Disclosure requirements – Latvia
Disclosure Category: 2
In the case of holdings in Latvia securities, Clearstream Banking can be under an obligation, to disclose, or being asked to disclose the identity of beneficial owners holding applicable positions.
Consent
Clients are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, but not limited to the issuer or its agent) as their attorney-in-fact, under power of attorney, to collect from Clearstream Banking such information as is required to be disclosed. Clients not willing to give this consent cannot hold such securities and/or financial instruments in their account with Clearstream Banking.
Disclosure requirements
In line with local laws and regulations, such as the Law on the Financial Instruments Market, as well as well as the SR Directive (EU) 2017/828 of 17 May 2017 and implementing Regulation (EU) 2018/1212, Clearstream Banking or its depository may be due to disclose holding information and details of beneficial ownership with respect to the Eligible Securities held with Clearstream Banking's securities account.
Background and legal basis
The Latvian rules regarding the qualifying holding and the disclosure of changes in shareholdings of listed shares are set by:
- The Commercial Law of 13 April 2000, and Article 236, provide to the company and the competent institutions with the right to request the information on the shareholders.
- The law of 20 November 2013 on the Financial Instruments Market, as amended from time to time, (the “Law on the Financial Instruments Market”) regarding changes in holding of securities listed on the Latvian regulated market; and
- Respective laws on the operation of regulated companies; for example:
- The Credit Institution Law of 5 October 1995, entered into force on 24 October 1995, and last amended on 15 February 2024 by LV, 38, 22.02.2024 (the “Law on Credit Institutions”);
- The Law on Investment Management Companies adopted on 18 December 1997, and last amended on 13 October 2022 by LV, 204, 20.10.2022 (the “Law on Investment Management Companies”);
- The Law on the Insurance and Reinsurance adopted 18 June 2015, and last amended on 13 October 2020 by LV, 204, 20.10.2022 (the “Law on Insurance and Reinsurance”);
- The Law on the Financial Instruments Market in cases of acquiring a financial qualifying holding in a regulated market organiser, the Nasdaq CSD or investment brokerage companies.
Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC with regard to the encouragement of long-term shareholder engagement (the second shareholder’s rights directive “SRD II”) has been transposed into the Law on the Financial Instruments Market on 16 July 2019 (SDR II Law).
Sanctions
Failure to fulfil disclosure requirements (where such disclosure is set by law) by any person increasing or decreasing their holding in an issuer's share capital or voting rights (whether directly or indirectly) is currently punishable by a fine.
In the case of failure to report crossing of a threshold according to Section 148 (16) of the Law on Financial Instruments Market foresees that the Commission is entitled to impose one or several of the following sanctions:
- To name in a public notice the natural or legal person who is responsible for the violation and the nature of the violation;
- To request that the natural or legal person who is responsible for the violation discontinues the relevant activity without delay;
- To impose a fine of the highest amount on the natural or legal person (up to EUR 10,000,000 for a legal person, or EUR 2,000,000 for a natural person, or up to twice the amount of the profits gained or potential losses avoided).
The Financial and Capital Market Commission (FCMC) is entitled to impose a fine from EUR 1,440 to EUR 14,200, if a person has acquired or increased major or qualifying holding, or terminate major holding in a regulated market operator or an investment brokerage company prior to submitting the notification referred to in Section 9 of the Law on the Financial Instruments Market.
Obligation to report threshold crossings
The obligation to report the crossing of thresholds falls on the beneficial owner (that is, the party eligible to vote) as follows.
Thresholds for securities listed on the Latvian regulated market
Sections 60 to 62 of the Law on the Financial Instruments Market provides that the beneficial owner notifies the company concerned and the FCMC within four (4) business days, of the proportion of their voting rights in the event that the holding reaches, exceeds or falls below the 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% thresholds. If the Republic of Latvia is the home Member State of the issuer, the beneficial owner is also due to notify the issuer and the FCMC within four (4) business days, in case of the proportion of voting rights is crossing the 90% or 95% thresholds.
Thresholds for qualified holdings in a regulated market operator or an investment brokerage company
Regulated market operators or investment brokerage companies are regulated separately. Section 9 of the Law on the Financial Instruments Market stipulates the obligation of notifying the FCMC in advance and in written in case of direct or indirect acquisition of 10% or more of a regulated market operator or investment brokerage company, or in the event the qualifying holding reaches, exceeds or falls below 20%, 33% or 50% of the issuer's share capital or voting rights (for example, Sections 26 to 332 of the Law on Credit Institutions, Section 7 of the Law on Investment Management Companies, Sections 8 to 11 of the Law on Insurance and Reinsurance, sections 7 to 13 of the Law on the Financial Instruments Market), or terminate a qualifying holding. The obligation to seek approval for qualified holdings must be fulfilled in advance. Notice of a qualified holding should contain in-depth information (as per instructions set out in the rules legislated by the FCMC) about beneficial owner's personality to determine whether the beneficial owner meets the criteria or not.
Investment funds, alternative investment funds and similar entities shall not be entitled to acquire a qualified holding in a regulated market operator or an investment brokerage company.
According to Article 7(4) of the Law on the Financial Instruments Market, Article 28(4) of the Law on Credit institutions and Article 75(4) of the Law on Insurance and Reinsurance, if stock has been acquired without being granted prior approval by the FCMC, the shareholder shall not be entitled to exercise the voting rights attached to all their shares.
The documentation can be completed by the beneficial owner's representative duly authorised to do so.
Shareholder identification as set out in the SRD II Law
The SRD II Law provides for the right for issuers to identify their shareholders.
Issuers can request intermediaries at each level of a custody chain to promptly provide relevant information to facilitate such identification.
In accordance with the SDR II Law as amended, an intermediary (in this case Clearstream Banking) shall, upon receipt of the shareholder identification disclosure request, transmit a similar request to the next intermediaries in the custody chain (that is, Clearstream Banking clients with holdings in the requested securities). A response to the shareholder identification disclosure request shall be sent by every intermediary in the custody chain directly to the recipient's address defined in the request and with Clearstream Banking books only.
The Clients are hereby informed and acknowledge that, according to Article 59.7(6) of the SRD II Law, the intermediary that discloses information concerning the identity of shareholders for the purposes of the SRD II rules (including Clearstream Banking) shall not be considered to be in breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision.
Fulfilment of the SRDII disclosure that take place prior to a meeting event, and subsequent registration of the beneficial owner in the Company’s register, is a conditional pre-requisite for votes to be accepted. Failure to disclose will therefore result into votes of non-registered shareholders to be rejected.