New role of an issue agent in private placements of securities in Poland

The latest capital market reform will enter into force on 1 July 2019, introducing changes to the private placements of bonds, mortgage bonds and investment certificates in Poland1. Along with the mandatory dematerialisation of those securities, the Polish legislator will introduce a new function for issue agents, which will be to intermediate and control the compliance of issuances.

The present and future role of an issue agent

Although an issue agent (Polish: agent emisji) is being directly regulated under Polish law for the first time, the concept of an issue agent has been recognised on the Polish market for quite a long time. Its role, however, has been rather strictly technical and related to ensuring the adequacy of records of securities on investors’ securities or omnibus accounts2. Nevertheless, from now on, the function of an issue agent will be much more legally important.

Firstly, the conclusion of an agreement with an issue agent will be obligatory for the issuers of bonds (Polish: obligacje) and mortgage bonds (Polish: listy zastawne) that are not issued by way of a public offering and where there is no intention to admit it to an organised trade3. This obligation shall also cover the issuance of investment certificates (Polish: certyfikaty inwestycyjne) by non-public closed-ended investment funds (Polish: niepubliczne fundusze inwestycyjne zamknięte). In the case of bonds, mortgage bonds, and investment certificates issued by way of a public offering and where the issuer has the intention to admit it to an organised trade – the engagement of an issue agent is optional4.

Secondly, the responsibilities of an issue agent will mainly cover control over the issuance process by: (1) verification of compliance of an issuer with the legal requirements related to the issuance, (2) verification of compliance of an issuer’s activities with the legal requirements related to the issuance, (3) verification of compliance of the securities and the issuer with the requirements referred to in the Regulation of the Central Securities Depository of Poland (Polish: Krajowy Depozyt Papierów Wartościowych; “KDPW”)5

Apart from the mentioned controlling competencies, an issue agent will also be responsible for establishing and running the evidence of persons entitled to securities as well as providing support to an issuer related to the conclusion of an agreement on the registration of the securities in the KDPW6

It should be noted that the above-mentioned responsibilities cannot be exempted or limited in the agreement with an issuer7

Entities authorised to perform an issue agent role

The issue agent role may be performed only by a narrow scope of entities, i.e. custodian banks and investment firms authorised to hold securities accounts. The latter consists of the brokerage houses, bank’s brokerage bureaus, foreign investment firms, and entities conducting brokerage activities in Poland8.

The reform also provides some measures intended to prevent conflicts of interest. In the case where an investment firm or a custodian bank is the issuer’s related entity or is connected with the issuer by any other legal or factual relationship that would lead to a conflict of interests or doubts as to the proper fulfilment of its duties, then it may perform an issue agent role only under the conditions that it: (1) separates organizationally the function of an issue agent from other functions that may pose a risk of conflicts of interests, (2) ensures the identification and monitoring of conflicts of interests and proper management of such conflicts9.

Given the similarities to the character of an investment fund’s depositary role and the scope of entities entitled to perform such a role10, it could be worth considering whether in the case of an issuance of investment certificates by a non-public closed-end investment fund, an issue agent’s role may be performed simultaneously with that of a depositary’s role11, provided that such a double role will not violate conflict of interest regulations (as mentioned above).

Liability of an issue agent

The Act on strengthening supervision over the financial market assigns liability to an issue agent for losses caused by non-performance or improper performance of its responsibilities. It also introduces specific criminal liability subject to a fine of PLN 2 million on persons acting on behalf of an issue agent where they provide KDPW with untrue data or conceal true data on securities or the issuer12.

1. The Act of 9 November 2018 on the amendment of certain acts with regard to strengthening the supervision over the financial market and the protection of investors on that market (Polish: Ustawa z dnia 9 listopada 2018 r. o zmianie niektórych ustaw w związku ze wzmocnieniem nadzoru nad rynkiem finansowym oraz ochrony inwestorów na tym rynku) (the “Act on strengthening the supervision over the financial market”).
2. § 40b(3) of the Regulation of the Central Depository for Securities (Polish: Krajowy Depozyt Papierów Wartościowych). 
3. Article 7a(1) of the Act of 27 July 2005 on trading in financial instruments (Polish: ustawa z dnia 29 lipca 2005 r. o obrocie instrumentami finansowymi) in wording resulted from the Act on strengthening the supervision over the financial market. (the “Amended act on trading in financial instruments”).
4. Article 7a(10) of the Amended act on trading in financial instruments. 
5. Article 7a(4)(1)-(3) of the Amended act on trading in financial instruments.
6. Article 7a(4)(4)-(5) of the Amended act on trading in financial instruments.
7. Article 7a(5) of Amended act on trading in financial instruments.
8. Article 3(33) of the Amended act on trading in financial instruments.
9. Article 7a(3) of the Amended act on trading in financial instruments.
10. Article 61(2)-(3) of the Act of 27 May 2004 on investment funds and managing alternative investment funds (Polish: ustawa z dnia 27 maja 2004 r. o funduszach inwestycyjnych i zarządzaniu alternatywnymi funduszami inwestycyjnymi).
11. Generally, a depositary function is carried out by the banks’ units responsible for depositary activity. See here
12. Article 178c of the Amended act on trading in financial instruments.