LuxCSD Disclosure Requirements – Iceland
Disclosure Category: 1
In the case of holdings in securities listed on an Icelandic marketplace, and/or registered in an Icelandic Securities Register, the custodian is under an obligation to disclose the identity and holdings of clients and the identity of final beneficial owners holding applicable positions.
Consent
Clients entering into any transactions in the Icelandic domestic market hereby consent and are hereby deemed to consent to the disclosure and to the appointment of the requestor (for example, Fjármálaeftirlitið, the Financial Supervisory Authority – FME, or Skatturinn, the Icelandic Tax Authorities) as their attorney-in-fact, under power of attorney to collect from LuxCSD such information as is required to be disclosed.
Background information
LuxCSD has obtained, as a custodian on the Icelandic Market, a licence to hold financial instruments owned by its clients in a nominee account opened with Nasdaq CSD SE (Nasdaq CSD, formerly known as the Icelandic Securities Depository hf. – ISD).
A condition on the issue of such licence by the Icelandic Regulator, FME, is for a custodian to guarantee compliance with the rules on disclosure of information to FME. FME may establish further rules on disclosure of information.
If LuxCSD violates the provision of information under Regulation No. 706/2008, FME may, in the worst case, revoke LuxCSD's licence for registration in a nominee account.
Legal basis
The legal basis for disclosing information consists of the following:
- Regulation No 706/2008 on nominee registration and the custody of financial instruments in nominee accounts (Articles 2, 4, 6, 7, 8, 14 and 15 in particular);
- Regulation No 45/1987 on the Withholding Tax Act (WTA) (Article 20 in particular);
- Act No 108/2007 on Securities Transactions (Securities Transaction Act) in accordance with Chapter IX, requires disclosure and notification of changes in significant proportions of voting rights to FME and to the issuer;
- Act No 94/1996 on the Withholding of Tax on Financial Income (Withholding Tax Act, WTA); and
- Act No 90/2003 respecting income tax (Icelandic Tax Act, ITA), as amended (Articles 90, 92 and 94 in particular).
Disclosure requirements of the book-entry system and securities market
The Icelandic authorities are entitled to obtain information on the beneficial owners of any financial instrument held by the custodian in Iceland that is listed on an Icelandic marketplace or registered in an Icelandic Securities Register.
As such, local laws and regulations require LuxCSD to disclose securities trading and holding information and the identity of the ultimate beneficial owners of certain securities or transactions.
Therefore, clients of LuxCSD are only admitted to participate in the services offered by LuxCSD on the Icelandic market if they deliver, upon request by LuxCSD, all or part of client information such as information related to their underlying clients and their underlying clients' holdings including, but not limited to:
- The identity of the ultimate beneficial owner of financial instruments held in a nominee account;
- The holdings of financial instruments and/or voting rights of the client beneficial owners;
- The identity of the ultimate beneficiary of a specific transaction.
Clients of LuxCSD must deliver the information as requested by FME and collected by LuxCSD within the requested time frame.
If a client does not provide such details, LuxCSD reserves the right to disclose to the requesting authorities the client’s identity and positions, as well as to exclude such client from any services offered on the Icelandic market and to take all necessary steps in relation thereto.
Tax disclosure requirements
In line with the Withholding Tax Act (WTA) and the Islandic Tax Act (ITA), all entities, including banks, savings banks and other financial institutions, securities markets and others that handle buying and selling, commission trading and other handling of shares, shall, of their own accord, supply the Director of Internal Revenue with a report of such transactions and parties thereto, for free, and in a form decided by the Director of Internal Revenue.
Banks, savings banks, other financial entities and other entities in accordance with Paragraph 1 of Article 3 of the WTA that accept deposits for the purpose of earning interest are of their own accord to give the tax authorities, for free, and in a form decided by the Director of Internal Revenue, information about paid or due interest in the year in accordance with Article 8 of this Act, as well as withheld taxes and deposits in bank accounts and any kind of securities, including investment funds. The same applies to any kind of loans to clients and interest payments from those loans.
