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(Compiled as of April 3, 2012)

2nd COMPARATIVE ANALYSIS OF ASIAN SECURITIES REGULAORS & SROs

AND MARKET CHARACTERISTICS

(Data and information provided by participating organizations in the 7th ASF Tokyo Round Table)

CONTENTS

I. Basic Organizational Features

I – 1. Organization Type, Statutory Basis I – 2. Number of Staff, Funding Source and Number of Member Firms

II. Regulatory Framework of the Securities Markets of Each Country

III. Regulation & Self Regulation

III – 1. Major Rule Making Functions of each Organization III – 2. Qualification System for Market Professionals III – 3. Securities Firms Inspection or Audit III – 4. Disciplinary Action and Measures Against Misconducts III – 5. Dispute Resolution System between Securities Firms and Customers III – 6. Investor Education Activities

IV. Market Structures

IV – 1. Breakdown of Financial Assets held by Household Account IV – 2. Share of Foreign Investors in the Stock Trading on the Exchange IV – 3. Share of Foreign Investors in the Bond Trading on Exchange/OTC Market IV – 4. Settlement and Clearing Systems for Securities Transaction IV – 5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.) IV – 6. Share of On-line Trading

V. Challenges of Securities and Capital Market

V – 1. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a whole V – 2. Specific Challenges in Equity Market V – 3. Specific Challenges in Bond Market V – 4. Specific Measures introduced / Implemented for the Securities Market V – 5. Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

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I. Basic Organizational Features I – 1. Organization Type, Statutory Basis No. Country Name of Organization Organization Type Statutory Basis 1 Cambodia Securities and Exchange Commission of

Cambodia SECC Government Regulator Established by Law on Issuance and

Trading of Non Government Securities 2 China Securities Association of China SAC SRO & Industry

Association Established by Securities Law of the People’s Republic of China

3 Hong Kong Hong Kong Securities Association HKSA Industry Association Established spontaneously in 1978, as the first securities industry association in Hong Kong

4 India Association of National Exchanges Members of India

ANMI Industry Association Spontaneously established

5 Indonesia Association of Indonesian Securities Companies

APEI Industry Association Spontaneously established

6 Japan Japan Securities Dealers Association JSDA SRO & Industry Association

Established pursuant to Financial Instruments and Exchange Act

7 Kazakhstan Committee for the control and supervision of the financial market and financial organizations of the National Bank of the Republic of Kazakhstan

FSC A part of the National Bank of the Republic of Kazakhstan

Established by Decree of the President of Republic of Kazakhstan № 61 of 18.04.2011. The Regulation on the Committee and its organizational structure has been approved in decree by the Board of Directors of the National Bank of the Republic of Kazakhstan # 88, dated April 28, 2011. On May 3, 2011, the city-of-Almaty’s Department of Justice registered the Committee as a legal entity categorized as a Republican public institution

8 Korea Korea Financial Investment Association KOFIA SRO & Industry Association

Established by Capital Market and Financial Investment Business Act (FSCMA)

9 Laos Lao Securities and Exchange Commission Office

SECO Government Regulator Established by the Government

10 Malaysia Association of Stockbroking Companies Malaysia

ASCM Trade Association Established by The Societies Act in Malaysia

11 Mongolia Mongolian Association of Securities Dealers

MASD Non-Government Organization

Established by Law of Non-Government Organization

12 Philippines Philippine Association of Stockbrokers and Dealers Inc,

PASBDI Industrial Association Established by Republic Act No.8799 –The Securities Regulation Code

13 Russia National Association of Securities Market Participants

NAUFOR SRO Established by Securities Market Act

14 Sri Lanka Securities and Exchange Commission of Sri Lanka

SEC Government Regulator Established by The Securities and Exchange Commission of Sri Lanka ACT No.36 of 1987 as Amended

15 Taiwan Chinese Taiwan Securities Association CTSA SRO & Industry Association

Established by Commercial Group Act and Securities and Exchange Act

16 Thailand The Thai Bond Market Association ThaiBMA SRO & Industry Association

Established by Securities and Exchange Act B.E.2535

17 Turkey The Association of Capital Market Intermediary Institutions of Turkey

TSPAKB SRO & Industry Association

Established according to the Capital Market Law. The Statute of the Association became operational through a Government Decree, dated January 8, 2001

18 UAE (DIFC) Dubai Financial Services Authority DFSA Government Regulator Established by Dubai Law No.9 of 2004 (as amended by Dubai Law No 7 of 2011)

19 Vietnam Vietnam Bond Market Association VBMA Industry Association Established according to Decision No. 830/QD-BNV dated May 22, 2009 issued by Ministry of Home Affair

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I – 2. Number of Staff, Funding Source and Number of Member Firms No. Country Name of

Organization No. of Full Time Staff

Funding Source Number of Member Firms (by Business Category)

1 Cambodia SECC 60 Government Budget (As of November.18, 2009) -There are 15 Securities Firms including the foreign Securities Firms. -There are 6 Securities Firms as the Commercial Bank.

2 China SAC 99 Membership Fee (As of Nov.30,2011) 109 securities companies 85 securities investment consulting institutions 6 credit rating institutions 1 asset management company 39 special members

3 Hong Kong HKSA 4

(26 directors elected from

members who are

voluntary)

Membership Fee, CPT Courses ; Sponsorship

1100 members from 350 firms (Consists of Securities brokers, derivatives brokers, investment advisors, banks, asset management companies and corporate finance companies)

4 India ANMI 15 Membership Fee, Special Contributions by Members

900 broker firms are Members all India comprising of Securities Companies including foreign collaborations

5 Indonesia APEI 5 Membership Fee, SRO Sponsorship, Fee for Training Course

Our members are only Securities Companies, which consist of: 1. Stock Exchange Member: 120 (including foreign securities companies) with the following breakdown:

Securities Houses 30 Underwriter Houses 12 Securities and Underwriting Houses 49 Securities and Fund Management Houses 4 Underwriter and Fund Management Houses 2 Securities, Underwriting and Fund Management Houses 23

2. Non stock Exchange Member: 12

6 Japan JSDA 354 Membership Fee, Fees for Examination and Training Course

(As of Sept.30,2011) 294 Regular Members consisting of securities companies including foreign securities companies 218 Special Members consisting of banks, insurance companies and other financial institutions

7 Kazakhstan FSC 275 Budget of the National Bank of the Republic of Kazakhstan, i.e. Central Bank of Kazakhstan

Number of firms licensed by Committee (As of December 1, 2011) 110 firms consisting of second tier banks (commercial banks), insurance companies, insurance brokers, pension funds and organizations engaged in certain types of banking operations; 147 firms consisting of securities companies such as:

- 74 broker/dealers; - 10 registrars; - 34 investment portfolio managers; - 14 pension assets management organizations; - 10 custodians; - 3 transfer-agents; - 1 stock exchange; - 1 depositary.

8 Korea KOFIA 240 Membership Fee, Examination Fees for financial certifications and revenues from textbook sales

(As of Nov. 15th) - 161 Regular members which include securities firms,

asset management firms and futures firms - 115 Associate members which include banks, insurance

companies etc. - 19 special members which include general administration

companies, collective investment scheme assessment companies, Korea Securities Depository etc.

9 Laos SECO 34 Government’s Budget, Trading Fees in the market

(As of October31,2011) Regular Members consisting of securities companies, which have two domestic securities companies

10 Malaysia ASCM 4 Membership Fee (As at 5 December 2011) - 17 Securities Firms including 3 firms with foreign

ownership. - 14 Investment Banks.

11 Mongolia MASD 6 Membership Fee, (As of Dec.30,2011)

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Fees for Examination and Training Course

There are 49 Members consisting of securities companies which have more 800 professionals to operating on the securities market, licensed by the Financial regulatory commission of Mongolia.

12 Philippines PASBDI 14 Membership Fee, Grants, Special Projects (e.g. conferences)

Trading Participants (TPs) or commonly known as the brokers – 132 (local: 122; foreign: 10 )

13 Russia NAUFOR 57 Membership Fee, Arbitration Fee

292 Members including 226 securities companies and 66 banks (As of Dec.20,2011)

14 Sri Lanka SEC 80 CESS Levy* (*A part of brokerage which SEC is entitled to receive; In case of equity - Transactions up to Rs. 50 mil. – total brokerage 1.12% of which SEC receives (as Cess) - 0.072% Transactions over Rs. 50 mil.- minimum brokerage (floor) - 0.200% of which SEC receives 0.0450%)

29 Licensed Stock Broking Companies (28 for Equity and Debt Trading and 01 Debt Trading only) 25 Registered Investment Managers 10 Registered Underwriters 1 Registered Central Depository System 3 Registered Credit Rating Agencies 8 Licensed Unit Trust Management Companies 7 Licensed Stock Dealers

15 Taiwan CTSA 50 Membership Fee, Fees for Examination and Training course

CTSA has 150 members consisting of securities firms and other financial institutions operating securities businesses in Taiwan.

16 Thailand ThaiBMA 50 Membership Fee, Fees for Examination and Training Course

- 51 Ordinary Members consisting of banks and securities companies which have debt trading license (Dealer)

- 2 Extraordinary Members consisting of securities companies which have inter-dealer broker license (IDB)

17 Turkey TSPAKB 28 Membership Fee & Training

fee (As of December 2011) - 101 brokerage firms, - 1 derivatives brokerage firm - 40banks

18 UAE (DIFC) DFSA 123 Government Budget, Firm Licensing Fee and on-going Supervision Fee

- 2 Authorised Market Institutions (1 securities and derivatives exchange and clearing house NASDAQ Dubai Limited, 1 commodities exchange Dubai Mercantile Exchange Limited)

- 270 Authorised Firms - 51 Ancillary Services Provider (including 15 Registered

Auditors) - 1341 Authorised Individuals - 78 Recognised Members - 7 Recognised Bodies

19 Vietnam VBMA 2 Membership Fee, VBMA has 55 members in which 33 Regular Members and 22 Associate Members, including - 26 Banks, - 7 Finance Companies, - 14 Securities Companies, - 1 Finance Leasing Companies, - 3 Insurance Companies and - 3 Law Firms.

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II. Regulatory Framework of the Securities Markets of Each Country No. Country Name of

Organization Major Laws, Rules or Practice in the Securities Markets of Each Country

1 Cambodia SECC [Law] -Law on Government Securities The purpose of this law is to provide a framework for the efficient issuance and management of government securities to ensure that the Government’s financing needs and payment obligation are met at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk, and to contribute to the development of the securities market in the Kingdom of Cambodia. - Law on Issuance and Trading of Non-Government Securities The objective of this law is to regulate the securities exchange, clearing and settlement facilities, securities depositories and other operators in the securities markets, who trade or provide financial services, as well as public limited companies or permitted entities that issue securities. [Anukret] (Sub-Degree) -Anukret of Implementation of Law on Issuance and Trading of Non-Government Securities. The purpose of the Anukret is to supervise the securities market, clearance and settlement facility operator, securities depository operator, other operator trading in securities market or providing security services, collective investment scheme, corporate governance, and issuing companies.

2 China SAC Laws: Securities Law of the People’s Republic of China Regulation issued by ministries and commissions and normative documents:

1. In terms of securities issuance, The Administrative Measures for the Initial Public Offering and

Listing of Stocks, The Administrative interim Measures for the Initial Public Offering and Listing of Stocks in Growth Enterprise Market，Measures for the Administration of Securities Issuance and Underwriting, Administrative Regulations of Sponsoring Securities Issuance and Listing. The Measures for the Issuance Examination Committee, Guidelines on Due Diligence Work of Sponsors, etc.

2. In terms of listed companies governance, Measures for the Administration of the Equity Incentives of Listed Companies (Trial Implementation), Administration of the Takeover of Listed Companies Procedures, The Administrative Measure of Noticeable Asset Restructuring of Listing Companies, Guidelines for the Articles of Incorporation of the Listed Companies, Rules for Shareholders Meetings of Listed Companies and Administrative Measures on Information Disclosure by Listed Companies, etc.

3. In terms of securities companies supervisory management, The Regulation on Supervision and Administration of Securities Firms, Regulation on Risk Management of Securities Firms, Risk Control Indices Management Measures on Securities Companies, Supervisory Measures on Qualification of Directors, Supervisions and Senior Management Persons of Securities Companies, The Management Measures on Margin Purchase and Short Sale Business of Securities Companies, and Guidelines for Internal Control on Margin Purchase and Short Sale Business of Securities Companies, etc.

4. In terms of securities investment fund management, The Administrative Measure of Fund Management Companies, Administrative Measures on Domestic Securities Investments of Qualified Foreign Institutional Investors (QFII), Governance Norms on Securities Investment Fund Companies(Trial), Notice on Related Problems of Setting Aside Risk Reserve Fund for Fund Management Companies, Guiding Opinions on Management of Investment Administrators of Fund Management Companies, etc.

5. In terms of securities registration and settlement, Administrative Measures on Securities Registration and Settlement, Administrative Measures on Securities Settlement Risk Fund, etc.

6. In terms of futures trading, Regulation on Trading Management of Futures, Management Measures for Futures Brokerage Companies, Management Measures for Futures Exchange, The Management Trial Measures on the Risk-based Supervision Index of Futures Companies, Trial Measures for the Provision of Intermediary Services by Securities Companies to Futures Companies, Trail Measures on Financial Futures Settlement Operation for Futures Companies, etc.

3 Hong Kong HKSA Securities and Futures Ordinance 4 India ANMI - Securities and Contracts (Regulations Act) (1956) (SCRA)

- Securities and Exchange Board of India (SEBI) Regulations - Companies Act, 1956 - Regulations & bye Laws under Stock Exchanges

5 Indonesia APEI - Under Law Number 8 Year 1995 regarding Capital Market (UUPM)-Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK)

- Indonesia Stock Exchange (IDX) Rules - Indonesian Clearing and Guarantee Corporation (KPEI) Rules - Indonesian Central Securities Depository (KSEI) Rules

6 Japan JSDA Financial Instruments and Exchange Act (“FIEA”)

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7 Kazakhstan FSA Law on securities market of the Republic of Kazakhstan - The Law of the Republic of Kazakhstan on "State regulation and supervision of financial market and financial organizations" - The Law of the Republic of Kazakhstan on "Investment Funds" - The Law of the Republic of Kazakhstan on joint-stock companies

8 Korea KOFIA Financial Investment Services and Capital Markets Act. (Hereinafter referred to as the “FSCMA”) 9 Laos SECO The Prime Minister’s decree on Securities and Exchange; Ref. No. 255/PM, 24 May 2010 10 Malaysia ASCM - Capital Markets and Services Act 2007 (“CMSA”)

- Bursa Malaysia Rules 11 Mongolia MASD Securities Market Law of Mongolia 12 Philippines PASBDI The applicable laws and rules are as follows:

a. Securities Regulation Code (SRC) - Republic Act No. 8799 b. Amended Implementing Rules and Regulations (IRR) of the Securities Regulation Code c. Rules of the Exchange:

• Revised Trading Rules and its IRR • Trading, Clearing and Settlement Rules • Revised Listing and Disclosure Rules • Amended Market Regulation Rules • Rules Governing Trading Rights and Trading Participants • PSE Amended Articles of Incorporation • PSE Amended By-Laws

13 Russia NAUFOR Russian securities market regulatory base is formed by several laws (Securities Market Act, Law on the

Protection of Rights and Legal Interests of Investors on Securities Market, Law on Counteracting the Misuse of Insider Information and Manipulation of The Market), that define general rules applicable to securities market and subordinate laws that establish special standards. The activities of some institutions are regulated by special laws: Investment Funds Act, Non-Governmental Pension Funds Act.

14 Sri Lanka SEC - Securities and Exchange Commission of Sri Lanka Act - Rules and Regulations of Colombo Stock Exchange (Listing Rules, Member Regulations, Trading Rules)

15 Taiwan CTSA - Securities and Exchange Act; • Securities and Exchange Act Enforcement Rules; • Regulations Governing Securities Firms

16 Thailand ThaiBMA - Securities and Exchange Act B.E. 2535 (the SEC’s Act)

- Regulation and Notifications of the Securities and Exchange Commission (SEC’s regulation) - Regulation and Notifications of the Thai Bond Market Association (ThaiBMA’s regulation)

17 Turkey TSPAKB - Capital Market Law (CML) - Capital Markets Board’s (CMB) Communiqués - Decree Law on Securities Exchanges - Istanbul Stock Exchange (ISE) and Turkish Derivatives Exchange’s (TurkDEX) rulebooks

18 UAE (DIFC) DFSA Primary Legislation: Federal Laws, Dubai Law, DIFC Law - Federal Law No 8 of 2004: Regarding The Financial Free Zones in the United Arab Emirates (the

Financial Free Zone Law) - Federal Decree No 35 of 2004 specifically established the DIFC as a Financial Free Zone in the Emirate

of Dubai - Dubai Law No 9 of 2004, '‘The Law Establishing the Dubai International Financial Centre’ is a Dubai

Law that recognises the financial and administrative independence of the DIFC. It establishes the various bodies, including the DFSA, that are necessary for the DIFC’s day-to-day operation.

- Dubai International Financial Centre (DIFC) laws administered by the DFSA governing Financial Services which are the Regulatory Law 2004, Markets Law 2004, Law Regulating Islamic Financial Business 2004, Trust Law 2005, Collective Investment Law 2006, Investment Trust law 2006.

- DIFC laws administered by the DIFC Authority such as the Companies Law, Insolvency Law, Companies Law, Contract Law, Arbitration Law, Insolvency Law, Data Protection Law

- DIFC laws are enacted by the Ruler of Dubai and apply only in the DIFC.

Secondary Legislation The DFSA Rules are subsidiary legislation made under the laws administered by the DFSA. The Rulebook is made up of topic-area modules which specify their scope and the audience to whom they apply, and there are a total of 18 modules. All DFSA rules are available on the DFSA website www.dfsa.ae

19 Vietnam VBMA - Securities Law issued on 29/06/2006 - Credit Institutions Law issued on 26/06/2010 - Decree No.01/2011/ND-CP dated 05/01/2011 on government bond issuance - Decree No. 90/2011/ND-CP dated 14/10/2011 on corporate bond issuance

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III. Regulation & Self Regulation III – 1. Major Rule Making Functions of Each Organization No. Country Name of

Organization Major Rule Making Functions

1 Cambodia SECC -Law on Trading and Issuance of Non-Government Securities. According to the Article 7 of the Law, the responsibility of Securities and Exchange Commission of Cambodia includes the following :

1. To regulate and supervise securities market in the Kingdom of Cambodia. 2. To enforce policy with respect to securities markets. 3. To formulate conditions for granting approval to the operators of a securities market, clearance

and settlement facility, and securities depository 4. To formulate conditions for granting license to securities companies and securities company

representatives 5. To promote and encourage compliance with requirements of this law. 6. To act as an appeal body in respect of decisions made by approved entities affect members,

participants or investors, 7. To consult with any qualified person for the purpose of formulating policies for the development fo

a securities market in the Kingdom of Cambodia. 8. To fulfill other duties prescribed by sub-decree.

2 China SAC According to the provision of Securities Law of the people’s Republic of China, the responsibilities of the

Securities Association of China (SAC) include formulating rules and regulations that SAC members must abide by, supervising and examining members’ action and the members who break the law, regulation or SAC rules will be subject to discipline action. SAC Regulation stipulates that SAC formulates self-regulatory rules, qualification standards for practitioners and business criteria and provides services and management to SAC members according to administrative regulation and CSRC regulatory documents, etc. Furthermore, the Regulation illustrates that SAC could promote Members’ establishment of information technology and information security, organize to develop industry technical standards and guidelines coordinating with industry development.

3 Hong Kong HKSA The Hong Kong Securities Association functions as a bridge between market practitioners, regulatory authorities, exchange and public investors. HKSA liaise with government and regulatory authorities through regular meetings and responses to consultation papers. Directors of the HKSA sits in various committees and panels of the Securities and Futures Commission and finance related Government body

4 India ANMI ANMI has rules governing the conduct of members as a trade organization. ANMI offers guidance on regulations issued by regulatory bodies as above. Its rule making functions do not cover the rules and regulations governing the capital market.

5 Indonesia APEI APEI is not a Self-Regulatory Organization (SRO). APEI functions are a bridge between our members and regulatory authorities. The industry regulated by Bapepam-LK and SRO (IDX, KSEI, KPEI)

6 Japan JSDA JSDA makes and enforces a wide range of self-regulatory rules covering the securities business in Japan that control the conduct of its member firms.

7 Kazakhstan FSC The major goals of the Committee are: • maintenance of financial stability of financial market and financial organisations and

support of the confidence in the financial system as a whole; • maintenance of the appropriate level of protection of interests of consumers of financial

services; • formation of equal conditions for the activities of financial organisations, aimed at

supporting fair competition in financial market The main functions of the Committee are:

• Issue and recall permissions to open (establish) financial organizations, and for their voluntary re-arrangement and liquidation, give consent for the opening of branches of financial organizations, as well as set the order of issuance of such permissions and consents;

• Give or deny consent to elect/appoint people to executive positions in financial organizations, as well as set the order of issuance or denial of such consent;

• Set the order of issuance, suspension and deprivation of licenses to perform professional activity in the financial market, in cases stipulated by the licensing laws of the Republic of Kazakhstan; issue, suspend, and deprive of such licenses;

• control compliance of financial organizations with the legislation f of the Republic of Kazakhstan on accounting records and financial records and standards of accounting records, except for cases stipulated by the legislative acts of the Republic of Kazakhstan;

• check the activity of financial organizations and their affiliated persons in cases and within the limits stipulated by the legislative acts of the Republic of Kazakhstan, including involvement of auditing organization;

• establish application order and apply to financial organizations restricted measures of action and sanctions as provided for by the legislative acts of the Republic of Kazakhstan;

• by agreement of the Government of the Republic of Kazakhstan, take decision on forced buy-out of shares of financial organizations, in cases stipulated by the legislative acts of the Republic of Kazakhstan;

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• control the activity of liquidation commissions of financial organizations, in cases stipulated by the legislative acts of the Republic of Kazakhstan

• publish in mass-media information about financial organizations (except for the information constituting service secret, commercial secret, bank secret or any other legally protected secret), including data about measures applied to them

8 Korea KOFIA FSCMA legally guarantees KOFIA’s regulatory power and allows for the making and revision of the

association’s regulations, as well as regulatory enforcement authority over its member companies. So KOFIA has introduced and implemented self-regulatory measures to create a culture of investor protection and fair business practice in capital market.

