic internalisers of client orders

 (1) The provisions of §§ 88⁷–88¹² of this Act apply to systematic internalisers of client orders upon the conclusion of transactions up to standard market size.

 (2) Standard market sizes are specified in table 3 of Annex II to Commission Regulation (EC) No 1287/2006.

 (3) "Systematic internaliser of client orders" (hereinafter systematic internaliser) means an investment firm which, on a regular and systematic basis, executes client orders outside a regulated market or an MTF by concluding transactions with the client on own account.

 (4) For the purposes of §§ 88⁷–88¹² of this Act, "price quotation" means a firm quote for purchasing or selling of a certain amount of shares.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁷.  Obligation of systematic internaliser to disclose price quotations

 (1) A systematic internaliser shall disclose a firm quote in those shares admitted to trading on a regulated market for which there is a liquid market and for which the investment firm is a systematic internaliser.

 (2) In the case of shares for which there is not a liquid market, a systematic internaliser shall disclose a quote to its client on request.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁸.  Manner of disclosure of price quotations

 (1) A systematic internaliser shall disclose its price quotations on a regular and continuous basis during normal trading hours.

 (2) A systematic internaliser has the right to receive a reasonable fee for disclosure.

 (3) A systematic internaliser has the right to decide based on transparent grounds and in a uniform manner pursuant to its internal rules who has access to its price quotation. A systematic internaliser shall apply uniform treatment to the same type of clients.

 (4) A systematic internaliser has the right to refuse to provide access of third persons to the price quotation at any time if the third person is not sufficiently solvent or on other similar commercial purposes.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88⁹.  Content of price quotations

 (1) A systematic internaliser has the right to determine the number of shares upon the acquisition or transfer of which its price quotation is applied.

 (2) A price quotation of shares contains a mandatory price for an investment firm in the case of transactions which do not exceed the standard market size for the class of shares. The share price shall reflect the prevailing market conditions for that share.

 (3) Share classes shall be formed and grouped on the basis of the arithmetic average value of the orders executed in the market for that share. The standard market size for each class of shares shall be a size representative of the arithmetic average value of the orders executed in the market for the shares included in each class of shares.

 (4) The market for each share shall be comprised of all orders executed in the European Union in respect of that share excluding those large in scale compared to normal market size for that share.

 (5) The Supervision Authority shall determine at least annually the class of shares to which each share traded on the market under its supervision belongs. The Supervision Authority shall make the abovementioned decision on the basis of liquidity specified in § 91 of this Act and the Commission Regulation (EC) No 1287/2006 which shall be determined on the basis of the arithmetic average value of the orders executed in the market. The Supervision Authority shall publish this information on its website and submit the information to the European Securities and Markets Authority.
[RT I, 29.03.2012, 1 - entry into force 30.03.2012]

§ 88¹⁰.  Changing price quotations

 (1) A systematic internaliser has the right to change its price quotations before the acceptance of the quotations.

 (2) A systematic internaliser has the right, under exceptional market conditions, to withdraw its price quotations before the acceptance of the quotations.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88¹¹.  Execution of orders related to price quotations

 (1) Systematic internalisers shall execute the orders they receive from their clients in relation to the shares at the quoted prices at the time of reception of the order.

 (2) Systematic internalisers shall, while complying with subsection (1) of this section with respect to retail clients, take into consideration the provisions of §§ 87³ and 87⁴ of this Act.

 (3) Systematic internalisers may execute orders they receive from professional clients at a better price than the one quoted if the following conditions are met:
 1) this price falls within a public range close to market conditions;
 2) the order is of a size bigger than the size customarily undertaken by a retail client or investor.

 (4) Systematic internalisers may execute orders they receive from their professional clients at prices different than their quoted ones without having to comply with the requirements of subsection (3) of this section if:
 1) the order is part of transactions with several securities;
 2) the order is subject to conditions other than the market price.

 (5) Where a systematic internaliser who quotes only one price quotation or whose highest price quotation is lower than the standard market size receives an order from a client of a size bigger than its quotation size, but lower than the standard market size, it may decide to execute that part of the order which exceeds its quotation size, provided that it is executed at the quoted price, except where otherwise permitted under subsections (3) or (4) of this section.

 (6) Where the systematic internaliser is quoting in different sizes and receives an order between those sizes, it has the right to execute the order at one of the quoted prices in compliance with the provisions of §§ 87⁵ and 87⁶ of this Act, except where otherwise permitted under subsections (3) or (4) of this section.

 (7) In order to manage the risks related to a client, a systematic internaliser has the right to limit in a uniform way the number of transactions from the same client which they undertake to enter on the basis of the price quotations.

 (8) A systematic internaliser has the right, in a uniform way, to limit the total number of transactions from different clients at the same time provided that the number or volume of orders sought by clients differs considerably from the norm. Upon exercising its rights systematic internaliser shall comply with the provisions of §§ 87⁵ and 87⁶of this Act.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88¹².  Activities of Supervision Authority related to price quotations

  The Supervision Authority shall exercise supervision over:
 1) regular disclosure of price quotations by an investment firm specified in § 88⁷ of this Act and compliance of the specified immediate change of price quotations to the prevailing conditions of the market;
 2) compliance of an investment firm with the requirements of subsection 88¹¹ (3).
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 88¹³.  Requirements for personal recommendations

  A personal recommendation specified in subsections 43 (5) and (6) of this Act shall comply with the following requirements:
 1) it shall be suitable for a person specified in subsection 43 (6) of this Act or be based on the circumstances related to that person;
 2) it shall contain a recommendation for purchasing, selling, subscription, conversion, depositing, redemption or securing a concrete security or for exercising or not exercising the rights arising from a security.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 89.  Prohibited activities upon conducting transactions

 (1) It is prohibited for an investment firm and a company associated therewith to:
 1) recommend transactions with securities to a client of the investment firm if such recommendations are not in the interests of the client of which the investment firm is aware or if the purpose of the transaction is to manipulate the market in the meaning of this Act;
 2) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) It is prohibited for an investment firm, the managers and employees thereof and other persons who are entrusted with the task of conducting securities transactions, carrying out securities analyses or providing investment consultations to manipulate the market in the meaning of this Act, including:
 1) conducting a securities transaction for a client of the investment firm or providing recommendations for the conduct of a transaction, with the objective of creating a misleading impression of the price of a security or the volume of transactions or of influencing securities prices in a specific direction;
 2) disclosing unfounded or misleading information, failing to disclose information which is subject to disclosure or unfounded delay in the disclosure thereof if such information and the disclosure thereof may have a significant impact on the price of a security or the volume of transactions;
 3) any activity which may create a wrong or misleading impression of the demand for a security in the market, its price or the accompanying rights or which may induce another person to conduct a transaction with such security or refrain from doing so or induce a person to use the rights accompanying the security or refrain from using such rights.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 89¹.  Reports on services provided to clients

 (1) An investment firm shall submit to its client a clear and appropriate report on the services provided to the client. The report shall include the costs associated with the transactions and services undertaken on behalf of the client.

