LAW OF UKRAINE

of October 30, 1996 No. 448/96-BP

About state regulation of the capital markets and the organized goods markets

This Law determines the legal basis of implementation of state regulation of the capital markets and the organized goods markets and the state control of issue (issue) and turnover, the conclusion and accomplishment of financial instruments in Ukraine.

Article 1. Determination of terms

1. For the purposes of this Law the following terms are used in the following value:

1) arrest - time, before cancellation according to the Code of administrative legal proceedings of Ukraine, deprivation by determination of court of the right to the order and use of property concerning which there is set of the bases or reasonable suspicions to consider that it is the proof of making of violation of the profile legislation;

2) determination of credit rating (rating) - the activities connected with the capital markets and the organized goods markets performed by rating agency and directed to determination of creditworthness of subject to rating in general and/or concerning its separate debt obligation;

3) the expert-person, having special knowledge and skills can also provide consultations and the conclusions during conducting investigations in the capital markets and the organized goods markets and/or hearings of cases about violation of the profile legislation;

4) responses to messages on the actual or potential violations of the profile legislation (further - response measures) - the actions made for the purpose of assessment of information obtained in the message on the actual or potential violations of the profile legislation, prevention or elimination of such violations, in particular internal checks (office investigations, functional audit checks), investigations in the capital markets and the organized goods markets, messages on criminal offenses, initiation of procedures of compensation of damage suffered according to the legislation;

5) reporting data information on members of the capital markets and professional participants of the organized goods markets and their activities that in pursuance of requirements of the legislation moves such persons in the National commission on securities and the stock market according to the procedure, terms and in form, established by it;

6) the head-person, performing powers of sole executive body, or the chairman and members of collegiate executive body, the chairman and members of council (supervisory board), the chairman and board members, the chief accountant of the legal entity;

7) corporate management system of the relations between participants, governing bodies of the legal entity and other interested persons which provides existence and functioning of organizational structure and mechanisms via which the purposes of the legal entity, methods of their achievement are determined and also is performed accomplishment and monitoring of accomplishment of such purposes. Corporate management of the legal entity determines method of distribution of powers and responsibility between governing bodies of such person, and also procedure and methods of adoption of decisions by them;

8) credit rating - conditional expression of creditworthness of subject to rating in general and/or concerning its separate debt obligation according to national scale of credit ratings;

9) criminal offense in the field of the capital markets and the organized goods markets - the criminal offense in the field of economic activity provided by Articles 199 (regarding production, storage, acquisition, transportation, transfer, import to Ukraine with sales objective, and also it is sold illegally made, received or counterfeit government securities), the 222nd 1, 223rd 1, 224, 232 (regarding intentional disclosure of professional secrecy in the capital markets and the organized goods markets), the 232nd 1, 232 2 Criminal codes of Ukraine;

10) the National rating scale (dalee-Natsionalnaya scale) - the scale which is divided into certain groups of levels and levels each of which characterizes the borrower's capability timely and in full to pay interests and the main amount on the debt obligations, and also its solvency. The national scale is used for assessment of credit risk of the borrower local government body, the subject of managing and separate debt tools bonds, mortgage securities, loans;

11) the profile legislation legislation on the capital markets and the organized goods markets, including on system of accumulative provision of pensions, the legislation on joint-stock companies, the legislation on advertizing of financial instruments, the capital markets and the organized goods markets, and also the consumer protection law of financial and accompanying services, state regulation and supervision of which provision is exercised by the National commission on securities and the stock market;

12) rating assessment of the issuer indicator, the characterizing level of capability of the issuer of securities timely and in full to pay interests and the main amount on debt obligations concerning debt obligations of other borrowers;

13) rating securities valuation of the issuer - the indicator characterizing the level of capability of the borrower (issuer) timely and in full to service obligations on securities;

14) the witness - the physical person to whom are known or the circumstances connected with investigation subject in the capital markets and the organized goods markets or consideration of the case about violation of the profile legislation and concerning which the decree on holding poll is issued can be known;

15) the authorized person of the National commission on securities and the stock market (further - the authorized person of the commission) - the employee of the National commission on securities and the stock market authorized on conducting inspection in the capital markets and the organized goods markets (the representative on conducting inspection), authorized on conducting investigation in the capital markets and the organized goods markets (the representative on conducting investigation), authorized on maintenance or the representative on hearing of cases about violation of the profile legislation (the representative on hearing of cases).