9 Laos SECO Make and enforce a wide range of self-regulatory rules covering the securities business in Lao PDR that control the conduct of securities firms and Lao Securities Exchange.

10 Malaysia ASCM ASCM is not a self-regulatory organisation. The industry is regulated by the Securities Commission and Bursa Malaysia which acts as both an exchange and frontline regulator of the Malaysian capital market.

11 Mongolia MASD - Protection of rights and interests of its members and their customers under the Securities market law and relevant regulations of Mongolia;

- Provide professional consultancy with relevant law and regulations to the professional participants; - Submit its proposal to develop and implement the securities legislation and policies to the authorized

organizations; - Make professional ethical code and its members should be following it publicly. - Organize training and seminars into its members’ professionals and the public, and make journal and

news; - Share information, study experience, and develop co-operation with the same organizations or

associations; - Organize professional training to get a license in direction with the Financial regulatory commission.

12 Philippines PASBDI 1. Mandated by the Securities and Exchange Commission (SEC) to give clearance for the yearly renewal of Trading Participants (TPs) license

2. Formulation and/or revision of rules and regulations by the Securities Exchange Commission (SEC), Philippine Stock Exchange (PSE) relating to Trading Participants (TPs), Listed companies (Issuers)

13 Russia NAUFOR NAUFOR sets a wide range of self-regulatory rules covering the securities business in Russia: standards of professional ethics on the securities market, rules protecting investors and clients of the professional participants of the securities market, standards of operations with securities.

14 Sri Lanka SEC The SEC is the statutory body entrusted with the task of regulating the Securities Market in Sri Lanka. The SEC was established in pursuance of the Securities and Exchange Commission of Sri Lanka Act. No. 36 of 1987 as amended by Act No. 26 of 1991, Act No. 18 of 2003 and Act. No.47 of 2009. For the purpose of carrying out its objects the SEC grants licences to the Stock Exchange, Stock Brokers, Stock Dealers and Managing Companies of Unit Trusts as well as register all Market Intermediaries i.e. investment managers, margin providers, underwriters, credit rating agencies and clearing houses. As the sole regulator of the Capital Market in Sri Lanka the SEC formulate and enforce rules and regulations to maintain a securities market that is fair, efficient, orderly and transparent.

15 Taiwan CTSA CTSA establishes and enforces self-regulatory rules for the engagement by the members in the underwriting, proprietary trading, and brokerage trading of securities, and any other business approved for operation in Taiwan.

16 Thailand ThaiBMA ThaiBMA serves as the SRO and information center for the Thai bond market. We issue rules and regulations governing the conduct of dealer-members, bond traders, and monitors day-to-day bond trading activities. All bond transactions are required to report to ThaiBMA within 30 minutes after execution.

17 Turkey TSPAKB - Establish professional rules and regulations, - Set safety measures aimed at preventing unfair competition, - Assist in the resolution of disputes arising from off-exchange transactions among its members or

between its members and investors, - Determine the principles on commissions and fees charged by its members and propose these to the

Capital Market Board, - Evaluate complaints against its members and inform the Board on the results, - Impose disciplinary action against the law and the Statute.

18 UAE (DIFC) DFSA The Rules made by the DFSA under the administered laws comprehensively cover the full range of financial and related activities undertaken in or from the DIFC. The regulatory mandate covers asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange.

19 Vietnam VBMA VBMA performs the following function as an association of debt market professional in Vietnam - A high-standard debt market professionals community in Vietnam - A market modernization champion and driver - A collective market information source - A policy dialogue interlocutor for policymakers and regulators - A training center for the market players VBMA has introduced to the market a written code of conduct applicable to VBMA members and their employees with regard to debt market transactions. The written mark convention applicable to debt market transactions among VBMA members and with

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their transaction counterparts was also produced and will be introduced to the market soon. A model back-office manual for debt market transactions that was designed to be used for reference by VBMA members when they attempt to standardize and improve their back-office operations for debt market transactions. VBMA has selected 04 members for pilot implementation this Back Office Manual at their organizations.

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III – 2. Qualification System for Market Professionals No. Country Name of

Organization Qualification Systems for Market Professionals

1 Cambodia SECC Under the Prakas (=Regulation) on Granting License to Securities Firms, the Chef Executive Officer (CEO) and Board Director or Partner, Head of Securities Representative, Head of Operation, Compliance Officer and Other Senior Officers of securities firms need to pass the examination for being engaged in the securities business in Cambodia. The outline of the examination that is conducted by SECC is as follows; - The above mentioned person shall buy the registration form at SECC and submit it to SECC. - SECC will provide the training courses for them. - The training is conducted for around 10 days. - The examination is paper based and with multiple choice questions - Knowledge of Laws and Regulations (Such as SECC’s regulation, CSX’s rules, Commercial Enterprise

Law, Investment Law, etc.) - Number of Questions: 70 Questions - Time (min): 180 - Passing Mark: 42/70

2 China SAC -Formulated by CSRC, The Measures for Securities Practitioners Qualification Management stipulates that professional persons undertaking securities business in securities companies, fund management companies, fund custodian and sales institutions, securities investment consulting institution and securities credit rating institutions must obtain practice qualifications and practitioners’ certificates. Furthermore, SAC is responsible for organizing practitioners’ qualification examination, issuing practitioners’ certificates, and launching registration, etc.

-Formulated by SAC, Implement Detailed Rules for Securities Practitioners Qualification Management (Trial) stipulates that SAC checks up practitioners’ certificates every two years, examines and investigates practitioners, and the rule violation practitioners will be subject to take disciplinary punishment and will be logged in the integrity web system making for securities practitioners.

-Formulated by SAC, ‘Code of Conduct for Securities Practitioners’ specifies the demand for Securities Practitioners. Securities Practitioners in there practice should maintain legitimate rights of customers and other related parties, be honesty, diligent; provide professional services to customers in accordance with business norms and practice standards; provide education for customers on securities investment, reveal the investment risk to clients; take part in the subsequent vocational training provided by SAC.

3 Hong Kong HKSA Individuals will either be register as “Representative” or “Responsible Officer”. Each firm must have at least 2 Responsible Officers for each regulated activities that it engages in. Market professionals must apply license from Securities and Futures Commission before conducting regulated activities. License will be granted to individuals meeting certain qualifications including passing of different licensing exams and attaining minimum academic level. SFC currently oversees ten “Regulated Activities” and they are as follows: - Type 1: dealing in securities - Type 2: dealing in futures contracts - Type 3: leveraged foreign exchange trading - Type 4: advising on securities - Type 5: advising on futures contracts - Type 6: advising on corporate finance - Type 7: providing automated trading services - Type 8: securities margin financing - Type 9: asset management - Type 10: providing credit rating services

4 India ANMI Under the SEBI and Exchange regulations, India have adopted a registration systems where at least two Designated Director of the Securities Companies, should have a minimum of 2 years experience in an activity related to dealing in securities. E.g. as a portfolio manager, or as investment consultant, or as a merchant banker, or in financial services or treasury, broker, sub broker, authorized agent or as a authorized representative or remisier or apprentice’ to a member of a recognized stock exchange, dealer, jobber, market maker, or in any other manner in dealing in securities or clearing and settlement thereof. The exchange requires member’s firms’ officers and dealers to pass suitable examinations certifying their capability to function in the capacity in which they are employed. They require obtaining the National Certificate for Financial Markets (NCFM). This is a prerequisite to employment in any securities company to ensure that they have adequate skills and knowledge. The NCFM certificate is available in all operational subjects. The National Stock Exchange, Bombay Stock Exchange as well as MCX Stock Exchange conduct their own examinations for the Equities Market, Futures & Options Market and the Currency Market. The concept of examination started in 1994 when NSE was launched. It wasn't made compulsory then, but has become compulsory now. Here is the link to NSE's site introducing you to NCFM: http://www.nseindia.com/content/ncfm/ncfm_introduction.htm In addition, NSE also offers a host of other examinations (including for those who want to become Insurance Agents). Here is the link giving a list of their modules: http://www.nseindia.com/content/ncfm/ncfm_modules.htm A few years ago SEBI formed an Institute called NISM, with the objective of making it, over time, the sole body conducting examinations for the Capital Markets. Here is the link to the NISM website: http://www.nism.ac.in/ The only outsourcing done by them is for conducting of the examinations, where they get professional

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entities (largely IT training institutes, since they have the required set-up) to conduct the examinations for them. The test material and all other back end work is handled by the respective entities.

5 Indonesia APEI Under the Capital Market and Financial Institutions Supervisory Agency Rules, we differentiate Securities Company and Individual licenses. There are three different licenses in a Security House may hold, they are: Broker-Dealer, Underwriter and Investment Manager Representative licenses. As of individuals, there are four types of licenses a professional may hold, they are: a , Broker Dealer License, Underwriter License. Fund Manager License and . Representative of Mutual Fund Sales Agent License. Each of these individual licenses can be obtained by taking and passing the intended test provided by the Capital Market Professional Standard Committee (PSP), except the test for the Representative of Mutual Fund Sales Agent License which is provided.by the Indonesian Mutual Funds Management Association (APRDI).

6 Japan JSDA Under the FIEA, Japan has adopted a registration system for sales representatives, and unqualified people are excluded from the sales activities of securities companies, etc. For this reason, JSDA requires member firms’ officers and employees to obtain qualification as a Sales Representative, which is a prerequisite for being engaged in the securities business in Japan. This rule ensures that market professionals have adequate skills and knowledge. JSDA has been offering computerized examinations since April 2002, which enable candidates to take examinations on any business day. The qualification examination for regular members is also conducted in English. In addition, JSDA introduced a Sales Manager and Internal Administration system in April 1992 whereby member firms must appoint a “Sales Manager” and an “Internal Administrator” for each sales unit. To become a “Sales Manager” or an “Internal Administrator”, candidates must pass the Internal Administrator examination.

7 Kazakhstan FSC In order to obtain a licence an applicant must comply with the following qualification requirements: - availability of a business plan, which describes the purpose of organization of the applicant, guidelines

of activities and the market segment in which the applicant plan to operate, types of services, marketing plan, risks related to professional activities of the applicant and methods to reduce such, financial perspectives (estimated balance-sheet, income statement for the first three financial (operating) years), a staffing plan;

- availability of programmes, computers and other equipment required for activities in the securities market in accordance with the regulatory legal acts of the authorised body;

- compliance of the organisational structure with the requirements established by Law on the security market of the Republic of Kazakhstan and regulatory legal acts of the authorised body; presence of regulations concerning the internal audit of the applicant.

[Until 2006, there used to be a requirement for individuals which were employees of brokers-dealers’ companies. They needed to pass qualification examinations. Instead of these requirements were approved requirements for the top management of the security firms such as:

- a university degree, - relevant work experience in financial market, - had a precedent of managing a member-firm that was recalled its license or liquidated - Others]

8 Korea KOFIA Under FSCMA, KOFIA is responsible for the management and supervision of financial investment professionals including certified investment advisors, financial planners, financial risk managers and certified research analysts. This rule ensures that qualified person has professional expertise for skills and knowledge. And prevent incomplete sales and conflict between sales company and individual investor.

9 Lao SECO Under the prime minister’s decree on Securities and Exchange, the SEC has adopted a decree on supervise sale representative in the securities business. SEC requires the securities firms’ officers and employee to obtain qualification as a sale representative which is prerequisite for being engaged in the securities market in Lao PDR and moreover, this rule ensure that market professional have adequate kills and knowledge.

10 Malaysia ASCM In Malaysia, the CMSA requires market professionals to hold Capital Markets Services Representative’s License (“CMSRL”) in order to deal in securities and futures trading. In attaining their licenses, the market professionals are required to pass licensing examinations set by the Securities Commission which acts as the regulator and enforcer of the CMSA.

11 Mongolia FRC 19.1. Professional participants in the securities markets are Stock Exchange, Trading center of securities dealers, Securities settlement and depository organizations, Mutual and Investment funds, Brokers, Dealers, Underwriters, Investment management and Investment Advisors.

20.1. The Commission (as Financial Regulatory commission or “FRC”) shall grant special licenses to professional participant in the securities markets specified in provision 19.1 of this law.

20.2. The Commission can grant special licenses to The Stock Exchange. Clearing and Settlement and Central Depository Systems and to the Securities dealers centers separately to each or it can grant a license for combined activities.

20.3. The Commission shall grant a special license to commercial banks in consultation with the Bank of Mongolia and grant a special license to insurance agencies and pension funds in consultation with central government agency in charge of financial and social affairs.

20.4. In order for applying lo get a special licenses specified in the provision 20.1 of this law an applicant shall attach the following documents to its application other than those provided by the Law on special licenses:

20.4 1. Verification of meeting the minimum capital requirements; 20.4.2. Certified copy of the Company Charter; 20.4.3. Business plan that contains an estimation of planned profits for first three years;

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20.4.4. Detailed introduction on consistent activities of securities clearing depository organizations with the networks of the Stock exchange or with the networks of center for trading of securities dealers;

20.4.5. Reference which verifies that the applicant is financially solvent and with non-past due loans; 20.4.6. Risk management plan; 20.4.7. Reference notes on professional and experienced personal employed; 20.4.8. Notes that certifies the place of business, equipment necessary for participating in securities trading.

12 Philippines PASBDI - Compliance Officer (“CO”) / Associated Person (“AP”) – the Philippine SEC administers a certification seminar and exam (Association Person Certification Exam) for those want to be compliance officers/associated persons. Only licensed Cos/Aps are allowed to occupy a compliance function in a brokerage house. Further, each TP/broker is required by SEC to have at least one CO/AP, failure to comply would result to cancellation of broker-dealer license. The PSE assists TPs in their compliance function by conducting seminars to keep them abreast with new rules and regulations.

- Salesman/ Trader - The SEC administers the licensing of salesman – a candidate must pass the Securities Certification Exam (SRCE) and the PAM Certification Seminar, conducted by the PSE, for the salesman to trade in the PSE.

13 Russia NAUFOR The Financial Market Specialists Regulations defines the group of persons that shall have the financial market specialist qualification certificate. Apart from the CEO and Internal Control Officer of the company, the group of above specified persons includes the employees that are involved in the examination of the documents related to securities transactions or transfer of the securities title, the employees involved in the process of signing of the documents for the clients, and some other employees. NAUFOR performs certification of financial market specialists according to the Accreditation of the Federal Financial Markets Service since October 2006.

14 Sri Lanka SEC Capital Market Education and Training Division (CMET) of SEC has a qualification framework for financial sector professionals and SEC has made this qualification compulsory to work as an Investment Advisor in the stock broking industry. Courses conducted by CMET

• Certificate in Capital Market • Diploma in Capital Market • Continues Professional Development Program

“Fit and Proper” personnel and specific Academic Qualification and Experience will be required for other Market Intermediaries

15 Taiwan CTSA According to “Regulations Governing Responsible Persons and Associated Persons of Securities Firms”, only person who obtains qualification as a sales agent can engage in securities business in Taiwan. A qualified sales agent of a securities firm should have passed the securities firm agent exam held by the Securities and Futures Institution (SFI) at the request of the CTSA. SFI is a center to provide various testing and qualification recognition. Qualification Examinations for securities professionals can be divided into written exams and computer-based qualification exams. Written exams are quarterly offered; computer-based qualification exams have been offering since 1999, which enable candidates to take examinations on any business day. Besides that, examinees holding a foreign securities specialist license need only pass the Securities Regulation and Market Operations Exam to obtain a domestic license. Examinees may select to take the exam in English or Chinese. An associated person of a securities firm who is assuming the job for the first time, or who has resumed the job after an absence of three years shall participate in pre-service training within six months after reporting for work. Currently employed personnel shall participate in in-service training once every three years.

16 Thailand ThaiBMA Under the SEC’s regulation, bond traders are required to register with ThaiBMA. In order to register, traders have to satisfy the set criteria and pass the registered trader examination administered by ThaiBMA. ThaiBMA will be responsible for ensuring that trading practice of registered traders follows the established Ethics and Code and Conduct for the bond market.

17 Turkey TSPAKB - Licensing requirements were introduced by the Capital Markets Board (CMB), the main regulatory authority in the capital markets, in August 2001. The licensing system aims to assess the professional qualifications and the knowledge of persons working at capital market related jobs. The first licensing examinations were held in September 2002.

- Since 2011, exams are organized by the recently established Capital Market Licensing and Training Agency with the cooperation of TSPAKB.

- Licenses are issued by the TSPAKB upon application of successful candidates at the exams. Detailed records of the licensed professionals are kept at the Association’s registry, and information on registered professionals is partially available to the public.

- The CMB introduced several types of licenses for market professionals. The first seven of the below-listed licenses are required for employment at intermediaries (banks and brokerage firms) and others for employment at other institutions such as rating agencies.

1. Basic Level: Required for branch managers, representative office managers. 2. Basic Level Customer Representative: Required for client advisors. 3. Advanced Level: Required for managers, research and corporate finance analysts. 4. Settlement & Operations: Required for back office employees. 5. Derivatives: Required for derivatives traders, managers and back office employees.

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6. Derivatives Customer Representative: Required for derivatives client advisors. 7. Derivatives Accounting & Operation: Required for back office employees. 8. Real Estate Appraisal: Required for mortgage and real estate appraisers. 9. Residential Real Estate Appraisal: Required for mortgage and real estate appraisers. 10. Credit Rating: Required for employees of credit rating agencies. 11. Corporate Governance Rating: Required for employees at corporate governance rating

agencies and employees at investor relations departments of listed companies. 12. Independent Auditing: Required for independent auditors of listed companies and

intermediaries.

18 UAE (DIFC) DFSA In order to conduct financial services in or from the Dubai International Financial Centre, individuals or entities need to seek authorisation from the DFSA. Authorisation is given in the form of a license which is issued by the DFSA, which specifies the type of financial services that can be conducted. The financial services activities which require regulation if they are carried out by way of business are as follows:

- Accepting deposits - Providing credit - Providing money services - Dealing in Investments as principle - Dealing in Investments as agent - Arranging Credit or Deals in Investments - Managing Assets - Advising on Financial Products or Credit - Managing a Collective Investment Fund - Providing Custody - Arranging Custody - Effecting Contracts of Insurance - Carrying Out Contracts of Insurance - Operating an Exchange - Operating a Clearing House - Insurance Intermediation - Insurance Management - Managing a Profit Sharing Investment Account - Operating an Alternative Trading System - Providing Trust Services - Providing Fund Administration - Acting as a Trustee of a Fund - Operating a Representative Office

Before the DFSA can authorise a firm as an Authorised Firm, the DFSA needs to be satisfied that the firm meets its Fit and Proper test, and is likely to do so on an ongoing basis. Generally, Fit and Proper means the ability to carry out a financial service competently, with honesty and integrity. The areas the DFSA assesses include:

- Legal status: A firm must be a body corporate or partnership. It can be formed in the DIFC, or a firm can establish a branch of a legal entity based in another jurisdiction. In the latter instance, the DFSA would expect the outside jurisdiction to have internationally compliant regulatory and legal standards.

- Location of offices: A firm must carry on its activities from a place of business in the DIFC. - Ownership and group structure: The DFSA seeks to establish that it will be able to effectively

supervise the firm. Therefore an applicant needs to make the DFSA aware of any Close Links (eg parent, subsidiary, sister company) which could hinder effective ongoing supervision.

- Adequate resources: A firm must have adequate resources to carry out the proposed financial services including financial resources and adequate systems and controls. A firm must have an internal audit function.

- Senior management: A firm must appoint a Senior Executive Officer, a Compliance Officer, an Anti-Money Laundering Reporting Officer and a Finance Officer. These individuals need to be Authorised. The first three positions require the individuals responsible to be resident in the UAE. As part of the licensing process, we will evaluate the competence and integrity of the proposed senior management team.

19 Vietnam VBMA According to Decision No. 15/2008/QĐ-BTC dated 27-3-2008 by the Ministry of Finance, there are 2 types

of certificates relating to securities business that market professionals must have, namely: Securities Business Practising Certificate and Securities Professional Certificate.

- Securities Business Practising Certificate gurantees that the holder is eligible to hold professional positions at securities firms, fund management companies, securities investment companies operating in Vietnam.

- Securities Professional Certificate guarantees that the holder meets necessary qualifications in securities and stock market.

A market professional must hold Securities Professional Certificate before attending the exam for the Securities Business Practising Certificate. There are 3 types of Securities Business Practising Certificates,

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including:

- Securities Brokerage Certificate - Financial Analysis Certificate - Fund Management Certificate

1. To attend the exam for Securities Brokerage Certificate, the Securities Professional Certificate must comprise of qualifications on Basics on securities and stock market; Laws on securities and stock market; Securities Analysis and Investment; Securities Brokerage and Investment Advisory.

2. To attend the exam for Financial Analysis Certificate, the Securities Professional Certificate must comprise of qualifications applied to brokers, together with qualifications on Financial Advisory and Issue Underwriting, and Analysis of Corporate Financial Statement.

3. To attend the exam for Fund Management Certificate, the Securities Professional Certificate must comprise of qualifications needed for the Financial Analysis Certificate and qualification on Fund and Asset Management.

Exams are held by the Securities Research and Training Center under the SSC. VBMA also provide the training course on the Fixed Income Trading Techniques for dealer in the market. We expect that in the time to come, all dealer must attend this training course.

