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New Regulations Tighten Grip on Alternative Investment Companies

INVESTINGNew Regulations Tighten Grip on Alternative Investment Companies

The financial market is not uniform. It is populated by entities that are either unsupervised or subject to limited supervision by the Financial Supervision Authority. For instance, the crowdfunding market and the crypto-asset market went a very long time without any oversight. Today, this is changing. It has already changed for crowdfunding, and the shift for crypto-assets is just around the corner. There is also a structure referred to as Alternative Investment Company (AIC). If a businessman wants to invest, it must be done within a certain legal framework, and this is subject to regulation by the Financial Supervision Authority. AICs are registered, and according to the law, the role of the Financial Supervision Authority in their oversight is quite limited. The actual process of registering AICs is also simplified and only involves checking certain formal aspects. The FSA checks the investment policy and strategy, but does not examine the capital structure. What does this mean? Registering enables entities to undertake investment activities, but with a far greater risk than investing through a brokerage house or investment funds supervised by the FSA. This simplified mechanism for registering AICs has resulted in a surge of entities, which in turn has roused the interest of the FSA.

“We note intensified FSA inspections of AICs. Various proceedings related to market irregularities are underway. The legislator noticed that greater oversight of AICs is required, and introduced restrictions on the sale of shares or stock,” said attorney Rafał Wojciechowski from Filipiak Babicz Legal in an interview with “Investment limits were also set, and the scope of information required from AICs to be relayed to the Financial Supervision Authority has been expanded to enable more realistic, cyclical oversight of these companies. By consequence, AICs are becoming increasingly regulated, making them safer for investors. However, we should be careful with the word ‘safety’ in the capital market; the aim of regulatory actions is, in fact, to minimize irregularities within AICs. We can expect legislative changes that will make the entire investment-related market more heavily regulated. I think that within the next two to three years, practically every investment activity, whether in the alternative or professional market, will come under FSA regulation, and without such oversight, it won’t be possible to invest in Poland,” predicts Wojciechowski.

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