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Unlike the portfolio management contract itself, it does not have
to be in writing, though this is not recommended. The
Commercial Code allows both parties to t. j. the manager as well
as the client to terminate the obligation under the contract by
termination. As part of arranging the purchase or sale of a
security, they may terminate the contract in any way, in part or
in full, in any way. If the termination does not specify a later
effect, it shall take effect on the day on which the operator
became aware or could have learned of it. The legislator does not
prescribe the form of termination or the method of delivery, but
again for reasons of legal certainty of the parties, it is appropriate
to comply with a demonstrable method of delivery (Mucha,
2019). From the effective date of the notice, the manager may
not continue the activity to which the notice relates. On the other
hand, he is obliged to warn the client to take the necessary
measures to prevent the occurrence of damage, which
immediately threatens the non-completion of the activities of the
manager. Here, however, the legal right of the manager to
reimbursement of necessary and purposefully incurred costs,
including a reasonable part of the remuneration for the activity
duly performed until the termination takes effect (Vedinas and
Condurache, 2019).
The Commercial Code does not allow the manager to terminate
the contract unilaterally at any time. As stated in the literature
(Šebestová at el, 2018), the manager may terminate it, but not
until the end of the calendar month following the month in
which the notice was delivered to him. As of that date, his
obligation to carry out the activity to which he has committed
himself also expires. Among other things, if the interruption of
such activity could cause damage to the client, he is obliged to
notify him of the necessary measures. If the client cannot do
them with the help of other persons and requests their
performance from the manager, the latter is obliged to carry
them out under the threat of possible liability for damage.
The obligation of the manager also expires on the basis of a legal
event such as his death, if he is a natural person, or his
termination without a legal successor, if he is a legal person.
However, he retains the right to reimbursement of purposefully
and necessarily incurred costs as well as to a part of the
remuneration reasonable to the result achieved in arranging the
matter (Langenbucher, 2011).
In the custody and administration of a security, the issue of
termination of the portfolio management agreement is regulated
in the same way. According to Okanazu (2019) in addition to the
fulfillment of the obligation, the expiration of the time as well as
the agreement on the termination of the contract, the contract can
be terminated. This option can be used by both the manager and
the client. However, the difference is in effectiveness. If the
contract does not specify a period of notice, the manager may
terminate the contract only at the end of the calendar month
following the delivery of the notice. The client can do so with
immediate effect. A special reason for the manager to terminate
the contract is not to collect the deposited securities by the client
within the agreed time. An exception is the situation when the
contract solves the situation differently (Mucha, 2019). We
evaluate positively the statutory guarantee of the manager to
secure his rights under the contract and especially the payment
of his remuneration by establishing a statutory lien on the
securities held and managed by him.
In practice, one negative phenomenon quite often occurs. Clients
quite often terminate a portfolio management agreement before
the expiration date for speculative reasons. They consider that
such a procedure will relieve them of their obligation to pay
remuneration to the manager (Przekova et al. (2019). They will
be misled by the application of the supporting § 574 paragraph 4
of the Commercial Code, which grants the manager the right to
reimbursement of costs as well as a reasonable part of the
remuneration for action duly performed until the termination
takes effect.
4 Discussion and conclusion
Securities contracts are important economic instruments of the
financial market, through which a change of owner of a security
takes place. The hypothesis that it is a separate type of contract
in Slovak commercial law is confirmed. The Securities Act in §
43 directly enshrines the legal definition of a portfolio
management agreement. From this its essential requirements are
determined:
contracting parties, t. j. who is the manager and who is the
client,
the obligation of the manager to manage the client's
portfolio on the basis of the manager's decision-making
within and within the scope of the contract,
the client's obligation to pay remuneration to the manager.
It also follows from the theory of law that in order to determine
whether it is a contractual type, it is sufficient to determine the
essential elements themselves without further specification.
However, this does not change the statement that this agreement
is strictly or insufficiently regulated by the Securities Act, which
in practice can cause several problems. Nor will the procedure of
the legislator, which sought to remedy this shortcoming by
referring to the regulation of other types of contracts in the
Securities Act and the Commercial Code, stand up.
In general, it is possible to agree with the statement of the
authors led by Eliáš (1999), who expressed a broader legal
opinion that the entire second part of the Securities Act, i. j. the
provisions of § 30 to § 53f, which regulate the issue of securities
contracts, constitute a lex specialis in relation to both the
Commercial Code and the Civil Code. As a clear positive, it is
necessary to point out the provision of § 261 paragraph 3 letter
c) of the Commercial Code, which classifies in the category of
absolute commercial obligations all types of obligations from
stock exchange trades and their intermediation (§ 642) and
remuneration contracts relating to securities. This fact excludes
any possible considerations about the application of the Civil
Code to the regulation of the rights and obligations of the
contracting parties from the portfolio management contract. In
this way, the legislator at least managed to eliminate the danger
of splitting the legal regime for the implementation of selected
types of contracts, which could otherwise comply with the
provisions of the Civil Code or the Commercial Code and cause
confusion.
Nor does it follow that the legislature prohibits the possibility of
concluding other “nominative” contracts relating to the
management of securities. However, such a possibility could be
expressed explicitly directly in the Securities Act
The legal regulation of all securities contracts, despite the efforts
of the legislator, is still insufficient and thus does not fully
respect the general trends in the development of European law.
As part of the de lege ferenda proposals. Therefore, a
comprehensive amendment to the second part of the Securities
Act should be undertaken. As part of the amendments, the
wording of the law should be supplemented not only with legal
definitions of all contractual types, but at the same time the
individual contractual types and in particular the securities
portfolio management agreement examined by us should be
expanded in a more appropriate and proportionate manner. The
result of such a procedure would be a comprehensive legal
regulation, which would be based on the current needs of the
Slovak capital market.
Literature:
1. Act No. 40/1964 Coll. Civil Code as amended
2. Act No. 513/1991 Coll. Commercial Code as amended
3. Act No. 566/2001 Coll. on Securities and Investment Services
as amended
4. Bajus, R. (2011). Manazment portfolia cennych papierov a
analyza investicii. Bratislava: Iura Edition
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