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III – 3. Securities Firms Inspection or Audit No. Country Name of

Organization Securities Firms Inspection or Audit

1 Cambodia SECC In accordance with Law on Issuance and Trading of Non-Government Securities, SECC supervises and inspects the laws and regulations, the condition of the business and assets of member firms, their books and records and other items. In principal, Inspection is conducted by visiting the head office, branch, sales officer, or other facility of the securities firms and inspecting the accounting records etc. (i.e. onsite inspection)

2 China SAC "SAC Member Management Measures" stipulates that Association members should submit business and financial information in accordance with the demands of SAC on regular or irregular period, meanwhile, accept evaluation organized by SAC coordinating with self-regulatory management. Related provisions exist in the self-regulatory rules for businesses of securities companies, SAC supervises the practices of securities companies, including self-run, margin purchase and short sale, asset management, risk control, anti-money laundering and investor education, etc.

3 Hong Kong HKSA Securities firms must ensure that the Financial Resources Rule set out by the SFC are met on a daily basis. Report under the Financial Resources Rule which contains financial data of the securities firm will be submitted to the SFC on a monthly basis. Site visits to securities firms will be conducted by the Intermediaries Supervision team from the SFC at regular intervals for inspection and audit.

4 India ANMI SEBI and the Exchanges inspect members’ books for adherences to compliance requirements as stipulated by them from time to time. Generally, all inspections are on-site inspections. The authority conducting the inspection may call for additional records.

5 Indonesia APEI The Capital Market and Financial Intitutions Supervisory Agency (Bapepam-LK) and the Indonesia Stock Exchange (IDX) perform regular and non-regular audits annually on all companies in the industry. An audit or even an investigation may be completed by visiting the head office or branch office of the members of stock exchange when needed..

6 Japan JSDA JSDA inspects the observance by member firms, etc. of laws and regulations, the condition of the business and assets of member firms, their books and records and other items. Currently, JSDA conducts four types of inspection, namely General Inspection, Special Inspection, Follow-up Inspection and Moving/ Continuous Inspection. In principle, inspection is conducted by visiting the head office, branch office, sales office, or other facility of the member firm and inspecting its accounting records etc. (i.e., onsite inspection). In some cases, instead of onsite inspection, off-site or document-based inspection may be conducted using accounting records etc. submitted by the member firm subject to the inspection without visiting the said firm.

7 Kazakhstan FSC The Committee shall have the right to carry out inspections of activities of issuers, licensees. The following shall be recognised as reasons for the performance of an inspection: - complaints of investors; - complaints of securities holders; - complaints of professional participants of the securities market and self-regulatory organisations; - a court ruling, resolution of the procurator or an inquest and preliminary investigation authority for the performance of an inspection or for the participation of workers of the authorised body in an inspection; - discrepancy of information contained in documents or details, discovered by the Committee in the course of considering documents submitted by an issuer for the state registration of an emission securities issue, consideration and approval of a report on results of allocation and (or) redemption of emission securities; - discrepancy established by the Committee in the course of considering reports on activities of licensees; - information on commission of a transaction in emission securities or other financial instruments with

the use of information which constitutes commercial and service secrets in securities markets; - other facts of violation of the Republic of Kazakhstan legislation by securities market entities, that

became known to the Committee. The on-site inspection is carried on a regular basis in accordance with the plan. Large companies are inspected once a year, while small companies are inspected once in a three years. There are special divisions which provide off-site regulation without visiting companies. There do exist ad hoc on-site inspections if necessary. But when Committee sees that some company has problems, such a company can be inspected in any time without the plan.

8 Korea KOFIA KOFIA may investigate whether a financial investment company and its employees comply with the Regulations and the appropriateness of internal control. To achieve this, KOFIA has a Member inspection team in the Self-regulatory planning department.

9 Lao SECO The SEC has a rule to manage and supervise operations of the issuing companies, securities companies and the securities market in stable, transparent, fair and efficient manner. So the SEC is building the inspection regulation it almost finish and wait for approve in using.

10 Malaysia ASCM As a frontline regulator, Bursa Malaysia closely supervises the business conduct of brokers and CMSRL holders. Supervision is carried out in the following manner: Inspection - conduct scheduled and/or ad-hoc inspection visits to the office premises of brokers with the focus to assess the degree of compliance, level of market conduct and adequacy of clients’ assets protection. Compliance Monitoring – ensure timely reporting by brokers, conduct analytical review on the periodic submissions and raise alert when the needs arise. Financial Monitoring - monitor the brokers’ financial condition and ensure the compliance with minimum financial requirements from various aspects. Registration – ensure all licensed brokers, the key staff and licensed personnel are duly registered with

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Bursa Malaysia for monitoring purpose. Others - Evaluate and process applications received from brokers that require prior consent of Bursa Malaysia before implementation, which among others, include applications for new business activity and establishment of new office premises

11 Mongolia MASD 19.2. Professional participants in the securities markets have the following responsibilities 19.2.1. Submit the information and reports related to securities transactions elaborated in compliance with the

relevant methodology and forms; 19.2.2. Determine and follow the fees for registration securities transaction, settlement and depository, membership

and seats and fees for other related services; 19.2.3. Issue and allow the regulations and instructions for their own activities by the permission of the Commission

in conformity with laws. 19.2.4. Inform to the Commission and the public in case if its members, an issuer of the securities and other

participants in the securities related the law; 19.2.5. To submit its audited semi-annual and annual financial statements elaborated on time specified by the

Accounting law to the Securities Commission and to the professional participants in the securities markets publish its balance sheets and inform the investors about it;

19.2.6. To have and update the list of insiders and monitor the performance of their duties. 19.2.7. To provide increased persons by fair information on timely basis; 19.2 8. To make transactions related to securities trading and options on fair, transparent and timely manner; 19.2.9. To submit the proposals for improving the activities in the securities markets to the Securities Commission; 19.2 10. To protect the common interests on an issuer and an investors; 19.2 11 to have the Risk funds. The sources of risk funds shall come from shareholders capital and from the

company profits. The association should request its members to implement and follow the above general duties and relevant other responsibilities, established by other regulations and provide training into them. The association has not right to inspect them and only FRC inspects their activities.

12 Philippines PASBDI The Trading Participants Regulation Department (TPRD) of the PSE shall conduct regulatory examination to determine and verify compliance by Trading Participants (“TPs”) with relevant Exchange rules and Securities Laws. TPRD shall emphasize, but shall not be limited to the examination of the TP’s compliance with the following rules: 1. Books and Records Rule; 2. RBCA and other financial ratios necessary to determine adequate capital for operation; 3. Customer Protection Rule; and 4. Relevant provisions of the Securities Laws on the business conduct and sales practices of TPs.. In addition, TPRD shall perform a monthly spot audit on Trading Participants which shall be prompted by the following parameters: 1. Net Liquid Capital (NLC) with 10% variance from previous month to current month 2. NLC below the required minimum limit (at least P5,000,000 or 5% of the Aggregate Indebtedness whichever is higher) 3. RBCA ratio is below 120% 4. Deficiency on Reserve Requirement The parameters may be revised if necessary. TPRD shall also conduct examination of TPs’ registered branch or agency

13 Russia NAUFOR One of the NAUFOR functions as an SRO is a control over member firms' activities to insure observance of the securities legislation and standards of operations with securities. There are 3 form of the inspection:

1. Onsite inspection is conducted by visiting the office of the member firm and examination its activities and documents,

2. Off-site (document-based) inspection is conducted by using documents submitted by the member firm without visiting the firm’s office,

Special inspection – is conducted in case of complaint by using documents submitted by the complainant and the member firm.

14 Sri Lanka SEC Supervision division conducts both risk based on-site and off-site inspection of all the regulated entities. Off-site inspection is conducted by reviewing the monthly financial statements which are submitted by the regulated entities monthly or quarterly. Off-site inspections are conducted based on the risk identified during on-site inspections and also when a special need arises.

15 Taiwan CTSA CTSA may perform general inspection and/or special inspection on members’ financial conditions and operational situations. The inspections are mainly conducted on securities firms who 1)accept orders to trade foreign securities, 2) underwrite or re-sell securities and 3) conduct wealth management business. Inspections can be conducted by physical inspection or document-based inspection. When conducting general inspection, in cases where the CTSA discovers that a member is being badly run, has suffered losses to the extent that it becomes difficult to maintain its creditworthiness, or has experienced any serious incident, or has the likelihood that the trading order and investment security are severely affected, the CTSA shall promptly initiate a special examination and provide advice, such procedures shall be drafted by the CTSA and reported to the FSC for recordation.

16 Thailand ThaiBMA ThaiBMA acts as a front line regulator to detect unfair trading practices by using Market Surveillance System which facilitated the task of detecting and evaluating suspicious patterns and potential fraudulent practices such as price or volume manipulation, series trading, excessive markup, and etc. ThaiBMA also conducted 2 types of inspections, namely Regular inspection and Special inspection with 2

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approaches (1) onsite inspection by visiting member firms’ office and facilities related to their bond trading i.e. trading account, electronic data, and etc. (2) off-site inspection by using document-based without visiting member firms.

17 Turkey TSPAKB TSPAKB has the right and the duty to • Establish professional rules and regulations to provide that activities performed by the Association

members are fair and honest, to provide business ethics, to facilitate the solidarity among the Association members, to safeguard the prudent and disciplined conduct of business by its members

• Take necessary measures to prevent unfair competition and inform the CMB. • Give disciplinary penalties specified in the Statute. • Notify the CMB regarding its proposal on principles regarding commissions and fees charged by

members, • Evaluate complaints against its members and inform CMB on the results. • Establish, enforce and supervise regulations on subjects assigned by the legislation or specified by

CMB. Therefore, TSPAKB can enforce its member firms in compliance with the above regulations. The enforcement can be done according to the case, so it would be on-site visit or distant view by collecting the document to the TSPAKB.

18 UAE (DIFC) DFSA The Supervision Division’s primary responsibility is to assess, monitor and mitigate risk in Authorised Firm’s (AF), Ancillary Service Provider’s (ASP) (law/accounting firms), and auditors. Stringent review of proposed new entrants occurs during the licensing process and continuing vigilance is maintained through inspections, supplemented by off-site surveillance. Firms’ proper conduct of business, financial health and adherence to laws, regulations and prudential standards are assessed by a team of experienced regulators. Timely remedial action is instituted to address weaknesses, objectionable practices or adverse conditions identified by our supervisory activities. Under the Supervision Module, there are various types of on-site visits by the DFSA on Authorised Firms, which differ in their objective and frequency depending on proportionality of the risks that they pose to the DFSA’s objectives. The greater the impact and probability of the Authorised Firms perceived risks, the more intensive the on-site visits. The DFSA requires AF’s registered external auditor to co-operate with the DFSA in a number of ways, including the submission of specific audit reports and statements. The Markets Division, on its part, is responsible for the licensing and ongoing supervision of exchanges and clearing houses based in the DIFC. It also recognises licensed entities seeking Recognition status, either to operate as exchange or clearing house in the DIFC or to become members of exchanges located in the DIFC.

19 Vietnam VBMA Inspectors from the State Securities Commission (SSC) inspects securities firms to assess the compliance to legal documents on securities and stock market

Exchanges supervises securities member firms in the compliance to membership obligations, including:

− Maintenance of eligibilities for membership

− Securities trading of members

− Reporting and information disclosure of members

− Handling violations of trading members

The inspection and supervision is applied to activities of securities firms, branches and transaction offices. This activity is planned yearly. Besides, there are unscheduled inspections at the request of the SSC’s Chairman and authorities.

The SSC inspection is also carried out based on reports from exchanges and other SSC agents on the violation of securities firms. After defining the level of violations, the inspection board announces the inspection to the securities firms and starts collecting evidences by visiting the securities firms and asking the firm to providing original copy of necessary documents. The conclusions are drawn after the analysis and assessment of accounting figures as well as professional activities.

The securities firm also has the internal audit system and has the yearly financial statement audited an auditing organization approved by the SSC. VBMA is not empowered by regulator to do these duty

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III – 4. Disciplinary Action and Measures Against Misconducts No. Country Name of

Organization Disciplinary Action and Measures Against Misconducts

1 Cambodia SECC According to Law on Issuance and Trading of Non-Government Securities, There are two kinds of administrative disciplinary action. One is applied to companies such as securities company, issuing company and other market participants. The other is applied o individual. There are five kinds of administration sanction to be taken against member firm ( Prakas on the Code of Conduct of Securities Firms):

1. A warning 2. A correction order 3. A suspension or dismissal of directors and/or senior officers. 4. Imposing restrictions on the license 5. A suspension or revoke the license

2 China SAC SAC Member Management Measure stipulates that SAC could take the form of written or verbal

reminders or questions to talk to members or practitioners for violation of laws, regulations, administrative rules and regulations of SAC, and disciplinary action is allowable according to the seriousness of the circumstances. Association members can be given disciplinary measures, such as warning, criticism within the industry, public reprimand through the media, suspension of membership rights, suspension or cancellation of membership qualification. The form of disciplinary action can be used alone or in combination. Members and practitioners, who subject to disciplinary action, must participate mandatory training organized by Association. The disciplinary action to members and practitioners should be investigated by SAC self-discipline Commission, and put forward opinions on the results of the investigation. SAC is entitled to make decisions on punishment under its regulations and other self-regulatory rules.

3 Hong Kong HKSA Depending on the severity and context of violations, disciplinary action may include – but are not limited to – reprimands, fines, suspensions or lifetime bans from the industry. Also, the SFC can revoke or suspend the license or registration of an intermediary, or impose a fine of up to HK$10 million per instance of misconduct. HKSA has no direct authority in this point.

4 India ANMI Under the SEBI and Exchange regulations, disciplinary action is applied against the securities company for any transgression of the governing laws by either the company or its employees. The disciplinary action may include any of the following: (1) Reprimand (2) imposition of a fine (3) suspension of membership for a defined period (4) Expulsion in case of a serious offence. Separately SEBI may compound the offence by disgorgement of profits with a consent order.

5 Indonesia APEI Under the Law Number 8 Year 1995 regarding Capital Market (UUPM), disciplinary actions include: 1. Sanctions against the company in the form of:

- written warning - penalty - temporary suspension 2. Sanctions against individuals (Director and/or Employee involved in the Securities) - written warning - penalty - temporary suspension individual license - revocation of individual license

6 Japan JSDA Under the FIEA, there are two categories of administrative disciplinary action. One is related to the non-compliance of law and regulations committed by the companies such as securities companies, banks, insurance companies and so on. The other is related to the same kind of misconducts committed by the individual sales representatives affiliated with those companies. As the task of taking administrative disciplinary action against those cases is assigned to JSDA under the FIEA, JSDA has two categories of disciplinary action. One is applied to the member firm for its own deficiency to comply with law and regulations while the other is applied the member firms for the reason of misconduct by its officers and employees. There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is triggered, namely ① reprimand, ②imposition of a negligence fine, ③limitation of membership, ④suspension of membership and ⑤ expulsion. When employees of the member firm are to be disciplined, JSDA may rescind the registration or order suspension of the business of a registered Sales Representative by specifying a period not exceeding two years when he or she violated laws and regulations or was found to have conducted extremely inappropriate acts concerning his or her duties of Sales Representatives. However, when employees have their registration revoked, normally they also lose their sales representative qualification at the same time. So, they have to re-qualify as sales representatives. Of course, even if they do again acquire the qualification, they will have to wait five (5) years after the revocation of their registration to become a registered sales representative again. Recently, JSDA introduced a “permanent expulsion” system for officers or employees committing insider trading violations.

7 Kazakhstan FSC In the cases when the Committee identifies violations of the prudential requirements and other standards and limits, which are obligatory for compliance, violations of the normative legal acts of the Committee, or disclosure of unlawful acts or failure to act by officials and employees of a security organisation, which may threaten its financial safety and stability, as well as non-fulfilment of any other requirements of the Committee, the Committee has a right to apply to the organisation one of the following restricted

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enforcement measures: - to require a letter of commitment; - to compile a written agreement with the security organisation; - to issue a warning; - to issue a written prescription, obligatory for execution - penalty (Enforcement measures are imposed on the financial organization or on the top management of the company, or on both - the company and individuals. It depends on the severity of the violation).

8 Korea KOFIA KOFIA may, when a financial investment company and its employees violate the Regulations or do not actively implement them, impose sanctions by the Association’s Articles of Association. The types of sanctions that can be imposed on the members(a financial investment company) by the Self-Regulation Committee(hereinafter referred to as the Committee) are any of the following Items, and the sanction of Item 4 may be imposed with other sanctions when deemed necessary: 1. Request for the member to be barred from the general meeting; 2. Suspension of the qualification of the member; 3. Suspension of the whole or part of the duties provided to the member by the Committee; 4. Imposing sanctions; 5. Warning; or 6. Caution.

The types of sanctions that can be recommended on the employees of the member by the Committee are any of the following Items;

1. Disciplinary dismissal; 2. Suspension 3. Salary reduction 4. Reprimand; or 5. Caution

9 Lao SECO Under the Decision on Regulation Regarding the implementation and operation of Securities and

Exchange Commission Office on giving the right to cancel the certificate on approval that service in securities business as Securities Companies, issuing of securities companies, accounting consultancy, and external audit companies; the SECO can stop in the operation of sale representative which is approved by SEC. therefore the SECO propose to stakeholders in disciplinary action to individual and entity that braking the rule in the securities business.

10 Malaysia ASCM In its commitment to deter and reduce breaches of the industry law, both Securities Commission and Bursa Malaysia play their respective roles in enforcing the CMSA and Bursa Malaysia Rules. In undertaking enforcement action, due process will be accorded where the defaulting parties are given opportunity to provide explanation to Securities Commission and/or Bursa Malaysia. In deciding the appropriate sanction to be imposed, a variety of factors are taken into consideration according to the circumstances of each individual case. The factors taken into consideration include, amongst others, public interest/deterrent element of the proposed penalty, antecedent character and background of the defaulting party, nature of the breach and circumstances and manner under which the breach was committed, mitigating and aggravating factors. As such, depending on the outcome of the assessment of the various factors in relation to the facts and circumstances of each individual case, the actions/ sanctions imposed may also vary even for the same breach by different parties. The type of sanctions that may be imposed for the breach include:

reprimand fines remedial actions suspension any other action deemed appropriate

11 Mongolia MASD FRC has rights to grant licenses the professional institutions that are participating in the securities

market to deal with professional activities on the securities market, monitor their activities, temporarily restrict and invalidate the license. 15.1. A regulations issued by the Commission to implement laws shall be followed by all participants in the

securities market.

The association has right to suspension of membership and to inform such member and its professional into the FRC and other related organizations if necessary

12 Philippines PASBDI With respect to brokers, however, the pertinent rules are found in the Amended MDR Rues, particularly article V thereof on Code of Conduct and Professional Ethics. For violations, the brokers/s involved is subjected to investigation proceedings and corresponding sanctions as provided in the said rules. Violations by brokers of this particular rule are usually discovered through complaints initiated by customers, which complaints are then lodged with the MRD. The usual investigation proceedings then follow, consisting of submission of documents, defences, arguments and pieces of evidence for parties, hearing and due process requirements before submission of the complaint for the resolution. If the broker is found to be in violation, the corresponding penalty as provided in the rules is then imposed, which penalty is published in the website of the Exchange. Violation of the provision of Article V of the Amended MRD Rules is concerned a major violation.

13 Russia NAUFOR NAUFOR has a Disciplinary Committee which considers cases of disciplinary offenses of NAUFOR members, makes decisions on them and enforces means of disciplinary influence in accordance to the

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NAUFOR Disciplinary Code. There are 3 kinds of disciplinary penalty: 1. Warning; 2. Fine; 3. Expulsion.

If the company commits a serious offence NAUFOR have the right to ask Federal Financial Markets Service to revoke a license of offender. Also in case of serious offence Federal Financial Markets Service can revoke the qualification certificates of employees of company – offender.

14 Sri Lanka SEC The Colombo Stock Exchange has a Disciplinary & Arbitration Committee(D.C ) A Broking Company found guilty of any violation shall be liable to a public reprimand and/ or fine and/or suspension from trading which shall be determined by the Board. The maximum fine not to exceed Rs.100, 000. On the other hand SEC Act empowers the Commission to cancel or suspend the License/Registration granted to stock broker, stock dealer or any other Market Intermediary

15 Taiwan CTSA If any member fails to perform any obligations, the CTSA may, through resolution of the directory board, request correction, give a warning or order the member to impose appropriate self disciplinary sanctions on its responsible person or employee. Any or all of the following sanctions may also be imposed based on the level of gravity and reports may be filed with the authority governing the specific business: 1. Impose penalty for breach in the amount of no less than 300,000 and no more than 10,000,000 NT

Dollars. The amount of penalty may be increased by 100% each time for consecutive sanctions until correction is made or required actions are undertaken.

2. Suspend all or part of the entitlements enjoyed by the member. Report the case to the governing authority for proper sanction.

16 Thailand ThaiBMA Under ThaiBMA’s rule, there are two categories of administrative disciplinary action. One is applied to member firms. The other is applied to individual registered trader affiliated with those member firms. There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is triggered, namely (1) warning (2) probation (3) fine (4) suspension (5) revocation.

17 Turkey TSPAKB A member which acts contrary to professional honour, professional principles and rules, to legislations related to the capital market activities and to resolutions of the TSPAKB can be fined according the measures of the Disciplinary Regulation. The following disciplinary penalties are applied, depending on the nature and importance of the act.

Warning: a written notice to the concerned member stating that it has to act more diligently and carefully in performing its activities.

Censure: a written notice to a member stating that it is faulty in its profession and behaviour. Fine: the amount is paid by the liable party to the Investors Protection Fund within 30 days

following the date of the notice. Temporary exclusion from the Association membership: direct or indirect restriction of

professional activities of a member for a temporary period of time to be designated according to the nature and importance of the incorrect act, not exceeding a period of 6 months.

Permanent discharge from the Association membership: in that case, the relevant institution cannot operate in the capital markets ever.

The actions requiring temporary exclusion are insider trading and market manipulation. The action requiring permanent exclusion is using customers’ assets (cash or capital market instruments) in favor of the member or third parties by issuing counterfeit documents or forging documents.

