Last year's amendment to the Act on Capital Market Business (ACMB) included investment instruments issued using distributed ledger technology (DLT) as investment instruments within the meaning of the ACMB. The Czech National Bank (CNB) has now issued an opinion on whether the Prospectus Regulation applies to such investment instruments.

According to the CNB's opinion, the Prospectus Regulation applies to investment instruments issued using DLT only if they have the characteristics of transferable securities, i.e. if they are book-entry securities in the relevant central or separate registry according to the ACMB, or if they are foreign securities.

It follows from the reasoning of the opinion that the Prospectus Regulation generally applies only to a defined range of securities, which are transferable securities within the meaning of MiFID I Iand which have been transposed into Czech law as investment securities under the ACMB. The fact that the amendment to the ACMB included instruments issued using DLT among investment instruments does not automatically lead to the conclusion that all investment instruments issued using DLT constitute investment securities under the ACMB or transferable securities within the meaning of MiFID II. Neither MiFID II nor the Prospectus Regulation provides guidance on how to assess which instrument can be considered a security. Therefore, in the context of their transposition, the regulation in the ACMB is decisive, based on the definition of securities and book-entry securities in the sense of private law, while even a Euro-conforming interpretation does not lead to a clear result justifying a different definition of a security.

The CNB also considered that a broader definition of investment security that includes instruments issued by DLT that are not securities would significantly expand the scope of cases of unauthorised provision of investment services and other financial market offences.

Author: Nathalie Hofmanová

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