2007 ASSESSMENT · 1 Over-the-counter (OTC) trading of financial instruments occurs directly...

SECURITIES MARKETS LEGISLATION ASSESSMENT PROJECT

2007 ASSESSMENT

based on legislation in force on 1 June 2007

UKRAINE

CHADBOURNE & PARKE LLP 11 Mykhailivska Street,01001 Kyiv

Ukraine http://www.chadbourne.com

EBRD – Securities Market Legislation Assessment 2007

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TABLE OF CONTENTS General Information ______________________________________________________________________________________________________ iv

Section I – Basic Information about Securities Market Related Laws and Regulations _________________________________________________ vi

Section II – Identity of the Relevant Market Regulatory Authorities (Statutory and Non-statutory) by Activities Regulated _____________________ i

Section A – Regulator ______________________________________________________________________________________________________ 1 Responsibilities of the Regulator _________________________________________________________________________________________________________________ 1 Independence of the Regulator___________________________________________________________________________________________________________________ 2 Accountability of the Regulator __________________________________________________________________________________________________________________ 4 Regulator’s powers and resources ________________________________________________________________________________________________________________ 8 Clear and Equitable Procedures ________________________________________________________________________________________________________________ 14 Professional Standards _______________________________________________________________________________________________________________________ 16 Cooperation among Regulators _________________________________________________________________________________________________________________ 17

Section B – Self-regulation ("SROs") ________________________________________________________________________________________ 19 Performance and Functions of SROs _____________________________________________________________________________________________________________ 19 Authorisation or delegation subject to oversight ____________________________________________________________________________________________________ 21 Oversight __________________________________________________________________________________________________________________________________ 22 Misuse of Information and Conflict of Interests_____________________________________________________________________________________________________ 23

Section C – Issuers and their Information-Disclosure Obligation __________________________________________________________________24 Content of the Prospectus______________________________________________________________________________________________________________________ 24 Foreign Issuers______________________________________________________________________________________________________________________________ 26 Full Disclosure______________________________________________________________________________________________________________________________ 27 Liability ___________________________________________________________________________________________________________________________________ 28 Derogations ________________________________________________________________________________________________________________________________ 29 Regulator’s Powers __________________________________________________________________________________________________________________________ 29 Other Listing Documents ______________________________________________________________________________________________________________________ 30 Ongoing Disclosure Requirements_______________________________________________________________________________________________________________ 30 Fair and Equitable Treatment of Shareholders _____________________________________________________________________________________________________ 32 Change in Corporate Control __________________________________________________________________________________________________________________ 33

Section D – Collective Investment Schemes (CISs) ______________________________________________________________________________35 Entry and Eligibility Criteria ___________________________________________________________________________________________________________________ 35


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Supervision and Ongoing Monitoring ____________________________________________________________________________________________________________ 39 Delegation of Functions _______________________________________________________________________________________________________________________ 41 Legal Form/Investors Rights ___________________________________________________________________________________________________________________ 41 Separation of Assets __________________________________________________________________________________________________________________________ 42 Disclosure _________________________________________________________________________________________________________________________________ 45 Asset Valuation______________________________________________________________________________________________________________________________ 50 Pricing and Redemption of Interest ______________________________________________________________________________________________________________ 50

Section E – Market Intermediaries ___________________________________________________________________________________________ 52 Authorisation and Licensing ___________________________________________________________________________________________________________________ 52 Ongoing Requirements________________________________________________________________________________________________________________________ 54 Investment Advisers __________________________________________________________________________________________________________________________ 56 Custodians _________________________________________________________________________________________________________________________________ 56 Capital Adequacy Requirements ________________________________________________________________________________________________________________ 56 Management and Supervision __________________________________________________________________________________________________________________ 58 Customer Protection _________________________________________________________________________________________________________________________ 58 Procedures for Dealing with intermediary in Financial Difficulty ______________________________________________________________________________________ 59

Section F – Secondary Market ______________________________________________________________________________________________61 Licensing of Exchanges and Trading Systems ______________________________________________________________________________________________________ 61 Ongoing supervision _________________________________________________________________________________________________________________________ 64 Transparency of Trading ______________________________________________________________________________________________________________________ 65 Detection of Unfair Practices___________________________________________________________________________________________________________________ 67 Monitoring of Large Exposures _________________________________________________________________________________________________________________ 69 Default Procedures __________________________________________________________________________________________________________________________ 70

G – Clearing and Settlement ________________________________________________________________________________________________ 72 Authorisation and Licensing of Securities Settlement Systems__________________________________________________________________________________________ 72 Trade Confirmation and Delivery Versus Payment __________________________________________________________________________________________________ 73 Transparency _______________________________________________________________________________________________________________________________ 74 Central Depository___________________________________________________________________________________________________________________________ 74 Oversight __________________________________________________________________________________________________________________________________ 75 Derivatives _________________________________________________________________________________________________________________________________ 75 Protection of customers’ securities ______________________________________________________________________________________________________________ 76

Section H – Accounting and Auditing of Financial Reports _______________________________________________________________________76


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Disclosure of Financial Results _________________________________________________________________________________________________________________ 76 External Auditor_____________________________________________________________________________________________________________________________ 77 Accounting Standards ________________________________________________________________________________________________________________________ 79 Auditing Standards___________________________________________________________________________________________________________________________ 82

Section I – Money Laundering ______________________________________________________________________________________________85 Scope of the criminal offence of money laundering __________________________________________________________________________________________________ 85 Customer due diligence and record-keeping _______________________________________________________________________________________________________ 86 Reporting of Suspicious Transactions and Compliance_______________________________________________________________________________________________ 87 International Cooperation _____________________________________________________________________________________________________________________ 88

Section J –Financial Instruments ____________________________________________________________________________________________ 89 Variety of financial instruments traded ___________________________________________________________________________________________________________ 89 Derivatives _________________________________________________________________________________________________________________________________ 90 Cross-Border Issuance________________________________________________________________________________________________________________________ 90 Sponsor/Underwriter _________________________________________________________________________________________________________________________ 91 Concentration Rule __________________________________________________________________________________________________________________________ 91 Private Placement ___________________________________________________________________________________________________________________________ 91


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2007 ASSESSMENT: GENERAL INFORMATION

In Ukraine the basic legislation on the securities market is the Law of Ukraine “On Securities and the Stock Exchange” enacted on 23 February 2007 No. 3480-IV and new Civil Code of Ukraine enacted on 16 January 2003 No. 436-IV. The Law of Ukraine “On Securities and the Stock Exchange” regulates the relations that arise during placement and circulation of securities and conduct of professional activities in the stock market, in order to ensure transparency and effectiveness of the stock market functioning. This Law stipulates definitions and forms of business associations, the regulations governing their establishment and activities and the rights and obligations of their members and founders. Civil Code of Ukraine regulates personal non-material and material rights based on the equality, free self-determination, and material independence of participants. Civil Code provides for special provisions applicable to the standards related to the operations with securities. The securities market legal framework was most recently amended. In fact, the newly introduced Law of Ukraine “On Securities and the Stock Exchange” includes amendments and suggestions contemplated by the regulator for quite some time. It sets out fundamental provisions developing on issues that were not covered by previous law and regulations. There is a list of projects prepared by the State Commission on Securities and Stock Exchange envisaged to be adopted by the Parliament of Ukraine. These changes cover current laws and make amendments to existing provisions. There are drafts of laws under review or awaiting its preliminary approval in parliamentary committees: Law of Ukraine on Rating System; Law of Ukraine on Joint Stock Companies; Law of Ukraine on Depository System Accounting of Securities; Law of Ukraine on Derivatives. Due to the planned Parliamentary Election in Ukraine, in September 2007, it is unclear at the moment when and whether current projects and amendments will be adopted by the Parliament. The securities market regulator is the State Commission on Securities and Stock Exchange. According to the Law of Ukraine “On State Regulation of Securities Market in Ukraine” following types of activities are carried out on the securities market: securities trading, depositary activity, securities management activity, asset management activity, registers of inscribed securities keeping activity and activity concerning the trading organization on securities market. These activities are under the control and supervision of the Commission. Other state authorities control participants of securities market in the context of their powers as defined by current legislation. However, the National Bank is a direct supervising body for the banking sector; Authorized Body for Control and Observance of Insurance is a direct supervising body for the insurance area; Cabinet of Ministers observe and control Pension funds which are responsible for collecting pension and insurance proceeds from different entities. There are 8 stock exchanges: the Kiev International Stock Exchange (KMFB), the Stock Exchange "INNEX", the Pridneprovsk Stock Exchange (PFB), the Crimea Stock Exchange (CFB), the Ukrainian Interbank Currency Exchange (UMVB), the Ukrainian Interbank Stock Exchange (UMFB), the Ukrainian Stock Exchange (UFB), the Out-of-Market Stock Exchange Trading System (Pozabirjova Fondova Torgova Systema, PFTS), the South-Ukrainian Information System "PTIS", the Trade Information System "PERSPEKTIVA" and 2 OTC Markets1/Trading systems: the First Stock Exchange Trading System (PFTS) and the South-Ukrainian 1 Over-the-counter (OTC) trading of financial instruments occurs directly between the parties to the transaction. An OTC trade is often entered into over the telephone, facsimile or electronic network. OTC markets, being relatively decentralised, are the opposite of trading on an exchange. For example, a large over-the-counter market has grown up in derivatives.


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Information System "PTIS". In 2006, the capitalization of the Ukraine's securities market for all 8 stock exchanges and trade systems] was USD 44 billion. Clearing and settlement of securities is performed by National Depository of Ukraine or other legal entities holding a licence from National Bank of Ukraine in relations to the securities, and legal entities - banks for the clearing and settlement for the on-going transactions related to the securities servicing. There is a number of self-regulated organizations in Ukraine: Professional Association of Registrars and Depositaries; Ukrainian Association of Investment Business; Association of Stock Market Participants; Ukrainian Association of Securities Traders including all stock exchanges and 2 OTC Market/Trading systems and others, making together 139 legal entities. There are 35 collective investments funds in Ukraine, with a market value of 2006 equal to 42,640,000,000 UAH (approximately USD 8.4 billion).


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2007 ASSESSMENT CHECKLIST FOR SECURITIES MARKET LEGISLATION Section I – Basic Information about Securities Market Related Laws and Regulations

# Official Title of Law/Regulation (in English) Promulgating Authority

Date of Promulgation Dates of Past Amendments

1. Law of Ukraine “On Securities and the Stock Exchange” Parliament New Law enacted on

23 February 2007 No. 3480-IV

No amendments since promulgation.

2. Law of Ukraine “On the Antimonopoly Committee” Parliament 26 November 1993 No. 3659-XTT

As amended on 13 July 2000 through 25 March 2005

3. Commercial Code of Ukraine Parliament 16 January 2003 No. 436-IV

As amended on 16 January 2003 through 09 January 2007

4. Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” Parliament 12 July 2001 No. 2664-

TTT As amended on 6 February 2003

5. Law of Ukraine “On the State Service” Parliament 16 December 1993 No. 3723-XTT

As amended on 11 July 1995 through 20 January 2005

6. Law of Ukraine “On Information” Parliament 2 October 1992 No. 2657-XTT

As amended on 6 April 2000 through 11 May 2004

7. Law of Ukraine “On the Supervisory and Auditing Service in Ukraine” Parliament 26 January 1993 No.

2939-XTT As amended on 10 January

2002 through 12 January 2005

8. Law of Ukraine “On Mutual Investment Institutes (Share Parliament 15 March 2001 No. As amended on 06 September


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and Corporate Investment Funds)” 2299-TTT 2005 and 15 December 2005

9. Law of Ukraine “On Citizens’ Associations” Parliament 16 June 1992 No. 2460-XTT

As amended on 11 November 1993 through 4 Feb 2005

10. Law of Ukraine "On Licensing of certain kinds of economic activity" Parliament 1 June 2000

No.1775-III As amended on 21 December 1993 through 27 April 2007

11. Law of Ukraine “On Business Companies” Parliament 19 October 1991 No. 1576-XTT

As amended 19 October 1991 through 11 May 2005

12. Law of Ukraine “On State Regulation of the Securities Market in Ukraine” Parliament 30 October 1996 No.

448/96-ВР As amended on 18 November

1997 through 20 November 2003

13. Law of Ukraine “On Accounting and Financial Statements in Ukraine” Parliament 16 July 1999 No.

996-XTV As amended on 16 July 1999

through 22 June 2000

14. Law of Ukraine "On payment system and money transfer in Ukraine" Parliament 5 April 2001 No.

2346-III As amended on June 2003 through

27 April 2007

15. Law of Ukraine “On Auditing” Parliament 22 October 1993 No. 3125-XTT

As amended on 22 October 1993 through 24 June 2004

16. Law of Ukraine "On protection of economic competition" Parliament 11 January 2001 No. 2210-III

As amended on 05 June 2003 through 27 April 2007

17. Law of Ukraine "On the State Budget for 2007" Parliament 19 December 2006 No. 489-V

As amended on 15 March 2007 through 1 June 2007

18. Law of Ukraine “On the Fight against Corruption” Parliament 5 October 1995 No. As amended on 3 April 1997


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356/95-BP through 1 December 2006

19. Law of Ukraine “On Prevention of and Counteraction against Legalization (Laundering) of Proceeds from

Crime” Parliament 28 November 2002

No. 249-IV

As amended on 24 December 2002 on 6 February 2003 through 18 May 2004

20. Law of Ukraine "On the National Depositary System and

Peculiarities of Electronic Circulation of Securities in Ukraine"

Parliament 10 December 1997 No. 710/97-BP

As amended on 22 May 2003 through 27 April 2007

21. Decree of the President of Ukraine “On Additional

Measures to improve Activities of the State Commission for Securities and the Stock Exchange”

President 25 September 2002

No. 861/2002

As amended on

15 December 2004

22. Decree of the President "On Procedure of Proclamation of Legal Acts and their Enforceability President 10 June 1997 No.

503/97

As amended on

4 December 1997 through 12 March 2007

23. Decree of the President "On the System of Central Executive Authorities President 15 December 1999

No. 1572/99 As amended on 7 April 2000

through 13 March 2006

24. Decree of the President of Ukraine “On Investment Funds and Investment Companies” President 19 February 1994 No.

55/94 As amended on 28 March 1995

through 7 August 1999

25. Decree of the President of Ukraine “On the State Commission for Securities and the Stock Market” President 14 February 1997 No.

142/97 As amended on 21 May 1998

through 5 March 2004

26. Decree of the President of Ukraine “On the State Commission of Ukraine for Regulation of Financial

President 11 December 2002 No. 1153/2002 No amendments


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Services Markets”

27. Decree of the President of Ukraine “On the Enabling Rules on the State Commission of Ukraine for Securities and the

Stock Market” President 4 April 2003 No.

292/2003 As amended on 5 March 2004

28. Decree of the President of Ukraine "On the Regulation on the Ministry of Finance of Ukraine" President 26 August 1999 No.

