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ESTONIA

INVESTMENT FUNDS ACT

Important Disclaimer

This translation has been generously provided by the Estonian Financial

Supervision Authority. This does not constitute an official translation and the

translator and the EBRD cannot be held responsible for any inaccuracy or

omission in the translation. The text should be used for information purposes

only and appropriate legal advice should be sought as and when appropriate.

Investment Funds Act1

Passed 14 April 2004

(RT2 I 2004, 36, 251),

entered into force 1 May 2004.

Chapter 1

General Provisions

§ 1. Investment fund

An investment fund (hereinafter fund) means a pool of assets established for collective

investment (hereinafter common fund) or a public limited company founded for collective

investment on the basis of this Act, which is or the assets of which are managed on the

principle of risk-spreading by a management company.

§ 2. Open-ended fund and closed-ended fund

(1) An open-ended fund is a common fund specified in § 105 of this Act the units of

which are redeemed according to the fund rules at the request of the unit-holder within one

month as of submission of the corresponding claim by the unit-holder.

(2) A fund which does not meet the requirements provided for in subsection (1) of this

section is a closed-ended fund.

§ 3. Public fund

A fund the units or shares of which are publicly offered according to the fund rules or the

articles of association of the fund pursuant to the provisions of § 217 of this Act is a publicly

offered fund (hereinafter public fund).

§ 4. UCITS

(1) A UCITS is a fund recognised in a Contracting Party to the EEA Agreement

(hereinafter Contracting State) which complies with the requirements provided for in the

Council Directive 85/611/EEC on the coordination of laws, regulations and administrative

provisions relating to undertakings for collective investment in transferable securities (OJ L

375, 31.12.1985, p. 3–18) (hereinafter directive regarding investment funds) and the units or

shares of which may be publicly offered in all Contracting States.

(2) A UCITS founded in Estonia is a public open-ended common fund which complies

with the requirements provided for in the directive regarding investment funds and this Act

concerning a UCITS.

§ 5. Business name or name of fund

(1) The word “investeerimisfond” [investment fund] or “fond” [fund] shall be used in the

business name of a fund founded as a public limited company or in the name of a common

fund.

(2) Other persons, agencies and associations shall not use the word “investeerimisfond”

or words or abbreviations with a misleadingly similar meaning in Estonian or in any other

language in their name. The specified restriction does not apply to the business name of a

management company.

(3) The business name or name of a fund shall be clearly distinguishable from the

business names or names of other funds which are founded or established in Estonia, or the

shares or units of which are sold in Estonia.

(4) The requirements for a business name provided for in § 12 of the Commercial Code

(RT I 1995, 26–28, 355; 1998, 91–93, 1500; 1999, 10, 155; 23, 355; 24, 360; 57, 596; 102,

907; 2000, 29, 172; 49, 303; 55, 365; 57, 373; 2001, 34, 185; 56, 332 and 336; 89, 532; 93,

565; 2002, 3, 6; 35, 214; 53, 336; 61, 375; 63, 387 and 388; 96, 564; 102, 600; 110, 657;

2003, 4, 19; 13, 64; 18, 100; 78, 523; 88, 591) apply to the name of a common fund.

(5) The business name or name of a fund shall not be misleading with regard to the

investment policy or other rules of the fund as prescribed in its articles of association if the

fund is founded as a public limited company or in its rules if the fund is a common fund.

§ 6. Parent undertaking and subsidiary

The provisions of § 7 of the Credit Institutions Act (RT I 1999, 23, 349; 2002, 17, 96; 21,

117; 23, 131; 53, 336; 63, 387; 102, 600; 105, 612; 2003, 17, 95; 23, 133; 81, 544) apply

upon determination of the parent undertaking, subsidiary and close links.

§ 7. Qualifying holding

The provisions of §§ 9 and 10 of the Securities Market Act (RT I 2001, 89, 532; 2002, 23,

131; 63, 387; 102, 600; 105, 612; 2003, 81, 544; 88, 591) apply to qualifying holdings and the

determination thereof.

§ 8. Implementation of Act

A fund specified in §§ 9 and 10, clause 22 1), subsection 34 (1), clause 76 (1) 4), clause 76

(5) 3), clause 121 4), clause 175 (2) 5), clause 252 (1) 3), clause 253 (2) 1), clause 255 (1) 2),

§§ 264 and 265, clause 268 (2) 4), §§ 273 and 296 of this Act means also an investment fund

founded in a foreign state or another similar undertaking or institution established for

collective investment.

Chapter 2

Management Company

Division 1

General Provisions

§ 9. Management company

(1) A management company is a public limited company whose main and permanent

activity is management of the assets of a fund founded as a public limited company or

management of a common fund (hereinafter management of fund). A management company

may manage several funds.

(2) In addition to the management of a fund, a management company may provide only

the following services:

1) management of a securities portfolio within the meaning of clause 43 5) of the

Securities Market Act;

2) provision of advice upon investment in securities pursuant to clause 44 4) of the


3) safekeeping of units of shares of a fund for a client within the meaning of clause 44 1)

of the Securities Market Act;

4) services specified in subsection 10 (1) of this Act to funds which or the assets of

which are not managed by the management company according to the provisions of

subsections (2) and (3) of the same section.

(3) A management company is a financial institution within the meaning of the Credit

Institutions Act.

§ 10. Management of fund

(1) Management of a fund means:

1) investment of the assets of the fund which means determination of the investment

policy of the fund and making of investment decisions upon investment of the assets of the

fund;

2) organisation of the issue and redemption or re-purchase of units or shares of the fund;

3) issue of documentation proving the right of ownership to the unit-holders or

shareholders of the fund, if necessary;

4) communication of necessary information to the shareholders or unit-holders of the

fund and provision of other services to clients;

5) organisation of marketing of the shares or units of the fund;

6) keeping account of the assets of the fund and organisation of accounting of a common

fund;

7) determination of the net asset value of the fund;

8) organisation of maintenance of a register of the units or, if necessary, of the shares of

the fund;

9) calculation of the income of the fund and organisation of the distribution of the

income between the shareholders or unit-holders of the fund;

10) monitoring the compliance of the activities of the management company and the fund

with this Act and other legislation, including application of a relevant control audit system;

11) activities directly related to the activities specified in this subsection.

(2) Only a management company of a fund has the right to manage the fund unless

otherwise provided for in this Act.

(3) A management company of a fund may transfer the activities specified in subsection

(1) of this section to third parties to the extent and pursuant to the procedure provided for in

§§ 73-75 of this Act.

(4) Persons to whom a management company has not transferred the right also have the

right to provide services specified in clauses (1) 3)–7) and 9)–11) of this section.

§ 11. Seat

(1) The seat and place of business of a management company shall be in Estonia.

(2) The seat of the management company of a fund founded as a public limited company

may be in a foreign state provided that its branch has been entered in the Estonian commercial

register.

Division 2

Activity Licence of Management Company

§ 12. Activity licence

(1) In order to operate as a management company, a public limited company shall hold a

relevant activity licence (hereinafter activity licence).

(2) Activity licences shall be issued and revoked by the Financial Supervision Authority.

(3) Activity licences shall be issued for an unspecified term.

(4) Activity licences are not transferable, and the acquisition or use thereof by other

persons is prohibited.

§ 13. Scope of activity licences

(1) A management company shall apply for an activity licence for the management of a

fund or an activity licence for the management of a fund together with the right to provide one

or several of the following services:

1) the services specified in clause 9 (2) 1) of this Act;

2) management of a mandatory pension fund specified in clause 3 (2) 1) of the Funded

Pensions Act (RT I 2004, 37, 252);

3) management of a voluntary pension fund specified in clause 3 (2) 2) of the Funded

Pensions Act.

(2) The management company of a UCITS shall not provide the services specified in

clauses 9 (2) 2) and 3) of this Act unless the company is granted the right specified in clause

(1) 1) of this section.

§ 14. Application for activity licence

(1) In order to apply for an activity licence, the members of the management board of a

management company who are set out in the memorandum of association or, in the case of an

operating company, the members of the management board entered in the registry card of the

commercial register shall submit a written application and the following documents and

information (hereinafter in this Division application):

1) the articles of association and, in the case of an operating public limited company,

also the resolution of the general meeting on amendment of the articles of association and the

amended text of the articles of association;

2) upon foundation of a public limited company, a notarially certified copy of the

foundation agreement and a document certifying the resources for payment of the share

capital;

3) the business plan which complies with the requirements provided for in § 15 of this

Act;

4) the balance sheet and income statement of the applicant as at the end of the month

prior to submission of the application;

5) the internal rules provided for in § 57 of this Act;

6) information on the members of the management board and supervisory board of the

applicant (hereinafter managers) which includes each member’s given name and surname,

personal identification code or date of birth in the absence of a personal identification code,

residence, educational background, a complete list of places of employment and positions

held during the last five years and, in the case of members of the management board, a

description of their duties;

7) information on the auditor and internal auditor of the applicant, including their name,

residence or seat, personal identification code or, in the absence of the identification code, the

date of birth or registry code;

8) the given name and surname, personal identification code or date of birth in the

absence of a personal identification code, residence and, educational background of the fund

manager, a complete list of places of employment and positions held during the last three

years and a copy of the contract entered into by the fund manager or a consent for entry into

the contract under which the manager undertakes to commence performance of the functions

of a fund manager after issue of the activity licence to the applicant;

9) 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;

10) information specified in § 46 of this Act on shareholders who directly or indirectly

hold more than 10 per cent of the votes represented by shares of the applicant;

11) information on companies in which the participation of the applicant, of a member of

its management board or supervisory board, or of the fund manager of the applicant is greater

than 20 per cent; this information shall also include the amount of share capital, a list of the

areas of activity and the percentage of participation of the above-mentioned persons;

12) if the person with a qualifying holding in the applicant belongs to a group, a

description of the structure of the group and the last annual report of the parent undertaking

and the group, if there is a group;

13) if a qualifying holding is owned by a foreign management company, investment firm,

credit institution or insurer, a certificate issued by the supervision authority of the appropriate

state which proves that the said foreign company holds a valid activity licence and, according

to the knowledge of the supervision authority, its activities are not contrary to legislation in

force.

(2) If, together with application for an activity licence, an applicant applies for the right

to provide one or several services specified in subsection 13 (1) of this Act, the applicant shall

make a corresponding notation in the application for the activity licence.

(3) If, during the processing of an application for an activity licence, there are changes in

the information specified in subsection (1) of this section, the applicant shall promptly submit

the corresponding updated information and documents to the Financial Supervision Authority.

(4) The accuracy of information and documents submitted concerning natural persons

specified in clauses (1) 6)-8) of this section shall be confirmed by the signature of the persons.

(5) The format of applications shall be established by a regulation of the Minister of

Finance.

§ 15. Business plan

(1) The business plan of a management company shall set out a forecast and analysis of

all the important economic indicators of the management company and the funds managed

thereby, and a description of the management structure of the management company and of

the rights, obligations and liability of persons involved in management of the funds, and also

a description, forecast and analysis of the following factors:

1) the net turnover and expenditure of the applicant by area of activity;

2) the size of the assets, share capital and shareholders’ equity of the applicant;

3) the development of the organisational structure and technical administration of the

applicant, and the organisation of the issue of units;

4) the types and number of funds managed;

5) the market value of the assets, net asset value and rate of return of the assets of the

funds;

6) the investment policy and structure of investments of the funds (division by security

and asset class, foreign issuer, sector of the economy, etc., and risks and the rate of return by

type of investment);

7) the size and structure of the management expenses of the funds;

8) the rates for and amount of proceeds from management fees, depositary’s charges, and

the issue and redemption fees of units;

9) the amount of fixed overheads;

10) a list of other services provided by the management company.

(2) A business plan shall be submitted for at least three years.

§ 16. Review of applications for activity licences

(1) If an applicant has failed to submit all the information and documents specified in §

14 of this Act or if such information or documents are incomplete or have not been prepared

in accordance with the requirements, the Financial Supervision Authority shall demand

elimination of the deficiencies by the applicant.

(2) The Financial 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 § 14 of this Act as to whether the applicant for an activity licence has

adequate facilities for the management of a fund or whether it meets the requirements for

management companies prescribed by an Act or legislation issued on the basis thereof or if

other circumstances relating to the applicant need to be verified.

(3) In order to verify the information submitted by an applicant, the Financial Supervision

Authority may request that more specific information and documents be submitted, perform

on-site inspections, order assessment or special audit, consult the commercial register and the

register of taxable persons of the Tax and Customs Board, obtain oral explanations from the

managers of a management company, the auditor and the fund manager, their representatives

and 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 information and documents specified in subsections (1)-(3) of this section shall

be submitted within a reasonable term determined by the Financial Supervision Authority.

(5) The Financial 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 data, documents or information requested

by the Financial Supervision Authority by the end of the term.

(6) Upon processing of an application for an activity licence, the Financial Supervision

Authority shall cooperate with the financial supervision authority of the corresponding

Contracting State if:

1) the applicant is a subsidiary of a management company, investment firm, credit

institution or insurer founded in the Contracting State;

2) the subsidiary of the parent undertaking of the applicant is a management company,

investment firm, credit institution or insurer founded in the Contracting State;

3) a person who exercises supervision over a management company, investment firm,

credit institution or insurer founded in the Contracting State also exercises, either directly or

indirectly, supervision over the applicant.

§ 17. Decision on issue of activity licence

(1) The Financial Supervision Authority shall make a decision to issue or refuse to issue

an activity licence within two months after receipt of all the necessary documents and

information, but not later than within six months after receipt of the application for the

activity licence.

(2) If, together with application for an activity licence, also the right to provide one or

several services specified in subsection 13 (1) of this Act is applied for, a decision on the

issue of an activity licence shall also set out the services which the management company has

the right to provide in accordance with the activity licence.

(3) The Financial Supervision Authority shall promptly inform an applicant of a decision

to issue or refuse to issue an activity licence.

§ 18. Bases for refusal to issue activity licence

(1) The Financial Supervision Authority shall refuse to issue an activity licence of a

management company or grant the right to provide one or several services specified in

subsection 13 (1) of this Act if:

1) the applicant does not meet the requirements for management companies provided for

in this Act or legislation issued on the basis thereof;

2) the resources for full payment of the share capital of a public limited company being

founded are not proved;

3) the applicant does not have the necessary resources or experience to operate as a

management company of a fund of the corresponding type with success and continuity;

4) the managers, fund manager, auditor or shareholders of the applicant do not meet the

requirements provided for in this Act or legislation established on the basis thereof;

5) close links between the applicant and another person prevent sufficient supervision

over the management company, or the requirements arising from legislation or the

implementation of legislation of the state where the persons with whom the applicant has

close links is established prevent sufficient supervision over the management company;

6) information presented in a business plan provided for in § 15 of this Act are

inadequate or insufficient;

7) the internal rules of a management company specified in § 57 of this Act are not

sufficiently accurate or unambiguous for regulation of the activities of the management

company;

8) the applicant 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 (RT

I 1997, 87, 1467; 2002, 82, 477; 2003, 26, 156; 2004, 18, 131);

9) the previous activity licence issued to the public limited company has been revoked,

unless the activity licence has been revoked for any reason provided for in § 21 of this Act.

(2) Among other matters, the following shall be considered upon assessment of that

provided for in clause (1) 3) of this section:

1) the level of the organisational and technical administration of the activities of the

applicant;

2) the professional qualifications and experience of persons engaged in the management

of funds, and transparency of their rights, obligations and liability;

3) the activities, financial situation, reputation and experience of the applicant, its parent

company and persons belonging to the same group as the applicant.

§ 19. Application for additional activity licence

(1) A management company which already holds an activity licence of a management

company and additionally wishes to commence provision of one or several of the services

specified in subsection 13 (1) of this Act shall apply for an additional activity licence therefor

from the Financial Supervision Authority.

(2) Upon application for an additional activity licence, a management company shall

submit to the Financial Supervision Authority a corresponding written application, a business

plan provided for in § 15 of this Act and the internal rules of the management company

specified in § 57 of this Act.

(3) The provisions of subsection 14 (4) and §§ 16-18 of this Act apply to the processing

of documents specified in subsection (2) of this Act.

§ 20. Amendment of decision on issue of activity licence

(1) Upon changes in the name, registry code, the address of the seat or place of business

of a management company or upon amendment of documents specified in clauses 14 (1) 1) or

3) of this Act, the Financial Supervision Authority shall make a decision on amendment of a

decision on issue of an activity licence specified in subsection 17 (1) of this Act or issue of an

additional activity licence provided for in § 19 of this Act.

(2) The Financial Supervision Authority shall make a decision on amendment of a

decision on issue of an activity licence or additional activity licence within one month after

submission of the changed information specified in subsection (1) of this section by the

management company.

(3) The Financial Supervision Authority shall promptly inform a management company

of a decision on amendment of a decision on issue of an activity licence or additional activity

licence.

§ 21. Revocation of activity licence

(1) Revocation of an activity licence or additional activity licence (hereinafter in this

Division activity licence) means the total or partial deprivation of the rights granted by the

activity licence.

(2) An activity licence shall be revoked either in full or in part in order to deprive of the

right to provide the services specified in subsection 13 (1) of this Act, whereupon the rights of

which the holder of the activity licence is deprived of upon the partial revocation of the

activity licence are specified.

(3) Prior to deciding on the revocation of an activity licence pursuant to § 22 of this Act,

the Financial Supervision Authority may issue a precept to the management company and set

a term for elimination of the deficiencies which are the basis for the revocation.

(4) The addressee of a decision, the fund founded as a public limited company managed

thereby and the depositary of a common fund managed thereby shall be promptly informed of

the decision on revocation of the activity licence.

(5) A decision on revocation of an activity licence enters into force on the date indicated

in the decision but not before communication of the decision to the addressee.

§ 22. Bases for revocation of activity licence

The Financial Supervision Authority may revoke an activity licence in full or in part if:

1) a management company has not commenced the management of the fund within

twelve months as of the issue of the activity licence thereto or the management company has

not managed any funds or assets of funds within a period of twelve consecutive months;

2) information submitted upon application for the activity licence which was of material

importance in the decision to issue the activity licence is false, and also in other cases where

false information has been submitted to the Financial Supervision Authority by or for the

management company;

3) the management company does not meet the requirements in force with regard to the

issue of activity licences;

4) the circumstances provided for in clauses 18 (1) 4) or 5) become evident;

5) a management company has violated provisions of legislation regulating the activities

thereof, a management company 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 or omissions of a management company are not in

compliance with good practice;

6) a management company has published materially incorrect or misleading information

or advertising concerning its activities or members of its directing bodies;

7) a management company is unable to perform the obligations it has assumed or if, for

any other reason, its activities significantly damage the interests of the fund, unit-holders,

shareholders of a fund founded as a public limited company or the clients of services

specified in subsection 9 (2) of this Act or adversely affect the regular functioning of the

securities market;

8) a management company which provides the services specified in clauses 9 (2) 1)-3) of

this Act fails to comply with the prudential requirements established with respect to the

company and provided for in this Act or legislation established on the basis thereof;

9) a management company which provides the services specified in clauses 9 (2) 1)-3) of

this Act fails to pay the contributions to the Investor Protection Sectoral Fund prescribed in

the Guarantee Fund Act (RT I 2002, 23, 131; 57, 357; 102, 600) for the specified term or in

full;

10) a management company which manages pension funds failed to pay contributions to

the Pension Protection Sectoral Fund prescribed in the Guarantee Fund Act for the specified

term or in full;

11) a management company has violated the rules of a common fund managed by the

management company or a management contract with a fund founded as a public limited

company (hereinafter management contract), where the interests of the unit-holders of the

common fund or fund founded as a public limited company managed by the management

company may be damaged due to such violation;

12) a management company has failed to implement a precept of the Financial

Supervision Authority within the term or to the extent prescribed.

§ 23. Revocation of activity licence on basis of application of management

company

(1) An activity licence shall be revoked in full or in part on the basis of the corresponding

application of a management company if:

1) the management company no longer provides the services specified in subsection 13

(1) of this Act;

2) the management company no longer manages any funds or assets of funds and the

legitimate interests of the shareholders and unit-holders of the funds previously managed by

the company are sufficiently protected;

3) upon merger of management companies, the management company is the

management company being acquired and the legitimate interests of the shareholders and

unit-holders of the funds previously managed by the company are sufficiently protected.

(2) An application specified in subsection (4) of this section shall be reviewed by the

Financial Supervision Authority and a decision to revoke or refuse to revoke the activity

licence in full or in part shall be made within two months as of the receipt of the application.

The provisions of subsections 21 (4) and (5) of this Act apply to the decision.

(3) The Financial Supervision Authority may refuse to revoke an activity licence in part

or in full on the basis of an application specified in subsection (1) of this section if:

1) the right of the management company to manage all the funds managed thereby has

not extinguished;

2) revocation of the activity licence in part or in full may damage the legitimate interests

of the unit-holders or shareholders of the funds managed by the management company;

3) revocation of the activity licence in part or in full may damage the interests of clients.

§ 24. Publication

(1) The Financial Supervision Authority shall publish a decision to issue an activity

licence or revoke an activity licence in full or in part pursuant to the procedure provided for in

§ 295 of this Act and legislation issued on the basis thereof.

(2) In addition to the provisions of subsection (1) of this Act, the Financial Supervision

Authority shall publish a decision to revoke an activity licence in full or in part which is made

pursuant to § 22 of this Act in at least one national daily newspaper.

(3) The Financial Supervision Authority shall publish a decision specified in subsection

(2) of this section not later than on the third working day after expiry of the term of

contestation of the decision to revoke the activity licence. The Financial Supervision

Authority shall publish other decisions specified in subsection (1) of this section not later than

on the next working day after the decision is made.

(4) The Financial Supervision Authority shall promptly inform the registrar of the

Estonian Central Register of Securities of a decision according to which the applicant may

manage mandatory pension funds.

Division 3

Activities of Management Company in Foreign State

§ 25. Bases of activities of management company in foreign state

(1) A management company founded in Estonia and holding an activity licence issued by

the Financial Supervision Authority may provide services in a foreign state by establishing

branches or providing cross-border services.

(2) Upon provision of services in a foreign state, a management company shall comply

with the requirements provided for in this Act, legislation issued on the basis thereof and

legislation of the foreign state.

(3) Cross-border services are services of a management company which the company

provides in a state where the management company or a branch thereof is not registered.

(4) The provisions of §§ 30-33 of this Act apply to the provision of services by

management companies of Estonia in other Contracting States.

(5) The provisions of §§ 26–29 and subsections 33 (1) and (4) of this Act apply to the

provision of services in a foreign state not specified in subsection (4) of this section

(hereinafter third country).

§ 26. Branch of management company in third country

(1) A management company which wishes to found a branch in a third country shall

apply for a corresponding authorisation (hereinafter in this Division authorisation for

foundation of a branch) from the Financial Supervision Authority.

(2) In order to apply for an authorisation for the foundation of a branch in a foreign state,

a management company shall submit a written application and the following information and

documents (hereinafter in this Division application) to the Financial Supervision Authority:

1) the third country where the management company wishes to found the branch;

2) the address of the seat of the branch in the third country;

3) a business plan for the activities of the branch in the third country, which complies

with the requirements provided for in § 15 of this Act;

4) information specified in clause 14 (1) 6) of this Act concerning the managers of the

branch.

(3) The format of an authorisation for the foundation of a branch in a foreign state may be

established by a regulation of the Minister of Finance.

§ 27. Processing of application for authorisation for foundation of branch and

decision on issue of authorisation

(1) The provisions of § 16 of this Act apply to the processing of applications for an

authorisation for the foundation of a branch, verification of the submitted information and

verification of the financial situation, organisational structure and technical systems of the

applicant and existence of sufficient resources for the foundation of a branch.

(2) The Financial Supervision Authority shall make a decision to grant or refuse to grant

an authorisation for the foundation of a branch within two months after receipt of all the

necessary information and documents, but not later than within three months after receipt of

the corresponding application.

(3) The Financial Supervision Authority shall promptly inform the management company

of a decision to grant or refuse to grant an authorisation for the foundation of a branch.

§ 28. Bases for refusal to grant authorisation for foundation of branch

The Financial Supervision Authority may refuse to grant an authorisation for the foundation

of a branch if:

1) the managers of branch do not meet the requirements for managers of management

companies provided for in this Act;

2) the financial situation, organisational structure and other resources of the management

company are insufficient for the provision of services specified in the business plan in third

countries;

3) the foundation of the branch in a third country or implementation of the business plan

submitted by the management company may damage the interests of the fund or the

shareholders or unit-holders of the fund, the financial situation of the management company

or adversely affect the reliability of its activities in Estonia, in another Contracting State or in

a third country;

4) a financial supervision authority of a third country has no legal basis or possibilities

for cooperation with the Financial Supervision Authority due to which the Financial

Supervision Authority cannot exercise sufficient supervision over the branch in the third

country.

§ 29. Revocation of authorisation for foundation of branch

(1) The Financial Supervision Authority may revoke an authorisation for the foundation

of a branch in a foreign state if:

1) the management company has submitted false information upon application for the

authorisation for the foundation of a branch which was of material importance in the decision

to grant the authorisation, and also in other cases where false information has been submitted

to the Financial Supervision Authority by or for the management company;

2) the management company has materially violated the requirements of legislation of

the relevant third country, which may damage the interests of the shareholders, unit-holders or

clients of funds managed by the management company;

3) the management company or its branch does not meet the requirements in force with

regard to the issue of authorisations for the foundation of a branch;

4) the management company fails to submit reports on its branch as required;

5) the management company has violated the rules or management contract of the fund

managed thereby where the interests of the shareholders or unit-holders of the fund managed

by the management company may be damaged due to such violation or if the management

company 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;

6) the management company has failed to implement a precept of the Financial

Supervision Authority within the term or to the extent prescribed;

7) the risks arising from the activities of the branch are significantly greater than risks

arising from the activities of the management company;

8) the activity licence of the management company has been revoked;

9) the circumstances provided for in § 28 of this Act arise.


and the financial supervision authority of a third country of a decision to revoke an

authorisation for the foundation of a branch.

(3) After becoming aware of revocation of an authorisation for the foundation of a

branch, the management company shall terminate provision of its services through the branch

founded in the third country not later than by the due date specified by the Financial

Supervision Authority.

§ 30. Branch of management company in another Contracting State

(1) A management company which wishes to found its branch in another Contracting

State shall inform the Financial Supervision Authority of its intention and submit an

application to the Financial Supervision Authority together with the following information

and documents:

1) the Contracting State where the management company wishes to found the branch;

2) the business plan of the branch which complies with the requirements provided for in

§ 15 of this Act and sets out all services which the management company wishes to provide in

the other Contracting State;

3) the address of the seat of the branch;

4) the names of the managers of the branch.

(2) The Financial 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

financial supervision authority of the corresponding Contracting State 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 Financial Supervision Authority

shall promptly inform the management company of the decision.

(3) If the information or documents submitted upon application do not comply with the

requirements provided for in this Act or legislation established on the basis thereof, or if the

information or documents are incorrect, misleading or incomplete, or if the management

company has refused to submit the information or documents, or if, upon application, the

data, documents or information required by the Financial Supervision Authority have not

been submitted within the prescribed term, the Financial Supervision Authority may refuse to

review the application.

(4) The Financial Supervision Authority shall forward the information and documents

specified in subsection (1) of this section to the financial supervision authority of the

corresponding Contracting State not later than on the second working day after the decision

specified in subsection (2) of this section is made. Information concerning the investor

protection scheme applicable in Estonia shall also be forwarded together with the specified

information and documents.

(5) A management company may found a branch in a Contracting State and commence

the provision of services two months after the date when the Financial Supervision Authority

forwards the documents and information specified in subsection (1) of this section to the

financial supervision authority of the Contracting State, having regard to the conditions

provided for in the legislation of the Contracting State and established by the financial

supervision authority of the Contracting State.

§ 31. Bases for refusal to forward documents and information

The Financial Supervision Authority may make a decision to refuse to forward the

information and documents specified in subsection 30 (1) of this Act if:

1) the management company does not manage a UCITS;

2) the financial situation, organisational structure or other resources of the management

company are insufficient for the provision of services specified in the business plan in other

Contracting States;

3) the foundation of the branch or implementation of the business plan submitted by the

management company may damage the interests of the fund, the unit-holders or the

shareholders of a fund founded as a public limited company, the financial situation of the

management company or its reliable activities in Estonia or in another Contracting State;

4) a financial supervision authority of a Contracting State has no legal basis or

possibilities for cooperation with the Financial Supervision Authority due to which the

Financial Supervision Authority cannot exercise sufficient supervision over the branch in the

Contracting State.

§ 32. Change in circumstances relating to submitted documents and information

(1) A management company shall inform the Financial Supervision Authority and the

financial supervision authority of a Contracting State of changes in the circumstances or

information specified in clauses 30 (1) 2)-4) of this Act at least one month in advance.

(2) The Financial Supervision Authority shall promptly inform the financial supervision

authority of a 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 management company operates through a branch.

(3) Upon changes in the circumstances or information specified in clauses 30 (1) 2)-4) of

this Act, the Financial Supervision Authority may revoke the decision specified in subsection

30 (2) pursuant to § 31 of this Act. The Financial Supervision Authority shall promptly

inform the management company of revocation of the decision. After becoming aware of

revocation of the decision, the management company shall terminate provision of its services

through the branch founded in the Contracting State not later than by the due date specified

by the Financial Supervision Authority.

§ 33. Provision of cross-border services by management company

(1) A management company which intends to provide cross-border services in a foreign

state shall inform the Financial Supervision Authority thereof and shall submit the following

information and documents to the Financial Supervision Authority:

1) the state where the management company wishes to provide cross-border services;

2) a business plan concerning the services to be provided in a foreign state, which meets

the requirements provided for in § 15 of this Act.

(2) If a management company which manages a UCITS intends to provide cross-border

services in another Contracting State, the Financial Supervision Authority shall forward the

information and documents specified in subsection (1) of this section to the financial

supervision authority of the Contracting State within one month. The Financial Supervision

Authority shall inform the financial supervision authority of the investor protection scheme

applicable in Estonia.

(3) After expiry of the term specified in subsection (2) of this section, a management

company which intends to provide cross-border services in a foreign state may commence

provision of cross-border services in a Contracting State having regard to the conditions



(4) Upon changes in a business plan specified in clause (1) 2) of this section, a

management company shall inform the Financial Supervision Authority and, in the case of a

UCITS, the financial supervision authority of the other Contracting State of the changes at

least one month in advance.

Division 4

Activities of Foreign Management Companies in Estonia

§ 34. Bases for activities of foreign management companies

(1) A person who, according to the legislation of the state where it is founded (hereinafter

home state), has the right to manage funds or other similar undertakings or institutions

established for collective investment, may manage funds founded as public limited companies

and registered in Estonia or provide services specified in subsection 9 (2) of this Act on the

basis of the activity licence issued in the home state by establishing branches or providing

cross-border services in Estonia.

(2) The provisions of §§ 38, 42 and 297 of this Act apply to a person specified in

subsection (1) of this section which is founded in another Contracting State and complies with

the requirements established for management companies in the directive regarding investment

funds (hereinafter in this Division management company of Contracting State).

(3) The provisions of §§ 35–37, 39–41 and subsections 297 (1) and (3) of this Act apply

to a person specified in subsection (1) of this section which does not comply with the

requirements provided for in subsection (2) of this section (hereinafter in this Division

management company of third country).

(4) For the purposes of this Division, cross-border services are services of a management

company provided by a person who is not or whose branch is not registered in Estonia. The

provisions of this Division concerning cross-border services apply also if cross-border

services are provided through a third party.

§ 35. Branch of management company of third country in Estonia

(1) In order to found a branch in Estonia, a management company of a third country is

required to apply for a corresponding authorisation (hereinafter in this Division authorisation

for foundation of a branch) from the Financial Supervision Authority.

(2) Upon application for an authorisation for the foundation of a branch, a written

application and the following information and documents (hereinafter in this Division

application) shall be submitted to the Financial Supervision Authority:

1) the name and address of the management company;

2) the scope of the activity licence issued to the management company and information

concerning the agency which issued the activity licence;

3) the business name and address of the branch;

4) information on the director of the branch pursuant to the provisions of clauses 387 10)

and 11) of the Commercial Code;

5) the information and documents specified in clauses 386 (2) 1), 3), 4) and 5) of the

Commercial Code;

6) the annual reports of the management company for the past two financial years;

7) the business plan of the branch which meets the requirements provided for in § 15 of

this Act and sets out all services provided by the branch in Estonia.

(3) In addition to the information specified in subsection (2) of this section, a

management company of a third country shall submit the following to the Financial

Supervision Authority:

1) the permission of the financial supervision authority of the home state to found a

branch in Estonia;

2) the confirmation of the financial supervision authority of the home state that the

management company 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 management company, including the amount of own funds, and the

description of the investor protection scheme applicable to the unit-holders and clients of the

funds managed by the management company in the home state.

(4) The format of an authorisation for the foundation of a branch may be established by a

regulation of the Minister of Finance.

(5) A management company of a third country shall submit the information and

documents specified in this section which are in a foreign language together with translations

into Estonian.

§ 36. Processing of application for authorisation for foundation of branch and

revocation of authorisation

(1) Sections 16–18 and 21–23 of this Act apply to the processing of applications for an

authorisation for the foundation of a branch and verification of information and to the grant

and revocation of authorisations, unless otherwise provided for in this section.

(2) In addition to the refusal on the bases provided for in § 18 of this Act, the Financial

Supervision Authority may refuse to grant an authorisation for the foundation of a branch 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 or

possibilities for cooperation with the Financial Supervision Authority.


of a branch if circumstances provided for in § 22 of this Act or in subsection (2) of this

section become evident.

(4) The Financial Supervision Authority may refuse to revoke an authorisation for the

foundation of a branch if the clients of the branch have claims against the branch or the

management company of a third country or the revocation of the authorisation damages the

interests of the fund or the shareholders or unit-holders of the fund.

§ 37. Amendment of authorisation for foundation of branch

(1) A management company of a third country which wishes to provide services in

Estonia which are not specified in the business plan submitted upon application for an

authorisation for the foundation of a branch shall submit an application for amendment of the

authorisation for the foundation of the branch to the Financial Supervision Authority.

(2) In order to amend an authorisation for the foundation of a branch, a management

company of a third country shall submit to the Financial Supervision Authority the

information and documents specified in clauses 35 (2) 1)-4) and 7) of this Act.

(3) The provisions of §§ 16–18 of this Act apply to the processing of applications for the

amendment of authorisations for the foundation of a branch, verification of information and

deciding on amendment of the authorisations.

§ 38. Branch of management company of Contracting State in Estonia

(1) A management company of a Contracting State which wishes to found a branch in

Estonia shall inform the Financial Supervision Authority thereof through the financial

supervision authority of the Contracting State. The following information and documents

shall be submitted to the Financial Supervision Authority:

1) the business plan of the branch which meets the requirements provided for in § 15 of

this Act and sets out all services provided by the management company in Estonia;

2) the business name and address of the branch:

3) the names of the managers of the branch;

4) the description of the investor protection scheme applicable to the unit-holders and

clients of the funds managed by the management company in the Contracting State.


authority of the Contracting State of receipt of the information specified in subsection (1) of

this section. The Financial Supervision Authority may make, within two months after receipt

of the aforementioned information, a decision which determines the requirements which the

management company must observe in Estonia and pursuant to which the management

company must provide its services, including portfolio management, consulting and

depositary services. The Financial Supervision Authority shall promptly inform the financial

supervision authority of a Contracting State of its decision.

(3) A management company of a Contracting State may found a branch and commence

provision of services two months after the date on which the Financial Supervision Authority

receives the documents and information specified in subsection (1) of this section.

(4) The Financial Supervision Authority shall be informed of changes in the information

and documents specified in subsection (1) of this section at least one month in advance.

Within one month as of becoming aware of the changes, the Financial Supervision Authority

may amend the decision specified in subsection (2) of this section or make the

aforementioned decision unless it has been made earlier.

(5) Confirmation from the Financial Supervision Authority concerning receipt of the

information specified in subsection (1) of this section and the decision of the Financial

Supervision Authority specified in subsection (2) of this section, if it exists, shall be

submitted upon entry of a branch in the commercial register. If the Financial Supervision

Authority makes a decision specified in subsection (4) of this section, the Authority shall send

a copy of the decision to the commercial register.

§ 39. Provision of cross-border services in Estonia by management company of

third country

(1) A management company of a third country which wishes to provide cross-border

services in Estonia shall apply for a corresponding authorisation (hereinafter in this Division

authorisation for provision of cross-border services) from the Financial Supervision

Authority.

(2) In order to apply for an authorisation for the provision of cross-border services, a

management company shall submit to the Financial Supervision Authority an application

together with the following information and documents:

1) the name and address of the management company;

2) the scope of the activity licence issued to the management company and information

concerning the agency which issued the activity licence;

3) the information and documents provided for in clauses 386 (2) 1) and 3)-5) of the

Commercial Code;

4) the annual reports of the management company for the past two financial years;

5) the business plan which meets the requirements provided for in § 15 of this Act and

sets out all services provided by the management company in Estonia.

(3) In addition to the information specified in subsection (2) of this section, a

management company of a third country shall submit the following to the Financial


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 management company 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 the unit-holders and clients of the funds managed

by the management company in the home state.

(4) A foreign management company shall submit the information and documents

specified in this section which are in a foreign language together with translations into

Estonian.

§ 40. Processing of application for authorisation for provision of cross-border

services and revocation of authorisation

(1) Sections 16–18 and 21–23 of this Act apply to the application for authorisations for

the provision of cross-border services, review of applications and the grant and revocation of

authorisations, unless otherwise provided for in this section.

