STOCK EXCHANGE AND SECURITIES LAW IN POLAND

KIEŁTYKA GŁADKOWSKI KG LEGAL advises on stock exchange and securities law.

This is not the domain of strict corporate law based solely on the basic legal sources such as the Commercial Companies Code or the Polish Accounting Act or CIT, which regulate the corporate life of a Polish joint-stock company.

That is why we support foreign investors and companies in the conditions of additional regulations:

1/ Polish Act on Trading in Financial Instruments;

2/ Polish Act on public offering and conditions for introducing financial instruments to an organised trading system and on public companies;

3/ Polish Act on Investment Funds and Management of Alternative Investment Funds;

4/ Polish Act on crowdfunding for economic undertakings and assistance to borrowers;

5/ Polish Act on supplementary supervision of credit institutions, insurance companies, reinsurance companies and investment firms that are part of a financial conglomerate;

6/ Polish Act on Capital Market Supervision;

7/ Regulation (EU) 2017/1129 of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market;

8/ Regulation (EU) No 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps;

9/ Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories;

10/ Regulation (EU) No 596/2014 of the European Parliament and of the Council on market abuse.

Below we present basic information that is particularly important for foreign investors in the stock exchange and securities. The information below is presented based on the previous assistance and support rendered for our foreign Clients and their information needs at the initial stage of cooperation.

Conditions and procedure for admission to stock exchange trading

Admission of financial instruments to stock exchange trading

Financial instruments may be traded on the stock exchange if they are admitted to trading by the Stock Exchange Management Board or under the Stock Exchange regulations. Before making a decision, the Management Board analyzes the financial situation of the issuer, its development plans and the terms of the issue, ensuring the safety of market participants. In the event of doubts or discrepancies in the documentation, it may refuse admission to trading.

Recent articles about this topic on our blog:

Info duties of listed companies

Issue of securities with or without prospectus

Insider dealing

For companies already listed, new share issues may be permitted after submitting an application, preparing an information document, ensuring the transferability of shares and meeting regulatory requirements. Subscription rights are permitted the day after they are established, provided they are compliant with the regulations and registered with the National Depository for Securities.

Rights to new shares are admitted to trading after the Stock Exchange receives information about the allocation, provided that they become shares of the same class, are registered with the National Depository for Securities and (if required) an information document has been prepared.

In the case of unlisted companies, rights to new shares may be admitted if the information document has been approved and the Stock Exchange Management Board is satisfied that trading will be smooth and safe.

Financial instruments may be introduced to trading:

• in the ordinary procedure – at the request of the issuer,
• in public sale mode – based on an offer from a stock exchange member.

In the case of a public sale, the offer must include, among other things, the number, value and price of instruments and the conditions for the execution of orders.

The segmentation of the regulated market depends on the company’s capitalization:

• MINUS 5 – up to 5 million EUR
• 5 PLUS – 5–50 million EUR
• 50 PLUS – 50–250 million EUR
• 250 PLUS – over EUR 250 million

The classification of companies into segments takes place quarterly (after sessions in March, June, September and December).

The Alert List is a sub-segment that includes companies with very low share prices, high volatility or in bankruptcy.

Derivatives on the Stock Exchange

The stock exchange offers, among others, futures contracts on indices, shares, currencies and index options.

These instruments allow to:

• make money even in times of decline (bear market),
• hedge positions on the cash market,
• speculate using financial leverage.

Futures contracts

It is an agreement between two parties: the buyer undertakes to buy, and the seller undertakes to sell, the underlying instrument at a specified time and at an agreed price.

• The buyer takes a long position – he expects the price to increase.
• The seller (issuer) takes a short position – he assumes the price will decline.

Options

Options work similarly to insurance policies – they protect investments against adverse price changes (falls or increases).

The buyer of the option pays a premium, which is the price for portfolio protection. One can choose the level of protection and its duration – the greater the protection, the higher the premium.