Therefore, to comply with Icelandic disclosure and reporting requirements, LuxCSD is requested to report the following information to the Icelandic Tax Authorities (RSK):
- On a monthly basis, the name and transaction details of the LuxCSD client to the RSK; and
- Upon request, disclosure of the positions of the ultimate beneficial owners on a specified date in a given security to the RSK or any other relevant authorities in Iceland.
Therefore, LuxCSD clients are only admitted to participate in the services offered by LuxCSD in the Icelandic market if they deliver full or partial client information upon request by LuxCSD.
If a client does not provide such details, LuxCSD reserves the right to disclose to the requesting authorities the identity and positions of the clients, as well as to exclude such client from any services offered on the Icelandic market, and to take all necessary steps in relation thereto.
In the event that the identity of a beneficial owner of Icelandic securities (the “Instruments”) is undisclosed for tax purposes, LuxCSD may be requested to disclose to the Icelandic Tax Authorities details of the LuxCSD clients holding Instruments on behalf of the beneficial owner in question (including the identity of the client, details of holdings and all other information requested).
If LuxCSD’s client is the beneficial owner, LuxCSD may have to disclose details about this client.
Additionally, in the event that details of a transaction or of the transaction beneficiary are requested by the Icelandic Tax Authorities, LuxCSD clients are obliged to disclose the requested information within the specified time frame and level of details.
Other reporting obligations
Obligation to report threshold crossings (“Changes in significant proportions of voting rights”)
FME and the issuer must be notified in a verifiable manner if voting rights or holdings in the company reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 50%, 66⅔% or 90% of a listed company. In such events, such issuer itself shall make such notification public (usually through the stock exchange).
Exemption from the notification requirement applies in relation to shares acquired for the sole purpose of clearing and settling within the usual short settlement cycle, or when a party holds shares in the capacity of custodian (provided that such custodian can only exercise the voting rights attaching to such shares under instructions given in writing or by electronic means).
The Securities Transaction Act can be found at: www.ministryoffinance.is/media/skjal/Act_No_108_2007_on_Securities_Transactions.pdf
Investment restrictions
Foreign investment is not allowed in any company involved in “fish operations” or the primary fish processing industry.
Only Icelandic citizens and other Icelandic entities, as well as individuals and legal entities domiciled in another member state of the EEA, are permitted to own energy exploitation rights for non-domestic use of waterfalls and geothermal energy. The same applies to enterprises that produce or distribute energy.
Positions held in Icelandic securities by LuxCSD clients, may only be held by the following:
- Non-resident beneficial owners; and
- Icelandic banks complying with Article 3.2 of Act no. 94/1996, holding non-taxable or taxable bonds or equities, via their account in LuxCSD or CBL, either:
- For their own assets (and therefore being themselves the final beneficial owner); or
- On behalf of underlying beneficial owners that are Icelandic tax residents (and therefore acting as intermediary bank).
Indemnity
Each client has to acknowledge and agree to indemnify and hold harmless LuxCSD from any and all expenses (including attorney fees), penalties, loss, damages, judgments, suits or any other liabilities whatsoever incurred by LuxCSD due to the fact that it will have provided LuxCSD with incomplete, untrue, misleading or inaccurate information or will not have provided LuxCSD with the information requested in a timely manner.
Sanctions
FME may impose administrative fines on any party that does not fulfil the disclosure requirements. Fines imposed on a legal person may range in amount from ISK 50,000 to ISK 50 million (which may be changed from time to time).
According to the Securities Transaction Act (Article 145), the violation of, among others, Articles 78 and 79 of the said Act is subject to fines or up to two years of imprisonment.
The sanctions in the event of violation of the ITA’s disclosure rules are set out in the ITA, in particular in Article 109 thereof.