(2) In addition to refusal on the bases provided for in § 18 of this Act, the Financial

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 or possibilities for cooperation with the Financial Supervision Authority.

(3) The Supervision Authority may revoke an authorisation for the provision of cross-

border services if circumstances provided for in § 22 of this Act or in subsection (2) of this



provision of cross-border services if the clients of the management company of a third

country have claims against the management company or the revocation of the authorisation

damages the interests of the fund or the shareholders or unit-holders of the fund.

§ 41. Amendment of authorisation for provision of cross-border services

(1) A management company of a third country 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 Financial


(2) In order to amend an authorisation for the provision of cross-border services, a

management company of a third country shall submit the information and documents

specified in clauses 39 (2) 1) 2) and 5) of this Act to the Financial Supervision Authority.

(3) The provisions of §§ 16–18 of this Act apply to the processing of applications for



§ 42. Provision of cross-border services in Estonia by management company of

Contracting State

(1) A management company of a Contracting State which wishes to provide cross-border

services in Estonia shall inform the Financial Supervision Authority thereof through the

financial supervision authority of the Contracting State. The following information and

documents shall be submitted to the Financial Supervision Authority:

1) the business plan which meets the requirements provided for in § 15 of this Act and

sets out all services provided by the management company in Estonia;

2) the description of the investor protection scheme applicable in the Contracting State to

the unit-holders and clients of the funds managed by the management company.

(2) After the Financial Supervision Authority has received the information specified in

subsection (1) of this section, the management company of a Contracting State may

commence the provision of cross-border services in Estonia.


authority of the Contracting State of receipt of the information specified in subsection (1) of

this section. The Financial Supervision Authority may make, within two months after receipt

of the aforementioned information, a decision in which it determines the conditions according

to which the management company of the Contracting State must provide its services,

including portfolio management, consulting and depositary services. The Financial

Supervision Authority shall promptly inform the management company of the Contracting

State of the decision.


specified in subsection (1) of this section at least one month in advance. Within one month as

of becoming aware of the changes, the Financial Supervision Authority may amend the

decision specified in subsection (3) of this section or make the aforementioned decision

unless it has been made earlier.

Division 5

Shares and Shareholders of Management Company

§ 43. Shares

(1) The shares of a management company are freely transferable.

(2) The pre-emptive right of a shareholder provided for in subsection 229 (2) of the

Commercial Code does not apply upon the transfer of the shares of a management company.

§ 44. Requirements for persons having qualifying holding

Qualifying holdings in a management company may be held by persons who are able to

ensure the sound and prudent management of the management company and whose business

connections and structure of owners are transparent and do not prevent supervision from

being exercised efficiently and regarding whom the Financial Supervision Authority can

receive information without any hindrance arising from the legislation of the home state of

the persons.

§ 45. Giving notification of acquisition of holding

(1) A person who intends to acquire a qualifying holding in a management company or to

increase a qualifying holding so that the proportion of the share capital or votes represented

by shares of the management company held by the person exceeds 20, 33 or 50 per cent or so

that the management company would become a company controlled by the person within the

meaning of § 10 of the Securities Market Act as a result of the transaction shall inform the

Financial Supervision Authority thereof in advance.

(2) The provisions of this Division also apply to a shareholder of a management company

who acquires a qualifying holding in a management company as a result of any other

transaction or the qualifying holding thereof increases so that the proportion of the share

capital or votes represented by shares of the management company held by the shareholder

exceeds 20, 33 or 50 per cent or as a result of the transaction the management company

becomes a company controlled by the shareholder. In such case, the person shall give

notification to the Financial Supervision Authority promptly after the management company

becomes a company controlled by the person or after becoming aware of the acquisition or

increase of qualifying holding in the management company.

§ 46. Information submitted upon giving notification of qualifying holding

(1) The Financial Supervision Authority shall be informed of the size of the acquired

holding and the following information and documents shall be submitted to the Financial


1) the name and seat of the acquirer if the acquirer is a legal person, and the registry code

thereof if it has a registry code, and in the case of a company, an officially authenticated copy

of the registry card from part B or of a registration certificate and the articles of association if

they exist;

2) information specified in clause 14 (1) 6) of this Act regarding the members of the

management board and supervisory board of the acquiring company as well as confirmation

from the acquirer regarding the reliability and impeccable reputation of such persons;

3) the annual reports of the acquiring company for the past two financial years, and an

audited interim report for the first six months if more than nine months have passed since the

end of the previous financial year, if such reports exist. The auditor's report shall be added to

the reports if preparation of the report is prescribed by legislation;

4) if the qualifying holding is being acquired by a company which is a member of a

group, a description of the group structure, stating the shares of the holdings of the companies

belonging to the group, and the annual reports and auditor's reports of the group for the past

two financial years;

5) if the qualifying holding is being acquired by a natural person, information specified

in clause 2) of this subsection and information concerning the origin of the money.

(2) If a foreign management company, investment firm, credit institution, insurer or

investment fund wishes to acquire a qualifying holding, confirmation from the relevant

foreign supervision authority to the effect that the foreign person holds a valid activity licence

and observes the established requirements shall also be submitted to the Financial Supervision

Authority in addition to the documents specified in subsection (1) of this section.

(3) Confirmation regarding the accuracy of the submitted information and documents

which is signed by the acquirer of holding shall be appended to the documents and

information specified in subsection (1) of this section and to any information submitted later

in connection with the documents and information. The accuracy of information and

documents submitted concerning natural persons specified in clause (1) 5) of this section shall

be confirmed by the signature of the persons specified.

(4) The Financial Supervision Authority may require additional information and

documents from the acquirer of qualifying holding in order to specify the information set out

in subsection (1) of this section.

§ 47. Conditions for acquisition of qualifying holding

(1) The Financial Supervision Authority has the right to specify a term for the acquirer of

qualifying holding for the acquisition or increase of the qualifying holding. The term shall not

exceed twelve months. The acquirer of qualifying holding is required, within the specified

term, to give notification to the Financial Supervision Authority promptly after making a

decision on conclusion of a transaction or failure to conclude a transaction by which the

holding is acquired or increased.

(2) A qualifying holding may be acquired if the Financial Supervision Authority does not

prohibit, by a precept, acquisition of the qualifying holding within three months after

submission of all the information and documents specified in subsection 46 (1) of this Act.

(3) Upon issue of a prohibiting precept specified in subsection (2) of this section, the

Financial Supervision Authority shall cooperate with the financial supervision authority of the

Contracting State if the management company, credit institution, investment firm or insurer

registered in the Contracting State or a person belonging to the same consolidation group with

an aforementioned person is the acquirer of qualifying holding or, as a result of the

transaction, becomes a person who controls the management company.

§ 48. Bases for prohibition on acquisition of holding

(1) The Financial Supervision Authority may prohibit, by a precept, acquisition or

increase of holding if:

1) the acquirer of the holding fails to submit on time or refuses to submit the data,

documents or information prescribed by this Act or requested by the Financial Supervision

Authority to the Financial Supervision Authority;

2) information or documents submitted to the Financial Supervision Authority do not

meet the requirements provided by legislation or the information or documents are incorrect,

misleading, incomplete or incorrectly prepared;

3) the acquisition or increase of the holding may significantly restrict competition in

management of funds or provision of other services specified in subsection 9 (2) of this Act;

4) it becomes clear that the person acquiring the holding does not meet the requirements

of § 44 of this Act or circumstances specified in clauses 18 (1) 4) and 5) of this Act would

become evident;

5) the acquisition or increase of the holding may significantly damage the legitimate

interests of the fund, the shareholders or unit-holders of the fund or the management company

would no longer comply with the requirements provided for in this Act;

6) the financial situation of the acquirer of the holding is not sufficiently secure or the

financial statements of the acquirer of the holding do not allow for a correct assessment to be

made of the financial situation of the applicant;

7) the monetary or non-monetary resources necessary for the acquisition or increase of

qualifying holding may, in the opinion of the Financial Supervision Authority, be connected

with a transaction which might be an indication of money laundering or terrorist financing;

8) the financial situation of the acquirer of the holding who wishes to acquire more than

50 per cent of the share capital or votes represented by shares of the management company is

insufficient to ensure the reliable and regular operation of the management company.

(2) After the expiry of the term specified in subsection 47 (2) of this Act, the Financial

Supervision Authority may issue a precept according to which acquisition of qualifying

holding is deemed to be contrary to this Act if:

1) the acquirer of qualifying holding has submitted misleading or inaccurate information

or falsified documents;

2) the activities of the shareholder who has a qualifying holding or a representative

thereof cause a significant risk to the sound and prudent management of the management

company;

3) other circumstances specified in subsection (1) of this section become evident.

§ 49. Consequences of illegal acquisition of qualifying holding

(1) As a result of a transaction by which a qualifying holding is acquired or increased, the

person who concluded the transaction 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 Financial Supervision Authority;

2) the Financial Supervision Authority has issued a precept specified in subsection 48 (2)

of this Act;

3) the Financial Supervision Authority has not been informed of the transaction pursuant

to the procedure provided for in §§ 45 and 46 of this Act;

4) the transaction is concluded before the expiry of the term specified in subsection 47

(2) of this Act.

(2) The acquirer of qualifying holding does not have any rights which would enable the

management company to be turned into a company controlled thereby if the management

company has turned the person into a controlled company as a result of a transaction in the

case of which the circumstances specified in subsection (1) of this section exist.

(3) If voting rights representing a qualifying holding acquired or increased by a

transaction, in the case of which 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, a court may declare the resolution of the general meeting

invalid on the basis of a petition of the Financial Supervision Authority, another shareholder

or a member of the management board or supervisory board of the company, if the petition is

submitted within three months as of the adoption of the adoption of the resolution of the

general meeting.

§ 50. Giving notification of changes in qualifying holding

(1) If a person intends to transfer shares in an amount which would result in the person

losing a qualifying holding in a management company or if the person reduces the holding

thereof such that it falls below one of the limits specified in subsection 45 (1) of this Act or

foregoes control over the management company, the person is required to inform the

Financial Supervision Authority thereof in advance and indicate the number of shares which

the person owns and transfers and holds after the transaction and information specified in

clauses 46 (1) 1), 2) and 5) of this Act concerning a person to whom the shares are

transferred.

(2) The provisions of subsection (1) of this section also apply if a person loses control

over a management company or qualifying holding in a management company as a result of

any other transaction or if the qualifying holding of the person is reduced such that it falls

below one of the limits specified in subsection 45 (1) of this Act. In such case, the person

shall inform the Financial 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 subsections 45 (1) and (2) of this

Act, a management company is required to promptly inform the Financial Supervision

Authority thereof.

(4) During each financial year, a management company shall, together with its annual

report, submit to the Financial Supervision Authority information concerning persons who

have qualifying holding in the management company and shall set out the size of holding

owned by the person and the circumstances relating thereto pursuant to § 9 of the Securities

Market Act.

Division 6

Management of Management Company

§ 51. Requirements for managers

(1) The managers of a management company shall have the education and knowledge

necessary for the performance of their duties and an impeccable business reputation.

(2) The following shall not be managers of management companies:

1) persons whose activities or omissions have caused the bankruptcy or revocation of the

activity licence of a fund, management company, professional securities market participant,

insurer or credit institution on the initiative of a state agency or a supervision authority;

2) persons who have 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;

3) persons who are subjected to a prohibition on business;

4) persons whose earlier activities during the last ten years have shown that the persons

are not capable of organising the activities of a management company such that the interests

of a fund and the shareholders or unit-holders of a fund would be sufficiently protected.

(3) The management board of a management company shall have at least two members.

(4) Members of the management board of a management company shall have completed

higher education or education equivalent thereto.

(5) The managers and employees of a management company are required to act with the

prudence and diligence expected of them, in accordance with the requirements for their

positions and in the interests of the management company and the funds managed by the

management company, the shareholders and unit-holders and other clients of the funds.

§ 52. Election or appointment of manager

(1) Upon the election or appointment of a manager of a management company, the

person to be elected or appointed shall present the following to the management company:

1) a written consent;

2) the residential address;

3) an overview of his or her education, work experience and engagement in enterprise;

4) confirmation that no circumstances exist which, according to this Act, would preclude

his or her right to be a manager of the management company.

(2) The exact list of information and documents to confirm that a manager of a

management company is trustworthy and suitable and that he or she meets the requirements

shall be established by a regulation of the Minister of Finance.

§ 53. Removal of manager

(1) The Financial Supervision Authority may issue a precept to demand the removal of a

manager of a management company if:

1) the manager does not meet the requirements provided for in this Act;

2) the manager has violated the requirements of this Act or other legislation relating to

the professional activities thereof;

3) misleading, incomplete or inaccurate information or misleading, incomplete or

falsified documents have been submitted in order to appoint him or her;

4) the activities of the manager in managing the management company have

demonstrated his or her inability to organise the management of the management company

such that the interests of the fund, the shareholders, unit-holders, clients and creditors of the

fund are sufficiently protected.

(2) If a management company fails to comply with a precept specified in subsection (1)

of this section in full or for the specified term, the Financial Supervision Authority has the

right to demand the removal of the manager of the management company through a court or

revoke the activity licence of the management company.

(3) A court may, at the request of the Financial Supervision Authority or the management

board, the supervisory board or a shareholder of the management company, appoint a new

member to replace a member removed from the supervisory board. The authority of a court-

appointed member of the supervisory board shall continue until the election of a new member

of the supervisory board by the general meeting.

§ 54. Restrictions on activities of managers and employees

(1) The manager or an employee of a management company shall not be a member of the

management board or supervisory board or an employee of another management company,

credit institution, insurer or investment firm.

(2) The manager or an employee of a management company may be a member of the

supervisory board in an undertaking belonging to the same group with the management

company.

(3) A member of the management board or supervisory board or an employee of the

parent undertaking of a management company may be a member of the supervisory board of

the management company.

(4) The manager or an employee of a management company holding an activity licence

for the management of mandatory pension funds shall not be member of the management

board or an employee of the registrar of the Estonian Central Register of Securities.

§ 55. Fund manager

(1) The management board of a management company shall appoint an employee or

employees for each fund managed by the management company whose duty is to coordinate

investment of the assets of the fund and other activities related to the management of the fund

and to monitor that the fund is managed pursuant to the provisions of legislation and the rules

of the common fund or the management contract (hereinafter fund manager).

(2) Fund managers may be employed by only one management company. The same

person may be the fund manager of several funds managed by one management company.

(3) A fund manager shall operate in the best interests of the fund and the shareholders or

unit-holders of the fund.

(4) A fund manager shall be liable to the fund manager for the damage caused by

violation of his or her duties if, as a result of violation of the duties, damage is caused to the

fund or the shareholders or unit-holders of the fund.

§ 56. Requirements for fund managers

(1) A fund manager shall have completed higher education or education equivalent

thereto and shall have the knowledge and experience necessary for the performance of his or

her duties, and an impeccable business reputation.

(2) A person who does not comply with the requirements of subsection 51 (2) of this Act

shall not be a fund manager.

(3) A fund manager shall provide services which involve the investment of assets or

performance of securities transactions or other similar services to third parties.

(4) Only a person who, within the last five years, has operated as a fund manager for at

least one year or has been involved in the provision of securities portfolio management

services for at least three years may be the fund manager of a mandatory pension fund.

§ 57. Internal rules of management company

(1) A management company shall establish internal rules which regulate the activities of

managers and employees and ensure the compliance of activities of the management company

and its managers and employees with legislation and the resolutions of the management

bodies of the management company, and also the investment of the assets of a fund pursuant

to the fund rules or articles of association of the fund.

(2) Among other matters, the internal rules shall set out the following:

1) the procedure for prevention of conflicts between the interests of the management

company and the personal economic interests of the managers and employees of the

management company, including the procedure for prevention of conflicts within the group if

the management company belongs to a group;

2) the procedure for the communication of information and movement of documents

within the management company;

3) relationships of subordination, the procedure for reporting and the delegation of

rights, including the separation of functions upon determination of the investment policy of a

fund, transactions with securities on behalf of a fund, assumption of obligations by the fund

manager, recording of services for accounting purposes and assessment of risks involved;

4) internal rules of procedure for the registration of transactions and information on

transactions concluded on behalf of a fund;

5) internal rules of procedure for application of international sanctions established on the

basis of the International Sanctions Act (RT I 2002, 105, 612; 2004, 2, 7), including a code of

conduct in case a situation with elements provided for in the International Sanctions Act and

legislation issued on the basis thereof is discovered;

6) the procedure for the provision of services specified in clauses 9 (2) 1)-3) of this Act,

including restrictions valid for a definite or indefinite period of time on the conclusion of

transactions.

§ 58. Internal control

(1) A management company shall implement sufficient internal control measures which

cover all management and operations levels of the management company.

(2) The supervisory board of a management company shall appoint an independent

employee or employees or shall enter into an agreement with an auditor for performance of

the functions of internal auditor (hereinafter internal auditor), who shall meet the

requirements provided for in subsection 51 (2) of this Act and shall not be employed as a fund

manager or perform other duties which create or may create a conflict of interest.

(3) The duty of an internal auditor is to monitor whether the activities of a management

company and its managers and employees comply with legislation, the precepts of the

Financial Supervision Authority, the resolutions of management bodies, the internal rules,

agreements entered into with the management company and good practice.

(4) A management company shall ensure that the internal auditor has the rights and

working conditions necessary to perform his or her duties, including the right to obtain

explanations and information from the managers and employees of the management company

and to observe the elimination of any deficiencies discovered and compliance with any

precepts issued.

(5) An internal auditor is required to forward any information concerning a management

company which becomes known to him or her and which indicates a violation of law or

damage to the interests of a fund, the shareholders, unit-holders or clients of a fund to the

supervisory board and management board of the management company, the depositary and

the Financial Supervision Authority promptly in writing.

Division 7

Merger, Division, Transformation, Dissolution and Bankruptcy of Management Company

§ 59. Transformation of management company

A public limited company which manages a fund shall not be transformed into a company of

a different type.

§ 60. Division of management company

The division of management companies is prohibited.

§ 61. Merger of management company

(1) Management companies shall be merged pursuant to the procedure prescribed in the

Commercial Code, unless otherwise prescribed in this Division.

(2) A management company may only merge with another management company. The

merger of management companies whereby a new company is founded is not permitted.

(3) An authorisation from the Financial Supervision Authority is required for the merger

of management companies (hereinafter in this Division authorisation for merger).

§ 62. Merger agreement and merger report

(1) The merger agreement of a management company shall not be entered into with a

suspensive or resolutive condition. A merger agreement may only provide for a condition

according to which the merger agreement enters into force after the Financial Supervision

Authority grants an authorisation for merger provided for in § 63 of this Act.

(2) The Financial Supervision Authority shall be informed of entry into a merger

agreement between management companies within ten days after the entry into the merger

agreement.

(3) Upon the merger of management companies, a merger report shall be prepared and

the report shall be audited by an auditor. The interim balance sheet provided for in subsection

419 (3) of the Commercial Code shall be prepared if the annual report has been prepared

more than three months before the merger agreement is entered into.

(4) The auditor's report shall provide an opinion on the exchange ratio of shares and the

determination thereof and on whether the acquiring management company meets the

prudential requirements provided for in this Act.

§ 63. Authorisation for merger

(1) In order to be granted an authorisation for merger, the acquiring management

company or the merging management companies jointly shall submit an application to the

Financial Supervision Authority to which the following information and documents are

appended (hereinafter in this Division application):

1) the merger agreement or a notarised copy thereof;

2) the merger report;

3) the merger resolutions;

4) the auditor’s report;

5) the business plan which meets the requirements provided for in § 15 of this Act for the

three years following the merger;

6) the information and documents specified in clauses 14 (1) 6) and 10) of this Act;

7) the draft internal rules of the management company which meet the requirements

provided for in § 57 of this Act.

(2) If merger brings about amendment of fund rules, the acquiring management company

shall also submit the information and documents specified in § 117 of this Act.

§ 64. Processing of application for authorisation for merger and decision on

grant of authorisation for merger

(1) The provisions of § 16 of this Act apply to the processing of applications for

authorisations for merger, verification of the submitted information and verification whether

the facilities of applicants for the management of funds and the acquiring management

company comply with the requirements arising from an Act or legislation issued on the basis

thereof.

(2) The decision to grant or refuse to grant an authorisation for merger shall be made by

the Financial Supervision Authority within two months after the receipt of a corresponding

application but not later than within one month after the receipt of all the necessary

documents and information.

(3) If amendment of fund rules is also applied for upon merger, the Financial Supervision

Authority shall make, together with the decision to grant an authorisation for merger, a

decision on registration of amendment of the fund rules pursuant to the provisions of § 118 of

this Act.

(4) The Financial Supervision Authority shall inform the acquiring management company

or the merging management companies of a decision to grant or refuse to grant an

authorisation for merger promptly after the decision is made.

(5) The Financial Supervision Authority shall decide to revoke an activity licence of a

management company being acquired pursuant to the provisions of § 21 of this Act at the

same time with the decision to grant an authorisation for merger, and the decision shall enter

into force not earlier than on the date when the merger is entered in the commercial register.

(6) The Financial Supervision Authority shall publish a decision to grant an authorisation

for merger not later than on the working day following the day the decision is made pursuant

to the procedure provided for in § 295 of this Act and legislation issued on the basis thereof.

§ 65. Bases for refusal to grant authorisation for merger

The Financial Supervision Authority may refuse to grant an authorisation for merger if:

1) the managers of the acquiring management company do not comply with the

requirements provided for in an Act or legislation issued on the basis thereof;

2) the merger would violate the limitations on investment provided for in this Act or

other legislation;

3) the financial situation of the acquiring management company does not comply with

the requirements provided for in this Act;

4) the merger agreement does not comply with the requirements provided for in this Act

or other legislation;

5) close links between the acquiring management company and another person prevent

sufficient supervision over the management company;

6) the merger may damage the interests of a fund or the shareholders or unit-holders of a

fund for other reasons.

§ 66. Disclosure of merger

An acquiring management company shall disclose the merger of management companies in at

least one national daily newspaper and on the website specified in § 242 of this Act

(hereinafter website of management company) within seven days after the corresponding

entry is made in the commercial register.

§ 67. Dissolution of management company

(1) The general meeting of a management company may adopt a resolution on dissolution

of the management company only after the dissolution of all funds managed thereby or

transfer of the management thereof.

(2) A management company which manages mandatory pension funds may be dissolved

only with the authorisation of the Financial Supervision Authority.

(3) In order to be granted an authorisation for the dissolution of a pension management

company, the pension management company shall submit an application to the Financial

Supervision Authority to which the following information and documents are appended:

1) the resolution of the general meeting of the pension management company concerning

application for the authorisation for dissolution of the management company;

2) the assessment of the pension management company concerning the effect of the

dissolution thereof on the interests of the unit-holders of the pension funds which have been

or are managed by the pension management company.

(4) The provisions of § 16 of this Act apply to the processing of an application for an

authorisation for the dissolution of a pension management company, verification of the

submitted information and verification whether the dissolution of the pension management

company is in the interests of the unit-holders of the pension funds which have been or are

managed thereby.

(5) The decision to grant or refuse to grant an authorisation for the dissolution of a

pension management company shall be made by the Financial Supervision Authority within

one month after the submission of all the necessary documents and information but not later

than within two months after the receipt of the corresponding application.

(6) The Financial Supervision Authority may refuse to grant an authorisation for the

dissolution of a pension management company if dissolution of the pension management

company is contrary to the interests of the unit-holders of the pension funds which have been

or are managed by the pension management company.

(7) The Financial Supervision Authority shall promptly inform a pension management

company of a decision to grant or refuse to grant an authorisation for dissolution of the

pension management company.

(8) The Financial Supervision Authority shall publish a decision to grant an authorisation

for dissolution of the pension management company not later than on the working day

following the day the decision is made pursuant to the procedure provided for in § 295 of this

Act and legislation issued on the basis thereof.

§ 68. Bankruptcy of management company

(1) The assets of a fund do not form a part of the bankruptcy estate of the management

company, and the claims of creditors of the management company shall not be satisfied out of

such assets. Unless otherwise provided for in this section, the shares or units of a fund which

are owned by the management company form a part of the bankruptcy estate of the

management company.

(2) Bankruptcy proceedings with regard to a pension management company may be

commenced only on the basis of a petition of the Financial Supervision Authority or a

liquidator.

(3) The Financial Supervision Authority shall submit a bankruptcy petition against a

pension management company if the assets of the pension management company are

insufficient to satisfy all claims of creditors.

(4) Bankruptcy cautions shall not be submitted to pension management companies.

(5) A court shall decide on the commencement of bankruptcy proceedings with regard to

a pension management company within three working days as of the submission of the

bankruptcy petition.

(6) In the event of the bankruptcy of a management company, claims against the

management company from unit-holders of pension funds managed by the company shall be

satisfied first, after claims secured by a pledge.

(7) The provisions of subsection (6) of this section apply for five years after transfer of

the management of a pension fund.

(8) The units of a mandatory pension fund which are owned by a pension management

company and managed by the pension management company shall not be included in the

bankruptcy estate.

(9) A pension management company may apply for the redemption of units of a

mandatory pension fund which are owned by the pension management company and managed

by the pension management company pursuant to the procedure provided for in § 81 of this

Act or for the deletion of such units pursuant to the procedure provided for in § 84 of this Act

only if the circumstances specified in subsection 32 (1) of the Funded Pensions Act have not

arisen within eighteen months as of transfer of management of the mandatory pension fund.

(10) Money received upon redemption of units specified in subsection (8) of this section

shall be included in the bankruptcy estate of the pension management company.

Division 8

Requirements for Activities of Management Company

§ 69. Activities of management company

(1) The activities of a management company shall comply with legislation, the articles of

association of the management company and the fund rules of a fund managed by the

management company and with the management contract.

(2) A management company has the right to dispose of and possess the assets of a fund in

accordance with the rules of the fund and the management contract, and has other rights

arising therefrom.

(3) A management company shall conclude transactions with the assets of a common

fund in its own name and on behalf of all the unit-holders collectively (hereinafter on behalf

of a common fund), or with the assets of a fund founded as a public limited company in the

name of and on behalf of the fund, or in the name of the management company on behalf of

the fund pursuant to a management contract.

§ 70. Functions of management company

(1) A management company is required to:

1) comply with the requirements arising from legislation and the management contract

and, in its activities, show sufficient competence, honesty, accuracy and conscientiousness in

order to ensure the protection of the best interests of a fund managed by the management

company and the shareholders, unit-holders and clients of the fund and the reliable and

regular operation of financial markets and other markets;

2) ensure the establishment and application of the procedures necessary for the activities

of the management company and the existence of resources necessary to manage funds and

the effective use of the resources;

3) refrain from conducting transactions in which the interests of the management

company are in conflict with those of a fund managed thereby and of a client (conflict of

interests) and, in the event a conflict of interests cannot be avoided, to act in the interests of

the fund and the client;

4) ensure that conflicts of interests between the management company and the client

thereof or between the management company and the fund or between the clients of the

management company and the funds managed by the management company are avoided or as

small as possible.

(2) A management company shall be liable for the damage caused to a fund, the unit-

holders or a fund founded as a public limited company by violation of the functions of the

management company.

(3) A management company has the right and duty to submit a claim in its own name on

behalf of unit-holders or a fund against a depositary or third parties if failure to submit such

claim will result or may result in significant damage to the fund or its unit-holders. A

management company is not required to submit such claim if the fund or unit-holders have

already submitted a claim.

(4) Upon investment of the assets of a fund, a management company shall:

1) obtain sufficient information on the assets which the company intends to acquire or

has acquired on behalf of the fund;

2) monitor the financial and economic situation of the issuer whose securities the

company plans to acquire or has acquired on behalf of the fund;

3) obtain sufficient information with regard to the solvency of the persons with whom

they transact on behalf of the fund.

§ 71. Duties of management company upon provision of investment services

(1) In addition to the provisions of § 70 of this Act, a management company shall register

and preserve the information related to the provision of services specified in clauses 9 (2) 1)-

3) of this Act pursuant to the provisions of § 90 of the Securities Market Act.

(2) Upon provision of services specified in clause 9 (2) 1 of this Act, a management

company may invest the assets of a client in a fund managed by the company only to the

extent that the client has granted the corresponding right to the management company in

writing.

(3) Upon provision of services specified in clauses 9 (2) 1)-3) of this Act, the provisions

of § 87 of the Securities Market Act apply to a management company.

§ 72. Separation of assets

(1) A management company shall manage the assets of a fund separately from its own

assets and from the assets of other funds managed by the management company and from

other pools of assets.

(2) Assets which are acquired on the basis of rights belonging to the assets of a fund, in a

transaction which is based on the assets of a fund or received as compensation for a thing or

right belonging to the assets of a fund also form a part of the assets of the fund.

(3) Upon provision of services specified in clauses 9 (2) 1)-3) of this Act, the provisions

of § 88 of the Securities Market Act concerning the maintenance and protection of the assets

of clients apply to a management company.

§ 73. Transfer of duties of management company

(1) For the better performance of its duties, a management company has the right to

transfer activities specified in subsection 10 (1) of this Act to third parties (hereinafter transfer

of duties):

1) unless the transfer of duties damages the legitimate interests of the fund or the

shareholders or unit-holders of the fund;

2) unless the transfer of duties hinders the activities of the management company and the

sufficient performance of the duties of the management company;

3) unless the transfer of duties prevents sufficient supervision over the management

company and the depositary;

4) unless the transfer of duties creates a situation where the management company does

not actually manage the fund;

5) if the third party to whom the duties are transferred has the necessary qualifications

for the performance of the duties and the party is able to perform the duties;

6) if the management company has the right to give additional instructions to third

parties to whom the duties of the management company have been transferred and to monitor

the activities of third parties which are related to the management of the fund;

7) if other requirements arising from this Act are complied with.

(2) A management company may transfer duties also to a foreign management company,

investment firm or credit institution which does not have a branch founded in Estonia or does

not provide cross-border services in Estonia.

(3) A management company may transfer to a third party only such activities listed in

subsection 10 (1) of this Act the transfer of which is permitted pursuant to the rules or

management contract of the fund managed by the management company.

(4) A management company shall promptly inform the Financial Supervision Authority

of transfer of the duties related to the management of a fund and shall submit a copy of the

contract on the transfer of duties.

(5) The transfer of duties to a third party does not release the management company and

the depositary from liability related to the management of the fund.

§ 74. Specifications for transfer of duties related to management of fund

(1) The investment of the assets of a fund provided for in clause 10 (1) 1) of this Act may

be transferred to a third party only with regard to a certain part of the assets of the fund.

(2) The investment of the assets of a fund may only be transferred to a management

company, credit institution or investment firm which holds an activity licence for the

provision of services specified in clause 43 5) of the Securities Market Act. The investment of

the assets of a fund may also be transferred to a management company, credit institution or

investment firm founded in a foreign state which, pursuant to the activity licence thereof, has

the right to provide securities portfolio management services.

(3) The investment of the assets of a fund shall not be transferred to the depositary of the

fund or to a third party in the case of which a conflict of interest between the third party and

the management company, the fund or the shareholders or unit-holders of the fund may arise.

(4) In addition to the persons specified in subsection (2) of this section, organisation of

the issue and redemption of units may also be transferred to the Estonian Central Register of

Securities.

(5) Maintenance of a register of the units of a common fund may be transferred only

pursuant to the provisions of Division 3 of Chapter 4 of this Act.

§ 75. Termination of transfer of duties of management company

(1) A management company shall have the right to terminate a contract on the transfer of

duties related to the management of a fund entered into with a third party at any time.

(2) The Financial Supervision Authority has the right to issue a precept which requires

termination of the transfer of a duty related to the management of all funds or a fund to a

certain person or termination of all contracts on the transfer of duties entered into by the

management company with third parties.

(3) The Financial Supervision Authority may issue a precept specified in subsection (2)

of this section if:

1) a third party does not have the necessary qualifications for the performance of the

duties of a management company;

2) the legitimate interests of a fund or the shareholders or unit-holders of the fund are

violated or there is a danger of such violation;

3) the conditions specified in §§ 73 or 74 of this Act are violated;

4) the financial supervision authority of a third country which exercises supervision over

a person specified in subsection 74 (2) of this Act has no legal basis or possibilities for

cooperation with the Financial Supervision Authority;

5) a third party to which the duties of a management company are transferred does not

comply with the requirements necessary for the performance of the duties transferred thereto.

§ 76. Activities of pension management company

(1) A management company which has been granted the authority provided for in clause

13 (1) 2) of this Act to manage mandatory pension funds is required to manage at least one

mandatory pension fund the assets of which may, pursuant to the pension fund rules, only be

invested in:

1) securities specified in clauses 2 (1) 2) and 5) of the Securities Market Act;

2) deposits in credit institutions;

3) derivative instruments specified in clause 2 (1) 6) of the Securities Market Act the

underlyings of which are assets specified in clauses 1), 2) or 4) of this section;

4) funds the assets of which may be invested only in securities or deposits specified in

clauses 1)–3) of this subsection.

(2) A management company may manage two or more mandatory pension funds only if:

1) this results from a merger of management companies;

2) this results from an assumption of the management of a mandatory pension fund;

3) pursuant to the rules of the funds and the provisions of this section, the investment

policies of the mandatory pension funds managed by the management company differ

significantly.

(3) The Financial Supervision Authority shall determine a difference in the investment

policies of pension funds based on the fundamental principles provided for in clause 112 (1)

4) of this Act, particularly taking into consideration the limitations on the investment of assets

of a pension fund in different classes of securities.

(4) A significant difference in the investment policy of mandatory pension funds

managed by the same pension management company is deemed to be the difference in the

limitations on the investment in shares which is provided for in the rules of the pension funds

and is not less than 25 per cent of the market value of the assets of a pension fund.

(5) In addition to the provisions of subsection (4) of this section, the investment policy of

pension funds is deemed to differ significantly also if the following limitations provided for in

the rules of the two compared pension funds individually or together differ as regards the

following conditions:

1) the states provided pursuant to subsection 269 (3) of this Act are different or the

limitations established on the states differ to the extent of not less than 25 per cent of the

market value of the assets of a pension fund;

2) the limitation on investment in immovables differs to the extent of not less than 10 per

cent of the market value of the assets of a pension fund;

3) the limitation on investment in the units and shares of other funds differs to the extent

of not less than 35 per cent of the market value of the assets of a pension fund.

§ 77. Termination of management authority

(1) The authority of a management company to manage a fund terminates upon:

1) transfer of the management in the case of a common fund pursuant to the procedure

provided for in §§ 155-160 of this Act;

2) revocation of the activity licence of the management company;

3) compulsory dissolution of the management company;

4) declaration of bankruptcy of the management company or abatement of bankruptcy

proceedings commenced against the management company due to a lack of assets to cover the

expenses of the bankruptcy proceedings.

(2) The Financial Supervision Authority may issue a precept by which the authority of a

management company to manage a fund is terminated:

1) if the net asset value of the common fund is less than 400 000 euro six months after

registration of the fund;

2) if the Financial Supervision Authority has issued a precept to suspend the issue of

units and the management company has failed to eliminate the circumstances which are the

basis for suspension of the issue of units within the term specified by the Financial

Supervision Authority;

3) if the management company has repeatedly suspended redemption of units of the

common fund and such suspension damages the legitimate interests of the unit-holders;

4) if the common fund does not have a depositary;

5) if the management company fails to manage the fund in compliance with the

requirements of this Act;

6) if this is necessary due to the legitimate interests of the shareholders or unit-holders of

the fund;

7) in other cases prescribed by law, the management contract or the fund rules or articles

of association of the fund.

Division 9

Participation of Management Company in Fund

§ 78. Holding of units by management company

(1) A management company may own units or shares of a fund managed by the

management company.

(2) A management company shall own at least 1 per cent of the units of each mandatory

pension fund managed by the pension management company.

(3) Within three years as of the formation of a mandatory pension fund, the management

company shall own at least 2 per cent of the units of the pension fund.

(4) If a mandatory pension fund owns more than 100 million units, a management

company shall own at least 2 million units in the pension fund plus 1 per cent of the number

of units which exceeds 100 million.

(5) In order, for the purposes of this Division, to determine the proportion of units of a

mandatory pension fund owned by a management company or person who has operated as a

pension management company, the number of units owned by such person shall be divided by

the number of units in the fund as registered by the registrar of the Estonian Central Register

of Securities.

(6) A management company shall not own any units of pension funds which the

management company does not manage.

§ 79. Specifications for holding of units

(1) The provisions of § 78 of this Act do not apply:

1) to a mandatory pension fund for a period of three months after a management

company assumes management of the pension fund;

2) under the conditions determined by the Financial Supervision Authority within six

months after the redemption of units in the case provided for in subsection 32 (1) of the

Funded Pensions Act.

(2) The Financial Supervision Authority may extend the term provided for in clause (1)

1) of this section to up to eighteen months under the conditions specified by the Authority.

§ 80. Obligation to acquire additional units

(1) In the cases provided by law, the number of units of a mandatory pension fund owned

by a management company shall exceed the number provided for in §§ 78 and 79 of this Act.

(2) Precepts concerning the acquisition of additional units and the conditions thereof are

issued to management companies by the Financial Supervision Authority.

§ 81. Acquisition and redemption of units

(1) Units of a common fund shall be acquired by a management company (hereinafter in

this Division acquisition of units) and units of a common fund owned by a management

company shall be redeemed by the management company (hereinafter in this Division

redemption of units) under the conditions and pursuant to the procedure provided for in this

Act, legislation established on the basis thereof and the rules of the corresponding fund.