 (2) An investment firm shall submit to its client a report on at least the execution of securities orders and securities portfolio management operations and on the safekeeping of the money and securities of the client.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 90.  Record-keeping and retention obligation

 (1) An investment firm and a branch of a foreign investment firm entered in the Estonian commercial register shall keep records of the services provided and the transactions concluded and the communication between the client and the investment firm and retain the records.

 (2) The records specified in subsection (1) of this section shall enable the Supervision Authority to assess the compliance of the activities of the investment firm and the branch of a foreign investment firm with this Act and also to determine the rights and obligations of the investment firm and the branch of a foreign investment firm and the client.

 (3) The records shall be retained in a durable medium in a way accessible for future reference by the Supervision Authority, and in such a form and manner that the following conditions are met:
 1) the Supervision Authority must be able to access the records readily and to reconstitute each key stage of the processing of each transaction;
 2) it must be possible for the Supervision Authority to ascertain easily any amendments, and the contents of the records prior to such amendments;
 3) it must not be possible for the records to be altered otherwise.

 (4) An investment firm and a branch of a foreign investment firm shall retain the records specified in subsection (1) of this section unaltered and available to the Supervision Authority for a period of at least five years unless the Supervision Authority has established a different term or a longer term is provided by law. An investment firm and a branch of a foreign investment firm shall retain the records which set out the respective rights and obligations of the investment firm and the client under a contract to provide services, or the terms on which the firm provides the services to the client for at least the duration of the legal relationship related to the provision of investment or ancillary services with the client unless a longer term is provided by this Act or other legislation.

 (5) The Supervision Authority has the right to require investment firms to retain the records specified in subsection (1) of this section for such longer period than the one specified in subsection (4) of this section as is justified by the nature of the security or transaction, if that is necessary to enable the Supervision Authority to exercise its supervisory functions under this Act.

 (6) Following the termination of the authorisation of an investment firm, the Supervision Authority has the right to require the firm to retain records for the outstanding term of the five year period required under subsection (4) of this section.

 (7) A more precise procedure for keeping records and a list of information subject to registration is provided in Articles 7 and 8 of the Commission Regulation (EC) No 1287/2006.

 (8) The Supervision Authority shall draw up a list of the records investment firms are required to keep.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 91.  Transaction reporting

 (1) An investment firm and a branch of an investment firm of a Contracting State entered in the Estonian commercial register shall notify the Supervision Authority of each transaction with securities admitted to trading on the regulated market of Estonia or another Contracting State. The specified obligation also applies to a branch of a third country investment firm entered in the Estonian commercial register.

 (2) A person specified in subsection (1) of this section (hereinafter in this section notifier) shall notify the Supervision Authority of each transaction specified in subsection (1) of this section (hereinafter in this Chapter transaction) not later than on the working day following the transaction.

 (3) A notifier has the right to notify the Supervision Authority by itself, through a representative, through a regulated market or MTF which enabled the conclusion of the transaction or through a securities settlement system or reporting system accepted by the Supervision Authority.

 (4) A report shall include details of the names and numbers of the securities bought or sold, the quantity, the dates and times of execution and the transaction prices and means of identifying the investment firms related to the transaction.

 (5) An investment firm shall implement legal, technical and organisational measures in order to ensure that the supervisory agency of a Contracting State exercising supervision over the most relevant market in terms of liquidity for the securities specified in subsection (1) of this section can notify the Supervision Authority of the relevant details pursuant to subsection (1) of this section.

 (6) The Supervision Authority shall transmit the information received from a branch of an investment firm of a Contracting State pursuant to subsection (1) of this section to the competent supervisory agency of the corresponding Contracting State. If the above-mentioned competent supervisory agency collects the information from the investment firm of a Contracting State by itself and therefore does not want to receive this information on regular basis, the Supervision Authority has the right to relieve the branch of an investment firm of a Contracting State of the obligation provided for in subsection (1) of this section.

 (7) The Supervision Authority may transfer the technical organisation of giving notification of transactions fully or partly to third parties on the condition that competition is not prejudiced thereby and the regular and lawful operation of the securities market is ensured. The notifier is required to use the technical solution determined by the Supervision Authority on the basis of paragraph (1) of Article 12 of the Commission Regulation (EC) No 1287/2006 in order to give notification of transactions.

 (8) The minister responsible for the area shall establish, by a regulation, the specific methods and technical procedure concerning notification of transactions, the permitted data carriers and methods of transmission and regarding the correction of data submitted concerning the conduct of transactions. The Supervision Authority has the right to decide on the application of exceptions within the scope prescribed in the regulation specified above.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 92.  Specification of requirements

  The minister responsible for the area shall establish, by a regulation, the specific procedure and methods for:
 1) the implementation of §§ 86 and 87 of this Act, including the submission, clarity, correctness, preciseness and completeness of information, information related to the classification of clients, information to be submitted with respect to an investment firm and its services, information on the securities, fees and costs, information with respect to holding and safekeeping of the money and securities of a client and requirements for the channels and form of the submission of information, taking into account the provisions of the Investment Funds Act concerning publication of information;
 2) the implementation of § 89¹ of this Act, by specifying the rules for executing client orders, the requirements for the form and content of the reports to be submitted on securities portfolio management operations and holding and safekeeping of the money and securities of a client.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

Chapter 11 PRUDENTIAL REQUIREMENTS  

§ 93.  Share capital and initial capital of investment firm

  [RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (1) Upon the establishment of an investment firm as a new company its share capital or, in case of an operating company, the start-up capital shall at least amount to:
 1) 50,000 euros, if the firm is providing services specified in clauses 43 (1) 1) or 2) of this Act.
 2) 125,000 euros, if the firm is providing services specified in clauses 43 (1) 4) or 7) or clause 44 1) of this Act;
 3) 730,000 euros, if the firm is providing services specified in clauses 43 (1) 3) or 6) of this Act.