Members of the Stock Exchange

A stock exchange member is an institution that participates directly in trading in financial instruments on the Stock Exchange. Only entities with the appropriate status may conclude transactions on the stock exchange.

To become a member of the stock exchange, an entity must:

• conduct brokerage activities (e.g. brokerage house, investment bank),
• be a legal person (natural persons cannot obtain this status),
• guarantee reliable and regulatory performance of stock exchange duties,
• ensure the security of trading in financial instruments,
• have the ability to correctly settle transactions concluded on the stock exchange.

Market Makers

Market makers play an important role in ensuring the liquidity of stock market trading. Their main goal is to facilitate trading in financial instruments, especially those that are less popular, through a constant presence on the market.

There are two types of market makers on the Warsaw Stock Exchange (WSE):

• Market maker – operates under an agreement with the Warsaw Stock Exchange, executing transactions on its own account in order to stabilize and support the liquidity of a specific financial instrument.
• Issuer’s market maker – cooperates directly with the issuer of a given instrument (e.g. a listed company), committing to support its liquidity based on a concluded agreement.

Market makers have limitations – they cannot place orders that would lead to the conclusion of a transaction in which they would be the buyer and seller at the same time.

Stockbrokers

Brokers are individuals appointed by a stock exchange member to handle investor orders. Their duties include:

• transmitting orders to the stock exchange,
• modifying orders,
• cancellation of orders – all in accordance with applicable regulations.

Each stock exchange member appoints a so-called supervising broker who:

• supervises the work of brokers,
• allows them to operate on the stock exchange,
• supervises compliance with procedures,
• monitors the correctness of executed orders.

Brokers play a key role in the investor service process – they are responsible for the efficient and correct transmission of orders to the market.

Brokerage orders

A brokerage order is an order placed by an investor (e.g. an individual, an institution) containing instructions to buy or sell a specific financial instrument (e.g. shares, bonds, futures contracts) on the stock exchange.

Basic elements of the order:

• Type of operation – purchase or sale,
• Financial instrument – e.g. shares of a given company,
• Number of units – e.g. number of shares,
• Price limit – maximum price (when buying) or minimum price (when selling),
• Type of order – e.g. limit order, at any price, stop loss,
• Validity period – e.g. an order valid only for one session, until a specific date (Valid Until Date), until its execution (Valid Until Cancelled).

Types of orders (examples):

• Limit Order – Execution only at a set price or better.
• Market Price Order – execution at the best available price.
• Loss / Stop Limit order – is activated only after reaching a specific price level (used to limit losses or protect profits).
• Order with condition (e.g. execute and delete) – specific orders carried out under specific conditions.

Stock exchange transactions

A stock transaction is the result of matching two orders from opposing sides of the market – the buyer and the seller. It occurs when the conditions (including price and quantity) of both sides are consistent.

Features of the transaction:

• They are concluded on the basis of automatic matching of orders by the stock exchange system (CATS/UONIA),
• They are settled by the National Depository for Securities (KDPW) – which is responsible for the transfer of funds and securities,
• Transactions are recorded, irreversible and binding – unless certain exceptions occur.

Cancellation of stock transactions

As a rule, transactions concluded on the stock exchange are irreversible, but there are exceptional situations in which it is possible to cancel (invalidate) a transaction.

Terms of transaction cancellation:

• Cancellation may only occur by decision of the Exchange Management Board, e.g. in the event of a system error or an obvious mistake (so-called “fat finger” – e.g. an order to buy 10,000 shares instead of 1,000),
• The exchange may invalidate a transaction if its conclusion:
  • violated the regulations,
  • occurred due to a technical error,
  • was created as a result of manipulation or abuse.

Procedure:

• An application for cancellation may be submitted by a stock exchange member (brokerage house) immediately after the erroneous transaction has been concluded,
• The exchange reviews the application and decides whether the transaction will be invalidated,
• All decisions are published and are official.

