THE RESOLUTION OF BOARD OF THE AGENCY OF THE REPUBLIC OF KAZAKHSTAN ON REGULATION AND SUPERVISION OF THE FINANCIAL MARKET AND THE FINANCIAL ORGANIZATIONS

of July 7, 2009 No. 135

About approval of the Instruction about requirements for availability of risk management system for the accumulation pension funds and the organizations exercising investment control of pension assets

According to Item 14-2) of Article 12 and Item 4-2) of article 13 of the Law of the Republic of Kazakhstan of July 4, 2003 "About state regulation and supervision of the financial market and the financial organizations", and also for the purpose of enhancement of the regulatory legal acts regulating activities of the accumulation pension funds and organizations exercising investment control of pension assets, Board of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations (further - the Agency) DECIDES:

1. Approve the enclosed Instruction about requirements for availability of risk management system for the accumulation pension funds and the organizations exercising investment control of pension assets (further - the Instruction).

2. Ceased to be valid

3. Declare invalid the resolution of Board of the Agency of April 30, 2007 No. 133 "About establishment of requirements to availability of risk management systems for the accumulation pension funds" (registered in the Register of state registration of regulatory legal acts at No. 4734, published on July 13, 2007 in the Yuridicheskaya Gazeta newspaper No. 106 (1309)).

4. To the accumulation pension funds and the organizations exercising investment control of pension assets till October 1, 2009 to bring the internal documents regulating conditions and procedure for activities for attraction of pension contributions and to implementation of retirement benefits and activities for investment management of pension assets, activities of their bodies, structural divisions (branches, representations) and workers and also the used software and hardware into compliance with requirements of the Instruction approved by this resolution.

5. This resolution becomes effective after fourteen calendar days from the date of its state registration in the Ministry of Justice of the Republic of Kazakhstan, except for the subitem 3) of Item 9, of subitems 7) and 11) of Item 19, of the subitem 7) of Item 28, of the subitem 3) of Item 33, of the subitem 2) of Item 37, of the paragraph of the sixth subitem 2) of Item 39, of the paragraph of the fourth subitem 1) of Item 41, of Items 42-45, of the subitem 8) Item 55, subitem paragraph two 2) Item 78, the subitem 2) Item 79, subitem paragraph two 2) Item 80, subitem paragraph two 3) Item 80, subitem paragraph two 1) Item 82 of the Instruction establishing requirements for the maximum admissible size of losses for the investment portfolio built at the expense of pension assets or own assets of the accumulation pension funds and the organizations exercising investment control of pension assets which become effective since January 1, 2010.

6. To department of supervision of subjects of the security market and accumulation pension funds (Hadzhiyeva M. Zh.):

1) together with Legal department (Sarsenov N. V.) to take measures to state registration in the Ministry of Justice of the Republic of Kazakhstan of this resolution;

2) in ten-day time from the date of state registration in the Ministry of Justice of the Republic of Kazakhstan of this resolution to bring it to the attention of the interested divisions of the Agency, Consolidation of legal entities "The association of financiers of Kazakhstan".

7. To service of the Chairman of the Agency (Kenzhe A. A.) take measures for publication of this resolution in mass media of the Republic of Kazakhstan.

8. To impose control of execution of this resolution on the vice-chairman of the Agency Aldambergen A. U.

Approved by the resolution of Board of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations of July 7, 2009 No. 135

The instruction about requirements for availability of risk management system for the accumulation pension funds and the organizations exercising investment control of pension assets

This Instruction is developed according to the Laws of the Republic of Kazakhstan of June 20, 1997 "About provision of pensions in the Republic of Kazakhstan" (further - the Law on provision of pensions), of July 2, 2003 "About the security market" (further - the Law on the security market) and of July 4, 2003 "About state regulation and supervision of the financial market and the financial organizations" and establishes obligatory for observance by the organizations having the license of the state body exercising regulation and supervision of the financial market and the financial organizations (further - authorized body) on implementation of activities for attraction of pension contributions and to implementation of retirement benefits and (or) license for activities on investment management of pension assets, requirements to availability of risk management systems and internal control.