(2) A management company shall inform the Financial Supervision Authority of an

intention to acquire or redeem units at least ten days before the acquisition or redemption of

the units. The management company shall submit the following information to the Financial


1) the name of the fund;

2) the market value of the assets and the net asset value of the fund;

3) the number of units which have been issued but not redeemed;

4) the number of units owned by the management company and the proportion thereof in

the total number of units;

5) the number of units which are intended to be acquired or redeemed;

6) the date of acquisition or redemption of the units (hereinafter in this Division date of

transaction).

(3) A management company shall inform the Financial Supervision Authority of a

transaction by which units are acquired or redeemed not later than on the tenth day following

the transaction. A notice shall set out at least the following:

1) the number of units acquired or redeemed by the management company;

2) the date of the transaction;

3) the number of the units of the fund on the date of the transaction;

4) the net asset value of a unit on the date of the transaction and on the working day

preceding and the working day following the date of the transaction.

(4) Giving notification to the Financial Supervision Authority according to subsection (2)

of this section is not required in the case of an open-ended fund and if units of a mandatory

pension fund are acquired or redeemed on the basis of a precept of the Financial Supervision

Authority pursuant to the provisions of subsection 80 (2) of this Act or §§ 32-35 of the


(5) The provisions of this Division concerning management companies also apply, with

regard to the redemption of units, to persons who no longer manage the fund of which the

redemption of units they request.

§ 82. Bases for prohibition on acquisition or redemption of units

(1) The Financial Supervision Authority may, by a precept, prohibit the acquisition of

units or determine the maximum number of the acquired units if:

1) the information or documents submitted upon giving notification do not meet the

requirements provided for in this Act or legislation issued on the basis thereof or are

inaccurate, misleading or incomplete;

2) after acquisition of the units of a fund the management company owns more than 5

per cent of the units of the fund;

3) acquisition of the units is contrary to the legitimate interests of other unit-holders.

(2) The Financial Supervision Authority may, by a precept, prohibit the redemption of

units or determine the maximum number of the redeemed units:

1) if the information or documents submitted upon giving notification do not meet the

requirements provided for in this Act or legislation issued on the basis thereof or are


2) if the Financial Supervision Authority has issued a precept to the management

company and it has not been complied with by the due date;

3) if the management company has deferred payment of a quarterly contribution on the

basis of subsection 67 (2) of the Guarantee Fund Act;

4) if the redemption of units would not be in the best interests of other unit-holders for

any other reason;

5) if the number of units of the pension fund owned by the management company after

the redemption of units would be less than the number provided for in §§ 78-80 of this Act;

6) if twelve months have not passed since a bonus issue of units of the mandatory

pension fund;

7) upon redemption of units owned by a person whose authority to manage a pension

fund managed thereby is transferred to another management company and less than six

months has passed since the transfer;

8) upon redemption of units owned by a person whose authority to manage the pension

fund managed thereby is transferred to a depositary of the pension fund – until the authority

to manage the pension fund is transferred to another management company or the pension

fund is liquidated.

§ 83. Acquisition or redemption of units at request of Financial Supervision

Authority

The Financial Supervision Authority may, by a precept, request that:

1) units of a fund be redeemed if the management company owns more than 5 per cent of

the units of the fund;

2) units of a mandatory pension fund be acquired if the number of units owned by a

management company in the mandatory pension fund managed by the management company

does not comply with the provisions of §§ 78 and 79 of this Act;

3) units of a mandatory pension fund be acquired if this is necessary in order to

guarantee compensation for the loss specified in subsection 32 (1) of the Funded Pensions Act

or to protect the interests of the unit-holders for any other reason;

4) units of a pension fund which are owned by a person who managed the pension fund

be redeemed if more than nine months have passed since the management authority of the

pension fund was transferred.

§ 84. Deletion of units of mandatory pension fund which are owned by

management company upon liquidation of pension fund

(1) After termination of the liquidation of a mandatory pension fund, the management

company or a person who operates as a management company has the right to apply for the

consent of the Financial Supervision Authority for payment of the amount which corresponds

to the net asset value of the units owned by the management company or person who operates

as a management company and deletion of the units from the register.

(2) If the Financial Supervision Authority refuses to grant consent, the provisions of § 82

of this Act apply. The Financial Supervision Authority shall promptly inform also the

registrar of the Estonian Central Register of Securities of grant or refusal to grant consent.

(3) The Financial Supervision Authority shall refuse to delete any or part of the units

owned by the management company if any of the circumstance provided for in subsection 32

(1) of the Funded Pensions Act arises.

(4) In the case provided for in subsection (3) of this section, the procedure for

compensation for loss provided for in §§ 32–35 of the Funded Pensions Act shall be applied

by way of cancellation of the units.

(5) A management company shall submit an application to the registrar of the Estonian

Central Register of Securities for payment of the amount which corresponds to the number of

the units of the pension fund owned by the management company and for deletion of the units

from the register of units and shall append the consent of the Financial Supervision Authority

for deletion of the units. On the basis of the application, the registrar of the Estonian Central

Register of Securities shall transfer money for the units to be deleted to the management

company.

Division 10

Prudential Requirements for Management Companies

§ 85. Share capital

(1) The share capital of a management company shall be at least 125 000 euro.

(2) The share capital of a management company shall be equivalent to at least:

1) 730 000 million euro, if the management company manages a voluntary pension fund;

2) 3 000 000 million euro, if the management company manages a mandatory pension

fund.

(3) The provisions of § 30 and subsections 31 (1) and (2) of the Insurance Activities Act

(RT I 2000, 53, 343; 2001, 43, 238; 48, 268; 59, 359; 87, 529; 93, 565; 2002, 35, 215; 63,

387; 102, 600; 105, 612; 2003, 17, 95; 2004, 14, 90) concerning the share capital of insurers

apply to the increase or reduction of share capital of management companies authorised to

manage a mandatory pension fund.

§ 86. Own funds of management company

(1) The following are the own funds of a management company:

1) Tier 1 own funds;

2) Tier 2 own funds;

3) Tier 3 own funds.

(2) Tier 1 and Tier 2 own funds together form gross own funds.

(3) In order to calculate net own funds, the following shall be deducted from gross own

funds pursuant to the procedure established on the basis of subsection 87 (5) of this Act:

1) holdings in other credit or financial institutions;

2) subordinated claims and other claims of a capital nature which are similar thereto and

held in respect of credit and financial institutions and which are part of the own funds of such

institutions.

(4) The provisions of §§ 97–100 of the Securities Market Act apply to the Tier 1, Tier 2

and Tier 3 own funds and subordinated claims specified in this section.

(5) A management company is promptly required to inform the Financial Supervision

Authority and submit its explanation if the net own funds of the management company have

decreased:

1) by more than 5 per cent;

2) below the minimum amount established in § 87 of this Act.

(6) If the net own funds of a management company are smaller than the minimum

amount provided for in subsection 87 (1) of this Act, the Financial Supervision Authority may

designate a term in order to bring the net own funds into compliance with the requirements of

this Act and legislation issued on the basis thereof.

§ 87. Minimum amount of net own funds

(1) The amount of the net own funds of a management company shall not at any time be

less than:

1) the minimum amount of share capital provided for in subsections 85 (1) and (2) of this

Act;

2) 25 per cent of the fixed overheads of the management company.

(2) If the net asset value of the funds managed by a management company and of the

funds the management of which has been transferred by the management company exceeds

250 000 000 euro, the management company shall own additional own funds to the extent of

0.02 per cent of the amount by which the net asset value of the managed funds exceeds 250

000 000 euro (hereinafter additional own funds).

(3) With the permission of the Financial Supervision Authority, a management company

may cover 50 per cent of the requirement of additional own funds by a guarantee in the

corresponding amount granted by a credit institution or an insurer. The credit institution or

insurer which has granted a guarantee shall be a credit institution or insurer of a Contracting

State or another credit institution or insurer provided that the person which grants the

guarantee is, according to the opinion of the Financial Supervision Authority, required to

comply with at least equivalent prudential requirements which are provided for in the

legislation of the European Community.

(4) The minimum amount of share capital provided for in subsections 85 (1) and (2) of

this Act and the amount of additional net own funds altogether need not exceed 10 000 000

euro.

(5) The procedure for calculating net own funds, the minimum amount of net own funds

and the fixed overheads of management companies and for the reporting on net own funds


§ 88. Fixed overheads of management company

(1) Fixed overheads shall be calculated on the basis of the last annual report approved by

the general meeting of the shareholders.

(2) On the basis of prior written consent from the Financial Supervision Authority, non-

recurring exceptional expenses which are included in the fixed overheads of the financial year

may be deducted upon calculation of fixed overheads.

(3) The Financial Supervision Authority has the right to demand that the amount of fixed

overheads which was taken as the basis for calculating the minimum amount of net own funds

be adjusted after approval of the annual report if significant changes have occurred in the

operating activities of the management company.

(4) The minimum amount of net own funds intended to cover the fixed overheads of a

management company commencing its activities or which has operated for less than one year

shall be calculated on the basis of the fixed overheads projected in the business plan provided

for in § 15 of this Act.

§ 89. Specifications for own funds of management company of pension fund

(1) The net own funds of a management company which manages a pension fund shall be

at least 2 per cent of the net asset value of the pension funds managed by the management

company, unless otherwise provided for in subsection (2) of this section.

(2) The net own funds of a management company which manages pension funds with a

net asset value greater than 125 000 000 euro shall be at least 2 500 000 euro plus 1 per cent

of that part of the net asset value of the pension funds managed by the management company

which exceeds 125 000 000 euro.

(3) Upon transfer of the management of a pension fund, a management company to

which the management of the pension fund is transferred shall comply with the requirements

provided for in subsection (1) or (2) of this section not later than six months after transfer of

the management authority.

(4) The Financial Supervision Authority may extend a term specified in subsection (3) of

this section by up to six months if extension of the term is justified having regard to the

financial situation of the pension management company and the structure of investments of

the pension funds managed by the management company and extension of the term is in the

legitimate interests of the shareholders or unit-holders of the fund.

§ 90. Application for permission for extension of term

(1) In order to apply for the permission specified in subsection 89 (4) of this Act, a

management company shall submit an application, information and documents (hereinafter in

this Division application) which set out the reasons that prevent the management company

from complying with the requirements provided for in subsections 89 (1) or (2) of this Act.

(2) The provisions of § 16 of this Act apply to the processing of applications specified in

subsection 89 (4) of this Act, verification of the submitted information and verification

whether the application is in the legitimate interests of the unit-holders and potential investors

and justified.

(3) The decision to grant or refuse to grant the permission specified in subsection 89 (4)

of this Act shall be made by the Financial Supervision Authority within one month after the

receipt of all the necessary information and documents but not later than within two months

after the receipt of the application.

(4) The Financial Supervision Authority may refuse to grant the permission specified in

subsection 89 (4) of this Act if extension of the term is unjustified or not in the legitimate

interests of the fund or the shareholders or unit-holders of the fund.


of a decision specified in subsection (3) of this section.

§ 91. Prudential requirements for consolidation groups

(1) If a management company belongs to a consolidation group, the requirements for net

own funds provided for in subsection 87 (1) of this Act apply with regard to the management

company separately and also on a consolidated basis.

(2) The consolidation group of a management company comprises the management

company, its parent undertaking and financial institutions belonging to the same group, as

well as financial institutions in which the management company owns at least 20 per cent of

the share capital or votes represented by shares.

(3) If at least one credit institution belongs to the consolidation group of a management

company, the consolidation group is deemed to be the consolidation group of the credit

institution and the provisions of the Credit Institutions Act and legislation issued on the basis

thereof shall apply with respect to the group.

(4) Upon exercise of supervision on a consolidated basis, the consolidation group of a

management company shall, with the consent of the Financial Supervision Authority, not

include an undertaking:

1) whose inclusion in the consolidation group would distort the actual financial and

economic situation of the consolidation group of the management company;

2) which is not located in a Contracting State and from which the possibility of obtaining

the necessary reports is restricted because the financial supervision authority of the home state

has no legal basis or possibilities for cooperation with the Financial Supervision Authority.

Chapter 3

Depositary

§ 92. Depositary

(1) A common fund and a public fund founded as a public limited company shall have a

depositary which safekeeps the assets of the fund and performs other functions assigned

thereto by law.

(2) A credit institution or an investment firm of a Contracting State which, according to

the activity licence, has the right to provide services specified in clause 6 (1) 14) of the Credit

Institutions Act or clause 44 1) of the Securities Market Act may be a depositary.

(3) Only a credit institution specified in subsection (2) of this section may be the

depositary of a public fund and pension fund.

(4) A credit institution, an investment firm and a branch of a credit institution or

investment firm founded in a Contracting State, which is the depositary of an open-ended or

public fund shall be entered in the Estonian commercial register.

§ 93. Depositary contract

(1) A depositary contract is a contract entered into between a management company of a

common fund and a depositary, or between a fund founded as a public limited company and a

depositary, pursuant to which the assets of the fund are entrusted with the depositary for safe-

keeping and the depositary undertakes to perform transactions therewith pursuant to the

orders of the management company and the terms and conditions of the depositary contract.

(2) A depositary contract shall prescribe:

1) the term of the contract;

2) the rights and obligations of the parties;

3) the procedure for transactions;

4) the amount and procedure for payment of the fee payable to the depositary;

5) the extent of and procedure for payment of expenses incurred upon the provision of

depositary services;

6) liability of the parties for breach of the contract;

7) liability of the depositary if the assets or securities of a fund are entrusted to a third

party;

8) the procedure for resolution of disputes;

9) the conditions and procedure for amendment and termination of the contract,

including the conditions for the holding and transfer of assets after termination of the

depositary contract;

10) other terms and conditions provided by law or arising from the fund rules or articles

of association of the fund.

(3) A depositary contract shall be entered into in writing.

§ 94. Requirements for depositary

(1) The level of the organisational and technical administration of activities of a

depositary, its financial situation, the competence and experience of the employees engaged

in performance of the functions of the depositary and its technical systems and facilities shall

be adequate to ensure the performance of functions prescribed for the depositary by this Act,

in the depositary contract and in the contract specified in subsection 22 (1) and 52 (3) of the


(2) Only a credit institution which is an account administrator specified in the Estonian

Central Register of Securities Act (RT I 2000, 57, 373; 2001, 48, 268; 79, 480; 89, 532; 93,

565; 2002, 23, 131; 63, 387; 110, 657; 2003, 51, 355; 88, 591) and which has operated as a

depositary for at least one year during the three years preceding entry into the depositary

contract may be the depositary of a mandatory pension fund.

(3) A depositary shall act independently of the management company and in the interests

of the fund and the shareholders or unit-holders of the fund.

(4) A depositary shall perform the functions provided for in this Act or the Funded

Pensions Act also after termination of the depositary contract if the depositary contract is

terminated due to circumstances provided for in § 77 of this Act or in other cases if the assets

of the fund are not transferred to another depositary after the termination of the depositary

contract. A depositary has the right to receive a fee provided for in the depositary contract for

performance of the activities specified in this subsection.

§ 95. Activities of depositary

(1) A depositary:

1) safekeeps the money, securities and other liquid assets of a fund;

2) organises safekeeping of the other assets of a fund unless the management company

and the depositary have agreed otherwise;

3) performs settlements and transactions with the assets of a fund and keeps account

thereof;

4) ensures that units are issued, redeemed and cancelled, compensated for and exchanged

pursuant to the requirements prescribed by law, legislation issued on the basis thereof and the

fund rules;

5) executes the orders of a management company in so far as, according to the

depositary, they are not contrary to this Act, other legislation, the fund rules or articles of

association of the fund;

6) performs other functions arising from this Act, other legislation and the depositary

contract.

(2) In addition to the provisions of subsection (1) of this section, the depositary of a fund:

1) ensures that the net asset value of an open-ended or public common fund and its units

is calculated pursuant to law, other legislation and the fund rules;

2) monitors that the distributions from an open-ended or public common fund as set out

in §§ 150–152 of this Act are made and that issue of new units from the account of the

income of the fund is carried out in accordance with this Act and the fund rules;

3) ensures that all transactions upon the transfer of fund assets and acquisition of assets

for a fund are performed in full and within the term prescribed by legislation or, in the

absence of a term, within the term ordinarily necessary for transfers.

(3) In order to perform the functions of a depositary provided for in subsections (1) and

(2) of this section, a depositary shall monitor that the relevant procedures of the management

company and the contracts entered into by the management company comply with law and

the fund rules or the articles of association of the fund. A depositary shall periodically verify

whether the activities of the pension management company comply with law and the fund

rules or the procedures established by the management company.

§ 96. Activities of depositary of pension fund

(1) In addition to the provisions of § 95 of this Act, the depositary of a pension fund:

1) organises the redemption of units of a pension fund in order to enter into an insurance

contract for a funded pension;

2) organises the exchange of units of voluntary pension funds;

3) organises the exchange of units of mandatory pension funds together with the registrar

of the Estonian Central Register of Securities;

4) organises entry into an insurance contract for a mandatory funded pension together

with the registrar of the Estonian Central Register of Securities and an insurer;

5) performs other functions arising from legislation or contracts.

(2) A depositary shall inform the registrar of the Estonian Central Register of Securities

of the issue price and redemption price and the size of the issue fee and redemption fee of a

unit of a mandatory pension fund by the beginning of each working day.

§ 97. Rights and obligations of depositary

(1) A depositary has the right and duty to submit a claim in its own name on behalf of

unit-holders or a fund founded as a public limited company against a management company if

submission of such claim is expedient. A depositary is not required to submit such claim if the

unit-holders or fund founded as a public limited company have already submitted a claim.

(2) A depositary has the right and duty to submit a claim on behalf of unit-holders or a

fund founded as a public limited company against third parties or to present an objection or an

application for the release of assets from seizure in its own name if compulsory execution is

performed against the assets or assets are seized in order to cover a claim for which the assets

of the fund are not subject to liability.

(3) A depositary may demand a reasonable fee from a management company for the

activities specified in subsections (1) and (2) of this section and reimbursement of expenses

related to such activities.

§ 98. Transfer of duties of depositary

(1) A depositary has the right to enter into agreements with third parties for the

safekeeping of fund assets, the performance of transactions therewith and the transfer of other

duties of a depositary, pursuant to the procedure prescribed in the depositary contract. Upon

transfer of duties, the depositary shall be held liable pursuant to the provisions of § 103 of this

Act.

(2) A depositary shall choose a third party which safekeeps the assets or securities of a

fund with due diligence in order to ensure the reliability of the third party. Before the transfer

of duties and thereafter, a depositary is required to verify whether the level of the

organisational and technical administration of a third party and its financial situation are

adequate to ensure the performance of obligations prescribed in the contract.

§ 99. Transactions with fund assets

(1) A management company shall conclude transactions with the assets of a fund only

through a depositary or with the prior written consent of a depositary.

(2) Money from the issue of units and the transfer of the assets of the fund, and

dividends, interest and other funds are deposited in the bank account or accounts of the fund

opened by the depositary (hereinafter bank account of fund).

(3) A depositary may make payments from the bank account of a fund only on the order

of the management company or the fund in the case of a fund founded as a public limited

company pursuant to law, the depositary contract, management contract, the fund rules or the

articles of association of the fund.

§ 100. Separation of assets

(1) A depositary shall keep the assets of funds, including claims arising from money held

in the bank account in a depositary or credit institution, separate from its own assets and shall

keep separate accounting of the assets of funds.

(2) A depositary may keep the assets of funds in its own name if the management

company consents thereto and separate accounting of the assets of funds is ensured.

(3) The assets of a fund do not form a part of the bankruptcy estate of the depositary, and

the claims of creditors of the depositary shall not be satisfied out of such assets.

§ 101. Depositary’s charges and expenses

A depositary has the right to receive a fee for the provision of services specified in §§ 95 and

96 of this Act and compensation for the expenses incurred upon provision of the services

pursuant to the fund rules, the depositary contract or the order of the management company.

An order is not required if the fund is managed by the depositary.

§ 102. Notification requirement

If the activities of a management company are, to a depositary’s knowledge and to a

significant extent, contrary to legislation, the fund rules, the articles of association of the fund,

or the depositary contract or management contract, the depositary is required to promptly give

notification to the Financial Supervision Authority, the supervisory board of the management

company and the management board of the fund founded as a public limited company.

§ 103. Liability of depositary

(1) A depositary shall be liable for the direct proprietary damage caused to a fund and

unit-holders and shareholders as a result of violation of duties of the depositary.

(2) Unless more stringent requirements are agreed in a depositary contract, the depositary

shall be liable for violation of the requirements provided for in subsection 98 (2) of this Act

and failure to exercise supervision over third parties.

§ 104. Change of depositary

(1) The Financial Supervision Authority may issue a precept obliging a management

company or a fund founded as a public limited company to change a depositary in order to

protect the legitimate interests of the shareholders or unit-holders of the fund if the depositary

fails to perform the obligations arising from this Act, other legislation, the depositary contract

or other contracts.

(2) A precept of the Financial Supervision Authority may designate a term within which a

management company or a fund founded as a public limited company has to enter into a new

depositary contract and transfer the assets of the fund to a new depositary.

(3) A depositary shall perform the obligations arising from law and the depositary

contract until a new depositary contract is entered into and shall transfer the assets of the fund

to a new depositary not later than by the due date designated by the Financial Supervision

Authority. A depositary has the right to receive a fee provided for in the depositary contract

for performance of the activities provided for in this subsection.

Chapter 4

Common Fund

Division 1

Common Fund, Assets and Units of Fund

§ 105. Common fund

(1) A common fund (hereinafter in this Chapter fund) is money collected through the

issue of units and other assets acquired through the investment of such money, which is

owned jointly by the unit-holders (hereinafter community of unit-holders).

(2) The bases for the activities of a fund and relationships of unit-holders with the

management company are specified by this Act and the fund rules.

(3) Each fund shall have only one management company at the same time.

§ 106. Unit and unit-holder’s share in assets of common fund

(1) A unit represents the unit-holder’s share in the assets of a fund.

(2) A unit-holder’s share in the assets of a fund is determined by the ratio of the number

of units held by the unit-holder and the total number of units held by all unit-holders. Upon a

change in such ratio, the unit-holder’s share changes accordingly.

(3) If a fund has several classes of units, a unit-holder’s share in the assets of a common

fund is determined by the ratio of the number of units held by the unit-holder and the total

number of all units of the same class and the total of the net asset values of all units of the

same class, respectively, to the net asset value of the fund.

(4) If a unit-holder owns units of several classes, the unit-holder's share in the assets of a

common fund is determined as the total of the units corresponding to the units of several

classes specified in subsection (3) of this section.

(5) Assets received as a result of the issue of units and investment of the assets of a fund

are owned by the unit-holders as the assets of the common fund according to the size of the

shares of the unit-holders provided for in subsections (2)-(4) of this section.

(6) The provisions of §§ 72–79 of the Law of Property Act (RT I 1993, 39, 590; 1999, 44,

509; 2001, 34, 185; 93, 565; 2002, 47, 297; 53, 336; 99, 579; 2003, 13, 64; 17, 95; 78, 523;

2004, 20, 141) do not apply to relationships between unit-holders. No unit-holder is entitled to

demand termination of the community of unit-holders. Further, such right can not be

exercised by the pledgee or creditor of a unit-holder in the execution proceedings or by the

trustee in bankruptcy in the bankruptcy proceedings of a unit-holder.

§ 107. Liability of unit-holder

(1) A unit-holder is not personally liable for the obligations of a fund assumed by the

management company on behalf of the fund, or for obligations the performance of which the

management company has the right to demand from the fund pursuant to the fund rules. The

liability of the unit-holder for performance of such obligations is limited to the unit-holder's

share in the assets of the fund.

(2) A management company shall not assume obligations in the name of unit-holders.

(3) In order to satisfy a claim against a unit-holder, a claim for payment may be made

against the units of the unit-holder but not against the assets of the fund.

(4) An agreement which derogates from the provisions of this section is void.

§ 108. Unit

(1) A fund may have several classes of units and the rights arising from the units may

differ as regards the nominal value of the units, the number of votes attaching to the units or

the size of the fees related to the units specified in § 139 and 140 and subsections 150 (2) and

(3) of this Act or the distributions made from a fund specified in § 152 of this Act.

(2) Units of the same class grant the unit-holders equal rights on equal bases.

(3) In the fund rules, a management company has the right to establish specifications for

different classes of units, which may arise from the required manner of acquisition of units or

the minimum number of units required upon acquisition of units.

(4) In fund rules, the units of the fund which belong to different classes shall be named

differently.

(5) The nominal value of a unit shall be expressed in kroons as a whole number or, if

units are sold for foreign currency, in full units of the foreign currency.

(6) A unit is divisible. The rules for the rounding of parts of units created as a result of

the division of units (hereinafter fractional unit) shall be provided for in the fund rules.

§ 109. Specifications for units of pension fund

(1) Units of pension funds shall only be acquired or owned by natural persons and

pension management companies or persons who have operated as a pension management

company under the conditions and pursuant to the procedure provided for in Division 9 of

Chapter 2 of this Act.

(2) Units of a pension fund shall not be transferred or encumbered.

(3) A pension fund shall only have units of one class.

(4) The fractional unit of a pension fund shall be indicated to the accuracy of two decimal

places.

(5) The nominal value of a unit of a pension fund shall be 10 kroons.

(6) Units of a pension fund shall not belong to several persons at the same time. Units of

a pension fund shall not be the joint property of spouses.

(7) In the event of the bankruptcy of a unit-holder of a pension fund or a claim for

payment being made on the assets of such unit-holder pursuant to enforcement procedure, the

trustee in bankruptcy or the bailiff, as appropriate, has the right to demand the redemption of

units of a voluntary pension fund or, in the event of the liquidation of a voluntary pension

fund, the making of payments. In other cases it is prohibited to make a claim for payment on

units of a pension fund.

§ 110. Rights attached to unit

A unit-holder has the right to:

1) demand that the management company redeem the units pursuant to the provisions of

the fund rules;

2) transfer the units held by the unit-holder to third parties;

3) receive, when payments are made, pursuant to the fund rules, a share of the income of

the fund in proportion to the number of units and the class of units held by the unit-holder;

4) receive, pursuant to the fund rules, a share of the assets remaining upon liquidation of

the fund in proportion to the number of units and the class of units held by the unit-holder;

5) call the general meeting of unit-holders in the cases and pursuant to the procedure

prescribed by law or the fund rules;

6) participate and vote in the general meeting pursuant to the number of votes provided

for in subsection 131 (3) of this Act;

7) obtain information provided for in § 242 of this Act on the activities of the fund;

8) perform other acts prescribed by law or the fund rules.

Division 2

Establishment of Fund and Fund Rules

§ 111. Establishment of fund

(1) The establishment of a fund is decided and the fund rules are approved by the

supervisory board of the management company.

(2) A decision on the establishment of a fund shall set out the following:


2) the business name and seat of the management company;

3) the business name and seat of the depositary;

(3) The location of a fund is the seat of its management company.

§ 112. Fund rules

(1) Fund rules shall set out:


2) the business name and seat of the management company and the business name of the

depositary;

3) the type of the fund having regard to the provisions of §§ 2-4 of this Act, and a

notation whether the fund is a mandatory or voluntary pension fund or a fund specified in §§

252–254 or 278 of this Act. In the case of a guaranteed fund, the conditions of the guarantee,

the business name and seat of the guarantor and the registry code of the guarantor if the

guarantor has one shall also be indicated;

4) the objective of the activities and the fundamental principles of the investment policy

of the fund, which shall indicate investments into different classes of securities and other

assets, more specific restrictions on risk-spreading and limitations on investment, and

restrictions in geographical sectors or sectors of the economy;

5) classes of units if the fund has different classes of units;

6) the rights and obligations attached to units;

7) the procedure for exercising the rights attached to units;

8) if exchange of units is permitted, the conditions and procedure for the exchange of

units, the procedure for the issue and redemption of units carried out upon exchange of units,

the procedure for the payment of issue and redemption fees and the corresponding terms;

9) the rights and obligations of the management company in management of the assets of

the fund;

10) the liability of the depositary if the assets or securities of the fund are entrusted to a

third party;

11) the procedure for the acquisition of holding in a fund by a management company and

the procedure for the redemption of units owned by a management company;

12) the procedure for the registration of units and the registrar;

13) the rate of fees and charges to be paid to the management company and the depositary

and the method for the calculation and determination of the fees and charges;

14) a complete list and method of calculation of expenses to be paid out of the fund;

15) limits on the fees, charges and expenses provided for in clauses 13) and 14) of this

subsection;

16) the conditions and procedure for issue and redemption of units;

17) the method of calculation and limits on the issue and redemption fees of the fund, and

the criteria on the basis of which different limits are applied to different unit-holders;

18) the method and frequency of calculation and publication of the net asset value of the

fund and of the issue price and redemption price of fund units;

19) if, according to the fund rules, the assets of the fund may be invested in things, the

procedure for ensuring the storage and preservation of these things;

20) the principles for calculating the net value of all classes of units;

21) the duration of a fixed-term fund if the duration is prescribed;

22) the procedure for the publication and submission of information concerning the fund,

including advertisements and reports;

23) the procedure for application of income of the fund, and for the making of

distributions out of the income of the fund;

24) the procedure for calling and conducting the general meeting of unit-holders if the

general meeting is prescribed by law or the fund rules;

25) the list of duties which the management company may transfer to third parties and the

extent of liability of the management company upon performance of the transferred duties;

26) the procedure for amendment of the fund rules and the place of publication of

amendments;

27) the conditions and procedure for the liquidation of the fund;

28) other rules provided by law.

(2) Fund rules may prescribe other rules which are not contrary to legislation.

§ 113. Specifications for pension fund rules

In addition to the provisions of subsection 112 (1) of this Act, the following shall be set out in

pension fund rules:

1) specifications to the procedure for the redemption of units of the pension fund upon

entry into an insurance contract for a funded pension;

2) the procedure for making of payments upon the succession of units;

3) the conditions and procedure for the cancellation of units of the mandatory pension

fund which belong to the management company or person who has operated as a pension

management company;

4) the procedure for the cancellation of units of the mandatory pension fund in the case

provided for in subsection 28 (4) of Funded Pensions Act if there are no successors;

5) the conditions and procedure for the making of periodic payments from the mandatory

pension fund provided for in §§ 41 and 42 of the Funded Pensions Act.

§ 114. Registration of fund rules

(1) Fund rules enter into force and a fund is deemed to be established after registration of

the fund rules with the Financial Supervision Authority.

(2) In order to register fund rules, a management company shall submit a written


application) to the Financial Supervision Authority:

1) the resolution to establish the fund;

2) the fund rules;

3) a prospectus specified in § 219 of this Act if units are sold by public offer and a

simplified prospectus if it exists;

4) information specified in clause 14 (1) 7) of this Act concerning the auditor of the

fund;

5) information specified in clause 14 (1) 8) of this Act concerning the fund manager;

6) the depositary contract and the consent of the depositary with the fund rules;

7) in the case of a pension fund, an overview of the previous activities of the depositary

as a depositary;

8) in the case of a mandatory pension fund, the opinion of the registrar of the Estonian

Central Register of Securities on the rules of the pension fund;

9) the contracts specified in subsections 22 (1) and 52 (3) of the Funded Pensions Act.

(3) Confirmation regarding the accuracy of the information and documents submitted

upon application for registration, signed by all members of the management board of the

management company, shall be appended to the application and to any information submitted

later in connection with the application.

§ 115. Processing of application for registration of fund rules and decision to

register

(1) The provisions of § 16 of this Act apply to the processing of applications for

registration, verification of the submitted information and verification whether the fund rules

comply with the requirements of this Act or legislation issued on the basis thereof and are in

the legitimate interests of the unit-holders.

(2) The Financial Supervision Authority shall make a decision to register or refuse to

register the fund rules within two months after receipt of all the necessary information and

documents, but not later than within six months after receipt of the corresponding application.


and the depositary of a decision to register the fund rules.

(4) The Financial Supervision Authority shall promptly inform also the registrar of the

Estonian Central Register of Securities of a decision on registration of the rules of a

mandatory pension fund..

§ 116. Bases for refusal to register fund rules

(1) The Financial Supervision Authority shall refuse to register fund rules if:

1) the fund rules do not reflect all the essential rules of the operation of the fund in full,

clearly and unambiguously, or contain provisions which are misleading or contradictory;

2) the investment policy proposed in the pension fund rules does not ensure that risk will

be adequately spread or that there will be the necessary reliability of the assets of the pension

fund;

3) the fund and the management thereof or the fund manager do not meet the

requirements provided for in this Act;

4) according to the rules of an open-ended or public fund, the assets of the fund may, to a

significant extent, be invested in assets the value of which is difficult to assess;

5) a public offer of the units of the fund or the prospectuses specified in subsections 219

(1), (2) or (3) of this Act do not comply with the requirements provided for in this Act,

legislation issued on the basis thereof or other legislation;

6) the procedure for the publication of information concerning the fund provided for in

the fund rules is insufficient;

7) the fund manager does not meet the requirements provided by legislation regulating

the professional activities of the manager or his or her knowledge, skills, experience and other

characteristics do not ensure sufficient protection of the interests of unit-holders of a fund of

the corresponding type;

8) the depositary does not meet the requirements for depositaries provided by legislation

or is not able for any other reason to ensure sufficient protection of the interests of unit-

holders of a fund of the corresponding type;

9) the depositary contract contains provisions which are contradictory, ambiguous, or

which prevent the depositary or management company from performing their duties in full, or

which for some other reason do not enable promotion of the best interests of the unit-holders

of the fund;

10) the registrar of the units of the fund does not comply with the requirements provided

for in Acts or legislation issued on the basis thereof;

11) the fund rules are contrary to the legitimate interests of the unit-holders or refusal to

register is necessary in the legitimate interests of the unit-holders for other reasons.

(2) In addition to the provisions set out in subsection (1) of this section, the registration of

fund rules may be refused if:

1) arising from the provisions of § 76 of this Act, the investment policy prescribed in the

rules of a mandatory pension fund does not differ significantly from the investment policy of

the pension funds which are already managed by the management company which submitted

the application or for the registration of whose rules the management company has applied for

at the same time;

2) the contract specified in subsections 22 (3) and 52 (1) of the Funded Pensions Act

contains provisions which contradict each other or legislation or which fail to designate,

unambiguously and with sufficient accuracy, the rights and obligations of the registrar, the

depositary of the pension fund and the pension management company upon organisation of

the issue and redemption of units of the mandatory pension fund.

§ 117. Amendment of fund rules

(1) The supervisory board of a management company or the general meeting of unit-

holders, if the general meeting is prescribed by law or the fund rules, shall decide on the

amendment of fund rules. The management company shall promptly inform the depositary of

a resolution on amendment.

(2) Amendments to fund rules shall be registered with the Financial Supervision

Authority.

(3) In order to register amendments to fund rules, a management company shall submit a

written application and the following information and documents (hereinafter in this Division


1) the resolution to amend the fund rules;

2) the amended text of the fund rules;

3) the public offer prospectus of units if the units are offered publicly and if amendment

of the fund rules results in amendments to the prospectus;

4) amendments to the depositary contract and the amended text thereof if amendment of

the fund rules results in amendments to the depositary contract;

5) the consent of the depositary with amendment of the fund rules;

6) a justification of the amendments and an analysis of the effects on the development of

the fund and on the interests of the unit-holders of the fund.

(4) Upon amendment of the rules of a mandatory pension fund, the opinion of the

registrar of the Estonian Central Register of Securities on amendment of the rules of the

pension fund and amendments to and the amended text of the contracts specified in

subsection 22 (1) and 52 (3) of the Funded Pensions Act, if amendment of the pension fund

rules results in amendments to the contracts, shall be submitted to the Financial Supervision

Authority in addition to that set out in subsection (3) of this section.

§ 118. Review of application for registration of amendments to fund rules

The provisions of §§ 115 and 116 of this Act apply to the review of applications for the

registration of amendments to fund rules and the adoption of a resolution and refusal to adopt

a resolution to register the amendments.

§ 119. Publication and entry into force of amendments to fund rules

(1) A management company shall inform unit-holders of amendment of the fund rules

pursuant to the procedure provided for in this section after registration of the amendments to

the fund rules.

(2) Upon amendment of the rules of a public fund, the management company shall

publish a notice concerning amendment of the fund rules in at least one daily national

newspaper and on the website of the management company promptly after the registration of

the amendments. The notice shall set out the following:

1) information on registration of the amendments with the Financial Supervision

Authority;

2) information concerning availability of the amended text of the fund rules, including a

reference to the website of the management company.

(3) Upon amendment of the rules of a fund not specified in subsection (2) of this section,

the management company shall publish the amended text of the fund rules on the website of

the management company promptly after the registration of the amendments and shall inform

the Financial Supervision Authority of the date of publication of the amendments.

(4) Amendments to the rules of a fund specified in subsection (2) of this section enter into

force one month after publication of a corresponding notice in a daily national newspaper

unless the notice prescribes a later date for entry into force.

(5) Amendments to the rules of a fund specified in subsection (3) of this section enter into

force one month after the date when the Financial Supervision Authority receives the

corresponding notice of the management company unless the notice prescribes a later date for

entry into force.

(6) Amendments to the rules of mandatory pension funds enter into force as of 1 January

but not earlier than one hundred calendar days after the publication of a corresponding notice.

Division 3

Registration of Units

§ 120. Registration of units

(1) Units shall be registered in the register of units (hereinafter in this Division register).

(2) The register of units shall be maintained by a management company or, if the duties

of the management company are transferred, by the registrar of the register of units

(hereinafter registrar). The registrar may be:

1) a management company founded in Estonia or in a foreign state;

2) the depositary of the fund or another depositary founded in Estonia or in a foreign

state;

3) the registrar of the Estonian Central Register of Securities;

4) another person founded in Estonia or in a foreign state which meets the requirements

provided for in § 125 of this Act and which, according to the legislation of the home state, are

not prohibited from provision of the service of maintenance of a register of securities.

