Securities Market on Verge of Major Changes

On April 14, the Milli Majlis passed the first reading of the draft law "On the Securities Market» (http://meclis.gov.az/?/az/law/916/1), on which the work conducted over the past four years. According to market participants, it will open new development of the securities market, which has a 15-year history of development.

The document consists of 12 chapters and 92 articles. It was developed with the participation of international experts. The bill aims to regulate the placing, state registration and mass supply of investment securities. This document will be governed by the depositary and post-trade market system, the organization of the central depository and the licensing of professional participants of the securities market. The powers of the state regulator of the securities market and protection of the rights of investors will be also defined by the bill.

Under the bill, investment securities can now be issued only in the book-entry form. Depositing will be arranged by the state JSC National Depository Center (NDC), which is granted the status of a central depository.

The new format of the securities market is no place for brokers, dealers and asset management companies. Investment companies, the minimum capital of which is determined by the state regulator, will come in their place.

Massive trade in securities and derivatives is organized by the Stock Exchange. In other words, trading in securities outside the stock exchange is not provided.

Exchange members must be at least three investment companies. All professional participants of the securities market should be organized in the form of a joint stock company. These companies will be able to provide investors with a credit or debt for transactions in securities and derivative instruments.

The requirements for reporting and transparency of professional participants, issuers of the securities market have been determined. The establishment of a unified database on securities, which will be updated regularly, is provided. Licensed companies will publish audited financial statements no later than April 30.

According to the transitional requirements the licenses issued before by the State Committee for Securities to brokers, dealers and asset managers will be valid until December 1 of this year. These companies can be transformed into investment companies. Licenses for clearing activities will become invalid on the entry of the bill into force. On July 1 NDC will be the only holder of the depositary and the register of holders of securities.

It is expected that the discussion of the bill in the parliament will not last long and after the signing by the President will come into force on 1 June this year. Since that moment the law of AR "On protection of the rights of investors in the securities market," several articles of the Civil Code, as well as a number of regulations of the State Securities Committee will lose virtue. ----08D