In July 2025, a number of amendments to the Montenegrin Capital Markets Act (Zakon o tržištu kapitala, “Official Gazette of Montenegro”, nos. 001/18 and 069/25) (“Capital Markets Act“) entered into force. The amendments are significant both in terms of their number and the scope of the issues they address. The goal of the reform is to harmonise national capital markets legislation with EU directives and regulations, including Directive 2014/65/EU on markets in financial instruments, Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to public, Regulation (EU) 2019/2033 on the prudential requirements of investment firms, Directive (EU) 2019/2034 on the prudential supervision of investment firms and Directive 2014/57/EU on market abuse. The amendments focus particularly on public offerings of securities, prospectus and disclosure requirements, capital adequacy and risk assessment for investment firms, supervisory powers of the Capital Markets Commission (“Commission“) and market abuse. While certain amendments introduce new concepts, such as simplified prospectus formats, others are primarily formal or structural in nature, enhancing the coherence and clarity of the law or regulating specific matters in greater detail.
Enhanced supervisory powers of the Commission
The supervisory powers of the Commission are significantly broadened. The new provisions establish a clearer procedure for both on-site and off-site inspections. On-site inspections entail reviewing the regulated entity’s documents and records, assessing overall operations, and conducting interviews with management and other relevant individuals either on-site or in its own premises. These inspections are conducted either regularly or exceptionally in response to specific concerns.
Inspections may be carried out directly by the Commission staff or, in some cases, by external experts hired by the Commission, such as auditors, who are, in that case, bound by confidentiality obligations. Entities subject to supervision include all participants in the capital market, and they are required to cooperate fully, provide access to relevant data and systems, and facilitate the inspection process.
Before initiating an on-site inspection, whether during regular or extraordinary supervision, the Commission must issue a formal notice outlining the scope and timing of the visit. During the on-site inspection, the supervised entity must provide adequate facilities and technical support, including access to IT systems for verifying data integrity. Following such an inspection, the Commission prepares minutes, to which the entity has the right to object, after which a formal decision may be issued.
In addition to conducting on-site inspections, the Commission performs off-site inspections by reviewing and assessing reports and filings regularly submitted by supervised entities, as well as other relevant data obtained from various sources. This process enables the Commission to evaluate the financial stability, risk exposure, and compliance of these entities with investor protection requirements. If irregularities are detected, the Commission can impose corrective measures and, if necessary, escalate to an on-site inspection. Additionally, the Commission may provide recommendations and opinions to supervised entities to help improve their operations, ensure their financial stability, and reduce risks.
The amended Capital Markets Act grants the Commission broad powers to impose measures when it identifies breaches of the law. These measures range from ordering the correction of misleading disclosures and suspending trading activities to revoking or suspending licenses, restricting access to client funds or suspending voting rights. The Commission determines the severity of sanctions based on factors such as the seriousness and recurrence of the violation, the financial capacity of the responsible party, the harm caused to third parties, and the level of cooperation during the supervisory process.
International cooperation
The Commission is now vested with explicit authority to cooperate with international capital markets regulatory authorities, participate in international organisations, and exchange information. It is also under the legal obligation to cooperate and exchange information with European Union regulatory authorities, as well as with Montenegrin institutions such as the Central Bank and the Insurance Supervision Agency. Additionally, the Commission may request from credit institutions data covered by banking secrecy obligation and may exchange such data with other regulatory authorities and institutions in accordance with the agreements concluded with regulatory authorities of other countries, provided that confidentiality is maintained.
New Prospectus and Disclosure Rules
One of the key innovations is the introduction of simplified prospectus formats tailored to different types of issuers and offerings and requiring only essential disclosures. These include the EU Recovery Prospectus, designed to support capital raising by companies recovering from economic shocks and available to issuers and offerors of shares admitted to trading on regulated market or SME growth market; the EU Growth Prospectus, available for SMEs, companies with a capitalisation below EUR 500 million, or those with public offerings under EUR 20 millions over 12 months; and the Simplified Prospectus for Secondary Issuance, available to issuers or offerors with securities already admitted to trading and seeking to raise additional capital.
The amendments also introduce the concept of a universal registration document, which streamlines and expedites the prospectus approval process by allowing issuers to pre-file a set of required information. The universal registration document is a comprehensive annual filing that issuers can voluntarily prepare. It contains detailed legal, business, financial, accounting, and shareholding information about the issuer, and serves as a foundational document for future securities offerings or admissions to trading. After two consecutive years of approved filings, issuers may file future documents without prior approval, subject to post-review by the competent authority. Amendments to the document can be made voluntarily or upon request and must be published promptly if they correct material errors or omissions. When used as part of a prospectus, the universal registration document and its amendments are subject to approval only at the time of full prospectus submission. Overall, the universal registration document simplifies and accelerates access to capital markets for frequent issuers by reducing regulatory burdens and enabling faster approval processes.