(3) The units of investment funds registered in Estonia which are traded on a regulated

securities market (hereinafter regulated market) and units of pension funds shall be registered

with the Estonian Central Register of Securities.

(4) If units are registered with the Estonian Central Register of Securities, the provisions

of the Estonian Central Register of Securities Act apply to the registration of the units.

(5) The liability of a registrar arising from provision of the service of maintenance of the

register of units shall be insured or guaranteed to the extent established by a regulation of the

Minister of Finance, unless the registrar is a credit institution or an insurer. The requirements

for insuring or guaranteeing the liability of the registrar shall be established by a regulation of

the Minister of Finance.

§ 121. Information entered in register of units

The following information shall be entered in the register of units:

1) the business name, address of the seat and registry code of the management company;


3) the name, address and personal identification code or, in the absence of the latter, the

date of birth of the unit-holder, or the registry code of the unit-holder if the unit-holder has a

registry code;

4) if the unit-holder is a fund, the name of the fund and the name and address of the seat

of the management company or depositary of the fund and the registry code of the

management company or depositary of the fund if the management company or depositary of

the fund has a registry code;

5) the number, class and nominal value of the units owned by the unit-holder;

6) the date of acquisition and issue price of units and the date of redemption and

redemption price of units if the units have been redeemed;

7) other rights related units and the time of creation, changing and extinction of the

rights;

8) other information which the management company or registrar deems necessary.

§ 122. Procedure for entry of information in register

(1) Information shall be entered, processed or amended in the register pursuant to the

requirements provided for in the Personal Data Protection Act (RT I 2003, 26, 158) and the

procedure provided for in the fund rules.

(2) A unit-holder has the right to request that the unit-holder be entered in the register as

unit-holder or amendment of the information in the register.

(3) A unit-holder has the right to request that the registrar issue a certificate or an extract

from the register concerning the units owned by the unit-holder.

(4) An entry in the register shall be made within one working day after receipt of a

corresponding order.

§ 123. Processing and storage of information entered in register

(1) Information entered in the register shall be processed pursuant to the data processing

rules established by the management company or agreed between the management company

and the registrar which shall ensure sufficient protection of the information entered in the

register against unauthorised processing, including unauthorised use, destruction or alteration.

(2) The registrar is required to ensure preservation of the information entered in the

register in a permanently unaltered state and enable reproduction thereof at the request of

entitled persons and agencies.

(3) Information and documents submitted to the registrar for an entry to be made shall be

preserved by the registrar for at least ten years as of the corresponding entry. Information and

documents specified in this subsection shall be preserved as documents or in a format which

can be reproduced in writing.

(4) A registrar may refuse to execute an order concerning a register entry if:

1) the order or the information contained therein does not meet the requirements

established by an Act or legislation established on the basis thereof;

2) the order has been given by a person not authorised to give orders.

(5) The procedure for the maintenance of a register, making register entries and

processing and storage of information entered in the register may be established by a


§ 124. Access to register

(1) The unit-holders of funds, management companies and depositaries, the Financial

Supervision Authority and the following persons and agencies, if they have a legitimate

interest, have the right to examine information entered in the register of units:

1) courts during proceedings of matters;

2) bailiffs in enforcement proceedings;

3) agencies conducting preliminary investigation in criminal matters;

4) the Tax and Customs Board in connection with proceedings concerning matters

pertaining to specific taxes;

5) notaries in connection with the performance of notarial acts;

6) trustees in bankruptcy in order to perform duties arising from law;

7) depositaries of declarations in order to perform duties arising from the Anti-corruption

Act (RT I 1999, 16, 276; 87, 791; 2000, 25, 145; 2001, 58, 357; 2002, 53, 336; 63, 387; 2003,

18, 108; RT III 2003, 2, 16; RT I 2003, 51, 349; 88, 591).

(2) A unit-holder has the right to examine only the information which is entered in the

register concerning the unit-holder.

§ 125. Requirements for registrars

(1) The level of the organisational and technical administration of activities of a registrar,

its financial situation, the competence and experience of the corresponding employees and its

other resources shall be adequate to ensure the performance of functions specified by law and

an agreement on maintenance of the register.

(2) In order to manage management and operating risks, a registrar shall apply sufficient

internal control measures.

(3) A registrar shall compensate for damage caused by violation of the obligations thereof

in the maintenance of the register.

Division 4

General Meeting of Unit-holders

§ 126. General meeting of unit-holders

(1) Fund rules may prescribe the right of unit-holders to adopt resolutions relating to the

activities of the fund in the general meeting of unit-holders (hereinafter in this Division

general meeting).

(2) A general meeting shall be prescribed in the rules of a closed-ended fund the units of

which are redeemed not earlier than one year after submission of a corresponding claim by a

unit-holder.

(3) The rules of a mandatory pension fund shall not prescribe a general meeting and unit-

holders do not have the right to adopt resolutions relating to the activities of the fund.

(4) Fund rules shall provide which resolutions specified in subsection 127 (1) of this Act

may be adopted by the general meeting of unit-holders. The rules of a fund specified in

subsection (2) of this section shall provide that the general meeting of unit-holders adopts all

resolutions specified in subsection 127 (1) of this Act.

(5) A general meeting shall be held at the seat of the management company unless

otherwise prescribed in the fund rules.

(6) The costs of holding a general meeting shall be covered by the management company

unless otherwise provided for in the fund rules.

§ 127. Competence of general meeting

(1) A general meeting is competent to:

1) amend the duration of a closed-ended fund;

2) liquidate a closed-ended fund;

3) amend the procedure for the redemption of units of a closed-ended fund;

4) increase the management fees and depositary’s charges of the fund and other fees and

charges paid on behalf of the fund;

5) amend the procedure for the making of distributions to unit-holders out of the income

of the fund;

6) decide on the merger and transformation of the fund unless otherwise provided by this

Act;

7) decide to amend the investment policy specified in clause 112 (1) 4) of this Act;

8) amend the fund rules;

9) decide on other issues placed within the competence of the general meeting by the

fund rules.

(2) The general meeting of unit-holders may adopt resolutions specified in subsection (1)

of this section on the initiative of the general meeting or the management company.

(3) A management company cannot adopt resolutions specified in subsection (1) of this

section without a resolution of the general meeting which expresses consent, except

resolutions specified in clause (1) 2) of this section.

(4) A management company shall submit amendments to the fund rules made by a

resolution of the general meeting for registration with the Financial Supervision Authority

within two months as of adoption the resolution.

(5) The provisions of §§ 117 and 118 of this Act apply to the registration of amendments

to fund rules.

§ 128. Calling general meeting

(1) A general meeting of unit-holders shall be called by the management company.

(2) The Financial Supervision Authority or unit-holders whose units represent at least

1/10 of the votes may also demand that a general meeting be called and issues be included in

the agenda of the general meeting. If the management company does not call a general

meeting within one month after receipt of a demand from the Financial Supervision Authority

or unit-holders, the Financial Supervision Authority or unit-holders have the right to call the

general meeting themselves.

§ 129. Notice calling general meeting

(1) Notice of a general meeting shall be given at least three weeks in advance unless the

fund rules prescribe a longer term.

(2) A notice calling a general meeting shall be published on the website of the

management company.

(3) At the same time with publication of a notice on the website of the management

company, the notice calling the general meeting of a public fund shall be published in at least

one daily national newspaper or the corresponding notice shall be sent to the postal addresses

of unit-holders indicated in the register of units.

(4) A management company shall inform also the Financial Supervision Authority of

calling a general meeting of unit-holders and shall forward the notice calling the general

meeting to the Financial Supervision Authority.

(5) If a general meeting is not called by a management company, a notice calling the

general meeting shall be published on the website of the Financial Supervision Authority or

pursuant to the procedure provided for in subsection (3) of this section.

(6) A notice calling a general meeting shall set out at least the following:



3) the time and place of the general meeting;

4) the agenda of the general meeting.

§ 130. Violation of procedure for calling general meeting

If the requirements of law or the fund rules are violated in calling a general meeting, the

general meeting does not have the right to adopt resolutions unless all unit-holders participate

in or are represented at the general meeting.

§ 131. Procedure of general meeting

(1) A unit-holder in person or a representative of a unit-holder who has been granted an

authorisation document in writing may participate in a general meeting, unless otherwise

provided by law. The participation of a representative shall not deprive the unit-holder of the

right to participate in the general meeting.

(2) A list of unit-holders participating in the general meeting which shall set out the

names of the unit-holders, the number of votes attaching to their units and the names of the

representatives of unit-holders shall be prepared at a general meeting. The list shall be signed

by the chair of the meeting and the recording secretary, and by each unit-holder or his or her

representative participating in the general meeting. The authorisation documents of

representatives shall be appended to the minutes of the general meeting.

(3) In order to adopt resolutions at a general meeting, the proportion of votes belonging to

a unit-holder shall be determined pursuant to the ratio of the number of votes arising from

units belonging to the unit-holder and the number of votes arising from all units which have

been issued and not redeemed as at ten days before the general meeting is held unless

otherwise prescribed in the fund rules.

(4) A general meeting may adopt resolutions if over one-half of the votes represented by

units are present unless the fund rules prescribe a greater representation requirement.

(5) An issue which is initially not on the agenda of a general meeting may be included on

the agenda with the consent of at least nine-tenths of the unit-holders who participate in the

general meeting if their units represent at least two-thirds of the votes.

§ 132. Resolution of general meeting

(1) A resolution of a general meeting shall be adopted if over one-half of the votes

represented at the general meeting are in favour unless the law or the fund rules prescribe a

greater majority requirement.

(2) The list of unit-holders provided for in subsection 131 (2) of this Act shall serve as

the basis for the calculation of votes.

§ 133. Invalidation of resolution of general meeting

On the petition of a unit-holder or a management company, a court may declare invalid a

resolution of a general meeting which is in conflict with law or the fund rules if the petition is

filed within three months after becoming aware of the resolution.

§ 134. Minutes of general meeting

(1) Minutes shall be taken of a general meeting. The minutes shall set out:



3) the time and place of the meeting;

4) the names of the chair and recording secretary of the meeting;

5) the agenda of the meeting;

6) the resolutions adopted at the meeting together with the voting results;

7) on the petition of a unit-holder who maintains a dissenting opinion with regard to a

resolution of the meeting, the unit-holder’s dissenting opinion;

8) other material circumstances at the general meeting.

(2) Written proposals and petitions submitted to the general meeting and the list of unit-

holders who participate in the meeting shall be appended to the minutes. The minutes shall be

signed by the chair and recording secretary of the meeting. A dissenting opinion shall be

signed by the person who presents it.

(3) A copy of the minutes of a general meeting shall be forwarded to the Financial


(4) The minutes shall be made accessible to the unit-holders seven days after the end of

the general meeting and unit-holders have the right to obtain a copy of the minutes or a copy

of a part thereof.

(5) At the request of the management company or the unit-holders whose units represent

at least one-tenth of the votes, the minutes of the general meeting shall be notarially certified.

Division 5

Issue and Redemption of Units

§ 135. Issue of units

(1) A unit may be issued only for the net asset value of a unit specified in § 143 of this

Act, which corresponds to the number of units to be issued upon payment of money into the

assets of a fund. Upon issue of a fractional unit, money which corresponds to that part of the

net asset value of the unit shall be paid into the assets of a fund.

(2) Units of an open-ended fund and a pension fund are issued on a continuous basis and

the volume of the issue of units and the number of units to be issued shall not be fixed.

(3) If so prescribed in fund rules, the units of an index fund provided for in § 254 of this

Act (hereinafter index fund) may be issued for the securities underlying the units of the index

fund.

(4) The provisions of subsection (1) of this section do not apply to the distribution of

income by the issue of new units and to the issue of units of an acquiring fund upon merger of

funds.

§ 136. Issue price of unit

(1) Units shall be issued by a management company for the issue price.

(2) The issue price of a unit is the net asset value of the unit of the corresponding class to

which the issue fee may be added pursuant to the procedure prescribed by the fund rules.

§ 137. Redemption of units

(1) Upon the redemption of units, a management company shall make a payment for the

units to be redeemed from the assets of the fund in money in an amount which corresponds to

the number of units to be redeemed and their redemption price.

(2) If so prescribed in fund rules, the units of an index fund may be redeemed for the

securities which belong to the index observed upon investment of the assets of the index fund.

(3) A management company may refuse to redeem a unit of an open-ended fund if units

of the fund are traded on a regulated market and it is ensured that the value of the unit on the

market does not differ significantly from the redemption price of the unit.

(4) Units shall be deleted from the register and the rights and obligations attached thereto

terminate from the date of payment therefor.

(5) Unless otherwise prescribed in fund rules, payments shall be made in the order that

requests are submitted. The specifications for the order provided for in fund rules may arise

from the number of units to be redeemed and the size of the payment made upon redemption.

Upon the redemption of units, payment is made from the assets of the fund within the term

and pursuant to the procedure prescribed by the fund rules.

§ 138. Redemption price of units

Units may be redeemed only for the redemption price which is the net asset value of the unit

of the corresponding class from which the redemption fee may be deducted pursuant to the

procedure prescribed by the fund rules.

§ 139. Issue fee and redemption fee

(1) Fees for the issue and redemption of units shall be paid from the account of the person

acquiring or redeeming units.

(2) Fees for the issue and redemption of units are determined as a percentage or set

amount of the net asset value of a unit of the fund.

(3) Fees for the issue and redemption of units shall not be higher than these provided with

regard to units of the corresponding class in the fund rules.

(4) At the request of persons acquiring or redeeming units, the persons shall be informed

in a format which can be reproduced in writing of the amount of the issue fee or redemption

fee charged to their account.

(5) A management company shall inform the public of the amount and procedure for

calculation of the issue fee or redemption fee of units or of amendment of the bases for the

establishment of different fees with regard to clients on the website of the management

company at least one month in advance.

§ 140. Specifications for issue fees and redemption fees for pension fund units

(1) Upon calculation of the issue price and redemption price of units, the same issue fee

or redemption fee rate shall be charged for units issued or redeemed on one and the same day,

unless otherwise provided for in this Act, the Funded Pensions Act and in the corresponding

pension fund rules. The issue fee rate shall not exceed the limit prescribed in the pension fund

rules.

(2) The rate of the redemption fee for a unit of a pension fund shall not exceed 1 per cent

of the net asset value of the unit.

§ 141. Publication of prices and net asset value of units

(1) A management company shall publish the issue and redemption price and the net

asset value of the units of a fund managed thereby pursuant to the provisions of the fund rules

each day when the issue or redemption of units is prescribed.

(2) The issue and redemption price and the net asset value of the units of an open-ended

fund and a pension fund shall be published at least once a month.

(3) The issue and redemption price and the net asset value of the units of a closed-ended

fund shall be published at least once a year.

§ 142. Net asset value of fund

(1) The net asset value of a fund shall be established on the basis of the market value of

the securities and other things or rights belonging to the assets of the fund from which claims

against the fund are deducted.

(2) The procedure for determining the net asset value of a fund and units shall be

established by a regulation of the Minister of Finance.

§ 143. Net asset value of unit

(1) The net asset value of a unit shall be calculated by dividing the net asset value of the

fund by the number of all units issued and not redeemed by the time of the calculation.

(2) If a fund has several classes of units, the net asset value of units of different classes

may differ pursuant to the bases provided for in the fund rules.

(3) Until the net asset value of a fund is determined pursuant to § 142 of this Act, the net

asset value of the unit is its nominal value.

§ 144. Determination of net asset value of units

(1) The net asset value of a unit shall be determined with an accuracy of two decimal

places.

(2) A management company shall establish the net asset value of units each day that it

issues or redeems units, but at least once a week in the case of an open-ended fund and a

pension fund and once a month in the case of a closed-ended fund.

(3) Units are issued and redeemed on the basis of the net asset value of a unit which is

established according to the fund rules either:

1) on the basis of the last net asset value determined by the time of receipt of the

corresponding application or

2) on the basis of the net asset value determined first after receipt of the corresponding

application.

§ 145. Suspension of issue of units


company to suspend the issue of units of a public fund if the requirements of this Act and

legislation established on the basis thereof or other legislation concerning the issue or public

offer of units are violated, or there is reason to believe that such requirements are violated, or

there is a danger of such violation, or the management company fails to comply with a

precept specified in subsection 251 (6) of this Act.

(2) Issue shall be suspended by the due date specified in a precept of the Financial

Supervision Authority but not for longer than three months.

(3) Upon suspension of an issue, the Financial Supervision Authority issues a precept

obliging a management company to eliminate the circumstances which are the basis for

suspension of the issue of units.

§ 146. Suspension of redemption of units

(1) A management company may suspend the redemption of units of an open-ended fund

for up to three months if the money in the accounts of the fund is insufficient for payment of

the redemption price of the units, if the regular management of the fund may be harmed by

the payment of the price, if the securities or other assets of the fund cannot be promptly sold

or if the interests of other unit-holders would be materially harmed thereby.

(2) If circumstances specified in subsection (1) of this section exist, a management

company may suspend the payment of the redemption price of units of a fund provided for in

§ 253 of this Act (hereinafter real estate fund) and a closed-ended fund for up to one year.

(3) A management company shall promptly inform the Financial Supervision Authority,

the depositary and the financial supervision authorities of all the Contracting States where the

units of the fund are offered of suspension of the redemption of units and the reasons therefor.


company to suspend the redemption of units if this is necessary in order to protect the

legitimate interests of the unit-holders.

(5) The Financial Supervision Authority may, by a precept, specify a term within which

the redemption of units may be suspended. The length of the term may be up to six months in

the case of an open-ended fund and up to two years in the case of a real estate fund or closed-

ended fund.

(6) A management company shall promptly publish a notice concerning suspension of the

redemption of units on the website of the management company and, in the case of an open-

ended fund or a pension fund, also in at least one daily national newspaper.

(7) The issue of units based on contributions specified in clause 18 1) of the Funded

Pensions Act shall be suspended by a corresponding decision of the Financial Supervision

Authority. No units shall be issued or redeemed during the time redemption of units of the

fund is suspended.

(8) If the issue of units of a mandatory pension fund is suspended in the case provided for

in subsection (8) of this section, the registrar shall keep the funds received for the acquisition

of such units in the bank account specified in subsection 12 (1) of the Funded Pensions Act.

§ 147. Suspension of redemption of units of mandatory pension funds

(1) In order to suspend the redemption of units of a mandatory pension fund, the

management company shall apply to the Financial Supervision Authority for an authorisation

(hereinafter in this Division authorisation).

(2) In order to apply for an authorisation, a management company shall submit a written



1) information specified in subsection 51 (4) of the Estonian Central Register of

Securities Act concerning the number of units of the pension fund which have been issued

and the number which have been redeemed during the month preceding submission of the

application, and information concerning the unit-holders who acquired or transferred the

units;

2) information concerning the assets of the pension fund, the net asset value of the units,

and changes in the redemption fee and issue fee for units during the month preceding

submission of the application;

3) an explanation of the reasons for suspension of the redemption of units;

4) an assessment of the impact of suspension of the redemption of units on the interests

of the unit-holders of the pension fund.

§ 148. Processing of applications for authorisation and decision

(1) The provisions of § 16 of this Act apply to the review of applications for an

authorisation, verification of the submitted information and verification whether suspension

of the redemption of units is reasoned.

(2) The Financial Supervision Authority shall make a decision regarding the grant of or

refusal to grant an authorisation within five working days after receipt of the corresponding

application and the management company shall be promptly informed of the decision.

§ 149. Bases for refusal to grant authorisation

The Financial Supervision Authority may refuse to grant an authorisation if:

1) it has not been proven that the circumstances specified in subsection 146 (1) of this

Act exist;

2) the interests of unit-holders are insufficiently protected if the redemption of units is

suspended.

§ 150. Fees, charges and expenses paid by fund

(1) Only fees and charges provided for in this Act, and expenses directly associated with

management of the fund and provided for in the fund rules shall be payable by the fund.

(2) Fees to a management company for the management of a fund (management fees)

shall be payable by the fund.

(3) Charges to a depositary for the provision of depositary services (depositary’s charges)

may be payable by the fund.

(4) The fees and charges specified in subsections (2) and (3) of this section shall not be

paid before the corresponding services are provided.

(5) The total of fees, charges and expenses specified in subsections (1)-(3) of this section

shall not exceed the limit prescribed by the fund rules.

§ 151. Fees, charges and expenses paid by pension fund

(1) Unless otherwise provided for in this Act, the following fees, charges and expenses

shall be paid by a pension fund:

1) management fees;

2) depositary’s charges;

3) transfer charges and service charges directly related to transactions performed from

the pension fund (hereinafter transaction costs);

4) costs relating to borrowing provided for in clauses 276 (1) 2) and 3) and § 277 of this

Act.

(2) Fees, charges and expenses related to the management of a pension fund which are

not specified in subsection (1) of this section shall be paid by the management company.

(3) The following shall be paid by a management company of a mandatory pension fund:

1) depositary’s charges;

2) the fee charged by the registrar of the Estonian Central Register of Securities for

organising the issue and redemption of the units of the mandatory pension fund, managing the

pension accounts and performing other duties provided for in this Act (hereinafter registrar's

charge);

3) contributions to the Pension Protection Sectoral Fund pursuant to the Guarantee Fund

Act.

(4) The registrar's charge consists of the maintenance fee and the entry fee. The size of

the maintenance fee shall be determined as a proportion of the market value of the assets of a

pension fund managed by the management company. An entry fee shall be charged for each

act of issue and redemption of units of a pension fund performed by the registrar of the

Estonian Central Register of Securities. A uniform amount of maintenance fee and entry fee

shall be applied to all mandatory pension funds under the same terms and conditions, and the

registrar of the Estonian Central Register of Securities shall co-ordinate the maximum

chargeable fees with the Minister of Finance according to the procedure provided for in § 23

(1) of the Estonian Central Register of Securities Act.

(5) The management fee of a mandatory pension fund shall not exceed the limit

established by a regulation of the Minister of Finance. The limit may differ depending on the

market value of the assets of mandatory pension funds or differences in the investment

policies of mandatory pension funds provided for in subsections 76 (4) and (5) of this Act.

§ 152. Distributions to unit-holders

(1) Distributions may be made to unit-holders from a fund if this is prescribed by the fund

rules. In such case, the fund rules shall prescribe the conditions and procedure for making

distributions, and primarily the extent and frequency of distributions.

(2) Distributions to unit-holders are made in money pursuant to the fund rules through the

depositary or by the issue of new units.

(3) This section does not apply to pension funds.

Division 6

Exchange of Units

§ 153. Right to exchange units

(1) A unit-holder has the right to exchange the units of a fund which belong to the unit-

holder for the units of the same fund which are of a different class, unless the fund rules

provide for a prohibition on the exchange of units.

(2) A unit-holder has the right to exchange the units of an open-ended fund which belong

to the unit-holder for the units of a fund managed by the same management company, unless

the fund rules provide for a prohibition on the exchange of units.

(3) The provisions of the Funded Pensions Act apply to the exchange of units of a

pension fund.

§ 154. Procedure for exchange of units

(1) A unit-holder shall inform the management company of the wish of the unit-holder to

exchange units with a notice which sets out at least the following:

1) the class and fund of the units which the unit-holder wishes to exchange and the class

and fund of the units for which the units are to be exchanged;

2) the number of units to be exchanged;

3) the date on which the unit-holder wishes to exchange units.

(2) Upon exchange of units, the units shall be redeemed and issued on the basis of the net

asset value of the units as at the date set out in the notice specified in subsection (1) of this

section.

(3) Payments shall not be made to unit-holders upon exchange of units.

(4) Units shall be exchanged pursuant to the procedure provided for in the fund rules.

Division 7

Transfer of Management of Fund

§ 155. Transfer of management

(1) With the permission of the Financial Supervision Authority, a management company

may, upon agreement with another management company, transfer management of a fund to

the other management company.

(2) The supervisory board of a management company shall decide on the transfer of

management of a fund and on entry into the corresponding contract.

(3) The provisions of Chapter 9 of the Law of Obligations Act (RT I 2001, 81, 487; 2002,

60, 374; 2003, 78, 523; 2004, 13, 86) do not apply to the transfer of the management of a

fund.

§ 156. Contract for transfer of management of fund

A contract for transfer of the management of a fund shall determine the conditions and

procedure for the transfer of all rights and obligations of the management company which

arise from the management of the fund and for the transfer of documents and administration

related thereto, including the extent of liability of a new management company.

§ 157. Application for authorisation for transfer of management of fund

In order to obtain an authorisation for transfer of the management of a fund, a management

company shall submit a written application and the following information and documents

(hereinafter in this Division application) to the Financial Supervision Authority not later than

on the twentieth day after entry into the contract on transfer of management of the fund:

1) the resolution of the supervisory board of the management company regarding

transfer of management of the fund;

2) the contract for transfer of management of the fund;

3) an application for amendment of the fund rules pursuant to the provisions of § 117 of

this Act;

4) the consent of the depositary of the fund concerning amendments to the depositary

contract arising from transfer of the fund;

5) the business plan of the management company to which management of the fund is

transferred, which complies with the requirements provided for in § 15 of this Act.

§ 158. Processing of applications for authorisation for transfer of management of fund and

decision


authorisation for transfer of the management of a fund, verification of the submitted

information and verification whether the transfer of management of a fund and the future

management company comply with the requirements arising from this Act or legislation

issued on the basis thereof.

(2) The decision to grant or refuse to grant an authorisation for transfer of the

management of a fund and registration of amendments to the fund rules shall be made by the

Financial Supervision Authority within two months after the receipt of a corresponding




and the depositary of the fund of a decision specified in subsection (2) of this section.

§ 159. Bases for refusal to grant authorisation for transfer of management of fund

The Financial Supervision Authority may refuse to grant an authorisation for transfer of the

management of a fund if:

1) the circumstances provided for in clauses 18 (1) 3), 5) or 7) become evident;

2) the circumstances provided for in § 116 of this Act become evident;

3) other circumstances which damage the legitimate interests of unit-holders become

evident.

§ 160. Publication and entry into force of transfer of management of fund

(1) A management company shall publish a notice concerning transfer of the

management of a fund pursuant to the procedure provided for in § 119 of this Act.

(2) The rights and obligations arising from management of a fund transfer to a new

management company at the time prescribed by the contract for transfer of management of

the fund but not before one month after publication of the notice specified in subsection (1) of

this section.

§ 161. Transfer of management authority to depositary

(1) If the authority of a management company to manage a fund terminates on bases

other than those provided for in clause 77 (1) 1) of this Act, management of the fund transfers

to the depositary of the fund. The depositary shall promptly give notice of transfer of the

management of the fund pursuant to the procedure provided for in § 119 of this Act.

(2) Upon termination of the authority to manage a fund, a management company shall

promptly transfer the administration and documents of the fund to the depositary. After

transfer of the administration and documents of a fund, the depositary has, in the management

of the fund, all rights and obligations of the management company unless otherwise provided

by law, the fund rules or the depositary contract. The depositary shall not issue or redeem

units upon management of the fund, except in the case of a pension fund.

(3) A depositary shall transfer management of a fund to a new management company

within three months after transfer of the authority to manage the fund to the depositary. With

the permission of the Financial Supervision Authority, the specified term may be extended at

the request of the depositary by up to six months and, in the case of a pension fund, by up to

eighteen months. The provisions of subsections 155 (1) and (3) and §§ 156–160 of this Act

apply to transfer of the management of a fund.

(4) A depositary shall publish a notice concerning transfer of management of a fund to a

new management company in at least one national daily newspaper or shall send the notice to

the postal addresses of unit-holders indicated in the register of units.

Division 8

Transformation of Fund

§ 162. Manners of transformation of fund

(1) A fund may be transformed into a fund of a different type specified in §§ 2-4 of this

Act by amendment of the fund rules.

(2) A UCITS shall not be transformed into a fund which is not a UCITS.

(3) A pension fund shall not be transformed.

(4) The provisions of §§ 117 and 118 of this Act apply the transformation of a fund.

(5) All costs related to the transformation of a fund shall be covered by the management

company.

§ 163. Resolution on transformation

(1) The supervisory board of a management company shall adopt a decision to amend

fund rules such that the fund is transformed (hereinafter in this Division resolution on

transformation).

(2) If law or fund rules prescribe the general meeting of unit-holders, the general meeting

of unit-holders shall grant its consent for adoption of the resolution on transformation.

(3) A general meeting is deemed to have granted consent for a resolution on

transformation if at the general meeting at least nine-tenths of the votes represented by units

are in favour.

(4) A management company may decide on transformation of a closed-ended fund into

an open-ended fund without the consent of the general meeting.

§ 164. Transformation of open-ended fund into closed-ended fund

(1) Upon transformation of an open-ended fund into a closed-ended fund, amendments to

the fund rules shall enter into force not earlier than one year after publication of the

amendments to the fund rules in at least one daily national newspaper.

(2) A resolution on transformation shall prescribe a sufficient term within which unit-

holders have the right to request redemption of the units of the fund.

§ 165. Transformation of public fund

A public fund may be transformed into a fund which is not a public fund only if offer of the

units of the fund meets the requirements provided for in subsection 12 (2) of the Securities

Market Act.

Division 9

Division and Merger of Fund

§ 166. Division

The division of funds is prohibited.

§ 167. Merger

(1) A fund (hereinafter fund being acquired) may be merged with another fund managed

by the same management company (hereinafter acquiring fund).

(2) Upon merger, the number of the units of a fund being acquired issued to a unit-holder

of the fund shall be such that the net asset value of the units corresponds to the net asset value

of the units of the fund being acquired which were owned by the unit-holder. Unit-holders

shall pay for the issued units with assets the amount of which corresponds to their part of

assets in the fund being acquired.

(3) Upon merger, the units of a fund being acquired shall be cancelled.

(4) Upon merger, no issue fee shall be charged upon the issue of units of an acquiring

fund.

(5) The units of an acquiring fund belonging to the assets of the fund being acquired and

the units of a fund being acquired belonging to the assets of the acquiring fund shall be

redeemed before merger.

(6) A fund being acquired is deemed to be liquidated after issue of the units of the

acquiring fund to the unit-holders and cancellation of the units of the fund being acquired.

The provisions of Division 10 of Chapter 4 of this Act do not apply upon merger.

(7) All costs related to the merger of a fund shall be covered by the management

company.

§ 168. Special merger rules

(1) A fund which is not a UCITS may be merged with a UCITS only if the acquiring fund

is a UCITS.

(2) A voluntary pension fund may be merged only with another voluntary pension fund.

(3) A mandatory pension fund may be merged only with another mandatory pension fund

if the pension fund being acquired and the acquiring pension fund have a similar investment

policy, having regard to the provisions of § 76 of this Act.

§ 169. Merger resolution

(1) A merger resolution shall be adopted by the supervisory board of a management

company.

(2) If law or fund rules prescribe the general meeting of unit-holders, the consent of the

general meeting of unit-holders is required for the merger of funds.

(3) A general meeting is deemed to have granted consent for adoption of a merger

resolution if at the general meeting at least two-thirds of the votes represented by units are in

favour, unless the fund rules prescribe a greater majority requirement.

§ 170. Authorisation for merger

(1) In order to merge funds, a management company shall apply for a corresponding

authorisation (hereinafter in this Division authorisation for merger) from the Financial


(2) If, before the merger of funds, the management of a fund is transferred to the

management company of a fund being acquired or an acquiring fund, an application for an

authorisation for transfer of the management of the fund may be submitted to the Financial

Supervision Authority together with an application for an authorisation for the merger of the

funds.

(3) In order to apply for an authorisation for merger, a management company shall

submit a written application and the following information and documents (hereinafter in this

Division application) to the Financial Supervision Authority:

1) the merger resolution;

2) the consent of depositaries with the merger;

3) the reasons for the merger of funds;

4) the number of units specified in subsection 167 (5) of this Act;

5) the description of the procedure for the cancellation of the units of the fund being

acquired and for the issue of the units of the acquiring fund and a schedule for the

cancellation and issue;

6) a business plan which complies with the requirements provided for in § 15 of this Act.

(4) If the merger of funds brings about amendment of the fund rules, the management

company shall submit also the information and documents specified in subsection 117 (3) of

this Act in addition to that provided for in subsection (3) of this section.

§ 171. Processing of application for authorisation for merger and decision on grant of

authorisation for merger


authorisation for merger, verification of the submitted information and verification whether

the merger is reasoned and in the legitimate interests of unit-holders.





(3) In the case provided for in subsection 170 (2) of this Act, the Financial Supervision

Authority shall make a decision to grant or refuse to grant an authorisation for transfer of the

management of a fund at the same time with the decision specified in subsection (2) of this

section.

(4) If amendment of the fund rules is also applied for upon merger, the Financial

Supervision Authority shall make, together with the decision to grant an authorisation, a

decision on amendment of the rules pursuant to the provisions of § 118 of this Act.

(5) The Financial Supervision Authority shall promptly inform the management

company, depositaries and, upon the merger of pension funds, also the registrar of the

Estonian Central Register of Securities of a decision to grant or refuse to grant an

authorisation for merger.

§ 172. Bases for refusal to grant authorisation for merger


1) the merger would violate the limitations on investment provided for in this Act,

legislation issued on the basis thereof or the fund rules;

2) the circumstances specified in § 116 of this Act become evident;

3) the merger of funds may damage the interests of the unit-holders for other reasons.

§ 173. Disclosure of merger

A management company shall disclose the merger of funds and, if necessary, also registration

of transfer of the management of a fund and amendment of fund rules pursuant to the

procedure provided for in § 119 of this Act.

Division 10

Liquidation of Fund

§ 174. Liquidation

(1) The supervisory board of a management company or, in the case provided for in

subsection 183 (1) of this Act, the depositary shall decide on the liquidation of a fund.

(2) The liquidation of a closed-ended fund the units of which are redeemed not earlier

than one year after unit-holders have submitted the corresponding claim may be decided only

by the general meeting of the unit-holders.

(3) The liquidation of a pension fund may be decided only if transfer of the management

of a pension fund pursuant to the procedure provided for in §§ 155-160 of this Act has been

impossible.

(4) A fund shall be liquidated by the management company or, in the case provided for in

§ 183 of this Act, by the depositary or, in the case provided for in § 183 of this Act, the

liquidators determined by the Financial Supervision Authority.

§ 175. Authorisation for liquidation

(1) In order to liquidate a fund, a management company shall apply for a corresponding

authorisation (hereinafter in this Division authorisation for liquidation) from the Financial


(2) In order to obtain an authorisation for liquidation, a management company shall


Division application) to the Financial Supervision Authority not later than on the twentieth

day after a resolution on the liquidation of a fund is adopted:

1) a resolution specified in subsection 174 (1) or (2) of this Act;

2) the reasons for the need to liquidate the fund and an assessment whether the

liquidation of the fund is in the interests of the unit-holders;

3) the opinion of the depositary of the fund to be liquidated;

4) the names, addresses and personal identification codes or, in the absence of the latter,

the dates of birth of the unit-holders, or the registry codes of the unit-holders if the unit-

holders have registry codes;

5) if the unit-holder is a fund, the name of the fund and the name and address of the seat

of the management company of the fund or, if there is no management company, the name

and address of the seat of the depositary of the fund and the registry code of the management

company or depositary of the fund if the management company or depositary of the fund has

a registry code;

6) the number, class and nominal value of the units owned by the unit-holders as at not

earlier than three working days before submission of the application;

7) information on all rights and obligations which belong to the assets of the fund;

8) upon liquidation of a pension fund, a report of the management company on acts

performed for the transfer of the management of the pension fund together with

documentation certifying the acts.

§ 176. Review of application for authorisation for liquidation and decision on grant of

authorisation for liquidation

(1) The provisions of § 16 of this Act apply to the review of applications for an

authorisation for liquidation, verification of the submitted information and verification

whether the liquidation of the fund complies with the requirements of this Act or legislation

issued on the basis thereof and is in the legitimate interests of the unit-holders.

(2) The decision to grant or refuse to grant an authorisation for liquidation shall be made

by the Financial Supervision Authority within one month after the receipt of all the necessary

documents and information but not later than within two months after the receipt of a

corresponding application.


and the depositary of a decision specified in subsection (2) of this section.

(4) Upon liquidation of a pension fund, the Financial Supervision Authority shall

promptly inform the also the registrar of the Estonian Central Register of Securities of a

decision specified in subsection (2) of this section.

§ 177. Conditions of authorisation for liquidation of mandatory pension fund

The Financial Supervision Authority may, by a decision to grant an authorisation for the

liquidation of a mandatory pension fund, establish the following conditions for the

liquidation:

1) a term which is longer than the term for the submission of applications which is

specified in subsection 37 (2) of the Funded Pensions Act;

2) the obligation to submit reports, including reports approved by an auditor, in the

course of liquidation proceedings;

3) other conditions which the Financial Supervision Authority deems necessary in order

to protect the legitimate interests of the unit-holders.

§ 178. Bases for refusal to grant authorisation for liquidation

The Financial Supervision Authority may refuse to grant an authorisation for liquidation if:

1) the management company has not, in the opinion of the Financial Supervision

Authority, exhausted all the opportunities to transfer the management of the pension fund;

2) the liquidation of the fund is not in the legitimate interests of the unit-holders for other

reasons.

§ 179. Notice of liquidation

(1) A management company shall publish a notice concerning liquidation of a fund

(hereinafter notice of liquidation) promptly after becoming aware of the decision to grant an

authorisation for the liquidation pursuant to the procedure provided for in § 119 of this Act.

(2) A notice of liquidation shall contain the following information:

1) the name of the fund to be liquidated;

2) the business name, registry code and seat of the management company;

3) the name of the depositary;

4) the term during which the creditors of the fund to be liquidated are to submit their

claims against the fund, and the term shall not be shorter than two months after publication of

the notice of liquidation;

5) upon liquidation of a mandatory pension fund, the term for submission of an

application specified in subsection 37 (2) of the Funded Pensions Act and the consequences

of failure to submit the application for the specified term;

6) the places and time of acceptance of claims and applications;

7) other necessary information.