Trading session schedule

Continuous quotes:

• The session starts at 8:30, but transactions start at 9:00.
• Trading lasts until 5:00 p.m., during which time one can conclude transactions on an ongoing basis.
• At 5:00 PM the closing price is set.
• From 5:00 p.m. to 5:05 p.m. there is a so-called extra time – transactions are still possible at the closing price.

Single quotes:

• Orders are accepted from 8:30 to 11:00.
• At 11:00 (first fixing) the opening price is set and transactions are concluded – trading lasts for 30 minutes.
• The second fixing takes place at 15:00, the closing price is set, at which one can also trade for 30 minutes.

Difference between systems:

• In continuous trading one can enter into transactions throughout the entire session.
• In single-quotation transactions take place only twice a day – after the morning and afternoon fixing .

Stock exchange transaction records

Stock exchange transaction records are the process of registering and storing information about transactions concluded on the stock exchange, including the purchase and sale of securities. It aims to ensure the security, transparency and correctness of trading on the capital market.

The National Depository for Securities (KDPW) is responsible for this process in Poland.

KDPW (National Depository for Securities) is the institution responsible for:

• Recording of securities (posting them to investors’ accounts),
• Settlement of transactions concluded on the WSE,
• Settlement – i.e. the transfer of securities and funds between the parties to the transaction.

KDPW operates within the modern KDPW Stream IT system, which combines all post-trade stages.

Process stages: recording – calculation – settlement

Record

• Registration of all transactions concluded on the stock exchange.
• Recording a change of ownership of securities.
• Maintaining securities accounts of market participants.

Calculation

• Calculation of monetary values and quantities of securities to be transferred between the parties.
• Settlements take place in the net system – only the differences between purchases and sales are processed.

Settlement

• Final transfer of securities and cash between investor accounts.
• It usually takes place on the second business day after the transaction is concluded (T+2).

Importance of transaction records:

• Guarantees legal security of trading – each transaction is confirmed in the system.
• It ensures market transparency – supervisory institutions can control the flow of securities and funds.
• It enables efficient and reliable settlement of transactions on the regulated market.

Secondary trading in financial instruments and the regulated market

Secondary trading in financial instruments refers to entering into transactions in instruments that have been previously issued and introduced to trading.

Secondary trading is generally organised and its functioning is subject to strict regulations of Polish and EU law (including the MiFID I and II directives). These regulations introduce restrictions on the freedom of contract, in particular regarding the form and manner of performing legal acts resulting in the disposal of rights incorporated in financial instruments.

The purpose of these restrictions is to protect the interests of investors, issuers and the public interest.

Regulated market

According to the current definition, a regulated market is a multilateral transaction system that is organised and serves to trade financial instruments.

Unlike the previous designation as a “trading venue”, the new definition emphasises its functional nature and complexity, indicating an organised structure that enables safe and transparent transactions between multiple market participants.

Regulated market and other trading platforms

The regulated market is one of the forms of so-called organised trading and operates alongside:

• ASO (Alternative Trading System),
• OTF (Organized Trading Facilities).

Compared to ASO, the regulated market is characterized by a higher level of formalization and requirements for issuers, which affects the higher level of transaction security and investor protection. The MiFID I and II Directives emphasize the need to ensure the same level of organization and transparency within different trading platforms.

Foreign regulated markets in Poland

In accordance with the principle of the EU single market for financial services and the concept of the so-called “European passport”, foreign regulated markets can also operate in Poland. In order to operate, they must be recognized by the relevant Member State and notified to the European Commission. In addition, foreign entities operating an ASO or OTF in another EU Member State can install systems and technical devices in Poland that allow Polish entities to access these platforms. Although this does not require a permit from the Polish Financial Supervision Authority (KNF), the relevant foreign supervisory authority must inform the KNF about the issuance of a permit to conduct business.

Identification of shareholders, providing them with information and supporting the exercise of their rights are key aspects of the activities of listed companies.

