Document 13 - Amendment to the Act on Investment Companies – EU

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The amendment to Act No. 240/2013 Coll. brings changes in the area of investment companies and investment funds. It includes updates to references to European directives and regulations, which means that Czech law is adapting to new European regulations. For example, references to Directive (EU) 2024/927 and others are added.

Investment funds may not provide consumer loans, which is now explicitly prohibited in Section 8 (1) of the Act. 4 and § 9 par. 6. This will affect funds that were previously able to engage in this activity and will have to adjust their strategies.

Managers of investment funds are now obliged to put in place effective policies, procedures and processes for the acquisition of receivables from fund loans, including rules for credit risk assessment and portfolio management. These processes must be reviewed regularly, at least once a year.

Borrowing funds must comply with the limits on the leverage rate, which are set at 175% for open-ended funds and 300% for closed-end funds. Exceeding these limits requires immediate corrective action.

The obligation to retain 5% of the nominal value of each receivable from a fund loan that the fund has acquired and subsequently assigned to another has been newly established. This obligation applies to the loan maturity period or at least 8 years.

A foreign bank without a branch in the Czech Republic may also be the depository of the special fund, if approved by the Czech National Bank. This change may facilitate the access of foreign entities to the Czech market.

Changes in terminology, such as the replacement of the word “fees” with the word “fees”, are aimed at unifying the legal language and improving the clarity of the law.

Collective investment funds must now provide more detailed information on costs, deductions, mark-ups and other monetary benefits borne by the investor. This information must be updated annually.

Administrators and managers of investment funds must meet strict requirements for professional competence, credibility and suitability to perform their duties. These requirements are assessed on an ongoing basis during the performance of the function.

Borrowing funds must be closed-end AIFs unless they meet specific liquidity risk management requirements that allow them to be open. The Czech National Bank may require proof of compliance with these requirements.

Funds may not acquire claims from fund loans against certain persons, such as managers, depositaries or fund administrators. This avoids conflicts of interest.

The Czech National Bank may extend the deadline for meeting investment limits by up to 12 months if a reasoned investment plan is submitted.

The law introduces new requirements for funds acquiring loans, including rules on liquidity management, conflicts of interest and the handling of proceeds from receivables. Funds must also provide detailed information on portfolio composition and costs to investors.

The repeal of some paragraphs, such as Section 208, brings simplification of the legislation.

Funds must now include at least two liquidity management tools in their statutes to ensure better investor protection in the event of liquidity problems with the fund.

[2/20] This part of the document focuses on changes in legislation concerning investment funds, their management, regulation and supervision.

The new changes include:

• Identification of high-risk countries: States that are designated as high-risk third countries or are on the list of non-cooperative EU jurisdictions must take measures to improve the situation within 2 years. This will affect foreign funds and their managers, who will have to ensure compliance with these requirements.

• Division of mutual funds: It is now possible to divide mutual funds in the form of splits, spin-offs or spin-offs. The process requires the approval of the demerger project and the approval of the Czech National Bank (CNB). Shareholders have the right to redeem unit certificates without deduction if they apply within 2 months.

• Obligations towards the CNB: Fund managers must provide the CNB with detailed information on the markets, investment instruments, exposures and assets of the funds. They must also notify the appointment of senior persons to positions no later than 30 working days in advance.

• Supervision and sanctions: The CNB may order the dismissal of senior persons if it finds that they are not suitable for the duties. It may also order the suspension of the issuance or redemption of units in the interests of investor protection or financial stability.

• International cooperation: The CNB is obliged to inform the European Supervisory Authorities and other institutions about the measures taken, changes in the lists of funds and suspected breaches of depositary obligations.

Practical impacts:

• Fund managers must ensure compliance with the new rules, especially with regard to cooperation with the CNB and the provision of information.

• Fund shareholders receive greater protection, such as the right to redeem unit certificates without deduction when the fund is distributed.

• Foreign funds and their managers must adapt their procedures if their home country is a high-risk country.

• Increased costs may arise in relation to administrative obligations and adaptation to the new rules.

• Temporary measures, such as exemptions from investment limits, may be introduced for a transitional period, the duration of which will be determined in the fund’s statutes.