(3) Upon liquidation of a pension fund, a management company shall inform the registrar

of the Estonian Central Register of Securities of publication of the notice of liquidation not

later than on the day preceding the publication of the liquidation notice.

(4) Failure to submit a claim within the term specified in clause (2) 4) of this section does

not mean that the validity of the claim has expired.

§ 180. Liquidation proceeding

(1) Liquidation proceedings commence on the date following the date of publication of

the notice of liquidation and terminate by submission of a liquidation report specified in § 187

of this Act.

(2) Liquidation shall be completed within six months after publication of the notice of

liquidation. With the permission of the Financial Supervision Authority, the specified term

may be extended at the request of the management company, but the term for liquidation shall

not exceed 18 months as a result of the extension.

(3) The issue and redemption of units of a fund to be liquidated shall be suspended as of

the date following the date of publication of the notice of liquidation, and as of the same date,

payments to unit-holders may be made only pursuant to the procedure provided for in § 182

of this Act.

§ 181. Transactions in liquidation proceedings

(1) Upon liquidation of a fund, the management company shall transfer the assets of the

fund as soon as possible and in accordance with the interests of the unit-holders, shall collect

the debts of the fund, and satisfy the claims of creditors of the fund including performance of

the obligations of the fund prescribed in the fund rules with respect to the management

company and the depositary.

(2) If a known creditor has not submitted a claim or the due date for fulfilment of the

claim of a creditor has not arrived and the creditor does not accept fulfilment, the money

belonging to the creditor shall be deposited with a credit institution.

(3) During liquidation of a fund, the management company may only conclude

transactions on behalf of the fund which are necessary for liquidation of the fund.

(4) Until performance of the obligations provided for in subsection (1) of this section,

funds derived from transfer of property upon liquidation may be placed in assets specified in

subsection 252 (1) of this Act, the issuer or credit institution of which has been assigned an

investment grade credit rating which is at least Baa 1 (Moody’s) or an equivalent thereto.

Transactions involving derivative instruments may be concluded only for the purposes of

managing risks arising from fluctuation of the value of the assets.

§ 182. Distribution of assets

(1) After performance of all the acts specified in subsection 181 (1) of this Act, the

supervisory board of a management company shall approve the final balance sheet and the

plan for distribution of the assets of the fund.

(2) A management company shall publish a notice concerning distribution of the assets

subject to distribution pursuant to the procedure provided for in § 119 of this Act. The notice

shall contain the following information:

1) the name of the fund to be liquidated;

2) the assets to be distributed per unit;

3) the terms of and procedure for the payment of assets subject to distribution;

4) a list of the information and documents required upon the payment of assets subject to

distribution.

(3) A management company shall distribute the assets remaining upon liquidation

between unit-holders on the basis of the class, number and net asset value of units owned by

each unit-holder.

(4) Payments to unit-holders may only be made in money. Upon liquidation of a closed-

ended fund or an index fund, payments may also be made in other assets with the consent of

the Financial Supervision Authority.

(5) Units shall be deleted and the rights and obligations arising therefrom shall be

terminated from the date on which payments are made. The redemption fee shall not be

charged upon deletion of units.

(6) If money or assets owned by a unit-holder cannot be paid to the unit-holder by the due

date, the money or assets prescribed for payment shall be deposited in a depositary.

(7) Upon liquidation of a mandatory pension fund, the provisions of §§ 38 and 39 of the

Funded Pensions Act apply to the distribution of assets.

§ 183. Depositary as liquidator

(1) If the transfer of a fund according to subsection 161 (3) of this Act is impossible, the

depositary shall liquidate the fund pursuant to the procedure provided for in §§ 174–182 of

this Act and the fund rules.

(2) A depositary may apply for an authorisation for the liquidation of a fund provided for

in § 175 of this Act from the Financial Supervision Authority also before expiry of the term

specified in subsection 161 (3) of this Act.

(3) If a management company has not been able to liquidate a fund within the term

specified in subsection 180 (2) of this Act, the depositary shall complete the liquidation of the

fund on the basis of the precept of the Financial Supervision Authority pursuant to the

procedure provided for in §§ 181 and 182 of this Act and the fund rules.

(4) In the case provided for in subsection (3) of this section, the depositary shall liquidate

a fund within six months after the Financial Supervision Authority has issued the

corresponding precept. With the permission of the Financial Supervision Authority, the

specified term may be extended at the request of the depositary, but the term for liquidation

shall not exceed 18 months as a result of the extension.

§ 184. Liquidators of fund

(1) If a depositary has failed to complete the liquidation of a fund within a term specified

in subsection 180 (2) of this Act or within an extended term specified in subsection 183 (4) of

this Act, the Financial Supervision Authority may designate liquidators which complete the

liquidation of the fund within the term designated by the Financial Supervision Authority

pursuant to the procedure provided for in §§ 181 and 182 of this Act.

(2) All rights and obligations of a management company shall be transferred to the

liquidators unless otherwise provided by law or the fund rules.

§ 185. Coverage of liquidation expenses

(1) Up to 2 per cent of the net asset value of the fund determined as of the date of the

adoption of the resolution on the liquidation of the fund by the supervisory board of the

management company or, in the case provided for in subsection 183 (1) of this Act, by the

depositary, may be used to cover the expenses of the liquidation of the fund on behalf of the

fund.

(2) If a depositary commences liquidation of a fund after the expiry of the term provided

for in subsection 161 (3) of this Act, the net asset value of the fund on the latest date by which

the liquidation should have commenced is taken as the basis for calculation of the liquidation

expenses.

(3) If the actual liquidation expenses exceed the amount specified in subsection (1) of this

section, the management company or a person who operates as a management company shall

be liable for the expenses exceeding that amount.

(4) If a fund is liquidated by a depositary or liquidators specified in § 184 of this Act, the

depositary or liquidators have the right to collect the liquidation expenses exceeding the

amount specified in subsection (1) of this section from the management company or a person

who operates as a management company.

§ 186. Extent of liability

(1) If during liquidation it becomes evident that a fund is insolvent, the management

company or a person who operates as a management company shall be liable for all claims

which are submitted against the fund and not satisfied.

(2) A depositary is liable for damage caused to the unit-holders, the management

company and creditors of a fund by failure to perform or unsatisfactory performance of its

duties during liquidation.

(3) In the event of the insolvency of a fund, a depositary shall be liable to the extent of

the claims against the fund which have arisen after transfer of the management of the fund or

liquidation of the fund to the depositary.

(4) In the event of the insolvency of a fund, liquidators shall be liable to the extent of the

claims against the fund which have arisen after transfer of the liquidation of the fund to the

liquidators.

§ 187. Liquidation report

(1) Within one month after termination of liquidation proceedings, a management

company shall submit to the Financial Supervision Authority the final balance sheet, the plan

for distribution of the assets of the fund and a report on its activities upon liquidation of the

fund. The requirements for reports on the liquidation of a fund shall be established by a


(2) The documents specified in subsection (1) of this section shall be submitted to the

Financial Supervision Authority by the depositary or by the liquidators if the depositary is a

liquidator or the liquidation is completed by the depositary or liquidators respectively.

Chapter 5

Fund Founded as Public Limited Company

Division 1

Activities and Shares of Fund Founded as Public Limited Company

§ 188. Application of provisions for public limited company

The provisions of Acts regarding public limited companies apply to the foundation, activities

and dissolution of a fund founded as a public limited company (hereinafter in this Chapter

fund) unless otherwise provided by this Act.

§ 189. Area of activity of fund

(1) The only area of activity of a fund shall be the investment of money received from the

issue of shares pursuant to the procedure provided for in Chapter 7 of this Act in order to

generate income.

(2) In order to act, a fund shall enter into a management contract with a management

company whereby the fund undertakes to transfer its assets to the disposal of the management

company and the management company undertakes to invest the assets of the fund pursuant

to the articles of association of the fund with the objective of generating income for the fund.

§ 190. Shares of fund

(1) A fund shall not issue preferred shares or convertible bonds, and other securities

which grant the owner thereof rights which are similar to rights arising from preferred shares

or convertible bonds.

(2) The shares of a fund shall be freely transferable. The provisions of subsection 229 (2)

of the Commercial Code do not apply to the transfer of shares of a fund.

Division 2

Foundation and Articles of Association of Fund Founded as Public Limited Company

§ 191. Foundation

(1) A fund may be founded only without share subscription. An operating public limited

company may be transformed into a fund if all shareholders of the public limited company are

in favour of the corresponding amendment to the articles of association.

(2) The foundation agreement of a fund shall, in addition to that provided for in the

Commercial Code, include the business name of the management company. In the case of an

operating public limited company, a management company shall be designated at the general

meeting where the transformation of the public limited company into a fund is decided.

(3) By entry into the foundation agreement of a fund, the founders shall also approve the

management contract and, in the case of a public fund, the depositary contract. If an operating

public limited company is transformed into a fund, the general meeting specified in

subsection (2) of this section shall approve the management contract and, in the case of a

public fund, the depositary contract.

§ 192. Articles of association

(1) In addition to the information provided for in the Commercial Code, the articles of

association of a fund shall contain the following information:

1) the objectives of the activities and the fundamental principles of the investment policy

of the fund, which shall set out investments into different classes of securities and other

assets, more specific restrictions on risk-spreading and limitations on investment, and

restrictions in geographical or industrial sectors;

2) the procedure for publication of the activities and presentation of the reports of the

fund.

(2) Share capital shall be specified in the articles of association of a fund as a minimum

and maximum capital whereupon the minimum capital may be less than one-quarter but not

less than one-twentieth of the maximum capital.

§ 193. Approval for foundation

(1) Before the registration of a fund in the commercial register or, in the case of an

operating public limited company, registration of amendments to the articles of association of

the public limited company in the commercial register, foundation of the fund or amendments

to the articles of association shall be approved by the Financial Supervision Authority.

(2) In order to obtain approval for the foundation of a fund, the members of the

management board of a public limited company who are set out in the memorandum of

association or, in the case of an operating company, the members of the management board

entered in the registry card of the commercial register shall submit a written application and

the following information and documents (hereinafter in this Division application) to the

Financial Supervision Authority:

1) the memorandum of association;

2) the articles of association;

3) the management contract;

4) the depositary contract if the fund has a depositary;

5) information on the members of the supervisory board and management board of the

public limited company, including each member’s given name and surname, personal

identification code or date of birth in the absence of a personal identification code, residence,

educational background, a complete list of places of employment and positions held during

the last five years and, in the case of the members of the management board, a description of

their duties;

6) information on the auditor of the public limited company, including the name,

residence or seat, personal identification code or, in the absence of the identification code, the

date of birth or registry code of the auditor;

7) a business plan which complies with the requirements provided for in § 194 of this

Act.

(3) Confirmation signed by all members of the management board of the fund regarding

the accuracy of the information and documents submitted upon application for approval shall

be appended to an application and to information and documents which are submitted later in

connection with the application.

§ 194. Business plan

(1) The business plan of a fund shall set out a description of the management structure of

the fund and of the rights, obligations and liability of members of the management board of

the fund and a forecast and analysis of all the important economic indicators of the fund,

including:

1) the net turnover and expenditure of the fund by area of activity;

2) the size of the assets, share capital and shareholders’ equity of the fund;

3) organisation of the issue of shares;

4) the market value, net asset value and rate of return of the assets of the fund;

5) the investment policy and structure of investments of the fund (division by security

and asset class, foreign issuer, sector of the economy, etc., and risks and the rate of return by

type of investment);

6) the size and structure of the management expenses of the fund;

7) the rates of management fees and depositary’s charges;

8) the amount of fixed overheads.

(2) A business plan shall be submitted for at least three years.

§ 195. Review of application for approval for foundation

(1) The provisions of § 16 of this Act apply to the processing of applications for approval

for the foundation of a fund, verification of the submitted information and verification

whether the fund complies with the requirements provided for in this Act or legislation issued

on the basis thereof and whether the fund rules are in the legitimate interests of the

shareholders.

(2) The Financial Supervision Authority shall make a decision to approve or refuse to

approve the foundation of a fund within two months after receipt of all the necessary

documents and information, but not later than within six months after receipt of the

corresponding application.

(3) The Financial Supervision Authority shall promptly inform the fund and the

management company of a decision on approval for the foundation of the fund.

(4) The decision on approval for the foundation of a fund shall be appended to the

application for entry of the fund in the commercial register.

§ 196. Refusal to grant approval for foundation

The Financial Supervision Authority may refuse to grant approval for foundation if:

1) the fund or the management thereof does not meet the requirements provided for in

this Act;

2) a public offer of the shares of the fund does not comply with the requirements

provided for in this Act or other legislation;

3) according to the articles of association of a public fund, the assets of the fund may be,

to a significant extent, invested in assets the value of which is difficult to assess;

4) the procedure for the publication of information provided for in the articles of

association of the fund is insufficient;

5) the fund manager of the management company does not meet the requirements

provided by legislation regulating the professional activities of the manager or his or her

knowledge, skills, experience and other characteristics are not adequate to ensure sufficient

protection of the interests of the shareholders of a fund of the corresponding type;

6) the depositary does not meet the requirements for depositaries provided by legislation

or is not able for any other reason to ensure sufficient protection of the interests of the

shareholders of a fund of the corresponding type;

7) the depositary contract contains provisions which are contradictory, ambiguous, or

which prevent the depositary or management company from performing their duties in full, or

which for some other reason do not enable promotion of the best interests of the shareholders

of the fund.

§ 197. Approval for amendments to articles of association

(1) Before entry in the commercial register, amendments to the articles of association of a

fund shall be approved by the Financial Supervision Authority.

(2) In order to obtain approval for amendments to the articles of association of a fund, the

fund shall submit a written application and the following information and documents to the


1) the resolution to amend the articles of association;

2) the amendments to and the amended text of the articles of association;

3) the consent of the management company and, if the fund has a depositary, also the

consent of the depositary with the amendment of the articles of association;

4) a justification of the amendments and an analysis of the effects on the development of

the fund and on the interests of the shareholders of the fund.

§ 198. Review of application for approval of amendments to articles of association and

decision on approval

(1) The provisions of §§ 195 and 196 of this Act apply to the review of applications for

approval of the amendments to the articles of association of a fund and the decision to register

the amendments.

(2) The decision on approval of amendments to the articles of association of a fund shall

be appended to the application for entry of the amendments to the articles of association of

the fund in the commercial register.

Division 3

Management of Fund

§ 199. Specifications for competence of general meeting

(1) In addition to that provided for in the Commercial Code, the general meeting of a

fund is competent to decide on entry into the management contract and depositary contract

and on amendment and termination thereof unless otherwise provided by this Act.

(2) A resolution specified in subsection (1) of this section is adopted if at least two-thirds

of the votes represented by shares at the general meeting are in favour. The articles of

association may prescribe a greater majority requirement.

(3) The general meeting of a fund may decide to amend the area of activity specified in

the articles of association such that a public limited company is no longer a fund if over two-

thirds of the votes represented by shares are represented at the general meeting. The

resolution shall be adopted if all shareholders who participate in or are represented at the

general meeting vote in favour.

§ 200. Specifications for competence of supervisory board

(1) By a resolution of the general meeting, the right to adopt resolutions specified in

subsection 199 (1) of this Act may be transferred to the supervisory board for a specified term

if so prescribed by the articles of association of the fund. The specified term shall not exceed

three years. In such case, the articles of association shall prescribe the method of calculation

and the rate of fees and charges to be paid to the management company and the depositary,

and a list and method of calculation of expenses to be covered on behalf of the fund.

(2) A resolution of the general meeting specified in subsection (1) of this section is

adopted if at least two-thirds of the votes represented at the general meeting are in favour. The

articles of association may prescribe a greater majority requirement.

(3) If the articles of association grant the supervisory board the right to increase the share

capital of the fund, the provisions of subsection 347 (3) and the second sentence of subsection

349 (2) of the Commercial Code do not apply. Upon undersubscription of shares, the

supervisory board has the right to extend the subscription term or cancel shares which are not

subscribed for during the subscription term. If shares are subscribed for by the new due date

designated by the supervisory board, the subscription is deemed to be valid.

(4) A resolution of the supervisory board provided for in subsections (1) and (3) of this

section is adopted if over two-thirds of the members of the supervisory board participating in

the meeting vote in favour or if a resolution of the supervisory board is made pursuant to the

procedure provided for in § 323 of the Commercial Code. The articles of association may

prescribe a greater majority requirement.

§ 201. Supervision by management board

(1) The management board of a fund shall, to the extent and pursuant to the procedure

prescribed by the management contract, exercise supervision over the activities of the

management company which are related to the fund.

(2) If a fund has a depositary, the management board of the fund shall exercise

supervision over the activities of the depositary to the extent and pursuant to the procedure

prescribed in the depositary contract.

§ 202. Requirements for members of management bodies

(1) The requirements provided for in § 51 of this Act apply to the members of the

management board and supervisory board of a fund.

(2) Members of the management board or supervisory board of the management company

or depositary of a fund shall constitute not more than one-half of the members of the

supervisory board of the fund.

Division 4

Issue of Shares

§ 203. Payment for shares

(1) Upon issue, shares shall be immediately paid for in full.

(2) Upon issue, shares may only be paid for by monetary contribution. Share capital may

also be increased by a bonus issue.

§ 204. Net asset value of fund and share of fund

(1) The net asset value of a fund shall be established on the basis of the market value of

the securities, immovables and other things and rights belonging to the fund from which

claims against the fund are deducted. The procedure for establishment of the net asset value

of funds shall be established by a regulation of the Minister of Finance.

(2) The net asset value of a share of a fund is equal to the net asset value of the fund

divided by the total number of shares issued at the time of calculation.

(3) The management company shall establish and publish the net asset value of a fund

and the shares pursuant to the procedure and at the time provided for in the articles of

association of the fund but not less than once a year.

§ 205. Reimbursement of management fee, depositary’s charge and expenses

(1) Only fees and charges provided for in this Act, and expenses associated with

management of a fund and specified in the articles of association of the fund shall be payable

on behalf of the fund.

(2) A fund shall pay the management company a management fee prescribed by the

management contract for management of the assets of the fund.

(3) A management company may pay from a fund only those expenses related to

management of the fund which are directly related to management of the fund and are

prescribed by the management contract.

(4) If a fund has a depositary, the fund shall pay the depositary a depositary’s charge

prescribed by the depositary contract for safekeeping the assets of the fund.

Division 5

Management of Assets of Fund

§ 206. Management of assets of fund

The assets of a fund shall be managed and disposed of by a management company to the

extent prescribed by law and the management contract.

§ 207. Termination of management contract

A management contract terminates:

1) upon expiry of the term of the management contract;

2) upon termination by agreement of the parties;

3) in the case of a management contract with an unspecified term, upon one month’s

advance notice of cancellation by the fund and upon three months’ advance notice of

cancellation by the management company unless the contract prescribes a longer term;

4) upon termination of the authority of the management company to manage the fund;

5) upon dissolution of the fund or the management company;

6) upon the declaration of bankruptcy of the fund or the management company or

abatement of bankruptcy proceedings commenced against either;

7) in other cases prescribed by law or the management contract.

§ 208. Publication of management contract

(1) A public fund shall publish a notice concerning amendment or termination of a

management contract on the website of the management company promptly after amendment

or termination of the management contract and shall publish the notice in at least one national

daily newspaper or send it to shareholders to the address entered in the share register by

registered mail. The notice shall set out information regarding the possibilities to examine the

amended text of the management contract.

(2) A fund not specified in subsection (1) of this section shall publish a notice concerning

amendment or termination of a management contract promptly after amendment or

termination of the management contract on the website of the management company.

§ 209. Transfer of management upon termination of management contract

(1) Upon termination of a management contract, a fund shall enter into a new

management contract within three months unless a management contract terminates upon

dissolution of the fund, upon the declaration of bankruptcy of the fund or upon abatement of

bankruptcy proceedings commenced against the fund. Until entry into a new management

contract, a fund founded as a public limited company shall be managed by the management

board of the fund.

(2) With the permission of the Financial Supervision Authority, the term specified in

subsection (1) of this section may be extended for up to six months.

(3) If a fund does not enter into a new management contract within the term specified in

subsection (1) or (2) of this section or if the general meeting of the fund fails to adopt a

resolution specified in subsection 199 (3) of this Act, the Financial Supervision Authority

shall commence compulsory dissolution of the fund.

Division 6

Merger, Division, Transformation and Liquidation of Fund

§ 210. Division and transformation of fund

(1) A fund shall not be transformed into a company of a different type.

(2) The division of funds is prohibited.

§ 211. Merger of funds

(1) Funds shall be merged pursuant to the provisions of Chapter 31 of the Commercial

Code unless otherwise provided for in this Division.

(2) A fund may merge with another fund.

(3) The merging funds shall inform the Financial Supervision Authority of merger of the

funds promptly after the second publication of the notice specified in subsection 399 (2) of

the Commercial Code.

§ 212. Merger of fund with another public limited company

(1) A fund (acquiring fund) may merge with a public limited company which is not a

fund (public limited company being acquired) in compliance with the requirements of the

Commercial Code and this Act.

(2) After the second publication of the notice specified in subsection 399 (2) of the

Commercial Code, a management company shall apply for an authorisation in order to merge

a fund with a public limited company (hereinafter in this Division authorisation for merger)

from the Financial Supervision Authority.

(3) In order to apply for an authorisation for merger, a management company shall


Division application) to the Financial Supervision Authority:

1) the merger agreement;

2) copies of the merger resolutions and the corresponding minutes of the general

meetings of the fund and the merging public limited company;

3) the merger report;

4) the auditor’s report on the merger;

5) information concerning the submission of claims specified in subsection 398 (1) of the

Commercial Code or concerning the absence thereof;

6) information concerning the submission of claims specified in subsection 399 (3) of the

Commercial Code or concerning the satisfaction thereof;

7) the opinion of the management company managing the acquiring fund;

8) the consent of the depositary with the merger if the fund has a depositary;

9) the reasons for the need to merge the fund and the public limited company;

10) a business plan which meets the requirements provided for in § 194 of this Act.

(4) If the merger of a fund and a public limited company brings about amendment of the

articles of association, the management company shall submit also the information specified

in subsection 197 (2) of this Act in addition to that provided for in subsection (3) of this

section.

§ 213. Processing of application for authorisation for merger and decision on grant of

authorisation for merger


authorisation for merger, verification of the submitted information and verification whether

the merger of a fund and a public limited company is reasoned and in the best interests of

shareholders.





(3) If approval of the amendments to the articles of association is also applied for upon

merger, the Financial Supervision Authority shall make, together with the decision to grant an

authorisation, a decision on approval of the amendments to the articles of association pursuant

to the provisions of § 198 of this Act.

(4) The Financial Supervision Authority shall inform the management company of a

decision to grant or refuse to grant an authorisation for merger promptly after the decision is

made.

§ 214. Refusal to grant authorisation for merger


1) the objectives of the activities and the investment policy of the acquiring fund and the

public limited company being acquired differ significantly;

2) the merger agreement contains conditions the occurrence or non-occurrence of which

may damage the interests of the shareholders of the fund;

3) the merger would violate the limitations on investment provided for in this Act,

legislation issued on the basis thereof or the articles of association;

4) other circumstances provided for in § 196 of this Act arise;

5) the merger of the fund and the public limited company may damage the legitimate

interests of the shareholders for other reasons.

§ 215. Publication of grant of authorisation for merger

A management company shall publish the decision to grant an authorisation for the merger of

a fund and a public limited company pursuant to the procedure provided for in § 208 of this

Act.

§ 216. Liquidation report or bankruptcy report

The liquidators or trustee in bankruptcy of a fund shall, promptly after termination of the

proceeding, present a report in accordance with the requirements established by a regulation

of the Minister of Finance to the Financial Supervision Authority; in addition, the liquidators

shall present the final balance sheet of the fund.

Chapter 6

Public Offer, Reporting and Information to be Published

Division 1

Public Offer and Prospectuses

§ 217. Public offer

(1) Within the meaning of this Act, the public offer of units of a common fund or shares

of a fund founded as a public limited company means communication of the information

concerning the conditions of the offer and the offered units and shares in any format in order

for these units or shares to be acquired.

(2) An offer specified in subsection (1) of this section is not deemed to be public if the

shares or units are offered under the conditions specified in subsection 12 (2) of the Securities

Market Act.

(3) The shares or units of a fund may be offered publicly only if the fund rules or articles

of association of the fund indicate that the fund is public.

§ 218. Application of this Division

(1) The provisions of this Division apply to the public offer of units of a public common

fund in Estonia (hereinafter in this Division offer).

(2) The provisions of the Securities Market Act concerning the public offer of shares

apply to the public offer of the shares of a fund founded as a public limited company.

§ 219. Prospectuses

(1) A prospectus shall be prepared concerning an offer of units of a public fund.

(2) In addition to a prospectus, a simplified prospectus which complies with the

requirements provided for in this Act and legislation issued on the basis thereof may be

prepared concerning an offer of units.

(3) In addition to a prospectus, a simplified prospectus shall always be prepared

concerning an offer of units of a UCITS.

(4) A prospectus and a simplified prospectus (hereinafter prospectuses) shall be approved

by the management board of a management company.

(5) The prospectuses shall be signed by all members of the management board of a

management company.

(6) A management company shall submit the prospectuses to the Financial Supervision

Authority together with an application for registration of the fund rules.

§ 220. Requirements for prospectuses

(1) The information presented in prospectuses shall be accurate, unambiguous and not

misleading and comply with the requirements provided by legislation and contain a clear and

understandable explanation concerning the risk level associated with the fund. The

prospectuses shall be prepared in a manner allowing users of the prospectuses to find

necessary information easily.

(2) A simplified prospectus shall be prepared and written so that content of the prospectus

is easily understandable.

(3) The date as of which the information presented in the prospectuses derives shall be

stated therein.

(4) The rules of a common fund are an integral part of a prospectus. Fund rules need not

be appended to a prospectus if an investor is informed that, at the request of the investor, the

prospectus shall be sent to the investor or a unit-holder is informed of all places where the

rules of the common fund are published in all the states where the units are traded.

(5) A simplified prospectus appended to a prospectus shall be separable from the

prospectus.

(6) Specific requirements for prospectuses and a list of information contained therein


§ 221. Information presented in prospectuses concerning investment policy of fund

(1) Prospectuses shall contain the principles according to which the assets of funds are

invested.

(2) If transactions are concluded with derivative instruments on behalf of a fund,

prospectuses shall contain a prominent statement whether the specified transactions are used

in order to manage risks or achieve the investment objectives of the fund. In addition, the

prospectuses shall set out the possible effect of the use of the derivative instruments on the

risk level of the fund.

(3) If a fund invests principally in assets specified in clauses 255 (1) 1), 3) and 4) and §

267 of this Act or pursuant to the rules provided for in § 253 of this Act or replicates a share

or debt securities index specified in § 254 of this Act upon investment, the prospectuses and,

where necessary, any other promotional literature of the fund shall include a prominent

statement drawing attention to the specified investment policy.

(4) When the net asset value of a fund is likely to have a high volatility due to investment

of the assets of the fund into securities of different classes and other assets and due to

transactions concluded upon management of the assets, its prospectuses and, where necessary,

any other promotional literature of the fund shall include a prominent statement drawing

attention to this characteristic.

(5) A fund that invests a substantial proportion of its assets in other investment funds

shall disclose in its prospectuses the maximum level of the management fees that may be

charged both to the fund itself and to the other investment funds in which it intends to invest.

(6) Upon request of an investor, the management company shall also provide

supplementary information relating to the quantitative limits that apply in the risk

management of the fund, to the measures of risk management and to the recent evolution of

the main instrument categories' risks and yields.

§ 222. Language

(1) The prospectuses shall be in Estonian.

(2) The Financial Supervision Authority may allow the preparation of prospectuses or

parts thereof in any other language if this is in the legitimate interests of unit-holders and

potential investors and justified, taking account of the investment policy of the fund and the

manner of marketing units.

(3) If prospectuses are prepared in Estonian and another language and if their wording

differs or it is possible to interpret them differently, the wording of the prospectus in Estonian

or its translation into Estonian takes precedence.

(4) The content of prospectuses offering the units of a UCITS in different languages shall

be identical.

§ 223. Application for authorisation for publication of prospectuses in foreign languages

(1) In order to apply for an authorisation specified in subsection 222 (2) of this Act

(hereinafter in this section authorisation), a management company shall submit an application

and documents which provide reasons for the need to publish prospectuses or parts thereof in

another language.


authorisation, verification of the submitted information and verification whether the

publication of prospectuses and parts thereof in another language is in the legitimate interests

of the unit-holders and potential investors and justified.

(3) The decision to grant or refuse to grant an authorisation shall be made by the

Financial Supervision Authority within two months after the receipt of a corresponding


information and documents.

(4) The Financial Supervision Authority may refuse to grant an authorisation if

publication of prospectuses or parts thereof in any other language is not in the legitimate

interests of unit-holders or potential investors or unjustified, taking account of the investment

policy of the fund and the manner of marketing units.

(5) The Financial Supervision Authority shall inform the management company of a

decision specified in subsection (3) of this section promptly after the decision is made.

§ 224. Obligation to publish prospectuses

(1) Prospectuses shall be accessible to the public (primarily to all investors and other

interested parties) for the term of the offer.

(2) A management company shall publish prospectuses in writing or in a format which

can be reproduced in writing approved by the Financial Supervision Authority at the seat of

the management company and on the website of the management company.

(3) A simplified prospectus shall be published not later than on the day on which the offer

is commenced and it shall be offered to the acquirer of units before entry into a contract on

acquisition of the units without charge.

(4) At the request of an acquirer of units, the prospectus shall be given to the acquirer

without charge.

§ 225. Changes in information contained in prospectuses

(1) If significant information contained in prospectuses is changed, a management

company shall send the amended prospectuses promptly to the Financial Supervision

Authority for its information and at the same time shall publish these pursuant to the

procedure provided for in § 224 of this Act.

(2) The Financial Supervision Authority shall require, by its precept, amendment of the

prospectuses and publication of the amendments if the prospectuses do not meet the

requirements of this Act or other legislation.

§ 226. Compensation for damage

(1) If prospectuses contain information which is significant for the purpose of assessing

the value of the fund or units and such information proves to be different from the actual

circumstances, the management company shall compensate the unit-holder for damage

sustained thereby due to the difference between the actual circumstances and the information

presented in the prospectuses, provided that the management company was or should have

been aware of such difference.

(2) The provisions of subsection (1) of this section also apply if prospectuses are

incomplete, including omission of relevant facts, provided that the incompleteness of the

prospectuses results from the management company hiding of the information.

(3) The obligation to compensate for damage prescribed in subsections (1) and (2) of this

section also rests with the management company if a third party is the source of the

information presented in prospectuses.

(4) A management company does not have the obligation to compensate for damage on

the basis of this section if the person that sustained the damage was aware, at the moment of

acquiring the unit, that the prospectuses were incomplete or contained inaccurate information.

The same applies if a professional investor that sustains damage should have realised, at the

moment of acquiring the unit and by exercising due diligence in its activities, that the

information contained in the prospectuses was inaccurate or incomplete, unless the damage is

caused intentionally.

(5) The limitation period for a claim prescribed in this section is five years as of the

beginning of the offer of the units of the relevant fund on the basis of prospectuses which

contain inaccurate information or are incomplete.

(6) Any agreements which exclude, limit or reduce compensation or the limitation period

prescribed in this section shall be void.

Division 2

Public Offer of Units and Shares of Foreign Fund in Estonia

§ 227. Application of this Division

(1) The provisions of this Division apply to the public offer (hereinafter in this Division

offer) of the units or shares of a foreign fund (hereinafter in this Division units) in Estonia.

(2) The provisions of §§ 229–233 of this Act do not apply to an offer of units of a UCITS

of another Contracting State.

§ 228. Offer of units of foreign fund

(1) Within the meaning of this Act, the public offer of units of a foreign fund means the

communication of information concerning the conditions of the offer and the offered units in

any format in order for these units to be acquired.

(2) An offer specified in subsection (1) of this section is not deemed to be public if the

units of a fund are offered only:

1) under the conditions specified in subsection 12 (2) of the Securities Market Act or

2) to a specific client upon provision of services specified in clause 43 5) or 44 3) of the

Securities Market Act by a management company, investment firm or credit institution.

(3) Units of a foreign fund are also deemed as being publicly offered in Estonia if the

fund is 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 seat is in Estonia.

§ 229. Marketing of units

(1) A foreign fund or a person which, according to the law of the foreign state where it is

founded (hereinafter home state), has the right to manage funds or other similar undertakings

or institutions established for collective investment (hereinafter in this Division foreign

management company), is required, in order to organise the purchase and sale of units of a

foreign fund (hereinafter in this Division marketing), enter into a contract in Estonia with a

management company, investment firm or credit institution who or whose branch is founded

in Estonia.

(2) There is no obligation to enter into a contract in order to market units of a foreign

fund if a foreign management company has, according to § 35 of this Act, founded a branch

in Estonia which, among other things, organises marketing of the units of the foreign fund.

§ 230. Application for registration of offer

(1) The offer of units of a foreign fund in Estonia shall be registered with the Financial

Supervision Authority before the offer is commenced.

(2) In order to register an offer, a written application and the following information and


1) a copy of the registration document of the foreign fund issued by a financial

supervision authority of the home state;

2) a copy of the activity licence of the foreign management company issued by the

financial supervision authority of the home state if the fund is managed by a management

company;

3) a confirmation of the financial supervision authority of the home state that the

activities of the foreign fund comply with the requirements established in the home state;

4) the articles of association and the last audited annual report of the foreign

management company if the fund is managed by a management company;

5) the public offer prospectus or another offer document regarding units;

6) a copy of the registration certificate of the prospectus issued by the financial

supervision authority of the home state or another document permitting the prospectus to be

published if such document is prescribed according to the legislation of the home state;

7) the last audited annual report and the semi-annual report of the foreign fund if it is

approved after the annual report;

8) the contract entered into with a management company, investment firm or credit

institution who or whose branch is founded in Estonia for marketing units of the fund except

in the case provided for in subsection 229 (2) of this Act;

9) a description of organisation of the marketing of units of the foreign fund and

transactions related thereto.

(3) Information and documents specified in subsection (2) of this section shall be

submitted to the Financial Supervision Authority together with translations into Estonian.

(4) If, after submission of the information and documents specified in subsection (2) of

this section, there are changes therein, the foreign fund or management company shall

promptly submit the amended information and documents to the Financial Supervision

Authority.

§ 231. Processing of application for registration of offer of units of foreign fund

(1) The provisions of § 16 of this Act apply to the processing of applications for the

registration of an offer, verification of the submitted information and verification whether the

offer complies with the requirements of this Act or other legislation.

(2) The decision to register or refuse to register the offer of units of a foreign fund shall

be made by the Financial Supervision Authority within six months after the receipt of a

corresponding application but not later than within two months after the receipt of all the

necessary documents and information.

(3) The Financial Supervision Authority shall promptly inform the foreign management

company or fund of a decision to register or refuse to register an offer.

§ 232. Conditions for registration

(1) The offer of units of a foreign fund shall be registered if all the conditions provided

for in this Division are complied with, including the following:

1) the foreign fund, and the foreign management company if the fund is managed by a

management company, are recognised by the financial supervision authority of the home

state;

2) the offer prospectus of units of a foreign fund complies with the provisions of §§ 220

and 22 of this Act and legislation issued on the basis of this Act;

3) the name of the foreign fund complies with the requirements provided for in § 5 of

this Act;

4) in order to market units of the foreign fund, a contract is entered into with a

management company, investment firm or credit institution who or whose branch is founded

in Estonia except in the case specified in subsection 229 (2) of this Act;

5) upon the issue of units of the foreign fund, it is ensured that the purchaser receives in

the account thereof the number of units which corresponds to the purchase price promptly

after payment of the purchase price;

6) upon the redemption or re-purchase of units of the foreign fund and making payments

on behalf of the foreign fund, the receipt of money by the unit-holders of the fund is ensured

pursuant to the provisions of the conditions of the transaction;

7) organisation of maintenance of a register of the units of the foreign fund is sufficient

to ensure the protection of interests of unit-holders;

8) access to information specified in § 245 of this Act concerning the activities of the

foreign fund is ensured.

(2) The Financial Supervision Authority may register an offer also if the offer prospectus

fails to meet the requirements established by a regulation issued on the basis of subsection

220 (6) of this Act unless the legitimate interests of unit-holder or investors are damaged

thereby.

§ 233. Bases for refusal to register

The Financial Supervision Authority may refuse to register the offer of units of a foreign fund

if:

1) the offer of the units of the foreign fund does not comply with the requirements

provided for in this Division;

2) the offer prospectus of the units of the foreign fund or another offer document fails to

reflect all the essential rules of the operation of the fund in full, clearly and unambiguously, or

contains provisions which are misleading, incomplete or contradictory;

3) the prospectus or other documents indicate that investment of the assets of the foreign

fund is not sufficiently based on the principle of risk spreading;

4) supervision over the activities of funds in the home state is insufficient or hindered;

5) the financial supervision authority of the home state has no legal basis or possibilities

for cooperation with the Financial Supervision Authority;

6) refusal to register is necessary in order to protect the legitimate interests of the

investors for other reasons.

