Act on Securities Trading (Securities Trading Act)

Part 1. Purpose, scope of application and key definitions

Chapter 2. Definitions

Section 2-1.Investment services and investment activities

(1) ‘Investment services and investment activities’ means:
1.reception and transmission of orders relating to one or more financial instruments,
2.execution of orders on behalf of clients,
3.dealing in financial instruments on own account,
4.portfolio management,
5.investment advice,
6.underwriting of financial instruments or placing of financial instruments on a firm commitment basis,
7.placing of financial instruments without a firm commitment basis,
8.operation of a multilateral trading facility (MTF),
9.operation of an organised trading facility (OTF).
(2) The ministry may make regulations to supplement this section.

Section 2-2.Financial instruments

(1) ‘Financial instruments’ means:
1.transferable securities,
2.money market instruments,
3.units in collective investment undertakings,
4.options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates, yields or emission allowances, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash,
5.options, futures, swaps, forwards and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of either party other than by reason of default or other event resulting in termination of the contract,
6.options, futures, swaps and any other derivative contracts relating to commodities that may be physically settled, provided that they are traded on a regulated market, an MTF or an OTF, except for wholesale energy products traded on an OTF that must be physically settled,
7.options, futures, swaps, forwards and any other derivative contracts relating to commodities, which have the characteristics of other financial derivatives, which may be physically settled unless otherwise mentioned in no. 6 and which are not for a commercial purpose,
8.derivatives for the transfer of credit risk,
9.financial contracts for differences,
10.options, futures, swaps, forward rate agreements and any other derivative contracts relating to climate variations, freight rates or inflation rates or other official economic statistics, which must be settled in cash or may be settled in cash at the option of either party other than by reason of default or other event resulting in termination of the contract, as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this section, which have the characteristics of other financial derivatives, having regard to whether, inter alia, they are traded on a regulated market, a multilateral trading facility or an OTF,
11.emission allowances under the Greenhouse Gas Emission Trading Act.
(2) Instruments issued by means of distributed ledger technology as mentioned in Article 2 (1) of Regulation (EU) 2022/858 are also regarded as financial instruments under subsection (1).
(3) The ministry may make regulations to supplement this section.

Section 2-3.Definitions relating to investment services and investment activities

(1) ‘Execution of orders on behalf of clients’ means conclusion of agreements to buy or sell financial instruments on behalf of clients, including agreements to sell financial instruments at the time of their issuance when the issuer is the investment firm or the credit institution itself.
(2) ‘Dealing in financial instruments on own account’ means trading against the undertaking's proprietary capital.
(3) ‘Portfolio management’ means discretionary management of investors' portfolios of financial instruments on a client-by-client basis and in accordance with investors' mandates.
(4) ‘Investment advice’ means personal recommendation to a client, at the initiative of the client or the investment firm, in respect of one or more transactions relating to specific financial instruments.
(5) The ministry may make regulations to supplement this section.

Section 2-4.Definitions relating to financial instruments

(1) ‘Transferable securities’ means those classes of securities which are negotiable on the capital market, including:
1.shares and other securities comparable to shares, as well as depositary receipts in respect thereof,
2.bonds and other debt instruments, as well as depositary receipts in respect thereof,
3.any other securities giving the right to acquire or sell any transferable securities, or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or interest yields, commodities or other indices or other measures.
(2) ‘Depositary receipts’ means securities which are negotiable on the capital market, which represent ownership of securities issued by a foreign issuer, which are able to be admitted to trading on a regulated market and which can be traded independently.
(3) ‘Money market instruments’ means those classes of instruments which are normally dealt in on the money market, such as treasury bills and certificates of deposit, and excluding instruments of payment.
(4) ‘Exchange-traded funds’ means funds of which at least one unit or share class is traded throughout the day on at least one trading venue and with at least one market maker which takes action to ensure that the price of the units or shares of the fund on the trading venue does not vary significantly from their net asset value and, where applicable, from their indicative net asset value.
(5) ‘Certificates’ means financial instruments as mentioned in Article 2(1)(27) of the Markets in Financial Instruments Regulation; see section 8-1.
(6) ‘Structured finance products’ means financial instruments as mentioned in Article 2(1)(28) of the Markets in Financial Instruments Regulation; see section 8-1.
(7) ‘Derivatives’ means financial instruments as mentioned in subsection (1) no. 3 and section 2-2 subsection (1) nos. 4 to 10.
(8) ‘Commodity derivatives’ means financial instruments as mentioned in subsection (1) no. 3 that are linked to a commodity or underlying instrument as mentioned in section 2-2 subsection (1) no. 10, or financial instruments as mentioned in section 2-2 subsection (1) nos. 5, 6, 7 and 10.
(9) ‘Agricultural commodity derivatives’ means commodity derivatives related to products mentioned in:
1.Article 1 and Annex I part I to XX and XXIV/1 to Regulation (EU) No 1308/2013, or
2.Annex I to Regulation (EU) No 1379/2013.
(10) The ministry may make regulations to supplement this section.