Companies and individuals must:

• Ensure that their funds and practices are up to date with the new requirements.

• Provide the CNB with the required information within the prescribed deadlines.

• Prepare projects for the distribution of funds and ensure their approval by the CNB.

• Monitor lists of high-risk countries and adjust their activities if their country appears on the list.

• Inform shareholders of changes and ensure their rights, for example, to redeem unit certificates.

New fees or penalties are not explicitly mentioned in the text, but increased administrative costs can be expected.

Temporary measures, such as exceptions to investment limits, may be introduced for a transitional period, the duration of which will be determined individually.

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The proposed legislation brings a change in terminology, where the term “fee” will be used instead of “fee”. This change mainly concerns the area of investment funds and is made in accordance with EU law. Firms and investment firms will need to adjust their documents and communications to match the new terminology.

Investment funds will now be obliged to apply liquidity management tools. Fund managers must choose at least two liquidity management tools and put in place procedures for their activation and deactivation. This obligation applies only to open-ended funds, not closed-end ones.

The rules for the acquisition of receivables from fund loans are newly modified. Funds will have a maximum exposure limit to one borrower per 20% of the fund’s capital. These rules aim to increase investor protection and ensure financial stability.

Investment funds will not be able to provide consumer loans, which is a confirmation of the current situation. However, funds can manage consumer loans that have been assigned to them, which can be used in cross-border situations.

Funds will be required to retain 5% of each transferred receivable from the fund loan for at least 8 years or until maturity. Exemptions from this obligation are only possible under specific conditions, such as in the case of international sanctions or in the best interests of investors.

The new legislation expands the range of activities of investment funds, such as the management of non-performing loans or the administration of benchmarks. The funds will also have extended reporting obligations towards the CNB, including information on managers and other key personnel.

The changes will bring a greater administrative burden for fund managers, but at the same time strengthen investor protection and confidence in the capital market. Direct impacts on the state budget are not expected, but the CNB will have a slightly negative impact on its budget due to the expansion of supervised obligations.

The legislation is in line with EU regulations, including the UCITS and AIFMD directives, and respects the principles of proportionality, subsidiarity and equal treatment. The changes also concern the transposition of EU directives into the Czech legal system, which contributes to the harmonization of rules within the EU.

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The definition of a “loan-originating AIF”, which invests mainly in receivables from fund loans, is newly modified. Funds must meet leverage limits: 175% for open-ended funds and 300% for closed-end funds. If the fund exceeds the limits, the manager must make amends.

The requirement for a minimum capital of an investment fund is abolished, which can reduce the administrative burden for smaller funds. This promotes economic convenience and economies of scale.

The terminology “fees” has been replaced by the term “fees”, which is intended to ensure greater legal precision and meets the requirements of the Charter of Fundamental Rights and Freedoms. This change affects many provisions of the Act.

A foreign bank from the EU without a branch in the Czech Republic is now allowed to be the depository of a special fund or a qualified investor fund, if the CNB agrees to it. However, this is not possible for below-threshold qualified investor funds.

The process of converting sub-funds, including their distribution, is simplified. It is now possible to combine mutual funds and sub-funds, which increases the flexibility of fund management.

An obligation for managers and administrators to notify the CNB of the assessment of the suitability of a manager before taking up their position is introduced. The CNB can proactively intervene if a candidate does not meet the required conditions.

Certain reporting obligations towards the CNB are being abolished, such as the obligation to inform about the non-approval of financial statements or to send key information messages to qualified investor funds. This reduces the administrative burden.

In relation to third countries, the designation “high-risk third country” is newly used according to EU rules, which replaces the current OECD list of non-cooperating countries. If a country becomes high-risk, a new depositary must be nominated within 2 years or the fund’s registered office changed.

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The amendment to the Investment Companies and Investment Funds Act (ZISIF) brings significant changes, especially in the area of transposition of the AIFMD II Directive. The changes include new obligations for managers and administrators of investment funds, such as the introduction of liquidity management tools and the expansion of activities that investment companies can perform, such as the management of non-performing loans or the administration of benchmarks.

