Too expensive a system or crucial security? The government and the opposition are arguing about the certificate market

The draft amendment to the Investment Funds Act regarding the register of certificates of non-public funds will return to the Sejm committees; On Wednesday, during the second reading, Janusz Kowalski (PiS) moved for its rejection. He also announced that he would ask the CBA to check the process of working on the amendment.

This is a government draft amendment to the Act on Investment Funds and Management of Alternative Investment Funds and the Act on Trading in Financial Instruments. It is an element of the government's deregulatory work and aims to eliminate the obligation to register certificates of non-public closed-end investment funds (FIZ) with the National Depository of Securities.

On Wednesday, the Sejm again referred the draft amendment to the Parliamentary Deregulation Committee and the Public Finance Committee. They will assess the motion of PiS MP Janusz Kowalski to reject the project in the second reading.

“I am submitting a request to the Central Anticorruption Bureau (CBA) for the CBA to investigate all activities and events that occurred over the last 12 months in connection with these two acts: the Act amending the Act on investment funds and management of alternative investment funds and the Act on trading in financial instruments,” Kowalski announced.

According to Kowalski, we are dealing with some kind of “lobbyistic stunt”. “We are not dealing with any deregulation, but with a systemic change consisting in de facto undoing the reform of the PiS government. (…) Someone came up with the idea not to save certificates on brokerage accounts, but to have investment fund companies keep their records in their own interest, because certainly not in the interest of stakeholders,” the MP believes.

Kowalski stated that the National Depository for Securities assessed that the changes would lead to a significant weakening of the protection of investors purchasing investment certificates of non-public closed-end investment funds FIZ.

The project was also criticized by the Confederation. Ryszard Wilk, an MP, pointed out that the certificate registration mechanism was introduced to make the market more transparent and free from abuse. “The certificates are not entered in a private TFI database, but in a central, independent depository with uniform standards and supervision,” he noted.

Representatives of the clubs forming the government coalition argued that the current solutions to the act were too expensive, and the amendment changes this and further simplifies the regulations. They emphasized that the changes apply to institutional investors who do not require the same protection as individual investors.

Deputy Minister of Finance Jurand Drop assured that during consultations on the project, the Polish Financial Supervision Authority assessed that it would be able to fulfill its supervisory functions regarding FIZ private funds.

Earlier, during the deliberations of the joint committees, Drop explained that the obligation to register certificates of non-public funds in the National Depository for Securities and the related obligation for such funds to have an issue agent are associated with high costs and at the same time provide small benefits in relation to these costs. Moreover, such an obligation does not result from EU regulations.

The planned changes to the Act on Investment Funds and Management of Alternative Investment Funds and to the Act on Trading in Financial Instruments are intended to introduce the possibility for investment fund companies to keep records of participants in non-public FIZ funds. The system for registering investment certificates of a non-public FIZ in the register of fund participants will have to be indicated in the statute of this fund, which is to allow “potential participants of a non-public FIZ to become familiar with the system for registering investment certificates adopted in the fund.”

The change is to enter into force 14 days after its announcement. (PAP)

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