Czech Republic: Amendments To Other Important Acts

Last Updated: 14 September 2008
Article by Ladislav Štorek and Lucie Vožehová

Amendments to Acts and Regulations on the Capital Market (Transposition of MiFID)

Act No. 230/2008 Coll. implementing amendments to the Act on Undretaking on the Capital Market and Certain Other Acts (on Banks, Commodity Stock Exchanges, etc.), represents a transposition of Directive 2004/39/EC, on Markets in Financial Instruments (MiFID) and other European regulations implementing the Directive, came into effect on the 1st of July 2008.

Amendments implemented thereby considerably affect banking and non-banking securities dealers (investment firms), investment intermediaries, organized markets and to a certain extent also investment (fund management) companies, commodity stock exchanges and other persons/entities, including those that until now were not supervised by the CNB.

The biggest change is the introduction of rather extensive and detailed regulations regarding the obligations of securities dealers (investment firms), in particular their obligations towards customers (performing transactions under the best conditions, evaluating whether or not a certain service is suitable/ appropriate for the customer, etc.). Provision of investment advice shall now be reserved to securities dealers (investment firms) and investment intermediaries; the securities dealers (investment firms) and investment intermediaries will also be exclusively in charge of trading with all derivatives, including commodity derivatives, although the Act provides for many exceptions. The conditions for operation of both the regulated markets in the Czech Republic (the Prague Stock Exchange a.s., RM-SYSTEM, a.s.) have now become uniform; the regulated market will be regulated more loosely than before, but the regulation of the current free market (newly the "multilateral trading facility") will become stricter. The content of the expression "official market" will change accordingly, and now it will mean a segment of the regulated market with the highest demands.

Certain relaxation, on the other hand, has been brought by the fact that the mandatory time for archiving documents by securities dealers (investment firms) for purposes of CNB supervisory activities was reduced from ten to five years and it is now possible not to apply the rule of due care to certain selected, so-called "professional" customers.

The Amendment to the Act forms the basis for new Decrees of the CNB that are going to regulate in particular certain issues relating to provision of investment services and operation of securities dealers (investment firms); major changes will apply to the requirements regarding the expertise of securities dealers' employees. Except for the expertise requirement, the core of the regulation is being transferred to the Act on Undertaking on the Capital Market even in those cases when the matter was so far regulated as a whole by Decrees. Unfortunately, it will be harder to get oriented in the new regulations.

The Amendment to the Act on Undertaking on the Capital Market came into effect on the 1st of July 2008; however, it provides for a transition period until the end of November 2008 during which securities dealers are to adjust to the new regulations and the persons/entities the business activities of which are now subject to a permit or registration by the CNB will thus have the time to obtain such permit or registration.

Amendment to the Trade Licensing Act

Act No. 130/2008 Coll. published in the Collection of Laws of the Czech Republic amends Act No. 455/1991 Coll., on Licensed Training Business (the Trade Licensing Act), as amended. The amended Act became effective on the 1st of July 2008.

One of the most important changes implemented by the Amendment newly stipulates that there will be only one unrestricted trade license including 80 branches of business.

The entrepreneur will now only need to inform the authorities about the branch of business it is intending to pursue within the framework of the single trade license. Certificates of trade license will be replaced by a single document, namely the Excerpt from the Trade License Register.

The local competence of Trade Licensing Offices has now been cancelled. Entrepreneurs will be able to notify their trades, file applications for trade permits and fulfill their notification and reporting duties to any municipal/local Trade Licensing Office in the entire Czech Republic.

The entrepreneur's notification duty to Trade Licensing Offices will be restricted and it will relate only to changes in such information that the Trade Licensing Office is unable to obtain from databases available to the public administration and state administration bodies.

Another change provides that entrepreneurs starting up their own business need less professional experience than previously set forth by the law.

Payment Order – New Provision on Electronic Payment Orders

The Amendment to the Rules of Civil Procedure (Act No. 123/2008 Coll.), which became effective on the 1st of July 2008, has implemented the institute of an electronic payment order. The institute is expected to allow for expedient settlement of the socalled non-doubtful claims (receivables).

Pursuant to Section 174a of the Rules of Civil Procedure a court may issue, based on the plaintiff's proposal, an electronic payment order, provided, however, that the proposal was filed on an electronic form signed by the secured electronic signature of the plaintiff and further provided that the financial performance claimed by the plaintiff does not exceed CZK 1,000,000.

The Amendment should make court proceedings relating to settlement of claims (receivables) more expedient, and with the use of modern technology it should release the judge from excessive paper work. According to the Minister of Justice Jiří Pospíail, the new arrangement would apply to approximately 250,000 cases per year. Such cases include primarily unpaid bills for gas, electricity or rent, public TV and/or radio fees, receivables under leasing contracts, receivables of transportation companies concerning fares or fare surcharges, or receivables arising from consumer loans.

Electronic payment orders will be issued almost entirely in the electronic form. The plaintiff only needs to fill in an electronic form available on the web pages of the Ministry of Justice and send it by e-mail to the court. After computer processing of the filled in form the judge will confirm, using his/her electronic signature, the correctness of the payment order. The debtor (defendant) may file a protest against an issued payment order, in which case the matter will be discussed before the court. If no protest is filed, the payment order will have the effects of a legally effective judgment (court decision).

In addition to the electronic payment order, there will still be the written payment order and promissory note (check) payment order; rules governing the issue of such orders will remain unchanged. It will be the creditor's (plaintiff's) discretion to decide on a specific instrument aimed at enforcing the creditor's (plaintiff's) right. Use of the electronic payment order will be made more advantageous by payment of only 50% judicial fee.

Amendment to the Criminal Register Act

An Act that amends Act No. 269/1994 Coll., on Criminal Register, as amended, as well as certain other Acts was published in the Collection of Laws under number 124/2008 Coll. The Act came into effect on the 1st of July 2008.

The Amendment brings a change in the manner of verifying citizens' clean record. Citizens will no longer have to obtain an Excerpt from the Criminal Register in person in connection with administrative proceedings, but the administrative authority itself will request it directly from the Criminal Register.

For other purposes, e.g. if a natural person applies for a job and must prove his/her clean record by an Excerpt from the Criminal Register, such Excerpt from the Criminal Register will be issued in the same manner as before.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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