Section 2-5.Related party

‘Related party’ of a person or entity means:

1.the spouse of such person or another person with whom the said person cohabits in a relationship akin to marriage,
2.the under age children of such person, as well as the under age children of another person as mentioned in no. 1 with whom the said person cohabits,
3.an undertaking within the same group as the said entity,
4.an undertaking over which the said person or entity or any person or entity mentioned in nos. 1, 2 or 5 exercises such influence as mentioned in the Private Limited Companies Act section 1-3 subsection (2), the Public Limited Companies Act section 1-3 subsection (2) or the General and Limited Partnerships Act section 1-2 subsection (2),
5.a party with whom the said person or entity must be assumed to be acting in concert in the exercise of rights accruing to the owner of a financial instrument, including in cases where a bid is frustrated or prevented.

Section 2-6.Ancillary services

(1) ‘Ancillary services’ means:
1.safekeeping and administration of financial instruments on behalf of clients, including management of cash and collateral, as well as other management services. This does not include activities that comprise providing and maintaining securities accounts under section A(2) of the annex to Regulation (EU) No. 909/2014,
2.granting of credit to an investor carrying out transactions in financial instruments, where the undertaking granting the credit is involved in the transaction,
3.advice to undertakings on capital structure, industrial strategy and related matters, as well as advice and services relating to mergers and the purchase of undertakings,
4.foreign exchange services where these are connected to the provision of investment services,
5.preparation and provision of investment recommendations, financial analyses or other forms of general recommendation relating to transactions in financial instruments,
6.services relating to underwriting,
7.services relating to the underlying of derivatives and commodity derivatives defined in section 2-4, subsections 7 and 8, where these services are connected to investment services or ancillary services.
(2) The ministry may make regulations to supplement this section.

Section 2-7.Definitions relating to undertakings, trading venues etc.

(1) ‘Investment firm’ means an undertaking that provides one or more investment services to third parties or performs investment activities on a professional basis.
(2) ‘Credit institution’ means an undertaking as mentioned in the Financial Institutions Act section 1-5 subsection (4).
(3) ‘Market operator’ means anyone organising or operating a regulated market and may be the regulated market itself.
(4) ‘Regulated market’ means a multilateral system that regularly facilitates the bringing together in the system of multiple third-party buying and selling interests in financial instruments admitted to trading on the market, in accordance with objective trading rules laid down by the market itself and the requirements of this Act and appurtenant regulations, in order to enable a binding trade to be concluded.
(5) ‘Multilateral trading facility’ (MTF) means a multilateral system that facilitates the bringing together in the system of multiple third-party buying and selling interests in financial instruments in accordance with objective trading rules, in order to enable a binding trade to be concluded.
(6) ‘Organised trading facility’ (OTF) means a multilateral system which is not a regulated market or MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in order to enable a binding trade to be concluded.
(7) ‘Stock exchange’ means a regulated market with authorisation pursuant to section 13-1.
(8) ‘Trading venue’ means a regulated market, an MTF or an OTF.
(9) ‘Multilateral system’ means a system in which multiple third-party buying and selling interests in financial instruments are able to interact in the system.
(10) ‘Systematic internaliser’ means an investment firm which, on an organised, frequent, systematic and substantial basis, deals on own account when executing client orders outside a trading venue without operating a multilateral system. Whether dealing is frequent and systematic shall be measured by the number of trades the investment firm carries out on own account outside a trading venue. Whether dealing is substantial shall be measured either by the size of the trading carried out by the investment firm outside a trading venue in relation to the total trading of the investment firm in each financial instrument, or by the size of the trading carried out by the investment firm outside a trading venue in relation to the total trading in the EEA in each financial instrument. An investment firm may opt to register as a systematic internaliser even if it does not meet the criteria under this provision.
(11) The ministry may make regulations to supplement this section.

Section 2-8.Other definitions

(1) ‘Structured deposit’ means a deposit whose principal amount is fully repayable at maturity and whose return may depend on:
1.an index or combination of indices not linked in its entirety to an interest rate index,
2.a financial instrument or combination of financial instruments,
3.a commodity or combination of commodities or other physical or non-physical assets, or
4.a currency or combination of currencies.
(2) ‘Market maker’ means a person who undertakes on a continuous basis to buy and sell financial instruments on own account at prices determined by such person himself.
(3) ‘Tied agent’ means a natural or legal person who, acting under the responsibility and on the account of only one investment firm, markets investment services or ancillary services, obtains assignments, receives and transmits instructions or orders in relation to investment services or financial instruments, places financial instruments or provides advice in respect of such financial instruments or services; see section 10-22.
(4) ‘Home state’ means the country where the investment firm has its registered office.
(5) ‘Host state’ means an EEA country other than the home state where an investment firm has a branch, provides investment services or performs investment activities or where a regulated market gives remote members or participants access to trading.
(6) The ministry may make regulations to supplement this section, including definitions of other relevant terms in this Act or regulations pursuant to the Act.