1081/99

Additional reference to the Decree of the President of Ukraine dated 27

December 2006 N 1837

29. Resolution of the Cabinet of Ministers of Ukraine “The Issue of the Ministry of Finances of

Ukraine”

Cabinet of Ministers of Ukraine

27 February 1993 No. 147

As amended on 10 August 1993 through 28 August 2002

30. Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Regulation on the Ministry of

Finance of Ukraine.

Cabinet of Ministers of Ukraine

27 December 2006 No. 1837

Additional reference to the Decree of the President of Ukraine dated 26

August 1999 N 1081/99

31. Decision of the Securities Commission “On Approval of Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market”

Securities Commission 8 July 2003 No. 302 No amendments since

promulgation

32.

Directive of the State Commission of Ukraine for Regulation of Financial Services Markets “On Approval of

Rules on the Conduct of Inspections by the State Commission of Ukraine for Regulation of Financial

Services Markets”

State Commission of Ukraine for

Regulation of Financial Services

Markets

28 October 2003

No. 96

No amendments since promulgation

33. Regulation of the Antimonopoly Committee of Ukraine “On the Regulation on Procedures for Inspections of

Antimonopoly Committee of

25 December 2001 No. 182-р As amended on 6 May 2003


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Compliance with Law on Protection of Economic Competition”

Ukraine on 26 August 2003

34. Decision of the Securities Commission “On Approval of the Regulation on Procedures for Registration of Shares

and Bonds of Foreign Issuers in Ukraine”

Securities Commission

20 November 1997 No. 42 No amendments

35. Decision of the Securities Commission "On Approval the Regulation on Disclosure of Information by Issuers of

Securities"


19 December 2006 No. 1591 No amendments

36. Decision of the Securities Commission "On approval of

the Regulation on the Order of Registration of the Shares Issue"


26 April 2007 No. 942 No amendments

37.

Decision of the Securities Commission “On Approval of the Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of

Debenture Bonds”

Securities Commission 9 June 1998 No. 72 As amended on 17 January

2000 through 8 December 2004

38.

Decision of the Securities Commission “On Approval of the Regulation on Procedures for Determination of the

Value of Net Assets of Mutual Investment Institutes (Share and Corporate Investment Funds)”

Securities Commission 2 July 2002 No. 201 No amendments

39. Decision of the Securities Commission “On Procedures

for Filing of Information by Self-Regulatory Organizations on the Securities Market”


25 February 2002 No. 65 No amendments

40. Decision of the Securities Commission “On Approval of Securities 11 November 1997 No amendments


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the New Restatement of the Regulation on the Self-Regulatory Organization on the Securities Market”

Commission No. 45

41. Decision of the Securities Commission “On Approval of

the Regulation on the Composition and Structure of Assets of the Mutual Investment Institute”


11 January 2002 No. 12

As amended on 30 August 2005 through 19 December 2006

42.

Decision of the Securities Commission "On Approval of the Order and Conditions of License Issuance and Conducting Certain Kinds of Activities on Stock

Market, Re-issuance of the License, Issuance of the backup version and copy of the License"


26 May 2006 No. 345 No amendments

43.

Decision of the Securities Commission “On Approval of Regulation on Procedures for Compiling of Administrative

Data related to activity of Securities Traders and Furnishing of particular Documents to the Securities

Commission”

Securities Commission 8 June 2004 No. 279 As amended on 13 April 2005

through 22 February 2006

44.

Decision of the Securities Commission "On Approval of the Regulation on Auditors' Reports Preparation,

Submitted to the Securities Commission at the Disclosure of Information by the Issuers and

Professional Participants of the Stock Market".



45.

Decision of the Securities Commission "On Approval of the Regulation on the order of registration of the

issuance of shares in order to conduct joint investment of the Corporate Investment Fund"




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46.

Decision of the Securities Commission “On Approval of the Regulation on Procedures for Placement, Circulation and Redemption of Securities of the Mutual Investment

Fund”

Securities Commission 9 January 2003 No. 3 As amended 23 April 2004

through 30 May 2005

47. Decision of the Securities Commission "On Approval of

the Regulation of Peculiarities of Accounting Operations of Joint Investment Institution"


48.

Decision of the Securities Commission "On Approval of the Regulation on the Order of Evaluation of

Investment Funds and Mutual Funds of Investment Companies Net Assets".


18 March 2002 No. 104 No amendments

49.

Decision of the Securities Commission "On Approval of the Rules (Conditions) of securities trade in brokerage

and dealers activity, underwriting, securities management".



50. Decision of the Securities Commission "On Approval of Licensing Terms for Conduct of Professional Activity

on Stock Market, Stock Trade Activity"


26 May 2006 No. 346 No amendments

51.

Decision of the Securities Commission “On Approval of the New Restatement of the Provisions on Registration of Stock Exchanges and Trading-Informational Systems and

Regulation of their Activities”


22 January 1998 No. 19 No amendments

52. Order of the Securities Commission “On Approval of the Regulation on the Self-Regulatory Organization on the Securities 23 December 1996 As amended on 29 August 1997


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Securities Market” Commission No. 329 through 3 June 2003

53.

Order "On Confirmation of Schedule of Development and Introduction of the Regulations (Standards) of

Accounting Applying International Accounting Standards (IAS)"

Ministry of Finance of Ukraine


54.

Order of the Securities Commission “On Approval of Rules for Consideration of Applications by Citizens to the

State Commission for Securities and the Stock Market and its Territorial Divisions”


55.

Order/Decision of the Securities Commission "On Approval of the Order of Control on Compliance with Licensing Conditions on Professional Activity on the

Stock Market"


21 April 2003 No. 52/162 No amendments

56. Decision of the Securities Commission “On State

Control of Activities of Stock Exchanges, Depositories and Trading-Informational Systems”

Securities Commission 8 May 2001 No. 144

As amended on 30 January 2004 through 17 November

2004

57.

Decision of the Securities Commission “On Approval of the Concept on Prevention of Manipulation of the Securities Market, Dishonest Trading Practices and Violations of

Ethics of Professional Activities on the Stock Market”


14 January 2003 No. 21 No amendments

58.

Decision of the Securities Commission “On Approval of Provisions on Procedures for Registration of Issuance of Investment Certificates by the Investment Fund and the

Investment Company and Information on their Issuance”


15 January 1998 No. 8 As amended on 14 July 1998


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59. Decision/Instruction of the Securities Commission "On Approval Instruction On Procedure for opening, use and

closing of accounts in local and foreign currency"


12 November 2003 No. 492 No amendments

60. Decision of the Securities Commission "On Approval the Regulation on Requirements to Certificates issued in the

Documentary Form

Securities Commission 31 July 1998 No. 95 As amended on 3 August 1999

through

61. Decision/Regulation of the Securities Commission "On

Approval of Regulation on Conducting Financial Monitoring by Banks"


14 May 2003 No. 189

As amended on 14 October 2003 through 23 March 2006

62. Order of the Securities Commission “On Approval of the Regulation on Procedures for Training and Attestation of

Specialists in Stock Market Matters”


24 September 1996 No. 215

2 March 1999 and 13 December 2001

63. Regulation on Continued Mandatory Improvement of Professional Knowledge of Ukrainian Auditors

Auditing Chamber 23 April 002 No. 109 As amended on 23 April 2002 through 29 April 2004


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Section II – Identity of the Relevant Market Regulatory Authorities (Statutory and Non-statutory) by Activities Regulated

# Activities Regulated Name of the Relevant Regulator

Date of Establishment Legal Basis

1. Securities issuance and offering2 State Commission for

Securities and the Stock Exchange

12 June 1995 Decree of the President “On the State

Commission for Securities and the Stock Market”

2. Change of control transactions3 Antimonopoly Committee of Ukraine 26 November 1993 Law of Ukraine “On the Antimonopoly

Committee”

3. Securities markets4 State Commission for




4. Brokerage or dealing related activities5 State Commission for




State Commission for Regulation of Financial

Services Markets 11 December 2002

Decree of the President of Ukraine “On the State Commission of Ukraine for

Regulation of Financial Services Markets” 5. Fund (or portfolio) and asset management (including

investment advisers, asset managers, etc.) State Commission for




2 Including prospectus and disclosure requirements, share registrations, tender offers, shareholder rights, beneficial ownership reporting, etc. 3 e.g., mergers, take-overs, monopoly positions, and other transactions affecting control in a company. 4 e.g., including establishment of exchanges and trading systems, admission to listing, trading, clearing and settlement, depository, etc. 5 e.g., including licensing, conduct of business requirements, prudential requirements, etc.


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Services Markets 11 December 2002

Decree of the President of Ukraine “On the State Commission of Ukraine for

Regulation of Financial Services Markets”

6. Collective investment schemes

State Commission for Securities and the Stock

Exchange 12 June 1995

Decree of the President “On the State Commission for Securities and the

Stock Market”

Ministry of Finances

27 February 1993

26 August 1999

27 December 2006

Resolution of the Cabinet of Ministers of Ukraine “The Issue of the Ministry

of Finances of Ukraine

Resolution of the Cabinet of Ministers of Ukraine “On the Regulation of the

Ministry of Finance of Ukraine”


Exchange

12 June 1995

25 September 2002


Stock Market”


Services Markets 04 April 2003

Decree of the President of Ukraine “On the Enabling Rules of the State

Commission of Ukraine for Regulation of Financial Services Markets”

7. Accounting and auditing standards/services

Auditing Chamber 22 April 1993 The Law of Ukraine "On the Auditing Activities"


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Services Markets 04 April 2003

Decree of the President of Ukraine “On the Enabling Rules of the State

Commission of Ukraine for Regulation of Financial Services Markets” 8. Investment services providers


Exchange 12 June 1995


Stock Market”

9. Money Laundering (i.e., FIU – Financial Intelligence Unit)

The State Committee for Financial Monitoring of

Ukraine 12 June 2003

Decree of the President of Ukraine “On the State Committee of Financial

Monitoring of Ukraine”


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Section A – Regulator6

# Issue Yes ( )

No ( )

Relevant provision number/citation of law/regulation;

Remarks/Other Comments

IOSCO Relevance

RESPONSIBILITIES OF THE REGULATOR

1. Whether the regulator responsibilities, powers and authority are clearly defined in the law?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.3, Art 4, Art 5 of the Regulation. The main purposes of the State Commission for Securities and the Stock Market is to realize the unified state policy on development and functioning of the securities stock market; integration of the national stock market in accordance to the international standards. Law of Ukraine “On the Antimonopoly Committee”, Art.3, Art.7. The main purpose of the Antimonopoly Committee is to ensure the state protection of competition in the entrepreneurial activities. Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.3, Art.4, Art.5, Art.6 of the Regulation. Commission realizes unified state policy in the sphere of financial services; development and realization of strategy for markets of financial services; conducting

1

6 Please answer the questions of this section considering the regulator (see Section II, above) in charge for: Securities issuance and offering; Securities markets; Brokerage or dealing related activities and Collective investment schemes


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# Issue Yes ( )

No ( )



IOSCO Relevance

state regulation and control in the sphere of the realization of financial services and compliances with law in this area.

2. Whether the regulator has discretion to interpret its responsibilities based on clear and transparent criteria and process so to prevent abuse of discretion?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art. 2, Art 4, Art. 6 of the Regulation. Law of Ukraine “On the Antimonopoly Committee” Art 2, Art 5, Art 7, Art. 13, Art 17.1, Art.18. Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.2, Art.4, Art 6.

1

INDEPENDENCE OF THE REGULATOR

3. Whether the term of office, the procedures for appointment and removal and the criteria for removal of the head and members of the governing body of the regulator are specified under the relevant law?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.9, Art. 10, Art 14, Art.15. Law of Ukraine “On the Antimonopoly Committee”, Art.9, Art.10, Art.11, Art. 12.1, Art.18 Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.8, Art.11, Art.12, Art.13, Art.14, Art.16.

2

4. Whether the operational independence of the regulator is assured by the law from external political, commercial, or other interest interference when Decree of the President “On the State

Commission for Securities and the Stock 2


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# Issue Yes ( )

No ( )



IOSCO Relevance

exercising its respective functions and powers? Market”, Art.2, Art.4, Art.5, Art.13. Law of Ukraine “On the Antimonopoly Committee”, Art.2, Art.5, Art. 7 Decree of the President of Ukraine “On the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.2, Art.4.

5. Whether the law provides legal protection (for bona fide actions only) to the regulator, the head and members of the governing body and its staff against lawsuits for actions taken in their functions?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.1 of the Regulation provides that Commission is the central entity of executive power with a special status. Special status grants powers and authorities and provides for legal protection according and as determined by Art. 2 of the Decree of the President "On the System of Central Executive Authorities" Law of Ukraine “On the Antimonopoly Committee”, Art.19, Art.29 Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.1 of the Regulation provides that Commission is the central entity of executive power with a special status. Special status grants powers and authorities and provides for legal protection according and as determined by Art. 2 of the Decree of the President "On the System of Central Executive Authorities"

2-5


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# Issue Yes ( )

No ( )



IOSCO Relevance

ACCOUNTABILITY OF THE REGULATOR

6. In the exercise of its regulatory powers, whether the regulator is required by the law to consult with or obtain an approval by the government, ministry or other authorities?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.4. State Commission for Securities and the Stock: -sets additional standards on the issue of securities in accordance with National Bank of Ukraine(further NBU); -on approval with NBU determines the requirements for Commercial Banks on licences to conduct depository and clearing and settlement; determines in accordance with Ministry of Finance and NBU the requirements on accounting of operations with securities; - jointly with NBU sets a standards on activities with state securities; (Please consult Art.4, Art.5 for detailed list of activities which have to be approved with different government authorities)

Law of Ukraine “On the Antimonopoly Committee”, Art.7. Antimonopoly Committee: - participate in the process of development and approval of legal acts by President of Ukraine and Cabinet of Ministers of Ukraine which regulate activities of competition, protection of competition and

2


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# Issue Yes ( )

No ( )



IOSCO Relevance

antimonopolization of market. Law provides that Committee consult government authorities at the stage of development of legal acts. While exercising its powers Committee is not limited or required to consult with other government authorities. Decree of the President of Ukraine “On the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 4. Commission: - in accordance with NBU, sets the rules, amount, criteria on loans to the insured who concluded agreement on insurance of life. - consult government authorities at the stage of development of legal acts.


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# Issue Yes ( )

No ( )



IOSCO Relevance

If the answer to the above question is "yes" (if "no" in the above, please tick "no" in the following sub-questions):

(1) whether the circumstances in which consultation or approval is required are clearly defined and the relevant process is sufficiently transparent? [If "yes", please briefly describe the process]

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.4 Law of Ukraine “On the Antimonopoly Committee”, Art.7. Antimonopoly Committee: Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 4 The Regulator is required to consult with or obtain an approval from other ministries or other government authorities when action taken by such Regulator affects matters falling within limits of competence of such other ministries or other government authorities

7.

