An investment firm, defined as a publicly traded company, specializes in offering one or more investment services to external parties or conducting one or more investment activities in a professional capacity. To operate as an investment firm, formal authorization from the Estonian Financial Supervision Authority (Finantsinspektsioon) is mandatory.
These authorizations are conferred for the provision of specific investment services, and they may encompass one or more supplementary services. It’s worth noting that investment firms do not receive a separate authorization exclusively for ancillary services.
Investment firms are exclusively permitted to deliver the investment and ancillary services for which they have received authorization. If they wish to offer investment or ancillary services not covered by their existing authorization, they must submit a separate application for additional authorization.
Application for authorization of investment firms
When seeking authorization as an investment firm, prospective applicants are required to adhere to a comprehensive set of guidelines and regulations specified by the European Union. Beyond these regulations, the Estonian Financial Supervision Authority (Finantsinspektsioon) mandates the submission of the following information and documents:
- Foundational documentation: If a new company is being established, a notarized copy of the memorandum of association or foundation resolution must be provided.
- Articles of association: Applicants must furnish a copy of their articles of association. In the case of an operational company, any resolutions passed by the general meeting pertaining to amendments in the articles of association and the revised text of the articles of association should be included.
- Shareholder information: A detailed list of the applicant’s shareholders is required, including their names, personal identification codes or registry codes, date of birth if no personal identification code or registry code is available, and information about the number of shares and votes held by each shareholder.
- Ownership and relationships: Information concerning shareholders and other individuals or entities holding qualifying interests in the applicant, as well as any relationships with investment firms, credit institutions, insurance companies, or other entities under financial supervision in a Contracting State, should be disclosed.
- Managerial profiles: Data on the applicant’s managerial team, including their names, personal identification codes or, in the absence of these, date and place of birth, educational backgrounds, a comprehensive employment history for the past five years, and, for board members, a description of their areas of responsibility, must be submitted. Additionally, any supporting documents validating the managers’ trustworthiness and conformity to the Securities Market Act requirements, as deemed necessary by the applicant, should be included.
- Affiliated companies: Information about companies in which the applicant or its managers hold ownership stakes exceeding 20 percent is necessary. This information should encompass share capital, areas of operation, and the size of ownership for both the applicant and its managers.
- Auditing and internal audit: Details about the applicant’s auditor and internal audit personnel, including names, residence or registered office, personal identification codes or, in the absence of these, date of birth or registry code, must be provided.
- Financial records: Applicants should furnish their opening balance sheet and a summary of revenues and expenses. Operating companies should include the balance sheet and income statement from the end of the month preceding the application, along with the last three annual reports if available.
- Own funds documentation: If applicable, documents verifying the amount of the applicant’s own funds, along with sworn auditor reports, are required.
- Third-party qualifying holdings: In cases where a credit institution, management company, investment fund, investment firm, insurance company, or another entity subject to financial supervision in a third country holds a qualifying interest in the applicant, confirmation from the relevant authority in that third country attesting to the validity of their authorization and compliance with prevailing legislation should be provided.
- Business plan: A comprehensive three-year business plan outlining the applicant’s intended activities, organizational structure, business locations, information systems, technical infrastructure, and economic indicators is essential.
- Accounting and internal policies: Documentation outlining accounting policies and procedures, as well as internal policies specified in the Securities Market Act or drafts thereof, must be submitted.
- Regulatory compliance: Rules of procedure in accordance with the Money Laundering and Terrorist Financing Prevention Act and internal audit guidelines for monitoring compliance must be included.
- Investor Protection Sectoral Fund contribution: A document confirming the applicant’s commitment to pay the single contribution to the Investor Protection Sectoral Fund, as prescribed in the Guarantee Fund Act, is necessary.
- Administrative fee: Certification of payment of the administrative fee to the Financial Supervision Authority must be provided.
Additionally, it is essential to complete the fit and proper assessment form to submit details about the managerial team to the Financial Supervision Authority.
In compliance with the pertinent guidelines and regulations governing the investment field, applicants should take into account any additional requirements.
Should the Financial Supervision Authority require further information or documents to ascertain the applicant’s capability to provide investment services or their compliance with legal obligations, such documents must be furnished.
In the event that circumstances arise during the authorization process that prevent a decision within the prescribed time frame, applicants should consider withdrawing their application. The withdrawal of an application does not preclude resubmission, provided that previous issues and deficiencies have been rectified. Subsequent submissions may reference previously submitted information and documents, provided they remain current. However, it’s important to note that resubmission does not guarantee a positive authorization decision.
Proceedings’ time limit
The Financial Supervision Authority makes a decision to grant or refuse to grant an authorisation within two months of the receipt of all the required information and documents, but no later than within six months of the receipt of the application for the authorisation.
The administrative fee payable when applying for the authorisation of an investment firm is 1000 euros.
The process of obtaining authorization for investment firms in Estonia is governed by a set of well-defined regulations and timeframes, ensuring transparency and efficiency. The Financial Supervision Authority is dedicated to rendering decisions on authorization applications within two months of receiving all the necessary information and documents, with a maximum absolute deadline of six months from the date of application. Additionally, an administrative fee of 1000 euros is levied to cover the costs associated with processing applications.
Overall, Estonia’s regulatory framework supports the establishment and growth of investment firms, contributing to a robust and credible financial sector in the country.
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