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custody. If the paper security is not already with the manager at
the time of concluding the contract, he is obliged to take it over
and deposit it immediately. Subsequently, however, he is obliged
to protect him with all professional care so as not to lose,
destroy, damage or devalue. The client's rights inevitably include
his ability to request the return of a paper security at any time, as
well as the ability to return the security to the manager, if the
concluded portfolio management contract has not expired in the
meantime (Nekit at al., 2020).
The possibility exists to declare bankruptcy on the part of the
property of the manager. Despite the fact that the occurrence of
such a situation in the conditions of the Slovak Republic is rather
hypothetical, it is necessary to clarify certain facts. The
declaration of bankruptcy means a fundamental interference with
the client's property. In order to secure the assets of the bankrupt
(manager) and satisfy the claims of creditors, the administrator
of the bankruptcy estate will perform actions aimed at handing
over the deposited securities to its owners. If it is not possible to
return them, for example due to an obstacle to the changed
address of the depositor, the insolvency administrator must
deposit the non-transferred securities with another custodian
under conditions similar to those under which they were
deposited. The additional custody costs incurred in this way are
borne by the bankrupt t. j. forest manager. However, it is
precisely his clients as custodians who are obliged by law to
reimburse the costs thus incurred to the administrator of the
bankruptcy estate according to the proportions of their shares.
Subsequently, they can recover these costs from the bankrupt in
bankruptcy proceedings, though with a minimal chance of
reimbursement (Sararu, 2016, 2017).
Even within the custody of a security, the manager has the
option to transfer the taken over security to another custodian
without the client's consent. In practice, this is the so-called
secondary custody, the purpose of which is to enable the
concentration of custody of paper securities by persons
specializing in this activity. It does not matter the person of the
manager with whom the client, as the owner of the security, has
entered into a contract. However, applying the principle of
availability, the portfolio management agreement may exclude
secondary custody (Rontchevsky, 2017). When looking for
answers to questions of liability for damage, it should be
emphasized that the transfer of a paper security to another
custodian does not mean the cessation of the manager's liability.
He is liable for any damage as if he had the security at his
disposal at all times.
3.4 Securities management
The Securities Act deals with the issue of securities management
only briefly in § 41 without reference to the supporting
application of the Commercial Code or the Civil Code. As part
of the administration of securities, the manager, as the
administrator, undertakes to perform all legal acts necessary for
the exercise and maintenance of rights associated with a
particular security for the duration of the contract, and the client,
as the owner of the security, undertakes to pay him
remuneration.
The mission of the manager is to perform all acts related to the
performance and preservation of rights associated with the
ownership of a security with professional care, even without the
instructions of his client (Mura and Rozsa, 2013). These include,
in particular, requiring the fulfillment of obligations arising from
ownership, the exercise of exchange or pre-emptive rights
attached to a security, provided that the securities portfolio
management agreement does not contain different rights or
obligations. The manager is also directly responsible by law for
the fulfillment of the client's instructions, which must be in
writing (Kotásek, 2013). However, in today's age of information
age, it is possible to contractually agree on another, most often,
electronic form. As part of the step-by-step obligation, the
administrator shall duly and timely notify the client of
incorrectly given instructions. When managing a dematerialized
security, the client is a contractual obligation, upon request by
the manager, to take timely measures to ensure that the manager
is entitled to issue orders for the disposal of the dematerialized
security to the necessary extent. Ownership of some type of
security is also associated with the right to vote, the exercise of
which the client may entrust to the manager (Veronesi, 2010).
To this end, however, he shall issue him with the necessary
power of attorney, within which he may also receive binding
instructions on how to vote.
The peculiarity of the security administration is also calculated at
the time of holding the security. In this case, it is limited to the
time necessary, as it is the legal obligation of the manager to
hand it over immediately after the act for which he had to be in
his possession. Even in this case, a deviation may occur within
the portfolio management. When managing a security, legal
liability for damage to the paper security during the holding is
also applied. The only reason for the liberation is the
impossibility of averting the damage with all professional care.
In the case of reimbursement of costs associated with the
administration of a security, the remuneration of the manager
also includes the costs incurred in the performance of his
obligation (Khan et al., 2020).
In general according to Panova (2020), the manager performs
legal acts related to the administration of a security on behalf of
and for the account of his client. The provisions of the Securities
Act and the provisions of the Commercial Code on the mandate
agreement shall be used as a support measure to determine other
rights and obligations arising from the administration of
securities which are not provided for in the Securities Act.
Again, there is an exception when the provisions of the
Commercial Code on the commission contract and the Securities
Act apply. This is the case when the manager has to perform a
legal act in his own name and on behalf of the client according to
the contract.
3.5 Determination of remuneration and termination of the
portfolio management contract
The Securities Act does not pay even minimal attention to the
issues of remuneration for the manager of the termination of the
obligation under the portfolio management contract. For this
reason, it is necessary to apply the general and special provisions
of Part Three of the Commercial Code.
The amount of the remuneration in general, not only for the
manager, is not one of the essential requirements of the contract,
either according to the Securities Act or according to the
Commercial Code. Retaliation contracts must only specify the
obligation to pay retaliation. Without determining the severance,
it could no longer be a portfolio management contract but only a
certain hybrid type of innominate contract. We agree with the
views of some authors (Ślusarczyk, 2018) that, however, the
portfolio management contract is the subject of the trader's
business, the purpose of which is to generate profit. Within the
subsidiary scope of the Commercial Code, retaliation can be
determined in several ways. The first way is the agreement of the
parties on the amount of remuneration as well as its maturity.
The second option for determining the remuneration would be an
agreement in the contract, according to which the method of
determining the remuneration for the contracting authority would
be determined (Maris, 2017). The last possibility is a legal
diction that the client pays the fee that is usually paid for
comparable services at the time of concluding the contract under
similar business conditions. In our opinion, the solution would
also be the issuance of a decree by the Ministry of Finance of the
Slovak Republic, which would determine the amount of
remuneration for individual activities. Such a procedure is
applied e.g. in advocacy in the provision of legal aid, when the
Ministry of Justice of the Slovak Republic issued Decree no.
655/2004 Coll. on lawyers' fees and compensation.
The easiest way to terminate a portfolio management contract is
to fulfill the obligation on both sides. Other ways of terminating
the contract include the expiration of the time for which it was
concluded and the agreement of the parties on its termination.
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