To enhance accessibility, the Capital Markets Act mandates that all approved prospectuses be published in electronic format. They must be downloadable, searchable, and printable, without registration or payment requirements. Investors also have the right to request a printed copy free of charge.
Investment firms established in the form of a limited liability company
One of the most notable changes is the permission for investment firms to establish themselves in the form of limited liability companies, and not solely in the form of joint-stock companies. Investment firms incorporated as limited liability companies are subject to the same legal framework applicable to joint stock companies in matters concerning shares and shareholders, thereby ensuring consistent regulatory treatment irrespective of the chosen legal form.
Capital and risk assessment requirements for investment firms
The amendments to the Capital Markets Act introduce a more flexible and risk-sensitive approach to regulating the capital of investment firms. The law now links the minimum required capital directly to the type and scope of investment services the firm is licensed to provide. Investment firms engaging in activities such as underwriting or dealing on own account must maintain a minimum initial capital of EUR 750,000, while firms providing execution-only services or investment advice without holding client assets are subject to a lower threshold of EUR 75,000. A mid-tier requirement of EUR 150,000 applies to firms outside these categories.
In addition to minimum initial capital requirements, the law introduces the concept of regulatory capital, which comprises both initial and additional capital. The composition of regulatory capital is subject to further detailed regulation by the Commission and is not covered by the Capital Markets Act.
New amendments also provide for a set of provisions regulating internal risk assessment. Firms must set up a comprehensive set of strategies, policies, and procedures for identifying, measuring, and monitoring risks across clients, markets, and the firm itself.
Investment firms, excluding those classified as small and non-interconnected, are obligated to establish and regularly update strategies and procedures for assessing and maintaining internal capital and liquid assets in line with their risk exposure. The Commission retains the authority to extend these requirements to small and non-interconnected investment firms if the complexity of their operations justifies it. Furthermore, the Commission may allow investment firms to use internal models for capital assessment, subject to mandatory notification of any changes. Compliance will be reviewed regularly, at least every three years. The Commission is authorised to prescribe detailed requirements for capital adequacy, liquidity, and exposure limits.
The Commission is empowered to impose additional prudential measures, including requiring firms to maintain regulatory capital above specified thresholds or to adjust their capital and liquidity positions in response to material changes in their business activities. The Commission may also require improvements to internal governance structures and risk management policies and procedures, the submission of recovery plans, restrictions on high-risk activities, retention of earnings to strengthen capital, limitations on distributions, increased reporting frequency, and the implementation of specific liquidity requirements.
Tied agents
Amendments introduce a more restrictive regime for tied agents. Tied agents may promote investment firm services, offer them to potential clients, receive and transmit orders, distribute financial instruments, and provide investment advice. However, they are now explicitly prohibited from holding or managing client funds or financial instruments under any circumstances. Tied agents may act only on behalf of one investment firm, and entities such as other investment firms or credit institutions performing similar functions are no longer considered tied agents. The foregoing provisions also apply to foreign firms offering investment services in Montenegro.
Furthermore, new amendments introduce eligibility criteria and compliance obligations in relation to tied agents. Tied agents must be domiciled in Montenegro and must demonstrate both a good reputation and relevant expertise. Investment firms are required to notify the Commission of each appointment and are unconditionally liable for the agent’s actions. They must implement internal controls, ensure clients are clearly informed of the agent’s role, and prevent conflicts between the agent’s other activities and their representation of the firm.
Market manipulation
Definition of the market manipulation is now broadened to include also “entering into a transaction, placing an order to trade or any other activity or behaviour which affects or is likely to affect the price of one or several financial instruments, a related spot commodity contract or an auctioned product based on emission allowances, which employs a fictitious device or any other form of deception or contrivance”. Furthermore, liquidity contract for own shares may, under certain conditions, be recognised as accepted market practices and as such be exempt from the application of market manipulation prohibition.
Conclusion
While the recent amendments to Montenegro’s Capital Markets Act represent an important step toward harmonising national regulations with EU standards, their practical impact will depend largely on the maturity and development of the domestic capital market. Some of the newly introduced institutions and mechanisms may remain underutilised unless market activity and investor participation increase significantly. Therefore, while the legal framework is now more aligned and clearer, its effectiveness will be tested over time as the market evolves. The reforms lay a solid foundation, but further efforts to stimulate market growth and build investor confidence will be essential to fully realise their potential.
