The European Bank for Reconstruction and Development, according to its 2006 report on Commercial Laws, assessed in 2004 the securities market legislation in Poland against the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation and found Poland to be in "medium compliance." At the time of the International Monetary Fund's (IMF) 2001 Financial Sector Assessment Program, whose findings were reported in its 2001 Financial System Stability Assessment, securities regulation in Poland already complied with most IOSCO Objectives and Principles. Furthermore, the areas where compliance could be strengthened were reasonably minor in importance. According to the EBRD's 2006 report, a 2005 update of Poland's securities markets legislation showed dramatic improvement in the already relatively sound Polish legal framework with the adoption of the Act on Public Offering, the Act on Trading in Financial Instruments, and the Act on Capital Market Supervision. Accession to the European Union has been the key driving force behind Poland's financial sector development, as it contributed to improvements in the regulatory framework, according to the IMF's 2006 Article IV Consultation report. The Act on Financial Market Supervision was adopted in September 2006, establishing the new, integrated financial supervision authority - the Polish Financial Supervisory Authority (PFSA) - for the securities market, insurance, and pension funds sector. Starting on January 1, 2008, banking supervision is also carried out by the PFSA.

General Overview

The International Monetary Fund (IMF) conducted a Financial Sector Assessment Program (FSAP) in February 2001 on Poland's compliance with the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation. It reported its findings in its 2001 Financial System Stability Assessment (FSSA). The IMF report concluded that "securities regulation in Poland complies with most IOSCO Objectives and Principles, and the areas where compliance could be strengthened are reasonably minor in importance" (p. 68). The extensiveness of securities regulation practices in Poland was also assessed in 2004 by the European Bank for Reconstruction and Development (EBRD), as reported in its 2006 Assessment on Commercial Laws of Poland. The EBRD came to the conclusion that securities legislation in Poland was in "medium compliance" with the IOSCO Principles. While the 2004 results were confirmed in a 2005 update, the EBRD stated that the new legislation, which entered into force following the assessment, "dramatically improves the already relatively sound Polish legal framework" (p. 6).

The legal framework governing the securities market in Poland was fundamentally amended in July 2005, as noted in the EBRD's 2006 report, with the adoption of the Act on Public Offering Conditions Governing the Introduction of Financial Instruments to Organized Trading (hereafter referred to as "Act on Public Offering"), the Act on Trading in Financial Instruments, and the Act on Capital Market Supervision. These three Acts supersede the 1997 Law on Public Trading in Securities, which remains in force. The Act on Public Offering was meant to transpose the relevant European Union (EU) legislation on prospectuses into Polish law. The Act on Trading in Financial Instruments introduced new definitions in line with EU regulation. Finally, the Act on Capital Market Supervision set the role and responsibilities of the Securities and Exchange Commission (Komisja Papierów Wartoœciowych i Gie³d, or SEC). As stated on the Polish Financial Supervisory Authority's (Komisja Nadzoru Finansowego, or PFSA) website, EU Directive No. 2004/39/EC on Markets in Financial Instruments is currently being implemented into Polish legislation by means of amendments to the 2005 Act on Trading in Financial Instruments and amendments to the 2004 Act on Investment Funds. EU accession has been the key driving force behind Poland's financial sector development, as it contributed to improvements in the regulatory framework, according to the IMF's 2006 Article IV Consultation report.

The new Act on Financial Market Supervision was adopted in September 2006, which establishes a new integrated financial supervision authority - the PFSA - merging the SEC, and the Insurance and Pension Funds Supervisory Commission (Komisja Nadzoru Ubezpieczen i Funduszy Emerytalnych, or KNUiFE). Starting on January 1, 2008 the Commission for Banking Supervision (Komisja Nadzoru Finansowego, or CBS) was also integrated into the new regulator. According to M Furtek i Wspólnicy in a 2006 International Financial Law Review (IFLR) article, the PFSA is a collegial body with a chairman appointed by the prime minister, to which the PFSA is accountable and submits annual reports. In its 2006 Article IV Consultation report, the IMF expressed concerns regarding the scope for political interference under the new legal framework for financial sector supervision, and noted that "the governance provisions for the new unified supervisory agency were little improved in the legislative process and continue to fall short of best practice" (p. 44).

