Draft Translation for Public Consultation, Version of January 3, 2018

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draft translation for public consultation, version of January 3, 2018

Act

No. 256/2004 Sb.,

on Capital Market Business,

as amended

(version applicable since January 3, 2018, after Act No. 204/2017 Sb., called “MiFID 2 Bill”, became applicable)

Amended by Acts No. 635/2004 Sb., No. 179/2005 Sb., No. 377/2005 Sb., No. 56/2006 Sb., No. 57/2006 Sb., No. 62/2006 Sb., No. 70/2006 Sb., No. 159/2006 Sb., No. 120/2007 Sb., No. 296/2007 Sb., No. 29/2008 Sb., No. 104/2008 Sb., No. 126/2008 Sb., No. 216/2008 Sb., No. 230/2008 Sb., No. 7/2009 Sb., No. 223/2009 Sb., No. 227/2009 Sb., No. 230/2009 Sb., No. 281/2009 Sb., No. 420/2009 Sb., No. 156/2010 Sb., No. 160/2010 Sb., No. 409/2010 Sb., No. 41/2011 Sb., No. 139/2011 Sb., No. 188/2011 Sb., No. 420/2011 Sb., No. 428/2011 Sb., No. 37/2012 Sb., No. 172/2012 Sb., No. 254/2012 Sb., No. 134/2013 Sb., No. 241/2013 Sb., No. 303/2013 Sb., No. 135/2014 Sb., No. 336/2014 Sb., No. 375/2015 Sb., No. 148/2016 Sb., No. 183/2017 Sb. and No. 204/2017 Sb.

The Parliament has adopted the following Act of the Czech Republic:

PART ONE

GENERAL PROVISIONS

Section 1

Scope of application

(1) This Act incorporates the relevant law of the European Union (hereinafter referred to as the “EU”)1), while following the directly applicable EU regulations2) and regulates the provision of services on the capital market, protection of the capital market and protection of investors and the public offer of transferable securities.

(2) This Act also incorporates the relevant EU law governing close-out netting arrangements24) and regulates the legal regime of the close-out netting arrangements.

(3) This Act further regulates the competence of the Czech National Bank (hereinafter referred to as the “CNB”) and, where applicable, the competence of the Ministry of Finance of the Czech Republic (hereinafter referred to as the “MoF”), and offences in connection with

(a) the directly applicable EU regulation on credit rating agencies49) (hereinafter referred to as the “CRA-R”),

(b) the directly applicable EU regulation on short selling and certain aspects of credit default swaps42) (hereinafter referred to as the “SS-R”),

(c) the directly applicable EU regulation on OTC, central counterparties and trade repositories43) (hereinafter referred to as the “EMIR”),

(d) the directly applicable EU regulation on prudential requirements for credit institutions and investment firms50) (hereinafter referred to as the “CRR”),

(e) the directly applicable EU regulation on improvement of settlement of securities transactions in the EU and on central securities depositories51) (hereinafter referred to as the “CSDR”),

(f) the directly applicable EU regulation on market abuse52) (hereinafter referred to as the “MAR”),

(g) the directly applicable EU regulation on transparency of trades providing financing and re-use61) (hereinafter referred to as the “SFTR”),

(h) the directly applicable EU regulation on markets in financial instruments53) (hereinafter referred to as the “MiFIR”),

(i) the directly applicable EU regulation on disclosure of key information on structured retail investment products and insurance products with investment component60) (hereinafter referred to as the “PRIIPS-R”), and

(j) the directly applicable EU regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds62) (hereinafter referred to as the “BMR”).

Section 2

Definitions

(1) For the purposes of this Act, the following definitions should apply:

(a) “client” means the person to whom the investment service is provided,

(b) “derivative” means financial instruments referred to in Section 3(1)(d) to (k) and transferable securities referred to in Section 3(2)(e),

1. represents the right of ownership of the securities of an issuer not having its registered office in an EU member state, and

2. may be admitted to trading on an EU regulated market and traded independently of the issuer's securities referred to in point 1,

(d) “execution of orders” means instructions leading to the conclusion of a contract for the purchase or sale of a financial instrument on behalf of the client, including the conclusion of a contract for the purchase of a financial instrument issued by an investment firm, bank, savings or credit cooperative bank or similar foreign person established in an EU member state on client's account at the time of issue,

(e) “dealing on own account” means of trading with own assets,

(f) “investment advice” means the provision of a tailor-made recommendation to the client regarding a transaction with a particular financial instrument, regardless of whether it is provided at the initiative of the client or potential client,

(g) “commodity derivative” means a financial instrument referred to in Section 3(1)(g) to (k) and the transferable securities referred to in Section 3(1)(e), the value of which relates to the commodity or to any of the indicators mentioned in Section 3(1)(j) and (k),