 (2) The initial capital shall consist of the capital and reserves specified in points (a) to (e) of
Article 26(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council.

 (3) If an investment firm executes only the transaction orders issued by clients and its share capital or initial capital is less than 730,000 euros, it has the right to hold the positions arising from such transactions on its account only if all the following conditions are met:
 1) this position arose from the inability of the investment firm to execute the client's order or from the partial execution of the client’s order;
 2) the total market value of all such positions is subject to a ceiling of 15 per cent of the firm's own funds;
 3) the position is of occasional and temporary nature;
 4) the duration of the position is strictly limited to the time needed to conduct the unsuccessful transaction in question;
 5) the investment firm complies with the requirements provided for in Articles 92–95 and Part IV of Regulation (EU) No 575/2013 of the European Parliament and of the Council.

 (4) The positions not included in a trading portfolio arising from the provision of investment services are not deemed to be investment services specified in clause 43 (1) 3) of this Act.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 94.  Prudential ratios

 (1) In order to guarantee the financial soundness and to reduce the risks related to providing investment services, an investment firm is required at all times to adhere to prudential ratios, which requirements and accounting procedure are established in Regulation (EU) No 575/2013 of the European Parliament and of the Council and § 82²of the Credit Institutions Act.

 (2) The investment firms providing the investment services specified in clauses 43 (1) 3) and 6) of this Act shall comply with the provisions of Division 2¹ of Chapter 7 of the Credit Institutions Act.

 (3) Eesti Pank may decide not to apply the buffers provided for in §§ 86⁴⁵ and 86⁴⁶ of the Credit Institutions Act to small and medium-sized investment firms defined pursuant to the Commission Recommendation No. 2003/361/EC of 6 May 2003, unless this endangers the stability of the financial system. In such case, Eesti Pank shall notify of implementing a derogation the European Commission, the European Systemic Risk Board, the European Banking Authority and, if necessary, the competent authorities of the relevant Contracting States and provide the corresponding reasons.

 (4) The own funds of an investment firm shall at all times be equal to or exceed the minimum amount of the initial capital provided for in § 93 of this Act.

 (5) The management and internal audit systems, the organisation of accounting and the system for documentation and preservation of all transactions and operations of an investment firm shall provide the Financial Supervision Authority with the opportunity at any moment to monitor the compliance with the requirements arising from legislation and ensure the accuracy of the calculation of and reporting on prudential ratios.

 (6) If an investment firm is part of a financial conglomerate for the purposes of § 110¹ of the Credit Institutions Act, the firm shall comply with the provisions of Chapter 9¹ of the Credit Institutions Act.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 94¹.  Minimum amount of own funds

  [Repealed – RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 95. – § 103. Repealed - RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 103¹.  Exceptions in fulfilling capital requirements

  [Repealed – RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 104.  Liquidity

 (1) An investment firm shall invest its assets such that the satisfaction of justified claims of creditors, i.e. the liquidity, is guaranteed at all times. For that purpose, an investment firm shall maintain the necessary ratio of liquid assets and current liabilities.

 (2) If necessary due to the nature of the services provided by an investment firm or the financial situation of an investment firm, the Supervision Authority may establish a separate liquidity requirement for each investment firm.

§ 105.  Limitations on large exposures

  [Repealed – RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 105¹.  Exceptions in calculation of limitations on large exposures

  [Repealed – RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 106.  Notification obligation

  An investment firm shall promptly inform the Supervision Authority and provide an explanation if the size of the own funds of the investment firm decreases by more than five per cent.
[RT I, 14.11.2015, 1 - entry into force 24.11.2015]

 (2) An investment firm shall immediately inform the Supervision Authority of the repayment of any subordinated liability and other similar obligations specified in subsection 100 (7) of this Act, if the size of the own funds provided for in subsection 103 (2) of this Act falls below 120 per cent of the prudential ratio.

 (3) An investment firm shall immediately inform the Supervision Authority and provide an explanation if the consolidation group of the investment firm fails to comply with the limitations provided for in subsection 105 (8)of this Act.
[RT I, 21.12.2010, 6 - entry into force 31.12.2010]

§ 106¹.  Terms of authorisation procedure upon calculation of prudential ratios
[Repealed - RT I, 09.05.2014, 2 - entry into force 19.05.2014]

Chapter 12 DISCLOSURE OF AND REPORTING ON INFORMATION RELATED TO PRUDENTIAL REQUIREMENTS, RISK MANAGEMENT AND ACCOUNTING 
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 107.  Organisation of Accounting

 (1) The accounting and reporting of investment firms shall be organised pursuant to the Accounting Act, this Act, other legislation and the articles of association of the investment firm.

 (2) The accounting of an investment firm shall provide truthful information relating to the business activities and the financial situation of the investment firm.

 (3) The parent undertaking of a consolidation group of an investment firm is required to organise consolidated accounting.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 108.  Reports

 (1) An investment firm shall prepare reports and submit them to the Supervision Authority pursuant to the procedure prescribed by law.

 (2) If an investment firm belongs to a consolidation group, its parent undertaking over which the Supervision Authority exercises supervision on a consolidated basis shall prepare and submit consolidated reports to the Supervision Authority.

 (3) The contents, methods of preparing and procedure for the submission of reports of investment firms and parent undertakings of investment firms shall be established by regulation of the minister responsible for the area.