(2) whether the circumstances where consultation or approval is required are limited to policy issues and not to day-to-day technical matters?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.4 Law of Ukraine “On the Antimonopoly Committee”, Art.7. Antimonopoly Committee: Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 4 Generally, circumstances where consultation or approval is required are limited to policy issues

2

8. Is the regulator accountable to the Parliament or another government body on an ongoing basis? [Please explain]

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.1

2


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# Issue Yes ( )

No ( )



IOSCO Relevance

Law of Ukraine “On the Antimonopoly Committee”, Art.9, Art.20.1 Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 11 The Regulator is accountable to the President of Ukraine, Parliament, and Cabinet of Ministers of Ukraine. The Law however does not set reporting standards and timeframe to meet such requirements

9. Are the regulator and the other parties to which the regulator is accountable required by the law to treat as confidential information received as part of the supervisory process and only to disclose information in certain defined circumstances?

Law of Ukraine “On the Antimonopoly Committee”, Art.22.1, Art.22.2 Law of Ukraine “On Information”, Art.30, Art.31, Art 37, Art.44.

2

10. Is the regulator’s receipt and use of funds subject to review or audit? Law of Ukraine “On the Supervisory and Auditing Service in Ukraine”, Art.2, Art.8 2

11. Does the regulator have to provide written reasons for its material decisions?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8, Art.12. Decree of the President “On the State Commission for Securities and the Stock Market”, Art.12. Law of Ukraine “On the Antimonopoly Committee”, Art.24. Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 4, Art.10.

2


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# Issue Yes ( )

No ( )



IOSCO Relevance

12. Are affected persons permitted to make representations prior to a regulator’s decision in appropriate cases? The law does not develop on this issue 2

13. Are all decisions taken by the regulator subject to a sufficient, independent review process, ultimately including judicial review?

Though law does not provide for a non-judicial independent review process of the decisions, it stipulates that any party has the right for judicial review or appeal. Law of Ukraine “On the Antimonopoly Committee”, Art.25. Law of Ukraine "On State Regulation of Securities Market in Ukraine", Art.6.

2

REGULATOR’S POWERS AND RESOURCES

14. Whether the regulator is empowered by the law to receive routine financial reports from regulated entities 7? If "yes", please identify from whom the regulator receives such routine reports.

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.4. Law of Ukraine "On Securities and the Stock Exchange", Art.25. The regulator is empowered by law to receive routine financial reports from a wide range of regulated market participants as provided by Ukrainian law, including, among others, issuers of securities, securities traders, securities custodians, investment companies, investment funds etc.

2, 10

15. Whether the regulator is empowered by the law to inspect a regulated entity business operation without giving prior notice? Law of Ukraine “On the Antimonopoly

Committee”, Art 15. 8

7 “Regulated entity” includes authorised or licensed entities or persons


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Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition, Art.8. Securities Commission Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market, Art.2.2.(Art.2.7 for planned inspections) Rules on the Conduct of Inspections by the State Commission of Ukraine for Regulation of Financial Services Markets", Art.3.1 (Art.3.6 for planned inspections) Planned inspections are subject to 5-day or 10-day prior notice, depending on the regulator; on-site spot inspections are not subject to the prior notice requirement. Planned inspections may be conducted once a year. On-site spot inspections are conducted on a need-to-be basis (in case of violations, requests from interested parties etc.)

16. Whether the regulator is empowered by the law to have access to books and records and request data or information from regulated entities without judicial actions, even in absence of suspected misconduct, in response to (i) a particular inquiry? (ii) on a routine basis? [please specify]

In response to (i) a particular inquiry - Art.8 (1)(2)(3)(9)(10) Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition; Law of Ukraine “On the Antimonopoly Committee”, Art 7(4). (ii) on a routine basis - Art. 5 (10) Decree of the President “On the State Commission for Securities and the Stock Market"; Law of Ukraine “On the Antimonopoly Committee”,

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Art 15. Does the regulator have the investigative and enforcement power to require from any persons involved in relevant conduct of who may have information relevant to a regulatory or enforcement investigation: 17.

(a) data?

Generally, law provides that Regulator exercise controlling and observing functions and empowered to conduct regulatory investigation to a certain degree prescribed by law. However, it doesn’t grant to the Regulator an enforcement power. Law provides that in case of enforcement of the decisions, Regulator has the right to call for assistance of enforcement agencies, Art.7(8) Law of Ukraine “On the Antimonopoly Committee”, Art 7(5). Regulator may require under regulatory investigation data: Law of Ukraine “On the Antimonopoly Committee”, Art 7(5). Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition, Art.8 (1)(2)(3)(9)(10) Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market, Art.6 Rules on the Conduct of Inspections by the State Commission of Ukraine for Regulation of Financial Services Markets, Art.2

rt


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(b) information?

Regulator may require under regulatory investigation information: Law of Ukraine “On the Antimonopoly Committee”, Art 7(5). Art.8 (1)(2)(3)(9)(10) Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market, Art.6

(c) documents?

Regulator may require under regulatory investigation document: Law of Ukraine “On the Antimonopoly Committee”, Art 7(5). Art.8 (1)(2)(3)(9)(10) Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market, Art.3,Art 6. Rules on the Conduct of Inspections by the State Commission of Ukraine for Regulation of Financial Services Markets, Art.8


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(d) records?

Regulator may require under regulatory investigation record: Law of Ukraine “On the Antimonopoly Committee”, Art 7(5). Art.8 (1)(2)(3)(9)(10) Regulation on Procedures for Inspections of Compliance with Law on Protection of Economic Competition Rules for Inspections of Activities of Issuers and Self-Regulatory Organizations on the Securities Market, Art.3,Art.6 Rules on the Conduct of Inspections by the State Commission of Ukraine for Regulation of Financial Services Markets, Art.8

(e) statements or testimony? No such rights provided by law

18. Whether, under the law or regulation, the regulator has the power to impose administrative sanctions? If "yes", please briefly describe the kinds of sanctions that can be imposed. If "no", please briefly describe what the regulator can do in case of non-compliance with laws.

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.11(for legal entities below), Art.13 for persons and government officials. -1000 non-taxable minimum incomes or 150 % of revenue from the actions of issuing and placing on the stock market unregistered securities; - 5000 non-taxable minimum incomes for conducting activities on the stock market without proper licence; -1000 non-taxable minimum incomes for refusing to deliver, untimely delivery or

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delivery of misleading information; -500 non-taxable minimum incomes for failure to comply or untimely compliance with instructions or rules to eliminate breaches related to securities

19. Whether, under the law or regulation, the regulator has the power to order suspension of trading in securities?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art. 8 (7) Decree of the President “On the State Commission for Securities and the Stock Market, Art. 5 (5) (7) (8) Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.5(12)

9

20. Whether, under the law or regulation, the regulator has the power to initiate or refer matters for criminal prosecution?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8 (11), Art.14. Decree of the President “On the State Commission for Securities and the Stock Market”, Art.5 (12) Law of Ukraine “On the Antimonopoly Committee”, Art.7(9) Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.4 (47)

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21. Whether the regulator is assured by the law and/or regulation to have sufficient financial and other resources to properly discharge its functions?8 If "no", please indicate the areas of insufficiency.

Laws of Ukraine “On the State Budget for 2007 year”, addendum N3 Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.18 (regulator’s budget is taken from the state budget) Decree of the President of Ukraine “On Additional Measures to improve Activities of the State Commission for Securities and the Stock Exchange”, Art. 16 of the Regulation(regulator’s budget is taken from the state budget) Law of Ukraine “On the Antimonopoly Committee”, Art.28 (regulator’s budget is taken from the state budget) Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art. 15 (regulator’s budget is taken from the state budget)

2

CLEAR AND EQUITABLE PROCEDURES

22. Whether the regulator has the power to issue legally binding rules and regulations?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.3 Decree of the President “On the State Commission for Securities and the Stock

4

8 The points of consideration in financial aspect should include: competitive salary scales, ability to hire external experts if necessary, training budget and programme, information technology equipment, and travel budget, etc.


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Market” ,Art.4 Law of Ukraine “On the Antimonopoly Committee”, Art.9, Art.26 Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets”, Art.18, Art.27, Art 29. Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.3. Law of Ukraine "On Information", Art.21 Regulator have to inform public, by the way of publishing it or on any other way, on current rules and regulations. The Law of Ukraine "On Procedure of Proclamation of Legal Acts and their Enforceability" regulates the procedure and prescribes the way legal acts become available to the public. However, this Law is suspended by the Order of the President N607/2007 dated 5 July until the next session of the Parliament.

23. Whether the law or regulation sets forth the general criteria for granting, suspending or revoking licenses?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”,Art.32 Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets”, Art.36, Art.40

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24. Whether the regulator is required by the law or regulation to publicly disclose and explain its policies in important operational areas, such as through interpretations of regulatory actions, settings of standards, or issuance of opinions stating the reasons for regulatory actions?

Law of Ukraine “On the Antimonopoly Committee”, Art.9, Art.26 Law of Ukraine "On Information", Art.21 Regulator have to inform public, by the way of publishing it or on any other way, on current rules and regulations. The Law of Ukraine "On Procedure of Proclamation of Legal Acts and their Enforceability" regulates the procedure and prescribes the way legal acts become available to the public. However, this Law is suspended by the Order of the President N607/2007 dated 5 July until the next session of the Parliament

4

PROFESSIONAL STANDARDS

25. Whether the staff of the regulator is required by law, regulation or other, [please explain] to observe a "Code of Conduct" or other written standards/guidance of the same nature in exercising their regulatory powers and discharging their functions?

General requirements are set out by the Law of Ukraine “On the Civil Service”, Art.5 Law of Ukraine “On the Fight against Corruption” ,Art.5

5

If the answer to the above question is "yes", whether the relevant "Code of Conduct" addresses issues in the following areas:

(1) conflicts of interest? Law of Ukraine “On the Fight against Corruption”, Art.5

(2) dealing with information obtained in the course of the exercise of powers and discharge of duties? Law of Ukraine “On the Civil Service”,

Art.10

26.

(3) observance of confidentiality and secrecy provisions and protection of personal data? Law of Ukraine “On the Civil Service”,

Art.10

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(4) ensuring procedural fairness? Law of Ukraine “On the Antimonopoly Committee”,Art.4

(5) restriction on the holding or trading of securities and requirement to disclose financial affairs or interest.

Law of Ukraine "On the National Depository System", Art.18 Decree of the President “On the State Commission for Securities and the Stock Market”, Art.5

27. Whether there are legal or other sanctions against the staff of the regulator who fails to adhere to the above mentioned "Code of Conduct"? Law of Ukraine “On the Fight against

Corruption” ,Art.7-12 5

COOPERATION AMONG REGULATORS

28. If there is more than one regulator listed in Section II above, whether the division of the responsibility among regulators are clearly and objectively set out by law?

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.3, Art 4, Art 5 of the Regulation Law of Ukraine “On the Antimonopoly Committee”, Art.3, Art.7 Decree of the President of Ukraine “On the Enabling Rules of the State Commission of Ukraine for Regulation of Financial Services Markets”, Art.3, Art.4, Art.5, Art.6 of the Regulation

1

29. If there is more than one regulator listed in Section II, whether they are required by the law to co-operate and share information with each other?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7 Decree of the President “On the State Commission for Securities and the Stock Market” ,Art.4 Law of Ukraine “On the Antimonopoly Committee” ,Art.7, Art.20, Art.21

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Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets”, Art.18 ,Art.21, Art.22

30. Whether the regulator has the authority under the law to share information with regulators in foreign jurisdictions?

It is not directly stipulated in the law that the regulator has the authority to share information with regulators in foreign jurisdictions.

11

31. Whether the regulator is permitted by the law to provide assistance to regulators in foreign jurisdictions?

It is not directly stipulated in law that regulator is permitted to assist regulators in foreign jurisdictions.

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Section B – Self-regulation ("SROs")9

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PERFORMANCE AND FUNCTIONS OF SROS

Are there any organisations in your country, that: 1.

a) establish rules of eligibility that must be satisfied in order for individuals or firms to participate in any significant securities activity?

The Ukrainian Stock Exchange (UFB), Rules of UFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000. Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7, Art.8 Law of Ukraine “On Citizens’ Associations” , Art.3 ,Art.6, Art.24

6

9 A self-regulatory organisation (SRO) is any organisation that has been given the power or responsibility to regulate any part of the securities market of industry. The term

“self-regulatory organisation” means any national securities exchange , registered securities association, or registered clearing agency, which have been granted the right to regulate themselves and enforce such regulation. This section applies to all SROs in your country – i.e. stock exchange, central depository to the extent that they fit within the SRO definition]


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b) establish and enforce binding rules of trading or business conduct for individuals or firms engaging in securities activities?

The Ukrainian Stock Exchange (UFB), Rules of UFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000. Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7, Art.8 Law of Ukraine “On Citizens’ Associations” , Art.3 ,Art.6, Art.24

c) establish disciplinary rules and/or conduct disciplinary proceedings, which have the potential to impose enforceable fines, or other penalties, or to bar or suspend a legal or natural person from participating in securities activities or professional activities related to securities activities?

the Ukrainian Stock Exchange (UFB), Rules of UFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000. Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7, Art.8 Law of Ukraine “On Citizens’ Associations” , Art.3 ,Art.6, Art.24


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AUTHORISATION OR DELEGATION SUBJECT TO OVERSIGHT

Whether, as a condition of ongoing authorisation, the regulatory framework requires SROs to:

(1) have the necessary capacity to enforce compliance by its members and associated persons with laws, regulations and rules?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market ,Art.12 ,Art.13 ,Art.14

(2) treat all members of the SRO and applicants for membership in a fair and consistent manner?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market,Art.6, Art.11

(3) develop rules that (i) are designed to set standards for its members and (ii) to promote investor protection?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.2, Art.4, Art.11, art12 (i) are designed to set standards for its members: a) technical and professional standards set by Statute approved by Commission on State Securities and Stock Exchange, Art.2; d) requirements on financial minimal limits for participants of SROs, Art.11. (ii) to promote investor protection: providing for timely notices on any changes in the internal activities,Art.2; introducing effective measures on resolving any disputes among the participants, Art.4; providing sanctions for participants violating established procedures, art12

2.

(4) submit to the regulator its rules and any amendments thereto for review and/or approval?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.2

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(5) co-operate with the regulator and other SROs in your jurisdiction to investigate and enforce applicable laws, regulations and rules?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market ,Art.15

(6) enforce its own rules and impose appropriate sanctions for non-compliance with its own rules?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.12 ,Art.13 ,Art.14

(7) assure fair representation of members on its board of directors and administration of its affairs?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.4

(8) assure that its rules do not create anti-competitive situations? Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.6

OVERSIGHT

3. Whether the regulator is required by the law or regulation to establish a programme/procedure/process to oversee the operations of SROs (including inspections, periodic reviews, reporting requirements, review/revocation of SRO rules, monitoring of continuing compliance with conditions of authorisation)?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, s.8 Securities Commission Procedures for Filing of Information by Self-Regulatory Organizations on the Securities Market, Art.1

7

4. In matters related to SRO responsibility, whether the regulator retains authority to (i) inquire and (ii) intervene into matters affecting investors or the market?

