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Investment Protection Sectoral Fund

Formation of sectoral fund 

 The Investor Protection Sectoral Fund shall be established out of the contributions of investment institutions

  • The Investor Protection Sectoral Fund shall be used in order to ensure that the interests of investors are protected under the conditions and to the extent provided by the Guarantee Fund Act
  • Investment institutions pay to the Fund the single and quarterly contributions using the rates established by the supervisory board of the Fund.

Activity license of investment institutions

For the purposes of the Guarantee Fund Act, the following are investment institutions:

  • investment firms within the meaning of the Securities Market Act;
  • credit institution;
  • management companies which have been granted the right for management of a securities portfolio within the meaning of § 43 (1) 4) of the Securities Market Act or safekeeping of units of shares of a fund for a client within the meaning of § 44 1) of the Securities Market Act

Investment institution in case of investment firms and credit institutions comprises also the branches in a state which is a Contracting Party to the European Economic Area Agreement (EEA Agreement) and cross-border investment services provided in a contracting state. NB fondivalitsejate filiaalid ja piiriülesed teeenused.

  • At present, the contracting parties to the EEA Agreement are: Austria, Belgium, Bulgaria, Estonia, Spain, Netherlands, Ireland, Iceland, Italy, Creece, Cypros, Lithuania, Liechtenstein, Luxembourg, Latvia, Malta, Norway, Poland, Portugal, France, Sweden, Romania, Germany, Slovakia, Slovenia, Finland, United Kingdom, Denmark, Check Republic, Hungary.  


Credit institutions

An activity license of credit institutions issued by the Financial Supervison Authority grants to the credit institution also the right to provide the investment services specified in subsection 43 (1) of the Securities Markets Act and the non-core services specified in § 44 of the Securities Markets Act to the extent stipulated in the activity license.

Companies that apply for activity licenses must submit to the Financial Supervision Authority, in addition to the other documents and data, the document with which the applicant enters into the obligation to make the single contribution into the Deposit Guarantee Sectoral Fund and the single contribution to the Investor Protection Sectoral Fund provided in the Guarantee Fund Act if the company plans to provide investment services in the business plan.

The Financial Supervision Authority may declare an activity license invalid if the credit institution has not paid the contributions to the Deposit Guarantee Sectoral Fund or the Investor Protection Sectoral Fund required pursuant to the Guarantee Fund Act during the prescribed deadline or to their full extent, and it has failed to comply with the corresponding precept of the Financial Supervision Authority by the prescribed deadline or to the prescribed extent.
 

Investment firm

Investment firm is a public limited company whose permanent business is to provide one or several investment services.

An activity license is required for operating as an investment firm. The Financial Supervision Authority issues and annuls activity licenses.

Activity licenses are granted for provision or one or several investment services. Activity licenses may cover one or several non-core services.

In order to apply for an activity license, the applicant must submit, in addition to other data and documents, the document in which the applicant enters into the obligation to pay the single contribution stipulated in the Guarantee Fund Act.

The Financial Supervision Authority may declare an activity license invalid if the investment firm has failed to pay the contributions to the Investor Protection Sectoral Fund specified in the Guarantee Fund Act by the specified deadline or to the full extent.
 

Management company

Management company is a public limited company whose main and permanent business is to manage the assets of the fund established as a public limited company or a common fund. A management company may manage several funds.
A public limited company must have an activity license to operate as a management company. The Financial Supervision Authority grants and annuls activity permits.

A management company shall apply for an activity license for fund management or an activity license for fund management with the right to provide one or several investment services (e.g. securities portfolio management, investment advice or safekeeping fund units or shares for clients).

If a management company applies for an activity license with the right to provide securities management services or the service of safekeeping fund units or shares for clients, the management company must also submit the document evidencing entering into the obligation to pay the single contribution to the Investor Protection Sectoral Fund when it applies for the activity license.

The Financial Supervision Authority may declare an activity license invalid if the investment firm has failed to pay the contributions to the Investor Protection Sectoral Fund specified in the Guarantee Fund Act by the specified deadline or to the full extent.

The Financial Supervision Authority has the right to demand payment of the contribution to the Investor Protection Sectoral Fund provided in the Guarantee Fund Act by issuing a precept.

Note: Property fund management companies and venture capital fund management companies may not be fund participants, as they may not provide

  • securities portfolio management services for the purposes of clause 43 (1) 4) of the Securities Markets Act; and
  • the service of safekeeping fund units or shares for clients for the purposes of clause 44 1) of the Securities Markets Act.

 A property fund management company is a management company that only manages property funds.

A venture capital fund management company is a company that only manages venture capital funds. 


Single contribution and terms of payment

The size of the single contribution shall be 1 300 euro.

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.


