AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
LEGAL ISSUES AND PRACTICAL PROBLEMS IN THE MANAGEMENT OF THE SECURITIES
PORTFOLIO IN SLOVAKIA
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TOMAS PERACEK
Comenius University in Bratislava, Faculty of Management,
Odbojarov 10, 820 05 Bratislava, Slovak Republic
e-mail:
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tomas.peracek@fm.uniba.sk
Abstract: Securities are an integral part of the basic instruments of the capital market
not only in the conditions of the Slovak Republic. In practice, several contractual types
contained in the Securities and Investment Services Act are used in securities trading.
It is primarily an agreement on the sorting of the securities portfolio, which is used by
securities traders. However, this contract consists of several types of contract, which
address the issue of procuring the purchase or sale of a security, its safekeeping and
administration. In this article, we focus on the examination of individual contract types
/ activities, which together as a whole represent a contract on the management of a
securities portfolio by a securities trader. With the help of scientific research methods
as well as with the use of scientific and doctrinal interpretation in Slovak but also
foreign professional literature and as case law, answers will be provided to selected
application problems from practice. A comprehensive legal examination of the
agreement on the management of the securities portfolio in the conditions of the
Slovak Republic is the main goal of this paper, which belongs to the area of business
and financial law with certain overlaps in economics and financial management.
Keywords: contract, financial and business law, portfolio management, securities,
1 Introduction
The capital market is understood as a system of institutions and
instruments ensuring the movement of medium and long-term
capital between economic entities through various forms of
securities. Unlike the monetary market, the circle of entities
operating on the capital market is wider and the organization of
the market is also more diverse (Dermine, 2015). An integral
part are stock exchange trades as special trading contracts. The
key feature of these contracts is that they are traded on a stock
exchange that differs from other markets by its high formal
organization. The transfer of capital in the form of securities
which are concluded on behalf of clients by securities traders as
a result of portfolio management agreements. The portfolio of
economic literature (Chovancová and Árendaš, 2016) is
understood as a combination of investment opportunities in
which the investor invested his capital. A portfolio investment is
an investment in a combination of assets and, according to
(Macíková et al., 2018), may be a combination in both the
primary market and the secondary market.
Securities trading in the Slovak Republic has never met with the
interest of the population. The lack of interest of the public as
well as the vagueness of the legal regulation may result in a lack
of interest of lawyers to examine this issue in more depth,
despite its undoubted importance in business practice. The issue
of financial markets is addressed by several experts, especially in
the field of economic theory. This issue is a legal prism, and it is
the legislative framework that determines the rules of the game.
For this reason the article seeks to contribute to the presentation
of the legal status of the management of the portfolio of
securities agreement. Therefore, a comprehensive of review the
issue of contractual management of the securities portfolio from
the point of view of valid and effective Slovak legislation would
be an important addition to the legal literature. The article is
divided into four chapters, each of which comprehensively
examines one of the activities of a securities trader within the
management of the client's portfolio.
2 Aim of the paper and methodology
The main goal of this scientific article is to examine its legal
regulation in the legal order of the Slovak Republic and to
identify the agreement on the management of the securities
portfolio. In addition to the main goal, we have chosen two sub-
goals, which are:
confirm or reject the hypothesis that the securities portfolio
management agreement represents separate contractual
types in Slovak commercial law.
assess the legislation as a whole and, if appropriate, make
proposals de lege ferenda.
According to the nature of the article, we use several scientific
methods of knowledge. For the knowledge of the law, we
consider it appropriate to use the method of logical analysis to
examine the legal status and legislation as well as abstraction.
Using the comparative method, we make available the different
opinions of theorists, whether on the appropriateness of
legislation or on the interpretation of individual legal institutes.
Due to the experience from the practice of law in some parts, we
also use a doctrinal interpretation. The primary source from
which we draw ideas are legal regulations as generally binding
formal sources of law in the Slovak Republic. We supplement
these sources with the secondary source, which is the decision-
making activity of Slovak and Czech courts. It aims to unify the
interpretation of the disputed legal institutes. Within the source
apparatus, scientific and professional literature occupies a
special place.
3 Securities portfolio management agreement in general
The contract on portfolio management as the last contractual
type is contained in § 43, Section 1 to 6 of Act No. 566/2001
Coll. on Securities and Investment Services, as amended
(hereinafter referred to as the “Securities Act”). The indirect
object is a portfolio consisting of investment instruments, other
securities or cash intended for the purchase of investment
instruments. Other professional literature (Bajus, 2011) defines a
portfolio of securities as a stock of various securities held by an
investor. The aim of creating a portfolio of securities is to
diversify risk, because holding securities allows the investor to
obtain an adequate rate of return on the capital invested at a
relatively low risk and obtain the highest possible rate of return
on invested capital.
As per § 43 Part 1 of the Securities Act, a portfolio management
contract, which can only be undertaken by a securities trader,
manages the client's portfolio based on the manager's decision
within the scope of the contract for which the client undertakes
to pay remuneration. A formal condition for the validity of a
portfolio management agreement is its written copy. However, if
an agreement were an oral contract, it would be affected by a
defect of the absolute invalidity of the legal act. The rights and
obligations arising from the concluded portfolio management
agreement are outlined only by the legislator, which leaves
unlimited freedom to the parties with a vague reference to the
agreement on the purchase of securities, mandate and
commission agreement on the purchase or sale of securities, and
contracts and custody of documents securities and the securities
administration contract. In this connection, Eliáš (1999) states
that the Paragraphs from § 30 to § 53f of the Securities Act
regulating the issue of securities contracts constitute a lex
specialis in relation to Act No. 40/1964 Coll. The Civil Code as
amended (hereinafter referred to as the “Civil Code”) and Act
No. 513/1991 Coll. Commercial Code as amended (hereinafter
referred to as the “Commercial Code”). These two codes
therefore apply ancillary to all securities contracts.
3.1 Commission method of buying or selling a security
Arranging the purchase or sale of a security is the basic activity
of a securities trader as a manager within the scope of portfolio
management. He may perform this activity primarily in a
commission manner. In this way, the manager, as a commission
agent, undertakes to arrange for the purchase or sale of a security
for his client in his own name as a client on his own account or
to act to achieve this result and the client undertakes to pay him
remuneration. In practice, this means that the objective of the
contract will be met if the manager succeeds in selling or buying
the security. The second possibility when the contract expires
upon fulfillment is also the situation when the purchase or sale
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