Recent difficult investor experiences have led to proposals for further regulatory changes aimed at increasing security and strengthening supervision of the financial market. Currently in a Sejm committee, a government bill is being read for the first time which would amend several acts, redefine the Polish Financial Supervision Authority, and impose an obligation to dematerialise some financial instruments.
Changes in the Polish Financial Supervision Authority (KNF)
The aim of these changes is to transform the KNF into a state legal entity. This would increase its independence and freedom to dispose of funds, as well as the right to receive funds from fees for supervision and examinations. Representatives of the Prime Minister, the Bank Guarantee Fund, the president of the Office of Competition and Consumer Protection, and the minister coordinating special services would join the KNF. This change would provide all these bodies with access to information obtained within the scope of their tasks and allow them to prevent and eliminate risks to a greater extent. If those changes are adopted, the KNF, which was established in 1991, will undergo an organisational change on 1 January 2019.
Dematerialisation of securities
GetBack bondholders’ problems probably contributed to the government’s preparation of proposals for amendments to the acts on bonds, investment funds (in terms of investment certificates), mortgage bonds and mortgage banks. The amendments would require dematerialisation of these financial instruments. No matter if the issue is a public or private offering, the securities will have to be registered with the Central Securities Depository of Poland (KDPW), while for a private placement, the bondholders will not have to have a securities account.
The draft act also provides that in case of a private placement, the issuer is obliged to engage an issuing agent—an investment firm whose task will be to verify the compliance of the issuer’s operations with legal requirements, proper performance of the dematerialisation obligation, and servicing of obligations under the issued bonds. The agent is to be liable for damage caused by improper performance of verification duties.
A newly created central repository would provide additional security for investors. It would be run by KDPW and gather information on debt securities issues, the value of issues and the degree of execution, as well as the timelines for repayment and redemption.
Financial Education Fund
The bill also creates a special fund to finance and undertake activities aimed at increasing public awareness of finance, capital markets and financial instruments, as well as cooperation with the Ministry of Education. The Central Securities Depository of Poland is to run the fund.
Danuta Pajewska, attorney-at-law, Capital Markets & Financial Institutions practice, Wardyński & Partners