Please provide specific answers to both issues: (i) inquire and/or conduct audits of SRO's in case of suspected violations, Art.8(9),(24). (ii) in case of violations by Stock Exchange Regulator intervenes into matters affecting the market by the way of suspension of operation until final resolution, Art. 8(7)

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Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8

MISUSE OF INFORMATION AND CONFLICT OF INTERESTS

Does the law or regulation requires SROs to:

(1) ensure that potential conflicts of interest at the SRO are avoided and resolved?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market ,Art.4 Securities Commission Procedures for Filing of Information by Self-Regulatory Organizations on the Securities Market, Preamble with reference to requirements established by Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market in Art.4

5.

(2) address prevention of misuse of information and observance of confidentiality of information?

Securities Commission Regulation on the Self-Regulatory Organization on the Securities Market, Art.4(2),(5)

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Section C – Issuers and their Information-Disclosure Obligation

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CONTENT OF THE PROSPECTUS

In a public offering of securities10, whether issuers are required to:

(i) prepare a prospectus (or an information document of similar nature)

Securities Commission Regulation on Procedures for Registration of Shares of Open Joint Stock Companies and Debenture Bonds of Enterprises, Art.1.9 s.1 Law of Ukraine “On Securities and the Stock Exchange”,Art.28, Art.29,Art.30

(ii) distribute it, and

Securities Commission Regulation on Procedures for Registration of Shares of Open Joint Stock Companies and Debenture Bonds of Enterprises, Art.1.9 s.1 Law of Ukraine “On Securities and the Stock Exchange”,Art.28, Art.29,Art.30

1.

(iii) file the prospectus with the regulator/stock exchange for review/approval

Decree of the President “On the State Commission for Securities and the Stock Market” provides that Commission review and approve the prospectus, Art.4

14

10 The term Public Offering of Securities refers to the issuance and/or sale of the securities to the public.


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Whether the prospectus is required to include information on:

(i) key financial information, including capitalisation and indebtedness of the issuer and reason for the offer and use of proceeds and risk factors

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", s1.s.2 par.2 Decision of the Securities Commission on approval of "Regulation of Procedure of Registration of Shares", Art.1.s.2 Law of Ukraine “On Securities and the Stock Exchange”, Art.30

(ii) the company, including history and development of the company, business overview, organisational structure, property, plants and equipment

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", Art.11s.1 Decision of the Securities Commission on approval of "Regulation of Procedure of Registration of Shares", Art.1.s.2 Law of Ukraine “On Securities and the Stock Exchange”, Art.30

2.

(iii) operating and financial review and prospects, including operating results, liquidity and capital resources, research and development, patents and licenses. [please specify if all or just some of these issues are included]

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", s.1,s.2, par.2 Decision of the Securities Commission on approval of "Regulation of Procedure of Registration of Shares" ,Art.1.s.2 Law of Ukraine “On Securities and the Stock Exchange”, Art.30

IOSCO – International Disclosure

standards for cross-border offerings and Initial listings

by foreign issuers


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(iv) directors, senior management and employees, including compensation of directors, board practices, number of employees and share ownership [please specify if all or just some of these issues are included]

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", .s.2 par.2, Art.6 Law of Ukraine “On Securities and the Stock Exchange”, Art.30

(v) major shareholders and related party transactions

Shareholders of 10 % or more participation interests, Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", .s.2 par.2, Art.7 (Information which is disclosed to Stock Exchange but not filed to Securities Commission) Law of Ukraine “On Securities and the Stock Exchange”, Art.30 ,Art.39

(vi) the identity and holdings of persons who hold a substantial beneficial ownership interest in the company

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", .s.2 par.2, Art.7 (Information which is disclosed to Stock Exchange but not filed to Securities Commission) Law of Ukraine “On Securities and the Stock Exchange”, Art.30

FOREIGN ISSUERS

3. Whether a foreign issuer is required to disclose additional information in the prospectus? If "yes", please briefly describe

Securities Commission Regulation "On Procedures for Registration of Shares and Bonds of Foreign Issuers in Ukraine", Art.1.9 s.1. An issuer is required to provide

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an additional information on the issuer, securities to be issued, procedures for subscription payment for securities, use of proceeds etc.

4. Whether a foreign issuer is allowed to use a prospectus which has been approved by a foreign regulator? If "yes", please briefly describe

Securities Commission Regulation on Procedures for Registration of Shares and Bonds of Foreign Issuers in Ukraine, Art.1.9 s.1: securities of foreign issuers may be circulated in Ukraine following their registration by the Securities Commission. In order to have its securities registered by the Securities Commission, a foreign issuer must submit a number of documents and information, including, among others, an application for registration of foreign securities, a document confirming the registration of a given issuance of foreign securities in the country of their origin by a competent governmental authority regulating securities, a prospectus for the securities and a report of the issuer for the last complete financial year; information on issuance of foreign securities offered for circulation in Ukraine etc.

14

FULL DISCLOSURE

5. Whether there are different disclosure requirements for different types of securities or according to the different circumstances in which securities are offered?

Securities Commission Regulation "On Procedures for Registration of Shares of Open Joint Stock Companies and Debenture Bonds of Enterprises", s.2, Art.2. Slightly different disclosure requirements apply to

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issuance of shares and debenture bonds

6. In addition to public offering of equity, whether prospectus requirements also apply to other types of public offerings (e.g., debt securities, warrants, pre-emptive rights offering to existing shareholders, etc.)?

Securities Commission Regulation on Procedures for Registration of Shares of Open Joint Stock Companies and Debenture Bonds of Enterprises, s.2, Art.2

14

7. Whether there are any restrictions on, or disclosure requirements with regard to, the content of information that an issuer discloses outside the prospectus during an offering (e.g., in advertisement, "road-show" materials or on the issuer's web-site)?

Law of Ukraine “On Securities and the Stock Exchange”, Art.44,Art.45, Art.46 14

8. If the answer to the above question is "yes", whether any such restrictions or requirements extend to those acting on behalf of the issuer in connection with the offering (e.g., underwriters or advisors)?

Law of Ukraine “On Securities and the Stock Exchange”, Art.44,Art.45 14

LIABILITY

9. Whether the issuer is liable for the content of the prospectus? If "yes", please describe if there are any exceptions provided for under the law.

Law of Ukraine “On Securities and the Stock Exchange”, Art.30 Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", .s.3, s.7 No provisions of law specifying or permitting any exceptions

14

10. Other than the issuer, whether there are any other persons/entities that may be held liable for the content of the prospectus (e.g., underwriter, auditor)? If "yes", please describe.

Law of Ukraine “On Securities and the Stock Exchange”, Art.30 (Entities, persons liable for supplying faulty or misleading information as to the content of the prospectus are subject to responsibility under the Law of Ukraine)

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DEROGATIONS

11. Whether there are circumstances where an issuer is permitted to proceed with a public offering without full disclosure of relevant information? If "yes", please briefly describe.

An issuer has to proceed with a public offering making all relevant and required information available to the public (confidential information doesn’t fall under the definition of the relevant or information required for disclosure, otherwise issuer is not permitted to withhold information which is mandatory for disclosure in a public offering)

14

REGULATOR’S POWERS

12.

Whether the regulator has the power to enforce prospectus and/or other listing documents disclosure requirements by delaying or stopping the offering or through other regulatory actions? If "yes", please briefly describe the nature of these actions (e.g., civil, administrative or criminal) and indicate whether these actions if taken are with immediate effect (e.g., trading halt or injunction).

Decree of the President “On the State Commission for Securities and the Stock Market”, Art.5(7) Securities Commission “Regulation on Procedures for Registration of Shares and Bonds of Foreign Issuers in Ukraine”, Art.1.15, s.1 Decisions by competent officers of the regulator or the court to suspend the offering of securities in the event of violation of Ukrainian securities law

9, 14


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OTHER LISTING DOCUMENTS

13. Apart from the prospectus, are issuers required to prepare or distribute documents for listing purposes? (e.g., listing particulars 11 or a document of similar nature)?

No provisions of law developing on this matter 14

14. Does the regulator have the power to enforce listing document disclosure requirements by delaying or refusing a listing?

No provisions of law developing on this matter 14

ONGOING DISCLOSURE REQUIREMENTS

15. Whether open/public/listed/admitted to trading companies [please specify] are required to prepare annual reports and/or periodic reports, under a certain timeframe? Please specify.

Law of Ukraine “On Securities and the Stock Market” ,Art.35, Art.40 Listed companies are subject to annual general disclosure requirements provided by Ukrainian law

14

16. If the answer to the above question is "yes", whether the annual and the periodic reports are made available to the public? If yes, please explain how they are distributed.

Issuers make information available by posting it to the line of news or publicly accessible database of the State Commission on Securities and Stock Exchange. Issuer can post information on the publicly accessible web portal with no limits or restriction in access. Securities Commission Regulation on Disclosure Filing of Information by the Issuer", Art.7, s.1; Art.1,s.1, par.4 Law of Ukraine “On Securities and the Stock Market” ,Art.35, Art.40

14

11 Listing particulars: details which a company is obliged to publish about itself together with any securities it issues before it obtains a listing on a recognised stock exchange.


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IOSCO Relevance

17. Whether issuers are required to file the annual and periodic reports with the regulator for review/approval? Law of Ukraine “On Securities and the

Stock Market” ,Art.35, Art.40 14

18. Whether the regulator has the power to enforce the disclosure requirements of the reports? If yes, please describe the available actions. Law of Ukraine “On State Regulation of the

Securities Market in Ukraine”, Art.8 14

19. Whether the issuer is liable for the content of the reports? If "yes", please describe if there are any exceptions provided for under the law

Law of Ukraine “On State Regulation of the Securities Market in Ukraine” ,Art.8 Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer", .s.3, s.7 No provision on exception against faulty or misleading information

14

20. Other than the issuer, whether there are any other persons/entities which may be held liable for the content of the annual/periodic reports (e.g., auditor)? If "yes", please describe.

No provisions in law developing on this issue 14

21. Whether issuers are subject to a general and continuing obligation to disclose promptly any material information that would significantly affect the price of their securities? If "yes", please describe whether such requirement varies according to types of issuers.

Securities Commission Regulation on Furnishing of Special Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds, Art.2.1.4

14

22. Whether there are circumstances where an issuer is permitted to derogate from its disclosure obligations (e.g., confidentiality)?

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer",Art.1, Art.2, s.2. Issuer have to disclose all relevant and necessary information required by the Regulator and listed in provision of Art.1, Art.2, s.2. The rest of information may be held by the Issuer as confidential and not required for disclosure.

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FAIR AND EQUITABLE TREATMENT OF SHAREHOLDERS

23. Whether the relevant law or regulation stipulates the right of fair and equitable treatment of shareholders?

No provision in law specifically addressing this matter 15

24. Whether issuers are required to disclose information to shareholders in order to help them make voting decisions? If "yes", please briefly describe the types of voting decisions that would trigger such disclosure requirement.

Civil Code, Art.159 Law of Ukraine “On Business Companies”,Art.10 (g); under Ukrainian law, shareholders are authorized to obtain information on activities of an issuer (joint stock company); Law of Ukraine “On Business Companies", Art.39, ar.39, Art. 41 list types of voting decisions that would trigger such disclosure requirement

15

25. Whether investors have the right to petition the regulator? If "yes", please indicate the grounds based upon which a petition can be made.

Securities Commission Rules for Consideration of Applications by Citizens to the State Commission for Securities and the Stock Market and its Territorial Divisions ,Art.1.1; Art.1.2 lists eligible grounds for such petition, i.e. breach of rights of the interested parties on the procedure of obtaining the information related to the issuance and trading in of securities;

15

26. Whether minority shareholders have the right to appoint an auditor to re-examine the books and accounts of the company? If yes, please specify the minority shareholding percentage requirement and other specific conditions and whether the shareholder or the company must pay for this audit

The minority shareholders (more than 10%) have the right to request an appointment of the auditor to re-examine the books and accounts of the company Law of Ukraine “On Business Companies",

15


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# Issue Yes ( )

No ( )



IOSCO Relevance

Art.49

27. Whether shareholders of a company have the right to start derivative suit (i.e., in the name of the company) against the directors of the company? If "yes", please indicate the shareholding percentage requirement, if any, for exercising such right.

Law of Ukraine “On Business Companies”, Art.41; shareholders may bring legal proceedings against officers of a company by a resolution of the general shareholders’ meeting of the company duly convened and having a requisite quorum (over 60% of the votes)

15

28. Whether shareholders of a company have the right to request an extraordinary general meeting of shareholders to be held? If "yes", please indicate the shareholding percentage requirement, if any, for exercising such right.

Law of Ukraine “On Business Companies”,Art.45; shareholders holding in aggregate more than 10% of the votes have the right to request an extraordinary general meeting of shareholders at any time and for any reason

15

29. Whether beneficial shareholders are required to publicly disclose their ownership and identity in specific circumstances? If yes, please specify the circumstances and the disclosure procedures

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer",Art.1, Art.2, s.1. The IPO requires shareholders of more than 10 % interests to disclose to the public

15

30. Whether the shareholders who are required to disclose their identity and ownership position due to their shareholding percentage have an on-going obligation to report changes in their shareholding? If "yes", please indicate how significant the change has to be to trigger such reporting obligation.

No relevant provisions in law 15

CHANGE IN CORPORATE CONTROL

31. Does the relevant law or regulation provide for the circumstances in which a mandatory tender offer must be made? If "yes", please describe the circumstances.



-- 34 --

# Issue Yes ( )

No ( )



IOSCO Relevance

32. Whether public/open/listed/admitted to trading companies are required to disclose adequate information in connection with a change in corporate control (e.g., take-over etc.) to enable minority shareholders to assess the offer?


33. Does the regulatory framework provide minority shareholders with the opportunity to vote eventual manoeuvres (e.g., poison pills) made up by the management to resist the tender offer?


34. In connection with a proposed transaction involving the company, whether the directors or other members of senior management of a company are required to disclose compensation or personal benefits that they may receive?


35. Does the regulatory framework provide minority shareholders with the concrete opportunity to sell their shares to the bidder at the same conditions as the controlling shareholder?



-- 35 --

Section D – Collective Investment Schemes (CISs)12

# Issue Yes ( )

No ( )



IOSCO Relevance

1. Does you country have a specific legislation on collective investment schemes? Please specify is the regulation is specifically on CIS or instead on other investment funds (e.g., privatisation funds)]

Law of Ukraine “On Mutual Investment Institutes (further as MII) (Share and Corporate Investment Funds)” Securities Commission Regulation on the MII Asset Management Company and Legal Entities carrying out Professional Activities concerned with Management of Pension Fund Assets, Conditions for Licensing of Professional Activities on the Securities Market

ENTRY AND ELIGIBILITY CRITERIA

Whether there are specific standards or requirements set forth in the relevant law or regulation for eligibility13 to:

(i) promote and sell a CIS? Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.4, Art.11 the Securities Market 2.

(ii) operate a CIS? Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”,Art.11

17

12 CIS includes open-end funds that redeem their shares or units (whether on a continuous basis or periodically), closed-end funds whose shares or units are traded in securities markets, unit investment trusts, contractual models and the European UCITS model. For purposes of this assessment checklist, CIS excludes schemes investing in property/real estate, mortgages or venture capital. 13 The term “eligibility” is intended to include authorisation, licensing, registration or other preconditions to operating or marketing a CIS.