(h) “personal data” means

1. in the case of a legal person and an undertaking natural person, the name, registered office and the identification number of the person, if assigned,

2. in the case of a natural person who is not doing business, the date of birth or the birth number, if assigned, and the place of residence,

(i) “initial capital” means the initial capital as referred to in Article 26(1)(a) to (e) of the CRR,

(j) “qualifying holding” means a direct or indirect share in the registered capital or voting rights of a legal entity of a sum of at least 10% according to Section 10b(1) and (2), Section 122(1), Section 122(1)(a) to (g), Section 122a(1) and (2) and Section 122c(1)(b) and (c), or of a sum enabling to exercise a significant influence over management of this legal entity,

(k) “close link” means the close link referred to in Article 4(1)(38) of the CRR,

(l) “management body” means a body of a legal person whose members are elected, appointed or otherwise called upon into function, empowered to determine the strategy, objectives and overall direction of that person, or to oversee the management processes at the management level and monitor such processes,

(m) “member of staff” means a person who is in a base employment relationship with another person, a person who is a proxy (in Czech “prokurista”) of another person, a person who is a member of an organ of another legal entity and who is elected, appointed or otherwise called into function, or a person who is a member of committee of another legal entity; if a member of the body of a legal entity is a legal person who is elected, appointed or otherwise called into function, a natural person who is designated by that legal person to carry out such activity is the “member of staff”,

(n) “person in senior management” means a natural person who provides day-to-day management of the performance of a legal entity's activities and is directly subordinate to the management body of that legal person or to a member thereof in the exercise of this office, even if such a position is held by a member of the management body of that legal person,

(o) “client's assets” means cash and financial instruments belonging to a client held by an investment firm in order to provide an investment service to that client, the client's assets do not cover deposits under the law regulating the activity of banks, which accounted for by an investment firm, which is a bank,

(p) “package” means a set of services or products offered together that can be negotiated at least partially separately,

(q) “durable medium” means a list or other information carrier that allows the client to store information intended to him personally so that they can be used for a period of time reasonable for that information and which allows the reproduction of that information in an unaltered form,

(r) “structured deposit” means a deposit according to the law regulating the activity of banks, which is fully due at maturity (term deposit) and whose yield is determined by a formula including for example an index, a financial instrument, an exchange rate, a commodity or other object (hereinafter referred to as the “thing”) other than a commodity, or a combination thereof; a “structured deposit” is not a floating interest rate deposit whose yield is directly linked to an interest rate index,

(s) “algorithmic trading” means a trading with financial instruments where a computer algorithm automatically, without or with a limited human intervention, determines the individual parameters of the instructions, such as the order, timing, price or volume of the order, or the method of handling the instruction after its submission; “algorithmic trading”, however, does not mean merely routing instructions to one or more trading venues, processing instructions without specifying any trading parameters, confirming instructions or processing trades,

(t) “high-frequency algorithmic trading technique” means an algorithmic trading which

1. automatically, without human intervention, initiates the process of creating an order, routing or execution, for individual trades or instructions,

2. inserts or cancels a high number of instructions or quotes during a trading day, and

3. uses infrastructure to minimize network and other types of delays, including at least co-location with other similar devices in the immediate proximity of the trading venue, location close to the trading venue, or high-speed direct electronic access,

(u) “direct electronic access” means a measure, by which a participant of a trading venue allows another person to use its business identification data to electronically transmit instructions relating to an investment instrument directly to that trading venue,

1. a “direct access”, which means measures that use the infrastructure or the system of connecting that participant to hand over the instructions, and

2. a “sponsored approach”, which means measures that do not use the infrastructure or the system of connecting that participant to hand over the instructions,

(v) “EU investment firm” means an investment firm or a similar foreign person authorised by the supervisory authority of another EU member state to provide at least one main investment service,

(w) “matched principal trading” means trading on its own account in such a way that an additional person (facilitator) is incorporated between the seller and the buyer in the trade in such a way that

1. this person is not exposed to market risk in connection with dealing with the seller and the buyer,

2. trades with both the seller and the buyer take place simultaneously and

3. a trade with the seller and with the buyer is closed at a price at which this person will not suffer loss or profits, except for the previously announced remuneration, and

(x) “structured finance product” means a structured finance product as referred to in Article 2(1)(28) of the MiFIR.

(2) The “trading venue” is

(a) an EU regulated market,

(b) an multilateral trading facility (hereinafter referred to as the “MTF”) and

(3) The ”execution venue” is

(a) a trading venue,

(b) a systematic internaliser,

(d) a person or a market in financial instruments having its registered office in a state which is not an EU member state with a similar activity to one of the persons or markets referred to in letters (a) to (c).

(4) The “market maker” is a person who is permanently active on the financial markets as a person willing to trade on own account by buying and selling financial instruments using his own assets and pricing.

Section 2a