Identification of shareholders

Listed companies have the right to identify their shareholders, which allows for direct communication with them and facilitates the exercise of their rights. Thanks to this procedure, companies can obtain data on shareholders from financial intermediaries such as banks or brokerage houses. In Poland, the National Depository for Securities (KDPW) plays a role in this process, handling the disclosure of data on shareholders.

Providing information to shareholders

To ensure transparency and the smooth functioning of the capital market, companies are required to provide shareholders with information on important matters, such as invitations to general meetings or changes to the company’s articles of association. Financial intermediaries must ensure that shareholders are kept up to date on these matters, which allows for greater awareness of the company’s activities.

Supporting the exercise of shareholder rights

Financial intermediaries are responsible for facilitating the exercise of shareholders’ rights, including participation in general meetings and voting on resolutions. In particular, they can organize correspondence or electronic voting, which is particularly helpful for foreign shareholders. Such activities support the involvement of shareholders in the company’s management process and improve the quality of corporate governance.

All these mechanisms aim to improve transparency, protect shareholder rights and strengthen confidence in the capital market.

Investor compensation system in Poland aims to ensure the protection of financial resources and financial instruments entrusted by investors in the event of the insolvency of brokerage entities. It is a mechanism that aims to increase confidence in the capital market.

Key information about the compensation scheme:

• Management: The compensation scheme is managed by the National Depository for Securities (KDPW) and its operation is supervised by the Polish Financial Supervision Authority (KNF).
• Scope of protection: The system covers funds and financial instruments that investors entrust to system participants, such as brokerage houses, brokerage banks and custodian banks.
• Compensation limit: The amount of compensation is limited. The maximum amount of compensation is 22,000 euros. The investor receives 100% of the value of the lost funds up to 3,000 euros, and then 90% of the value of the excess above this amount.
• Sources of financing: Funds for the payment of compensation come from mandatory contributions from system participants, which are calculated on the basis of the average value of funds accumulated in investors’ accounts over the last 12 months.
• Payment procedure: In the event of bankruptcy of a brokerage house, the trustee has six months to prepare a list of investors entitled to compensation and calculate the amounts due to them. KDPW then pays out the compensation funds .

It is worth noting that the compensation system does not protect against investment risk or losses resulting from bad investment decisions. Its purpose is to provide minimum protection for investors’ funds in the event of the insolvency of financial institutions.

The handling of information documents related to a public offering or the application for admission of securities to trading on a regulated market is strictly regulated by law, aimed at ensuring transparency and protection of investors’ interests.

Key aspects of these documents include:

Preparation of information document:

The issuer or offeror are required to prepare a document containing information about the public offering of securities. This document should include, among others:

• Basic information about the issuer, including financial data.
• Details of the securities offered and the terms of the offer.
• Information on the planned use of proceeds from the issue.
• Identification of significant risk factors.
• Issuer’s statement of responsibility for the information contained therein.

The document should be prepared in Polish and made publicly available, ensuring appropriate protection of investors’ interests.

Notification from the Polish Financial Supervision Authority (KNF):

The issuer or the offeror are obliged to inform the PFSA of the intention to conduct a public offering at least 7 business days before making the information document available.

Sharing a document:

The information document must be made available in a manner that ensures proper protection of investors’ interests. In the case of a public offer addressed to an unspecified addressee, the document should be published on the website of the issuer, offeror or intermediary investment firm.

Submitting an application for admission to trading:

An application for admission of securities to trading on a regulated market is submitted by their issuer. It is also possible for another entity to submit such an application without the issuer’s consent, provided that the relevant regulations of the regulated market provide for this and the securities are already admitted to trading on another regulated market.

Issuers’ reporting obligations Issuers of securities are required to provide accurate and current information to ensure market transparency and investor protection. Their main reporting obligations include:

Disclosure of confidential information: Issuers must promptly disclose any material information that may affect the price of their securities.

Current reports: Issuers are obliged to regularly inform about events that may affect the value of their financial instruments, in the form of current reports.