-- 36 --

# Issue Yes ( )

No ( )



IOSCO Relevance

Whether the eligibility standards or requirements for licensing or registration of operators of CIS include the following factors:

(1) fitness and propriety of operator (including persons who hold a material interest in the operator)?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.8, Art.11

(2) honesty and integrity?

Securities Commission Regulation "On Approval of the Rules of Securities Trade in Brokerage and Dealers Activity, underwriting, securities management", par.13, Art.1

(3) competence to carry out the functions and duties of a scheme operator (i.e., human and technical resources)?

Conditions for Licensing of Professional Activities on the Securities Market, par.2,Art.4

(4) financial capacity?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.8, Art.10,Art.11. Law of Ukraine “On Licensing of Certain Types of Business Activity,Art.8 ,Art.12

3.

(5) capacity to discharge operator-specific powers and duties?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.11, Art. 12 Conditions for Licensing of Professional Activities on the Securities Market, par.2,Art.5

17


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# Issue Yes ( )

No ( )



IOSCO Relevance

(6) adequacy of internal management procedures?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.11 Conditions for Licensing of Professional Activities on the Securities Market, par.2,Art.6

4. Whether, in assessing eligibility to market or operate a CIS, it is required by the law or regulation to assess the qualifications of key individuals employed by the CIS operator or manager?

Law of Ukraine “Securities and Stock Exchange", Art.48, Art. Conditions for Licensing of Professional Activities on the Securities Market, par.13,Art.6

17

If the answer to the above question is "yes", whether the following factors are considered:

(1) educational requirements?

Securities Commission “On Procedures for Training and Attestation of Specialists in Stock Market Matters”, s.1 Securities Commission Regulation on Certification of Persons who are engaged in Professional Activities on the Securities Market in Ukraine, Art.2

(2) fitness and propriety?

Securities Commission Regulation on Certification of Persons who are engaged in Professional Activities on the Securities Market in Ukraine, Art.2

(3) honesty and integrity?

Securities Commission Regulation on Certification of Persons who are engaged in Professional Activities on the Securities Market in Ukraine, Art.2

5.

(4) past experience in marketing or operating of CIS? No reference as to this requirement in law

17


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# Issue Yes ( )

No ( )



IOSCO Relevance

(5) continual professional training? No relevant provisions in law

6. Whether CIS operators are required to make public disclosure of the information listed in the preceding questions? Please briefly describe what is the disclosure procedure


7. Whether there are sanctions against unlicensed operation of a CIS? If "yes", please briefly describe.

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.11(for legal entities below), Art.13 for persons and government officials. -1000 non-taxable minimum incomes or 150 % of revenue from the actions of issuing and placing on the stock market unregistered securities; - 5000 non-taxable minimum incomes for conducting activities on the stock market without proper licence; -1000 non-taxable minimum incomes for refusing to deliver, untimely delivery or delivery of misleading information; -500 non-taxable minimum incomes for failure to comply or untimely compliance with instructions or rules to eliminate breaches related to securities Law of Ukraine “On State Regulation of the Securities Market in Ukraine” ,Art.3; suspension of professional activities; Law of Ukraine “On Licensing of Certain Types of Business Activity”, Art.20,Art.21,Art.22

17


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# Issue Yes ( )

No ( )



IOSCO Relevance

SUPERVISION AND ONGOING MONITORING

8. Whether CIS operators are subject to a general and continuing obligation to report to the regulator or to investors any information regarding material changes in its management or organisation?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.9 Conditions for Licensing of Professional Activities on the Securities Market, s.3 Securities Commission “Regulation on Certification of Persons who are engaged in Professional Activities on the Securities Market in Ukraine, Art.4

17

9. If the answer to the above question is "yes", whether the regulator's approval of these changes is required? No relevant provisions in law 17

10. Whether there are provisions to prohibit, restrict or disclose conduct likely to give rise to conflicts of interests between a CIS and its operators or their associates or related parties? If "yes", please briefly describe.

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”,Art.12, Art.30 - diversified MIIs are prohibited to:

purchase or exchange securities issued by related persons of an asset management company;

- representatives of an asset management company, securities function of a nominal holder of securities of the MII whose assets it manages; to acquire into ownership the property constituting assets of the given MII and others

17


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# Issue Yes ( )

No ( )



IOSCO Relevance

11. Whether there are regulatory means14 available to minimise conflict of interest situations to ensure that any conflicts if they arise do not adversely affect the interests of investors? If "yes", please describe.

Law does not address this issue specifically 17

12.

Whether there is an ongoing monitoring of the conduct of CIS operators throughout the life of a CIS (including compliance with licensing or registration requirements)? If "yes", please briefly describe the monitoring method(s) adopted.

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.9 Law of Ukraine “On Licensing of Certain Types of Business Activity”, Art.20

17

13. Whether the regulator has the power under the law to take actions in the event of suspected or actual breaches or default by CIS operators? If "yes", please briefly describe what actions the regulator can take.

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.11(for legal entities below), Art.13 for persons and government officials, the Regulator can impose following sanctions: -1000 non-taxable minimum incomes or 150 % of revenue from the actions of issuing and placing on the stock market unregistered securities; - 5000 non-taxable minimum incomes for conducting activities on the stock market without proper licence; -1000 non-taxable minimum incomes for refusing to deliver, untimely delivery or delivery of misleading information; -500 non-taxable minimum incomes for

17

14 Possible means include direct prohibition of particular transactions under the law, use of a code of conduct, review and/or approval of certain transactions and activities by the regulatory authority, disclosure by the operator, prior approval or ratification of certain transactions by the investors, record keeping by the operator, limitation of the activities of the operator and independent review by a third party, etc.


-- 41 --

# Issue Yes ( )

No ( )



IOSCO Relevance

failure to comply or untimely compliance with instructions or rules to eliminate breaches related to securities Law of Ukraine “On State Regulation of the Securities Market in Ukraine”,Art.3; suspension of professional activities; Law of Ukraine “On Licensing of Certain Types of Business Activity”, Art.20,Art.21,Art.22

DELEGATION OF FUNCTIONS

14. Whether CIS operators are permitted to delegate their functions to other persons? No relevant provisions in law 17

If the delegation by CIS operators of their functions is permissible: (1) whether the regulatory system require the CIS operator to (i) monitor the activity and (ii) evaluate the performance of the delegate? No relevant provisions in law

(2) whether the delegating operator is required to disclose to investors the delegation arrangements and the identity of the delegate? No relevant provisions in law

(3) whether the delegating operator will be held responsible for actions or omissions of the delegate as though they were done as its own? No relevant provisions in law

15.

(4) whether the CIS operator can terminate the delegation and make alternative arrangements for the performance of the delegated function, where available? No relevant provisions in law

17

LEGAL FORM/INVESTORS RIGHTS

16. Whether there are requirements as to the legal form and structure of a CIS?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.7, Art.14, Art.15 the Civil Code of Ukraine, Art.153

18


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# Issue Yes ( )

No ( )



IOSCO Relevance

Law of Ukraine “On Business Companies“, Art.1, Art.4, Art.23, Art.24

17. Whether the rights of investors to a CIS, the ways to exercise them and the risks associated with the investment are required to be disclosed to investors?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.5, Art.17 Securities Commission “Regulation on Procedures for Registration of Issuance of Shares and Debenture Bonds of Enterprises and Information on their Issuance”, s.2, Art.2 the Civil Code of Ukraine, Art.152, Art.153, Art.162 Law of Ukraine “On Business Companies“, Art.10, Art.18

18

18. Does the regulatory framework provide that where changes are made to investor rights that do not require prior approval from investors, notice is given to (i) investors and to (ii) the regulator before the changes take effect?

Decision of the Securities Commission "On Approval of Regulation on the Disclosure Procedure of Information by the Issuer", s.2, par.1.2. provides that any changes should be made available to the public through posting such changes in the official edition of the Commission on Securities and Stock Market. No specific requirements to issue notice directly to the investors or regulator.

18

SEPARATION OF ASSETS

19. Whether the operator of a CIS is required to separate and segregate CIS assets from the assets of managers, its related entities and other schemes? Law of Ukraine “On Securities and the

Stock Market” ,Art.17 18

20. Whether there are qualification requirements for the entities holding CIS Law of Ukraine “On Securities and the 18


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# Issue Yes ( )

No ( )



IOSCO Relevance

assets? If "yes", please briefly describe. Stock Market” ,Art.48 Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.4, Art.29

21. If CIS assets are required to be held in safekeeping on behalf of the investors by a third party, whether it is required that the third party be independent of the CIS operator? If "yes", please briefly describe such independence requirement.

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.50 Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.50-54

18

22. If the custodian and investment functions may be performed by the same legal entity or related entities, whether there are special legal or regulatory safeguards with respect to the CIS assets? If "yes", please briefly describe.

An asset management company of an MII and its related persons shall not be a custodian Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.50-54

18

23. Whether CIS operators are required to maintain a register of holders of shares or units in the scheme?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”,Art.54 The MII shareholder registry is maintained by a registrar or a custodian of MII assets pursuant to an agreement with the asset management company subject to requirements of the law. The MII shareholder registry may be maintained by a custodian of the MII assets without a license from the Securities Commission. In the event that the number of shareholders

18


-- 44 --

# Issue Yes ( )

No ( )



IOSCO Relevance

(participants of a Share Investment Fund) of the MII does not exceed 500 persons, the MII shareholder registry may be maintained by the Corporate Investment Fund or the asset management company. The asset management company of the MII of the open type maintains independently the MII shareholder registry pursuant to procedures laid down by the Securities Commission

24. Whether CIS operators are required to keep all books and records in relation to transactions involving CIS assets and all transactions in CIS shares or units?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.51, Art.54 Law of Ukraine “On Accounting and Financial Statements in Ukraine", Art.11, Art.12

18

25. Whether there are auditing requirements in relation to CIS assets?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.5 Law of Ukraine “On Securities and the Stock Market”, Art.40 the Civil Code of Ukraine, Art.162 Law of Ukraine “On Business Companies“ ,Art.18 Law of Ukraine ”On Auditing”, Art.8

18

26. If the answer to the above question is "yes", whether the auditors are required to report to the regulator any irregularities or non-compliance? No relevant provision in law 18


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# Issue Yes ( )

No ( )



IOSCO Relevance

DISCLOSURE

In making a public offering of a CIS, whether the CIS operator is required to

(i) issue an offering document (e.g., a prospectus)? Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.39

(ii) deliver it to investors?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.39 Law of Ukraine “On Securities and the Stock Exchange”, Art.29

27.

(iii) deposit it to the regulator and obtain its prior approval?


19

Whether CIS offering document is required to include the following information: 28.

(1) the date of the issue of the offering document?

Law of Ukraine “On Securities and the Stock Exchange”, Art.30 Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48, Art.49

19


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# Issue Yes ( )

No ( )



IOSCO Relevance

(2) information concerning the legal constitution of the CIS?

Law of Ukraine “On Securities and the Stock Exchange”, Art.30 Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48, Art.49 Securities Commission “Regulation on Procedures for Registration of Issuance of Shares and Debenture Bonds of Enterprises and Information on their Issuance”, s.2

(3) the rights of investors in the CIS?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.39 Securities Commission “Regulation on Procedures for Registration of Issuance of Shares and Debenture Bonds of Enterprises and Information on their Issuance”, s.2 Securities Commission Regulation "On Procedures for Registration of Shares of Corporate Investment Fund for Mutual Investment Purposes", s.2

(4) any pending material legal proceedings involving the CIS? No relevant provision in law

(5) procedures for purchase, redemption, and pricing of units?

Securities Commission “Regulation on Procedures for Registration of Issuance of Shares and Debenture Bonds of Enterprises and Information on their Issuance”, s.2


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# Issue Yes ( )

No ( )



IOSCO Relevance

(6) relevant, audited financial information concerning the CIS?

Law of Ukraine “On Securities and the Stock Exchange”, Art.30 Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48, Art.49 Securities Commission “Regulation on Procedures for Registration of Issuance of Shares and Debenture Bonds of Enterprises and Information on their Issuance”, s.2

(7) information on the custodian?

Securities Commission Regulation "On Procedures for Registration of Shares of Corporate Investment Fund for Mutual Investment Purposes", s.2,Art.2

(8) the investment policy of the CIS (i.e., indicating the markets and instruments in which investments are made)?

Securities Commission Regulation "On Procedures for Registration of Shares of Corporate Investment Fund for Mutual Investment Purposes", s.2.

(9) information on the risks involved in achieving the investment objectives? No relevant provision in law

(10) the appointment of any external administrators or investment managers or advisers who have a significant and independent role in relation to the CIS?

Securities Commission Regulation "On Procedures for Registration of Shares of Corporate Investment Fund for Mutual Investment Purposes", s.4.

(11) fees and charges in relation to the CIS?



-- 48 --

# Issue Yes ( )

No ( )



IOSCO Relevance

(12) the regulatory authority, auditors and other independent third parties and their responsibilities in relation to the CIS?

Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.4, Art.5,Art.6 Law of Ukraine “On Securities and the Stock Exchange”, Art.47

(13) description of the methodology of asset valuation? Securities Commission Regulation "On Procedures for determination of asset valuation", Art.2, Art.3

29. Whether CIS operators are subject to a general disclosure obligation to allow investors to evaluate the suitability of the CIS for them?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48 Securities Commission “Regulation on Procedures for Filing of Information by an Asset Management Company on Results of Activities of Mutual Investment Institutes (Share and Corporate Investment Funds)”, par.1;par.2.

19

30.

Whether the regulator has the power under the law to take actions in the event that the issuing documentation is inaccurate, misleading or false or fails to satisfy the filing/approval requirements? If "yes", please list all regulatory actions available.

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.3 -suspension of activities or suspension of licence of the operator Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.41 Regulator has rights to refuse registration of the prospectus of the CIS, thus delaying issuing of shares until inaccurate, misleading or false documentation satisfy the filing/approval requirements.

19


-- 49 --

# Issue Yes ( )

No ( )



IOSCO Relevance

31. Whether the offering document is required to be kept up-to-date to take account of any material changes affecting the CIS?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.39

19

32. Whether prior notification is required to be given to the regulator regarding changes to information in an offering document? If "yes", please indicate whether the regulator's approval is required.

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)” ,Art.40 Changes have to be registered with the Regulator by the similar procedure as required for the registration of the prospectus, thus approval of the Regulator is required

19

33. Whether CIS operators are required to submit to the regulator a report setting forth the activities in respect of a CIS on a periodic basis (please specify the report’s periodic basis: annual, semi-annual, quarterly)?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48 CIS operators are required to submit to the regulator a report setting forth the activities in respect of a CIS on an annual and semi-annual basis(for diversified CIS)

19

If the answer to the above question is "yes":

(1) whether the law or regulation require a timely distribution of the report?

34. (2) whether the regulatory framework requires that the accounts of a CIS be prepared in accordance with high quality, internationally acceptable accounting standards?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.48 Securities Commission “Regulation on Peculiarities of Accounting Standards of CIS"

19


-- 50 --

# Issue Yes ( )

No ( )



IOSCO Relevance

ASSET VALUATION

35. Whether CIS operators are required to have the CIS net asset value (NAV)15 calculated on a regular basis? If "yes", please indicate the frequency.

