RULEBOOK ON PENSION FUND INVESTMENT

Transcription

1 Unofficial Translation AGENCY FOR SUPERVISION OF FULLY FUNDED PENSION INSURANCE RULEBOOK ON PENSION FUND INVESTMENT Skopje, June 2004

2 According to Article 105 paragraph (3), Article 106 paragraphs (1) and (2), Article 112 paragraph (5), and Article 113 paragraph (2) of the Law on Mandatory Fully Funded Pension Insurance (Official Gazette of the Republic of Macedonia No. 29/2002, 85/2003 and 40/2004), the Management Board of the Agency for Supervision of Fully Funded Pension Insurance at the meeting held on 23 rd of June, 2004 adopted: Rulebook on Pension Fund investment General provision Article 1 This Rulebook closely regulates: the requirements to be met by organized secondary capital markets on which Pension Fund assets can be traded; quality of shares, bonds and other securities in which Pension Fund assets can be invested; the countries or groups of countries in which Pension Fund assets can be invested; maximum investment limits per issuer or per instrument in which the Pension Fund assets can be invested; transfer of asset management of the Pension Fund to a foreign asset manager. Requirements to be met by organized secondary capital markets in which Pension Fund asset can be traded Article 2 1) All trading of securities carried out with Pension Fund assets shall take place in regulated secondary markets. 2) Exceptions to the paragraph 1 of this Article are: a) Acquiring bonds and securities issued or guaranteed by the Republic of Macedonia, directly from the issuer; b) Acquiring bonds and other securities issued by foreign governments of any member country of the European Union, Japan or the United States of America or Central Banks of any of the foregoing governments, directly from the issuer; c) Acquiring certificates of deposit and commercial notes issued or guaranteed by banks licensed by the National Bank of the Republic of Macedonia, directly from the issuer; d) Trading with participation units of open-end investment funds in the Republic of Macedonia operating according to the Law on Investment Funds and participation units of open-end investment funds with headquarters in a country-member of European Union, Japan or the USA, in which the majority of Pension Fund assets are invested in shares admitted to public quotation in the foregoing counties, is effected directly from/to the investment fund or the Company that manages that investment fund;

3 e) Acquiring shares from local or foreign investment funds stated in Article 105 paragraph (1) items i) and m) from the Law on Fully Funded Pension Insurance (hereinafter referred to as: Law), when a local or foreign closed-end investment fund issues new shares, directly from the investment fund, provided that the right to acquire shares arises from the Pension Fund s prior ownership of shares of that investment fund. Article 3 1) The domestic regulated secondary market consists of Stock Exchanges and other licensed secondary markets or brokerage houses regulated by the Securities and Exchange Commission of the Republic of Macedonia. 2) The foreign regulated secondary market consists of the following institutions: a) The Stock Exchanges included in the Stock Exchanges Register maintained by the Agency for Supervision of Fully Funded Pension Insurance (hereinafter referred to as: Agency); b) Brokerage and dealer houses working with securities that are duly registered and authorized in their respective markets by a supervisory authority. They can operate on an exchange or in the over-the-counter market ( OTC ). c) Banks authorized to collect cash deposits and to operate with securities both for themselves and on behalf of third parties, which meet the minimum investment grade level rating A or higher credit rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's. Quality of shares, bonds and other securities in which Pension Fund assets can be invested and countries or groups of countries in which Pension Fund assets can be invested Article 4 Pension Fund assets can be invested in bank deposits stated in Article 105 paragraph (1) item a) of the Law and in certificates of deposit, commercial notes and bonds stated in Article 105 paragraph (1) item c) of the Law, if they are issued by or deposited in a bank which meets the following requirements: a) Has capital in amount of at least 10 million Euro (MKD counter value); b) It s capital adequacy ratio should be maintained at a level higher than 10% from the moment of purchase onward; c) Has audit report of the bank prepared by at least one international audit house; Article 5 Pension Fund assets can be invested in mortgage backed securities stated in Article 105 paragraph (1) item d) of the Law, if the bank that issues

4 those securities meets the requirements stated in Article 4 of this Rulebook on Pension Fund investment and the following requirements: a) The face value of the issue is not less than 5 million EURO in MKD counter value according to the middle exchange rate of the National Bank of the Republic of Macedonia. b) The market value of the mortgages securitizing the issued mortgage backed securities should not be lower than the ratio 1.5:1; Article 6 Pension Fund assets can be invested in shares of joint-stock companies stated in Article 105 paragraph (1) item f) of the Law and in shares of closed-end investment funds in the Republic of Macedonia operating according to the Law on Investment Funds, if the joint-stock companies or the investment funds meet the following requirements: a) Have market capitalization in the amount of at least 10 million Euro in MKD counter value according to the middle exchange rate of the National Bank of the Republic of Macedonia; b) Their shares are admitted to public quotation continuously for a period of at least 2 years prior to purchase; c) Their audit reports should be audited by at least one international audit house for the last three years; Article 7 Pension Fund assets can be invested in bonds issued by joint-stock companies stated in Article 105 paragraph (1) item g) of the Law, if the equity securities of the joint-stock companies that issue those bonds meet the requirements stated in Article 6 of this Rulebook, and the face value of the bond issue is not less than 5 million EURO (MKD counter value). Article 8 Pension Fund assets can be invested in commercial notes of joint-stock companies stated in Article 105 paragraph (1) item h) of the Law except those issued by banks, if the joint-stock company that issues those notes meets the requirements stated in the Article 6 of this Rulebook and the face value of the issue is not less than 1 million EURO in MKD counter value according to the middle exchange rate of the National Bank of the Republic of Macedonia. Article 9 Pension Fund assets can be invested in bonds and other securities stated in Article 105 paragraph (1) item j) of the Law, if: a) The bonds and other securities are issued only by the National Governments or their Central banks;