18 UAE (DIFC) DFSA Laws and rules of the DIFC administered by DFSA are enforced by the Enforcement Division. The Division takes action pursuant to a referral from the Supervision or Markets Division in circumstances of suspicion of any misconduct that may cause damage to the DIFC’s reputation or to the financial services industry in the DIFC. A wide range of enforcement powers are available to the Division. The DFSA may accept enforceable undertakings, impose fines or censures, take licensing action or commence proceedings in the Financial Markets Tribunal or the DIFC Courts. The Division also proactively tries to prevent misconduct through education and outreach programs. The Enforcement Division frequently provides assistance to other international regulators, and takes every opportunity to work closely with local regulators.

19 Vietnam VBMA According to Decree No. 85/2010/NĐ-CP dated 02/08/2010 on penalties of administrative violations in the field of securities and securities markets, where Domestic and foreign individuals, agencies and institutions (hereinafter referred to as individuals and institutions) found guilty of administrative violations in the field of securities and securities markets shall be subject to penalties in accordance with this Decree, unless otherwise stipulated in international conventions of which Vietnam is a signatory or participant. Violations the field of securities and securities markets are categorized as follows:

a. Violations of rules and regulations of public offering of securities; b. Violations of rules and regulations of public companies; c. Violations of rules and regulations of listing of securities on Stock Exchanges; d. Violations of rules and regulations of organizing securities market; e. Violations of rules and regulations of securities business activities and securities business

practicing certificate; f. Violations of rules and regulations of securities trading; g. Violations of rules and regulations of securities business, securities registration, securities

depository; clearing and settlement of securities transactions; custodian banks; depository banks;

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h. Violations of the rules and regulations of reporting regime and information disclosure; i. Violations of the rules and regulations of auditing issuers, listing companies and business

organizations in the field of securities; j. Violations of rules and regulations of inspection and examination of authorities;

Jurisdiction of giving administrative penalties 1. The SSC’s Chief Inspector may: a) Give a warning; b) Impose a fine of up to VND 70,000,000; 2. The SSC’s Chairman may: a) Give a warning; b) Impose a fine of up to VND 500,000,000; c) Apply forms of additional penalties and other measures for correction as stipulated in the Decree. Transferring the case with signs of crime to criminal prosecution: The procedures of transferring the case with signs of crime to criminal prosecution are complied with as stipulated in Article 62 of the Decree-Law of Treatment of Administrative Violations. Disciplinary Action and Measures against misconducts in the fields of securities and securities market will be announced on the website of SSC. Right now VBMA is not empowered to do this duty.

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III – 5. Dispute Resolution System between Securities Firms and Customers No. Country Name of

Organization Dispute Resolution System between Securities Firms and Customers

1 Cambodia SECC According to Law on Trading and Issuance of Non-Government Securities, SECC plays the role as the appeal body in respect of decision made by approved entities that affect members, participants and investor and an solve the dispute between the customers and businesses related to the Securities Sector. SECC accepts the complaint and consultation from customers about operations and conducts “mediation” between member firms and their customers to solve dispute concerning securities business operated by the members.

2 China SAC 1. The company level: securities company can freely negotiate with customers, reach a settlement; 2. Association level: SAC Member Management Measure stipulates that disputes between securities

companies or disputes between securities company and clients could apply to the Association for mediation. In addition.

3. The judicial level: if mediation can’t be reached, involved persons may apply for arbitration or sue. The measures and procedures for mediation of securities disputes are in progress.

3 Hong Kong HKSA Currently, disputes will be settled between Securities Firms and Customers directly. Although customers may file a complaint with the SFC and the SFC can impose disciplinary action against a Securities Firm, it does not include power to order securities firms to compensate customers. Looking forward, Hong Kong will introduce mediation and arbitration system for financial disputes later this year.

4 India ANMI The SEBI regulations require all exchanges to organize a grievance redress cell for customers. At first, the exchange attempts to conciliate between the disputants. In case conciliation is frustrated, the disputants can refer the dispute to arbitration under the Indian Arbitration Act. The exchanges specify the rules for Arbitration in accordance to the Arbitration Act. The disputants may appeal against the arbitration award. The final award is binding on the disputants.

5 Indonesia APEI Investors in Indonesia may report a dispute to the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) and it will conduct an investigation. A settlement can be obtained through the Indonesian Capital Market Arbitration Board (BAPMI) as an intermediary in dispute settlement via negotiation or reconciliation. If this measure is unsuccessful, the dispute may be brought to the court.

6 Japan JSDA In April 2009, FINMAC (Financial Instruments Mediation Assistance Center: NPO) was established as a new financial ADR organization for disputes between customers and financial instruments service providers. FINMAC evolved out of the previous “Securities Mediation and Consultation Center”, which was an internal organ of JSDA. The previous organization accepted complaints and consultations from customers about operations performed by JSDA member firms and conducted “mediation” between member firms and their customers to solve disputes concerning securities businesses operated by the members. After migrating to FINMAC, the above mentioned services are being offered through contracted based business operators such as members of Financial Futures Trading Association, Investment Trust Association, JSDA, Japan Commodities Investment Sales Association and to the Specific Business Operators (individually registered Type 2 financial instruments business operators, etc.)

7 Kazakhstan FSC - Financial Institutions’ Association of Kazakhstan (FIAK) was established in May, 1999. - The main FIAK’ functions are the following:

– Participation in development of the regulation of the financial market and tax regulation;

– Participation in Kazakhstan financial, budget, tax and currency policies development and implementation;

– Participation in further development of financial services market; – Participation in the development and implementation of measures pertinent to the

support and protection of local entrepreneurs; – Compiling, analyzing and summarizing proposals of FIAK members on the resolution of

financial sector issues and improvement of legislation pertaining to the financial sector subjects’ interests;

– Establishment of the work groups on the priority and problem directions with the FIAK members’ involvement, development of general proposals and implementation of such with the authorized bodies;

– Organization of joint discussions, round tables and Kazakhstan Financiers’ Congresses, which have become a regular event.

8 Korea KOFIA KOFIA operates a Dispute Resolution Office that offers investors information and advice about the laws

and regulations governing financial investment products. The office provides advisory service to help investors address every possible issue they may confront.

9 Laos SECO Under the prime minister’s decree on Securities and Exchange, the SECO has a role to study and consider in the process of settling disputes and denunciations in activities of securities and the securities market, based upon its stated rights. We are in the process in setting this regulation.

10 Malaysia ASCM Any dispute will be handled as case per case basis by Bursa Malaysia which acts as the frontline regulator of Malaysia capital market. In cases related to the CMSA, the Securities Commission will lead the investigation task. Both the Securities Commission and Bursa Malaysia have their respective Complaints Bureau department to handle customer reports against the securities firm. The report is then relayed to the investigation units for further actions. Investigation reports will then be used as the basis to resolve the dispute.

11 Mongolia MASD Protection of interests of investors 13.1. It is prohibited lo disclose information on number of securities owned by an investor and related to that

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information which was not disclosed for the public and it is also prohibited to offer of purchases of securities by an interested persons without owner’s permission.

13.2 If the professional participants in the securities markets violate the provision 13.1 of this law it becomes a justification/reason to suspend or revoke of granted licenses from those professional organizations/participants in the securities markets.

Provision 14. Disclosure of information related to securities to investors 14.2. A professional participants in the securities markets shall disclose the following information to investors at

their request: 14.2.1. Documents related to special licenses to participate in professional dealings with securities in the markets

and related to certificate of slate registration; 14.2.2. Information about the capital, debt, loans and the state of financial situation of professional market

participants; 14.2.3. Information related to sanctions was imposed to any of their official in relation to her/his professional

activities; 14. 2.4. Information on trading and on prices of trading for last 6 months issued by the professional participants; 14.3 The false information disclosed to investors violating the provision 14.2 of this law shall become a basis for

making changes to the Agreement made between the investor and the professional market participant or to cancel the Agreement.

14.4 An investor has right during the process of purchasing and selling of securities to request any information specified in the law from an issuer or from the professional market participants.

12 Philippines PASBDI Dispute resolution comes in the form of hearing, in instances when a case is filed by a customer against the broker for violation of the rules. After the filing of the complaint, pertinent documents and evidence, the issue are considered joined and the parties are called to appear before the Prosecution and Enforcement Department (PED) (of the PSE) for a hearing, the purpose of which, among others, is primary to explore any possible amicable settlement between the parties. Should the parties be not able to come into any agreement, however, the case shall be considered submitted for resolution and the PED will decide whether or not a violation was indeed committed by the broker, imposing the corresponding sanctions as warranted. You can say therefore that dispute resolution is only a minor part of the whole investigation proceedings of the PED. And it is only to that extent that dispute resolution is observed and possible amicable settlement is explored. Dispute resolution is also possible only in cases of investors’ complaints. All other cases before the MRD are not subject to dispute resolution proceedings.

13 Russia NAUFOR NAUFOR Arbitration (a part of NAUFOR) was founded in 1996. It considers disputes arising from civil relations and connected to entrepreneurial and other economic activities. The dispute resolution is performed in accordance to the Federal Law "On Referees Courts in the Russian Federation", Regulation on the NAUFOR Arbitration and Rules of the NAUFOR Arbitration. According to the Federal Law "On the International Commercial Arbitration Court", NAUFOR Arbitration can act as an international arbitration court. NAUFOR Arbitration has resolved over 180 cases. NAUFOR Arbitration unites the most respected securities lawyers. Advantages of the NAUFOR Arbitration:

- parties can select arbiters from the list adopted by NAUFOR Board of Directors; - arbitration fee, especially in large lawsuits, is lower than state duty taken in state courts; - the time between submission of a lawsuit and final decision is much shorter than in state courts; - NAUFOR Arbitration's hearings are private and confidential; - place of hearing can be determined by parties; - NAUFOR Arbitration decisions can be enforced in foreign jurisdictions.

Decision of Arbitration is final and is not subject to appeal. It is in force from the moment of announcement.

14 Sri Lanka SEC Disputes between the securities firms and the customers are resolved by the Colombo Stock Exchange (CSE). First the client has to make the complaint in writing to the compliance officer of the broker firm, and if he/she not satisfied with the decision client can refer the complaint to the CSE. Exchange secretariat deals with the complaint and if the client is even satisfied with the CSE secretariat’s decision he/she can appeal to the Dispute Resolution Committee of the Exchange for review the decision. As a final resort the investor and complain (in writing) to the SEC Failure of a member firm to comply with the decision reached by the Exchange will render the member firm liable to a reprimand and/or a fine and/or a suspension from trading

15 Taiwan CTSA 1. Disputes arising from business related to securities between CTSA’s members and investors, or between members will be mediated by CTSA’s Discipline Committee. In some cases, CTSA may select members having expert knowledge in laws, accounting or securities to settle the dispute.

2. According to the Securities Investors and Futures Traders Protection Act, which became effective on January 1, 2003, the Securities and Futures Investors Protection Center is an organization set up under the Act to provide consultation on the trading of securities and futures as regulated by related laws and regulations; mediation of disputes arising from the trading of securities and futures; and litigation services on behalf of investors. In addition, the Center manages a protection fund to compensate investors if a securities or commodities firm is unable to do so due to financial difficulties.

3. Promulgated on June 29, 2011, Financial Consumer Protection Act is specifically enacted to protect the interests of financial consumers. In order to handle financial consumer disputes, a financial mediation organization were newly established in January of 2012. Financial consumers may deal with a dispute by filing a complaint with the financial services enterprise, such as securities firms.

16 Thailand ThaiBMA In case of bond trading disputes between members or between members and its client, the parties may

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seek arbitration proceeding or mediation provided by ThaiBMA. Panel of Arbitrators shall be appointed for this matter.

17 Turkey TSPAKB Investors in the Turkish capital markets can always resort to courts for all complaints. However, if the customer prefers alternative dispute resolution methods, the procedure is determined according the nature of the complaint.

- If the complaint relates to exchange transactions, the customer can resort to the related exchange (Istanbul Stock Exchange-ISE or Turkish Derivatives Exchange-TurkDEX). The dispute resolution method is similar to arbitration. The customer can decide to go to the court at any stage. The decision taken by the exchange is binding for the parties. Appeals on the ISE and TurkDEX decisions can be made to the Capital Markets Board (CMB). CMB decisions can be appealed to administrative courts.

- If the complaint relates to off-exchange disputes, the customer can resort to the TSPAKB. TSPAKB offers two alternative dispute resolution methods; arbitration and mediation.

Arbitration: If the related parties agree to do so, arbitrators are chosen from TSPAKB’s list of arbitrators. The decision is binding. Appeals against arbitrators’ decisions can be made to the Court of Appeals.

Mediation: TSPAKB helps the parties in solving complaints. TSPAKB’s mediation decisions are not binding.

The CMB is not directly involved in customer complaint resolution. However, in case an investor reports a complaint, CMB may initiate an inspection.

18 UAE (DIFC) DFSA The DFSA maintains a complaints section on its website which provides information on how complaints are dealt with. Authorised Firms must maintain adequate mechanisms to deal with customer complaints. These mechanisms are designed to help resolve any customer disputes by dealing with the company directly. Authorised Market Institutions (Exchanges) in the DIFC are also required to maintain a complaints mechanism. Before contacting the DFSA the customer should try dealing with the Authorised Firm first. This can often be quicker and more efficient as it is also in the company’s interest to resolve the complaint If the customer is unhappy with this response received from the Authorised Firm or the Authorised Market Institution then the customer can contact the DFSA. The Financial Markets Tribunal (FMT) serves as an independent financial services disciplinary tribunal to determine breaches of DFSA administered legislation and related regulatory proceedings. It is broadly empowered with a remit and powers comparable to other international integrated financial services regulatory tribunals. The FMT is operationally independent of the DFSA Board and Executive. Decisions on originating proceedings before the FMT may be appealed to the DIFC Court. Decisions of the FMT on appeals of Exchange decisions may be appealed to the DIFC Court on a point of law.

19 Vietnam VBMA The SSC is responsible for: - Dealing with complaints and claims from investors and market participants. - Acting as intermediary in dispute settlement

In securities trading, compensation for damages caused by trading mistakes are stipulated as follows: Members who make trading mistakes which lead to the elimination of trading results must compensate for the damages incurred. The compensation is negotiated by two trading partners but not exceeds 10% of the value of the faulty transaction. In case of bond trading disputes between members or between members and its client, the parties may request VBMA acting as mediation center. The mediation will followed the Mediation rule set by VBMA. The dispute will be brought to the court when the mediation solutions fail.

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III – 6. Investor Education Activities No. Country Name of

Organization Investor Education Activities

1 Cambodia SECC Nowadays, Securities and Exchange Commission of Cambodia (SECC) have made arrangements to strengthen investor education. Securities and Exchange Commission of Cambodia (SECC) made a lot of work to provide the education for issuing Securities Companies, public investors and other market participants. The training focuses on “Development of Securities Market in Cambodia”

2 China SAC China Securities Regulatory Commission has made arrangements to strengthen investor education and market supervision. For example, in 2011, CSRC Formulated “Work Instruction for Business or product innovations of Security Firms”. It states that security firms should conscientiously make a good job on investor education; fully reveal the rights, obligations and risks to clients; disclose related information timely and correctly in the process of business or produce innovations. In terms of investor education, Securities Association of China has made a lot of work. For instance, to intensify risk revelation, SAC issued “Member Investor Education Guidelines” “Investor Education Business Norms In Business Office of Securities Companies”, “Indispensable Terms to GEM Market Investing Risk”, “Equity Notice of Investors holding Security Investment Fund”, etc. To push forward Members’ investor education activities, the content related to investor education is affiliated to many self-discipline rules，such as “The Guideline for Agency Agreement of Security Exchange”, “Regulation for Knowing Clients in Asset Management Business (Trial)”. Carrying out training on investor education for practitioners, and launching a special inspection for investor education. Furthermore, with the launching of GEM, Stock Index Futures, Margin Purchase and Short Sale Business, and other new business, SAC took various forms of education to help investors understand the stock market and improve the level of investment.

3 Hong Kong HKSA The Securities and Futures Commission focuses its Investor Education towards knowledge of risks involved in various investments and identification of frauds. Such educations are conducted mainly through pamphlets, TV and radio commercials and even game shows and contests.

4 India ANMI The association regularly conducts investor education and financial literacy programs at various remote towns in pursuit of this objective ANMI has been working in close co-operation with from various other organizations like The Institute of Chartered Accountants of India (ICAI) & the Institute of Company Secretaries of India (ICSI), Commodity Participants Association of India (CPAI) & Depository Participation Association of India (DPAI), Educational Institutions, Stock Exchanges, Ministries and business organizations like FICCI, CII, ASSOCHAM & PHDCCI etc. We have been providing speakers to most of the aforesaid organizations for their investor conferences.

5 Indonesia APEI Indonesia Stock Exchange (IDX) collaborates with APEI regularly conducts investor education and financial literacy programs in the form of seminars, workshops, training program, etc. to educate and enhance the capital market knowledge of investors. IDX also involves education institutions on creating capital market training courses. The objectives of these programs are to educate and enhance the knowledge of investors, hence more and more investors may invest their capital in the market.

6 Japan JSDA Currently, Japan envisages the following issues; 1. Need to change money flow from savings to investment 2. Continued low interest rates in a mature economy and growing difficulty to build wealth through

deposits and savings 3. Growing concerns about public pension system in an aging society 4. Complex financial products supplied through various sales channels (unexpected losses, financial

fraud, etc.) Under these circumstances, JSDA acknowledges the increasing need for upgrading financial literacy among Japanese citizens and has been conducting investor education activities as mentioned below;

• Supports school teachers by providing experience-based teaching materials, education programs and information magazines, and holding seminars.

• Set up websites for teachers and students • Supports securities research activities by university students • Offers donated courses on securities through the Open University of Japan ･ Holds “Investment Day” commemorative events, “Spring Securities Investment Seminars” and IR

seminars 7 Kazakhstan FSC -The purpose of the Committee for the Development of the Regional Financial Center of the City of Almaty

of the National Bank of the Republic of Kazakhstan (hereinafter -RFCA) is to create a special educational system aimed at improvement of the financial knowledge of the population.

-RFCA functions include training and provision of information on the following: 1. the securities markets and financial services market (pension, banking and insurance services

markets); 2. ways of capital and investment attraction by the domestic companies through the stock market.

8 Korea KOFIA To improve the financial literacy of Korean investors and to promote and enhance investor education, KOFIA led the establishment of the Korea Council for Investor Education (KCIE) in 2006, to better facilitate investor education initiatives. KCIE is a non profit organization established by a consortium of eight institutions including Financial Services Commission, Financial Supervisory Service, Korea Exchange etc.

9 Laos SECO The SECO acknowledges the important for investor education activities for securities business among Lao

citizens as investors and has been conducting education activities as publicize and organize training

sessions in education institutes, ministries and each part of Lao PDR. Moreover, the SECO support the

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investment information in securities market to newspapers, magazines and other medias.

10 Malaysia ASCM The industry’s investor education role is spearheaded by Bursa Malaysia which also acts as the promoter of Malaysia capital market. The investor education activities are fully supported by the stockbroking community and public listed companies as industry players. At the beginning of the year, Bursa Malaysia organised an industry leadership forum called ‘Rethink Retail’. Attended by various captains of industries, the highlight of this forum was the sharing of insights into Malaysian attitudes to investing. The forum’s objective was to initiate a mind-set change and promote planning collaboration amongst key stakeholders and partners. It was also the starting point for various activities designed to create a more vibrant retail market, by reaching out to young retail investors and overcoming misconceptions through education and information. Interaction with young Malaysians is a feature of many of our investor development efforts. Talks were held throughout the year for visiting students from local and foreign universities. Topics covered included an overview of the capital market and the basic understanding of investment. The industry sponsored the Annual Young Corporate Malaysians Summit. The event was attended by professionals between 21 and 35 years old. There was also a series of advertorial articles published in the media, aimed at changing perceptions about investing in shares and other capital market instruments as an option to savings, unit trust and investment-linked insurance. In line with the industry’s retail strategy of sustaining and engaging existing investors, the industry continued with the annual nationwide engagement programme called ‘Market Chat’. Market Chat remains an integral part of the industry’s Retail Investor Engagement Programme and is now in its fourth year with the launch of the 2010/11 series in October 2010. The latest series is conducted in conjunction with eight broker partners, and will concentrate on raising the profile of alternative investment products (CBBCs, ETFs and REITs). The events will also help create greater awareness of the value added services Bursa Malaysia provides for retail investors, such as internet trading and e-Dividend. The industry organised two retail investment seminars for high-net-worth individuals. The talks showcased top financial experts and offered the audience practical strategies and ideas on surviving and thriving in a climate of global volatility. The industry also participated in several retail investor conferences such as Minggu Saham Amanah Malaysia, Minggu Kesedaran Kewangan 2010 and Asia Trader and Investor Convention (Singapore and Kuala Lumpur).

11 Mongolia FRC The association and its some members organize a primary training for investors together. We have organized “Investors’ education opening days” events with the FRC and its members for 4 times or since 2007. It made a book of “Financial guidelines” for investors in 2010. Our website has a lot of presentations.