2. Other terms are used in this Law in the following values:

1) the terms "multilateral system", "agreement on replacement of the party of the derivative contract", "issuer", "investors in financial instruments", "transaction on financial instruments", "professional secrecy in the capital markets and the organized goods markets", "professional participants of the organized goods markets", "capital markets", "members of the capital markets", "systemic risk for functioning of the capital markets", "participants of the commodity spot markets", "financial instruments" - in the values given in the Law of Ukraine "About the capital markets and the organized goods markets";

2) the terms "faultless goodwill", "identification data", "family members" - in the values given in the Law of Ukraine "About prevention and counteraction of legalization (washing) of income gained in the criminal way, to financing of terrorism and financing of distribution of weapons of mass destruction";

3) the terms "close person", "potential conflict of interest", "real conflict of interest" - in the values given in the Law of Ukraine "About prevention of corruption";

4) the term "legal assistance" - in the value given in the Law of Ukraine "About free legal assistance";

5) the terms "subjects of system of accumulative provision of pensions", "investors", "participants" - in the values given in the Law of Ukraine "About obligatory national pension insurance";

6) the term "administrative service" - in the value given in the Law of Ukraine "About administrative services";

7) terms "measures of early intervention", "prudential requirements", "prudential standard rates" - in the values given in the Law of Ukraine "About financial services and finance companies";

8) the term "non-state pension fund" - in the value given in the Law of Ukraine "About non-state pension provision";

9) the term "the armed aggression" - in the value given in the Law of Ukraine "About defense of Ukraine".

Article 2. Tasks and forms of implementation by the National commission on securities and the stock market of state regulation and supervision of activities in the capital markets and the organized goods markets

1. State regulation and supervision of activities in the capital markets and the organized goods markets (further - state regulation and supervision) exercise the National commission on securities and the stock market (NKTsBFR) (further - the commission) and other state bodies within the powers determined by the law.

2. The task of the Commission on state regulation and supervision consists in providing:

1) market developments of the capital and organized goods markets, their justice, transparency and efficiency;

2) protection of the rights and interests of investors;

3) reduction of systemic risks for functioning of the capital markets.

3. The commission exercises state regulation and supervision on the basis, within the powers and method which are directly provided by the law, and also in time - if it is provided by the law, way:

1) adoption of normative legal acts of the Commission;

2) licensing and application of other methods of authorization in the markets and the organized goods markets;

3) maintaining registers;

4) implementation of registration actions concerning legal entities and physical persons and their documents in the cases established by the law;

5) registration of issues of securities, reports on results of issue of securities and approval of prospectuses of securities;

6) provision of administrative services in the field of the capital markets and the organized goods markets;

7) law enforcement implementation;

8) delegation of the self-regulating organization of professional participants of the capital markets (further - SRO) according to the procedure, established by the law, powers (the functions and/or the rights determined by the law) of the Commission or their parts;

9) coordination and ensuring assistance with methodological recommendations to increase in level of financial literacy of investors in financial instruments;

10) consumer protection of financial services, state regulation and supervision of which provision is exercised by the Commission;

11) implementation of other measures according to the law.

4. The requirements established by the Commission to professional participants of the capital markets which are banks shall be approved with the relevant requirements to banks established by the National Bank of Ukraine.