According to the IMF's 2006 Article IV Consultation report, while the corporate bond market remained in its infancy, growth in the equity market had been impressive. Equity markets in Poland included the Warsaw Stock Exchange (Gielda Papierów Wartoœciowych w Warszawie, or WSE), the "NewConnect" trading platform; the Central Table of Offers (CeTO); and the Electronic Treasury Securities Market, as noted in the 2008 U.S. Department of Commerce (DoC) Country Commercial Guide. MTS Poland Market, the successor of the Electronic Treasury Securities Market, was established as a non-regulated organized market to provide wholesale electronic trading of Polish treasury bills and bonds. NewConnect, on the other hand, is operated by the WSE outside the regulated market as an alternative trading system. Furthermore, the CeTO functions as an over-the-counter market. In 2000, according to the 2008 U.S. DoS report, a modern trading system - the Warset - was launched on the WSE to enable direct cooperation with other stock exchanges in Europe. As of 2007, per the same report, there were over 350 listed joint stock companies on the WSE, with total market capitalization over $400 billion (i.e. 80% of GDP). 23 foreign companies from the Czech Republic, Hungary, Austria, Ukraine, and Italy were also listed on the WSE in 2007.

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

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At the time of the IMF's 2001 FSSA, supervision of the securities market was conducted by the SEC. The 1997 Act on Public Trading in Securities clearly defined the responsibilities and objectives of the SEC. Its regulatory responsibilities included "supervising the observance of fair trading and competition rules in public trading, ensuring that universal access to accurate information on the securities market is available, protecting investors' interests, and drafting acts concerning the securities market for legislative approval" (p. 67). The new integrated financial supervision authority - the PFSA - was established in 2006 under the Act on Financial Market Supervision, merging the SEC with the Insurance and Pension Funds Supervisory Commission. The integration of the Banking Supervisory Commission into the PFSA was planned for January 1, 2008, as noted in the IMF's 2006 Article IV Consultation report. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

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At the time of the IMF's 2001 FSSA, the SEC enjoyed "a reasonable degree of financial and operational independence" (p. 69). In theory, however, the Act on Public Trading in Securities allowed for possible political interference in the operations of the SEC. The IMF report noted that "a more transparent and independent structure could be achieved if the chairman was appointed for a fixed term" (p. 68). The SEC was incorporated into the PFSA in September 2006. According to M Furtek i Wspólnicy in a 2006 IFLR article, the PFSA is a collegial body with a chairman appointed by the prime minister, to which the PFSA is accountable and submits annual reports. Per the same article, while in theory "the new commission will be an independent authority exercising supervisory powers over the financial market in an autonomous way," its effective independence seems uncertain. In its 2006 Article IV Consultation report, the IMF expressed concerns regarding the scope for political interference under the new legal framework for financial sector supervision, and noted that "the governance provisions for the new unified supervisory agency were little improved in the legislative process and continue to fall short of best practice" (p. 44). The IMF report further noted that the independence of the PFSA was insufficiently established in the legislation. The implementation of the 2006 Act on Financial Market Supervision was expected to determine the effectiveness of the PFSA. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

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At the time of the IMF's 2001 FSSA, the SEC was granted clear powers "to license securities admitted to public trading, brokers, investment advisors, over-the-counter (OTC) markets, mutual funds, commodity exchanges, exchange clearing houses, commodity brokers, and brokerage houses in commodities markets" (p. 67). The SEC was incorporated into the PFSA in September 2006. According to the 2008 U.S. DoC report, the PFSA has maintained the strong reputation originally established by the SEC as the regulator of the stock market. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

4. The regulator should adopt clear and consistent regulatory processes.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

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At the time of the IMF's 2001 FSSA, Poland made relatively limited use of Self-Regulatory Organizations (SROs), and many SRO-powers were exercised by the SEC. The IMF report noted that Poland was considering giving more importance to SROs as markets develop. However, the available sources do not directly address Poland's compliance with this principle.