Securities Commission Regulation "On Procedures for determination of asset valuation", Art.2, Art.3 -daily - until 13.00 of the following day; - quarterly - until 10 th day of the following month from the reporting quarter; - report of the forth quarter - until first of March of the following year.

20

36. Whether the valuation of the CIS assets is required to be checked by independent auditors?


20

37. Whether there are specific regulatory requirements in respect of fair valuation of assets where market prices are not available?

Securities Commission Regulation on the Procedure of the valuation of Assets of the Mutual Investment Institute ,Art.2, Art.3

20

PRICING AND REDEMPTION OF INTEREST

38. Whether the operator of a CIS is required to disclose or publish the price of the CIS unit on a regular basis?


20

39.

Whether CIS operators are subject to an on-going obligation to disclose, in a timely fashion by way of notices or announcements, information which is material to the value of a CIS or otherwise significant to holders of interests in a CIS?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art. 49

19

15 The calculation of the net asset value (NAV) of a CIS is extremely important, as the NAV reflects the price which an investor pays when investing in a CIS (subject to any additional up-front charges) and the price an investor will receive (subject to any additional exit charges) should a holding be liquidated.


-- 51 --

# Issue Yes ( )

No ( )



IOSCO Relevance

40. Whether there is a maximum time period for making payment of redemption proceeds?

Law of Ukraine “On Mutual Investment Institutes (Share and Corporate Investment Funds)”,Art.42, Art.44

20

41. Whether there are rules governing the fees or charges payable by investors on the purchase or redemption of shares or units of a CIS? No relevant provision in law 20

42. Whether there are rules or mechanisms in place to address errors in respect of the price of the CIS units or the value of CIS assets?

Securities Commission “Regulation on Procedures for Determination of the Value of Net Assets of Mutual Investment Institutes (Share and Corporate Investment Funds)”, Art.2, Art.3

20

43. Whether suspension or deferral of routine valuation and pricing and regular redemption of shares or units of a CIS is permissible under certain circumstances? If "yes", please briefly the circumstances.

No relevant provision in law 20

44. Whether the regulator has the power to demand, delay or stop the deferral or suspension of redemption rights?

On general grounds in cases when the law is violated or rights of investors and other interested parties are threatened Law of Ukraine "On State Regulation of the Securities Market in Ukraine",Art.8

20


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Section E – Market Intermediaries

# Issue Yes ( )

No ( )



IOSCO Relevance

AUTHORISATION AND LICENSING

Whether licensing is required to conduct business as:

(i) Market intermediaries16? Law of Ukraine “On Licensing of Certain Types of Business Activity”,Art.2 1.

(ii) Investment Advisers17? Law of Ukraine “On Licensing of Certain Types of Business Activity, Art.2

21

2. Whether the relevant law or regulations establish minimum standards or criteria that all applicants for licensing must meet before a license is granted? Conditions for Licensing of Professional

Activities on the Securities Market, s.1,par.3 21

3. Whether the circumstances in which a license application may be refused are clearly set forth in the law or regulation? If "yes", please briefly describe.

Law of Ukraine “On Licensing of Certain Types of Business Activity”, Art.11 -misleading information in the application for licence documents; - failure of the applicant to comply with the licensing conditions.

21

16 “Market intermediaries” include those who are in the business of managing individual portfolios, executing orders and dealing in, or distributing, securities. 17 “Investment advisers” for the purpose of this assessment are those engaged in the business of advising others regarding the value of securities or the advisability of investing in, purchasing or selling securities. They offer only advisory services without offering other investment services.


-- 53 --

# Issue Yes ( )

No ( )



IOSCO Relevance

If the answer to the above question is "yes", whether these requirements include:

(1) an assessment of whether the applicant has the appropriate financial resources (e.g., minimum initial capital) to carry on the proposed business? If "yes", please specify

Decision of the Securities Commission "On Approval of the Order and Conditions of License Issuance and Conducting Certain Kinds of Activities on Stock Market, Re-issuance of the License, Issuance of the backup version and copy of the License" s.1, par.3 Art.4, Art.5, Art.6 The charter capital of the provider should be at least: - activities on securities market for dealers - 120 000 UAH; activities on securities market for brokers - 300 000 UAH; activities on securities market for dealers - 600 000 UAH;

(2) an assessment of whether the applicant has adequate operational systems and controls for the businesses it proposes to carry on, such as proper books and records, internal controls, risk management, and supervisory systems?

Decision of the Securities Commission "On Approval of the Order and Conditions of License Issuance and Conducting Certain Kinds of Activities on Stock Market, Re-issuance of the License, Issuance of the backup version and copy of the License", s.1,par.3

4.

(3) an assessment of whether the applicant has senior management and directors with the knowledge, skills and experience necessary to perform their proposed roles?


21


-- 54 --

# Issue Yes ( )

No ( )



IOSCO Relevance

(4) an assessment of whether the applicant has a proven track record/past conduct?


ONGOING REQUIREMENTS

In the event that a market intermediary fails to meet ongoing requirements, whether the regulator has the power to:

(1) suspend the intermediary's license? Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.8 (5)

(2) revoke the intermediary's license? Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.8 (5)

(3) impose conditions or restrictions on the intermediary's business operations? Law of Ukraine "On State Regulation of the

Securities Market in Ukraine", Art.8 (5) (4) take effective steps to seek the removal of persons employed at the intermediary which have committed securities violations? Law of Ukraine "On State Regulation of the

Securities Market in Ukraine", Art.8 5.

(5) impose other sanctions? If "yes", please specify.

Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.8 - jointly with other relevant authorities conduct inspections on financial violations; -convey materials to competent bodies of Enforcement Agencies; - take a decision on liquidation of operating entities;

21


-- 55 --

# Issue Yes ( )

No ( )



IOSCO Relevance

Whether intermediaries are required to immediately report to the regulator on the occurrence of the following events:

(1) significant change in the ownership of the firm?

Securities Commission Approval of Regulation on Procedures for Compiling of Administrative Data related to activity of Securities Traders and Furnishing of particular Documents to the Securities Commission, s.2

(2) change in the senior management or directors of the firm?

Securities Commission Approval of Regulation on Procedures for Compiling of Administrative Data related to activity of Securities Traders and Furnishing of particular Documents to the Securities Commission, s.2

(3) change in the information delivered during the licensing process or a material change in the intermediary's circumstances?

Securities Commission Conditions for Licensing of Professional Activities on The Securities Market, s.1 Law of Ukraine "On licensing Certain kind of Activities", Art.17

6.

(4) other specific events? If "yes", please specify.

Securities Commission Conditions for Licensing of Professional Activities on The Securities Market ,Art.14 - any events which can significantly influence situation of the intermediaries or related parties.

21

Whether the following information about intermediaries is required to be made publicly available:

(1) the existence of a license, its category and status? Not required by current law 7. (2) the scope of its permitted activities, the names of its senior management and other individuals authorised to act in the name of the intermediary? Not required by current law

21


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# Issue Yes ( )

No ( )



IOSCO Relevance

INVESTMENT ADVISERS18

8.

Does the regulatory framework on investment adviser include detailed requirements setting out the disclosures to be made by the adviser to potential clients, including: (i) descriptions of the adviser’s educational qualifications, (ii) investment strategies, (iii) fee structure and other client charges, (iv) potential conflicts of interest, and (v) past investment performance? [please specify for each of the items]

No such requirements established by law 21

CUSTODIANS19

9. In case of custodians, does regulation provides for the protection of client assets, including segregation and periodic or risk-based inspections (either by the regulator or an independent third party)?


CAPITAL ADEQUACY REQUIREMENTS

10. Whether intermediaries are required to calculate and maintain a minimum amount of capital on an on-going basis? If "yes", please briefly describe.

Decision of the Securities Commission "On Approval of the Order and Conditions of License Issuance and Conducting Certain Kinds of Activities on Stock Market, Re-issuance of the License, Issuance of the backup version and copy of the License", s.1, par.3

22

11. Does the regulatory framework provide for different minimum capital requirement for intermediaries depending on the risks undertaken?

Decision of the Securities Commission "On Approval of the Order and Conditions of License Issuance and Conducting Certain

22

18 See footnote 17, above. 19 For the purpose of this assessment, custodians are c those professionals who do not deal, but are permitted to have custody of client assets (i.e., to hold securities on behalf of clients).


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No ( )



IOSCO Relevance

Kinds of Activities on Stock Market, Re-issuance of the License, Issuance of the backup version and copy of the License" s.1, par.3 Art.4, Art.5, Art.6 The charter capital of the provider should be at least: - activities on securities market for dealers - 120 000 UAH; activities on securities market for brokers - 300 000 UAH; activities on securities market for dealers - 600 000 UAH;

12. Whether intermediaries are required to provide audited financial statements or other audited reports to the regulator?

Securities Commission on Approval of Regulation on Procedures for Compiling of Administrative Data related to activity of Securities Traders and Furnishing of particular Documents to the Securities Commission, s.2

23

13. Whether the regulatory framework require intermediary to have specific liquidity and solvency requirements (e.g., enough capital to run the business for three months)?

Securities Commission on Approval of Regulation on Procedures for Compiling of Administrative Data related to activity of Securities Traders and Furnishing of particular Documents to the Securities Commission, s.6

22

14. Whether an intermediary is required to give notice to the regulator if its capital falls below the minimum requirements?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.2

22

15. Whether there are regulatory measures that the regulator can take in the event that a market intermediary's capital falls below a required minimum? If Law of Ukraine "On State Regulation of the

Securities Market in Ukraine", Art.8(16) 22


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No ( )



IOSCO Relevance

"yes", please list them. - temporarily appoint new management of the entity to remedy the situation;

16. Whether capital adequacy requirements take into consideration trading book20 positions?

Securities Commission Conditions for Licensing of Professional Activities on The Securities Market, s.2, Art.8

22

MANAGEMENT AND SUPERVISION

Whether market intermediaries are required to establish and maintain:

(1) appropriate standards of conduct to ensure that the firm complies with all applicable laws and regulations?

Securities Commission Approval of the Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.3 17.

(2) appropriate systems of risk management and internal controls?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.9

23

CUSTOMER PROTECTION

18. Whether a market intermediary is required to “know its customer” before providing specific advice to a customer?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.8, Art.1

23

19. Whether market intermediaries are subject to a general duty to put the interests of a client ahead of its own interests?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities

23

20 The trading book of an institution shall consist of all positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book (Art.111 of EC Directive 2006/49).


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involving Securities, s.8, Art.1

20. Whether market intermediaries are required to disclose to the clients where there is a potential for conflicts of interest?


23

21. Whether market intermediaries are required to treat all clients equally in case where conflicts of interest arise between several of the firm's clients?

On the Regulation on the Self-Regulatory Organization on the Securities Market s.13, Art.1

23

22. Whether market intermediaries are required to enter into written contracts with all clients?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.1, s.3

23

Whether market intermediaries are required to provide clients with:

(1) transaction reports and/or confirmations?

Securities Commission Rules on the Conduct by Securities Traders of Commercial and Commission Activities involving Securities, s.13,Art.1 23.

(2) account statements?


23

PROCEDURES FOR DEALING WITH INTERMEDIARY IN FINANCIAL DIFFICULTY

24.

Whether the regulator has a contingency plan or other measures to deal with the financial difficulty (i.e., a situation which could potentially lead to insolvency) of a market intermediary, including a combination of activities to restrain conduct, to ensure assets are properly managed and to provide


24


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No ( )



IOSCO Relevance

information to the market as necessary?

25. Whether there is an investor compensation fund/scheme21 in place? Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.3, Art.7 24

26.

Does the regulatory framework provide for early warning systems or other mechanisms (e.g., a specified threshold below which a market intermediary is considered in financial difficulty and the regulator's action is required) to give the regulator notice of financial difficulty by a market intermediary and time to address the problem and to take corrective actions?

No provisions in law specifically developing on this issue 24

In the event of financial difficulty of a market intermediary, whether the regulator has the power to:

(1) restrict activities by the intermediary? Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7, Art.8

(2) require the intermediary to take specific actions (e.g., moving clients accounts to another intermediary)?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.7, Art.8 Decree of the President "On the State Commission for Securities and the Stock Market", Art.5

(3) freeze or seize assets held by the intermediary or by a third party on behalf of the intermediary? No relevant provision in law

(4) appoint a monitor, receiver, or other administrator? No relevant provision in law

27.

(5) require that the relevant information is disclosed to the market? Decree of the President "On the State Commission for Securities and the Stock Market", Art.5

24

21 The investor compensation fund (or scheme) is a fund set up usually with contributions of market intermediaries (or the state) aiming to compensate investors in case of an intermediary insolvency. It is not a banking deposit insurance scheme.


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Section F – Secondary Market

# Issue Yes ( )

No ( )



IOSCO Relevance

LICENSING OF EXCHANGES AND TRADING SYSTEMS

Whether prior authorisation or licensing is required in respect of:

(1) a securities exchange? [please specify is this authorisation/licensing is different from the one of market intermediary]

Law of Ukraine “On Securities and the Stock Exchange”, Art.16(3) Licence is required to conduct a securities exchange. Licence is issued for intermediaries to conduct specific activities; thus, if activity of securities exchange is on the list of permitted activities, no additional licence is required. 1.

(2) a trading system22?

Law of Ukraine “On Securities and the Stock Exchange”, Art.16(3) Licence is required to conduct a securities exchange. Licence is issued for intermediaries to conduct specific activities; thus, if activity of securities exchange is on the list of permitted activities, no additional licence is required.

25

22 A trading system means essentially any organization, association, person, group of persons, or system that constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange. The main difference between a trading system and the stock exchange is that the former does not set rules governing the conduct of subscribers other than the conduct of such subscribers' trading on such organization, association, person, group of persons, or system; or discipline subscribers other than by exclusion from trading (for a different definition under EU law, see Art. 4, item 14 and 15 of Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments – so-called MiFID).


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IOSCO Relevance

In connection with an application by an exchange or trading system for authorisation or licensing, whether the regulatory framework requires:

(1) evidence of the operational or other competency or fitness of the system operator as a secondary market ?

Securities Commission Rules for Conditions for Licensing of Professional Activities on The Securities Market , s.2

(2) the operator of the system assuming risks23 to comply with prudential and other requirements designed to reduce the risk of non-completion of transactions (e.g., mandatory margin assessment and collection, capital or financial resources, member contributions, compensation scheme, credit or position limits)?

Securities Commission Rules for Conditions for Licensing of Professional Activities on The Securities Market , s.2 Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2

(3) the regulator to be informed of the types of securities to be traded?

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2

2.

(4) the regulator to give approval of the rules [and any amendments thereof] governing the admission of securities to be traded?

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2

25

23 I.e., principal risk, settlement risk, guarantee risk and performance risk.


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(5) all persons with direct access to the system to be authorised or licensed? [please specify if the same rules apply to the trading system and stock exchange]

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2, Art.29 These rules are applicable to the Trading system and stock exchange. Securities Commission Rules for Conditions for Licensing of Professional Activities on The Securities Market , s.2

(6) the same financial capacity, integrity, or performance criteria as those for market intermediary must be met by persons with direct access to the system or exchange?