Investment funds will have to adjust their processes, such as adapting liquidity management rules, which may entail additional costs. On the other hand, effective liquidity management can bring better investment opportunities and increase the attractiveness of the Czech capital market.

The abolition of some administrative obligations, such as the approval of CNB managers, will bring savings and a reduction in the administrative burden. Managers will now only be notified to the CNB.

The amendment allows the CNB to allow foreign banks without a branch in the Czech Republic to become depositories of investment funds, which expands opportunities for investment companies and can improve the competitiveness of the Czech market.

The transitional provisions give investment fund managers 6 months to adapt to the new legislation. Funds established before 15 April 2024 have exemptions from some new obligations, for example, they do not have to meet the limits under Sections 37c and 37k of the ZISIF until 2029.

Amendments to the Act on Administrative Fees abolish fees associated with proceedings under Sections 507 and 516 of the ZISIF, which will bring savings for the entities concerned.

The amendment to the Non-Performing Loans Market Act allows investment funds to manage non-performing loans, which expands their possibilities and harmonises Czech legislation with European regulations.

The amendment is divided into two phases: 16 April 2026 and 16 April 2027, which allows for gradual adaptation to the new rules.

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The new legislation prohibits investment funds from providing consumer loans in the Czech Republic, but allows them to manage these loans. This step aims to protect the position of consumers while not restricting the possibilities of credit management, which has been assessed as necessary to maintain current practice. Funds that manage consumer loans must meet specific conditions set by law.

The Czech National Bank gains the power to allow foreign banks with their registered office in the EU but without a branch in the Czech Republic to act as depositories of investment funds. This change expands opportunities for investment companies and increases flexibility in the market.

Investment firms can expand their activities, for example, to manage client assets or provide investment advice. These changes require adherence to strict rules of conduct, including the protection of insider information, the prevention of market manipulation and ensuring the best conditions for trades.

The costs associated with the implementation of these changes will be fully at the disposal of market participants, while public entities will not have increased budgets. The review of the effectiveness of the regulation will be carried out on an ongoing basis by the Czech National Bank and, at the EU level, by ESMA and the European Commission, with a review planned for 16 April 2029.

Investment funds must put in place effective policies, procedures and processes for acquiring claims from fund loans, including rules on credit risk assessment and loan portfolio management. These procedures must be regularly updated and reviewed.

Investment fund managers must meet strict requirements for professional competence, credibility and experience. Managers are obliged to continuously assess the suitability of these persons and take measures in the event of non-compliance with the requirements.

The rules of conduct of managers include obligations to act honestly, competently and in the best interests of shareholders. They also include procedures to ensure the protection of inside information, economic analysis of trades, and rules for executing trades on the best terms.

[8/20] This part of the document focuses on the rules and requirements relating to the management and management of investment funds, including foreign funds, and sets out specific obligations for managers and administrators of such funds.

Investment funds must comply with rules on the management of conflicts of interest, including their identification, prevention and disclosure to unit-holders. Fund managers have a duty to ensure that no unjustified costs are incurred and that the fund statutes are respected.

Minimum initial capital requirements have been introduced for different types of funds. For example, investment companies managing standard funds must have a capital of at least EUR 125 000, while self-managed investment funds require a minimum of EUR 300 000.

The new rules also regulate the limits on the level of leverage used. Open-ended alternative investment funds must not exceed a leverage of 175%, while closed-end funds must not exceed 300%.

Fund administrators must put in place effective management and control systems, including risk management, internal control and conflict of interest management systems. These systems need to be evaluated and updated regularly.

The Czech National Bank has the power to lay down qualitative requirements for the procedures and rules for the management of funds by decrees, unless EU regulations are already regulated.

Fund managers are obliged to ensure that the proceeds from receivables from fund loans are credited to the fund’s account after deduction of eligible costs. Furthermore, it is prohibited to manage funds whose strategy is focused exclusively on the acquisition of receivables for the purpose of their assignment.

Administrators must ensure that managers meet the requirements for credibility, professional competence and suitability to perform the function. These requirements must be assessed on an ongoing basis.

The liquidity management rules include the possibility to suspend the issuance and redemption of securities or to introduce additional liquidity management tools, which must be specified in the fund’s statutes.