 (4) The contents, methods of preparing and procedure for the submission of reports of branches of foreign investment firms may be established by regulation of the minister responsible for the area.
[RT I 2005, 59, 464 - entry into force 01.03.2006]

 (5) The Financial Supervision Authority has the right to request additional reports and information necessary for the exercise of supervision to the extent provided by this Act, as well as the information and reports concerning the services provided by an investment firm, which are necessary for the performance of the duties of the Financial Supervision Authority on the basis of Regulation 1095/2010 of the European Parliament and of the Council establishing a European Supervisory Authority (European Securities and Markets Authority) (OJ L 331, 15.12.2010, p. 84–119).
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 109.  Term for submission of reports

  [RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (1) An investment firm providing investment services provided for in this Act shall submit to the Supervision Authority the supervision reports:
 1) once a month, within 20 days after the end of the reporting period, if the investment firm holds an activity licence for the provision of services specified in clauses 43 (1) 3) or 6) of this Act;
 2) once a month, within twenty days after the end of the reporting period, if the investment firm holds an activity licence for the provision of services specified in clauses 43 (1) 1), 2), 4), 5);7) or 8) or 44 1) of this Act.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

 (2) The parent undertaking of a consolidation group of an investment firm shall submit the reports specified in subsection (1) of this section once a quarter within one month after the end of the reporting period.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) The annual report, the sworn auditor's report, the proposal for and the resolution on the distribution of profits or the covering of losses for the financial year and an extract from the minutes of the general meeting concerning the approval of or refusal to approve the annual report shall be submitted to the Supervision Authority within two weeks after the general meeting of shareholders but not later than by 1 May of the year following the financial year.
[RT I, 24.03.2011, 1 - entry into force 03.04.2011]

§ 110.  Disclosure of reports

 (1) An investment firm shall disclose the annual report within four months after the end of the financial year.
[RT I, 24.03.2011, 1 - entry into force 03.04.2011]

 (2) An investment firm which holds an activity licence for the provision of services specified in clauses 43 3)-8) or 44 1) of this Act shall disclose and submit to the Supervision Authority the public annual reports regarding six months and twelve months within two months after the end of the period under review.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) The list of information to be disclosed, the methods of preparing the reports, the procedure for disclosure and submission to the Supervision Authority of the reports may be established by regulation of the minister responsible for the area.
[RT I 2010, 2, 3 - entry into force 22.01.2010]

 (4) Reports subject to disclosure by an investment firm shall be available at the seat and all branches and representative offices of the investment firm as well as on its website. If the investment firm does not have its own website, it shall submit the report subject to disclosure to the Supervision Authority for disclosure thereof on the website of the Supervision Authority.
[RT I 2005, 59, 464 - entry into force 01.03.2006]

 (5) A branch of a foreign investment firm shall disclose at least the last annual report of the investment firm which has been prepared according to the legislation of the home country of the investment firm and translated into Estonian.
[RT I 2005, 59, 464 - entry into force 01.03.2006]

§ 110¹.  Information concerning risk management, own funds and capital adequacy subject to disclosure

 (1) An investment firm shall disclose the following information concerning risk management and the principles of calculation of capital adequacy:
 1) strategy of risk management and processes by significant risk;
 2) extent of application of Chapter 11 of this Act by the investment firm and its consolidation group;
 3) principles of calculation of Tier 1, 2 and 3 own funds;
 4) principles and methods of the process provided in § 82² of this Act;
 5) methods used for calculation of capital requirement.

 (2) An investment firm shall disclose the following information on own funds and capital adequacy:
 1) the size of Tier 1, 2 and 3 own funds, set forth by component;
 2) size of capital requirements, set forth by risk.

 (3) The information provided in subsections (1) of this section shall be disclosed and submitted to the Supervision Authority together with the annual account at least once a year at the time provided in § 109 of this Act. If significant changes occur during a financial year in the information subject to disclosure based on subsection (1) of this section, such changes shall be disclosed together with the interim account of the corresponding accounting period in the manner and at the time provided by § 110 of this Act.

 (4) The information provided by subsection (2) of this section shall be disclosed and submitted, together with the annual account and interim accounts, to the Supervision Authority in the manner and at the time provided by § 110 of this Act.

 (5) Specific requirements for the information subject to disclosure concerning risk management, own funds and capital adequacy of an investment firm, and for the methods for disclosure of such information shall be established by regulation of the minister responsible for the area.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 111.  Audit

 (1) Companies belonging to the same consolidation group as an investment firm shall be audited by at least one common auditor.

 (2) As a result of auditing an investment firm, an auditor shall submit a report to the investment firm and the Supervision Authority, assessing, inter alia, prudential requirements established for own funds and the sufficiency and efficiency of the internal audit system.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 112.  Appointment of auditor

 (1) A trustworthy person with adequate expertise and experience to audit investment firms may be appointed auditor of an investment firm.

 (2) The auditor of an investment firm may be appointed to conduct a single audit or for a specific term which shall not exceed five years.

 (3) An auditor shall be appointed by a court of the seat of the investment firm on the basis of a petition from the Supervision Authority if:
 1) the general meeting has not appointed an auditor;
 2) the auditor appointed by the general meeting refuses to conduct an audit and the general meeting of the investment firm fails to appoint another auditor within one month;
 3) in the opinion of the Supervision Authority, the auditor is no longer trustworthy.

 (4) The authority of a court-appointed auditor shall continue until appointment of a new auditor by the general meeting.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 113.  Notification obligation of auditor

 (1) An auditor is required to notify the Supervision Authority promptly in writing of any circumstances of which he or she becomes aware in the course of conducting an audit of the investment firm and which result or may result in:
 1) material violation of legislation regulating the activities of investment firms;
 2) interruption of the activities of the investment firm;
 3) interruption of the activities of a subsidiary of the investment firm;
 4) a qualified report by the sworn auditor concerning the annual accounts or consolidated accounts of the investment firm;
[RT I 2010, 9, 41 - entry into force 08.03.2010]
 5) a situation, or the risk of a situation arising, in which the investment firm is unable to perform its obligations;
 6) an act by a manager or employee causing significant proprietary damage to the investment firm or to a client or clients thereof.

 (1¹) An auditor is required to notify the Supervision Authority promptly in writing of any circumstances of which he or she becomes aware in the course of conducting an audit of a person which has a close link with an investment firm and which result or may result in the circumstances provided in subsection (1) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) An obligation not to disclose information, which is imposed on an auditor by legislation or a contract, does not apply to the requirement to forward information to the Supervision Authority.