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2, Art.29 Securities Commission Rules for Conditions for Licensing of Professional Activities on The Securities Market , s.2

(7) clearly disclosed standards or procedures governing trade execution (e.g., requirements with respect to precedence of client orders, prohibitions on front-running24 or trading ahead of customers, etc)? If "yes", please describe.

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and Regulation of Their Activities, s.2, Art.29 These rules are applicable to the Trading system and stock exchange. Securities Commission Rules for Conditions for Licensing of Professional Activities on The Securities Market , s.2

24 The illegal practice of taking a position based on information not publicly available regarding an imminent transaction, possibly ahead of a customer order. (e.g., a broker who buys himself 200 shares in a stock just before his or her brokerage plans to buy a large block of 400,000 shares).


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ONGOING SUPERVISION

3. Whether the regulatory framework requires the regulator to have arrangements in place for continuous monitoring, surveillance and supervision of the trading system and the conduct of its participants?

Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.8 On the Decision of the Securities Commission “On the Procedure of Inspection of Compliance with Licensing Conditions to Conduct Professional Activities on the Stock Market", Art.2 Securities Commission Regulation on State Representatives at Stock Exchanges, Depositories and Trading-Information Systems, Art.2, Art.3

26

4.

Whether the regulatory framework provides the system operator, the regulator or others have the power to suspend or halt trading, set margins, set position limits or otherwise intervene in case unusual or potentially improper trading occurs? If "yes", please briefly describe.

Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art.8 On the Decision of the Securities Commission “On the Procedure of Inspection of Compliance with Licensing Conditions to Conduct Professional Activities on the Stock Market", Art.2 Securities Commission Regulation on State Representatives at Stock Exchanges, Depositories and Trading-Information Systems, Art.2, Art.3

25

5. Whether the regulatory framework requires the regulator to have a procedure in place to assess the continuing compliance of the trading system or exchange with the initial authorisation requirements?

Securities Commission Regulation on State Representatives at Stock Exchanges, Depositories and Trading-Information Systems, Art.2, Art.3

26


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IOSCO Relevance

Is the regulator determines that the exchange or trading system is unable to comply with the conditions of its initial authorisation, does the regulatory framework provide the regulator with the power to:

(i) re-examine the exchange or trading system conditions of authorisations/licensing and impose a range of actions, such as restrictions or conditions on the market operator?

Securities Commission Regulation on State Representatives at Stock Exchanges, Depositories and Trading-Information Systems, Art.2, Art.3 6.

(ii) withdraw the exchange or trading system’s authorization?

Securities Commission Provisions on Registration of Stock Exchanges and Trading-Informational Systems and Regulation of their Activities, s.12,Art.64

26

TRANSPARENCY OF TRADING

Whether the regulatory framework includes 7.

(i) requirements or arrangements for providing (a) pre-trade (i.e., posting bids and offers) and (b) post-trade (i.e., last sale price and volume of transactions) information to market users? If "yes", please indicate the frequency and timing of reports and what is reported.

Such requirements or arrangements are governed by rules of concerned trading systems or stock exchanges Ex. the Ukrainian Stock Exchange (UFB), Rules of UFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000

27


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(ii) Requirements or arrangements that information on completed transactions be provided on an equitable basis to all participants?

Such requirements or arrangements are governed by rules of concerned trading systems or stock exchanges Ex. the Ukrainian Stock Exchange (UFB), Rules of UFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000

8. Does the regulatory framework allow the exchange or trading system’s operator to permit derogation from the objective of real-time transparency25? If yes, are conditions clearly defined?

No specific provisions

25 The degree of transparency of a market can be measured as a deviation from a real-time standard. However, there is no single standard of “timeliness.” Most exchanges and regulatory systems provide for a certain degree of deviation from a real-time standard, such as, permitting some degree of opaqueness of quote information for block transactions, adopting different definitions of “real-time,” adopting a “promptness” standard that varies from several minutes to a longer time, allowing exceptions to real-time based on the size of the trade, type of trade (dealer mediated rather than auction market) or type of dealer. Indeed, each type of market microstructure delivers market fairness, efficiency and transparency in slightly different ways.


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IOSCO Relevance

DETECTION OF UNFAIR PRACTICES

Whether there is legislation prohibiting the following conduct in respect of securities admitted to trading on authorised exchanges and regulated trading systems:

(1) market or price manipulation?

Securities Commission Concept on Prevention of Manipulation of the Securities Market, Dishonest Trading Practices and Violations of Ethics of Professional Activities on the Securities Market No specific article. The concept is laid out in a way of plain text

(2) misleading information?


9.

(3) insider trading?


28


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IOSCO Relevance

(4) front-running26?


(5) excessive leverage in the system (e.g., trading on margin27)?


(6) other fraudulent or deceptive conduct and market abuses?


10. Does the regulatory framework provide the regulator with the power to supervise and inspect (i) securities position limits, (ii) quotation display rules, (iii) order handling rules, (iv) settlement price rules or market halts?

Securities Commission Rules for Registration of Stock Exchanges and Trading-Informational Systems and

28

26 See footnote 25. 27 This practice is about trading with borrowed money, which can be extremely risky because both gains and losses are amplified. That is, while the potential for greater profit exists, this comes at a hefty price - the potential for greater losses. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money.


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IOSCO Relevance

Regulation of Their Activities, s.12, Art.6 In case of detection of trading violations, whether the following actions can be taken by the relevant authority:

(1) liquidation of positions? Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8

(2) suspension of trading? Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8

(3) fines? Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8

(4) revocation or suspension of membership or access authorisation? Law of Ukraine “On State Regulation of the Securities Market in Ukraine” ,Art.8

(5) other sanctions?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8 - jointly with other relevant authorities conduct inspections on financial violations; -convey materials to competent bodies of Enforcement Agencies; - take a decision on liquidation of operating entities;

11.

(6) required arbitration or mediation? No relevant provision in law

28

MONITORING OF LARGE EXPOSURES

12. Whether the relevant regulatory framework requires the clearing firm, the market, and/or the regulator to monitor trading in order to identify large exposures28? If "yes", please briefly describe (i) how the law defines “large


28 The terms “large exposure” refers to open positions or credit exposures that are sufficiently large to expose a risk to the market or to a clearing firm.


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IOSCO Relevance

exposure” and (ii) the monitoring functions conducted (e.g., reporting requirement, inspections etc.)

13. Whether the regulator or the market has the power to compel customers or market members carrying or controlling large positions to reduce their exposures or to post increased margin?


In case a market member does not make relevant required information needed to evaluate an exposure available to the market authority, whether the following action can be taken by the relevant market authority:

(1) impose limitations on future trading?

(2) require liquidation of positions?

(3) increase margin requirements?

(4) revoke trading privileges?

(5) suspend from trading?

Depends on rules of specific trading systems or stock exchanges. For ex.: Ex. the Ukrainian Stock Exchange (UFB), Rules of UFB registered by the State Commission on Securities and Stock Exchange by the Order N 246 dated 23 June 2001. the Kiev International Stock Exchange (KMFB) Rules of KMFB registered by the Sate Commission on Securities and Stock Exchange by the Order N 229 dated 05 December 2000

14.

(6) require to increase capital of the market member? No relevant provision required by law

29

DEFAULT PROCEDURES

15. Whether the market is required to have contingency plans or emergency procedures in dealing with a market disruption or system failure? 29

16.

Whether the regulatory framework requires markets and/or the clearing and settlement system(s) promptly to isolate the problem of a firm in financial difficulty by addressing its open positions or otherwise protect customer funds and assets from an intermediary’s default under national law?

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, Art.7

29


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IOSCO Relevance

Securities Commission Regulation on Depository Activities, s.3, Art.3; par.5

17. Whether the regulatory framework requires intermediaries to separate and segregate customers’ assets from other funds and assets?


29

18. If yes, in the event of intermediary’s insolvency, does the framework enable customer’s positions to be moved by a receiver to a solvent intermediary?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.30, Art.51 Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, Art.7 Securities Commission Regulation on Depository Activities, s.3, Art.3; par.5

29


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G – Clearing and Settlement

# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance

AUTHORISATION AND LICENSING OF SECURITIES SETTLEMENT SYSTEMS

1. Whether the clearing and settlement systems are subject to direct supervision either by the regulator or the relevant market authority?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8 Law of Ukraine "on Securities and Stock Exchanges", addendum, par.7, Art.4.

18

If the regulator has oversight responsibility regarding the clearing and settlement system, whether the regulator has the power to:

(1) license clearing and settlement systems? Law of Ukraine "on Securities and Stock Exchanges", addendum, par.7, Art.4.

(2) issue rules mandating specific standards for clearing and settlement systems?

Law of Ukraine "on Securities and Stock Exchanges", addendum, par.7, Art.4. Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine, Art.8

2.

(3) approve changes to a clearing and settlement system’s rules and procedures?


30


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CPSS / IOSCO

Relevance

(4) conduct surveillance of the operations of clearing and settlement systems?

Law of Ukraine "on Securities and Stock Exchanges", addendum, par.7, Art.4. Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine, Art.8;Art.15(2)

(5) inspect, audit or require a third party inspection or audit of clearing and settlement systems?


(6) require the clearing organization to file reports?


(7) bring regulatory actions against a clearing and settlement systems for violations of the securities laws and regulations or for failure to enforce its own rules?

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine, Art.8

TRADE CONFIRMATION AND DELIVERY VERSUS PAYMENT

3. Whether the regulatory framework requires that confirmation of trades between direct market participants occur no later than trade date (T+0)?

These matters are governed by rules adopted by exchanges and trading systems; internal rules established by each of listed above trade systems and stock exchanges.

2


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CPSS / IOSCO

Relevance

4. Whether the regulatory framework requires that trades be settled within three days from the trade date (T+3)?


3

5. Does the technical, legal and contractual framework ensure that delivery of securities takes place if, and only if, payment is received? (i.e., DVP - delivery versus payment)?


3

TRANSPARENCY

6.

Do entities that provide the clearing, settlement and custodial infrastructure of securities markets make clear disclosures to market participants about their rules, regulations, relevant laws, governance procedures, risks, steps taken to mitigate risks, and the rights and obligations of participants?


17

CENTRAL DEPOSITORY29

7. Are securities issued on a dematerialised basis (i.e., electronic issue opposed to the issuance as a physical certificate)?

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, par.4,Art.13

6

8. Does the transfer of securities require any form of physical delivery?

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, par.4,Art.13

6

29 There are several different ways for owners to hold securities. In some jurisdictions, physical securities circulate and beneficial owners may keep securities in their possession, although owners typically employ a custodian to hold them to reduce risks and safekeeping costs. The costs and risks associated with owning and trading securities may be reduced considerably through immobilisation of physical securities, which involves concentrating the location of physical securities in a depository. The immobilisation or dematerialisation of securities and their transfer by book entry within a CSD significantly reduces the total costs associated with securities settlements and custody.


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CPSS / IOSCO

Relevance

9. Does a central securities depository (CSD) exist? If NO, please briefly describe the settlement system.

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”,Art.2

6

10.

If the answer to the above question is “yes”, does an entry in the CSD result automatically in the transfer of the legal title to the securities in the official register of the issuer? If NO, please specify which rights are given by the entry

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”,Art.5

6

11. Are securities immobilised or dematerialised and transferred by book entry in a CSD?


6

OVERSIGHT

Is the clearing and settlement systems required to:

a) file periodic reports to the regulator?

Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, Art.8 12.

b) submit to periodic and/or special audits and inspections?


30

DERIVATIVES

13. Whether derivative securities clear and settle on a different system through a specialised trading and/or clearing system? No special provision in law 30

14. If the answer to the above question is "yes", whether the legislative framework addresses the treatment of derivatives risks? 30


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No ( )



CPSS / IOSCO

Relevance

PROTECTION OF CUSTOMERS’ SECURITIES

15.

Does the legal or regulatory framework provide any arrangements to protect customers’ securities from theft, loss or misuse and to ensure that they will not become subject to claims of the custodian’s creditors (e.g., segregation of assets insurance, compensation schemes)?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.17 12

16. Are the entities holding securities in custody subject to mandatory internal or external audit, or both, to determine if there are sufficient securities to satisfy customer claims?

Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, Art.8 Law of Ukraine “On the National Depositary System and Particularities of Electronic Circulation of Securities in Ukraine”, Art.16, Art.17

12

Section H – Accounting and Auditing of Financial Reports

# Issue Yes ( )

No ( )



IOSCO Relevance

DISCLOSURE OF FINANCIAL RESULTS

1. Whether issuers are required to publish financial and other information at regular intervals (i.e. annual and periodic financial reports, please specify)?

Law of Ukraine “On Securities and the Stock Exchange”, Art.40 Securities Commission Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds. Art.1, par.1

14


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IOSCO Relevance

If the answer to the above question is "yes", (1) Whether the issuer or other persons (depending on the circumstances, they might be the underwriter, sponsor, advisor, etc.) is legally responsible for the contents of these reports?

Law of Ukraine “On Securities and the Stock Exchange”, Art.17

(2) Whether companies are required to file these reports with the regulator for review/approval?

Law of Ukraine “On Securities and the Stock Exchange”, Art.35 Securities Commission Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds, par.2;par.3

2.

(3) Whether the regulator has the power to take action for incomplete or misleading information in these reports? Law of Ukraine “On Securities and the

Stock Exchange",Art.36 (4)

14

EXTERNAL AUDITOR

3. Whether the relevant law or regulation requires that annual financial statements published by issuers should be audited by external auditors?

Law of Ukraine “On Business Companies”, Art.9, Art.18 Law of Ukraine “On Auditing”,Art.8(1)

16

4.

Does the regulatory framework require that an issuer’s governance body independent in both fact and appearance of the management of the company (e.g., shareholders or a statutory or corporate audit oversight body) oversee the process of selection and appointment of the external auditor?

Law of Ukraine “On Business Companies” , Art.18, Art.49 Law of Ukraine “On Auditing”, Art.20 Civil Code of Ukraine Art. 162

16

5. Whether the regulatory framework requires issuer to change the external auditor after a certain number of years (i.e., rotation)? If yes, please specify the rotation period

No special provisions in law 16

6. Whether issuers are required to provide audited financial statements in public offering prospectuses?

Decision of the Securities Commission on approval of "Regulation on the Disclosure Procedure of Information by the Issuer",

16


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IOSCO Relevance

par.1, par.2 Securities Commission Regulation On Approval of Provisions on Procedures for Registration of Issuance of Investment Certificates by the Investment Fund and the Investment Company and Information on their Issuance”, s.2

Whether the required audited financial statements include the elements listed below:

(1) a balance sheet or statement of financial position?

Law of Ukraine “On Accounting and Financial Statements in Ukraine” Law of Ukraine “On Auditing” ,Art.11, Art.12 Securities Commission Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds, s.2, Art.2

7.

(2) a statement of the results of operations?

Law of Ukraine “On Accounting and Financial Statements in Ukraine” Law of Ukraine “On Auditing” ,Art.11, Art.12 Securities Commission Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds , s.2,Art.2

16


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No ( )



IOSCO Relevance

(3) a statement of cash flow?