12 Philippines PASBDI Most recently we have fine-tuned our 2010 investors’ education from a three (3) point strategy namely: (1) Short term “awareness campaigns”, ( 2) Medium term “impact” programs and (3) Long term “core and foundation” program, and simplified it to a two point strategy. 1. Impact programs (simply a combination of “awareness campaigns” and “impact” programs) –

“below-the-line” (non-traditional marketing) events designed to draw huge numbers of participants with whom stock investments may be promoted. With the benefits of equity investments as the main message for this type of event, awareness campaigns also aim to entice prospective investors to participate in the PSE’s medium and long term market education programs. a. Maximizing free media channels b. By penetrating corporate and professional websites and newsletters c. Overseas Filipino Program d. Promotional Competitions/ Impact Seminars e. Inclusion of PSE topics in corporate and institutional communication channels f. Local Road Shows g. Industry Briefings

2. Long Term “Core and Foundation” Program – cutting edge programs designed to produce enduring results. Because of its nature, this program is expected to yield results in the long term. Mostly academy-based, these programs are aimed at addressing the root problem of ignorance about the stock market and promoting financial literacy among Filipinos. In the advanced stage of this program are continuing education courses for market participants and serious investors. a. Integration of Capital Markets topics in High School Subjects b. Integration of “Savings & Investments” subject in College General Education c. Implementation of Commission on Higher Education (CHED) Memorandum Order 39 (CMO 39) d. Institutional of Master of Business Administration (MBA) Specializing in Capital Markets e. PSE Certified Securities Specialist Course

Broad Objectives of our Market Education program are designed to: 1. Educate and Expand Investor Base

a. Increase number of domestic retail investors which remains below 1% of the total population of the Philippines

b. Correct Misconceptions and Improve Confidence in the capital market 2. Empower Investors and the Public by understanding

a. Investor rights & responsibilities b. Personal investment goals and risk tolerance c. Investment risk and how to manage it d. Characteristics of different financial products e. Different types of investment fraud and how to avoid them

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f. Importance of choosing a good stock broker Our Short-term Retail Marketing Plan aims to target: Investor Profile Ages 25 and above, Male and Female, ABC Status with an annual income of 500,000 and above (monthly income of P40,000 - 50,000). Professions - OFWs, Entrepreneurs, Lawyers, Engineers, Architects, Professionals, Center Executives, Medical Professionals, Celebrities, Retirees, Islamic community. Long Term Market Education initiative is the PSE Academy. 1. Areas of Focus

a. Academe -High School, College and Post-graduate students -Educators and School Administrators

b. Government - Government Regulators - SEC, BSP, GSIS, SSS

c. Market Participants - Trading Participants: PSE Employees, Analysts, Brokers & Traders, Backroom Operations,

Investment Advisers, Securities Salesmen - Listed Companies - Board of Directors, Compliance Officers, Human Resource

d. General Public 2. Methodologies

a. Learning Activities -Stock Market Seminars -Kids and Parents Investment Camp -Exchange Visits -Training the trainers

b. National Education System -Stock Market in High School - BSBA - Senior HS Subject - MBA - Curriculum, Faculty, Material, Research dev't.

c. Promotional Contests - Quiz competition - Stock Trading Game - Best Thesis Competition

Partner Institutions include Business Industry Linkage, PCDEB, PACSB, CMITAP, CECON and other academe tie-ups.

13 Russia NAUFOR 1. NAUFOR’s website contain a lot information about basic features of financial market and about the risks of financial operations.

2. In 2010 NAUFOR’s experts participated in special education program “Financial Literacy Train”, which promote the financial literacy in Russian regions.

14 Sri Lanka SEC The SEC has two Divisions in order to educate stakeholders on the Capital Market. CMET conducts a qualification framework for financial sector professionals and also conducts certificate courses for investors. External Relations and Market Development Division (ERD) is involved in educating investors/students/undergraduates/teachers by organizing workshops, road shows, TV/Radio programs, publishing articles in papers/magazines and organizing other promotional/educational activities.

15 Taiwan CTSA 1. Subsidize personal investment and finance general knowledge classes hosted by non-finance faculty in tertiary education institutes. A total of 23 lectures had their proposals approved in 2010 (9 were sponsored by TWSE and 2 were sponsored by GTSM); a total of 1,657 non-finance faculty student attended general knowledge classes.

2. Give speeches of correct investment and finance concepts to secondary education institutes. TSA accepted applications from secondary education institutes to appoint qualified lecturers to promote correct investment and finance concepts to secondary education students. For the year 2010, a total of 2,078 students from five schools participated.

3. Publish investment and finance promotional material, TSA has put together the “Securities and Me” and “Explore Securities Market” promotional booklets, which were published in 2011.

16 Thailand ThaiBMA As part of our role in promoting investor education, ThaiBMA has established website to provide

information in both the primary market and secondary market for investors through www.thaibma.or.th and www.thaibond.com. Our websites also provide research and articles about the bond market knowledge and investment. ThaiBMA regularly organizes free seminar for both retail and institutional investors. Advanced training courses in the area of bond and financial market are also offered to professionals in the bond market at minimal cost. Moreover, ThaiBMA holds monthly training for members to promote their practical understanding on the bond market operation.

17 Turkey TSPAKB • A joint investor education campaign was launched recently with the cooperation of relevant capital market institutions.

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• TSPAKB financed a broad based financial literacy survey in 2010. A quantitative survey was done with 2010 people, representing the whole population. TSPAKB also published a book about the basics of Turkish capital markets and financial products.

• Experts from the Istanbul Stock Exchange, the Capital Markets Board and the Association of Capital Market Intermediary Institutions of Turkey visited several universities in order to create and increase the awareness of capital markets among university students.

18 UAE (DIFC) DFSA The DFSA participates in investor education forums such as the DIFC Knowledge Series, organizes

regular outreach sessions for Authorised Firms to address relevant regulatory topics, issuing of DFSA investor alerts in relation to scams and fraudulent activities.

19 Vietnam VBMA - Quarterly, The Dialogue between Regulators and VBMA members and non – members is organized. The Dialogue is a communication channel between regulators and market players. At the Dialogue, The Regulators popularize new policies to the market players and the market players update the market situation to the Regulators.

- The Investor Guide is under the preparation and will be published soon - To help the reporters to understand about the whole picture of the bond market and its operation that

help them in writing the news for the media, a training seminar was organized for the reporters. - The basic and advance training for member is organized. - The Investors Conference is also organized yearly.

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IV. Market Structures IV – 1. Breakdown of Financial Assets held by Household Account No. Country Name of

Organization Breakdown of Financial Assets held by Household Account

1 Cambodia SECC n/a 2 China SAC By Nov. 30, 2011, bank deposits reached 81.421trillion RMB, the total stock market value of 23.17 trillion

RMB, total amount of bond is 21.19 trillion RMB bonds at par. 3 Hong Kong HKSA n/a 4 India ANMI

Items Per cent to Total Financial Saving 2008 – 09 2009 – 10 2010 – 11 Financial Saving (Gross)

100.0 100.0 100.0

a) Currency 12.7 9.8 13.3 b) Deposits i) With Commercial Banks ii) With Non-banking Companies iii) With Coperative Banks and Societies iv) Trade Debt (Net)

60.7 52.8 2.0 4.7 1.2

47.2 41.7 1.9 3.6 -0.1

47.3 42.0 2.9 2.5 -0.1

c) Share and Debentures of which: i) Private Corporate Business ii) Banking iii) Bonds of public Sector undertakings iv) Mutual Funds (including UTI)

-0.7 1.0 0.0 0.1 -1.4

4.6 1.3 0.1 0.1 3.3

-0.4 1.2 0.1 0.1 -1.8

d) Claims on Government i) Investment in Government securities ii) Investment in Small Savings, etc.

-3.8 0.0 -3.8

4.3 0.0 4.3

6.5 0.0 6.5

e) Life Insurance Funds of which : i) Life Funds of LIC and private insurance companies

21.0 20.3

22.6 22.0

24.2 23.8

f) Provident and Pension Funds 10.1 11.5 9.1 Source: RBI Annual Report (August, 2011)

5 Indonesia APEI As of the end of November 2011, Household Account amounted as follows :

a. Currency and Deposits IDR. 2,601.43 Trillion b. Bonds IDR. 6,802.95 Trillion c. Stock Market Value IDR. 2,091.21 Trillion d. Mutual Fund IDR. 157.76 Trillion

6 Japan JSDA While on a flow basis, the financial assets of households had an inflow of about 7.0 trillion yen during

the fiscal year, at the end of FY2010 (Apr. 2010 to Mar. 2011), they totaled 1,476.4 trillion yen, down 8.1 trillion yen from a year earlier. The decline can be attributed to the large fall in stock prices caused by concerns about damage from the earthquake disaster and following nuclear power plant accident.

FY2008 FY2009 FY2010(E)

FY2010 (E)(Amount) (¥ trillion)

Financial Assets of Household 1,451.2 1,484.5 1,476.4 1,476.4Currency and Deposits 54.6% 54.2% 55.3% 816.3Bonds 2.7% 2.6% 2.4% 35.6Investment Trusts 3.3% 3.8% 3.6% 53.0Trust Beneficiary Rights 0.2% 0.2% 0.2% 2.5Shares & Other Equities 5.7% 6.8% 6.1% 90.4Insurance and Pension Reserves 29.5% 28.3% 28.4% 419.8Overseas Portfolio Investment 0.4% 0.6% 0.7% 10.1Others 3.5% 3.5% 3.3% 48.4(source) Bank of Japan

7 Kazakhstan FSC n/a 8 Korea KOFIA The financial assets of households at the end of 3rd quarter in 2011 amounted 2,216.9 trillion Won(1,926

Bil. Dollar). The breakdown (%) is as follows. (data from Bank of Korea) cash and deposit 46.9 insurance and pension reserve 25.7 bonds 8.5 stocks 18.2 etc. 0.7

30

9 Laos SECO At the end of 2010, money base was amounted to 9.560,38 billion kip, up by 48.56 percent compared to 2009. The components of monetary base consist of (1) cash in circulation amounted to 4,504.52 kip, up by 25.84 percent, (2) deposit of commercial banks and financial institutions held at the Bank of the Lao PDR (BOL) amounted to 5,056.86 billion kip, rose by 77.03 percent

10 Malaysia ASCM Total financial assets held by household accounts for year 2010 was at RM1,386 billion. Composition of the household financial assets is as below.

Financial Asset

Percentage of composition (in %)

Deposits with Financial Institutions 31 Savings with Employee Provident Fund 30 Equity holdings 17 Unit trust holdings 16 Endowment policies 6 Total 100

11 Mongolia FRC

• Common stock • Bond

There are very small market for common stocks and government bonds.

12 Philippines PASBDI In the Philippines, a significant part of the financial assets of household are placed in cash deposits, with stocks and bonds occupying a smaller portion of the pie. But recent statistics showed that stocks and bonds are starting to gain recognition from the investing public.

13 Russia NAUFOR There are no official ordered data on structure and quantitative characteristics of the investor base of the Russian financial market. The MICEX (Russian Exchange) regularly discloses the information about the number and structure of traders’ customers. At the end of the 2010 the number of natural persons that are MICEX customers (active shares and bonds holders) reached 714,295 persons. Information on the number of investors in unit investment funds is little systematized. Expert RA Rating Agency estimates customer base of unit investment funds in 515 thousand persons at the end of the 2010.

14 Sri Lanka SEC n/a 15 Taiwan CTSA

Assets Structure for Households Sector In Taiwan(Based on final ownership)

End of 2009

Assets, Base on final ownership Amount (100 Million NT$) % 1. Physical Assets 39,743 35.61% Real Estate 284,368 31.67% Household's Equipment 35,375 3.94 2. Net Foreign Assets 73,010 8.13%3. Net Domestic Financial Assets(A-B) 505,087 56.6% Domestic Financial Assets(A) 3,888 69.49% Cash and Demand Deposits 90,358 10.06% Time Deposits & Foreign Currency Deposits 122,808 13.68% Life Insurance and Pension Fund Reserves 104,571 11.65% Portfolio (shares, mutual funds, bonds) 75,657 30.70% Other Financial Assets 30,495 3.40% Less Domestic Financial Liabilities(B) 118,801 13.23% Loans 108,606 12.10% Other Financial Liabilities 10,196 1.14%

Stock and bond trade (bln MNT)

31

Total Net Assets 897,841 100%Note: Portfolio consists of government securities, domestic corporate bonds, bank debentures, mutual funds, shares and other equities. Other financial assets cover repurchase agreements, loans by nonfinancial institutions, short-term securities, accounts receivable/payable and net other assets & liabilities.

16 Thailand ThaiBMA As of September 2011, approximately 45% of total corporate bonds had been held by individual investors while government bonds have been held only 15%.

17 Turkey TSPAKB Financial Assets of Households

2009 2010 2011/092011/09

(Bn. $)Cash 8% 9% 10% 28.1TL Deposits 50% 53% 52% 151.5FX Deposits 23% 20% 20% 57.7Equities 6% 7% 6% 17.5Mutual Funds 6% 6% 5% 15.3Pension Funds 2% 3% 3% 7.6Bonds/Bills-Eurobonds 3% 2% 2% 4.8Precious Metals 0% 0% 2% 6.8Repo 1% 0% 0% 1.2Total 100% 100% 100% 290.5Source: Central Bank of the Republic of Turkey

Cash and deposits (TL and FX) are the major component of the financial assets representing 80% of household’s total savings. Total cash and deposit measure US$ 237 billion, as of end of September 2011. During the last three years, while equities’ share increased in total, the share of fixed income instruments decreased.

18 UAE (DIFC) DFSA Information not available as such national statistics are not published in the UAE

19 Vietnam VBMA n/a

32

IV – 2. Share of Foreign Investors in the Stock Trading on the Exchange No. Country Name of

Organization Share of Foreign Investors in the Stock Trading on the Exchange

1 Cambodia SECC n/a 2 China SAC In 2003, China launched the system of Qualified Foreign Institutional Investors (QFII). The system is the

only way for foreign investors to carry on the A-share trade. QFII system is a transitional institutional arrangement for limitedly introducing foreign capital and opening capital market in the case of unopened capital account. The latest data from State Administration of Foreign Exchange (SAFE) shows that by the end of November 2011, a total of 108 QFII have been sanctioned the amount of $ 21.14 billion by accumulation. The newly amount increased by $ 1.42 billion from January 2011 to November 2011. Furthermore, on Dec.16 2011, China Securities Regulatory Commission (CSRC), People's Bank of China(PBOC) and the State Administration of Foreign Exchange (SAFE)jointly issued “Trial Measure for Fund management companies, securities companies RMB Qualified Foreign Institutional Investors in domestic security investment”. It stipulates that the subsidiaries in Hong Kong of domestic fund management companies, security companies could use RMB raised in Hong Kong to invest in domestic security market.

The changes of investor structure distribution from 2009 to 2010

Number of account at the end of FY 2010（Account） 2009（Account） Growing rate % Individuals 151,460,366 137,277,240 10.33 Normal Institutions 479,872 440,314 8.98 Security Investment Fund 1,400 1,139 22.91 Social Security Fund 154 154 0.00 QFII 214 175 22.29

3 Hong Kong HKSA Overseas investors accounted for 46.3% of total market turnover in 2009/2010 with overseas institutional investors accounted for 41.8% and overseas retail investors accounted for 4.5% of total market turnover. (Source : HKEx Cash Market Transaction Survey 2009/10)

4 India ANMI Net Investments - 2011 (in INR crore)

Equity Debt Total January -4,813.2 10,176.7 5,363.5February -4,585.5 1,315.7 -3,269.8March 6,897.8 -14.9 6,882.9April 7,213.3 -17.2 7,196.1May -6,614.4 2,338.4 -4,276.0June 4,572.2 311.1 4,883.3July 8,030.1 2,622.8 10,652.9August -10,833.6 2,931.1 -7,902.5September -158.3 -1,707.4 -1,865.7October 1,677.4 1401.4 3078.8November -4,197.9 934.7 -3,263.2December Total FII Investment -2812.1 20292.4 17480.3* The data presented above is compiled on the basis of reports submitted to SEBI by custodians and constitutes trades conducted by FIIs on and upto the previous trading day(s).

Source: www.sebi.gov.in

5 Indonesia APEI Indonesia was downgraded below investment grade since the crisis at the end of 1997, hence, foreign

investors which accounted for nearly 63% diminished drastically to a level of below 4% by early 1998. Since then, gradually foreign investors came back to Indonesia, as of end of November 2011, it has reached to a level of 59%. By mid-December 2011, Indonesia had been promoted again to an investment grade country which many believe that in 2012, foreign investors may be more and more attracted to invest their fund in Indonesia.

6 Japan JSDA

Market Share & Trading Balance by Types of Investors -Tokyo, Osaka, Nagoya -

Year Member Account Individuals Foreigners Investment

Trusts Business

Cos. Life &

Non-lifeCiti BK &

Regional BKTrust BK

Other

Financial

Institutions

Market Share 2008 26.7% 16.7% 46.4% 1.9% 1.0% 0.2% 0.1% 5.0% 0.1%2009 26.5% 21.5% 39.0% 2.4% 1.2% 0.3% 0.1% 5.7% 0.1%2010 24.2% 17.6% 47.2% 2.0% 1.0% 0.4% 0.1% 5.0% 0.1%

Net Selling (-)/Buying (+) (¥billion)

2008 -3,537 982 -3,708 301 1,632 -328 -36 -4,502 -1932009 -1,987 -866 1,777 76 -184 -418 -277 1,440 -184

33

Source: TSE Monthly Statistics Report

7 Kazakhstan FSC n/a 8 Korea KOFIA As of Nov. 2011 (data from Korea Exchange(KRX)) (billion Won, %)

Trading volume(mil. share) Trading value (tril. KRW) Shareholding (market

capitalization, tril. KRW) Total 20,157 181 1,236 Foreign 781 24 385 % 3.87% 13.25% 31.17%

9 Lao SECO In the Stock market has only two companies listed, so the share of foreign investors since open market until now as the following:

(Unit Million kip) Companies Share Money

BCEL 12.91 123.68 EDL-GEN 27.10 117.82 Total 40.01 301.50 Average per day 0.17 1.25

10 Malaysia ASCM The table below indicates the market demography by trading value (in %) for domestic and foreign investor categories since the past five years.

Year 2006 2007 2008 2009 2010 Foreign Investors (%)

34 37 42 26 27

Domestic Investors (%)

66 67 63 74 73

11 Mongolia MASD There have accounts of approximate 1000 investors to own their shares of Mongolian listed companies. 12 Philippines PASBDI Foreign investors still continue to occupy a significant part of the market share this indeed would tell that

PSE has a small yet growing retail investor base. But PSE is optimistic that with the advent of the new trading system, online trading and increased efforts on investor education its local investors will definitely improve significantly.

YEA

R

TOTAL FOREIGN BUYING (Php)

TOTAL FOREIGN SELLING (Php)

NET FOREIGN BUYING (SELLING)

TOTAL VALUE TRADED (Php)

FOR

EIG

N

AC

TIV

ITY

2007

680,327,184,716.23 624,758,963,452.91 55,568,221,263.32 1,338,252,424,663.95 48.8%*

2008

361,002,678,556.56 383,165,755,696.06 (22,163,077,139.50) 763,901,383,786.43 48.7%

2009

329,284,581,630.32 314,369,505,041.93 14,915,076,588.38 994,150,277,564.80 32.4%

2010

477,378,705,480.79 441,756,205,082.61 35,622,500,398.18 1,207,383,736,683.16 38.06%

2011

565,864,989,049.42 509,348,078,482.59 56,516,910,566.83 1,422,591,318,094.42 37.79%

* - percentage of foreign activity (%FA) is arrived using this formula: %FA= [(Total Foreign Buying and Selling)/ Total Value Traded x 2]

13 Russia NAUFOR 2011 May June July August September October November Share of Foreign Investors

40.6 % 42.2 % 43.7 % 39.5 % 39.3 % 38.2 % 40.3 %

Source: MICEX 14 Sri Lanka SEC Issuance of shares by resident companies to foreign investors (non residents) is permitted without

prior approval of the Exchange Control Department (ECD) in terms of general permission granted in Gazette Notification No.1232/14 of 19/04/2002, 1248/19 of 08/08/2002 and 1685/2 of 21/12/2010 subject to certain exclusions, limitations and conditions. In the areas of investment, movement of funds of such transactions will be through a scheme of account titled, "Securities Investment Account" (SIA). Permission has been granted for the issue and transfer of shares in a company up to 100% of the issued capital of such company, to approved country funds, approved regional funds, corporate bodies incorporated outside Sri Lanka and individuals resident outside Sri Lanka (inclusive of Sri Lankans resident outside Sri Lanka) subject to the exclusions, limitations and conditions. Exclusions: the permission granted shall not apply in respect of shares of a company proposing to carry on or carrying on any of the following businesses:

i. Money lending,

34

ii. Pawn broking iii. Retail trade with a capital of less than One Million US Dollars. iv. Coastal fishing v. Provision of Security services including security management, assessment and consulting to

individuals or private organizations.

Limitations: • The permission granted shall apply in respect of shares in a company carrying on or proposing

to carry on any of the following businesses only up to 40% of the issued capital of such company, or if approval has been granted by the Board of Investment of Sri Lanka for a higher percentage of foreign investment in any company, only up to such higher percentage.

i. Production of goods where Sri Lanka's exports are subject to internationally determined quota restrictions;

ii. Growing and primary processing of tea, rubber, coconut, cocoa, rice, sugar and spices; iii. Mining and primary processing of non renewable national resources; iv. Timber based industries using local timber; v. Fishing (deep sea fishing);

vi. Mass communications; vii. Education;

viii. Freight forwarding; ix. Travel agencies; x. Shipping agencies.

• The permission granted shall apply in respect of shares of a company carrying on or proposing to carry on any of the businesses set out below only up to the percentage of the issued capital of the company for which percentage either general or special approval has been granted by the Government of Sri Lanka or any legal or administrative authority set up for the approval of foreign investment in such businesses.

i. Air transportation; ii. Coastal shipping;

iii. Industry undertaking in the Second Schedule of the Industry Promotion Act. No.46 of 1990, namely

Any industry manufacturing arms, ammunitions, explosives, military vehicles and equipment aircraft and other military hardware;

Any industry manufacturing poisons, narcotics, alcohols, dangerous drugs and toxic, hazardous or carcinogenic materials;

Any industry producing currency, coins or security documents; iv. Large scale mechanized mining of gems; v. Lotteries.

Conditions:

• A person resident outside Sri Lanka who is a party to a transaction permitted hereunder must make a declaration to the effect that such person is resident outside Sri Lanka on the share transfer form or share application form as applicable.