Chapter 13 MERGER OF INVESTMENT FIRMS  

§ 114.  Prohibition of division

  Division of an investment firm is prohibited.

§ 115.  Special merger rules

 (1) The merger of an investment firm shall be performed pursuant to the procedure prescribed in the Commercial Code, unless otherwise prescribed in this Chapter.

 (2) Investment firms may be merged only with investment firms founded according to the law of a Contracting State.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (3) If investment firms merge by founding a new company, the activity licences of all the merging investment firms expire.

§ 115¹.  Own funds upon merger of investment firms

  The own funds of a new investment firm created upon merger of two or more investment firms shall not fall below the overall level of own funds of the merged investment firms at the moment of merger.
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]

§ 116.  Merger agreement and merger report

 (1) The merger agreement of an investment firm shall not be entered into with a suspensive or resolutive condition.

 (2) The Supervision Authority shall be notified of entry into a merger agreement between investment firms within three working days as of the merger agreement being entered into.

 (3) Upon the merger of investment firms, a merger report shall be prepared and the report shall be audited by an auditor.
[RT I, 02.11.2011, 1 - entry into force 12.11.2011]

 (4) The auditor's report shall provide an opinion on the exchange ratio of shares and the determination thereof and on whether the acquiring investment firm or the investment firm being founded meets the prudential ratios provided for in this Act.

§ 117.  Authorisation for merger

 (1) Authorisation is necessary from the Supervision Authority for the merger of investment firms (hereinafter authorisation for merger).

 (2) In order to be granted authorisation for merger, the acquiring investment firm or, in the case prescribed in subsection 115 (3) of this Act, the merging investment firms jointly shall submit an application to the Supervision Authority to which the following information and documents are appended:
 1) the merger agreement or a notarised copy thereof;
 2) the merger report;
 3) merger resolutions if the adoption thereof is required;
[RT I, 02.11.2011, 1 - entry into force 12.11.2011]
 4) the auditor’s report;
 5) the business plan specified in clause 54 (1) 11) of this Act for the three years following the merger;
 6) the information and documents specified in clauses 54 (1) 4), 5), 12) and 13) of this Act.

 (3) The provisions of § 53 and subsections 55 (1)–(4¹) of this Act regarding applications for activity licences and the review thereof shall apply with respect to applications for authorisation for merger.
[RT I 2005, 59, 464 - entry into force 15.11.2005]

§ 118.  Decision regarding authorisation for merger

 (1) A decision to grant or to refuse to grant authorisation for merger or to issue an activity licence to an investment firm founded as a result of a merger shall be taken by the Supervision Authority not later than within thirty days as of submission of all the required information and documents. The applicant shall be informed of the decision immediately.

 (2) The Supervision Authority may refuse to grant authorisation for merger if:
 1) the information or documents submitted upon applying for authorisation for merger do not meet the requirements provided for in this Act or legislation established on the basis thereof or such information is or such documents are inaccurate, misleading or incomplete;
 2) the applicant fails, within the prescribed term, or refuses to submit the information or documents subject to submission to the Supervision Authority upon applying for authorisation for merger;
 3) the investment firm founded as a result of the merger does not meet the requirements provided for in this Act or legislation established on the basis thereof or if the merger harm the interests of clients of the investment firm for some other reason;
 4) in the opinion of the Supervision Authority, a manager or person carrying out the duties of the internal audit unit of the investment firm resulting from the merger or a person having a qualifying holding therein does not meet the requirements provided for in this Act;
[RT I, 09.05.2014, 2 - entry into force 19.05.2014]
 5) the merger would significantly reduce effective competition in the securities market or would harm the regular operation of the securities market for some other reason.

 (3) The Supervision Authority shall decide to terminate an activity licence upon merger of investment firms whereby a new investment firm is founded at the same time when it decides to issue an activity licence to an investment firm founded as a result of a merger, and the decision does not enter into force before the date of entry of the new investment firm in the commercial register.

 (4) The Supervision Authority shall decide to terminate an activity licence of an investment firm being acquired upon merger of investment firms at the same time when it decides to issue an authorisation for merger, and the decision does not enter into force before the date when the merger is entered in the commercial register.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 119.  Merger notification

  [RT I 2007, 65, 405 - entry into force 15.12.2007]

 (1) Merging investment firms shall immediately publish a merger notification concerning the fact of being granted authorisation for merger in at least one national daily newspaper and on the websites of all merging investment firms.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (2) [Repealed - RT I 2007, 65, 405 - entry into force 15.12.2007]

 (2¹) An investment firm shall submit an application for entry of a merger in the commercial register promptly after publication of the merger notice specified in subsection (1) of this section.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (3) The Supervision Authority shall publish the decision on the grant of an authorisation for the merger of investment firms on its website pursuant to the procedure provided on the basis of subsection 237 (3) of this Act.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

Chapter 13¹ INVESTMENT AGENT  
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119¹.  Use of investment agents

 (1) An investment agent is a representative of an investment firm acting on the basis of an authorisation document who may be used by the investment firm for the advertising, introductions and sales promotion of the investment services and ancillary services provided by the firm, the receipt and forwarding of the orders related to securities of clients, including the forwarding of instructions related to investment services, the organisation of the offer or issue of securities, or for provision of consultations related to securities and the services offered by the investment firm. An investment agent may carry out such activities as an ancillary activity.

 (2) The use of investment agents shall be established by the internal policies of an investment firm.

 (3) An investment agent may represent only one investment firm.

 (4) The provisions of subsections 82⁶ (2) and (3) and clause (7) 7) of this Act apply to the use of investment agents by investment firms.

 (5) The provisions of this Chapter concerning investment agents do not apply to investment firms which provide services equivalent to the services provided by an investment agent.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119².  List of investment agents

 (1) Only an investment agent included in the list of investment agents (hereinafter list) is permitted to operate as an investment agent, and an investment firm is permitted to use only the services provided by an investment agent entered in such list.

 (2) An investment agent is entered in and deleted from the list by the investment firm whom the agent represents or, in cases provided by law, by the Supervision Authority. If the legislation of a Contracting State does not allow the investment firms of that Contracting State to use investment agents then an investment firm may also enter an investment agent established in the Contracting State in the list.

