Closer scrutiny for investment firms’ deals

The new Capital Market Commission bill is expected to bring a number of changes to the operation of investment companies, such as a considerable rise in the amount of money they can borrow; easier listing, yet with a great increase in minimum share capital; and tighter custody standards regarding clients’ portfolios. «The new measures, though bringing no ground-shaking changes overall, are a serious initiative by the Capital Market Commission so that the legislation for portfolio investment companies is harmonized with that for mutual funds,» a top official at the Tzimbanoulis & Associates law firm told Kathimerini. The firm specializes in stock market legislation, and particularly in investment companies and mutual funds. With this draft law, investment companies will be able to borrow up to 35 percent of their current portfolio’s value, albeit only for investments in securities. Until now companies could also borrow up to 10 percent of their equities to purchase securities, as well as real estate. Market officials note that the increase in borrowing quantity in practice allows companies to broaden their investment activities, as they will also be able to perform leverage. «It is not possible for an investment company to obtain a margin on borrowed funds,» market officials say. Another crucial point of the bill is that it facilitates the listing of investment companies. It specifically allows them to submit an application as soon as its operation license is approved, while the Capital Market Commission will be obliged to study the application within three months. Notably, companies will not have to previously publish their annual financial data anymore. However, the draft law raises the threshold of an investment company’s minimum share capital to 10 million euros before it can be listed, in order to safeguard the domestic capital market and investors.

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