5 b) The country of the issuer of the bonds and other securities has long term foreign currency rating of at least A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's. Article 10 Pension Company assets can be invested in debt securities stated in Article 105 paragraph (1) item k) of the Law, if: a) The debt securities meet the minimum investment grade level rating granted by at least one reputable international rating agency, that is: - A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's for long-term instruments; - F1 or higher rating according to Fitch Investor Service, A1 or higher according to Standard & Poor's or P1 or higher according to Moody's for short-term instruments b) The face value of that issue is not less than 100 million EURO in MKD counter value according to the middle exchange rate of the National Bank of the Republic of Macedonia; c) If the country of the issuer of the debt securities has long term foreign currency rating of at least A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's. Article 11 Pension Fund assets can be invested in shares stated in Article 105 paragraph (1) item (l) of the Law, if: a) They are admitted to public quotation on the Stock exchanges stated in the Stock Exchange Registry maintained by the Agency; b) Are issued by companies registered in and with headquarters located in a country which is a member of the European Union, Japan, or the USA; c) The issuing company has market capitalization of at least 500 million EURO in MKD counter value according to the middle exchange rate of the National Bank of the Republic of Macedonia; d) The issuing company has a minimum investment grade level rating for all of their senior unsecured debt securities of A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's; e) If the country of the issuer of the shares has long term foreign currency rating of at least A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's; Article 12 Pension Fund assets can be invested in participation units and shares of foreign investment funds, if:

6 a) The Company managing those investment funds meets the following requirements: - has at a minimum seven years of continuous experience managing assets of third entities; - has headquarters in a country member of the European Union, Japan, or the USA, provided that the investment company must not operate or be registered in an off-shore zone; and b) The foreign investment funds, meet the following requirements: - The country in which the investment fund is registered has long term foreign currency rating of at least A or higher rating according to Fitch Investor Service and Standard & Poor's, or A2 or higher according to Moody's; - Net asset value of the investment fund should not be less than 100 million EURO; - Minimum 60% of the investment fund assets are invested in shares admitted to quotation on the Stock Exchanges in a country member of the European Union, Japan, or the USA. Article 13 (1) The bank in which instruments, stated in Article 105 paragraph (1) item a), c) and d) of the Law, the Pension Fund assets are invested should, from the moment of purchase onward, fulfill the requirements stated in Article 4 items a) and b) of this Rulebook. (2) If the bank fails to fulfill the requirements stated in Article 4 items a) and b) of this Rulebook for a period of successive 3 months, the Pension Company should divest itself of all deposits or securities issued by that bank, in the following 3 months. Article 14 Obligations to transfer securities resulting from transactions in securities in which Pension Funds are involved, shall be settled by simultaneous delivery of the securities and payment of the price of the securities, in accordance with the delivery versus payment principle. Article 15 (1) Pension Companies may not obtain instruments with the Pension Fund s assets that are subject to any type of prohibitions or limitations on the sale or purchase of such instrument. (2) The Pension Company can not trade with financial instruments through block and cross transactions. (3) The pension company managing a Pension Fund is not permitted to keep short positions (short selling) i.e. borrowing of securities. Article 16

7 Pension Companies may not trade with financial instruments with Pension Fund assets at prices that are prejudicial to the Pension Fund. A prejudicial price is a price that is different from the average market price at the moment when the transaction is effected, regardless if the purchase or sale price is higher or lower than the average market price. Maximum investment limits per issuer or per instrument in which the Pension Fund assets can be invested Article 17 (1) Pension Fund assets can be invested in securities of the same issuer but no more than 10% of the face value of each security issued by that issuer, provided however, that bonds and other securities issued or guaranteed by the Republic of Macedonia shall not be subject to the foregoing limitation; (2) No more than 5% of the value of all Pension Fund assets can be invested in securities issued by the same non-state entity registered in the Republic of Macedonia or in a country member of the European Union, Japan, or the USA; (3) No more than 15% of the value of all Pension Fund assets can be invested in deposits, certificate of deposits, commercial notes, bonds and mortgage backed securities of any one bank which is licensed by the National Bank of the Republic of Macedonia; Transfer of asset management of the Pension Fund to a foreign asset manager Article 19 (1) When the Pension Company is investing in foreign countries through a foreign asset manager the company that can be entrusted with the management of the Pension Fund assets must meet the following minimum requirements: a) Must be legal entity; b) The assets of the foreign asset manager must be kept absolutely separate from the assets of the third parties that they manage; c) Must manage assets of third parties equivalent to no less than 20 billion EURO; d) Must have no less than seven years continuous experience in managing assets of third parties; e) Must be registered in the Foreign Asset Manager Register (hereinafter referred to as: Manager Register) maintained by the Agency; (2) The Pension Company should submit to the Agency evidence that the requirements from paragraph (1) of this Article are met before entrusting the Pension Fund asset management to a foreign asset manager. The Agency may refuse the registration of the foreign asset manager in the Manager Register, if the requirements are not met, or if the Agency finds that it is contrary to the interests of the Pension Fund Members;

8 (3) Pension Companies cannot invest in foreign countries through foreign asset managers that are not registered in the Manager Register; (4) The Pension Company is obligated to inform the Agency of changes in its foreign asset managers; (5) In it s own By-Law, the Pension Company must regulate the conditions and the manner of transferring of asset management of the Pension Fund to a foreign asset manager. Final provision Article 20 This Rulebook shall come into force the following day after publishing in the Official Gazette of the Republic of Macedonia.