 (3) The list shall be published on the web site of the Supervision Authority.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119³.  Requirements for investment agents

 (1) Investment agents who are natural persons and members of the management board of investment agents who are companies shall have impeccable professional and business reputation.

 (2) The following shall not operate in the capacity of the persons specified in subsection (1):
 1) persons whose act has resulted in the bankruptcy or compulsory liquidation of a company or the revocation of the activity licence of a company;
 2) persons who are subjected to a prohibition on business;
 3) persons whose activities have shown that they are not capable of organising the management of a company such that the interests of the shareholders, members, creditors and clients of the company are sufficiently protected;
 4) persons who have been punished for an economic offence, official misconduct, offence against property or offence against public trust unless the information concerning the punishment has been expunged from the punishment register pursuant to the Punishment Register Act.

 (3) The natural persons specified in subsection (1) of this section must have sufficient experience in work related to the provision of investment and financial services and sufficient training in the area of investment.

 (4) An investment firm represented by an investment agent shall provide, at the request of its investment agent, training in the area of investment to the investment agent.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119⁴.  Entry of investment agent in list

 (1) A person is entered in the list on the basis of the person’s application.

 (2) The investment firm who received an application shall make a decision on entry in the list or refusal of entry in the list within fourteen days after receipt of the application. An investment firm shall enter the applicant in the list promptly after the relevant decision is made.

 (3) Persons who do not comply with the requirements provided for investment agents in this Act shall not be entered in the list.

 (4) The given name and surname of an investment agent, his or her personal identification code, contact details and the name of the investment firm whom the investment agent represents shall be entered in the list concerning an investment agent who is a natural person.

 (5) The business name, registry code and address of an investment agent, the name of the investment firm whom the investment agent represents, and the given name and surname of the member of the management board responsible for assisting the investment firm in its operation shall be entered in the list concerning an investment agent who is a legal person.

 (6) The investment firm who made an entry in the list shall be responsible for the accuracy of the entry.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119⁵.  Deletion of investment agent from list

 (1) An investment firm represented by an investment agent shall immediately delete the investment agent from the list as its representative if:
 1) the investment agent requests deletion thereof from the list;
 2) the investment agent is a legal person and is dissolved or the investment agent is a natural person and dies;
 3) the representation relationship between the investment agent and the investment firm is terminated;
 4) the investment agent does not conform to the requirements prescribed for investment agents by this Act;
 5) a member of the management board of the investment agent does not meet the requirements provided for in this Act;
 6) the investment agent has violated the provisions of this Act or the interests of the clients of the investment firm are insufficiently protected;
 7) the Supervision Authority demands the deletion of the investment agent from the list due to the becoming evident of any of the facts specified in this subsection.

 (2) Upon becoming evident of the facts specified in subsection (1) of this section, the Supervision Authority has the right to delete an investment agent from the list.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 119⁶.  Specific duties of investment agents

 (1) In addition to performing the duties of notifying clients provided by this Act and arising from legislation established on the basis thereof, an investment agent has the duty to disclose, upon contacting a client or a potential client, the name of the investment firm represented by the agent and the extent of the agent's authorities.

 (2) An investment agent has no right to receive or store money or securities to be transferred by a client to the investment firm unless the investment agent itself is an investment firm or a credit institution.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

Part 4 REGULATED MARKET  

Chapter 14 RIGHT TO OPERATE  

§ 120.  Activity licence

 (1) In order to operate a regulated market (hereinafter in this Part market) as a permanent area of activity, a corresponding activity licence (hereinafter in this Part activity licence) shall be applied for from the Supervision Authority.

 (2) A separate activity licence shall be applied for for operating each market. An activity licence for a multilateral trading facility can be applied for only together with an activity licence for a market or after obtaining an activity licence for a market.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) Each market may have only one operator of the market (hereinafter in this Part operator). An operator shall not operate only a multilateral trading facility.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) Only public limited companies have the right to operate as operators.

 (5) An operator does not have the right to engage in other areas of activity which are not related to operating the market or multilateral trading facility or which endanger the regular and reliable operations of the market or multilateral trading facility or its activities as an operator.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 121.  Application for and processing of activity licence

 (1) The provisions of subsections 48 (2) and (3), subsection 51 (1), clauses (2) 1) and 3) and subsection (3), § 52, subsection 53 (3), subsections 54 (2) and (3) and §§ 55, 55¹, 57 and 58¹ of this Act shall apply with respect to activity licences of operators.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) Upon application for an activity licence, the members of the management board of a company being founded or operating (hereinafter in this Chapter applicant) shall submit a written application, as well as the information and documents specified in clauses 54 (1) 1)-10), 12) and 15) of this Act, the draft rules specified in § 127 of this Act and the applicant's business plan for the next three years (hereinafter in this Chapter application).
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (3) The business plan specified in subsection (2) of this section shall contain a precise description of the trading, settlement, information and other systems of the market as well as a description of the applicant's organisational structure, places of business and the information technology and other technical measures to be implemented, and its economic indicators.

 (4) The minister responsible for the area may, by a regulation, establish more specific requirements for the business plan specified in subsection (2) of this section.
[RT I 2005, 13, 64 - entry into force 01.04.2005]