Fund managers must comply with limits on exposure to a single borrower or borrower, which may not exceed 20 % of the fund’s capital. These limits may be temporarily suspended for a maximum period of 12 months.

The Czech National Bank may extend the deadlines for meeting certain requirements if a reasoned investment plan is submitted.

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The administrator of a collective investment fund now has the option to immediately revoke the authorisation of another person to perform activities if it is in the interest of the fund’s shareholders, partners or beneficiaries. This increases flexibility and investor protection.

The depositary of a collective investment fund may only be a bank, a foreign bank with a branch in the Czech Republic, a securities dealer or a foreign entity authorised to provide investment services in the Czech Republic. A foreign bank without a branch may be a depository of a special fund only on the basis of a decision of the CNB if the offer of services in the Czech Republic is insufficient.

A qualifying investor fund must have at least one depositary if its manager exceeds the relevant limit. Funds that do not exceed this limit do not have to have depositories.

The current value of the unit certificate or investment share must be calculated within the time limit set by the fund’s statute. The deadlines vary according to the type of fund, for example, 2 weeks for a standard fund, 1 month for a special fund that does not invest in real estate, and up to 2 years for a qualified investor fund investing in real estate.

The fund capital of a collective investment fund must reach at least EUR 1 250 000 within 6 months of the fund’s inception. If the fund does not reach this capital, the manager must take measures or decide to cancel it.

Owners of unit certificates or investment shares have the right to redeem them without deduction if there is an increase in fees above the amount specified in the fund’s statute. The deadline for exercising this right is at least 30 days from the publication of the information on the increase in fees.

The statute of a collective investment fund must contain detailed information on the manager, administrator, depositary, investment strategy, risk profile, fees and other essentials. The statute may be provided in paper form or electronically, if the investor agrees to it.

The annual report of a collective investment fund must contain data on the manager’s activities, the composition of assets, the development of assets, remuneration of employees and managers, and other relevant information. Special funds investing in real estate must provide detailed information about real estate and real estate companies.

The semi-annual report of a collective investment fund contains the balance sheet, data on the fund’s assets, its development and other essential information. The Czech National Bank sets out the requirements for the content of the half-yearly report by decree.

Investors in special funds must be informed about the investment strategy, risks, legal implications, fees, historical performance of the fund and other relevant data before investing. This information must be made available in accordance with the relevant EU rules.

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Qualifying investor funds must reach a minimum capital of EUR 1 250 000 within 12 months of inception. If the fund invests more than 90% of its assets in securities or intellectual property rights, the minimum capital is EUR 1,000,000.

Investments in foreign funds in the Czech Republic are subject to registration in the list maintained by the Czech National Bank. The application for registration must be submitted electronically and contain documents proving that the conditions are met. The Czech National Bank has 20 working days to process the application.

When offering investments across borders, the conditions relating to the exchange of information between supervisory authorities, compliance with prudential rules and international tax agreements must be met. Funds from high-risk countries cannot be offered under the EU regulation.

A depositary of a foreign investment fund must comply with strict conditions, including supervision, prudential rules, and international tax treaties. If the depositary state is designated as high-risk, the depositary must be changed within 2 years.

The Czech National Bank decides on the approval of mergers, mergers or divisions of funds within 20 working days of the submission of the application. If the application contains defects, the time limit is extended by the time needed to remedy them.

The transformation of mutual funds includes various forms, such as merger, merger, division or transfer to a joint-stock company. Other forms of conversion are not permissible.

The division of a mutual fund can take place in the form of a split, when the fund ceases to exist and its assets are transferred to new funds, or in the form of a spin-off, when part of the assets are transferred to a new fund, while the original fund is retained.

[11/20] This part of the document focuses on the rules and procedures relating to the division of mutual funds, their transformation and obligations towards the Czech National Bank (CNB).

Mutual funds can be divided in three ways: splitting, spin-off or spin-off. Each method has specific conditions and forms, such as the creation of new funds or mergers with existing funds. The division must be approved by the CNB, which assesses the protection of the interests of shareholders and compliance with legal regulations.