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

9. The regulator should have comprehensive enforcement powers.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

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At the time of the IMF's 2001 FSSA, the SEC had "adequate authority to share information with the president of the National Bank of Poland and under reciprocal arrangements with foreign securities regulators" (p. 69). However, the available sources do not directly address Poland's compliance with this principle.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

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The 1997 Act on Public Trading in Securities required listed companies to file annual, semi-annual, and quarterly consolidated financial statements, as noted in the World Bank's 2005 report on Accounting and Auditing. In 2005, the Law on Public Trading in Securities was superseded by the Act on Public Offering, the Act on Trading in Financial Instruments, and the Act on Capital Market Supervision, as noted in the EBRD's 2006 report, but remained in force. The EBRD report further noted that the aim of the Act on Public Offering was to transpose the relevant EU legislation on prospectuses into Polish law, and to grant new responsibilities to the SEC, including "the approval of the prospectus, supervision over carrying out a public offering, admission to trading on a regulated market and conduct of promotional activities and maintaining a register of qualified investors" (p. 5). The SEC was incorporated into the PFSA in September 2006. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

15. Holders of securities in a company should be treated in a fair and equitable manner.

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The World Bank, in its 2005 report on Corporate Governance, stated that basic minority shareholder rights were in place in Poland. According to the EBRD's 2006 report, the Act on Public Offering enhances the disclosure of shareholdings in a public company, and provides that "a shareholder owning at least 90% of the total voting rights has the right to demand that all minority shareholders sell their shares ("squeeze out") [and] minority shareholders can request the shareholder having 90% of the voting rights to buy their shares ("sell out")" (p. 5). However, the legislation did not include specific requirements for the board to provide equitable treatment to shareholders, as noted in the World Bank's 2005 report. According to the IMF's 2006 Article IV Consultation report, the problem of voting rights and board representation for minority shareholders, as well as other corporate governance issues, were intended to be addressed by the EU Directive No. 2007/36/EC on the Exercise of Certain Rights of Shareholders in Listed Companies, which was under consideration. The EU Directive on Shareholders Rights was adopted on July 11, 2007. Moreover, on July 4, 2007, according to M Furtek i Wspólnicy in a 2007 IFLR article on corporate governance, the Supervisory Board of the WSE adopted the new "Best Practices of WSE Listed Companies," which were to take effect on January 1, 2008. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

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According to the World Bank's 2005 report on Accounting and Auditing, financial reporting by Polish companies is governed by various laws and regulations which include very detailed accounting requirements primarily based on the Fourth EU Directive No. 78/660/EEC on the Annual Accounts of Certain Types of Companies, and the Seventh EU Directive on Consolidated Accounts No. 83/349/EEC. As of 2005, the Law on Accounting, which enacts the provisions set out in the Fourth and Seventh EU Company Law Directives (as amended), requires that the consolidated financial statements of listed companies comply with the International Financial Reporting Standards. Moreover, listed companies are subject to statutory audit requirements. The 2008 U.S. DoC report noted that Polish accounting standards did not differ significantly from international standards. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

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At the time of the IMF's 2001 FSSA, no action was required for this principle. Nevertheless, there is insufficient information publicly available regarding Poland's compliance with this principle.

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

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See Principle 17.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

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See Principle 17.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

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See Principle 17.

21. Regulation should provide for minimum entry standards for market intermediaries.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

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Under the 2005 Act on Trading in Financial Instruments, according to the EBRD's 2006 report, the initial capital requirement of PNL 4 million for Polish investment firms is no longer required if the investment activity is of limited scope. The EBRD report further noted that "investment firms are allowed to obtain civil liability insurance for any damage caused in the course of their investment activities and if the insurance provides a minimum coverage of 1.5 million Euro the initial capital is not required" (p. 5). Despite the information provided above, the available sources do not directly address Poland's compliance with this principle.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

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In 2000, according to the 2008 U.S. DoS report, a modern trading system - the Warset - was launched on the WSE to enable direct cooperation with other stock exchanges in Europe. However, the available sources do not directly address Poland's compliance with this principle.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

27. Regulation should promote transparency of trading.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

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There is insufficient information publicly available regarding Poland's compliance with this principle.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

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The 2005 Act on Trading in Financial Instruments eliminated the "concentration rule," which ended the monopoly of the National Depository for Securities in settling transactions executed in alternative trading systems. However, the available sources do not directly address Poland's compliance with this principle.