§ 122.  Refusal to issue activity licence

  The Supervision Authority shall refuse to issue an activity licence if:
 1) the information or documents submitted upon application for the activity licence do not meet the requirements provided for in this Act or legislation established on the basis thereof or are inaccurate, misleading or incomplete;
 2) the applicant fails, within the prescribed term, or refuses to submit the information or documents subject to submission upon application for an activity licence or requested by the Supervision Authority to the Supervision Authority;
 3) the applicant, due to its organisational structure, legal and technical solutions or insufficiency of assets and owners' equity, is not able to meet the requirements established by this Act or legislation established on the basis thereof for operators, the market or multilateral trading facility;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 4) other areas of activity of the applicant endanger the regular and lawful operation of the market or multilateral trading facility or its activities as an operator;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 5) in the opinion of the Supervision Authority, the members of the supervisory board and management board of the applicant do not have sufficient knowledge for operating a market or multilateral trading facility or they are unable to operate the market or multilateral trading facility in a regular and lawful manner, or that manager of the applicant is lacking the education, knowledge, experience or impeccable reputation necessary to perform his or her duties;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 6) a manager has been a bankrupt or if bankruptcy proceedings with respect to this person have been terminated by abatement, or if the activities or omissions of the manager have led to the bankruptcy, compulsory dissolution or revocation of the activity licence of a person or if the activities or omissions of the manager have shown his or her inability to organise the activities of a professional securities market participant or qualified investor in a manner that would sufficiently protect the interests of its creditors;
 7) the applicant fails to meet the requirements provided for in this Act or legislation established on the basis thereof;
 8) the applicant has materially or repeatedly violated requirements provided for in legislation or the activities or omissions of the applicant are in contradiction with good business practices;
 9) close links between the applicant and another person prevent sufficient supervision over the operator, or the requirements arising from legislation or the implementation of legislation of the state whose rules of law apply to the applicant or the persons with whom the applicant has close links prevent sufficient supervision over the operator.

 (2) During the period of validity of its activity licence, an operator shall prevent circumstances which would serve as a basis for refusal to issue the activity licence as provided for in subsection (1) of this section.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 123.  Revocation of activity licence

 (1) Unless otherwise prescribed by this section, the provisions of subsections 58 (1), (3) and (4) shall apply with respect to revocation of the activity licence of an operator.

 (2) The Supervision Authority has the right to revoke an activity licence if:
 1) disorder in the market or multilateral trading facility may endanger the economy of the state as a whole or law and order in the state;
 2) the operator endangers the regular and lawful operation of the market or multilateral trading facility through its activities or omissions;
 3) the operator does not meet the valid requirements for the issue of activity licences;
 4) the operator is unable to ensure, to the extent of its competence, protection of the interests of investors related to the market or multilateral trading facility;
 5) grounds for refusal to issue an activity licence provided for in subsection 122 (1) of this Act exist with respect to the operator;
 6) the operator has repeatedly or materially violated the provisions of legislation regulating its activities or the activities of the operator are in contradiction with good business practices;
 7) according to information submitted to the Supervision Authority by a securities market supervisory agency of a Contracting State, the operator has violated the conditions provided by legislation of the Contracting State;
 8) the operator fails to comply in full or within the prescribed term with a precept issued by the Supervision Authority;
 9) the activities or omissions of the operator have led to a loss of confidence therein;
 10) it becomes evident that the operator has chosen Estonia as the place for application for activity licence and registration in order to evade compliance with stricter requirements established for operators in another Contracting State where the operator mainly operates;
 11) the operator fails to commence activities or have not organised the market for more than six consecutive months, or if an act or omission by the founders of the operator shows that the operator will be unable to commence activities within twelve months as of the issue of activity licence;
 12) the operator fails to commence operating the market within six months as of the issue of the activity licence.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

Chapter 14¹ REQUIREMENTS FOR CONTROL, MANAGEMENT AND ORGANISATIONAL STRUCTURE OF OPERATORS OF MARKETS  
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 123¹.  Qualifying holding in operator

 (1) The provisions concerning investment firms in §§ 72-78 of this Act apply to operators and persons acquiring, increasing, decreasing, transferring or owning a qualifying holding in the operators.

 (2) An operator shall publish, at its website, clear, correct and accurate data concerning the shareholders who had, as at the end of the previous financial year, a qualifying holding in the operator. The operator shall amend the data immediately after becoming aware of changes thereto.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 124.  Operating risk management

 (1) The information technology system or other system used by the operator to conduct transactions and record information in order to operate the regulated market shall be reliable and dependable and reduce operating risks in the market and with respect to market participators, and shall ensure the continuity and regularity if the operation of the market or multilateral trading facility, including the conduct of transactions in a swift, safe and trouble-free manner.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

 (2) The minister responsible for the area may, by a regulation, specify the criteria for a reliable and dependable information technology system or other system specified in subsection (1) of this section.

 (3) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

 (4) [Repealed - RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 124¹.  Requirements for manager

 (1) Only persons who have the education, experience and professional qualifications necessary to manage an operator and who have an impeccable reputation may be elected or appointed managers of operators.

 (2) The manager of an operator shall be a member of the supervisory and management board thereof. An employee of an operator or another person who independently takes management decisions related to the development or business activities of the operator may be deemed to be the manager of the operator by the Supervision Authority. In such event the Supervision Authority is required to inform the operator thereof at the earliest opportunity.

 (3) The management board of the operator shall consist of at least two members.

 (4) Members of the management board of an operator shall have a degree or education corresponding thereto, and the experience necessary for managing an operator.

 (5) The following shall not be managers of operators:
 1) persons whose act or omission has resulted in the bankruptcy or compulsory liquidation of a company or the revocation of the activity licence of a company;
 2) persons whose activities have shown that they are not capable of organising the management of a company such that the interests of the shareholders, members, creditors and clients of the company are sufficiently protected;
 3) persons who are subjected to a prohibition on business;
 4) persons who have been punished for an economic offence, official misconduct, offence against property or offence against public trust unless the information concerning the punishment has been expunged from the punishment register pursuant to the Punishment Register Act.

 (6) The managers and employees of an operator are required to act with the prudence and diligence expected of them and in accordance with the requirements for their positions.

 (7) The managers of an operator shall guarantee that the organisational structure of the operator is transparent, the areas of responsibility are clearly delineated and procedures for the establishment, measurement, management, constant monitoring and reporting of risks have been established and that such procedures are proportional to the nature, extent and level of complexity of the activity of the operator.

 (8) The managers of an operator are required to keep themselves informed of the rules and established for compliance with this Act and the legislation issued on the basis thereof, and with other rules of procedure. The managers of an operator shall regularly review such rules and rules of procedure, evaluate their efficiency and take necessary measures to eliminate any deficiencies.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 124².  Giving notification of officers and auditor

 (1) Upon the election or appointment of a manager of an operator, the person who is to be elected or appointed shall submit the following to the operator:
 1) the information specified in clauses 54 (1) 5) and 6) of this Act;
 2) confirmation that no circumstances prescribed in this Act which would preclude his or her right to act as manager of the operator apply to him or her.

