The Ministry of Finance sent an amendment to the Act on Investment Companies and Investment Funds (the "Act") to the comment procedure. The aim of this amendment is, among other things, to tighten the rules for the operation of so-called alternative or sub-limit funds according to Section 15 of the Act. This is in response to constantly recurring situations where small investors entrust their assets to alternative funds in the mistaken belief that they are regulated by the Czech National Bank (CNB) and thus are not aware that their investment is relatively risky.

What new obligations will the amendment impose on alternative fund managers?

· The legal entity managing the alternative fund will have to include the information that it is a venture capital entity in its name.

· They will also have to fulfil an information obligation towards their investors so that the investor is aware of the riskiness of their investment, what the fundwill invest in, what the fund's investment horizon is and what fees will be paid to the fund manager.

· The minimum investment by an investor in an alternative fund will be newly EUR 125,000.

· A maximum of 20 people do not have to meet the minimum investment criterion; however, the fulfilment of this condition will have to be verified by an auditor, so that it is not circumvented. The auditor's report on the number of persons who are not quasi-qualified investors will be submitted to the CNB.

If the alternative fund does not fulfil the stated obligations, the CNB may remove the fund from the list of alternative funds. Such an entity cannot then be entered on the list for another 10 years.

If the legislative process continues smoothly, the amendment to the Act should enter into effect on 1 July 2024.

Author: Jana Pospíšilová

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