Chapter 1. General provisions

1. The purpose of this Instruction is determination of requirements to forming in the accumulation pension funds (further - Fund) and (or) the organizations exercising investment control of pension assets (further - the Organization), risk management system and internal control.

2. The board of directors and board of Fund (Organizations) provide compliance of risk management system and internal control to requirements of this Instruction and create conditions for execution by divisions and employees of Fund (Organizations) of the obligations assigned to them in the field of risk management and implementation of internal control.

3. In this Instruction the following concepts are used:

1) open foreign exchange position - exceeding of requirements (obligations) of Fund (Organizations) in currency of separate foreign state (group of foreign states) over obligations (requirements) of Fund (Organizations) in the same foreign currency;

2) price risk - the risk of emergence of expenses (losses) owing to change in value of financial instruments arising in case of change of conditions of the financial markets influencing market value of financial instruments;

3) reputation risk - risk of emergence of expenses (losses) owing to negative public opinion or decrease in trust to Fund (Organization);

4) bek-testing - methods of check of efficiency of procedures of risks measurement with use of historical data on Fonda (Organizations) and comparison of the calculated results with the current (actual) results from making of the specified transactions;

5) currency net position - difference between the cumulative amount of long positions of Fund (Organizations) for all foreign currencies and the cumulative amount of short positions on all foreign currencies;

6) currency risk - the risk of emergence of expenses (losses) connected with change of the foreign exchange rates when implementing of activities by Fund (Organization). Danger of expenses (losses) arises because of revaluation of line items on currencies in value term;

7) gap line item - difference between pension (own liquid) assets and liabilities of Fund (Organizations) on pension (own liquid) to assets depending on terms of their execution;

8) country (transfer) risk - risk of emergence of expenses (losses) owing to insolvency or unwillingness of foreign state or resident of foreign state to answer for obligations;

9) service of internal audit - the division of Fund (Organizations) created according to the legislation of the Republic of Kazakhstan on joint-stock companies which main function is control of financial and economic activities of Fund (Organizations);

10) internal control system - element of risk management system, representing set of the procedures and the politician of internal control providing realization of long-term goals of profitability by Fund (Organization) and maintenance of reliable system of the financial and management reporting promoting compliance with law of the Republic of Kazakhstan and regulatory legal acts of authorized body, policy of Fund (Organizations), internal regulations and procedures, to decrease in risk of losses or reputation risk of Fund (Organizations);

11) internal documents - the documents regulating conditions and procedure for activities of Fund (Organizations), their bodies, structural divisions (branches, representations), workers;

12) the counterpartner - the legal entity who is rendering services to Fund (Organizations) in the course of the conclusion of the transactions with financial instruments made at the expense of pension and (or) own assets of Fund (Organizations), having the license or permission granting the right to transactions with the financial instruments received according to the legislation of the state in the territory of which this legal entity is registered as the legal entity;

13) corporate management - the system of strategic and tactical management by the organization representing the complex of relations between the supreme body, governing body, executive body and other bodies of the organization aimed at providing effective functioning of the organization, protection of the rights and interests of its shareholders and giving to shareholders opportunity of effective control and monitoring of organization activity;

14) credit risk - risk of emergence of expenses (losses) owing to failure to pay by the issuer the principal debt and remuneration which is due to the investor in the time established by conditions of security issue including also risk of the losses arising in connection with failure to carry out by the partner of obligations in the swaps, options, forwards and other financial instruments subject to credit risk and during settlement of payment under these securities and financial instruments;

15) legal risk - risk of emergence of expenses (losses) owing to violation of requirements of the legislation of the Republic of Kazakhstan by Fund (Organization) or discrepancies of practice of Fund (Organizations) to their internal documents, and in the relations with nonresidents of the Republic of Kazakhstan - legislations of other states;

16) policy of investment of own assets - the document determining the list of investment objects, the purposes, strategy, conditions and restrictions of investing activities on own assets of Fund (Organizations), conditions of hedging and diversification of own assets;

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