Latvia

The Latvian market
These are some of the most important institutions and regulations for participants in the Latvian market:

Regulatory authority
The financial market in Iceland is regulated by The Financial and Capital Markets Commission, which is reporting directly to the Ministry of Finance.

LCD - Latvian Central Depository
The Latvian Central Depository (LCD) serves as the central depository for equity and debt securities. All securities traded in Latvia through brokers are held in dematerialised form at the LCD. Securities introduced to the LCD are in book-entry form and cannot be rematerialized. All equity and debt is registered in the name of the LCD participants. Banks and brokers are direct participants of the LCD.

The Riga Stock Exchange
In December 1993 The Riga Stock Exchange, RSE was founded by 4 Latvian commercial banks. In August 2002 HEX Group became the main shareholder of the RSE. Simultaneously the RSE becomes a 100% owner of the Latvian Central Depository. On the 4th of September the HEX Group merged with the OM Group thus creating the OMHEX Group. HEX integrated Markets, a division of OMHEX, is the operator of the largest securities market in the Nordic/Baltic region and consists of Stocholmsbörsen, Helsinki, Tallinn and Riga Stock Exchanges, as well as the central securities depositories in Finland, Estonia and Latvia. On April 7th a new NOREX agreement was signed between HEX Integrated Markets and Copenhagen Stock Exchange, Oslo Stock Exchange and Icelandic Stock Exchange. The new agreement provides for Helsinki, Tallinn and Riga exchanges joining the NOREX alliance. September the 27th OMX Exchanges’ marketplace in Helsinki, Tallinn and Riga successfully launched the common Nordic trading platform SAXESS, already in use at the Stockholm Stock Exchange, for trading on the cash market. The launch of SAXESS, developed and operated by OMX Technology, is a milestone in OMX’s effort to realize the vision of an integrated Nordic Baltic securities market.

Taxation
Dividends paid by a Latvian resident company to a non-resident are subject to 10% withholding tax. The withholding tax is not applicable if the recipient is resident in a member state of the European Union and has owned at least 25% of the capital and voting shares in the Latvian registered company for at least two years. In other cases an applicable double tax treaty may reduce the rate of withholding tax on the payment of dividends to non-EU residents.

Interest paid by a Latvian resident company to a third party is not subject to withholding tax provided the recipient is not a resident in a statutorily designated low tax zone. Interest paid to a related party is subject to 10% withholding tax (5% if the interest is paid by a Latvian registered Bank). Applicable double tax treaties may reduce the rate of withholding tax in some cases.

Investment restrictions
All shares are registered and dematerialised, and a company can request beneficial ownership disclosure. The RSE and/or the Central Bank may request substantial shareholder reporting of any issue within five days.

Investors whishing to acquire 10% or more of a Latvian banks shares must obtain prior approval from the Central Bank, a process that generally takes one month. It is the investor’s responsibility to seek and obtain this approval. If an investor inadvertently acquires more than 10% of a bank’s shares without prior Central Bank approval, the Central Bank may direct the purchaser to sell shares to bring its holding below the 10% threshold. Additional approvals are required to obtain 20%, 33% and 50% of a banks outstanding share capital.