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Latvia

Private placement rules and law in Latvia

Table of contents
  1. Summary of private placement provisions for fund interests (if applicable)
  2. Other forms of possible placement options for fund interests outside fund regulations
  3. Consequences of non-compliance with placement regimes for fund interests
  4. Private placement rules for non-fund investments available
Latvia

1. Summary of private placement provisions for fund interests (if applicable)

The Latvian law implementing the AIFMD, i.e., the Law on Alternative Investment Funds and their Managers (“LAIFM”), was passed on 9 July 2013 and came into force on 8 August 2013. 

Neither the LAIFM nor the Law on Market for Financial Instruments (“LMFI”), the latter of which regulates financial markets and the public trading of securities in Latvia, includes any definition of “private placement”. The notion of private placement is generally addressed by way of specific exemptions relating to the obligation to prepare and register a prospectus, with such exemptions corresponding to the exemptions in Regulation 2017/1129. 

According to the terms of the LAIFM and LMFI, funds distributed in Latvia must be registered with the Bank of Latvia (“BoL”). As part of this registration process, the prospectus must be prepared in accordance with the regulations specified in the LMFI. However, there is an exemption to this requirement. If an offer of securities, for which the total calculated payment in the EU within a 12-month period falls within the range of EUR 1,000,000 to 8,000,000 and if notification in accordance with Article 25 of Regulation 2017/1129 is not requested, then there is no obligation to prepare a prospectus.  

Latvia has not transposed Article 42 of the AIFMD into LAIFM. This means that Latvia does not allow non-EEA AIFMs to market non-EEA AIFs to Latvian investors. Consequently, the marketing of non-EEA AIFs managed by non-EEA AIFMs is prohibited in Latvia, unless the non-EEA AIMF is authorized under AIFMD.  

2. Other forms of possible placement options for fund interests outside fund regulations

As an exemption from the general authorisation rule, unsolicited business with Latvian clients does not trigger any licensing requirements. In other words, there is no restriction on the right of persons and entities domiciled in Latvia to request the services of any entity (such as a fund manager) on their own initiative (i.e., reverse solicitation).

3. Consequences of non-compliance with placement regimes for fund interests

Where there has been a distribution of fund interests in a manner not compliant with Latvian law, in accordance with the LAIFM, administrative penalties of up to EUR 142,300 may be imposed. Additionally, the BoL has the authority to impose administrative fines for the distribution of AIF units to individuals who do not qualify as professional investors or qualified retail investors, with fines reaching up to EUR 14,200.  

Administrative penalties may also be imposed for violations related to providing false or misleading information and failing to meet periodic disclosure obligations. Moreover, individuals engaged in the management or marketing of AIFs without proper authorization may face criminal liability and associated sanctions.

Furthermore, additional regulatory sanctions can also include the prohibition on further distribution activities of the fund, as well as the possibility of claims for damages by investors.

4. Private placement rules for non-fund investments available

The private placement of securities is regulated by the LMFI. This law provides for a number of private placement exemptions based on Regulation 2017/112, the most important applying to offers (i) where the minimum subscription amount is EUR 100,000 per investor; (ii) where the offer is addressed to fewer than 150 investors per EEA Member State; or (iii) being restricted to qualified investors.