Periodic reports: Every issuer must publish regular financial reports that present the company’s current financial status and results of operations, enabling investors to assess the situation.

Corporate governance principles: Issuers should comply with corporate governance principles that ensure responsible and transparent management of the company.

Failure to comply with these obligations may result in sanctions from supervisory authorities and negatively impact the issuer’s image and investor confidence. For more detailed information on this topic, it is worth familiarizing yourself with the guidelines of the Polish Financial Supervision Authority and the Warsaw Stock Exchange.

Significant blocks of shares in public companies refer to a situation where an investor or group of investors holds a significant number of shares in a given public company, which gives them significant influence over its operations. Having such blocks is associated with information and regulatory obligations.

Here are the key issues regarding qualifying shareholdings:

• Notification obligation: Investors who acquire or sell shares in a public company and reach a certain threshold (e.g. 5% of votes at the general meeting) must immediately inform both the company and the relevant supervisory authorities.
• Influence on company control: Owning large blocks of shares may give an investor the ability to influence decisions that govern the company, including appointing members of the management board or supervisory board, as well as shaping the company’s strategy.
• Protection of smaller shareholders: Regulations related to large shareholdings aim to protect the interests of smaller shareholders by ensuring their equal access to information and enabling them to participate in decisions taken at the general meeting.
• Disclosure obligations: When investors with large shareholdings make decisions that may affect the company’s operations, they are obliged to inform the market about these actions, which ensures transparency of trading.

Delisting and exclusion of shares from organised trading are legally regulated processes that aim to ensure market transparency and protect investor interests.

Delisting of shares:

According to the Public Offering Act, a public company may apply for the withdrawal of its shares from trading on a regulated market or in an alternative trading system if it meets certain conditions, such as a change in the company’s legal form, its merger or division. In such cases, the company must obtain the consent of the Polish Financial Supervision Authority (KNF).

Exclusion of shares from trading:

The exclusion of shares from stock exchange trading means their removal from the list of instruments available on the stock exchange. This may occur at the initiative of the company or the decision of the KNF in the event of a breach of information obligations or other regulations by the issuer. The exclusion of shares may lead to a loss of investment liquidity and a reduction in the possibility of selling shares on the regulated market.

These processes require numerous formalities and obtaining appropriate permits. Investors should be aware of the risks associated with such activities, especially in terms of liquidity and investment implementation.

The prospectus is a document that contains information necessary for investors to make an informed decision to invest in the securities offered. Its content and format are strictly defined by law to ensure transparency and uniformity of information on the capital market. Key elements of the prospectus :

• Registration document: Contains information about the issuer, such as its history, organizational structure, business activity, financial situation and data on the management board and supervisory board.
• Offer document: Describes the details of the securities offer, including the terms of the issue, the issue price, the objectives of the issue and information about the market on which the securities will be listed.

Depending on the type of issuer and the characteristics of the offer, the prospectus may contain additional information, such as financial data, risks related to the investment or information on security. It is important that the prospectus complies with applicable regulations and standards, which ensures its acceptance by the relevant supervisory authorities and investor confidence.

Preparing an issue prospectus is a complex process that requires cooperation with experts such as auditors and legal advisors to ensure the document is complete and complies with applicable regulations.

Approval and publication of the prospectus are key stages in the process of offering securities to investors. These procedures are strictly defined by law to ensure transparency and investor protection.

Approval of prospectus:

In Poland, an application for approval of an issue prospectus is submitted to the Polish Financial Supervision Authority (KNF). The application may be submitted by the issuer or jointly by the issuer and the offeror. The KNF website provides an application form for approval of the prospectus, which includes a list of required attachments.

Member States shall not allow the public offering of securities without prior publication of a prospectus. However, there are exceptions, such as offers directed exclusively at qualified investors.

The Polish Financial Supervision Authority refuses to approve the prospectus if it does not meet the requirements specified in the law in terms of form and content.