• The payment for shares in any issue or transaction permitted hereunder should be made only out of or into a SIA opened in a commercial bank of Sri Lanka in accordance with directions given by the Controller of Exchange in that behalf to commercial banks.

• A commercial bank, a licensed stock broker or any other person entrusted with the payment of capital monies such as sale proceeds of shares, dividends and commissions in respect of any transaction permitted hereunder shall make such payment only into or out of a SIA referred to in sub paragraph (b) above.

• The Secretary/ Registrar to a company in which the issue or transfer of shares to persons resident outside Sri Lanka are limited under 'limitations' shall not register the name of any person resident outside Sri Lanka or a citizen of a foreign State or their nominee as a share holder in such company if by such registration the limits specified shall be exceeded.

2011 (Jan to 5th Dec)

2010

Equity Equity Turnover (US $ Mn) 4,701.0 5,133.5 Domestic (US $ Mn) 4,202.7 4,183.1 Foreign (US $ Mn) 498.4 950.4Shares Traded (No. Mn) 24,128.4 18,489.2 Domestic (No. Mn) 22,784.1 16,684.5 Foreign (No. Mn) 1,344.3 1,804.7Trades (No.) 4,452,003 3,355,126 Domestic (No.) 4,340,133 3,225,041

35

Foreign (No.) 111,870 130,085Foreign Investor Contribution to Total Turnover (%)

10.6 18.5

Contribution to Total Market Turnover (%) Foreign Companies 8.0 15.3 Foreign Individuals 2.6 3.2 Local Companies 34.9 37.5 Local Individuals 54.5 44.0

15 Taiwan CTSA Highlights of Foreign Investment in Taiwan’s Stock Market Unit：US$100Million

FINI FIDI Year Accumulated Net

Inward RemittanceAccumulated Net

Inward Remittance

Total Accumulated Net Inward Remittance

Percentage of Market Value

Held by Foreign Investors

2008 1,246.89 0.76 1,247.65 28.98%

2009 1,512.50 0.93 1,513.43 29.80%

2010 1,656.49 1.09 1,657.58 31.19% Note: 1. Each foreign institutional investor (FINI) is allowed to invest directly in the stock markets without an

upper limit. The maximum ceiling of foreign exchange settlement for each onshore and offshore overseas Chinese and foreigner is US$5 million; and US$50 million for each onshore judicial person.

2. The accumulated net inward remittance of FINI has been adjusted by incorporating QFII and GFII.

16 Thailand ThaiBMA Foreign investors trading value during January to November 2011 captured by 47% of total trading value in Stock market. We calculated this number by gathering information from the Stock Exchange of Thailand.

17 Turkey TSPAKB Investor Breakdown of the Equity Trading Volume 2009 2010 2011/09Domestic Total 86% 84% 85%

Domestic Individual 67% 66% 68%Domestic Corporation 10% 10% 8%Domestic Institutional 9% 9% 9%

Foreign Total 14% 16% 15%Foreign Individual 0% 0% 0%Foreign Corporation 9% 11% 11%Foreign Institutional 5% 5% 4%

Source: TSPAKB

After increasing for five consecutive years from 2004 to 2008, the share of foreign investors’ exceeded 25% in 2008. Due to the global financial crisis, this trend reversed and foreign investors’ share decreased to around 15 % between 2009 and 2011/09. Foreign corporations, reflecting mainly financial institutions, are the major investor group among foreigners.

18 UAE (DIFC) DFSA The DIFC and DFSA laws and regulation do not impose limits on foreign investor ownership or trading. The international orientation of the NASDAQ Dubai, the DIFC exchange and clearing house, is evidenced by the variety of the country of origin of the entities with listed equity securities, i.e. Australia, US, Switzerland, South Africa, Bahrain, Jordan, Cayman Islands and India. Listed companies which operate subsidiaries in the UAE are required to comply with the UAE Companies Laws which stipulates foreign ownership limits. In respect of 3 equity securities listed on NASDAQ Dubai

Primary Listed Shares UAE Nationals % Foreign ownership DP World Limited More than 80% Not available Depa Limited 51.17 % 48.83 % Damas International Limited 61.45 % 38.55 %

19 Vietnam VBMA Foreign trading as % of market are 14.7% on HOSE and 2.6% on HNX. These are the statistics over the last 2 weeks.

36

IV – 3. Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market No. Country Name of

Organization Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market

1 Cambodia SECC n/a 2 China SAC The same as the case of Stock Trading 3 Hong Kong HKSA n/a 4 India ANMI As on June. 2011.

Foreign investment in the country's debt market stands at nearly Rs 15,000 crore in the current year so far, FIIs have so far this year made a net investment of Rs 14,969 crore in the debt market, as per information available with market regulator SEBI.

5 Indonesia APEI As of end of November 2011 the total of Corporate Bonds and Governments Bonds traded by foreign investors reached US$.9,86 bio which is about 1,32% of the total bonds issued of US$.749,2 bio.

6 Japan JSDA

18%

3%

15%

10%

2%2%

19%

1%

30%

City Banks & Long-Term Credit BanksRegional Banks

Trust Banks

Other Financial Inst.

Life & Non-LifeInsurance CompaniesInvestment Trusts

Foreigners

Corporation &IndividualsOthers

*Trading among bond dealers is excluded.

7 Kazakhstan FSC n/a 8 Korea KOFIA As of Nov. 2011 foreign has 86.7 trillion won values of listed bonds. It consists 7.2% of total.

(quoted from FSS) 9 Laos SECO Not applicable 10 Malaysia ASCM The table below indicates the amount of foreign investors trading in the debt securities for the first 3

quarters of 2011, as published by the Central Bank. (The share of foreign investors trading among overall trading amounts is not publicized by the Central Bank)

Bank Negara Bills / Bank

Negara Monetary Note

Malaysian Treasury Bills

Malaysian Government

Securities

Bank Negara Negotiable

Notes / Bank Negara

Monetary Note - Islamic

Malaysian Islamic

Treasury Bills

Government Investment

Issues

Bank Negara

Malaysia Sukuk Ijarah

Total

: of which foreign

currency denominated

Total

: of which foreign

currency denominate

d

Total

2011* Jan 34,395.6 960.9 75,195.4 3,906.2 80.0 500.2 - 9,412.0 6.1 4,785.5 - 129,235.7 Feb 37,612.5 1,130.1 79,401.5 3,671.0 55.0 536.2 - 10,696.9 6.1 4,761.4 - 137,864.6 Mar 45,873.6 1,271.6 80,835.8 2,403.0 112.3 822.2 13.0 10,709.8 - 4,775.8 - 146,817.1 Apr 64,319.0 1,302.8 83,081.8 7,176.9 99.0 1,441.2 65.0 10,756.6 - 4,852.5 - 173,095.0 May 65,092.3 1,217.3 87,863.4 10,085.5 99.0 1,427.2 65.0 10,797.0 - 4,820.9 - 181,467.6 Jun 64,464.5 1,325.9 91,607.8 10,437.5 50.0 1,072.0 65.0 10,510.9 - 5,019.9 - 184,553.6 Jul 63,983.6 1,208.6 95,358.5 9,909.8 30.0 688.9 65.0 10,294.8 - 4,965.8 - 186,505.1 Aug 61,063.4 1,216.1 98,746.4 8,804.2 100.0 904.2 65.0 10,014.6 - 5,105.0 - 186,018.8 Sep 54,154.1 1,128.2 92,702.1 3,378.4 130.0 586.7 65.0 9,993.9 - 5,174.6 - 167,313.0

End of Period

Public Sector (in RM Million) Private Sector (in RM Million)

Conventional Islamic Sukuk Conventional Islamic Sukuk

11 Mongolia MASD There are not OTC market. There have not share of foreign investors. 12 Philippines PASBDI Uncertainty in the United States, Middle East and Euro zone has redirected money flow into gold,

sovereign bonds and high quality corporate papers. Money flow into the Philippine bond market is robust as investors chase yields. Stable economic fundamentals, interest rate differentials, and the potential appreciation of the peso are positive factors. As of end-June2011, outstanding Philippine external debt approved/registered by the BSP stood at $61.4Bn, reflecting an increase of $476Mn (0.8%) from the $60.9Bn level as of end-March 2011. The creditor profile remained unchanged: official creditors (consisting of multilateral institutions and bilateral creditors) continued to have the largest exposures at 43.3% of total, followed by foreign holders of bonds and notes, 36.9%, and foreign banks and other financial institutions, 13.3%. The rest of the creditors (6.5%) were mainly foreign suppliers/exporters. The Philippines opened 2012 with a 25-year, US$-denominated benchmark bond to fund the country's economic stimulus projects. The government raised US$1.5 billion from bonds carrying an interest rate of

37

5.0% and maturity by January 2037. The offer was heavily subscribed attracting orders of $12.5B with the biggest demand coming from the US and locally, followed by the rest of Asia and Europe. This year the government plans to raise another $2.5 billion from overseas bond sales in 2012 and about 75 percent of its debt sales will be in the domestic market to help plug a deficit projected to hit 286 billion pesos ($6.54 billion) as the government steps up infrastructure spending to spur economic growth amid sluggish global demand.

13 Russia NAUFOR Corporate bonds on Exchange 2011 May June July August September October NovemberShare of Foreign Investors

18.2 % 17.5 % 17.6 % 16.1 % 12.0 % 9.2 % 8.5 %

Sub-federal bonds on Exchange 2011 May June July August September October NovemberShare of Foreign Investors

19.8 % 20.6 % 16.6 % 14.7 % 12.5 % 10.6 % 5.6 %

Municipal bonds on Exchange 2011 May June July August September October NovemberShare of Foreign Investors

3.3 % 5.3 % 0.1 % 26.6 % 2.3 % 2.0 % 17.7 %

Source: MICEX There are no statistical data of Bond Trading on OTC Market

14 Sri Lanka SEC Issue and transfer of debentures of companies incorporated in Sri Lanka to foreign investors are permitted in terms of a general permission granted in Gazette Notification No. 1681/11 of 22/11/2010 subject to certain terms and conditions.

Permission has been granted for the issue and transfer of convertible or non-convertible, redeemable or non-redeemable debentures denominated in Sri Lankan Rupees in a company classified as a specified business enterprise in terms of the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995, to foreign institutional investors, corporate bodies incorporated outside Sri Lanka, individuals resident outside Sri Lanka and Sri Lankans resident outside Sri Lanka, subject to the following terms and conditions.

Debt Corporate Debt

2011 (Jan to 1stDec)

2010

Turnover (US $ Mn) 23,489.2 0.7Trades (No.) 55 92Debentures Traded (No. 000) 26,722 693Government Debt Turnover (US $ Mn) 247.8 0.4Trades (No.) 6 18Debentures Traded (No. 000) 27,900 46,794

15 Taiwan CTSA Not available 16 Thailand ThaiBMA

From January 2011 to November 2011, foreign investors account for 15% of total trading. In term of bond holding, foreign investors accounted for only 6% of total outstanding value of Thai bond market or by 411,958 million baht.

17 Turkey TSPAKB In Turkey, banks generated around 90% of bonds and bills transactions totally both in exchange and OTC market. The table shows only the brokerage firms’ transactions breakdown. Investor Breakdown of the Bonds & Bills

38

Trading Volume (Exchange+OTC Market) of Brokerage Firms 2009 2010 2011/09Domestic Total 94% 95% 91%

Domestic Individual 10% 5% 5%Domestic Corporation 28% 38% 26%Domestic Institutional 56% 52% 60%

Foreign Total 6% 5% 9%Foreign Individual 0% 0% 0%Foreign Corporation 5% 5% 9%Foreign Institutional 0% 0% 0%

Source: TSPAKB

Foreign investors’ bond trading through brokerage firms is quite limited with a 9% share in 2011/09. These investors prefer to trade bonds through banks rather than brokerage firms.

18 UAE (DIFC) DFSA A large number of Sukuk (Islamic bonds) are admitted to the Official List of the DFSA. A list of such Sukuk is provided below. However the trading of such Islamic bonds takes place OTC and currently does not require reporting to the DFSA.

Type Date of Admission

Cherating Capital Ltd Sukuk July 6th, 2007

Dar Al Arkan International Sukuk Company Sukuk July 23rd, 2007

DEWA Funding Limited Sukuk June 18th, 2008

DIB Sukuk Company Limited Sukuk March 26th, 2007

DP World Sukuk Limited Sukuk July 3rd, 2007

Dubai Sukuk Centre Limited Sukuk June 18th, 2007

GE Capital Sukuk Ltd. Sukuk December 10th, 2009

Hilal Sukuk Company Sukuk November 4th, 2009

IIG Funding Limited Sukuk June 14th, 2007

JAFZ Sukuk Limited Sukuk December 7th, 2007

Paka Capital Limited Sukuk May 20th, 2008

RAK Capital Sukuk August 21st, 2008

Tamweel Funding Limited Sukuk April 2nd, 2008

Tamweel Sukuk Limited Sukuk July 29th, 2008

TID Global Sukuk 1 Limited Sukuk October 16th, 2006

19 Vietnam VBMA Share of Foreign Investors in the Bond Trading on HNX are 37.7% (from 12/19/11 to 12/23/11) and 4.8% (from 12/26/11 to 12/30/11)

39

IV – 4. Settlement and Clearing Systems for Securities Transaction (for Stocks, Bond, Derivatives Respectively) No. Country Name of

Organization Settlement and Clearing Systems for Securities Transaction

1 Cambodia SECC In Cambodia, the Securities Clearing and Settlement Facility are provided by Cambodia Securities Exchange (CSX). The services impose of registration of securities, settlement by book-entry transfer of securities and general shareholders notification.

2 China SAC Securities Law of the People's Republic of China stipulates that the securities registration and settlement institution is a non-profit institution providing centralized registration for securities transactions, custody and settlement services. Securities registration and settlement takes unified national operation mode and the securities registration and settlement institution shall establish central securities settlement accounts and capital settlement accounts. As offering net amount settlement services to securities transactions, it should require the participants to deliver the securities and funds in full-amount and provide delivery guarantees in accordance with the principle of equivalence on money and goods. The various types of settlement funds and securities collected by the securities registration and settlement institution under business rules must be deposited in special accounts of settlement and delivery, which only be used for settlement of securities transactions in accordance with business rules. Securities Registration and Settlement Management Measures stipulates that the securities companies which participate in the centralizing clearance and settlement of securities must apply for the clearance qualification, sign an agreement with securities registration and settlement institutions and definite the rights and obligations to both sides. Securities registration and settlement institution shall select the qualified commercial banks as settlement banks for funds pay business. The settlement on securities and capital practices settlement classification. If the clearance result is wrong caused by securities registration and settlement institution, settlement participants can ask for collection by the securities registration and settlement institution after performing settlement obligations and undertaking the losses suffered by settlement participants.

3 Hong Kong HKSA Both stocks and derivatives settlement and clearing are conducted by novation through the Hong Kong Exchange and Clearing. Stock transactions are settle T+2 through the Central Clearing and Settlement System (CCASS) and derivatives transactions are margined and mark to market daily through the Derivatives Clearing and Settlement System (DCASS)

4 India ANMI The Indian settlement system works under the T+2 compulsory ‘rolling-settlement cycle’ i.e. transaction on the trade day are settled on the second business day after the trade day. India has two Clearing Corporations; the National Securities Clearing Corporation (NSCCL) organized by the National Stock Exchange and the Bank of India Services Limited (BOISL) set up by the Bombay Stock Exchange. In case the settlement is not completed on T + 2 day, the shares are auctioned. The auction is done on T + 3 day and auction payout is done on T + 4 day. The auction standard will be T + 1 day price for NSE and T day price for BSE. Default in auction payout then the closing out price would be 20% higher than the standard auction price. All trades on the exchange platform are in the dematerialized form. There are two Depositories in India viz the National Securities Depository Limited (NSDL) organized by the National Stock Exchange and the Central Depository Services Limited (CDSL) set up by the Bombay Stock Exchange. Final settlement of trades takes place on the depositories in the book entry format. Trade Guarantee Fund: - SEBI requires the exchanges to have a system of guaranteeing settlement of trades or set up a Clearing Corporation to take up counter party risk to ensure that payment default by the members does not disturb the market equilibrium.

5 Indonesia APEI In Indonesia, settlement, custodian and clearing of securities transactions in the exchange are handled by the Indonesian Central Securities Depository (KSEI) and the Indonesian Clearing and Guarantee Corporation (KPEI). KSEI involvement includes: All transaction settlement and securities custodian handled by KSEI through a system called C-BEST (Central Depository and Book Entry Settlement System) for all stocks, bonds as well as derivative products. KPEI differentiate its clearing system based on products transaction, they are:

1. For Stock Transactions: the clearing system is processed through e-CLEARS (electronic Clearing and Guarantee System).

2. For Bonds Transactions: e-BOCS (electronic Bond Clearing System) is used to support bond clearing and settlement transactions.

3. For Derivatives Transactions: a netting method is used to complete the clearing, to guarantee, and to complete the related transaction settlement of Securities Index Future Contracts as well as Stock Option Contracts through its R-MOL (Risk Monitoring On-Line) and Cash Management Systems.

6 Japan JSDA In Japan, the settlement services for securities transactions are provided mainly by Japan Securities

Depository Center, Inc. (JASDEC). Its services consist of the registration of securities, settlement by book-entry transfer of securities, custody and its related operations such as general shareholders notification, conversion agency service (CB), dividend payments and proxy services for foreign stocks. In addition to those services, JASDEC provides settlement matching services, and pre-settlement matching services. On the other hand, Japan Securities Clearing Corporation (JSCC) provides clearing services such as obligation assumption, netting of cash securities positions, settlement instruction to CSDs/Settlement Banks for securities/cash, and settlement guarantees In Japan, the settlement period for stock transactions is T+3.

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The Bank of Japan settles JGB transactions.

7 Kazakhstan FSC In Kazakhstan, the settlement services for securities transactions are provided mainly by the Central

depositary. Its services consist of the following functions:

- render to deponents services associated with the nominal holding of financial instruments; - carry out settlements in financial instruments in relation to transactions concluded in the

organized securities market and in relation to transactions concluded in the over-the-counter market with the participation of its deponents (between deponents themselves; between a deponent on the one hand and a client of another deponent on the other hand; between clients of two different deponents), as well as other persons carrying out broker and (or) dealer activities without an appropriate license in accordance with legislative acts of the Republic of Kazakhstan;

- carry out depository services with regard to state securities in accordance with the Republic of Kazakhstan legislation and its compendium of rules;

- render consultative, information services and other types of services not contradicting the Republic of Kazakhstan legislation;

- clearing for deals in financial instruments in form of financial instruments and (or) in money. 8 Korea KOFIA All trading orders submitted to the KRX by member firms shall be traded in accordance with the matching

principles specified in business regulations of the KRX. Immediately after the transaction, KRX shall inform (in electronic format) member firms of the trading results which shall then be notified to respective customers.

Customers shall conduct settlement of their transaction with member firms by deposit of money or relevant securities for buying or selling securities on T+2 (exact time for settlement deadlines are set by each member firms). Entire process of a trade will be complete when every member firms complete their required settlement transaction with KRX (as a CCP) by 16:00 of T+2.

KRX shall, as a clearing institution, perform transaction confirmation, debt acquisition, deduction, confirmation of settlement securities, settlement item, and settlement amount, settlement execution guarantee, follow-up measures on settlement failure, or settlement instruction as a result of transactions on the securities market and derivatives market.

9 Laos SECO In Lao PDR, the settlement and clearing services for securities transactions are provided mainly by settlement and depository under Lao Securities and Exchange.

Trading, Clearing and Settlement Flow Chart

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10 Malaysia ASCM The settlement services for securities transactions are provided by Bursa Malaysia Depository. Its services consist of the registration of securities, settlement by book-entry transfer of securities, custody and its related operations such as general shareholders notification, electronic dividend payments, electronic share application and provision of depositors’ records service. In Malaysia, the settlement period for securities transaction is T+3. On the other hand, Bursa Malaysia Securities Clearing and Bursa Malaysia Derivatives Clearing provide clearing services for securities and derivatives transaction respectively. The clearing services include netting of cash/asset positions, settlement instruction to settlement banks for asset/cash, and settlement guarantees. Government and corporate bonds are settled and cleared at the Central Bank’s Real Time Electronic Transfer of Funds and Securities (RENTAS) settlement system.

11 Mongolia MASD Settlement and Clearing systems make transactions for stocks and bonds under instruction of cash trading by Mongolian stock exchange. There has no derivatives

12 Philippines PASBDI The Securities Clearing Corporation of the Philippines (SCCP), a wholly-owned subsidiary of PSE, was established to ensure the orderly settlement of equity trades executed at the PSE. SCCP acts as a Central Counterparty, and therefore guarantees the settlement of all PSE trades up to the extent of its Clearing and Trade Guaranty Fund (CTGF). Clearing Members are limited to the Trading Participants of the PSE. There are 132 active Clearing Members, of which 122 are Local, and 10 are Foreign. The settlement period is T+3.

13 Russia NAUFOR Market competition and objective integration processes resulted in two leading infrastructure centres – MICEX Group and RTS Group which today form the Russian securities and derivatives market. 1. MICEX Group is a vertically-integrated trading and clearing infrastructure which supports several trading modes: • Public securities market - order-driven market, full preliminary deposit of assets, Т+0 DVP settlement cycle; • Basic trading mode - order-driven market, full preliminary deposit of assets, Т+0 DVP settlement cycle; • Negotiated deals mode - non-anonymous trading mode, opportunity to choose a clearing date (from Т+0 to Т+30) with total provision control or without a provision control; • Repos trading mode; • Derivatives market (a little numbers of transactions). 2. RTS Group is a vertically-integrated trading and clearing infrastructure that supports several trading modes: • Exchange market - order-driven market, full preliminary deposit of assets, Т+0 DVP settlement cycle, quotes and settlements in rubles; • RTS Standard – order-driven market, partly preliminary deposit of assets, Т+4 DVP settlement cycle, quotes and settlements in rubles; • RTS Classica – non-anonymous trading mode, the absence of a preliminary deposit of assets, quotes in US dollars, and the opportunity to choose a clearing date (from Т+0 to Т+30); • Derivatives market FORTS - order-driven market, clearing and delivery are performed at the end of contract circulation, quotes and clearing are in rubles. Now RTS Group and MICEX Group are in the process of consolidation. The Russian stock market has two alternative ways of equal legal force to account rights to securities: on personal accounts in a register system and on deposit accounts in depository.