Article 3. Principles of activities and guarantee of powers of the Commission

1. The principles on which activities of the Commission are based and by which it shall be guided when implementing the powers are:

1) establishment of powers only law;

2) openness and transparency, publicity of process of state regulation and supervision, except the cases established by this Law;

3) submission to control, accountability and operational independence when implementing the powers;

4) sufficiency of resources and institutional possibility for accomplishment of tasks and implementation of the powers;

5) need of development and adoption of regulatory legal acts or application of other measures of state regulation is proved;

6) adequacy - compliance of forms and methods of implementation of powers to the needs for the solution of the existing problems and to market requirements taking into account all acceptable alternatives;

7) efficiency providing when implementing powers of achievement of the greatest possible positive results at the expense of minimum necessary costs of resources of members of the capital markets and the organized goods markets, citizens and the state;

8) balance - ensuring balance of interests of members of the capital markets and the organized goods markets, citizens and the state when implementing powers;

9) predictability, the sequence, transparency and accounting of opinion of members of the capital markets and the organized goods markets in the course of adoption of regulatory legal acts by the Commission;

10) compliance of employees of the Commission to requirements for professional suitability and other requirements, the established this Law;

11) identification, monitoring, taking measures to reduction of systemic risks for functioning of the capital markets;

12) identification and settlement of the not settled legal relationship relating to the sphere of competence of the Commission;

13) prevention and settlement of conflicting interests at employees of the Commission, and also ensuring appointment to such workers of remuneration in such a way that makes impossible creation of threat of independence and objectivity in their activities;

14) complexity of implementation of law enforcement;

15) non-admission of abuses of authority when implementing law enforcement;

16) procedural justice when implementing the powers provided by the law, - observance fair, impartial, proportional, expected and determined by the law of procedures;

17) proportionality of law enforcement providing of the most admissible non-interference to the regular course of the organization of internal processes of person concerning which law enforcement, and respect for reasonable balance between private and public interests is performed, considering risk - the oriented approach, circumstances and conditions of specific situation, in particular the sizes of such person, its financial condition and owners of essential participation in it, types of the activities performed by it and the risks inherent in these activities;

18) priority of law enforcement - determination of the sequence of decision making and acceptance of other adequate measures, based on results of risks assessment in activities of person concerning whom law enforcement is performed;

19) rationality of terms of implementation of law enforcement - decision making and acceptance of other adequate measures in terms which objectively necessary for law enforcement implementation also do not exceed the terms determined by the legislation;

20) other principles established by the law.

2. If provision of the law or other regulatory legal act or the different laws or regulatory legal acts assume ambiguous (multiple) interpretation of the rights and obligations of members of the capital markets and the organized goods markets and/or the commissions owing to what it is possible to make the decision or to take out (to issue) the act of individual action for benefit of the member of the capital markets and the organized goods markets or the commission, the decision is adopted or the act of individual action is taken out issued) for benefit of the member of the capital markets and the organized goods markets.

3. Intervention of public authorities, other state bodies, authorities of the Autonomous Republic of Crimea, local government bodies, their official and officials, any other legal entities or physical persons in execution by the commission of the powers established by the law is not allowed, except the cases provided by the Constitution of Ukraine and this Law.

Influence in any form on the employee of the Commission for the purpose of hindrance to accomplishment of service duties by it attracts legal accountability.

Article 4. Activities in the capital markets and the organized goods markets which are subject to licensing

The national commission on securities and the stock market in the procedure established by it within the corresponding types of professional activity in the capital markets grants licenses for such types of activity:

1) subbroker activities;

2) broker activities;

3) dealer activities;

4) activities for portfolio management of financial instruments;

5) investment consulting;

6) underwriting;

7) activities for placement with provision of a guarantee;

8) activities for placement without provision of a guarantee;

9) activities for the organization of the securities trading in the controlled stock market;

10) activities for the organization of the conclusion of derivative contracts in the controlled market of derivative contracts;

11) activities for the organization of trade in tools of the money market in the controlled money market;

12) activities for the organization of the securities trading on stock multilateral trading floor;

13) activities for the organization of the conclusion of derivative contracts on multilateral trading floor of derivative contracts;

14) activities for the organization of trade in bonds on organized trading floor of bonds;

15) activities for the organization of the conclusion of derivative contracts on organized trading floor of derivative contracts;

16) activities for asset management;

17) activities for management of mortgage covering;

18) depository activity of depository institution;

19) activities for storage of assets of institutes of joint investment;

20) activities for storage of assets of the pension funds;

21) clearing activities for determination of obligations;

22) clearing activities of the central partner;

23) activities for property management for financing of construction objects and/or implementation of real estate transactions;

24) activities for provision of services in accumulative system of obligatory national pension insurance;

25) activities for administration of non-state pension funds.