 (2) An operator is required to inform the Supervision Authority of the election or appointment of managers and an auditor, and of their resignation or the initiation of their removal before the expiry of their term of office within ten days as of the relevant decision being made or the relevant application being received. Upon election or appointment of a manager, the operator shall submit the data and confirmation specified in subsection (1) of this section and, in the case of an auditor, submit the name of the auditor together with a confirmation concerning the absence of facts which preclude the right to be the auditor of the operator.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 124³.  Removal of manager

 (1) The Supervision Authority may issue a precept to an operator to remove a manager if:
 1) the manager does not meet the requirements provided for in this Act;
 2) misleading, incomplete or incorrect information or documents have been submitted in connection with his or her election or appointment;
 3) the activities of the manager in managing the operator have demonstrated his or her inability to organise the management of the operator such that the interests of clients and creditors are sufficiently protected.

 (2) If an operator fails to comply with a precept specified in subsection (1) of this section in full or within the prescribed term, the Supervision Authority has the right to demand the removal of the manager by a court.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 124⁴.  Policies and procedures

 (1) An operator shall establish and apply rules of procedure regulating its activities (hereinafter in this Chapter internal rules), the aim of which is to ensure that legislation regulating the activities of the operator and the rules of the operator's market are complied with and that decisions taken by the directing bodies of the operator are duly observed.

 (2) The rules and procedures established and applied by an operator shall guarantee the lawful and regular operation of the operator and the market. The operator shall regularly evaluate the efficacy of its rules and procedures and the correspondence thereof to the actual situation, and adjust the rules and procedures in order to guarantee the best possible operation of the market in a lawful and regular manner.

 (3) The provisions relating to investment firms in subsection 82 (3) and §§ 82³, 82⁴, 82⁶, 83–83² and 88 of this Act and legislation established on the basis of such provisions apply to operators.

 (4) The provisions of § 82³ of this Act apply to operators of markets only for transactions, the object of which are securities admitted to trading on the markets or multilateral trading facilities operated by the operator.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 125.  Financial risk management

 (1) The share capital of an operator shall be at least 125,000 euros.

 (2) The owners' equity of an operator shall be at least equal to the operating costs needed to operate the relevant market for five months.

 (3) If the operator has not commenced operations, the operating costs needed to operate the market shall be determined on the basis of the business plan submitted to the Supervision Authority by the applicant upon application for an activity licence.

Chapter 15 SELF-REGULATION  

§ 126.  Self-regulation

 (1) An operator shall, through its management and organisational structure, ensure the regular and lawful operation of the market and supervision of the participators and issuers on the market and the activities thereof.

 (2) In order to ensure the regular and lawful operation of the market, the operator shall establish the rules and regulations of the market (hereinafter rules and regulations).

 (3) The rules and regulations shall set out standard conditions on agreements to be entered into with a person for the operator to grant that person the right to participate in the market and on agreements to be entered into with issuers of securities for the admission of such securities to trading to the market.

 (4) Unless otherwise provided by law, the Supervision Authority shall conduct supervision over a market, and the over the transactions and other activities on the market if the location of the operator's seat has been specified as Estonia in the register.
[RT I 2007, 58, 380 - entry into force 19.11.2007]

§ 127.  Rules and regulations

 (1) The purpose of the rules and regulations is to ensure that the obligations of the participators and issuers in the market are performed, taking into account public and economic interests and the protection of investors.

 (2) The rules and regulations shall prescribe at least:
 1) the organisational structure of the market and its operator, to the extent that this is not described in the articles of association of the operator;
 2) the bases, conditions and procedure for admitting a security to trading and for the suspension and termination of trading;
 3) the principal rights and obligations of the issuer of securities admitted to trading with respect to the operator, market participators and issuers of other securities admitted to be traded on the market;
 4) the bases, conditions and procedure for forwarding information to the operator;
 5) the bases, conditions and procedure for admitting a person to the market and removing a participator from the market, and for operating as a direct or remote market member;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 6) the principal rights and obligations of a market participator with respect to the operator, other market participators, clients or creditors of the market participator and issuers of securities admitted to be traded on the market;
 7) the conducting of a transaction in a market in a swift, safe and trouble free manner, giving of notification of a transaction, forwarding of information necessary to conduct a transaction, and disclosure of the price quotations of a security and other similar information;
[RT I 2007, 58, 380 - entry into force 19.11.2007]
 8) the rights and obligations of the person, body or member thereof who decides on the admission of a security to trading or the suspension or termination of trading therewith, and the bases, conditions and procedure for the election or appointment thereof;
 9) the rights and obligations of the person, body or member thereof who exercises supervision upon the exercise of supervision, and the bases, conditions and procedure for the election or appointment thereof;
 10) contractual penalties for violation of this Act, legislation established on the basis thereof and the rules and regulations;
 11) matters pertaining to the guarantee fund, in the event there is a guarantee fund in the regulated market.

 (3) The provisions of law regarding unreasonably harmful standard conditions shall not apply with respect to rules and regulations.

 (4) Any agreement entered into by an operator regarding service fees and payment thereof in return for participation in the market, admission of a security to be traded on the market, conducting of transactions on the market and other services is not deemed to be part of the rules and regulations.

§ 128.  Amendment of rules and regulations

 (1) Operators have the right to amend rules and regulations unilaterally.

 (2) In the event of amendment of the rules and regulations, the amendments shall be submitted to the Supervision Authority for approval. Upon application for approval, a corresponding written application shall be submitted to the Supervision Authority accompanied by the draft rules and regulations together with explanations of the amendments and an estimate of their impact on the market participators and the operation of the market.

 (3) The Supervision Authority may request the operator to submit additional information and documents in order to specify the amendments to the rules and regulations and estimate the impact thereof.

 (4) The Supervision Authority shall make a decision approving the amendments to the rules and regulations or refusing approval thereof within thirty days as of submission of a corresponding application, but not later than within twenty days as of submission of all the information specified in subsection (3) of this section.

 (5) The Supervision Authority shall refuse approval if the amendments to the rules and regulations are not in compliance with legislation or are contradictory, misleading or incomplete or if implementation thereof would not guarantee sufficient protection of the interests of investors or of persons serving as parties to the rules and regulations.