Closed investment funds constitute an increasingly popular form of investing assets. Investment possibilities that are definitely wider than in the case of open investment funds, as well as the possibility of selling investment certificates issued by such funds, not only allow for the more effective diversification of investment risk, but also "tailoring" the investment policy of such fund to the needs and goals of individual investors.
Closed funds, aside from open investment funds and specialised open investment funds, are one of three basic types of investment funds foreseen by the Polish Act on Investment Funds. A closed fund may invest in securities, receivables, shares in limited liability companies, currencies, derivative securities, money market instruments and selected property rights. Such a fund may also issue both public as well as non-public investment certificates.
A closed fund may only be formed by an Investment Fund Association (hereinafter: TFI), a joint-stock company with its registered office in the territory of the Republic of Poland that has obtained a permit from the Polish Financial Supervision Commission (FSC) which in its scope includes, at the least, the establishment of investment funds and management of such, and including brokerage activities relating to the sale and purchase of participation units, representing such before third parties and the management of an overall securities portfolio.
The creation of an investment fund requires:
The statute of the investment fund is prepared in the form of a notary deed. Such document should define in particular: the name and type of the investment fund, the company name, the registered office and address of the TFI, the governing bodies of the investment fund and the manner of representation, the company name, the registered office and address of the depositary, the investment goal of the investment fund and principles regarding its investment policies, the principle for the payment of profits from the fund investment to fund participants, the frequency, methods and principles for carrying out valuations of assets, establishing the net asset value of the investment fund and the value of net assets due to each investment certificate. The depositary is the entity keeping a register of assets for the investment fund. It ensures that the issuance and redemption of investment certificates takes place pursuant to legal regulations and the statute of the investment fund, that the net worth of assets of the investment fund and the value of units are calculated pursuant to legal regulations and the statute of the investment fund, that profits of the investment fund are used pursuant to the laws and the statute of the fund, through permanent control over factual and legal actions of the fund and as well as supervising that such actions comply with the law and the fund's statute. It is important to note that the depository, due to the scope of his obligations, may only be a domestic bank whose equity amounts to at least PLN 100,000,000, the branch of a credit institution with its registered office in the territory of Poland, if the funds assigned to this branch amount to at least PLN 100,000,000 or the National Securities Deposit S.A. The agreement with the depositary should determine the detailed duties of the depositary and the investment fund and the manner in which they will be performed as well as the remuneration of the depositary and the manner of calculating costs charged to the fund.
The permit for the creation of an investment fund is issued by FSC. The Commission, in issuing a permit for the creation of an investment fund, approves the statute of the fund and choice of the depositary of the fund. However, an amendment to the statute of a closed investment fund does not require a permit. The company applying for a permit to establish and manage investment funds applies at the same time for a permit to create an investment fund, whereas an already existing TFI only files an application for permission to create a fund. The taking of orders for closed investment fund certificates may commence on the following day after the date on which the permit to create the fund was delivered to TFI. The period for taking in subscriptions may not exceed 2 months. TFI may by itself carry out subscriptions for non-public investment certificates or through an entity conducting brokerage activities relating to the taking in and forwarding of orders for the purchase and sale of financial instruments, a domestic bank or the domestic branch of a credit institution entitled to carry activity out activities relating to the taking in and forwarding of orders for the purchase or sale of financial instruments.
If payments at the amount determined in the statute of the investment fund are made during the period for subscribing to investment certificates, then TFI, within 14 of days of ending the acceptance of subscriptions, shall allocate investment certificates. TFI, immediately after such allotment, shall file with the court of registration an application for entering the investment fund in the register of investment funds. The following shall be attached to such a filing: FSC permit for the creation of the investment fund, the statute of the fund, the statute of the TFI creating the investment fund and a copy of the commercial register, the list of TFI Management Board members as well as the declaration of the depositary regarding the collection of payments as required by the statute, as well as the compliance of such collection of payments with the act, the statute of the investment fund together with the permit issued by FSC. The court of registration shall rule on the case within 14 of days of the day the filing is submitted or supplemented. The fund, immediately after being entered in the register of investment funds, issues investment certificates pursuant to its terms and conditions and in the manner determined in the statute of the fund and the prospectus or in the issue conditions.
Second and subsequent issues of public investment certificates requires the preparation of a prospectus or information memorandum as well as securing the approval of FSC to place such certificates in public trading. In principle, the issue price of second and third issue investment certificates cannot be lower than the net asset value of the fund falling on an investment certificate pursuant to the valuation of assets carried out 7 days prior to the start-up date for the collection of subscriptions for new certificates. It should also be noted that handling fees may be collected during the acceptance of subscriptions, if the statute of the fund allows for such and determines their maximum value and the manner of collecting such payments. A handling charge may not be taken into consideration in the issue price. The issue of non-public certificates does not require the preparation of a prospectus (issue memorandum) but so-called purchase terms and conditions, containing in particular: data relating to the fund, including data regarding its activities, data regarding the depositary, TFI, the financial statement of the issuer as well as information on issues carried out and the risk associated with the purchase of the given investment certificates.
Author: Ewa Dolińska, lawyer from Finance Law Department of the Krawczyk & Partners Law Office, ewa.dolinska@krawczyk-legal.com