The national commission on securities and the stock market in the procedure established by it grants licenses for implementation of professional activity in the organized goods markets:

1) activities for the organization of trade in products at commodity exchanges;

2) activities for the organization of the conclusion of derivative contracts at commodity exchanges".

Licensing of professional activity is performed by the National commission on securities and the stock market according to the laws of Ukraine which regulate such professional activity, the regulatory legal acts adopted according to these the laws.

In case of cancellation of the license for provision of services in accumulative system of obligatory national pension insurance non-state pension fund - the subject of the second level of system of provision of pensions can give to the National commission on securities and the stock market not earlier than in three years from the date of cancellation of such license the new statement for its issue. Together with the statement for issue of the new license for provision of services the documents confirming elimination of the reasons of cancellation of the previous license shall be submitted.

Requirements to form of submission of documents (paper or electronic) for receipt of the license are established by regulatory legal acts of the National commission on securities and the stock market.

Article 4-1. Rating agencies and rating assessment

Rating estimates which receipt according to the law is obligatory have the right to determine exclusively authorized rating agencies and/or the international rating agencies (together - Rating agencies). The international rating agencies shall be acknowledged as the National commission on securities and the stock market.

Person acquires the right to determine rating estimates from date of issue to it Certificates on inclusion in the State register of authorized rating agencies.

Person joins in the State register of authorized rating agencies by results of competitive selection (further tender).

Several people can be the winner of tender.

The international rating agency acquires the right to determine rating estimates from the date of inclusion it in the list recognized as the National commission on securities and the stock market.

In case of determination of rating assessment which determination is obligatory under the law the authorized rating agency shall use the National scale.

The national scale is divided into two groups urovneyinvestitsionny and speculative.

The national scale, and also separation of each group of levels into appropriate levels affirms the Cabinet of Ministers of Ukraine.

Determinations of rating assessment by the international rating agency it is performed on the scale accepted by such agency.

Cases of obligatory determination of rating assessment of issuers and securities are determined by the law.

Determinations of rating assessment need such issuers:

1) the companies in which authorized capital there is the state share

2) the companies having strategic importance for economy and safety of the state;

3) the companies which hold the monopoly (dominating) position.

Obligation of determination of rating assessment does not depend on pattern of ownership, subordination or other signs of the issuer.

Determinations of rating assessment if other is not established by the law, need all types of debt and mortgage issued securities which are not distributed between founders or among in advance determined group of people and can extend by public offer, be bought and on sale in the controlled stock market, except bonds of international financial institutions, except the government securities and securities emitted by the Public mortgage institution.

Obligation of determination of rating securities valuation does not depend on the issuer, method of their issue, procedure for placement or other signs.

Article 5. Complex information system of the Commission

1. For the purpose of ensuring state regulation and supervision the commission creates complex information and communication system (further - TURNED SOUR) as the integrated system which constituting (subsystems) implementation by the commission of supervision of activities of members of the capital markets and professional participants of the organized goods markets, reaction taking measures, provision by the commission provide to physical persons and legal entities of the services (including electronic) connected with implementation of state regulation and supervision, in particular, and also implementation of disclosure of information by members of the capital markets and professional participants of the organized goods markets.

2. The procedure for functioning of PUSSYCATS is established by the Commission as collegiate organ. Access for members of the capital markets and professional participants of the organized goods markets to PUSSYCATS is performed on a grant basis.

3. The commission can conclude with the legal entity whose 100 percent of shares (shares) belong to the state and who treats the sphere of management of the commission, the agreement on technical, technological support of functioning of Braids which conditions shall contain, in particular, obligation of such person (the technical administrator) on ensuring safety and the data protection containing in BRAIDS.

4. The commission provides planned development of PUSSYCATS from the funds allocated for financing of the Commission.

Article 6. National commission on securities and stock market

The commission (NKTsBFR) is the state collegiate organ subordinated to the President of Ukraine accountable to the Verkhovna Rada of Ukraine.

The commission consists of the Commission as collegiate organ and office of the Commission.

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