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NEW RULES FOR JOINT INVESTMENT

 

Joint investment activities in Ukraine will be conducted within a new structure and under specific legal protection with the adoption of the new law on joint investment institutions.

The new law provides for specific types of entities through which persons may be engaged in joint investment activities and contains detailed provisions regarding how those entities must operate. This law supersedes the 1994 presidential decree on investment funds and investment companies. Investment funds and mutual funds of investment companies established under the presidential decree generally must be liquidated or reorganized into entities under the new law by April 24, 2003. Certain existing closed funds may continue to operate until their stated term has ended and then either liquidate or reorganize.

 

NEW INVESTMENT FUND CLASSIFICATIONS

 

Joint investment activities will now be carried out through a “joint investment institution,” which can be either a “corporate investment fund” or a “share investment fund.” A corporate investment fund is an entity created in the form of an open joint stock company that is engaged exclusively in joint investment activities. A share investment fund is formed by an asset manager. The asset manager sells to investors investment certificates representing interests in the assets to be owned by the investors and managed by the asset manager. A share investment fund is not an actual legal entity.

Either type of fund may be an “open” or “interval” fund, where investors generally do not have the right to have shares repurchased until the fund liquidates. All open and interval funds must be “diversified”, with limitations on the amount of securities not publicly traded that they may hold. Closed funds may be “non-diversified” and not be subject to those types of limitations. Open and interval funds may have an indefinite duration, but closed funds must have a staled duration.

 

 

INTERNAL STRUCTURE AND GOVERNANCE ACTIVITIES

 

The new provides for extensive regulation of the structure and governance of investment funds. For corporate investment funds, their governing documents must contain specific provisions relating to the various classifications and activity limitations set forth in the new joint investment law. The new law also establishes the shareholders as the highest governing group of corporate investment fund and specifically grants them authority regarding specific investment fund items, in addition to matters reserved for shareholders under the law on joint stock companies. Most significantly,

shareholders are required to approve agreements with the manager and the custodian of the fund’s assets and any termination of those relationships. Each corporate investment fund is required to have a supervisory board that meets at least quarterly and has responsibility, for supervising the company hired to manage the fund’s assets. No member of the supervisory board may be related in any way to the company managing the fund’s assets, an entity selling the fund’s securities or a custodian, registrar, auditor or appraiser furnishing services to the fund.



For share investment funds, the company desiring to manage the fund’s assets is the primary participant in the establishment and operation of the fund. It creates the fund’s governing regulations, which must contain specific provisions regarding the classification and internal governance process of the fund. It also enters into required agreement with a custodian, auditor, appraiser and registrar for the fund of and organizes the process of issuing investment certificates to investors in the fund. Holders of investment certificates do not have the same level of power as shareholders in corporate investment funds. Although supervisory board may be created for share investment funds under specific circumstances, these boards have significantly fewer responsibilities in the context of share investment funds. The company managing the assets of a share investment fund may be replaced only by the State Commission on Securities and the Stock Market, in accordance with circumstances specified in the new law.

 


Date: 2015-01-29; view: 831


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ABOUT FOREIGN INVESTMENTS | REGISTRATION AND ISSUING OF SECURITIES
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