§ 234. Offer of units of UCITS of another Contracting State

(1) Units of a UCITS of a Contracting State may be offered in Estonia if the offer

complies with the requirements of this Act concerning a UCITS, including requirements set

for the advertising of the fund, and the following is ensured:

1) the possibility to pay dividends or make distributions to unit-holders from the UCITS

of the Contracting State and the ability of unit-holders to demand redemption and re-purchase

of units and payment of an amount which corresponds to the unit;

2) publication of information concerning the UCITS of the Contracting State pursuant to

the procedure and to the extent provided for in this Act concerning a UCITS.

(2) The Financial Supervision Authority shall be informed of the offer of units of a

UCITS of a Contracting State before the offer is commenced. The following information and


1) a confirmation of the financial supervision authority of the home state that the offered

fund is a UCITS;

2) the prospectus and the simplified prospectus;

3) the fund rules or articles of association of the fund;

4) the annual report and the last semi-annual report if it is approved after the annual

report;

5) the unit marketing plan of the fund.

(3) The offer of units of a UCITS of a Contracting State may be commenced two months

after the date on which the Financial Supervision Authority receives the notice, information

and documents specified in subsection (2) of this section.

(4) The offer of units of a UCITS of a Contracting State shall not be commenced if the

Financial Supervision Authority has decided, within two months as of receipt of the

documents specified in subsection (2) of this section, that the offer of the units of the UCITS

does not comply with the requirements provided for in §§ 4, 217–225 and 237–245 of this

Act.

(5) The Financial Supervision Authority shall communicate the decision specified in

subsection (4) of this section to the financial supervision authority of the Contracting State

and the UCITS of the Contracting State or to the management company thereof.

Division 3

Offer of Pension Fund Scheme of Contracting State in Estonia

§ 235. Offer of pension fund scheme of contracting state in Estonia

(1) The provisions of this Division apply to a pension fund scheme of an employer of a

Contracting State (hereinafter pension fund scheme) provided for in paragraph (a) of Article 6

of the Directive 2003/41/EC of the European Parliament and of the Council on the activities

and supervision of institutions for occupational retirement provision (OJ No. L 235,

23.09.2003, p. 10–21) which is offered to the employees or members of the supervisory board

and management board of an employer registered in Estonia (hereinafter in this Division

employer).

(2) The Financial Supervision Authority shall be informed of an offer of a pension fund

scheme to the employees or members of the supervisory board and management board of an

employer registered in Estonia (hereinafter offer in Estonia) through the financial supervision

authority of the Contracting State. The following information shall be submitted to the


1) a confirmation from the financial supervision authority of the Contracting State of the

location of the person who offers the pension fund scheme that the offered pension fund

scheme complies with the requirements provided for in the EC directive specified in

subsection (1) of this section;

2) the name of the employer with whom the making of payments into a corresponding

pension fund scheme has been agreed;

3) a description of the principal conditions of the pension fund scheme, including the

rules for the investment of assets in the pension fund scheme.

(3) The provisions of subsection 257 (4) and 272 (1) of this Act apply to the part of the

assets of a pension fund scheme which corresponds to the part of the employees or members

of the supervisory board and management board of an employer.

§ 236. Giving notification of conditions and changes

(1) Within two months after the financial supervision authority of a Contracting State has

communicated the information specified in subsection 235 (2) of this Act to the Financial

Supervision Authority, the Financial Supervision Authority may determine the conditions

which an offer of a pension fund scheme shall meet according to this Act, the Income Tax Act

(RT I 1999, 101, 903; 2001, 11, 49; 16, 69; 50, 283; 59, 359; 79, 480; 91, 544; 2002, 23, 131;

41, 253; 44, 284; 47, 297; 62, 377; 111, 662; 2003, 18, 105; 58, 387; 82, 549; 88, 587 and

591), the Employment Contracts Act (RT 1992, 15/16, 241; 1993, 10, 150; RT I 26, 441;

1995, 14, 170; 16, 228; 1996, 3, 57; 40, 773; 45, 850; 49, 953; 1997, 5/6, 32; 1998, 111, 1829;

1999, 16, 276; 60, 616; 2000, 25, 144; 51, 327; 57, 370; 102, 669; 2001, 17, 78; 42, 233; 53,

311; 2002, 61, 375; 62, 377; 110, 656; 111, 663; 2003, 4, 22; 13, 69; 88, 591; 90, 601) and

other relevant Acts and legislation issued on the basis of these Acts.

(2) The Financial Supervision Authority shall inform a person who offers a pension fund

scheme and the financial supervision authority of the corresponding Contracting State of the

conditions specified in subsection (1) of this section.

(3) The offer of a pension fund scheme in Estonia may be commenced after receipt of the

information specified in subsection (1) of this section from the Financial Supervision

Authority or after expiry of the term specified in subsection (1) of this section.

(4) The Financial Supervision Authority is required to inform the financial supervision

authority of the Contracting State of the location of the person who offers the pension fund

scheme of any material changes in the conditions specified in subsection (1) of this section

which arise from amendments to the corresponding Acts and legislation issued on the basis

thereof.

Division 4

Accounting and Reporting

§ 237. Organisation of accounting

(1) The accounting and reporting of a management company and a fund shall be

organised on the basis of the Accounting Act (RT I 2002, 102, 600; 2003, 88, 588), this Act,

other legislation and the accounting policies and procedures of the management company.

The provisions of § 14, subsections 15 (2) and 18 (3) and §§ 25 and 26 of the Accounting Act

do not apply to the accounting and reporting of common funds.

(2) The accounting of a common fund shall be organised by the management company.

(3) The accounting of a common fund shall be kept separate from the accounting of the

management company and other common funds.

(4) The financial year of a common fund is the financial year of its management

company.

(5) The provisions in the Accounting Act concerning annual reports apply to annual

reports and semi-annual reports of funds founded as public limited companies unless

otherwise provided by this Act.

§ 238. Reporting

(1) A management company shall prepare its annual report and interim reports and also

the annual reports and interim reports of common funds managed thereby (hereinafter

reports), submit them to the Financial Supervision Authority and publish them pursuant to the

procedure provided by this Act or legislation issued on the basis thereof.

(2) A fund founded as a public limited company shall prepare its annual report and

interim reports (hereinafter reports), submit them to the Financial Supervision Authority and

publish them pursuant to the procedure provided by this Act or legislation issued on the basis

thereof.

(3) An interim report is an accounting report, and the period which serves as the basis

therefor is shorter than a financial year.

(4) A semi-annual report is an interim report prepared for the first six months of a

financial year.

(5) The requirements for the content of reports to be submitted to the Financial

Supervision Authority and the methods of preparation and procedure for the submission of the

reports shall be established by a regulation of the Minister of Finance.

(6) Management companies are required to use the balance sheet and income statement

formats established for their area of activity.

(7) The layouts of the reports of management companies to be submitted to the Financial

Supervision Authority, requirements for the content of the items, and the methods of

preparation and procedure for the submission of the reports shall be established by a


(8) In addition to annual reports and interim reports, the Financial Supervision Authority

has the right, for the exercise of supervision, to request additional regular reporting or specific

reports from a management company on the management company or a common fund

managed by the management company or from a fund founded as a public limited company.

(9) The Financial Supervision Authority may request that a foreign fund or management

company which provides services in Estonia submit the same information in its reports as

management companies or funds of Estonia.

(10) The Financial Supervision Authority may request that a branch of a foreign

management company which provides services in Estonia submit regular reports on the

activities of the branch or on the funds managed by the management company.

§ 239. Approval of reports

(1) The annual reports and semi-annual reports of a common fund shall be approved by

the management board of the management company. The reports shall be signed by all

members of the management board of the management company.

(2) The semi-annual reports of a fund founded as a public limited company shall be

approved by the supervisory board of the fund founded as a public limited company.

§ 240. Audit

(1) A common fund shall have an auditor who is designated by the supervisory board of

the management company and complies with the requirements provided for in the Authorised

Public Accountants Act (RT I 1999, 24, 360; 2002, 21, 117; 53, 336; 57, 357; 61, 375; 2003,

23, 133).

(2) The corresponding provisions of this Act, the Accounting Act, Commercial Code and

other legislation concerning audits apply to the audit of common funds.

(3) Before approval, the annual report of a common fund shall be audited by the auditor.

The auditor’s report shall be appended to the annual report of the common fund.

(4) The auditor shall, among other things, monitor compliance of the activities of the fund

with the requirements prescribed by this Act and the fund rules or articles of association of

the fund.

(5) Companies belonging to the same group as a management company shall be audited

by at least one common auditor.

(6) In the course of auditing a management company, an auditor shall audit a report and

submit it to the management company and the Financial Supervision Authority, assessing at

least the following areas:

1) compliance of the activities of the management company with the requirements

provided for in this Act;

2) compliance with the requirements established with regard to own funds;

3) the sufficiency and efficiency of the internal audit measures;

4) the security of the information systems of the management company.

§ 241. Notification obligation of auditor

(1) The auditor is required to inform the Financial Supervision Authority promptly in

writing of any circumstances revealed in the course of an audit which result or may result in:

1) material violation of legislation regulating the activities of management companies,

funds or depositaries;

2) interruption of the activities of the management company;

3) a situation or the risk of a situation arising in which the management company or

depositary is unable to perform its obligations;

4) a qualified report by the auditor concerning the annual accounts of the management

company;

5) significant proprietary damage to the management company, to unit-holders or

shareholders of funds managed by the management company or to other clients, which is

caused by an act by a member of the management board or supervisory board or an employee

of the management company:

(2) Upon communication of information to the Financial Supervision Authority according

to subsection (1) of this section, an auditor does not violate the obligation to maintain the

confidentiality of information which is imposed on the auditor by legislation or a contract.

Division 5

Publication

§ 242. Publication of information

(1) A management company shall publish and make available the information provided

for in this Act and legislation issued on the basis thereof at the seat of the management

company, in its branches and on the webpage of the management company or on the webpage

of the group into which the management company belongs or, in the case of a fund the units

or shares of which are traded on a regulated market registered in Estonia, on the website of

the operator of the market.

(2) Each person shall be able to examine the following information and documents at the

seat of the management company of a public fund:

1) the fund rules or articles of association of the fund;

2) the last annual report of the fund;

3) the last semi-annual report of the fund if this is approved after the last annual report;

4) an offer prospectus regarding the units or shares of the public fund and a simplified

prospectus if it exists;

5) the name and contact details of the management company;

6) the name of the fund manager;

7) the name and contact details of the depositary;

8) a list of the members of the supervisory board and management board of the fund if

the fund is founded as a public limited company;

9) the management contract of the fund founded as a public limited company;

10) information on the size of holding of the management company in the fund.

(3) The unit-holders or shareholders of a fund not specified in subsection (2) of this

section shall be able to examine the information and documents specified in subsection (2) of

this section at the seat of the management company.

(4) A management company shall give copies of the documents specified in clauses (2)

1)-4) of this section to the unit-holders or shareholders at the request thereof without charge.

(5) Information specified in clauses (2) 1)-7), 9) and 10) of this section shall be made

available within three working days after entry into force of the corresponding document or

amendment of the information.

(6) The information and documents specified in subsection (2) of this section shall be

published in Estonian.

(7) A management company shall promptly, pursuant to the procedure prescribed in the

fund rules or articles of association of the fund, make public all circumstances which

materially influence the activities, financial situation or net asset value of the shares or units

of the funds managed by the management company.

§ 243. Requirements for information to be published

(1) All other information presented concerning a fund in documents and published

concerning a fund shall be true, unambiguous and not misleading.

(2) All information presented concerning a fund in documents and other information

published concerning a fund shall not give actual or ostensible guarantees concerning the

income, or distributions or dividends from the fund, and shall not contain forecasts of the

financial performance of the fund, unless the rate of return of the fund is guaranteed pursuant

to the provisions of §§ 278 and 279 of this Act.

(3) All advertising or information which directly or indirectly invites persons to purchase

shares or units of a fund shall include a notation as to where the documents specified in clause

242 (2) 4) of this Act can be examined.

(4) In order to ensure that true information and documents are communicated to

shareholders and unit-holders, more precise requirements for the information and advertising

published concerning a fund may be established by a regulation of the Minister of Finance.

§ 244. Obligation to publish reports

(1) Copies of the annual report of a common fund and the annual report of a fund

founded as a public limited company shall be given to the unit-holders or shareholders or an

acquirer of units or shares of the fund at their request without charge.

(2) A copy of the semi-annual report of a public fund shall be given to the unit-holders or

shareholders or an acquirer of units or shares of the fund at their request without charge.

(3) A management company of a common fund or a fund founded as a public limited

company shall publish and submit to the Financial Supervision Authority the annual report of

the fund within four months after the end of a financial year and a semi-annual report of the

fund within two months after the end of the first six months of a financial year pursuant to the

procedure provided for in § 242 of this Act. The annual report and semi-annual report of a

public fund shall be published in the places or manner specified in the prospectuses.

(4) The requirements for the content of annual reports and semi-annual reports of a fund

which are subject to publication, the methods of preparing the reports and term for publication

thereof shall be established by a regulation of the Minister of Finance.

(5) The minimum amount of information to be published by a management company, the

methods of preparing reports and term for publication thereof may be established by


§ 245. Information to be published regarding foreign funds

(1) The unit-holders and shareholders of a fund shall have the opportunity to examine the

information and documents specified in subsection 242 (2) of this Act, if prepared concerning

the fund, at the seat of the branch of the management company, at the seat of a management

company, investment fund or credit institution marketing the units of the fund and founded in

Estonia or at the seat of the branch of the aforementioned foreign persons founded in Estonia.

(2) All advertising or information which directly or indirectly invites persons to purchase

shares or units of a fund shall include a notation as to where the prospectuses can be

examined.

(3) The documents and information specified in subsection (1) of his section shall be

published pursuant to the procedure provided for in subsections 242 (2)-(6) of this Act.

Chapter 7

Requirements for Management of Fund Assets

Division 1

General Requirements

§ 246. General provisions for investment of assets

(1) The assets of a fund may be invested only in the assets specified in the fund rules or

the articles of association of the fund, taking account of the limitations provided for in this

Act, legislation issued on the basis thereof, the fund rules or the articles of association of the

fund.

(2) The fund rules or the articles of association of a fund shall provide for separate

limitations by classes of assets and set out the states or persons located in the states in which

the assets of the fund are invested, and shall also provide for limitations broken down by

states if the assets of the fund are invested in securities traded on the regulated markets of the

states.

§ 247. General requirements for investment of assets and risk-spreading

(1) In acquiring and transferring assets on behalf of a fund, a management company shall

ensure that the investments of the fund are sufficiently spread between different securities and

other assets.

(2) The limitations on the investment of assets and restrictions on risk-spreading provided

for in this Chapter do not apply upon the liquidation of a fund, unless the Financial

Supervision Authority prescribes otherwise in its decision to grant an authorisation for the

liquidation of the fund as provided for in § 176 of this Act.

(3) All the assets of a fund may be invested in one investment fund if, upon investment of

the assets, the requirement to spread investments in different securities and other assets is

complied with to the sufficient extent pursuant to this Act or legislation of other states.

§ 248. Risk management

(1) A management company shall establish internal rules of procedure for the

management of risks associated with investment of the assets of a fund (hereinafter in this

Chapter rules) which enable the management company to monitor and measure at any time

the risk of the positions and their contribution to the overall risk profile of assets of the fund.

(2) A management company shall promptly inform the Financial Supervision Authority

of establishment of the rules and amendments thereto.

(3) The Financial Supervision Authority may require, by its precept, amendment of rules

if the rules:

1) do not comply with the requirements provided for in this Act;

2) do not comply with the provisions of the fund rules or articles of association of the

fund;

3) are incomplete, misleading or contain provisions which are contradictory or

ambiguous;

4) do not enable adequate determination of the net asset value of the fund;

5) are not in the best interests of the shareholders or unit-holders of the fund for other

reasons.

§ 249. General requirements for derivative transactions

(1) If, according to the fund rules or the articles of association of the fund, it is permitted

to conclude derivative transactions, the fund rules or the articles of association of the fund

shall provide for the objectives of the transactions involving derivative instruments.

(2) A management company shall establish detailed rules where it shall define the types

of derivative instruments, the underlying risks, the quantitative limits and the methods which

are chosen in order to estimate the risks associated with transactions in derivative instruments

regarding each managed fund. The rules shall also include a process for accurate and

independent assessment of the value of derivative instruments acquired over-the-counter

(hereinafter OTC).

(3) If securities specified in clauses 2 (1) 1)-3), 5) and 7) of the Securities Market Act

embed derivative instruments, the provisions of this Chapter regarding derivative instrument

apply to the securities.

(4) Specific requirements for derivative transactions, the procedure for the calculation of

limitations on investment and persons who are counterparties to transactions with derivative

instruments may be established by a regulation of the Minister of Finance.

§ 250. Investment in immovables

(1) Objects which are necessary for the management of immovables may also be acquired

on behalf of a fund investing in immovables.

(2) For the purposes of this Act, adjacent immovables or immovables in close proximity

to each other are deemed to be one immovable, unless the intended use of the immovables or

the risks and circumstances which affect the value of the immovables are clearly

distinguishable.

§ 251. Valuation of immovables

(1) Fund rules or the articles of association of a fund shall provide:

1) the procedure for and terms of valuation of immovables;

2) criteria for choosing a valuator of an immovable, including criteria for assessment of

the competence and independence of the valuator;

3) the value and class of an immovable in the case of which more than one valuator of

immovables must be designated.

(2) The rules for the valuation of immovables shall be published on the website of the

management company.

(3) A management company is required to inform the Financial Supervision Authority of

the valuators of immovables chosen thereby and the criteria on the basis of which the

valuators were chosen.

(4) A management company shall ensure that immovables are valued at least once a year

as at the end of the financial year and before the audit of the annual report of the fund is

conducted.

(5) Only an independent valuator of immovables who is of good repute and has sufficient

experience to valuate the assets concerned may be a valuator of immovables.

(6) The Financial Supervision Authority may require, by its precept, a re-valuation of

immovables if valuation of the immovables:

1) does not comply with the provisions of the fund rules or articles of association of the

fund;

2) was not objective;

3) does not enable adequate determination of the net asset value of the fund;

4) is not in the best interests of the shareholders or unit-holders of the fund for other

reasons.

Division 2

Different Types of Funds

§ 252. Money market fund

(1) A money market fund is a fund the assets of which are, according to the fund rules or

articles of association of the fund and having regard to the limitations arising from this

Chapter, invested only in:

1) money market instruments provided for in clause 2 (1) 5) of the Securities Market Act

(hereinafter money market instrument);


3) units and shares of other funds which are deemed to be money market funds according

to other legislation of Estonia or foreign states;

4) other debt obligations the redemption or maturity date of which is in up to thirteen

months;

5) short-term derivative instruments.

(2) In addition to the provisions of subsection (1) of this section, the assets of a money

market fund may be temporarily held in a bank account or placed on overnight deposit.

(3) In order to protect the interests of the shareholders or unit-holders of a fund, more

precise requirements and additional limitations on investment of the assets of a money market

fund, including limitations arising from the home state and credit rating may be established by

a regulation of the Minister of Finance.

§ 253. Real estate fund

(1) According to the fund rules or the articles of association of the fund, the assets of a

real estate fund shall be invested as follows:

1) at least 50 per cent in immovables or

2) at least 75 per cent in immovables and securities relating to immovables.

(2) The following are securities relating to immovables specified in subsection (1) of this

section:

1) the units or shares of a fund which is deemed to be a real estate fund according to the

legislation of Estonia or foreign states;

2) the units or shares of a real estate undertaking whose main activity is investment in

immovables or management of immovables;

3) securities provided for in subsection 260 (1) of this Act which are secured by

immovables;

4) derivative instruments the underlyings of which are securities specified in clauses 1)-

3) of this subsection.

(3) The Financial Supervision Authority has the right to determine whether a real estate

undertaking complies with the requirements provided for in clause (2) 2) of this section.

§ 254. Index fund

(1) An index fund is a fund which, in the investment of its assets, replicates the

composition of a certain share or debt securities index which is recognised by the Financial

Supervision Authority. The index to be replicated shall comply with the following

requirements:

1) its underlying assets are sufficiently diversified;

2) the index represents the movement of the market to which it is related;

3) the index is published in an appropriate manner.

(2) Upon registration of the rules or articles of association of an index fund, the Financial

Supervision Authority may require that a management company submit a contract on the

basis of which the management company of the index fund or another entitled person

designated thereby is required to regularly publish the purchase and selling prices of the units

or shares of the fund and execute the purchase and sales orders according to the prices.

Division 3

Specifications for Investment of Assets of Open-ended Public Fund and of Risk-spreading

§ 255. Investment of assets

(1) The assets of a UCITS may be invested only in:


2) securities specified in clauses 2 (1) 1)-3), 5) and 7) of the Securities Market Act

excluding shares of an investment fund (hereinafter in this Division securities);

3) derivative instruments;

4) shares and units of an investment fund.

(2) The assets of a UCITS shall not be invested in precious metals and securities which

grant rights with regard to precious metals.

(3) In addition to that provided for in subsection (1) of this section, the assets of other

open-ended public funds may be invested in immovables.

(4) In the case of a UCITS, all persons belonging to one and the same group are deemed

to be one person upon investment in assets specified in § 256 or §§ 259-263 of this Act.

§ 256. Investment in deposits and risk-spreading

(1) The assets of a UCITS and other open-ended public funds may be invested in deposits

in credit institutions maturing in no more than twelve months.

(2) The assets of a UCITS and other open-ended public funds may be invested in deposits

in credit institutions of third countries if the prudential ratios applicable to these institutions

comply with the requirements which are at least as strict as those established by the

legislation of the European Community. The Financial Supervision Authority has the right to

determine whether a credit institution of a third country complies with the aforementioned

requirements.

(3) A UCITS and other open-ended public funds may not invest more than 20 per cent of

the market value of its assets in deposits made with the same credit institution.

(4) Other open-ended public funds may invest up to 30 per cent of the market value of the

assets of the funds in deposits made with credit institutions not specified in subsections (1)

and (2) of this section.

(5) The provisions of subsection (3) of this section do not apply to money held in a bank

account specified in § 99 of this Act or placed on overnight deposit.

§ 257. Investment in securities

(1) The assets of a UCITS and other open-ended public funds may be invested in

securities which are freely transferable and meet at least one of the following requirements:

1) the securities are traded on a regulated market of a State which is a Contracting Party

to the EEA Agreement (hereinafter in this Chapter Contracting State) as defined in § 3 of the


2) the securities are traded on a regulated securities market of a state not specified in

clause 1) of this subsection if the state is specified in the rules or articles of association of the

investing fund;

3) the securities are not traded on regulated markets of states specified in clauses 1) or 2)

of this subsection but, pursuant to their conditions of issue, the securities shall be admitted to

the regulated market of a state specified in clause 1) or 2) of this subsection within twelve

months after issue of the securities.

(2) In addition to the provisions of subsection (1) of this section, the assets of a UCITS

and another open-ended public fund may be invested in money market instruments not

specified in subsection (1) of this section, which meet at least one of the following

requirements:

1) the money market instruments are issued or guaranteed by a state, federated state or

regional or local government, the European Union, the central bank of a Contracting State, the

European Central Bank, the European Investment Bank or an international organisation in

which the Contracting State is a member or partner;

2) the money market instruments are issued by a person which has issued other securities

traded on a regulated market specified in clauses (1) 1) or 2) of this section;

3) the money market instruments are issued or guaranteed by a management company,

investment firm, insurer or credit institution, if financial supervision is exercised over

compliance with prudential ratios established thereon pursuant to the requirements of

legislation of the European Community or requirements which are at least as strict as the

requirements of legislation of the European Community. The Financial Supervision Authority

has the right to determine whether the management company, investment firm, insurer or

credit institution which is the issuer or guarantor of the money market instruments complies

with the aforementioned requirements;

4) the issuer of the money market instruments is included among the issuers approved by

the supervision authority of another Contracting State pursuant to the conditions specified in

Article 19(1)(h)(4) of the directive regarding investment funds;

5) the issuer of the money market instruments meets the requirements established by the

Minister of Finance.

(3) The assets of a UCITS, up to a total of 10 per cent of the market value of the assets of

the UCITS, may be invested in securities not specified in subsections (1) and (2) of this

section.

(4) The assets of another open-ended public fund, up to 30 per cent of the market value of

the assets of the fund, may be invested in securities not specified in subsections (1) and (2) of

this section.

(5) The provisions of this section do not apply to open-ended public real estate funds.

(6) The conditions specified in clause (2) 5) of this section, taking into particular account

the financial situation, purpose of activities and reliability of the issuer, shall be established

by a regulation of the Minister of Finance.

§ 258. Risk-spreading upon investment in securities

(1) A UCITS may invest no more than 10 per cent of the market value of its assets in

securities issued by the same person.

(2) If the value of securities issued by one person is more than 5 per cent of the market

value of the assets of a UCITS, the aggregate value of such securities shall total not more than

40 per cent of the market value of the assets of the UCITS.

(3) The value of securities issued by persons belonging to the same group shall total not

more than 20 per cent of the market value of the assets of a UCITS.


the assets of the fund, may be invested in securities issued by the same issuer.

(5) This section does not apply upon investment in securities specified in §§ 259 and 260

of this Act.

§ 259. Specifications for risk-spreading upon investment in securities issued or guaranteed by

state

(1) The value of securities belonging to the assets of a UCITS and another open-ended

public fund which are issued by the same person may form up to 35 per cent of the market

value of the assets of the fund if they are issued or guaranteed by:

1) a Contracting State;

2) another state which guarantees conditions for investment with a degree of risk similar

or smaller than the Contracting States and which is set out in the fund rules or articles of

association of the fund;

3) an international organisation to which at least one Contracting State belongs.

(2) The assets of a UCITS and another open-ended public fund, more than 35 per cent of

the market value of the assets of the fund, may be invested in securities of a person specified

in subsection (1) of this section or securities guaranteed by the person if:

1) sufficient protection of the interests of the shareholders and unit-holders of the fund is

ensured;

2) the assets of the fund comprise securities issued or guaranteed by such person during

at least six different issues, and the value of securities acquired in a single issue totals not

more than 30 per cent of the market value of the assets of the fund;

3) the fund rules or articles of association of the fund and the prospectus set out the

issuers the securities issued or guaranteed by whom are targets for investment or are subject

to investment in which more than 35 per cent of the market value of the assets of the fund are

invested.

§ 260. Specifications for investment in covered bonds and risk-spreading

(1) The assets of a UCITS and another open-ended public fund may be invested in debt

securities which are continuously and repeatedly issued by a credit institution of a Contracting

State (hereinafter covered bonds) if all the following requirements are met:

1) the credit institution regularly publishes its annual reports and state financial

supervision is exercised over the institution primarily in order protect the interests of persons

holding debt securities;

2) money received from the issue of these debt securities is invested in assets which,

during the whole period of validity of the debt securities, cover claims attaching to the debt

securities;

3) in the case of the insolvency of the credit institution, the principal and the accrued

interest on the debt securities is reimbursed to the creditors on a priority basis.

(2) Up to 25 per cent of the market value of the assets of a fund may be invested in

covered bonds issued by the same person.

(3) If the value of covered bonds issued by one person is more than 5 per cent of the

market value of the assets of a UCITS, the aggregate value of such bonds shall total not more

than 80 per cent of the market value of the assets of the UCITS.

§ 261. Investment in derivative instruments

(1) The assets of a UCITS and another open-ended public fund may be invested in

derivative instruments traded on regulated markets specified in clauses 257 (1) 1) and 2) of

this Act or derivative instruments acquired OTC, provided that:

1) the counterparty to the derivative transactions concluded OTC is a person whose

compliance with prudential ratios established with regard to the person is subject to state

financial supervision;

2) the value of derivative instruments acquired OTC can be reliably assessed every day

and the UCITS can, on its own initiative, transfer the derivative instruments at any time for

fair price, liquidate its position therein or close them by an offsetting transaction.

(2) The assets of a UCITS and another open-ended public fund may be invested in

derivative instruments the underlyings of which are:

1) deposits which meet the requirements provided for in subsections 256 (1) and (2) of

this Act;

2) securities specified in § 257 and units or shares of another investment fund specified

in subsection 264 (1) or (2) of this Act;

3) securities indexes, interest rates or currency in which the fund may invest pursuant to

its rules.

(3) Obligations assumed on behalf of another open-ended public fund through derivative

instruments not specified in subsections (1) and (2) of this section shall exceed not more than

20 per cent of the market value of the assets of the fund.

§ 262. Risk-spreading upon investment in derivative instruments

(1) Upon investment of the assets of a UCITS and another open-ended public fund in

derivative instruments traded on regulated markets, the provisions of § 258 of this Act

concerning securities apply to risk-spreading.

(2) The risk exposure to a counterparty of a UCITS in an OTC derivative transaction may

not exceed 10 per cent of the market value of the assets of the UCITS when the counterparty

is a credit institution which meets the requirements provided for in subsection 256 (2) of this

Act.

(3) In the case of another open-ended public fund, the risk exposure to one person in an

OTC derivative transaction may not exceed 20 per cent of the market value of the assets of

the fund.

(4) The risk exposure to a counterparty of a UCITS in an OTC derivative transaction may

not exceed 5 per cent of the market value of the assets of the UCITS when the counterparty is

a person not specified in subsection (2) of this section.

(5) A UCITS shall ensure that its global exposure relating to derivative instruments does

not exceed the total market value of the assets of the fund.

(6) The exposure (or the value of a derivative instrument) shall be calculated taking into

account the value of the underlying assets, the counterparty risk (credit risk), market

movements and the time available to liquidate the positions.

(7) The underlyings of derivative instruments of a UCITS and another open-ended public

fund shall, at the moment the derivative instruments are possibly used, not exceed in

aggregate the limitations on investment provided for in this Chapter regarding the funds. The

aforementioned does not apply in the case of index-based derivative instruments.

§ 263. Risk-spreading upon investment in one person

(1) The value of securities belonging to the assets of a UCITS and issued by the same

person, deposits placed with the person and exposures arising from derivative transactions

undertaken with the person shall total not more than 20 per cent of the market value of the

assets of the UCITS.

(2) The aggregate value of securities, derivative instruments and covered bonds

belonging to the assets of a UCITS and issued by the same person, and deposits placed with

the person shall total not more than 35 per cent of the market value of the assets of the

UCITS.

§ 264. Investment in units or shares of other investment funds

(1) The assets of a UCITS and another open-ended public fund may be invested in:

1) the units of a UCITS;

2) the units and shares of a UCITS of another Contracting State specified in § 4 of this

Act.

(2) In addition to the provisions of subsection (1) of this section, the assets of a UCITS

and another open-ended public fund may be invested in other funds which according to the

legislation of Estonia or other states are deemed to be open-ended public funds and which

meet the following requirements:

1) financial supervision is exercised over the fund pursuant to the requirements of

legislation of the European Community or requirements which are at least as strict as the

requirements of legislation of the European Community and cooperation between the

Financial Supervision Authority and the authority exercising supervision over the fund is not

hindered;

2) pursuant to this Act the level of protection for unit-holders is equivalent to that

provided for investors in a UCITS, and in particular the requirements of § 72, subsections 276

(3) and (4) and subsections 277 (1) and (2) of this Act must be complied with;

3) the business of the fund is reported in half-yearly and annual reports which include the

statement of assets and liabilities, income and expense statement and the statement of

investments of the fund;

4) no more than 10 per cent of the assets of the fund may be invested in other investment

funds.

(3) The assets of a UCITS, up to a total of 30 per cent of the market value of the assets of

the UCITS, may be invested in units or shares of funds specified in subsection (2) of this

section.


the assets of the fund, may be invested in units or shares of funds not specified in subsection

(2) of this section. The aforementioned does not apply to the units or shares of an investment

fund which are traded on regulated markets specified in clauses 257 (1) 1) or 2) of this Act.

(5) The Financial Supervision Authority has the right to determine whether the

supervision exercised over a fund in the assets of which investments are made complies with

the requirements provided for in clause (2) 1) of this section.

§ 265. Risk-spreading upon investment in units and shares of other investment funds

(1) The value of units or shares of an investment fund shall not total more than 20 per

cent of the market value of the assets of a UCITS.

(2) The shares or units of other funds managed by the management company of the fund

shall not be acquired or held on behalf of a UCITS and another open-ended public fund,

including shares or units of funds which the management company manages as a third party

to whom the duties of the management company are transferred, unless all the following

conditions are met:

1) the investment policies of the funds differ significantly;

2) such possibility is prescribed in the fund rules or articles of association of the fund;

3) the management company does not charge a redemption fee or issue fee therefor.

(3) The provisions of subsection (2) of this section apply also if the assets of a UCITS are

invested in the shares or units of funds managed by a company with which the management

company is linked by common management or control, or by a substantial holding, and also if

the company is a third party to whom management of the fund is transferred.

§ 266. Specifications for index fund

(1) If the index fund is a UCITS, the limitations on the investment of assets and

restrictions on risk-spreading provided for in this Chapter shall be complied with, unless

otherwise provided for in this section.

(2) The shares or debt securities issued by one person and belonging to the assets of an

index fund which is a UCITS shall total not more than 20 per cent of the market value of the

assets of the fund.

(3) The assets of an index fund which is a UCITS may be invested in securities of a

person specified in subsection (2) of this section or in securities guaranteed by a person

specified in subsection (2) of this section to a maximum of 35 per cent of the market value of

the assets of the fund where that proves to be justified by the particular conditions of a

regulated market where certain shares or debt securities are highly dominant.

§ 267. Investment of assets of other open-ended public fund in immovables

(1) The acquisition cost of an immovable together with the acquisition costs of objects

specified in subsection 250 (1) of this Act shall, at the time of acquisition, total not more than

20 per cent of the market value of the assets of another open-ended public fund.

(2) The market value of an immovable together with the value of objects specified in

subsection 250 (1) of this Act shall not total more than 25 per cent of the market value of the

assets of another open-ended public fund.

(3) Another open-ended public fund shall invest not more than 25 per cent of the market

value of its assets in immovables which are located in states which do not have an effective

and reliable registration system for immovables which proves the right of ownership. The

aforementioned does not apply upon investment in immovables located in a Contracting State.

§ 268. Limitations on participation

(1) On behalf of a management company and the UCITS-s managed thereby, qualifying

holding shall not, directly or indirectly, be acquired or held through any shares carrying

voting rights.

(2) A management company may, on behalf of a UCITS, acquire no more than:

1) 10 per cent of the non-voting shares of any single body;

2) 10 per cent of the debt securities of any single body;

3) 10 per cent of the money market instruments of any single body;

4) 25 per cent of the units of another investment fund specified in § 264 of this Act.

(3) A management company shall not, on behalf of another open-ended public fund,

acquire or hold in any person more than 50 per cent of the securities and money market

instruments issued by the management company.

(4) The provisions of this section do not apply upon acquisition or holding of securities

issued or guaranteed by the state or an international organisation pursuant to the provisions of

§ 259 of this Act.

Division 4

Specifications for Investment of Assets of Pension Funds and Risk-spreading

§ 269. Investment of assets

(1) The limitations and restrictions established with regard to UCITS-s and the provisions

of § 267 of this Act apply to investment of the assets of a pension fund and risk-spreading,

unless otherwise provided for in this Division.

(2) The assets of a pension fund may be invested only in securities provided for in § 2 of

the Securities Market Act, deposits in credit institutions and immovables.

(3) The rules of a mandatory pension fund shall provide for limitations broken down by

states if more than 30 per cent of the market value of the assets of a fund is invested in the

same state in securities specified in § 257 of this Act and units or shares of other funds.

(4) In order to protect the interests of unit-holders, additional limitations on investment of

the assets of mandatory pension funds may be established by a regulation of the Minister of

Finance.

§ 270. Investment in deposits

(1) The assets of a mandatory pension fund invested in the deposits of credit institutions

shall not total more than 35 per cent of the market value of the assets of the pension fund.

(2) The assets of a pension fund deposited in a single credit institution or in credit

institutions belonging to the same group shall not total more than 5 per cent of the market

value of the assets of the pension fund.

§ 271. Investment in shares

(1) The assets of a mandatory pension fund shall not be invested in shares to an extent

greater than 50 per cent of the market value of the assets of the mandatory pension fund.

(2) For the purposes of subsection (1) of this section, investments in funds the assets of

which may, directly or through other funds, be invested in shares are also deemed to be

investments in shares.

§ 272. Limitations on investment in securities

(1) The value of securities issued by one person and specified in clauses 2 (1) 1)–3), 5)

and 7) of the Securities Market Act (hereinafter in this section securities) shall not total more

than 5 per cent of the market value of the assets of a mandatory pension fund, unless

otherwise provided for in this Division.

(2) The value of securities issued or guaranteed by a state specified in § 259 of this Act

shall not total more than 35 per cent of the market value of the assets of a pension fund.

(3) Up to 10 per cent of the market value of the assets of a pension fund may be invested

in covered bonds issued by the same person.

(4) The value of money market instruments shall total not more than 35 per cent of the

market value of the assets of a mandatory pension fund.

(5) The limitation provided for in subsection (4) of this section applies also if the assets

of a mandatory pension fund are invested in the units and shares of funds which in the

legislation of Estonia or foreign states are deemed to be money market funds.

§ 273. Investment in other funds

(1) Upon investment of the assets of a pension fund in other investment funds, the

provisions of subsection 264 (3) of this Act do not apply.

(2) Up to 30 per cent of the market value of the assets of a mandatory pension fund and

up to 50 per cent of the market value of the assets of a voluntary pension fund may be

invested in the units or shares of an investment fund not specified in subsections 264 (1) and

(2) of this Act.

(3) The value of units or shares of a fund shall not total more than 5 per cent of the

market value of the assets of a pension fund.

(4) The value of the shares and units of other funds managed by a management company

which manages a pension fund shall not total more than 10 per cent of the market value of the

assets of a mandatory pension fund or more than 50 per cent of the market value of the assets

of a voluntary pension fund.