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Depositaries in Russia, according to the world practice, are divided into clearing and custodian depositaries. At the end of 2011 the settlement system of Russia was reformed. In 2012 will be created a Centralized depository, which will have an exclusive status of clearing depository.

14 Sri Lanka SEC Central Depository Systems (Pvt) Ltd (CDS) is the sole Clearing House in Sri Lanka which is a fully owned subsidiary of Colombo Stock Exchange. CDS provides depository facilities and clearing services for securities traded on the Colombo Stock Exchange. It also provides a safe keeping facility and an electronic record of all listed securities that are dematerialized. In Sri Lanka settlement period for stock transactions is T+3. There are four banks as settlement Banks of the CDS.

15 Taiwan CTSA With the growth of cross-industry operations in Taiwan’s financial sector, there has been a steady increase in the volume of securities, bond and bill transactions handled by both securities firms and bill dealers. In July 2005, in order to ensure a higher level of convenience for market participants, avoid duplication of investment and keep up with the trend towards back-office integration among the world’s leading stock markets, two organizations (TSCD & DIDC) merged into TSCD. It is now recognized as the Taiwan Depository & Clearing Corporation (TDCC). It was anticipated that the integration of settlement, clearing and central depository platforms. The major settlement and clearing system listed as following: Clearing method：TWSE adopts multilateral net settlement to produce the netting amounts of receivables and payables of securities and funds between securities firms and TWSE. Principle of two-tiered settlement：The clearing and settlement between the securities firm and its clients, and between the securities firm and TWSE are operating separately in accordance with the principle of two-tiered settlement. Book-entry system：Since 1995, the transfer of securities between securities firms and its clients, and between securities firms and TWSE, have to be processed through book-entry system operated by TDCC (the centralized depository). The funds between securities brokers and its clients have to be processed through transference among the accounts in the settlement banks, while the funds between securities brokers and clients entrusting custodian banks to complete the settlement obligations can be processed via wiring. Same-day clearing and settlement cycles：TWSE implements same-day clearing method. The settlement day is T+2. In case of block trade, investors can choose the settlement day to be either T+2 or T. DVP：All trades in TWSE's market are locked-in ones. The settlement of funds and securities from securities firms to TWSE is final and irrevocable.

16 Thailand ThaiBMA Stock Clearing and settlement of stock exchange transactions are centralized at Thailand Securities Depository Co. (TSD) and Thailand Clearing House Co.(TCH), subsidiaries of the Stock Exchange of Thailand (SET), and DVP with net settlement are used for stocks. Stock settlement convention is T+3. Bond In Thailand, clearing and settlement of bond transactions are centralized at Thailand Securities Depository Co. (TSD), a subsidiary of the Stock Exchange of Thailand (SET). The Bank of Thailand (BOT) acts as the registrar for government bonds and is responsible for the operation of BAHTNET, a high value transaction clearing network. Clearing and settlement of government transactions are done on DVP and real time gross settlement basis (RTGS). Bond Settlement convention is T+2 but can be varied upon counterparty agreement. Derivatives Exchanged traded derivatives are listed and traded on the Thailand Futures Exchange Co. (TFEX), a subsidiary of the Stock Exchange of Thailand. Clearing and settlement of these derivatives transaction are done through Thailand Clearing House Co., Ltd. (TCH), also a subsidiary of the Stock Exchange of Thailand. The clearinghouse provides a range of services related to the registering, clearing and settling of transactions executed on the exchange, the guaranteeing of contracts and the managing of risks of its members. The most important role of the clearinghouse is to serve as counterparty to every transaction.

17 Turkey TSPAKB In Turkey, while Takasbank is responsible for settlement and clearing services, Central Registry Agency serves as the central depository for the dematerialized capital markets instruments. Takasbank is a specialized bank dedicated to securities services in Turkey. In addition to settlement and clearing services, Takasbank acts as the central counterparty and clearing house for the Turkish Derivatives Exchange and operates the Takasbank Money Market, an OTC market where ISE members can lend and borrow funds. The Central Registry Agency Inc. (CRA) is the only central depository for all dematerialized capital market instruments. It was established in 2001 as a private company. The dematerialization process was completed in 2006 for equities and in 2007 for mutual funds and corporate bonds. The main functions of the CRA are to dematerialize and register capital market instruments and the rights attached in electronic form, with respect to issuers, intermediary institutions and rights holders, and manage the Investors’ Protection Fund (IPF). The IPF was established in 2001 to cover the obligations to investors of bankrupt brokerage firms and banks, with respect to equity transactions. Equities The settlement of equities and cash is done on T+2 by Takasbank, through delivery-versus-payment (DVP) system. The securities settlement operations are carried out via Takasbank Settlement Pool Account with the Central Registry Agency (CRA). CRA and Takasbank systems are fully interlinked in real time, so securities transfers are reflected in the CRA instantaneously. Settlement is realized along with the details transferred from the CRA.

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The custody accounts are held with the CRA. Intermediaries have a settlement pool account besides their own portfolio account and client sub-accounts. The cash accounts are held at Takasbank. At the end of each trading day, ISE transmits details of all transactions to Takasbank. Takasbank multilaterally nets the settlement positions, determines the obligations of each broker in each security, and calculates their net cash position. The net settlement position on client basis is transmitted to CRA on the trade day (T). Details of netting are available to brokers electronically on T, showing also settlement amounts due. At the end of the day, the securities of the delivering clients are blocked automatically by the CRA for settlement purposes. On T+1, net settlement records that are checked by the CRA are made available to brokers electronically. On T+2, the securities of the delivering clients are transferred from the blocked settlement account to the settlement pool account of the broker within the CRA system. Securities are transferred to client sub-accounts by the CRA. Bonds & Bills Clearing and settlement is handled by Takasbank. The settlement date for transactions is T+0, unless otherwise agreed between the parties. On the other hand, for the foreign currency denominated securities, settlement date is T+3. The settlement of government debt securities traded in the organized and OTC markets are done through the Electronic Securities Transfer System operated by the Central Bank. Takasbank has a securities account with the CBRT in order to facilitate the settlement of government debt securities. After a trade, the ISE issues confirmations to both parties and to Takasbank. Takasbank multilaterally nets all trades for each ISE member for each security traded and for cash. Netting results are reported to the members electronically on trade day. Only trades done before 14:00 hrs can be settled on the same day. Derivatives The clearing and settlement of transactions are executed mostly on a cash settlement basis. TurkDex introduced physical delivery for currency contracts in 2009 and for live cattle contracts introduced for the Feast of Sacrifice in 2011. Takasbank acts as the central counterparty and guarantees the settlement of transactions. But the guarantee is limited to the collateral taken from the members and the size of the guarantee fund. Trades are executed on a client account basis, which means that margins are also monitored on account basis. However, although the margins are followed on account basis, clearing members are responsible for the margin calls. Everyday, after the announcement of daily settlement prices of contracts by TurkDex, Takasbank starts marking-to-market on account basis. If the collateral falls below the maintenance margin, a margin call is announced by Takasbank. If the collateral is above the maintenance margin in an account, but the cash margin is negative after the losses are deducted from the cash collateral, the relevant member shall be required to compensate for the negative balance by a margin call. While daily losses are deducted from the cash collateral on the same day (T+0), profits are added to the cash collateral on the following day (T+1).

18 UAE (DIFC) DFSA The DIFC has 2 exchanges, Dubai Mercantile Exchange (DME) and NASDAQ Dubai. The rest of the United Arab Emirates has 3 exchanges, Abu Dhabi Securities Exchange (ADX), Dubai Financial Market (DFM), and Dubai Gold and Commodities Exchange (DGCX). DFSA regulates DME and NASDAQ Dubai as they are established in the DIFC. The legal and regulatory environment of the DIFC exchanges is aligned to meet international best practice. NASDAQ Dubai was licensed from in Sept 2005 for the financial service of operating and exchange and operating a clearing house in respect of shares, debentures, warrants, certificates, units, rights in those investments, designated investments, options (but not on commodities) and futures (but not on commodities). DME was licensed in April 2007 for the financial services of operating an exchange in respect of commodity derivatives. Following the consolidation with DFM on 11th July, 2010, NASDAQ Dubai has outsourced its trading, clearing, settlement and custody functions for equities to DFM. Trades, for instance, have moved from a T+3 to a T+2 settlement cycle of DFM, whilst settlement timings have also changed in line with DFM. Trading hours of NASDAQ Dubai for the equity market from Sunday to Thursday are now from 10.00 to 14.00 for continuous trading whilst the pre-opening auction period is from 9.30 to 9.55. In terms of clearing, NASDAQ Dubai remains the central counterparty (CCP) for the clearing and settlement of trades in NASDAQ Dubai equities to the extent that if there is a payment default, the bank guarantee defaults, CCP will meet the obligations of its member. DME lists the DME Oman Crude Oil Futures Contract, which is an exchange traded contract for crude oil price transparency in the east of Suez crude markets. Additionally, DME lists the DME Oman Crude Oil Financial Contract, which is settled with reference to the benchmark DME Oman Crude Oil Futures contract. All trades executed on the DME are cleared through and guaranteed by NYMEX, a member of the CME Group, which is regulated by the U.S. Commodity Futures Trading Commission (CFTC). DME markets trade electronically, opening at 1800 (EST) and closing 1715 (EST) the next day, Sunday to Friday to mirror the trading hours for NYMEX products on CME Globex.

19 Vietnam VBMA The HNX has the “Electronic Bond Trading” system or EBT, which is a modernized and advanced alternative in bond trading. EBT allows only members of HNX to enter the trading bonds by EBT system. This system is very convenient and efficient that can facilitate electronic negotiation, payment by BIDV and settlement by VSD.

Bond-Trading operation process as in Timely Basis

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Transaction or dealing date (T-n) • Front office negotiates and makes deals with counterparty.

• Back office verifies deals with internal front office, confirms deal with counterparty, and sends payment to BIDV as for ensuring cash availability or checks with VSD to make sure that bonds are available for selling.

• Transactions, confirmation could be done within the same day as trading date (T) or up to a week before trading date (that is “n” could be a number from zero to 7) or even longer period sometimes. Note that the larger number of n means that there could be more risk in settlement if the bond market is very volatile.

Trade date (T) • Back office key in dealing details, as put through, into the Electronic bond trading system (EBT).

Settlement date (T+ 1) • The EBT will automatically notify the BIDV and VSD to make the payment and transfer

securities. Processing timing for bond dealing, confirmation, payment, and settlement depends on agreement among the parties and has to be done within office hours of three main organizations, i.e., HNX, BIDV and VSD, which are summarized in the following table, and before entering deals into the EBT system to prevent a failed settlement.

Trading Date T Payment date: T+1 Settlement date: T+1

Morning Working Time 8:30 am - 11:30 am

Afternoon Working Time 13:30 pm - 17:00 pm

Organizations involving in Bond Trading in Exchange

Trading Time 8:30 am - 11:00 am

Hanoi Stock Exchange (HNX) Vietnam Security Depository (VSD)BIDV for Cash Payment

Working Time 8:30 am - 16:00 pm

Duties: Electronic Bond Trading (EBT)

Duties: Securities Registration and Depository Securities Clearing and Settlement

Duties: Cash settlement or payment

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IV – 5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.) No. Country Name of

Organization Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.)

1 Cambodia SECC n/a 2 China SAC At present, China’s equity markets with the features and functions of OTC are consisted of Agency Share

Transfer System and Regional Markets of Property Right Transaction. CSRC is committed to developing the Agency Share Transfer System into a national and unified OTC market under the supervision of CSRC. At present, The number of regional markets of property right transaction has more than 200. The regional markets were established by the functional departments of local government to meet the demand for the state-owned enterprise reform and the stated-owned assets transformation in the transition process from planned economy to market economy. The regional markets have played a positive role in solving the transfer of stated-owned assets, restructuring and financing, etc. As a large number of state-owned capital exited in competitive fields, the trading volume of state-owned property right has reduced tremendously. Meanwhile, the multi-level capital market system is imperfect, the demands of small business finance and the property rights transfer are unmet, in these case, a lot of regional markets of property right transaction expand there services to small and medium enterprises. The regional markets provide listing platform to meet the demand of equity transaction, and other financing services. Currently, the function definition on the regional markets of property right transaction is unclear. The markets lack of legal basis and a good monitoring mechanism. It is difficult to unite the scattered markets throughout the country. Because of the above reasons, it is difficult to form a unified national OTC market based on the regional markets. In July 2001, approved by CSRC, Agency Share Transfer System (hereinafter referred to as “Agency System”) was set up to solve the historical issues. Agency System is under self-regulation by SAC. In 2002, Agency System began to provide service of share transfer for delisting companies. To support the development of high-tech enterprises, in January 2006, Agency System began to provide service of share transfer by quotation for the non-listed limited companies registered in Zhongguancun Science Park. By the end of November 2011, Agency System has 146 listing companies totally, including 8 companies from STAQ and NET, 44 delisting companies, and 94 quoted companies from Zhongguancun Science Park. 59 security companies have the business qualification in Agency System. Cumulative trading volume over the previous years is 8.8 billion shares, value of all trading is 19 billion Yuan.

3 Hong Kong HKSA Off-Exchange transactions are not the mainstream mode of transaction and are limited only to professionals and institutional investors mostly traded in structured products. Nevertheless, off-exchange platforms such as Scoach and StockMax (developed by HSBC for dark pool trading) recently show interest in entering the Hong Kong retail investor market.

4 India ANMI Off-Exchange transactions are few in number. Such transactions take place directly between the two parties who give direct instructions to the Depositories to conduct the transactions. These transactions mainly take place in case of an open offer or takeover of a company. Such transactions do not require reporting to the exchange. In case the off-exchange transaction is executed through a registered stockbroker on a principal-to-principal basis, the stockbroker must report such transactions to the Exchanges.

5 Indonesia APEI Bond trading in Indonesia is mostly on the Over The Counter (OTC) basis. All OTC trading is requiring reporting to Indonesia Stock Exchange (IDX) through Central Trading Platform (CTP) within 30 minutes.

6 Japan JSDA Since the 1998 abolishment of the obligation to trade stocks on exchanges in Japan, off-exchange transactions have been gradually increasing. However, in Japan, unlike US and European market, most stock orders are still executed through the stock exchanges and market fragmentation is not so notable. Having said that, the PTS (proprietary trading system) operators are gradually entering the Japanese market as order placement through DMA, algorithm trading, etc. grow.

7 Kazakhstan FSC for the 1st quarter of 2011 - 28.6 bln. USD for the 2nd quarter of 2011 - 23.7 bln. USD for the 3d quarter of 2011 - 19.5 bln. USD

for the 4th quarter of 2011 - 18.7 bln. USD Those figures include all the transactions (stocks, bonds, derivatives, etc.)

8 Korea KOFIA KOFIA manages and operates the FreeBoard, the over-the-counter market that was created in 2005. Stocks not listed on KRX market are eligible to be listed on the FreeBoard, and KOFIA is responsible for listing and delisting such stocks. In additions, KOFIA holds the authority to propose or revise the rules and regulations governing the market’s operation and disclosure requirements. KOFIA also manages and administers the OTC bond market in Korea. Since most bonds in Korea are traded on the OTC market, KOFIA plays an important role in this secondary market. To enhance the transparency of OTC bond trading, KOFIA provides market participants with essential information such as the details of bond trading, mark to market yields, representative bond yields, and final quotation yields for different bond types on its website. To further enhance investor protection, the ATS system was introduced in 2010 to facilitate greater transparency and more transactions in OTC bond trading.

9 Laos SECO Not applicable 10 Malaysia ASCM Equities and derivatives transactions in Malaysia are traded on the Exchange. Unlisted debt securities

are however traded over the counter and most of the debt securities available in the market are unlisted. The Electronic Trading Platform (ETP) operated by the Central Bank facilitates over the counter trading transactions. ETP is a centralized database on Malaysian government and corporate debt securities that is

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integrated with Fully Automated System for Issuing/Tendering (FAST). ETP provides information on terms of issue, real-time prices, details of trades done, and supplies relevant news on debt securities issued by both the government and the private sector.

11 Mongolia MASD Currently in Mongolia there is no such type of transaction. 12 Philippines PASBDI In the Philippines, most stock transactions are still executed through the stock exchange due to the lower

transaction cost relative to OTC transactions. The government has been supportive of the stock market as an avenue for investing by completely abolishing Documentary Stamp Tax (DST) for exchange trades.

13 Russia NAUFOR There are no legal restrictions on OTC transactions in Russia, though there are no matching utilities like PTS, ATS, MTF.

14 Sri Lanka SEC At present Sri Lanka does not have any Off-Exchange Transactions. 15 Taiwan CTSA According to the article 150 of Securities and Exchange Act of Taiwan, the trading of listed securities shall

be conducted on a centralized securities exchange market operated by a stock exchange except in the following situations: 1. transactions in government bonds. 2. due to the operation of an act or regulation, the transacting parties are unable to acquire or dispose the ownership of the securities through trading on the centralized securities market. 3. direct private transfer of securities not in excess of one trading unit, and the interval between any two such transfers is not less than three months.

4. other transactions in conformity with the regulations prescribed by the Competent Authority. 16 Thailand ThaiBMA Bond trading in Thailand is mostly on the over-the-counter (OTC) basis. Although an electronic trading

platform is offered by the Stock exchange to be an alternative for trading, it accounts for only less than 5% of total trading. Inter-dealer trading is actively done through voice box from the two main inter-dealer brokers. All trading (no matter where it takes place) is required to report to ThaiBMA within 30 minutes. ThaiBMA then disseminates these executed transactions to the market to provide for intraday market movement information.

17 Turkey TSPAKB According to the Article 55 of the “Regulations Pertaining to the Foundation of Stock Exchanges and their Principles of Operation”, the buying and selling of listed stocks and/or securities on the exchange is the main rule. However, upon the proposal of the relevant exchange and the necessary arrangements by the CMB, authorization may be granted for off-exchange trading. Unless an exception has been made to such trading, exchange members cannot trade securities of their customers’ off-exchange. Currently; intermediaries must trade equities, rights coupons and exchange-traded funds, and the derivatives based on equities or the equity indices on the exchanges. However, they can trade bonds & bills and derivatives based on assets other than equities or equity indices off-exchange, with the obligation to register off-exchange transactions to the ISE. Registration fee for off-exchange transaction is higher compared to the exchange traded ones.

18 UAE (DIFC) DFSA Securities listed on NASDAQ Dubai can also be traded over the counter, (OTC). The activity of operating an alternative trading system (ATS) is considered a financial services activity that could only be carried on by an Authorised Firm in the DIFC. As an Authorised Firm an ATS provider will have to comply with the regulation such as standards for applicants, requirements on conduct of business, systems and controls, monitoring, etc. However, there is no ATS which is operating at the moment in the DIFC.

19 Vietnam VBMA n/a

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IV – 6. Share of On-line Trading No. Country Name of

Organization Share of On-line Trading

1 Cambodia SECC n/a 2 China SAC In March 2000, CSRC promulgated “Interim Measures for Online Securities Commission” to regulate and

promote the development of online transactions. Subsequently, the development of online trading system is very fast. By 2006, the volume of transactions conducted via the Internet reached more than 40%. The proportion has already been averagely more than 70% at present, much higher securities companies reached more than 90%. On-line trading becomes the main trade way now.

3 Hong Kong HKSA Proportion of retail online trading in 2009/2010 reaches 27% of total retail investor. Accounted for 7% of total market turnover in 2009/2010. (Source : HKEx Cash Market Transaction Survey 2009/10)

4 India ANMI All transactions in India take place online through the exchanges. There is no floor trading in India. The exchanges offer connectivity to its trading members through V-SAT connectivity or through leased lines. The members in turn extend connectivity to trading terminals across India through computer-to-computer links (CTCL) again through V-SAT connectivity or through leased lines. The broker using his computer link directly executes transactions on the exchange. Besides Brokers are permitted to offer internet based trading to their clients. Securities and Exchange Board of India (SEBI) in August granted the brokers registered with SEBI to provide Internet-based trading are eligible to provide securities trading using wireless technology (Mobile based trading). This is the next push forward to encourage increased retail participation and has started in India.

5 Indonesia APEI Currently, around 58 brokerage houses (around 48% of all the 120 brokerage houses in Indonesia) offer On-Line Trading System for their investors.

6 Japan JSDA Japan has witnessed a rapid increase in the number of Internet users and the PC market penetration rate since the latter half of the 1990s. In addition, in October 1999, the Japanese stock market entered a new era of complete liberalization of commissions and fees in the stock brokerage business. And these two factors have led to the birth of online brokers in Japan. Since then, competition among online brokers has been severe. Most of them cut commissions and fees in stock trading significantly to increase their customer base. In October 1999, there were around 300,000 internet brokerage accounts in Japan, but by March 2009, this number had reached 15 million accounts. If we only consider the retail equity market, 90% of stock trading is now conducted over the Internet. Currently, the top 6 online brokers (SBI, Monex, Matsui, Rakuten, Kabu.com, Nomura/Joinvest) account for 75% of all Internet trading.

7 Kazakhstan FSC Nowadays the average level of on-line trading is about 0.01%. 8 Korea KOFIA The share of transaction through the Home Trading System is 41% in KOSPI market and 75% in

KOSDAQ market. It is worth noticing that percentage of HTS is decreasing while that of wireless phone (smart phone) is increasing. (data from KRX) [KOSPI] % Securities

Company Terminals

Wire terminal(telephone)

Wireless terminal(smart phone)

HTS Etc.