Fund administrators and managers are required to develop a demerger project that includes key information such as the form of the distribution, identification of the funds, valuation of assets and debts, rules for exchanging unit certificates, and more. This project must be approved by all stakeholders and controlled by the depositary.

The CNB has 20 working days to decide on the approval of the division. If the application contains defects, the applicant is invited to remove them within 10 working days. Once the distribution has been approved, information about the distribution must be published on the fund’s website. Shareholders have the right to redeem unit certificates without deduction if they exercise this right within 2 months of the publication of the announcement.

The conversion of mutual funds into other forms, such as joint-stock companies or standard funds, also requires the CNB’s approval. The application for conversion is submitted by the administrator or manager of the fund.

Foreign persons wishing to manage funds in the Czech Republic must meet specific conditions, including credibility, authorisation from the supervisory authority of the home country and compliance with international tax rules.

Administrators and managers are obliged to regularly inform the CNB about changes in fund documents, the use of liquidity management tools, conflicts of interest and other key data. Some changes do not take effect until 2027.

The practical implications include the obligation of funds and their managers to ensure compliance with the new rules, including the preparation of distribution projects, communication with the CNB and the publication of information. Fund shareholders should follow the announcement of the distribution and use their rights, for example, to redeem unit certificates.

Companies must take into account the administrative costs associated with the preparation of documentation and communication with the CNB. Foreign entities must ensure that the conditions for operating in the Czech Republic are met, which may include additional costs for legal and administrative services.

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The Czech National Bank (CNB) grants authorisation to act as the chief administrator of investment funds on the basis of meeting strict conditions, such as the credibility of the company, transparent capital, organisational and personnel prerequisites, and a minimum number of managers (at least two). Companies must have a business plan supported by real economic calculations.

Applications for authorisation of investment companies or foreign persons must be submitted electronically and contain all the prescribed requirements. The CNB has the right to reject applications if the legal conditions are not met.

The CNB may limit the scope of permitted activities, such as the investment strategy of the funds, or order changes in the manager, administrator or depository of investment funds. It can also suspend certain activities for up to 5 years or withdraw permits in case of serious violations of the law.

Collective investment funds must reach a minimum capital of EUR 1 250 000 within 6 months of their creation, otherwise they may be dissolved. Qualified investor funds have similar requirements, but with a longer period (12 months).

The CNB informs the European Supervisory Authorities (ESAs) of authorisations granted or withdrawn, changes in the lists of funds, and of reasonable suspicions of breaches of obligations by foreign managers or depositories. The information shall be provided on a quarterly basis or promptly in the event of risks to financial stability.

Managers of investment firms must meet strict requirements of age, credibility, professional competence and experience. If the person does not perform the function within 6 months of the granting of the consent, this consent expires.

The CNB may order the dismissal of a senior person if reasonable doubts arise as to his or her suitability to perform the duties. The CNB’s measures may also include conservatorship or the cancellation of a decision to suspend the issuance of unit certificates.

Funds that do not meet the statutory capital or activity requirements may be removed from the CNB’s list. Deletion may be carried out on request or due to non-compliance with the conditions of the law.

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This part of the document focuses on the regulation of investment funds, their managers, administrators and depositories. It contains an overview of obligations, offences and sanctions associated with their activities.

Managers of investment funds are obliged to comply with the rules relating to liquidity management, professional diligence, management and control systems, rules of conduct, records and information of the Czech National Bank. Failure to comply with these obligations can lead to fines of up to CZK 300 million or 10% of annual turnover.

Investment fund administrators must ensure proper record-keeping, accounting, publication of documents and information, and compliance with the rules of conduct. Violations of these obligations are punishable by fines of up to CZK 300 million or 10% of annual turnover.

Depositories of investment funds are obliged to ensure the proper management of the fund’s assets, the introduction of control mechanisms, reporting to the Czech National Bank and compliance with the rules on conflicts of interest. Failure to comply with these obligations may be sanctioned with fines of up to CZK 150 million or 10% of annual turnover.

Fines for misdemeanors can be set on the basis of a percentage of the annual turnover or twice the unjustified benefit. In some cases, disclosure of information on the nature of the infringement may be ordered.

The document contains references to directly applicable European Union regulations governing investment fund activities, including regulations on sustainability, transparency and technical standards.