Law of Ukraine “On Accounting and Financial Statements in Ukraine” Law of Ukraine “On Auditing” ,Art.11, Art.12 Securities Commission Regulation on Furnishing of Regular Information by Open Joint Stock Companies and Enterprises - Issuers of Debenture Bonds, s.2,Art.2

(4) a statement of changes in ownership equity or comparable information included elsewhere in the audited financial statement or footnotes? No relevant provision in law

ACCOUNTING STANDARDS

8. Are financial statements required in public offering and publicly available annual reports required to be prepared and presented in accordance with a comprehensive body of accounting standards?

Law of Ukraine “On Accounting and Financial Statements in Ukraine”, Art.6, Art.11

16

9. If the answer to question above is “yes”, are these accounting standards of a high and internationally acceptable quality?

Resolution of the Cabinet of Ministers of Ukraine N1706 dated 10.28.1998 “On approving the program to reform an accounting system in accordance with international standards” Law of Ukraine “On Auditing”, Art.2, Art.6 They are in compliance with the internationally recognized standards

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

10. Whether an organisation responsible for the establishment and timely interpretation of accounting standards is set out by the relevant law or regulation? If "yes", please state the name of the body and its composition

Law of Ukraine “On Accounting and Financial Statements in Ukraine”,Art.7 Ministry of Finance of Ukraine creates a Methodological Board, acting as an expert council at the Ministry, which consist of leading specialist pulled out from different financial entities and approved by the Ministry of Finance

16

11. If the answer to the above question is "yes", whether the standard setting body is subject to regulatory oversight? If "yes", please indicate who the supervisory authority is.

Methodological Board is supervised by Ministry of Finance of Ukraine Law of Ukraine “On Accounting and Financial Statements in Ukraine”, Art.7

16

Whether the accounting standards used in preparing financial statements and financial reporting address the general topics listed below:

(1) presentation of financial information?

Accounting Regulation (Standard) 1 “General Requirements for Financial Statements” Ministry of Finance “Accounting Regulation (Standard) 6 Rectification of Errors and Changes in Financial Statements”

(2) consolidation of financial information? Ministry of Finance “Accounting Regulation (Standard) 20 “Consolidated Financial Statements

12.

(3) business combinations? Ministry of Finance “Accounting Regulation (Standard) 19 “Associations of Enterprises”

16


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IOSCO Relevance

(4) tangible and intangible assets (including impairment of assets)?

Ministry of Finance “Accounting Regulation (Standard) 7 “Fixed Assets” Ministry of Finance “Accounting Regulation (Standard) 8 “Non-tangible Assets” Ministry of Finance “Accounting Regulation (Standard) 9 “Inventory”

(5) leases? Ministry of Finance “Accounting Regulation (Standard) 14 “Leasing”

(6) income taxes? Ministry of Finance “Accounting Regulation (Standard) 17 “Profit Tax”

(7) employee benefits (e.g., pension, stock compensation, etc.) Ministry of Finance “Accounting Regulation (Standard) 26 “Payments to Employees”

(8) provisions and contingencies? Ministry of Finance “On Notes to Annual Financial Reports”

(9) financial instruments (including derivative financial instruments)? Ministry of Finance “Accounting Regulation (Standard) 13 “Financial Instruments”

(10) securitisation? Ministry of Finance “Accounting Regulation (Standard), no such approved or adopted standard

Whether the accounting standards used in preparing financial statements and financial reporting address the following areas of particular interest to investors:

(1) earnings per share? Ministry of Finance “On Approval of Accounting Regulation (Standard) 24 “Return on a Share”

(2) interim financial reporting? No relevant provision in law

13.

(3) information about business segments? No relevant provision in law

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

(4) related party transactions? Ministry of Finance “Accounting Regulation (Standard) 23 “Disclosure of Information on Related Parties”

(5) leases? Ministry of Finance “Accounting Regulation (Standard) 14 “Leasing”

AUDITING STANDARDS

14. Are audited financial statements included in public offering and publicly available annual reports, required to be audited in accordance with a comprehensive body of auditing standards?

Law of Ukraine “On Accounting and Financial Statements in Ukraine”, Art.6, Art.11

16

15. Are these auditing standards of a high and internationally acceptable quality? Law of Ukraine “On Auditing”, Art.2, Art.6 They are in compliance with the internationally recognized standards.

16

16. Does the regulatory framework provide for an organization responsible for the establishment and timely interpretation of auditing standards? Law of Ukraine “On Auditing”, Art.12 16

Do auditing standards expressly require the auditor to:

(1) use due professional care in the performance of the audit? Law of Ukraine “On Auditing”, Art.19

17.

(2) adequately plan and supervise the audit?

Auditing Chamber “Norm 4. Planning of an Audit” Auditing Chamber “Norm No. 9 Planning of an Audit” Auditing Chamber “Norm No. 5 Control of Quality of Auditing Services”

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

(3) obtain an understanding of the internal control system of the entity?

Auditing Chamber “Norm No. 12 Assessment of Internal Control of an Enterprise and a Risk related to the Efficiency of Its Functioning” Auditing Chamber “Norm No. 32 Assessments of an Inherent Risk and a Risk of Non-Compliance of Internal Control, their Impact upon Independent Procedures for Audits”

(4) obtain sufficient evidence to determine whether the financial statements are free of material misstatements? Auditing Chamber “Norm 13. Auditor’s

Opinion

Whether an auditor report is required to disclose:

(1) any exceptions to the application of accounting principles used? Auditing Chamber “Norm 13. Auditor’s Opinion

(2) any material uncertainties in the financial statements? Auditing Chamber “Norm 13. Auditor’s Opinion”

18.

(3) any going-concern issues? Auditing Chamber “Norm 13. Auditor’s Opinion”

16

19. Whether the regulatory framework requires auditors to be independent from the issuer? If "yes", please define “independence”

Law of Ukraine “On Auditing” Auditing Chamber “Norm 3. Major Principles governing Audits” Auditing Chamber “Norm 13. Auditor’s Opinion”

16

20. Whether auditors are required to be licensed or approved and to satisfy specific education criteria and other qualifications in order to practice? Law of Ukraine “On Auditing”, Art.10 16

21. Whether auditors are subject to continuing professional education requirements after they are licensed or approved to practice?

Auditing Chamber “Regulation on Continued Mandatory Improvement of Professional Knowledge of Ukrainian

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

Auditors”

22. Does the regulatory framework provide for a mechanism for enforcing compliance with accounting standards such as requiring restatements of financial statements that deviate from accepted standards?

Auditing Chamber “Instruction on Procedures for Review of Applications (Statements, Complaints etc.) by the Auditing Chamber”

16


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Section I – Money Laundering

# Issue Yes ( )

No ( )



FATF Relevance

SCOPE OF THE CRIMINAL OFFENCE OF MONEY LAUNDERING

1.

Whether there is legislation in place to address the issues of money laundering (ML)? If "yes", please identify the name of such legislation and when it was adopted [if a special law exists, please include details of the law in Section I, above]

Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime Decree of the President of Ukraine “On Measures aimed to Prevent Legalization (Laundering) of Proceeds from Crime” Decree of the President of Ukraine “On Additional Measures to fight against Laundering of Proceeds from Crime” Resolution of the Board of the National Bank “On Approval of Methodological Recommendations on Issues of Preparation by Ukrainian Banks of Programs in order to counteract against Legalization (Laundering) of Proceeds from Crime” Law of Ukraine N249-IV dated 28.11.2002 “On Prevention of and Counteraction against Legalization (Laundering) of Proceeds from Crime” Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on Matters of Prevention of Use of Banks and other Financial Institutions in order to legalize (launder) Proceeds from Crime”

1


-- 86 --

# Issue Yes ( )

No ( )



FATF Relevance

Whether the following conventions have been signed and ratified (please specify in your comments):

(i) 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention)

Law of Ukraine N 344-V dated 15.11.2006, "On Ratification of Agreement on illicit traffic on sea, concluded in accordance with Art. 17 of UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances"

(ii) 2000 UN Convention against Transnational Organized Crime (the Palermo Convention)

Law of Ukraine N 1433 dated 04.02.2004, "On ratification of UN Convention against Transnational Organized Crime"

2.

(iii) 2003 UN Convention against Corruption

Law of Ukraine N 251-V dated 18.10.2006, "On ratification of UN Convention against corruption". This Law is not in force yet, until law on changes related to other laws on corruption will be brought in compliance to applied convention.

1 and 35

3.

Does the law provide for the confiscation of property (including funds and securities) that has been laundered or which constitutes (i) proceeds from; (ii) instrumentalities used in; and (iii) instrumentalities intended for use in the commission of any ML, financing of terrorism (FT) or other predicate offences, and property of corresponding value.

Law of Ukraine N 738/97 dated 17.12.1997 "On Ratification of Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime"

3

CUSTOMER DUE DILIGENCE AND RECORD-KEEPING

4. Does the regulatory framework require that financial institutions obtain senior management approval before establishing business relationships with politically exposed persons?

No special provisions in law 6

5. Does the regulatory framework require financial institutions to maintain all State Archive Department Order N 41 10


-- 87 --

# Issue Yes ( )

No ( )



FATF Relevance

necessary records on transactions, both domestic and international, for at least five years following completion of the transaction regardless of whether the account or business relationship is ongoing or has been terminated?

6. Are financial institutions required to undertake customer due diligence measures including identifying and verifying the identity of their customers?

Instructions provided by the National Bank of Ukraine "On Procedure of Opening, Servicing and Closing of Accounts in National and Foreign Currency", s.2, Art.2

5

Does the regulatory framework prohibit from opening/ maintaining

(i) anonymous accounts,


(ii) accounts in fictitious names,


(iii) numbered accounts


7.

and (iv) non registered (i.e., bearer) securities? Law of Ukraine "On State Regulation of the Securities Market in Ukraine", Art. 11

5

REPORTING OF SUSPICIOUS TRANSACTIONS AND COMPLIANCE

8.

Does the regulatory framework require financial institutions to report to the relevant authority suspicious transactions (i.e., when it suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity or terrorism financing), regardless of the amount of the transaction?

Anti-money laundering law provisions, Art.9 and Order N 183 dated 14.05.2003 of the National Bank of Ukraine "On Approving the Rules of Financial Monitoring by Banks", s.2, Art.2 require to

13


-- 88 --

# Issue Yes ( )

No ( )



FATF Relevance

report suspicious transactions, though only those exceeding determined limit

9. Does the regulatory framework require market intermediaries to have in place policies and procedures designed to minimise the risk of using an intermediary's business as a vehicle for money laundering?


INTERNATIONAL COOPERATION

10.

Does the regulatory framework allow the relevant authority to cooperate with foreign authorities for AML purposes (e.g., search and seizure of information, taking of evidence or statements from persons, providing originals or copies of relevant documents and records)?

Though there is a treaty signed on foreign cooperation, there is no specific provisions on procedures and enforceability

36-38


-- 89 --

Section J –Financial Instruments

# Issue Yes ( )

No ( )



IOSCO Relevance

VARIETY OF FINANCIAL INSTRUMENTS TRADED

1. Does the regulatory framework provide for a definition of financial instruments/securities or similar?

Law of Ukraine “On Securities and Stock Exchange", Art.1 Financial instruments - securities, fixed-term contracts (futures), money circulation instruments, interest fixed-term (forward) contracts, fixed-term exchange contracts (for a certain future date), depending on the interest rate, currency exchange rate of stock index (interest, rate or index swaps), options granting the right of purchase or sale of any of the above instruments, including those providing for payment in cash (exchange rate and interest options)

Does the regulatory framework provide comprehensive regulation for listing and trading of:

(i) commercial bonds

(ii) government bonds

(iii) municipal bonds

2.

(iv) derivatives

Law of Ukraine N 3480-IV "On Securities and Stock Exchange", Art.6-15

25

3. Whether there is a specific regulation applicable to the issuance of financial instruments to the benefit of employees as an employee share purchase plan?

Law of Ukraine N 3480-IV "On Securities and Stock Exchange", Art.6-15 14, 25


-- 90 --

# Issue Yes ( )

No ( )



IOSCO Relevance

DERIVATIVES

4. Does the regulatory framework clearly provide that derivative contracts are enforceable without exceptions?30

The Law on derivatives is of no force yet (there is a draft of law prepared by Securities Commission for preliminary assessment and approval by Parliament. However, it is not clear when this law will be accepted for review and adopted by the Parliament)

14, 25

5. If a market for derivatives exists, does the regulatory framework require disclosure of the terms of the contracts traded, the mechanisms of trading and the risks?

The Law on derivatives is of no force yet (there is a draft of law prepared by Securities Commission for preliminary assessment and approval by Parliament. However, it is not clear when this law will be accepted for review and adopted by the Parliament)

14

CROSS-BORDER ISSUANCE

6. Does the regulatory framework provide for any limits/restrictions to the issuance and the selling of financial instruments by a foreign issuer in your market?

Law of Ukraine N 3480-IV "On Securities and Stock Exchange" restricts the issuance and selling of financial instruments by a foreign issuer to the market without special permit from State Commission on Securities and Stock exchange, Art.37

14-16

7. Does the regulatory framework provide for any limits/restrictions to the issuance and the selling of financial instruments by a national issuer in a Law of Ukraine N 3480-IV "On Securities

and Stock Exchange", Art. 37 restricts the 14-16

30 In some jurisdictions, the enforceability of derivatives is limited due to a concurring provision addressing unenforceability of gaming bets. In some other countries enforceability of derivatives is limited only to licensed financial institutions.


-- 91 --

# Issue Yes ( )

No ( )



IOSCO Relevance

foreign market? Please describe issuance and selling of financial instruments by national issuer in a foreign market without special permit from State Commission on Securities and Stock exchange.

SPONSOR/UNDERWRITER

8. In the case of Initial Public Offering, whether the issuer is required to have a sponsor or an underwriter?

Law of Ukraine N 3480-IV "On Securities and Stock exchange", Art.28 provides that Issuer is not required but may use the service of a sponsor or an underwriter

14

CONCENTRATION RULE

9. Does your regulatory framework require that all relevant transactions be conducted on a stock exchange?

There are no such requirements. In fact, in Ukraine exist out of market stock exchange trading. Out-of-Market Stock Exchange Trading System (Pozabirjova Fondova Torgova Systema), PFTS is an example that relevant transactions can be carried out of stock exchanges.

14

PRIVATE PLACEMENT

10. Whether there is a specific regulation for private placement of financial instruments? Please define private placement.

Law of Ukraine N 3480-IV "On Securities and Stock exchange". Private placement (close) - is an offer to the designated individuals determined well in advance, Art.28.2

14


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This Assessment does not constitute legal advice. Readers are advised to seek appropriate legal advice before entering into any transaction, making any determination or taking any action related to matters discussed herein. The contents of this Assessment are copyrighted. For further information or eventual comments please contact Gian Piero Cigna at [email protected]

To see the complete list of published assessments, please visit: www.ebrd.com/law

mailto:[email protected]

http://www.ebrd.com/law

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