(5) The value of the shares and units of other funds managed by management companies

belonging to the same group with a management company which manages a mandatory

pension fund shall not total more than 50 per cent of the market value of the assets of a

mandatory pension fund and all the conditions provided for in subsections 265 (2) and (3) of

this Act shall be met.

§ 274. Transactions with derivative instruments

(1) The assets of a mandatory pension fund specified in subsection 76 (1) of this Act

may, in addition to the provisions of the same subsection, be invested in derivative

instruments the underlyings of which are securities indexes of debt securities, interest rates or

currency in which the assets of the mandatory pension fund may be invested according to the

fund rules.

(2) Obligations which exceed 10 per cent of the market value of the assets of a pension

fund shall not be assumed by the pension fund on behalf of the pension fund by transactions

provided for in § 262 of this Act, except a transaction entered into for the purposes of

managing foreign exchange risks with which assets are acquired on behalf of the fund in the

currency in which the transaction is made.

(3) A unit-holder or a person with an equivalent economic interest shall not be a

counterparty to a transaction with derivative instruments entered into on behalf of a pension

fund.

§ 275. Investment in immovables

(1) Investments in immovables shall not total more than 20 per cent of the market value

of the assets of a voluntary pension fund or more than 10 per cent of the market value of the

assets of a mandatory pension fund.

(2) The acquisition cost of an immovable shall, at the time of acquisition, not total more

than 5 per cent of the market value of the assets of a voluntary pension fund or more than 2

per cent of the market value of the assets of a mandatory pension fund.

Division 5

Other Restrictions on Activities, Violation of Requirements and Compensation for Damage

§ 276. Permissible transactions

(1) If so prescribed by the fund rules or the articles of association of the fund and

provided that the limitations on investment provided for in this Act are observed, a

management company has, on behalf of the fund, the right to:

1) guarantee an issue of securities;

2) take a loan;

3) enter into repurchase or reverse repurchase agreements and conclude other securities-

borrowing transactions.

(2) The fund rules or the articles of association of a fund shall provide for the extent and

terms of taking of loans and assumption of obligations specified in causes (1) 2) and 3) of this

section .

(3) On behalf of a UCITS and a pension fund, it is prohibited to:

1) issue debt securities;

2) grant a loan and assume obligations arising from a contract of suretyship or guarantee

contract, except acquisition of securities which are not paid for in full;

3) borrow from the persons specified in subsections 281 (1) and (2) of this Act;

4) conclude borrowing-transactions pursuant to clause (1) 3) of this section if

performance of the obligation is not covered by the securities in the assets of the fund to the

same extent.

(4) Securities which at the time of entry into the transfer deed do not belong to the assets

of a UCITS shall not be transferred on behalf of the UCITS.

(5) Objects belonging to the assets of a fund shall not be pledged or in other way

encumbered or granted as security except in the case where the objective is to guarantee

performance of a transaction concluded on behalf of the fund or to secure a loan specified in

subsection (1) of this section.

§ 277. Restrictions on borrowing

(1) A management company may, on behalf of a UCITS or a pension fund, take loans and

assume other obligations specified in subsection 276 (1) of this Act in an amount which totals

up to 10 per cent of the market value of the assets of the fund.

(2) The term of a loan taken or obligation assumed on behalf of a UCITS shall not exceed

three months.

(3) On behalf of another open-ended public fund, it is permitted to take loans and assume

obligations specified in subsection 276 (1) of this Act in an amount which totals up to 50 per

cent of the market value of the assets of the fund.

§ 278. Guaranteed fund

(1) A guaranteed fund is a fund in the case of which a credit institution or an insurer

(hereinafter guarantor) assumes an obligation to guarantee that at least 75 per cent of the

value of an initial investment made by an investor is preserved (hereinafter guaranteeing the

rate of return of the value of a fund).

(2) It is prohibited to guarantee a share which is smaller than 75 per cent of the initial

investment.

(3) The rate of return of a mandatory pension fund shall not be guaranteed.

(4) A person who belongs to the same group with a management company or a depositary

of a fund shall not be a guarantor.

(5) A management company or another person shall not grant guarantees concerning the

income, or distributions or dividends from the fund, or make forecasts of the financial

performance of the fund, they shall not offer other guarantees outside the fund on the basis of

the factors relating to the fund, unless the fund meets the requirements for guaranteed funds

provided for in this Division.

(6) Specific rules for guaranteeing the rate of return of the value of a fund shall be

provided for in the fund rules or the articles of association of the fund.

§ 279. Requirements for guaranteed fund

(1) In the case of an open-ended or public fund, the rate of return of the assets of the fund

shall be guaranteed until liquidation of the fund.

(2) If the rate of return of the assets of a fund is not guaranteed any more, the fund shall

be liquidated pursuant to the procedure provided for in Division 10 of Chapter 4 of this Act.

(3) Guaranteed funds shall not be merged.

(4) The Financial Supervision Authority has the right to demand that the issue of the units

of a fund the rate of return of the assets of which is guaranteed be suspended if the guarantee

granted by a guarantee contract is insufficient in order to guarantee the rate of return of the

fund.

(5) In order to protect the interests of the shareholders or unit-holders of a fund, specific

requirements for guaranteed funds and guarantors may be established by a regulation of the

Minister of Finance, taking account of the home state and credit rating of the guarantor.

§ 280. Avoiding conflicts of interest

(1) Participation in the management company that manages a fund or in its subsidiary

shall not be acquired or held on behalf of the fund and securities issued by such persons shall

not be acquired or held on behalf of the fund. The aforementioned does not apply upon

investment in the units and shares of another fund managed by the management company of

the fund.

(2) Participation in companies belonging to the same group of companies as the

management company of a fund and securities issued by such persons shall be acquired on

behalf of the fund only through a regulated market. The aforementioned does not apply to the

acquisition of money market instruments.

(3) The market value of the securities specified in subsection (2) of this section shall not

total more than 5 per cent of the market value of the assets of a pension fund.

(4) An open-ended or public fund shall not be a partner of a general partnership or limited

partnership, a member of a non-profit association or association, or a founder of a foundation.

This limitation does not apply to membership in an apartment association if the fund owns an

apartment ownership.

§ 281. Restrictions on transfer

(1) The assets of a fund shall not be transferred to:

1) the management company of the fund;

2) a member of the management board or supervisory board, or the auditor, fund

manager or an employee of the management company of the fund;

3) a member of the management board or supervisory board of the fund;

4) other funds managed by the management company of the fund, except the transfer of

securities through a regulated market at the market price as at the time of transfer.

(2) The assets of a fund shall not be transferred to persons who have an equivalent

economic interest with persons specified in clauses (1) 1)–3) of this section.

(3) Assets shall not be acquired on behalf of a fund from persons specified in subsections

(1) or (2) of this section.

§ 282. Application of limitations on investment and specifications for risk-spreading

(1) The restrictions on risk-spreading provided for in Divisions 1-4 of this Chapter do not

apply:

1) within nine months after registration of the rules of a fund or entry of a fund founded

as public limited company in the commercial register;

2) within six months after registration of the rules of a UCITS;

3) within eighteen months after registration of the rules of a real estate fund or entry of

the specified fund in the commercial register.

(2) Upon investment of the assts of a UCITS and another open-ended public fund, the

restrictions on risk-spreading provided for in this Chapter need not be observed if subscription

rights are exercised with regard to securities specified in clause 255 (1) 2).

(3) The restrictions on risk-spreading provided for in Divisions 1-4 of this Chapter may

be temporarily exceeded for reasons independent of the management company. Exercising a

right of pre-emption to acquire securities, a bonus issue, a change in the market value of

securities and other such reasons are deemed to be reasons independent of a management

company if the objective of the transactions performed on behalf of a fund is to commence

observance the aforementioned restrictions, taking into account the interests of the

shareholders or unit-holders of the fund.

(4) The requirement provided for in subsection 267 (2) of this Act applies eighteen

months after the foundation of the fund.

(5) The restrictions provided for in subsection 258 (1) and limitations provided for in

subsection 272 (2) of this Act do not apply until eighteen months after the registration of the

rules of a voluntary pension fund, with the exception of cases where the net value of the

assets of the pension fund exceeds 1 200 000 million kroons by the end of the aforementioned

term.

(6) The limitations provided for in subsections 272 (1) and (2) of this Act do not apply

until nine months after the registration of the rules of a mandatory pension fund, with the

exception of cases where the net value of the assets of the pension fund exceeds 3 200 000

million kroons by the end of the aforementioned term.

§ 283. Violation of requirements and compensation for damage

(1) Violation of the requirements provided for in this Chapter upon entry into a

transaction does not render such transaction void, although the management company shall

compensate the fund or the shareholders or unit-holders of the fund for any damage caused by

the violation.

(2) A management company is required to promptly notify the Financial Supervision

Authority in writing of violation and termination of violation of the requirements provided for

in this Chapter.

Chapter 8

Supervision

§ 284. Bases of supervision

(1) The Financial Supervision Authority shall supervise whether the activities of a

management company, funds, third parties to whom the duties of a management company

have been transferred, persons who have a qualifying holding in the management company

and persons engaged in the management of a fund without an activity licence of a

management company comply with the requirements provided for in this Act, the Funded

Pensions Act, the Securities Market Act, the Guarantee Fund Act, the Money Laundering and

Terrorist Financing Prevention Act (RT I 1998, 110, 1811; 2000, 84, 533; 2001, 93, 565;

2002; 53, 336; 63, 387; 2003, 81, 544; 2004, 18, 131), the International Sanctions Act and

legislation issued on the basis thereof.

(2) The Financial Supervision Authority shall supervise whether the activities of a

depositary and third parties to whom the duties of a depositary have been transferred comply

with the requirements provided for in the Credit Institutions Act, the Funded Pensions Act,

the Securities Market Act, this Act and legislation issued on the basis thereof.

(3) The purpose of supervision is to ensure that the foundation or establishment, activities

and dissolution of funds and management companies comply with Acts and other legislation,

with particular attention to protection of the interests and rights of the shareholders or unit-

holders of funds.

(4) The provisions of the Administrative Procedure Act (RT I 2001, 58, 354; 2002, 53,

336; 61, 375; 2003, 20, 117; 78, 527) apply to administrative proceedings prescribed in this

Act, taking account of the specifications provided for in this Act and the Financial

Supervision Authority Act (RT I 2001, 48, 267; 2002, 12, correction notice; 23, 131; 105,

612; 2003, 81, 544).

§ 285. Submission of application of participant in proceeding

(1) A participant in a proceeding shall submit to the Financial Supervision Authority an

application for an authorisation, consent or approval of the Financial Supervision Authority

provided for in this Act or legislation issued on the basis thereof or for the issue of an

administrative act or taking of a measure in writing or in a format which can be reproduced in

writing if the application is accompanied by a digital signature.

(2) In supervisory proceedings, a participant in a proceeding has the right to submit

written questions to witnesses through the Financial Supervision Authority. The Financial

Supervision Authority has the right to refuse to forward questions to witnesses with good

reason.

§ 286. Receipt of information

(1) In order to exercise supervision, the Financial Supervision Authority has the right to

demand information, documents and oral or written explanations without charge concerning

facts which are relevant in the exercise of supervision from the following persons:

1) a management company, a manager or employee of a management company;

2) a manager or employee of a company which belongs to the same group as the

management company;

3) a depositary;

4) a fund founded as a public limited company;

5) a third party to whom the duties of a management company or a depositary have been

transferred;

6) a fund manager;

7) an investor;

8) a management company or a liquidator of a fund or a trustee in bankruptcy;

9) the shareholder of a management company;

10) third parties;

11) a state or local government agency, including a general national register, national

register and the chief processor and authorised processor of a state database.

(2) If necessary, the Financial Supervision Authority may require that a person appear at

the offices of the Financial Supervision Authority at the time designated by the Financial

Supervision Authority in order to provide explanations.

(3) The Financial Supervision Authority may require that a third party reply to the

submitted questions in writing at the time designated by the Financial Supervision Authority.

(4) For the purposes of supervision, the Financial Supervision Authority may require that

a management company or a company belonging to the same group as the management

company, and a third party to whom the duties of a management company or a depositary

have been transferred, a depositary or a fund founded as a public limited company submit

additional information or reports.

(5) If necessary, the Financial Supervision Authority may issue an order whereby the

Authority designates a term for the performance of obligations provided for in subsections

(1)-(4) of this section. The order may contain a warning that upon failure to perform the

obligations within the designated term, a penalty payment may be imposed pursuant to the

procedure provided for in the Substitutive Enforcement and Penalty Payment Act (RT I 2001,

50, 283; 94, 580).


receive from credit institutions information which contains banking secrets concerning a fund,

management company, depositary and investors, and a third party to whom the duties of a

management company or a depositary have been transferred.

(7) For the purposes of supervision, the Financial Supervision Authority has the right to

receive from a third party information concerning a management company or a depositary

without informing the specified management company or depositary of communication of the

information, and the third party is required, upon communication of the information, not to

inform the management company or depositary thereof.

§ 287. Bases for refusal to provide information

(1) The following have the right to refuse to provide information on the basis of

subsections 286 (1)-(4) of this Act:

1) advocates, employees of an advocate's law office and employees of the Bar

Association in respect of circumstances which become known to them in connection with the

provision of legal assistance;

2) notaries, ministers of religion and doctors in respect of circumstances which become

known to them in connection with their professional activities;

3) agencies conducting state statistical surveys in respect of information which becomes

known to them in connection with a survey.

(2) The relatives of the following persons also have the right specified in subsection (1)

of this section, unless they have to provide information in connection with their duties of

employment or official duties:

1) the manager, and the head and employees of the internal audit unit of a management

company;

2) the manager, and the head and employees of the internal audit unit of a company

belonging to the same group as the management company;

3) the manager, and the head and employees of the internal audit unit of a third party

performing the duties of a management company;

4) the manager, and the head and employees of the internal audit unit of a depositary;

5) the manager, and the head and employees of the internal audit unit of a fund founded

as a public limited company;

6) the manager, and the head and employees of the internal audit unit of an investor.

(3) Within the meaning of subsection (2) of this section, the spouse, cohabitee,

ascendants and descendants, adoptive parents and adoptive children and sisters and brothers

are deemed to be relatives.

§ 288. Duties of Financial Supervision Authority

In the exercise of supervision, the Financial Supervision Authority shall:

1) decide on the grant, amendment and revocation of authorisations provided for in this

Act;

2) verify everything relating to the acquisition, increase or reduction of holdings;

3) perform the registrations and approvals provided for in this Act;

4) monitor, upon verification of the submitted reports and other documents and upon

performance of on-site inspections, whether the activities of the management company, fund

and the depositary comply with law;

5) monitor whether the public offer of the shares of a fund and a pension fund scheme of

a Contracting State complies with the requirements provided for in this Act;

6) issue mandatory precepts to a management company, a fund founded as a public

limited company or a depositary when necessary;

7) perform other duties arising from Acts or legislation issued on the basis thereof.

§ 289. Precepts

(1) The Financial Supervision Authority has the right to issue a precept:

1) if violations of the requirements of Acts specified in subsections 284 (1) and (2) of

this Act and legislation established on the basis thereof, the fund rules or the articles of

association of the fund founded as a public limited company are discovered as a result of

supervision;

2) for the prevention of violations specified in clause 1) of this subsection;

3) if the risks assumed by a management company have increased significantly or if

other circumstances emerge which endanger or may endanger the activities of the

management company or the interests of the fund, unit-holders, shareholders or clients or the

reliability of the securities market as a whole.

(2) The recipient of a precept shall, immediately after being notified of the precept,

commence compliance with the precept.

(3) The filing of an appeal or a challenge against a precept and proceedings regarding the

appeal do not suspend the requirement to comply with the precept, unless otherwise provided

by the Financial Supervision Authority.

§ 290. Rights upon issue of precepts

(1) The Financial Supervision Authority has the right, by issuing a precept, to:

1) prohibit certain transactions or activities from being conducted or to establish

restrictions on their volume;

2) prohibit, wholly or partially, payments from the profit of a management company;

3) demand that a management company, if the units or shares of a fund which is

managed by the management company are offered publicly, promptly disclose information, if

the obligation to disclose such information arises from legislation;

4) demand amendment of prospectuses and publication of the amendments if the

prospectuses do not meet the requirements of this Act or other legislation;

5) demand restrictions on the operating expenses of a management company;

6) demand amendment of internal rules or rules of procedure of a management company;

7) demand the removal of the manager of a management company;

8) demand that the auditor of a management company be changed;

9) demand removal of a fund manager;

10) demand that an employee of a management company be suspended from work;

11) demand that performance of the duties of a management company transferred by the

management company to a third party be terminated prematurely;

12) demand that a management company acquire or redeem the units of a fund managed

by the management company;

13) terminate the authority of a management company to manage a fund;

14) demand that the issue or redemption of the units of a common fund be suspended;

15) demand that a management company pay the contributions to the Investor Protection

Sectoral Fund prescribed in the Guarantee Fund Act;

16) make other demands for the implementation of this Act, the Funded Pensions Act, the

Credit Institutions Act, the Commercial Code, the Securities Market Act, the Guarantee Fund

Act, Money Laundering and Terrorist Financing Prevention Act and the International

Sanctions Act.

(2) If the addressee of a precept fails to comply with the precept of the Financial

Supervision Authority, the Financial Supervision Authority may impose a penalty payment

pursuant to the procedure provided for in the Substitutive Enforcement and Penalty Payment

Act.

(3) In addition to the provisions of subsection (2) of this section, if the addressee of the

precept fails to comply with the precept of the Financial Supervision Authority, the Financial

Supervision Authority may apply other measures prescribed by this Act, including:

1) revocation of the activity licence of the management company;

2) revocation of the authorisation for the foundation of a branch;

3) demanding the removal of a manager of the management company by a court.

§ 291. Calling meeting of directing bodies

(1) In order to protect the interests of the shareholders or unit-holders of a fund, the

Financial Supervision Authority has the right to issue a precept to a management company:

1) to call a meeting of the supervisory board or management board of the management

company;

2) to call a general meeting of the unit-holders of a common fund if the general meeting

is prescribed by law or the fund rules;

3) to call a general meeting of the management board, supervisory board or the general

meeting of shareholders of a fund founded as a public limited company;

4) to include an issue on the agenda of a meeting of the management board or

supervisory board of the management company or a general meeting of unit-holders or

shareholders if this is necessary in the opinion of the Financial Supervision Authority.

(2) On the basis of its precept, the Financial Supervision Authority has the right to send a

representative of the Financial Supervision Authority to the meetings specified in subsection

(1) of this section. A precept shall be communicated not later than on the working day before

the date of the meeting. At the meeting, the representative of the Financial Supervision

Authority has the right to present positions, make proposals and demand the recording thereof

in the minutes of the meeting.

§ 292. On-site inspection


carry out on-site inspection at the seat or place of business of a management company,

depositary, fund founded as a public limited company and a third party to whom the duties of

a management company or a depositary have been transferred.

(2) An on-site inspection shall be carried out if:

1) it is necessary to check whether the information submitted corresponds to reality;

2) the Financial Supervision Authority suspects that the provisions of legislation

specified in subsections 284 (1) and (2) of this Act have been violated;

3) it is necessary to execute supervisory duties.

(3) In order to carry out an on-site inspection, the Financial Supervision Authority shall

issue a precept which sets out the purpose, extent, duration of the period and time of the

inspection. The precept shall be delivered to the person to be inspected at least three working

days before the on-site inspection is commenced, unless giving such notice damages

attainment of the objectives of the inspection. An on-site inspection shall be carried out by an

employee authorised by the Financial Supervision Authority, unless otherwise prescribed in

this Act.

(4) In the course of an on-site inspection, inspectors have the right to:

1) enter all premises, in compliance with the security requirements in force with regard

to the person being inspected;

2) use a separate room necessary for their work;

3) study documents and media necessary for exercising supervision, make excerpts and

copies thereof and monitor the work processes;

4) obtain oral and written explanations from the managers and employees of the

management company.

(5) The management of a person being inspected is required to appoint a competent

representative in whose presence the inspection is carried out and who shall provide the

person carrying out the inspection with documents and other information necessary for the

performance of his or her duties, including the auditor's report concerning the reports of the

person being inspected and the special reports of the auditor, and provide necessary

explanations with regard to such documents and information.

§ 293. Report concerning on-site inspection

(1) An inspector is required to prepare a report concerning the results of the inspection

within two months after completion of the on-site inspection and the Financial Supervision

Authority shall promptly communicate the report to the person being inspected.

(2) The manager and an employee of a person being inspected have the right to provide

oral explanations within one month after the date of delivery of the report.

(3) After hearing the oral explanations of the person being inspected, but not later than

within four months after the on-site inspection is completed, the Financial Supervision

Authority shall prepare a final report which is delivered to the person being inspected.

(4) In the event of disagreement with the facts indicated in a report, the person being

inspected has the right to append a written dissenting opinion to the report.

(5) If, after the on-site inspection or the oral explanations of the person being inspected,

additional circumstances become evident or the Financial Supervision Authority obtains

additional information, the term for preparation of the report of the Financial Supervision

Authority or a final report specified in subsection (3) of this section may be extended by up to

two months, and the new term for preparation of the report or the final report shall be

communicated to the person being inspected and the reason for extension of the initial term

shall be indicated.

§ 294. Assessment and special audit in supervisory proceedings

(1) The Financial Supervision Authority may involve experts in proceedings in the cases

where expertise is required to ascertain facts which are relevant to the matter.

(2) The Financial Supervision Authority has the right to demand a special audit if:

1) the reports or information submitted to the Financial Supervision Authority or the

public are misleading or incorrect;

2) transactions have been concluded which may result or have resulted in significant

damage to a management company, a fund or the shareholders or unit-holders of a fund;

3) other issues relevant to the financial situation of a management company, depositary

or a company belonging to their consolidation group or a fund founded as a public limited

company need additional clarification in the supervisory proceedings.

(3) The Financial Supervision Authority shall involve an expert or, for a special audit, an

auditor on its own initiative or at the request of a participant in the proceeding. The name of

an expert or auditor and the reasons for involvement of the expert or auditor shall be

communicated to a participant in the proceeding before involvement of the expert or auditor,

unless proceedings regarding the matter need to be conducted quickly or communication of

the information may impede attainment of the objectives of the assessment or special audit.

(4) If an expert or an auditor who performs a special audit ascertains facts relevant in the

supervision proceedings and the Financial Supervision Authority did not directly assign the

task of ascertaining these facts to the expert or auditor, the expert or auditor shall also provide

his or her opinion or assessment with regard to the facts.

(5) An expert or an auditor who performs a special audit has the right to exercise all

rights provided for in subsection 292 (4) of this Act and make proposals to the Financial

Supervision Authority and participants in proceedings for the submission of additional

information and documents. The expert is required to maintain the confidentiality of any

confidential information which becomes known to him or her in connection with performance

of the duties of an expert.

(6) Costs related to the conduct of an assessment or a special audit shall be covered from

the budget of the Financial Supervision Authority. If an expert or auditor is involved at the

request of a participant in the proceeding, costs related to the conduct of an assessment or a

special audit shall be covered by the participant in the proceeding.

§ 295. Requirement to notify Financial Supervision Authority

(1) A management company is promptly required to notify the Financial Supervision

Authority of changes in any information or circumstances which were of material importance

in the decision to issue the activity licence of the management company, and shall submit the

following information and documents:

1) the business name or address of the seat of the management company or, in the case

of changes in details, a new business name, address of the seat and new details;

2) upon changes in the share capital of the management company, the amount of share

capital and the date of making the entry;

3) upon changes in the articles of association of the management company, the

amendments to and the amended text of the articles of association;

4) upon changes in the internal rules of the management company, the amended internal

rules;

5) upon a change of managers, information specified in clause 14 (1) 6) of this Act;

6) upon a change of auditors, information specified in clause 14 (1) 7) of this Act;

7) upon a change of a fund manager, a copy of the decision specified in subsection 55 (1)

of this Act and information specified in clause 14 1) 8) of this Act if the management

company has not submitted the specified information to the Financial Supervision Authority

earlier;

8) upon a change of shareholders, information specified in clause 14 (1) 9) of this Act.

(2) A management company is promptly required to notify the Financial Supervision

Authority of changes in any circumstances which were of material importance in the

registration of the rules of a common fund, and shall give notification:

1) if the type of the fund is changed, of the type of the fund;

2) upon a change of auditors of the fund, of information specified in clause 14 (1) 7) of

this Act.

(3) A fund founded as a public limited company is promptly required to inform the

Financial Supervision Authority of changes in any information or circumstances which were

of material importance in the approval of the articles of association of the fund founded as a

public limited company, and shall submit the following information and documents:

1) upon changes in the share capital, the amount of share capital and the date of making

the entry;

2) upon changes in the articles of association, the amendments to and the amended text

of the articles of association;

3) upon changes in the management contract, the amendments to and the amended text

of the management contract;

4) information on termination of the management contract;

5) if the fund founded as a public limited company has a depositary, upon changes in the

depositary contract, the amendments to and the amended text of the depositary contract;

6) upon a change of member of the management board or supervisory board of the fund

founded as a public limited company, information specified in clause 193 82) 5) of this Act;

7) upon a change of auditors, information specified in clause 193 (2) 6) of this Act.

(4) At the request of the Financial Supervision Authority, a management company or a

fund founded as a public limited company shall promptly disclose the information specified in

subsections (1)-(3) of this section.

(5) The Financial Supervision Authority shall publish the information specified in this

section on its web site.

(6) The exact list of information specified in this section shall be established by a


§ 296. Supervision over management company providing services in foreign state

(1) If a management company whose branch is founded in a foreign state or which

provides cross-border services in a foreign state violates the requirements of legislation

established in a third country or a Contracting State, the Financial Supervision Authority shall

promptly apply measures for termination of the violation on the proposal of the financial

supervision authority of the third country or Contracting State. The Financial Supervision

Authority shall inform the financial supervision authority of the third country or Contracting

State of the applied measures.


authority of the third country or the Contracting State where the branch of a management

company is founded or where a management company provides cross-border services of

revocation of an activity licence of the management company, an authorisation for the

foundation of a branch in a foreign state or a decision specified in subsection 30 (2) of this

Act.

(3) A branch of a management company or a management company which provides

cross-border services shall, at the request of the financial supervision authority of a third

country or a Contracting State, submit information which is necessary for the exercise of

supervision over the activities of the management company in the state. The Financial

Supervision Authority shall cooperate with the financial supervision authority of the third

country or the Contracting State in order to ensure performance of the obligations of the

management company specified in this subsection.

§ 297. Supervision over foreign management company providing services in

Estonia

(1) The Financial Supervision Authority may demand that a management company of a

third country or a Contracting State which provides its services in Estonia submit additional

information and documents which are necessary for the exercise of supervision over the

management company.

(2) A management company which provides services in Estonia and whose activity

licence is suspended or revoked by the financial supervision authority of a third country or a

Contracting State shall not provide services in Estonia.

(3) If a management company of a third country which provides services in Estonia

violates the requirements provided for in this Act or other legislation, the Financial

Supervision Authority may apply measures necessary for the termination of the violation or

revoke the authorisation for the foundation of a branch or for the provision of cross-border

services.

(4) The Financial Supervision Authority may demand that a management company of a

Contracting State which has founded a branch is Estonia or provides cross-border services in

Estonia terminate violation of the requirements provided for in Acts or legislation established

on the basis thereof.

(5) If a management company of a Contracting State specified in subsection (4) of this

section continues to violate the requirements provided for in legislation, the Financial

Supervision Authority shall inform the financial supervision authority of the Contracting State

thereof.

(6) If the measures applied by a financial supervision authority of a Contracting State are

insufficient and the management company of the Contracting State continues to violate the

requirements provided for in legislation, the Financial Supervision Authority may in turn, by

its precept, apply measures provided for in this Act for the termination of the violation or

prohibit the activities of the management company of the Contracting State in Estonia and

shall inform the financial supervision authority of the Contracting State thereof beforehand.

(7) The Financial Supervision Authority shall inform the management company of the

Contracting State of the measures applied thereby.

(8) In exceptional cases, the Financial Supervision Authority may, in order to protect

investors or the public interest, apply measures with regard to a management company of a

Contracting State which violates the requirements provided for in legislation without advance

notice to the financial supervision authority of the Contracting State of the measures.

(9) The Financial Supervision Authority shall promptly inform the European Commission

and the financial supervision authority of a Contracting State of application of the measures

specified in subsections (6) or (8) of this section.

§ 298. Supervision over public offer of units or shares of foreign fund in Estonia

(1) The Financial Supervision Authority shall exercise supervision over the compliance

of the public offer of the units or shares of a foreign fund in Estonia with the conditions

provided for in this Act and other legislation.

(2) If, upon the public offer or marketing of the units of shares of a foreign fund, the

requirements provided for in this Act or other legislation are violated, the Financial

Supervision Authority may prohibit the pubic offer of the units or shares of the foreign fund

in Estonia or apply measures for termination of the violation.


authority of the Contracting State of application of measures.

§ 299. Suspension of offer

(1) The Financial Supervision Authority may, by its precept, suspend the public offer of

the units or shares of a foreign fund in Estonia if:

1) the offer does not comply with the requirements provided for in this Act or other

legislation;

2) upon application for the registration of the offer, upon giving notification of the offer

or during the offer, incorrect, misleading or contradictory information have been submitted or

the information is not submitted in due time;

3) the re-purchase or redemption of the units or shares in the home state is suspended;

4) the fund, foreign management company or the distributor of the units or shares of the

fund submits or publishes incorrect, misleading or contradictory information, advertising or

reports concerning the fund;

5) the terms and conditions prescribed in the prospectuses are not complied with upon

the offer of the units or shares of the fund;

6) the requirements of this Act have been violated upon the re-purchase or redemption of

the units or shares;

7) information contained in the prospectuses which are in Estonian and offer the units of

a UCITS of a Contracting State is different from information contained in the prospectuses

published in the Contracting State.

(2) When suspending an offer, the Financial Supervision Authority shall issue a precept

to oblige the offerer to eliminate the circumstances causing the suspension of the offer. After

eliminating such circumstances, the offerer may resume the offer with the permission of the

Financial Supervision Authority.

§ 300. Supervision over offer of pension fund scheme

(1) The Financial Supervision Authority has the right to exercise supervision over the

compliance of an offer of a pension fund scheme with the requirements provided for in

subsection 235 (3) or 236 (1) of this Act and demand that reports on a regular or individual

basis be submitted on the pension fund scheme.

(2) If the requirements provided for in subsection 235 (3) or 236 (1) of this Act are

violated upon an offer of a pension fund scheme, the Financial Supervision Authority shall

inform the financial supervision authority of the Contracting State thereof.


insufficient and the offerer of a pension fund scheme continues to violate the requirements

provided for in subsection 235 (3) or 236 (1) of this Act, the Financial Supervision Authority

may, in turn, apply measures for the termination of the violation or prohibit the offer of the

pension fund scheme in Estonia.

(4) The Financial Supervision Authority shall inform the financial supervision authority

of the Contracting State of the measures applied thereby beforehand.


investors or the public interest, apply measures with regard to an offerer of a pension fund

scheme which violates the requirements provided for in subsection 235 (3) or 236 (1) of this

Act without advance notice to the financial supervision authority of the offerer concerning the

measures.


and the financial supervision authority of the Contracting State of application of the measures

specified in subsection (5) of this section.

§ 301. Upper limit for penalty payment

(1) In the event of failure to comply or inappropriate compliance with a precept issued

pursuant to this Act or another administrative act, the Financial Supervision Authority has the

right to impose a penalty payment pursuant to the procedure provided for in the Substitutive

Enforcement and Penalty Payment Act.

(2) In the event of failure to comply or inappropriate compliance with an administrative

act, the upper limit for a penalty payment is, in the case of a natural person, up to 18 000

kroons for the first occasion and altogether up to 50 000 kroons for each subsequent occasion

to enforce the performance of the same obligation and, in the case of a legal person, up to 50

000 kroons for the first occasion and altogether up to 500 000 kroons for each subsequent

occasion to enforce the performance of the same obligation.

Chapter 9

Liability

§ 302. Violation of requirements for offer of units of common fund

(1) The public offer of the units of a common fund without registration of the fund rules

or prospectuses or without publication of the prospectuses is punishable by a fine of up to 300

fine units.

(2) The same act, if committed by a legal person, is punishable by a fine of up to 50 000

kroons.

§ 303. Violation of requirements for offer of units of foreign fund

(1) The public offer of the units of a foreign fund without registration of the offer, upon

failure to give notification of the offer or without publication of the prospectuses is

punishable by a fine of up to 300 fine units.


kroons.

§ 304. Violation of requirement to notify investors on equal basis

(1) Violation of the requirement to inform all potential investors on an equal basis during

an offer of units of a common fund is punishable by a fine of up to 300 fine units.


kroons.

§ 305. Violation of requirements for advertising

(1) Publication of misleading or incomplete advertising or information about a public

offer of the units of a common fund or presentation of information which has not been

presented in the prospectuses in an advertisement or in other manner is punishable by a fine

of up to 300 fine units.


kroons.

§ 306. Violation of guarantee requirements

(1) Violation of a prohibition on guaranteeing the rate of return of a mandatory pension

fund or other requirements for guaranteeing the rate of return of a fund is punishable by a fine

of up to 300 fine units.


kroons.

§ 307. Failure to submit mandatory reports, documents and information

(1) A fine in the amount of up to 300 fine units is imposed on the manager or an

employee of a management company or of a fund founded as a public limited company for

failure to submit or publish, or for incomplete submission or publication of or failure to

submit or publish on a timely basis mandatory reports, documents, explanations or

information to the Financial Supervision Authority, or documents or information to the unit-

holders of a fund managed by the management company or to the public; or for submission of

false or misleading information in such reports.


kroons.

§ 308. Violation of procedure for acquisition of qualifying holding in

management company

(1) Acquisition or transfer of qualifying holding in a management company which is

contrary to a precept specified in subsection 47 (2) of this Act and issued by the Financial

Supervision Authority or acquisition or transfer of qualifying holding upon failure to inform

the Financial Supervision Authority thereof pursuant to the provisions of this Act is



kroons.

§ 309. Exploitative abuse of assets of fund

(1) A fine in the amount of up to 300 kroons is imposed on the manager or an employee

of a management company for covering expenses from the account of a fund which were not

determined in the rules of a common fund or in the management contract of a fund founded as

a public limited company, and which were not directly related to management of the fund; for

violation of the limitations prescribed by law in the investment of fund assets; for the

violation of the restrictions prescribed in the rules of a common fund or in the management

contract of a fund founded as a public limited company, for the transfer of fund assets in

violation of law or for the guarantee of an issue of securities on behalf of a fund if such

possibility is not prescribed by the articles of association of the fund or the fund rules.


kroons.

§ 310. Violation of procedure for issue or redemption of units

A fine in the amount of up to 50 000 kroons is imposed on a management company for the

issue or redemption of units of a common fund upon liquidation of the fund or during a period

when redemption is suspended; or for the acquisition, without the permission or consent of

the Financial Supervision Authority, of the units or shares of other funds managed by the

management company of the fund; or for other violation of the procedure for the issue or

redemption of units which is provided by law; or on a pension management company for the

acquisition or redemption, without the permission of the Financial Supervision Authority, of

units of the pension fund managed by the pension management company.

§ 311. Violation of suspension of public offer of units and shares of foreign fund

(1) Violation of suspension of a public offer of the units or shares of a foreign fund is



kroons.

§ 312. Violation of requirements for management company

A fine in the amount of up to 50 000 kroons is imposed on a management company for failure

to perform the obligations provided for in this Act, including failure to perform the

obligations of a management company upon provision of investment services, for failure to

perform the obligation to keep the assets of a fund separate from the assets of the

management company, for transfer of the duties of a management company to a third party

without basis, for the incorrect calculation of the net asset value of a fund or a share or unit of

a fund or for the publication of an incorrect net asset value and for failure to perform any

other obligation arising from this Act, the Funded Pensions Act or legislation issued on the

basis thereof.

§ 313. Violation of requirements for manager of management company

A fine in the amount of up to 300 fine units is imposed on the manager of a management

company for violation of the obligations provided for in this Act, including failure to ensure

sufficient protection of the interests of the shareholders or unit-holders and clients of funds

managed by the management company.

§ 314. Violation of requirements for fund manager

A fine in the amount of up to 300 fine units is imposed on a fund manager for violation of the

obligations provided for in this Act, including failure to operate in the best interests of the

shareholders or unit-holders of a fund managed by the management company.

§ 315. Violation of prudential requirements

A fine of up to 50 000 kroons is imposed on a management company which violates the

prudential requirements provided for in this Act or on the basis thereof.

§ 316. Violation of requirements for activities of foreign management company

(1) A fine in the amount of up to 300 fine units is imposed on the manager or an

employee of a foreign management company for offering its services in Estonia without the

permission of the Financial Supervision Authority or for violation of the requirements of this

Act established with regard to the activities of foreign management companies.


kroons.

§ 317. Violation of obligations of depositary

A fine of up to 50 000 kroons is imposed on a depositary for failure to give notification of

violations during the liquidation proceedings of a common fund or of non-compliance of the

activities of a management company with legislation, the fund rules or the articles or

association or management contract of the fund and for other violation of the obligations

imposed on the depositary in this Act, the Funded Pensions Act or legislation issued on the

basis thereof.

§ 318. Violation of obligations of liquidator

(1) A fine of up to 300 fine units is imposed on a liquidator for violation of the

obligations arising from this Act or the Commercial Code during the liquidation proceedings

of a common fund or a fund founded a public limited company.


kroons.