Managers, administrators and depositories must ensure that their activities are in accordance with Czech laws and European regulations. This includes the establishment of appropriate systems, rules and procedures, regular reporting and informing of the competent authorities, and compliance with the rules of professional diligence.

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New sanctions and fines: The document introduces severe penalties for violations of legal entities and individuals in the field of investment funds. Fines can reach up to CZK 150,000,000, or twice the unjustified benefit. In some cases, it is possible to impose a ban on activity for up to 5 years.

Changes in the administration of funds: Managers of investment funds must bring their ratios into line with the new requirements of the law within 6 months of the entry into force. This includes amendments to the fund statutes and key information communications.

Registration and accreditation fees: The document sets out new administrative fees, such as CZK 35,000 for the registration of an investment fund depository or CZK 50,000 for the granting of authorisation to operate as a non-bank consumer credit provider.

Confidentiality obligations: Employees of the Czech National Bank and other persons involved in capital market supervision must comply with a strict duty of confidentiality. Information may only be shared under specific conditions, such as with supervisory authorities or courts.

Transitional provisions: Funds established before 15 April 2024 have specific conditions for compliance with the limits of leverage and receivables from fund loans. These terms and conditions are valid until April 16, 2029.

Foreign Persons: Foreign persons may provide investment services in the Czech Republic without locating a branch, provided that they meet the conditions set out in law. The Czech National Bank may request a list of tied representatives of such persons.

New fees for accreditations: Accreditations under various laws, such as those on consumer credit or insurance distribution, are charged between CZK 10,000 and CZK 25,000.

Temporary measures: Some transitional arrangements are in place until 2029, for example for qualified investor funds that acquire claims from fund loans.

Practical steps: Legal entities and individuals must ensure compliance with the new requirements of the law, including updating the documentation of funds, notifying the Czech National Bank and complying with the new limits. Foreign persons must ensure proper procedures in the provision of investment services in the Czech Republic.

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New fees have been introduced in the area of insurance and reinsurance distribution. The granting of authorisation to operate as an independent intermediary will cost CZK 10,000, accreditation CZK 25,000 and the extension of accreditation CZK 10,000. Companies operating in this area must take these costs into account when applying for permits.

New definitions and rules have been established for the management of non-performing loans. Administrators must ensure a governance system that includes administrative procedures, internal controls, debtor protection, and anti-money laundering rules. This means that companies servicing non-performing loans must invest in these systems and ensure their functionality.

The Czech National Bank will maintain an electronic list of non-performing loan administrators, which will be publicly available on the Internet. Changes to the data will be updated without undue delay. Businesses need to ensure that their list data is up to date.

Fines for offences in the area of non-performing loan management have been increased. For example, a fine of up to CZK 5,000,000 may be imposed for breaching obligations towards debtors. Companies must make sure that all obligations are complied with to avoid these sanctions.

Administrators of non-performing loans wishing to operate in other EU Member States must notify the Czech National Bank of their plans. The notification must contain detailed information, including the address of the branch, anti-money laundering procedures and how to communicate with debtors in the language of the host state. Notifications can only be submitted electronically.

The transitional provision stipulates that fee obligations under Items 65 and 66 of Act No. 634/2004 Coll. will be governed by the wording effective before the new Act comes into force. This means that companies that submitted applications before the new law came into force will follow the old rules.

The Act does not apply to the administration of non-performing loans by lawyers, notaries or bailiffs when providing legal services. These professions are exempt from the scope of the law, which may affect their credit management activities.

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). Each key point should be in a separate paragraph for better readability. The law also contains provisions concerning foreigners and their rights or obligations.

[18/20] This part of the document focuses on the regulation of foreign investment funds and their managers, in particular with regard to the conditions for their registration, obligations towards the Czech National Bank (CNB) and requirements for cooperation with third countries.

Foreign investment fund managers must comply with conditions such as ensuring that the third country where the fund is established is not designated as high-risk under EU Directive 2015/849 and that that country has OECD-compliant tax information exchange agreements in place. These conditions are crucial for the fund’s registration with the CNB.