Calculation and payment of quarterly contribution

Investment services which form the basis for calculation

  • the average turnover of the securities sale and purchase transactions (investment services specified in clauses 43 (1) –1) and 2) of the Securities Market Act) which are performed in the investment institution within the last ten working days of the quarter preceding payment of the contribution and where one party or broker is the investment institution;  
  • the market value of the the money and securities  managed by the investment institution (investment services specified in § 43 (1) 4) of the Securities Market Act) as on the last banking day of the quarter preceding payment of the contribution;
  • the market value of the securities held by the investment institution (investment services specified in § 44 1) of the Securities Market Act) as on the last banking day of the quarter preceding payment of the contribution 

Investments not subject to guarantee and compensation

For the purposes of calculating the size of a quarterly contribution the following investments shall not be included in the volume of investments:

  • Investments of professional investors;
  • Investments subject to compensation on the basis of § 52 and 53 of the Estonian Central Register of Securities Act according of which the registrar of the Estonian Central Register of Securities and account administrators bear civil liability and shall compensate for damages.
  • Investments belonging to any of the following Estonian or foreign persons:

1) the state;

2) a local government;

3) a financial institution / juriidiline isik, kelle peamiseks ja püsivaks tegevuseks on osaluste omandamine või ühe või mitme krediidiasutuste seaduse § 6 lõike 1 punktides 2–12 loetletud tehingu ja toimingu tegemine;

4) a company belonging to the same consolidation group as the given investment institution;

Calculation

The size of a quarterly contribution shall be calculated by multiplying the indicators which characterise the volume of the investment services provided by an investment institution by the corresponding contribution rates established by the supervisory board of the Fund. Before that investments not subject to guarantee and compensation are excluded from the volume of investments for the purposes of calculating the size of a quarterly  contribution. 

The size of a contribution shall be calculated by totalling the amounts payable on the basis of the volume of investments.

The size of a contribution shall be calculated by the investment institution. The minister responsible for the area shall establish the specific bases and procedure for calculating the size of a contribution.

Minimum size of contribution

The size of a contribution shall not be less than 50 euro per investment institution.

If all investments subject to compensation out of the Sectoral Fund have not been compensated  and the loans from credit institutions or other persons or the money received from other sectoral funds for the performance of the obligations of the Sectoral Fund have not been fully repaid together with the interest thereon, the size of a contribution shall not be less than 255 euro.  

Reporting and payment

The investment institution shall submit a report on the size of the contribution to the Fund through the Financial Supervision Authority to the extent and pursuant to the procedure established by the minister responsible for the area. (More in Estonian Rahandusministri määrus 23.10.2002 nr 123 "Investorikaitse osafondi kvartaliosamakse aruandluse kord" ja määrus 23.10.2002 nr 121 "Investorikaitse osafondi kvartaliosamakse arvutamise ning investeeringu väärtuse määramise kord").

New corrected reports must be submitted to the Financial Supervision Authority if errors are found and if calculation principles are changed. 

An investment institution or a branch shall pay quarterly contributions on a regular basis by the 15th day of the second month of each quarter.

If an investment institution fails to pay a contribution or does not pay a contribution in full by the due date (by the 15th day of the second month of each quarter), the Fund shall charge a fine for delay in the amount of 0.2% of the outstanding amount per day.

If an investment institution fails to pay a contribution by the due date or to perform any other obligation arising from the Guarantee Fund Act, the Fund shall immediately notify the Financial Supervision Authority of such failure.


Contribution rates

Calculated size of investment services
Maximum rates
Established rates
The average turnover of the securities sale and purchase transactions which are performed in the investment institution within the last ten working days of the quarter preceding payment of the contribution and where one party or broker is the investment institution
0,1%
0,012%
The market value of the the money and securities  managed by the investment institution as on the last banking day of the quarter preceding payment of the contribution
0,075%
0,0048%
The market value of the securities held by the investment institution as on the last banking day of the quarter preceding payment of the contribution
0,01%
0,0012

The supervisory board of the Fund shall establish separate contribution rates for different volumes of investments and they shall not exceed the maximum rates prescribed in the Guarantee Fund Act.  

Uniform contribution rates shall be applied to all investment institutions and branches.

Any amendment of a contribution rate shall enter into force as of the beginning of a quarter, but not earlier than one month after adoption of the corresponding resolution of the supervisory board of the Fund.  

 


Deferring payment of quarterly contributions

The supervisory board may, by a resolution thereof, grant investment institutions the right to defer payment of up to one-third of a quarterly contribution if the investment institution assumes the obligation to pay the deferred part of the contribution immediately upon submission of a corresponding request by the Fund. The Fund shall submit a request for payment of the deferred part of the contribution when the obligation arises to compensate for the investments guaranteed out of the Sectoral Fund.

The Fund may require an investment institution to insure performance of the defferred obligation or to secure performance of the deferred obligation by a third party acceptable to the supervisory board of the Fund. The total amount of contributions deferred by one investment institution shall not exceed four times the total amount of contributions calculated on the basis of the maximum limits provided in the Guarantee Fund Act.

The maximum limits for contribution rates do not apply to the payment of a part of a contribution deferred by the investment institution.


Suspending collection of quarterly contributions

The Fund shall suspend the collection of quarterly contributions on the basis of a resolution of the supervisory board of the Fund if all of the following conditions are complied with:

  • the value of the assets of the Sectoral Fund exceeds 2 000 000 euro;
  • all investments subject to compensation out of the Sectoral Fund have been compensated for; 
  • the loans from credit institutions or other persons and the money received from other sectoral funds for the performance of the obligations of the Sectoral Fund have been fully repaid together with the interest thereon. 

 

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