§ 319. Proceedings

(1) The provisions of the General Part of the Penal Code (RT I 2001, 61, 364; 2002, 86,

504; 82, 480; 105, 612; 2003, 4, 22; 83, 557; 90, 601; 2004, 7, 40) and of the Code of

Misdemeanour Procedure (RT I 2002, 50, 313; 110, 654; 2003, 26, 156; 83, 557; 88, 590)

apply to the misdemeanours provided for in §§ 302-318 of this Act.

(2) Extra-judicial proceedings concerning the misdemeanours provided for in this Act

shall be conducted by the Financial Supervision Authority.

Chapter 10

Amendment of Legislation Currently in Force

§ 320. Amendment of Securities Market Act

The Securities Market Act (RT I 2001, 89, 532; 2002, 23, 131; 63, 387; 102, 600; 105, 612;

2003, 81, 544; 88, 591) is amended as follows:

1) clause 45 3) is amended and worded as follows:

«3) a management company to the extent prescribed in the Investment Funds Act (RT I

2004, 36, 251);”;

2) clause 47 (2) 2) is repealed;

3) subsection 132 (1) is amended and worded as follows:

«(1) Each person of Estonia or of a foreign state which provides investment services

within the meaning of clauses 43 3) and 4) of this Act pursuant to a valid activity licence has

the right to participate in a market if the person complies with the requirements which are

equivalent to the provisions of the Council Directive 93/6/EEC (OJ L 141, 11.06.1993, p. 1–

26) on capital adequacy of investment firms and credit institutions, and meets the conditions

provided for in this Act, legislation established on the basis thereof and the rules and

regulations established by the operator and if the securities market supervisory agency of

Estonia or a foreign state exercises supervision over the person.”;

4) section 132 is amended by adding subsection (11) worded as follows:

«(11) Everyone meeting the conditions provided for in this Act, legislation established on

the basis thereof and the rules and regulations established by the operator may put issued

securities on the market for trading.”;

5) the existing text of § 166 is considered subsection (1) and the section is amended by

adding subsection (2) worded as follows:

«(2) A person who has made a takeover bid for all shares of the target issuer for the fair

purchase price and has, as a result of the bid, gained dominant influence over the target issuer

does not have the obligation to make a takeover bid provided for in subsection (1) of this

section.”;

6) clauses 221 (2) 1) and 2) are amended and worded as follows:

«1) a credit institution or a branch of a foreign credit institution within the meaning of the

Credit Institutions Act or a foreign credit institution which holds a valid activity licence and

complies with the requirements which are equivalent to the provisions of the Council

Directive 93/6/EEC (OJ L 141, 11.06.1993, p. 1–26) on capital adequacy of investment firms

and credit institutions, and meets the conditions provided for in this Act, legislation

established on the basis thereof and the system rules established by the system operator and

over which a securities market supervisory agency of a relevant foreign state exercises

supervision;

2) an investment firm or a branch of a foreign investment firm and a person providing

cross-border investment services within the meaning of this Act or a foreign investment firm

which complies with the requirements which are equivalent to the provisions of the Council

Directive 93/6/EEC (OJ L 141, 11.06.1993, p. 1–26) on capital adequacy of investment firms

and credit institutions, and meets the conditions provided for in this Act, legislation

established on the basis thereof and the system rules established by the system operator and

over which a securities market supervisory agency of a relevant foreign state exercises

supervision;”.

§ 321. Amendment of State Fees Act

The State Fees Act (RT I 1997, 80, 1344; 2001, 55, 331; 53, 310; 56, 332; 64, 367; 65, 377;

85, 512; 88, 531; 91, 543; 93, 565; 2002, 1, 1; 18, 97; 23, 131; 24, 135; 27, 151 and 153; 30,

178; 35, 214; 44, 281; 47, 297; 51, 316; 57, 358; 58, 361; 61, 375; 62, 377; 90, 519; 102, 599;

105, 610; 2003, 4, 20; 13, 68; 15, 84 and 85; 20, 118; 21, 128; 23, 146; 25, 153 and 154; 26,

156 and 160; 30, correction notice; 51, 352; 66, 449; 68, 461; 71, 471; 78, 527; 79, 530; 81,

545; 88, 589 and 591; 2004, 2, 7; 6, 31; 9, 52 and 53; 14, 91 and 92; 18, 131 and 132; 20,

141) is amended as follows:

1) subsections 77 (2)-(4) are repealed and § 77 is amended by adding subsection (5)

worded as follows:

«(5) A state fee of 10 000 kroons shall be paid upon application for an authorisation for the

foundation in Estonia of a branch of a management company registered in a foreign state or

for the provision of cross-border services in Estonia by a foreign management company.”;


«(3) A state fee of 10 000 kroons shall be paid upon application for the registration of a

public offer of the units or shares of a foreign fund or upon giving notification of the public

offer of the units or shares of a fund of a Contracting State.”;

3) sections 80-82 are repealed.

§ 322. Amendment of Income Tax Act

The Income Tax Act (RT I 1999, 101, 903; 2001, 11, 49; 16, 69; 50, 283; 59, 359; 79, 480;

91, 544; 2002, 23, 131; 41, 253; 44, 284; 47, 297; 62, 377; 111, 662; 2003, 18, 105; 58, 387;

82, 549; 88, 587 and 591) is amended as follows:

1) subsection 15 (4) is amended by adding clause 11) worded as follows:

«11) income from the exchange of units of an investment fund of a Member State of the

European Union pursuant to the procedure provided for in §§ 153 and 154 of the Investment

Funds Act (RT I 2004, 36, 251).”;


«(9) The acquisition cost of the units of an investment fund which are transferred in the

course of an exchange is deemed to be the acquisition cost of the units acquired upon the

exchange of the units of an investment fund specified in clause 15 (4) 11) of this Act.”

§ 323. Amendment of Financial Supervision Authority Act

The Financial Supervision Authority Act (RT I 2001, 48, 267; 2002, 12, correction notice; 23,

131; 105, 612; 2003, 81, 544) is amended as follows:

1) in subsection 2 (1), the words “the Investment Funds Act (RT I 1997, 34, 535; 1998,

61, 979; 2000, 10, 55; 57, 373)” are substituted by the words “the Investment Funds Act (RT I

2004, 36, 251)” and the words “the Funded Pensions Act (RT I 2001, 79, 480; 2002, 23,

131)” are substituted by the words “the Funded Pensions Act (RT I 2004, 37, 252)”;

2) section 47 is amended by adding subsections (5) and (6) worded as follows:

«(5) The Inspectorate shall submit an overview of the decisions specified in subsection 30

(2) of the Investment Funds Act on refusal to forward documents and information to the

financial supervision authority of a Contracting State to the European Commission in every

two years.

(6) The Inspectorate shall submit a list of decisions specified in subsections 297 (6) and

(7) of the Investment Funds Act which prohibit the activities of a management company of a

Contracting State in Estonia to the European Commission in every two years.”

§ 324. Amendment of Guarantee Fund Act

The Guarantee Fund Act (RT I 2002, 23, 131; 57, 357; 102, 600) is amended as follows:

1) clause 43 (1) 3) is amended and worded as follows:

«3) management companies which have been granted the right specified in clause 13 (1)

1) of the Investment Funds Act (RT I 2004, 36, 251).”;


«(2) An investment institution shall pay the single contribution within one month after

notification of the resolution to issue an activity licence or grant the corresponding right to the

investment institution.”;

3) clause 55 (1) 3) is amended and worded as follows:

«3) the date of invalidation of the activity licence of a management company or

revocation of the right specified in clause 13 (1) 1) of the Investment Funds Act, if the

activity licence is invalidated on the basis of the failure by the management company to

perform its obligations related to investments;”.

§ 325. Amendment of Support of Enterprise and State Loan Guarantees Act

Clause 12 (2) 7) of the Support of Enterprise and State Loan Guarantees Act (RT I 2003, 18,

96; 88, 591) is amended and worded as follows:

«7) shares in an investment fund registered in Estonia on the basis of the Investment

Funds Act (RT I 2004, 36, 251) or an investment fund registered in a state of Zone A of the

Organisation for Economic Co-operation and Development;”.

§ 326. Amendment of State Export Guarantees Act

Clause 18 (2) 7) of the State Export Guarantees Act (RT I 2003, 1, 2) is amended and worded

as follows:




§ 327. Amendment of Insurance Activities Act

Clause 41 (3) 7) of the Insurance Activities Act (RT I 2000, 53, 343; 2001, 43, 238; 48, 268;

59, 359; 87, 529; 93, 565; 2002, 35, 215; 63, 387; 102, 600; 105, 612; 2003, 17, 95; 2004, 14,

90) is amended and worded as follows:




§ 328. Amendments to the Credit Institutions Act

The Credit Institutions Act (RT I 1999, 23, 349; 2002, 17, 96; 21, 117; 23, 131; 53, 336; 63,

387; 102, 600; 105, 612; 2003, 17, 95; 23, 133; 81, 544) is amended as follows:

1) in the entire text of the Act, the words “foreign” and “foreign states” [välismaa] shall

be substituted by the words “foreign” and “foreign states” [välisriik] in the appropriate case

form;

2) in the entire text of the Act, the word combination “member state of the European

Union” or the word “member state” shall be substituted by the words “Contracting State” in

the appropriate case form;

3) in the entire text of the Act, the words “banking supervision” shall be substituted by

the words “financial supervision” in the appropriate case form;


«(2) This Act also applies to subsidiaries, branches and representative offices of

Estonian credit institutions in foreign states, unless otherwise prescribed by the

legislation of the state where they are registered, and to subsidiaries, branches and

representative offices of foreign credit institutions in Estonia, unless otherwise

provided by international agreements entered into by Estonia.”;


«(4) A foreign credit institution may operate in Estonia under a business name which is

registered in a state where the institution is founded (hereinafter home state) if the name is

clearly distinguishable from other business names entered in the commercial register in

Estonia. If there is any danger that a business name is not clearly distinguishable from the

business names of other credit institutions operating in Estonia, the Financial Supervision

Authority has the right to demand that such business name be accompanied by an attribute.”;

6) the second sentence of subsection 14 (2) is amended and worded as follows:

“The applicant shall be promptly notified of the decision.”;

7) the Act is amended by adding § 191 worded as follows:

«§ 191. Bases of activities of credit institution in foreign state

(1) A credit institution founded in Estonia and holding an activity licence issued by the

Financial Supervision Authority may provide services specified subsection 6 (1) of this Act in

a foreign state by establishing branches or providing cross-border services.

(2) Upon provision of services in a foreign state, a credit institution shall comply with the

requirements provided for in this Act, legislation issued on the basis thereof and legislation of

the foreign state.

(3) Cross-border services are services of a credit institution which the institution provides

in a state where the credit institution or a branch thereof is not registered.

(4) The provisions of subsections 20 (7) and (8), §§ 201–205 and § 971 of this Act apply

to the provision of services by credit institutions of Estonia in another Contracting State.

(5) The provisions of § 20, subsection 204 (1) and § 971 of this Act apply to the

provision of services in foreign states not specified in subsection (4) of this section.”;


«(3) The Financial Supervision Authority shall inform the foreign financial supervision

authority of a submitted application within three months as of the receipt of the application or

additional information and documents specified in subsection (2) of this section.”;


«(51) The Financial Supervision Authority shall inform the foreign financial supervision

authority of grant of an authorisation and shall co-ordinate the principles of supervision and

liability.”;

10) section 201 is amended and worded as follows:

«§ 201. Specifications for foundation of branch of credit institution in Contracting State

(1) A credit institution which wishes to found its branch in another Contracting State

shall inform the Financial Supervision Authority of its intention and submit an application

together with the information and documents provided for in clauses 20 (1) 1), 2), 4) and 5) of

this Act to the Financial Supervision Authority.

(2) The Financial 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

financial supervision authority of the corresponding Contracting State within three months

after receipt of the application, but not later than within three months after receipt of all the

required information and documents. In addition to the provisions of subsection 20 (3) of this

Act, the Financial Supervision Authority shall submit information concerning the amount of

own funds and the capital adequacy indicator of the credit institution.

(3) If the information or documents submitted upon application do not comply with the

requirements provided for in this Act or legislation established on the basis thereof, or if the

information or documents are incorrect, misleading or incomplete, or if, upon application, the

data, documents or information required by the Financial Supervision Authority have not

been submitted within the prescribed term, or if the credit institution has refused to submit the

data, information or documents, the Financial Supervision Authority may refuse to review the

application.

(4) The Financial Supervision Authority shall promptly inform the credit institution of a

decision specified in subsection (2) of this section.

(5) Having regard to the conditions provided for in the legislation of a Contracting State

and established by the financial supervision authority of the Contracting State, a credit

institution may found a branch in the Contracting State two months after the date when the

Financial Supervision Authority forwards the documents and information specified in

subsection 20 (1) of this section to the financial supervision authority of the Contracting State.

(6) A credit institution shall inform the Financial Supervision Authority and the financial

supervision authority of a Contracting State of changes in the circumstances or information

specified in clauses 20 (1) 2)-4) and 5) of this Act at least one month in advance.

(7) If the circumstances or information specified in clauses 20 (1) 2), 4) and 5) of this Act

are changed or the financial supervision authority of a Contracting State has informed the

Financial Supervision Authority that a credit institution has committed a violation of the

conditions provided for in the legislation of the Contracting State and established by the

financial supervision authority of the Contracting State, the Financial Supervision Authority

may revoke a decision specified in subsection (2) of this section on the basis specified in §

203 of this Act. The Financial Supervision Authority shall promptly inform the credit

institution of the decision. After becoming aware of revocation of the aforementioned

decision, the credit institution shall terminate provision of its services through the branch

founded in the Contracting State not later than by the due date specified by the Financial

Supervision Authority.”;

11) section 202 is repealed;

12) the Act is amended by adding §§ 203-206 worded as follows:

«§ 203. Bases for refusal to forward documents and information

The Financial Supervision Authority may make a decision to refuse to forward the

information and documents specified in subsection 201 (1) of this Act if:

1) the information or documents submitted upon application do not meet the

requirements provided for in this Act or legislation established on the basis thereof or are


2) the financial situation, organisational structure or other resources of the credit

institution are insufficient for the provision of services specified in the business plan in a

Contracting State;

3) the foundation of the branch or implementation of the business plan submitted by the

credit institution may damage the interests of its clients, the financial situation or reliable

activities of the credit institution;

4) a financial supervision authority of a Contracting State has no legal basis or

possibilities for cooperation with the Financial Supervision Authority due to which the

Financial Supervision Authority cannot exercise sufficient supervision over the branch

located in the Contracting State.

§ 204. Provision of cross-border services

(1) A credit institution which intends to provide cross-border services in a foreign state

shall inform the Financial Supervision Authority thereof and indicate which transactions and

acts listed in subsection 6 (1) of this Act the credit institution intends to conclude and

perform.

(2) If a credit institution intends to provide cross-border services in a Contracting State,

the Financial Supervision Authority shall inform the financial supervision authority of the

corresponding Contracting State thereof within one month after the receipt of the notice

specified in subsection (1) of this section.

(3) After expiry of the term specified in subsection (2) of this section, a credit institution

which intends to provide cross-border services in a Contracting State may commence

provision of cross-border services in the Contracting State having regard to the conditions



§ 205. Branch of financial institution belonging to consolidation group of credit institution

and provision of cross-border services in Contracting State

(1) The provisions of §§ 201–204 and § 971 of this Act apply regarding a financial

institution of Estonia which is a subsidiary of a credit institution or jointly controlled by two

or more credit institutions and the articles of association of which permit the conclusion of

transactions and performance of acts specified in clauses 6 (1) 2)-12) of this Act, and which

wishes to found a branch and provide cross-border services in a Contracting State, unless


(2) A parent credit institution of a financial institution shall apply for a written

confirmation from the Financial Supervision Authority regarding a financial institution

specified in subsection (1) of this section which wishes to found a branch in a Contracting

state or offer cross-border services and the written confirmation shall indicate that the

financial institution meets the following requirements:

1) the parent undertaking or undertakings hold an activity licence issued by the Financial

Supervision Authority for acting as a credit institution;

2) the financial institution concludes the transactions and performs the acts specified in

clauses 6 (1) 2)-12) of this Act in a Contracting State;

3) the parent undertaking or undertakings hold at least 90 per cent of the votes

represented by shares or units of the financial institution;

4) the parent undertaking or undertakings ensure the prudent management of the

financial institution;

5) the parent undertaking or undertakings have stated that they solidarily guarantee

performance of the obligations assumed by the financial institution;

6) together with the parent undertaking or all its parent undertakings, the financial

institution is subject to supervision on a consolidated basis, in particular regarding the

transactions and acts specified in clauses 6 (1) 2)-12) of this Act and concerning limitations

on investments, capital adequacy and limitations on concentration of exposures.

(3) In addition to the provisions of subsection 20 (3), the Financial Supervision Authority

shall forward, after provision of a confirmation specified in subsection (2) of this section, the

confirmation and information concerning the amount of own funds of the financial institution

and the capital adequacy indicator of the credit institution or credit institutions which are

parent undertakings on a consolidated basis to the financial supervision authority of another

Contracting State.

(4) If a financial institution of Estonia no longer meets the requirements provided for in

subsection (2) of this section, the Financial Supervision Authority shall inform the financial

supervision authority of the other Contracting State thereof.

§ 206. Bases for activities of foreign credit institution

(1) A person who pursuant to the legislation of the home state has the right to receive

money from the public for the purposes of depositing or to receive repayable funds in any

other manner may, on the basis of the activity licence issued in the home state, conclude the

same transactions and perform the same acts in Estonia by establishing branches or providing

cross-border services in Estonia.

(2) The provisions of §§ 214–216, 22 and 972 of this Act apply to a person specified in

subsection (1) of this section who is founded in another Contracting State and complies with

the requirements established regarding credit institutions in the Directive 2000/12/EC of the

European Parliament and of the Council relating to the taking up and pursuit of the business

of credit institutions (OJ L 126, 26.05.2000, p. 1–59).

(3) The provisions of §§ 21–213, 22 and subsections 972 (1)-(3) of this Act apply to a

person specified in subsection (1) of this section who does not comply with the requirements

provided for in subsection (2) of this section. Such persons may provide services in Estonia

only through a branch.

(4) For the purposes of this section, cross-border services are services provided in Estonia

by a person who is not or whose branch is not registered in Estonia. The provisions

concerning cross-border services apply also if cross-border services are provided through a

third party.”;

13) section 21 is amended and worded as follows:

«§ 21. Foundation of subsidiary credit institutions or branches of foreign credit institutions in

Estonia

(1) A foreign credit institution which wishes to found a subsidiary credit institution in

Estonia shall apply for an authorisation specified in § 13 of this Act from the Financial


(2) A foreign credit institution which wishes to found a branch in Estonia is required to

apply for an authorisation from the Financial Supervision Authority and submit an application

to which the following information and documents are appended:

1) the business plan of the branch being founded and a detailed description of the

intended activities, a description of the organisational structure, and the relationship with the

credit institution founding the branch;

2) the address of the branch;

3) data relating to the director of the branch, pursuant to subsection 48 (7) of this Act;

4) the data and documents required by subsection 30 (2) of this Act relating to

shareholders who have qualifying holdings in the credit institution founding the branch;

5) the documents prescribed in clauses 386 (2) 1), 3), 4) and 5) of the Commercial Code

(RT I 1995, 26–28, 355; 1998, 91–93, 1500; 1999, 10, 155; 23, 355; 24, 360; 57, 596; 102,

907; 2000, 29, 172; 49, 303; 55, 365; 57, 373; 2001, 34, 185; 56, 332 and 336; 89, 532; 93,

565; 2002, 3, 6; 35, 214; 53, 336; 61, 375; 63, 387 and 388; 96, 564; 102, 600; 110, 657;

2003, 4, 19; 13, 64; 18, 100; 78, 523; 88, 591).

(3) The consent of the financial supervision authority of the home state of the credit

institution to the foundation of a subsidiary credit institution or foundation of a branch in

Estonia, confirmation that the credit institution holds a valid activity licence, data relating to

the amount of own funds and the capital adequacy of the credit institution, and data relating to

the deposit guarantee system of the home state shall be submitted to the Financial Supervision

Authority.

(4) A foreign credit institution shall submit the information and documents specified in

this section which are in a foreign language together with translations into Estonian.

(5) In addition to the provisions of subsection 15 (1) of this Act, the Financial

Supervision Authority may refuse to grant an authorisation if:

1) according to the opinion of the Financial Supervision Authority, the financial situation

of the foreign credit institution is not sufficiently sound;

2) the organisational structure of the subsidiary credit institution or branch of the foreign

credit institution in Estonia is not suitable for the intended activities;

3) the legislation of the home state of the credit institution does not require or the

financial supervision authority of the home state does not exercise sufficient supervision,

including supervision on a consolidated basis.

(6) A reasoned decision on the grant of or refusal to grant an authorisation shall be made

by the Financial Supervision Authority within two months as of the receipt of an application

and all the data and documents specified in subsection (2) of this section.

(7) The applicant shall be promptly notified of the decision.”

14) section 211 is repealed;

15) the Act is amended by adding §§ 212-216 worded as follows:

«§ 212. Processing of application for authorisation for foundation of branch and revocation of

authorisation

(1) Sections 13-15, 17 and 18 of this Act apply to the processing of applications for an

authorisation for the foundation of a branch, verification of information and to the grant and

revocation of authorisations, unless otherwise provided for in this section.

(2) The Financial Supervision Authority may refuse to grant an authorisation for the

foundation of a branch on the bases provided for in § 15 of this Act and if supervision over

the applicant is not ensured at the necessary level or the foreign financial supervision

authority has no legal basis or possibilities for cooperation with the Financial Supervision

Authority.


of a branch if circumstances provided for in § 17 of this Act or in subsection (2) of this



foundation of a branch if the clients of the branch have claims against the branch or the

foreign credit institution.

§ 213. Amendment of authorisation for foundation of branch

(1) A foreign credit institution which wishes to provide services in Estonia which are not

specified in the business plan submitted upon application for an authorisation for the

foundation of a branch shall submit an application for amendment of the authorisation for the

foundation of the branch to the Financial Supervision Authority.

(2) In order to amend an authorisation for the foundation of a branch, a foreign credit

institution shall submit to the Financial Supervision Authority an application to which the

information and documents specified in clauses 21 (2) 1)-3 of this Act are appended.

(3) The provisions of §§ 14–15 of this Act apply to the processing of applications for the



§ 214. Specifications for foundation of branch of credit institution of Contracting State in

Estonia

(1) A credit institution of a Contracting State which wishes to found a branch in Estonia

shall inform the Financial Supervision Authority thereof through the financial supervision

authority of the Contracting State. The information and documents specified in clauses 21 (2)

1)-3) and subsection 21 (3) shall be submitted to the Financial Supervision Authority.


authority of the Contracting State of receipt of the information and documents specified in

subsection (1) of this section. The Financial Supervision Authority may make, within two

months after receipt of the aforementioned information, a decision which determines the

requirements which the credit institution must comply with in Estonia. The Financial

Supervision Authority shall promptly inform the financial supervision authority of the

Contracting State of its decision.

(3) A credit institution of a Contracting State may found a branch and commence

activities two months after the date on which the Financial Supervision Authority receives the

documents and information specified in subsection (1) of this section.


and documents specified in subsection (1) of this section at least one month in advance.

Within one month as of becoming aware of the changes, the Financial Supervision Authority

may amend the decision specified in subsection (2) of this section or make the

aforementioned decision unless it has been made earlier.

(5) Confirmation from the Financial Supervision Authority concerning receipt of the

information and documents specified in subsection (1) of this section and the decision of the

Financial Supervision Authority specified in subsection (2) of this section, if it exists, shall be

submitted upon entry of a branch in the commercial register. If the Financial Supervision

Authority makes a decision specified in subsection (4) of this section, the Authority shall send

a copy of the decision to the commercial register.

§ 215. Provision of cross-border services in Estonia by credit institution of Contracting State

(1) A credit institution of a Contracting State which wishes to provide cross-border

services in Estonia shall inform the Financial Supervision Authority thereof through the

financial supervision authority of the Contracting State and indicate which transactions and

acts listed in subsection 6 (1) of this Act the credit institution intends to conclude and

perform.

(2) One month after the date on which the Financial Supervision Authority receives the

notice specified in subsection 81) of this section, a credit institution of a Contracting State

may commence the provision of cross-border services in Estonia.

(3) After receipt of the notice specified in subsection (2) of this section, the Financial

Supervision Authority may make a decision in which it determines the conditions according

to which the credit institution of the Contracting State must provide its services. The Financial

Supervision Authority shall promptly inform the credit institution of the Contracting State of

the decision.

§ 216. Foundation of branch of financial institution belonging to consolidation group of credit

institution of Contracting State and provision of cross-border services in Estonia

(1) The provisions of §§ 214, 215, 22 and 972 of this Act apply regarding a financial

institution of a Contracting State which is a subsidiary of a credit institution or jointly

controlled by two or more credit institutions and the articles of association of which permit

the conclusion of transactions and performance of acts specified in clauses 6 (1) 2)-12) of this

Act, and which wishes to found a branch and provide cross-border services in Estonia, unless


(2) The parent credit institution of a financial institution of a Contracting State specified

in subsection (1) of this section which wishes to found a branch in Estonia or provide cross-

border services shall inform the Financial Supervision Authority thereof through the financial

supervision authority of the Contracting State and shall submit the information and

documents specified in clauses 21 (2) 1)-3) of this Act concerning the financial institution,

information concerning the amount of own funds of the financial institution and the capital

adequacy indicator of the credit institution or credit institutions which are parent undertakings

on a consolidated basis and a confirmation issued by the financial supervision authority of the

Contracting State which indicates that the financial institution meets the following

requirements:

1) the parent undertaking or undertakings are authorised as credit institutions in the

Contracting State by the law of which the activities of the financial institution is governed;

2) the financial institution concludes the transactions and performs and acts specified in

clauses 6 (1) 2)-12) of this Act in Estonia;

3) the parent undertaking or undertakings hold more than 90 per cent of the votes

represented by shares or units of the financial institution;

4) the parent undertaking or undertakings ensure the prudent management of the

financial institution;

5) the parent undertaking or undertakings have stated that they solidarily guarantee

performance of the obligations assumed by the financial institution;

6) together with the parent undertaking or all its parent undertakings, the financial

institution is subject to supervision on a consolidated basis, in particular regarding the

transactions and acts specified in clauses 6 (1) 2)-12) of this Act and concerning limitations

on investments, capital adequacy and limitations on concentration of exposures.”;

16) in clauses 22 (1) 1) and 4), subsection 30 (5), subsection 96 (11) and subsection 97

(4), the words “home country” [asukohamaa] are substituted by the words “home country”

[päritoluriik] in the appropriate case form;

17) the Act is amended by adding §§ 971 and 972 worded as follows:

«§ 971. Supervision over credit institutions which have founded branches in foreign states

and credit institutions providing cross-border services

(1) If a credit institution whose branch is founded in a foreign state or which provides

cross-border services in a foreign state violates the requirements of legislation established in a

foreign state, the Financial Supervision Authority shall promptly apply measures for

termination of the violation on the proposal of the foreign financial supervision authority. The

Financial Supervision Authority shall inform the foreign financial supervision authority of the

applied measures.


authority of the foreign state where the branch of the credit institution is founded or where the

credit institution provides cross-border services of revocation of an activity licence of the

credit institution, an authorisation for the foundation of a branch in a foreign state or a

decision specified in subsection 201 (2) of this Act.

(3) A branch of a credit institution or a credit institution which provides cross-border

services shall, at the request of a foreign financial supervision authority, submit information

which is necessary for the exercise of supervision over the activities of the branch or credit

institution in the state.

§ 972. Supervision over branches and representative offices of foreign credit institutions in

Estonia and credit institutions providing cross-border services in Estonia

(1) The Financial Supervision Authority may demand that a foreign credit institution

whose branch is founded in Estonia submit additional information and documents which are

necessary for the exercise of supervision over the credit institution.

(2) A credit institution whose branch or representative office is founded in Estonia or

which provides cross-border services in Estonia and whose activity licence has been

suspended or revoked by a foreign financial supervision authority shall not continue to

operate or provide cross-border services in Estonia.

(3) If a credit institution of a foreign state which is not a Contracting State or its branch

located in Estonia violates the requirements provided for in this Act or other

legislation, the Financial Supervision Authority may apply the measures provided for

in §§ 96–110 and 1341–134

5 of this Act to terminate the violation or revoke the

authorisation for foundation of the branch.

(4) The Financial Supervision Authority may demand that a credit institution of a

Contracting State which has founded a branch is Estonia or provides cross-border services in

Estonia terminate violation of the requirements provided for in Acts or legislation established

on the basis thereof.

(5) If a credit institution of a Contracting State specified in subsection (4) of this section

continues to violate the requirements provided for in legislation, the Financial Supervision

Authority shall inform the financial supervision authority of the Contracting State thereof.


insufficient and a credit institution of the Contracting State continues to violate the

requirements provided for in legislation, the Financial Supervision Authority may in turn, by

its precept, apply measures provided for in this Act for the termination of the violation or

prohibit the activities of or provision of cross-border services by the credit institution of the

Contracting State in Estonia and shall inform the financial supervision authority of the

Contracting State thereof beforehand.

(7) The Financial Supervision Authority shall inform the credit institution of the

Contracting State of the measures applied thereby.


depositors, investors and the public interest, apply measures provided for in legislation with

regard to a credit institution of a Contracting State without informing the financial supervision

authority of the Contracting State of the measures beforehand.


and the financial supervision authority of the Contracting State of application of the measures

on the basis of subsections (6) or (8) of this section.”

§ 329. Amendment of Estonian Central Register of Securities Act

Section 2 of the Estonian Central Register of Securities Act (RT I 2000, 57, 373; 2001, 48,

268; 79, 480; 89, 532; 93, 565; 2002, 23, 131; 63, 387; 110, 657; 2003, 51, 355; 88, 591) is

amended as follows:

1) clause (1) 4) is amended and worded as follows:

«4) the units of investment funds registered in Estonia which are traded on a regulated

securities market;”;

2) subsection (1) is amended by adding clause 41) worded as follows:

«41) the units of pension funds registered in Estonia;”;

3) subsection (2) is amended and worded as follows:

«(2) In addition to the rights and obligations specified in subsection (1) of this section,

other shares, subscription rights, units, holdings, issued debt obligations and other similar

rights and obligations may be entered in the register unless otherwise provided by this Act.”

Chapter 11

Implementing Provisions

§ 330. Validity of activity licences

(1) A management company which holds a valid activity licence at the time this Act

enters into force shall, within six months after the entry into force of this Act, submit to the

Financial Supervision Authority a notice indicating which services specified in subsection 13

(1) of this Act the management company provides.

(2) After submission of a notice specified in subsection (1) of this section, a management

company may only provide services set out in the notice, unless an additional activity licence

provided for in § 19 of this Act has been issued to the management company.

(3) If a management company has failed to submit a relevant notice to the Financial

Supervision Authority within a term specified in subsection (1) of this section, the

management company is deemed to provide only the services specified in subsection 13 (1) of

this Act.

§ 331. Bringing of activities of funds and management companies into compliance

(1) Management companies which hold a valid activity licence at the time this Act enters

into force shall bring their activities and documents into compliance with the provisions of

this Act within six months as of the entry into force of this Act. Until bringing into

conformity with this Act, the activities and documents of management companies shall

comply with the Investment Funds Act in force until the entry into force of this Act.

(2) The rules or articles of association of funds registered before the entry into force of

this Act, the activities of the funds, the registration of units, the offer of the units of shares of

the funds and management of the assets of the funds shall be brought into compliance with

the requirements provided for in this Act within six months as of the entry into force of this

Act. Until bringing into conformity with this Act, the specified activities and documents shall

comply with the requirements of the Investment Funds Act in force until the entry into force

of this Act.

(3) One month after entry into force of amendments to the fund rules specified in

subsection (2) of this section, the registrar shall organise the issue of fractional units of a

relevant value for the amounts remaining after the issue of units of a mandatory pension fund.

All fractional units shall be issued on the same date.

(4) The share capital of a management company which manages a mandatory pension

fund shall comply with the provisions of clause 85 (2) 2) of this Act no later than by 1

January 2007. Until the expiry of the specified term, the share capital of a pension

management company which manages a mandatory pension fund shall be at least 30 000 000

kroons.

§ 332. Bringing of activities of management company in foreign state into compliance with

requirements

(1) Upon entry into force of this Act, a management company providing services in a

foreign state shall, pursuant to the procedure provided for in this Act, give notification that it

provides services in the foreign state or apply for an authorisation for the foundation of a

branch in the foreign state pursuant to the procedure provided for in §§ 25–33 of this Act and

bring its activities into compliance with the requirements of this Act within six months as of

the entry into force of this Act.

(2) A management company which upon entry into force of this Act provides services in

a foreign state may, until performance of the obligations provided for in subsection (1) of this

section, continue to provide services in the foreign state but for not longer than six months as

of the entry into force of this Act.

§ 333. Bringing of activities of foreign management company into compliance with

requirements

Upon entry into force of this Act, a foreign management company which offers services in

Estonia shall apply for an authorisation for the foundation of a branch in Estonia or for the

provision of cross-border services pursuant to the procedure provided for in this Act, and a

management company of a Contracting State shall give notification of foundation of a branch

in Estonia or provision of cross-border services by the management company. The

aforementioned persons shall bring their activities into compliance with the requirements of

this Act within six months as of the entry into force of this Act.

§ 334. Bringing of pension fund scheme of Contracting State into compliance with

requirements

Upon entry into force of this Act, the Financial Supervision Authority shall be informed of an

offer of a pension fund scheme in Estonia pursuant to the procedure provided for in this Act

and shall bring the offer of the pension fund scheme of the Contracting State into compliance

with the requirements of this Act within six months as of the entry into force of this Act.

§ 335. Calculation of euro

The amounts stated in this Act in euro shall be converted into Estonian kroons on the basis of

the exchange rate of Eesti Pank.

§ 336. Repeal of Act

(1) The Investment Funds Act (RT I 1997, 34, 535; 1998, 61, 979; 2000, 10, 55; 57, 373;

2001, 48, 268; 79, 480; 89, 532; 93, 565; 2002, 23, 131; 53, 336; 63, 387; 102, 600; 105, 612;

2003, 23, 133; 51, 355; 88, 591) is repealed.

(2) Legislation established pursuant to subsection 43 (2), § 55, subsection 69 (1), § 77,

clause 107 (4) 2), subsections 116 (7), (8) and (9) and subsection 134 (3) of the Act specified

in subsection (1) of this section remain valid until they are repealed.

§ 337. Entry into force of Act

(1) This Act enters into force on 1 May 2004.

(2) Until the establishment of the legislation specified in subsections 14 (5), 87 (5), 142

(2), 151 (5), 187 (1), 204 (1), § 216, subsections 220 (6), 238 (5), 244 (4), 269 (4) and 295 (6)

of this Act, management companies shall operate pursuant to the provisions of legislation

established on the basis of the Investment Funds Act in force until the entry into force of this

Act and legislation specified in subsection 77 (2) of the Funded Pensions Act, unless

otherwise provided for in this Act.

(3) Subsection 237 (1) of this Act enters into force on 1 January 2005. Pursuant to this

Act and legislation issued on the basis thereof, reports shall be prepared for accounting

periods beginning on 1 January 2005 or later.

(4) Reports for accounting periods beginning before the date specified in subsection (3)

of this section shall be prepared pursuant to legislation established on the basis of subsections

116 (7), (8) and (9) of the Investment Funds Act in force until the entry into force of this Act.

(5) The second sentence of subsection 108 (6) of this Act applies retroactively to all units

issued by mandatory pension funds unless the units have been divided before 1 May 2004.

1 List of EU Directives:

1. Council Directive 85/611/EEC on the coordination of laws, regulations and administrative

provisions relating to undertakings for collective investment in transferable securities

(UCITS) (OJ L 375, 31.12.1985, p. 3–18);

2. Council Directive 88/220/EEC amending, as regards the investment policies of certain

UCITS, Directive 85/611/EEC on the coordination of laws, regulations and administrative

provisions relating to undertakings for collective investments in transferable securities

(UCITS) (OJ L 100, 19.04.1988, p. 31–32);

3. European Parliament and Council Directive 95/26/EC amending Directives 77/780/EEC

and 89/646/EEC in the field of credit institutions, Directives 73/239/EEC and 92/49/EEC in

the field of non- life insurance, Directives 79/267/EEC and 92/96/EEC in the field of life

assurance, Directive 93/22/EEC in the field of investment firms and Directive 85/611/EEC in

the field of undertakings for collective investment in transferable securities (UCITS), with a

view to reinforcing prudential supervision (OJ L 168, 18.07.1995, p. 7–13);

4. Directive 2000/64/EC of the European Parliament and of the Council amending Council

Directives 85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC as regards exchange of

information with third countries (OJ L 290, 17.11.2000, p. 27–28);

5. Directive 2001/107/EC of the European Parliament and of the Council of 21 January 2002

amending Council Directive 85/611/EEC on the coordination of laws, regulations and

administrative provisions relating to undertakings for collective investment in transferable

securities (UCITS) with a view to regulating management companies and simplified

prospectuses (OJ L 041, 13.02.2002, p. 20–34);

6. Directive 2001/108/EC of the European Parliament and of the Council amending Council

Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions

relating to undertakings for collective investment in transferable securities (UCITS), with

regard to investments of UCITS (OJ L 041, 13.02.2002, p. 35–42);

7. Directive 2003/41/EC of the European Parliament and of the Council on the activities and

supervision of institutions for occupational retirement provision (OJ L 235, 23.09.2003, p.

10–21).

2 RT = Riigi Teataja = State Gazette

http://folk.uio.no/olavt/direktiver/en_395L0026.shtml





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