Given the interest in the upcoming launch of the securities, we want to address some of the more popular questions received during last couple of weeks. We also remind you that the transition from the current model to the securities is a mandatory step to become a fully licensed investment firm.

Look and feel of the securities

• These are asset-backed securities, i.e., each security is backed by a pool of at least 10 loans that an investor gets exposure to, thus ensuring a greater diversification for investors.
• Securities will come with a variety of documents to offer the highest level of transparency. These documents, among others, include a base prospectus, final terms, and key information document (“KID”). Investors will be able to read the extensive information about the specific financial instrument, the potential risks related to investments, and description of specific loan originator’s operations and financials.
• Similarly, to loans, the maturity of the securities will depend on the underlying assets. We expect it to be in the range from 3 to 60 months. The investment term may increase with the securities, yet a decent amount of investments will still be in the short-term horizon. Furthermore, the secondary market will remain available.
• Securities will come with a fixed return which will vary among different products and depend on the market conditions.

Withholding tax

• After evaluating alternative jurisdiction options to offer our investors optimal product structure (incl. taxation), as well as observing regulatory requirements, we have decided to register the security issuers in Latvia.
• Latvian law determines that interest income from investments in securities is subject to 20% withholding tax.
• Based on the tax convention, the reduction of the WHT is possible if a tax residence certificate from the local tax authority is submitted. The reduced tax rate depends on investor’s tax residency.
• Furthermore, we, together with our industry, are in active discussions with Latvian authorities to decrease the WHT rate to as low as 3% to 5%.
• Furthermore, we, together with our industry, are in active discussions with Latvian authorities to decrease the WHT rate to as low as 3% to 5%.
  • If these changes to the legislation are adopted, certificates of residence will not be required, and a minimum of 3% to 5% WHT will be retained automatically.
  • If these changes to the legislation are not adopted, investors will be able to apply the reduced rate by submitting a certificate of residence.

You can rest assured that our aim is to find the most advantageous solution for our investors.

Investor protection mechanisms

• Investors will become subject to the investor protection mechanisms according to the requirements of the Financial Instruments Market Law and the relevant Directive (MiFID II), Packaged Retail Investment and Insurance Products (PRIIPs), the Key Information Document (KID), the Investor Protection Law, Prospectus Regulation, and other regulations which aim to further protect the interests of investors.
• Access to the investor protection mechanism imposed by the state prescribing the compensation of up to €20,000 for each individual investor according to the requirements of EU Directive 97/9/EC. This specific protection mechanism applies only to investments in securities.
• Buyback and Payment Guarantee mechanisms offered by the loan originators will remain as a product feature.