Publication of the prospectus:

Once the prospectus has been approved, the issuer is required to publish it. The prospectus must be available to investors before the public offering or admission of securities to trading on a regulated market.

The method of publishing the prospectus may include:

• Publication in electronic form: The prospectus is available on the website of the issuer or the offering party in a searchable and non-modifiable format.
• Publication in newspapers: The offer announcement may be published in a newspaper with national or regional circulation, containing information about the issuer, the type of securities and the planned schedule of the offer.

Compliance with these procedures is essential to ensure the transparency of the capital market and the protection of investor interests.

Cross-border public offerings of securities and their admission to trading on a regulated market are regulated by European Union regulations aimed at simplifying and harmonizing these processes. Key aspects regarding the use of languages in such transactions are also strictly defined.

Cross-border listings and admissions to trading:

• Passporting of prospectus: Issuers approved in one Member State can offer securities or apply for their admission to trading in other Member States on the basis of a so-called “passport”. This only requires filing the prospectus approved in the home country with the relevant authorities of the other Member States.
• Minimising disclosure requirements: To facilitate cross-border offers, exemptions from the obligation to publish a full prospectus have been introduced, provided that certain criteria are met, such as the amount of the offer or the number of securities offered.

Use of languages in the prospectus:

• Language of the prospectus: The prospectus should be drawn up in a language accepted by the competent authority of the Member State of the issuer.
• Translation of the prospectus in the host country: If the offer or admission to trading takes place in more than one Member State, the prospectus may be required to be translated into a language accepted by the host country authority.
• Language of application for admission to trading: In case of admission of non-equity securities, the prospectus may be drawn up in an international financial language accepted in both the home and host countries.

These rules aim to simplify procedures related to cross-border offers and admissions to trading, while ensuring adequate investor protection through transparency requirements and information availability.

Issuers of securities that are based outside the European Union (in third countries) are subject to special regulations regarding the public offering and admission of securities to trading on a regulated market in the EU.

Key requirements for third country issuers:

Prospectus approval: A third country issuer wishing to make a public offering in the EU or have its securities admitted to trading on a regulated market must obtain approval of its prospectus from the relevant authority in its country of residence.

Compliance with national regulations: In some cases, the issuer may apply the regulations applicable in its own country, provided that they are recognised as equivalent to the regulations applicable in the European Union.

Home country of the issuer: The issuer must disclose information about its country of residence and comply with applicable laws in relation to national and EU regulations, submitting this information to the relevant authorities both in the country of residence and in the countries where the securities are admitted to trading.

The European Securities and Markets Authority (ESMA) is an independent European Union authority whose main task is to supervise financial markets in the EU. Its aim is to provide greater investor protection, improve the functioning of financial markets and safeguard financial stability.

ESMA works with national supervisory authorities responsible for supervising financial institutions in their countries. The authority develops regulations and guidelines that ensure a uniform approach to supervision throughout the European Union. This enables effective management of financial markets at the EU level.

In case of difficulties in exchanging information or refusal of cooperation, competent authorities may request assistance from ESMA. In addition, ESMA develops rules that help ensure compliance with EU regulations, including guidelines on the assessment of members of management bodies and shareholders.

Information obligation of companies that make part of their shares available in a public offering

Companies that decide to make some of their shares available in a public offering are subject to specific information obligations towards the stock exchange and investors. They are required to provide reliable and timely information regarding their financial condition and important events that may affect the valuation of shares.

These obligations are divided into current and periodic reports. Current reports include, among others, changes in the management, conclusion or termination of significant agreements, or financial forecasts. In turn, periodic reports are regularly published financial statements – quarterly, half-yearly and annual – together with the management’s commentary on the company’s situation.

The legal basis for these obligations includes the EU MAR Regulation, the Public Offering Act and the Warsaw Stock Exchange regulations. The purpose of these regulations is to ensure transparency and equal access to information for all market participants.