1. Implementation of MiFID Legislative Adjustment: New Rules and Regulations Introduced by the New Directive Matjaž Albreht Assistant Director The Slovene Securities Market Agency Split, 14. – 15. June 2007

2. Disclosure Any views expressed in this presentation do not necessarily reflect views of the Slovene Securities Market Agency.

3. Agenda  About MiFID  Financial Instruments Market Act (FIMA) in Slovenia  Status of adopting FIMA: timetable  Novelties introduced by FIMA  Impact of MiFID on the EU accession countries

4. VISION Markets in Financial Instruments (MiFID) would play an important role in the wider European economic reform agenda given the contribution that deep and liquid capital markets can make to encouraging investment, innovation, growth and employment.

5. Financial Instruments Market Act Markets in Financial Instruments Directive will be implemented in Financial Instruments Market Act (FIMA) in Slovenia, which will represent new legal environment for Slovene capital market and will replace the present Securities Market Act.

6. New Legal Framework in the Slovene Capital Market: FIMA  It will replace the present Securities Market Act (adopted in 1999).  It is fully harmonized with the following main Directives: 1.Market Abuse Directive – MAD (2003/6/EC) 2.Prospectus Directive (2003/71/EC) 3.Markets in Financial Instruments Directive– MiFID (2004/39/EC) 4.Transparency Directive (2004/109)... and other directives: 89/117, 97/9, 98/26, 2001/34, 2003/124, 2003/125, 2004/72, 2006/48, 2006/49; and regulations: 2273/2003, 809/2004, 1287/2006.

7. Process of adopting FIMA 30.04.2006 31.01.200701.11.2007 MiFID entered in force MiFID should be transposed by Member States MiFID measures should be applied by industry TIMELINE 01.07.2007 All executive acts should enter into force 01.08.2007 15.08.2007 FIMA should be in reading in Parliament FIMA should enter into force FIMA should be published in Official Gazette of RS

8. Transposition delayed Nov.2006 draft sent in government procedure May 2007 draft sent in government procedure Ministry of Finance & Ministry of Public Administration FIMA Jan.2007 draft has been withdrawn

9. Structure of FIMA FIMA 590. Articles Banking Act 416. Articles BA by-laws logical application FIMA by-laws app. 40 new ones

10. Novelties introduced by FIMA  Type of investment firm determined by authorised capital  Defining “Small Investment Firm”  Systematic internalisers  Borrowing/lending customers financial instruments/ funds  Outsourcing  Tied Agent

11. Types of Investment firms The scope of services listed in the Article 8 of FIMA that an investment firm can perform is determined by its amount of the authorised capital: 1. Min. value of authorised capital 730.000 EUR = Investment firm can perform all services and activities listed in Article 8 of FIMA. 2. Min. value of authorised capital 125.000 EUR = Investment firm can provide all services and activities, except:  dealing on its own account;  underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis.

12. Types of Investment firms - continuation 3. Min. value of authorised capital 50.000 EUR = Investment firm can provide all services and activities, except:  dealing on its own account;  underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;  safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management.

13. “Small Investment firm”... is an investment firm that can perform only the following investment services and activities:  transmission of orders in relation to transferable securities or units of collective investment undertakings to persons from Article 32. FIMA (providers of investment services and activities);  investment advise; And whose  yearly income could not exceed 750.000 EUR.

14. SIF: special rules  Provisions of FIMA do not apply to:  value of authorised capital;  performing services and activities outside the territory of RS;  obligation to disclose supervised information;  risk management;  rules of operations on performing investment services and activities;  system of guarantees with regard to investors’ claims.  It can perform only investment advising and trading of insurance products.  It should have protection of it’s liability for damage in relation to it’s customers.

15. MTF & Systematic Internaliser  MTF is a multilateral system, operated by an investment firm or a market operator which brings together multiple third party buying and selling interests in financial instruments in the system in a way that results in a contract in accordance with special rules for MTF.  Systematic internaliser is an investment firm which on an organised, frequent and systematic basis deals on its own account by executing client orders outside a regulated market or an MTF.

16. Borrowing/lending customers financial instruments/funds Investment firm should not be allowed to use customers financial instruments or funds, held by them on behalf of a client, for their own account or the account of another client of the firm, unless:  the client gives prior express consent to the use of his/her instruments or funds on specified terms, signed by the client;  consensus could be general or particular for use of client’s instruments or funds in a single transaction. DUE CARE OF INVESTMENT FIRM WITH CUSTOMER’S ASSETS

17. Outsourcing  If investment firms outsource critical or important operational functions or any investment services or activities to a third party, they have to adopt all reasonable measures to avoid unnecessary additional operational risks.  It is not permitted that investment firms outsource performing important operational functions in the way that would make the quality of internal control system’s performing impossible or extensively difficult as well as that would make compliance with relevant law difficult.

18. Tied Agent... is natural or legal person who under the full and unconditional responsibility of only one investment firm on whose behalf it acts:  promotes investment and/or ancillary services to clients or prospective clients;  receives and transmits instructions or orders from the client in respect of investment services or financial instruments;  sales financial instruments;  provides advice to clients or prospective clients in respect of those financial instruments or services.

19. MiFID’s impact for the EU accessing countries  Opportunity for domestic investment firms to act cross national borders using single passport.  Competition between exchanges and other trading platforms will significant reduce transaction costs.  Lower costs and cross-border trading will increase liquidity of domestic market.  Suggestion: learn on experiences and mistakes of EU Member States.

20. TREM  Investment firms which execute transactions in any financial instruments admitted to trading on a regulated market should report details of such transactions to the competent authority as quick as possible and no later than at the close of the following working day. This obligation should be applied whether or not such a transactions were carried out on a regulated market.  The competent authority should establish the necessary arrangements in order to ensure that the competent authority of the most relevant market in terms of liquidity for those financial instruments also receives this information.

21. Principles for transaction reporting Duties of investment firms:  Report transactions to home competent authority ASAP  All transactions: On the exchange + off the exchange  Special case: Branches Duties of competent authorities:  Set up a national transaction reporting system  Exchange TRs between certain competent authorities  Principle: „Most relevant market in terms of liquidity“

22. Deadlines for competent authorities

23. Questions?