The CNB is obliged to register a foreign investment fund on the list within 20 working days if all the required conditions are met. This includes, for example, demonstrating that the state where the fund is established is not on the list of non-cooperative jurisdictions.

Fund managers must regularly provide the CNB with information on the markets on which they trade, the instruments they trade and the fund’s exposures. It must also disclose conflicts of interest, the persons authorised and their sources, and any changes in the authorisation of third parties.

If the fund depositary is established in a high-risk third country, it must be replaced by another depositary within two years. This period is set with a view to protecting the interests of investors.

Fund managers must also notify the CNB if they plan to entrust a third party with certain activities and provide detailed information about these authorised persons, including their identifiers, registered office and supervisory authority.

Practical implications include increased administrative obligations for fund managers, in particular in the area of reporting and ensuring compliance with international tax and financial standards. Companies must ensure that their funds and depositories meet all requirements, otherwise there is a risk of penalties or loss of registration.

The measures in place are permanent and aim to increase the transparency and security of the investment environment in the Czech Republic.

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The new requirements for management companies and investment funds include an obligation to provide detailed information on the human and technical resources that will be used for portfolio management and risk management. This information must include a description of the activities entrusted to you, whether the delegation is partial or full, and regular due diligence measures.

Investment firms wishing to go beyond the relevant limit or to manage standard funds must submit a detailed plan of activities, including the organisational structure, hierarchical relationships and responsibilities of the persons who manage the firm’s activities. They must also provide an overview of the time devoted to individual duties and a description of material and personnel resources.

Foreign persons who wish to manage funds in the Czech Republic must meet the conditions relating to their registered office in non-cooperating countries or jurisdictions. If a country is designated as a high-risk third country, the foreign person must take measures to remedy the situation within two years.

The Czech National Bank is obliged to inform the European Supervisory Authorities on a quarterly basis about authorisations granted or withdrawn, changes in the list of funds and other relevant data. This obligation applies to investment companies, foreign persons and self-managed investment funds.

In the event of extraordinary circumstances, the Czech National Bank may order the activation or deactivation of funds liquidity management tools if there are risks to investor protection or financial stability. These measures must be published on the CNB’s website.

Management companies must ensure that the persons managing their activities are of sufficient repute and experience. These persons must be employed full-time or be members of the company’s governing body.

Foreign persons must have their registered office in a state that has concluded an agreement with the Czech Republic on the avoidance of double taxation and the exchange of information in tax matters. A state must not be included in the list of non-cooperative jurisdictions in tax matters.

The Czech National Bank is obliged to inform the European Supervisory Authorities of suspected breaches of the obligations of depositaries or fund managers, including the reasons for the suspicions.

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The Czech National Bank (CNB) is obliged to provide data to the European System of Central Banks (ESCB) for statistical purposes only. This means that companies and institutions that are supervised by the CNB must be prepared to share data that can be used for statistical analyses at the European level.

In the event of risks to the stability of the financial system, the CNB must immediately inform the European Systemic Risk Board of specific measures, such as the suspension of the issuance and redemption of funds. This may affect fund managers, who must be prepared for quick reactions and communication with the CNB.

Managers of investment funds that were established before 15 April 2024 have a transitional period until 16 April 2029, during which they must comply with specific requirements for credit and leverage limits. Managers of these funds are not allowed to increase values above the specified limits, which requires careful monitoring and management of the funds.

Information provided to the CNB by a foreign office may only be used for the purposes for which it was provided and may not be shared without the consent of the provider. This emphasizes data protection and confidentiality.

The management of non-performing loans as a business is only permitted to investment companies authorized to exceed the applicable limit or to foreign persons under the Investment Companies and Investment Funds Act. This limits access to this activity to specific entities.

The transitional provisions allow managers of funds that were established before 15 April 2024 to benefit from certain exemptions from the new rules, provided that they inform the CNB about it. This provides time to adapt to the new regulations.

CNB employees and persons involved in capital market supervision are obliged to maintain confidentiality about all information obtained in the course of their activities. A breach of this obligation can have legal consequences, which increases the liability of these persons.

Temporary measures, such as a transitional period until 2029, provide time to adapt to the new rules, but at the same time require close monitoring and compliance with the established limits and rules.