2009 73.95 0.54 1.38 47.71 6.40 2010 47.65 0.44 1.98 42.79 7.11

2011.1~8 46.73 0.38 4.17 41.04 7.65 [KOSDAQ] % Securities

Company Terminals

Wire terminal(telephone)

Wireless terminal(smart phone)

HTS Etc.

2009 13.72 0.77 2.55 81.43 1.49 2010 14.77 0.69 3.80 79.30 1.42

2011.1~8 14.53 0.60 7.90 75.43 1.51 9 Laos SECO Not applicable 10 Malaysia ASCM Since the advent of online trading in Malaysia, the growth has been steadily increasing. Currently, online

trading contributes to about 16% of the total trades executed through Bursa Malaysia. It was also reported that 18% to 20% of total retail transactions were performed through online broking.

11 Mongolia MASD Currently in Mongolia there are no online broker and dealer trading. 12 Philippines PASBDI In the Philippines, online TPs haven’t gained significant market share yet. Among the 132 active TPs,

only 9 have online trading facility. These TPs cater mostly to retail clientele belonging to the younger generation. While the goal of capturing a considerable market share, the online TPs are designing an attractive online trading. Most of them offer them low commission charges, intensive investor education and are equipped with research tools/analysis. One of the online TPs also decided to go public. The PSE will provide an online trading infrastructure to 132 brokers by 2013, currently we have 35,000 online trading accounts with a market potential of 400,000 to 500,000 new accounts.

13 Russia NAUFOR There are no official statistics of number of internet brokerage accounts. It is believed that the rate of on-line trading on securities market is about 70-80 per cent.

14 Sri Lanka SEC At present 20 broker firms provide internet trading facilities for investors. Internet trading is still not

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popular among Sri Lankan investors. The contribution of Internet Trading is less than 5% of the Total Market Turnover.

15 Taiwan CTSA End of 2006, on-line trading accounted for 16.2% of 101.2million total number of transactions End of 2008, on-line trading accounted for 18.8% of 135.6million total number of transactions End of 2010, on-line trading accounted for 32.7% of 159.8million total number of transactions End of 2011, on-line trading accounted for 33.9% of 149.2million total number of transactions

16 Thailand ThaiBMA Not sure of On-line trading definition. If it means electronic trading platform offered by the Stock Exchange of Thailand, it accounts for less than 5% of total trading. Some traders use messaging likes Reuters, Bloomberg but they still have to confirm just like OTC.

17 Turkey TSPAKB Internet Transactions of Brokerage Firms 2009 2010 2011/09Equities No. of Active Internet Investors 262,969 297,486 354,443No. of Trades 30,997,052 39,954,020 42,177,261Internet Trading Volume (US$ 1.000) 88,928,523 169,732,385 273,334,276Bonds and Bills No. of Active Internet Investors 409 240 141No. of Trades 2,503 1,540 775Internet Trading Volume (US$ 1.000) 11,916 16,671 12,082Futures No. of Active Internet Investors 7,611 7,135 6,442No. of Trades 5,810,525 4,917,918 5,242,829Internet Trading Volume (US$ 1.000) 97,941,045 177,853,806 214,360,200Warrants No. of Active Internet Investors 457 3,713No. of Trades 31,435 854,735Internet Trading Volume (US$ 1.000) 64,772 615,919Source: TSPAKB

In Turkey, brokerage firms are allowed to trade in each type of markets. On the other hand, while derivatives brokerage firm can trade only in futures market, banks are allowed to trade both in futures and bonds & bills markets. The table shows the only the brokerage firms’ (including derivatives brokerage firms) transactions. Internet transactions in the market have an increasing share in total. While the share of the internet transactions in equities was 0.2% in 1999, it reached to 24% at the end of the 2011/09, indicating a historic high level. Internet trading’s share in the derivatives exchange rose from 5% in 2006, to 38% at the end of the 2011/09, and online trading became the major channel for futures transactions.

18 UAE (DIFC) DFSA Members of the exchanges are connected electronically to the trading platforms of the exchanges. Orders to the members can be made either electronically, through voice devices or written instructions. Some members provide their customers with online trading access.

19 Vietnam VBMA For trading the HNX has the “Electronic Bond Trading” system or EBT, which allows only members of HNX to enter the trading bonds by EBT system. This system is very convenient and efficient that can facilitate electronic negotiation, payment by BIDV and settlement by VSD. Trading listed bond process in OTC is almost exactly the same as the first type except that it uses conventional methods of negotiation. After the deal is done, both sides of the traders will put the transaction through the EBT system.

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V. Challenges for Securities and Capital Market V – 1. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a Whole No. Country Name of

Organization Major Recent Incidents and/or Challenges in Securities and Capital Market as a whole

1 Cambodia SECC 1. Systematic Risks (Market Risk) 2. Investor Awareness about the complex financial products

2 China SAC Major Recent Incidents：

1. In December 2011, CSRC, PBOC, SAFE jointly released “Trial Measure for Fund management companies, securities companies RMB Qualified Foreign Institutional Investors in domestic security investment”.

2. In November 2011, National Development and Reform Commission released “Notice on promoting the standardizing development of equity investment enterprises”. This is the first national governance rules for equity investment enterprises. It indicates the development of China's equity investment (fund) enterprises enters into the institutionalized orbit.

3. November 2011, the State Council issued “The decision to inspect and rectify all types of transaction market for guarding against financial risk”. Except the security exchange established legally or the trading places authorized by State Council for financial product, any trading place can’t spit rights and interests into equal share for public release, can’t adopt by ways of bidding, market maker and other centralized trading, can’t continuously list the rights and interests by standardized units; the time-gap between buying and selling for a investor trading on the identical variety can’t less than 5 trading days; Except that law, administrative regulations have corresponding rules, the rights and interests holder can't exceed 200 people totally.

4. In October of 2011, CSRC released “The rules for listed company to establish inside information insiders registration management system”. It stipulates that listed companies should establish inside information insiders registration management system.

5. CSRC revised “The Pilot Management Measures on Margin Purchase and Short Sale Business of Securities Companies”. It indicates that Margin Purchase and Short Sale Business of Securities Companies have transferred from pilot to a formal routine. In October 2011, CSRC released “The Regulatory Pilot Measures for Refinancing Margin Purchase and Short Sale business”.

Challenges: For a long time, China has formed a financing structure that the indirect financing is predominated, which leads to enterprise financing excessively dependent on bank credit. It results in the risk of macro-economic volatility highly concentrated in the banking system. During 9 years from 2002 to 2010, the fund raised from exchange market of China for Chinese enterprises is 3.28 trillion Yuan totally, only 8.5% of the increment of bank loan for the same period.

3 Hong Kong HKSA The market turnover of derivative warrants and callable bull/bear contracts combined exceeds 40% of total market turnover at the end of 2011 compare to under 30% at the beginning of 2011. Many believe that this high proportion of derivative products is not a healthy trend for retail investors and smaller listed companies will become more difficult to raise capital through the market.

4 India ANMI - The year 2011 has been a relatively slow for Indian capital market as compared to year 2010. While the first half of the year had a reasonable volume of capital raisings, the second half has witnessed the Indian markets reacting to global trends such as sovereign credit problems in Europe, Standard & Poor’s downgrade of the US credit rating, and the resultant lack of direction across the world’s equity and debt markets.

- A large portion of the capital market is concentrated in the eight to ten large cities of India; there is a need to deepen the access of the capital market to small markets and rural areas.

5 Indonesia APEI The main challenge in security market are:

• Globally economic recession • Improvement of the security market, such as: Investor Protection Fund • Very small percentage of local investors • Few listed public companies • Misperception of investing in stock market is like a gamble & only for the rich people • Improvement of continuous settlement, Single Investor ID (SID) and Straight-Through-Processing

(CTP).

6 Japan JSDA 1. Impact of the Great East Japan Earthquake The major earthquake disaster affected all JSDA members in some way or other. Along with the collapse in stock prices after the major earthquake hit on March 11, 2011, there were large amounts of advances made to customers by many JSDA members to avoid settlement fails by customers on deposits for futures, options, margin, and other transactions. Among JSDA members that were Internet specialist brokers, some wrote off large amounts to their allowance for bad debt account and some ceased their securities businesses because of these large amounts of advances made to customers.

2. Setup of CCPs for OTC Derivatives In line with the global trend for regulating OTC products, discussions about setting up CCPs for CDS, etc. are underway.

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7 Kazakhstan FSC Major Challenges in Securities market are: - low liquidity of the securities market; - small number of retail investors. Major investors of the securities market of Kazakhstan are institutional investors, like private pension funds;

- small number of issuers; - deficit of financial instruments.

8 Korea KOFIA Congress is revising the FSCMA and also going to legislate brand new kind of financial consumer protection law that covers all financial sectors including banking, insurance etc. Securities and capital market are worrying two laws are conflict and overlapping regulation makes capital market hard to do business.

9 Laos SECO The securities market in Lao PDR has only two companies listed, this is the challenge that the SECO has to work hard in developing new instrument as fine out the potential listed companies, public awareness or investors and other regulations. encouraging other companies come to borrow the fund in market. Future more, the SECO has a tool in supervise market as other regulations, law or decree to ensure in protection the investors.

10 Malaysia ASCM There are several challenges in the securities market, particularly those facing the stockbroking industry. The economic and business environment is less than conducive as cost of doing business in Malaysia is gradually increasing whilst the regulators and the Exchange maintain their cost structure. Further to this scenario, the brokerage rate and commission sharing with commission-based dealers have been fully liberalized early this year. As a result, the stockbrokers’ profitability has been affected and this is more apparent in the case of small to medium size stockbrokers. Coupled with the dwindling trend of the market volume, the stockbrokers are now facing the challenge to enlarge the market pie for their business continuity and future plans. From the regulatory perspective, the stockbroking industry has also been inflicted with additional regulatory structures. Previously, the industry has been regulated by the Securities Commission and Bursa Malaysia which acts as the frontline regulator. However, in the recent years, the Central Bank has also been actively involved on the regulations of the industry, particularly to the stockbrokers that are licensed as investment banks. Inevitably, the additional regulatory structures and the embedded bureaucracies have in some or other ways affected the smoothness of the stockbrokers’ business operations. In tackling these challenges, the ASCM has been engaging the regulators as well as the Government with appropriate proposals to resolve the issues facing the industry and Malaysian capital market as a whole.

11 Mongolia MASD • Improve Securities legal environment. Now we are discussing about draft of securities market law

including new services and standards such as clearing, custody, investment trust and advisors, and self-regulatory organizations

• Establish new systems for securities trading, clearing, settlement and depository, and online brokerage and dealing. Management team of London Stock Exchange are help to develop those system since April 2011.

• Develop standards and requirements of new services such as clearing and custodian services, trust services, asset management and advisors.

• Disclosure of information for securities issuers and professional participants and develop information receive and delivery infrastructure based on Mongolian stock exchange or Financial regulatory commission.

• Develop standards of governance of the listed companies and implement them.

12 Philippines PASBDI Developments • The Philippine Stock Exchange (PSE) and NYSE Technologies, the commercial technology division

of NYSE Euronext, today jointly announced the successful migration of the PSE to NYSE Technologies’ NSC V900 trading platform. The new innovative trading infrastructure will enhance PSE’s product range, trading performance and volume capacity.

• The creation of the “Maharlika Board” – this distinguishes listed companies from the rest by promoting a higher standard in corporate governance. With the launch of NSC V900 on July 26, 2010, the PSE is now able to handle larger trading volume and process trades 10 times faster than the previous system.

• The Philippine Stock Exchange has extended trading hours effective January 2012. Trading starts at 9:30 am to 12:00 pm. Lunch break 12:00 – 1:30 pm. and resumes at 1:30 – 3:30 pm.

Major Challenges • Expansion of local and Foreign Investors • Expansion of listed companies • High friction (transaction) costs relative to its neighbouring exchanges • Perception from the public that the stock market is only for the rich

Need more products like domestic ETFs, derivatives, index linked fund, more experienced and qualified personnel from the regulatory, issuer and the Philippine Stock Exchange.

13 Russia NAUFOR The main challenge for the market is to create a comprehensive system of stimulation of internal investment demand in the securities market. Currently the number of retail investors does not exceed 1% of total population; assets of institutional investors in the market are as well too low. We expect a large number of various incentives to be implemented and barriers removed to attract more domestic long-term investments to the market.

14 Sri Lanka SEC In a relatively short span of time, the role of Sri Lanka’s capital market’s in funding and mobilizing savings has become more comparable to that of the banking sector. The capital market has also firmly established its profile as an indicator and facilitator of growth within the Sri Lankan economy. This unprecedented growth of the market resulted in attracting a large number of new investors and

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issuers to the market. The role of the Securities and Exchange Commission of Sri Lanka (SEC), in protecting the investor, preventing systemic crises and promoting the market has enhanced greatly over the last two years due to the resounding growth in the market.

15 Taiwan CTSA Taiwan, as an export driven economic entity, which is easily to be affected by the factors of outside the island. Looking back to 2011 and the outcomes of the Taiwan equity market, the stock index of the second half of the year was affected by worldwide slow economic recovery, the European credit crisis, and various global economic factors , all of which had an impact on securities firms’ earnings in Taiwan. The KMT has already established friendly ties with China during the past 4 years. Most significant fact is the Cross-Straits Economic Cooperation Framework Agreement concluded June 2010, which aims to normalize trade and economic relations between Taiwan and China. However, as the past few months have shown, momentum in Taiwan Presidential election can be fickle and the result can influence the future economic development between Taiwan and China. And, it will also move Taiwan’s economic relations with other countries. The prospects of political climate and “China Policy” of Taiwan could be the key issue to the future growth of Taiwan’s Securities and Capital Markets in 2012.

16 Thailand ThaiBMA 1. Liberalization of securities business by the year 2012. This will create stronger competition in the business and allow for newcomers. We have started to see some of the non-bank securities companies either been acquired by bank or been merged among themselves. Many securities companies look for diversified business income apart from stock trading commission.

2. The issuance of new debt products by government and big corporation, e.g. 50-year government bond, 10-yr government Inflation linked bond, saving bonds distributed by ATM, and 100-yr putable corporate bond.

3. Demutualization of Thailand’s Stock Exchange has been delayed due to change of government. 4. Volatile capital inflow/outflow from foreign investors. 5. Bank deposit insured by Deposit Insurance Agency will be reduced to 1 Million Baht per account

per bank. 6. Commercial banks have issued a lot of Bill of Exchange to individual investors instead of deposit to

avoid paying premium to Deposit Insurance Agency. 7. Introduction of Gold / Silver futures by the Thailand Futures Exchange

17 Turkey TSPAKB Regulations

The Capital Markets Board conducted a twinning project with the German BaFIN in 2006-2007. In that study, Turkish regulations were reviewed and their conformity to European Union regulations was analyzed. It has been concluded that Turkish regulatory structure is in line with the EU standards to a large extent. Yet, there are still some amendments to be implemented. In April 2010, the communiqué regarding public offerings has been amended in view of harmonising with the EU acquis, and facilitating the IPO process. Within the context of this revision, the main amendment was the removal of the minimum free float requirement. In addition, the underwriting obligation for intermediary institutions was lifted. Offerings to qualified investors and equities to be registered for listing on the Emerging Companies Market, established for SMEs, was also regulated by this new communiqué. In July 2010, a series of new regulations, aiming largely at hindering market manipulation were announced by CMB. CMB classified equities into three groups according to liquidity and free float criteria and differentiated the trading rules. These measures became effective in October 2010. In October 2010, a new regulation regarding the sale of foreign securities was released. This regulation allowed the IPO of foreign equities and eased existing regulations regarding foreign securities. In October 2010, the Banking Regulation and Supervision Agency allowed banks to issue TL-denominated bonds and bills. On the other hand, in 2011 leveraged forex transactions were defined for the first time in the Capital Market Law. Accordingly, this market is regulated by Capital Markets Board starting from end-August. In July 2011, asset management companies were given the opportunity to apply for brokerage licenses, limited to mutual fund transactions. As the global turmoil affected the markets, buy-backs have been introduced for the first time in August 2011. Concurrently, the regulation regarding short-selling was tightened. In October 2011, CMB released a new communiqué related with corporate governance. Accordingly, each listed company in the ISE-30 Index is required to have independent board members. The number of the independent board members has to be at least one-third of the total board. Banks are exempt from this regulation. In addition, studies are conducted for the preparation of a new Capital Market Law. Market Reforms The Emerging Companies Market (ECM), established as a separate market on the ISE, became operational in October 2010. This market with looser requirements than the main market is designed for SMEs. A market advisor mechanism is introduced for the ECM. On the bonds and bills market of the ISE, several new sub-markets were established lately. In May 2010, ISE introduced a new borrowing market for companies whose stocks are traded on ISE. Those companies will be able to issue debt instruments on the Offerings Market for Qualified Investors without issuing a prospectus and a circular. Repo Market for Specified Securities and Interbank Repo-Reverse Repo Market were established in December 2010 and January 2011. Istanbul Regional Financial Centre Project The government has undertaken a project in order to make Istanbul a regional financial center. Studies have started under the coordination of the government and working groups have been formed in early

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2009, with the contribution of 81 public and private institutions, non-governmental organisations (including TSPAKB) and universities. The resulting Strategy Document was made public in October 2009. The studies are continuing in a wide range of areas including the justice system, regulatory and supervisory framework, diversification of financial services, taxation policies, human resources and infrastructure via working committees. Our Association is involved in every step of the project. IPO Campaign The Istanbul Stock Exchange, the Capital Markets Board, the Union of Chambers and Commodity Exchanges of Turkey, and the Association of Capital Market Intermediary Institutions of Turkey signed a protocol to encourage public offerings in 2008. Within the context of the protocol, a series of seminars, conferences and private meetings are organised across the country in order to increase the awareness among the companies about public offerings, inform them about the benefits and procedures of an IPO. A similar protocol was signed in February 2011 by the Istanbul Stock Exchange, the Capital Markets Board, the Small and Medium Industry Development Organization, and the Association of Capital Market Intermediary Institutions of Turkey in view of encouraging the IPO of small and medium size enterprises. Within the context of the protocol, the Small and Medium Industry Development Organization will subsidise the IPO costs of SMEs to be traded on the newly established Emerging Companies Market. Investor Education As stated in Section III under the “Investor Education Activities”, in order to increase the awareness about the capital markets, investor education activities were initiated jointly with capital markets institutions.

18 UAE (DIFC) DFSA The UAE and Dubai have not been immune to the fallout of the global financial crisis. As a result trading volumes have decreased dramatically. To further support the capital markets in the DIFC, the DFSA has completed a review of the offering and securities rules to recognise regulatory developments in peer jurisdictions and enhance the regulatory framework applicable to the issue of securities and the continuing obligations of Reporting Entities (listed companies). Effective from October 1, 2011 the DFSA operates the Official List for Securities and is the single responsible authority for admitting companies to the list and monitoring continuing obligations and disclosures. The DFSA has also amended its Recognition regime which now includes Alternative Trading Systems and enables such platforms to remotely connect firms authorised in the DIFC.

19 Vietnam VBMA - The Government in February 2011 issued Resolution 11 regarding key measures to curb inflation, stabilize the macro economy and ensure social welfare. The resolution initially has proved effective in the management of money, credit, interest rates, exchange rates, foreign currencies and gold, which are gradually becoming stable.

- The Government focus on restructuring three key areas of the economy — public investment, state owned enterprises and banking sector.

- The State Bank of Vietnam (SBV) focus on restructuring weak banks in the next year to ensure the liquidity in the entire banking system, while avoiding any bankruptcies in the sector.

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V – 2. Specific Challenges in Equity Markets No. Country Name of

Organization Specific Challenges in Equity Markets

1. Cambodia SECC 1. Insider Trading, Trading Fraud and Price Manipulation. 2. Ineffective mechanism to provide the effectively and timely accurate disclosure to the public.

2 China SAC 1. It is necessary to improve multi-level capital market. At present, China has not yet formed a national

OTC market under unified supervision. 2. It is urgent to establish stock transfer mechanisms between different markets.

3. Product structure of capital markets is far from perfect. Capital markets need expand the breadth and depth in serving the national economy.

4. The intrinsic restraint mechanism is not perfect, some market participant lack of honesty and law-abiding sense.

5. Capital markets need to improve investor suitability arrangement. It should take measures to strengthen risk revealing and classification of various products in multi-level market, carry out investor appropriate system matching with different product. Ensure the right product sold to the right investors.

6. The foundation of rational investment and long-term investment is not yet solid, and the phenomenon of speculation is still quite prominent.

3 Hong Kong HKSA Price war among some brokers (as low as US$0.50 per trade) has made the overall profitability of broker firms decreased dramatically. Average securities daily turnover at Q4 was US$7,600 mil compare with over US$9,100 mil for previous 3 quarters in 2011. Some of the IPOs has cancelled in Q4 of 2011.

4 India ANMI The financial sector does not have a pro-equity bias. Indeed, it is even possible to argue that the financial sector does not necessarily reach out to the bottom of the pyramid.., needs to create financial inclusion.

5 Indonesia APEI The specific challenges in Indonesia Equity Market are: 1. The equality of comprehension of knowledge about investing in equity securities 2. Introducing the capital market activities to attract much more investors 3. Monitoring system of securities transaction to conform with the Capital Market Rules 4. Implementations of separate securities and cash account for each investor

6 Japan JSDA In Japan, the stock market for emerging companies remains sluggish for the recent couple of years due

mainly to the loss of confidence caused by the successive occurrence of scandals among those companies. The JSDA conducted a series of opinion exchanges with different market-related groups (venture capital companies, institutional investors, economists, and others) to consider specific measures for recovering confidence in and vitalizing startup markets as stated in the Japanese government’s “New Growth Strategy”.

7 Kazakhstan FSC Kazakhstan's stock market, including emerging companies, remains sluggish. Joint stock companies don't release shares in a free trade.

8 Korea KOFIA n/a 9 Laos SECO In Equity Market, the Lao Securities and Exchange will develop new instrument for investor in the early

2012 as: - Home Trading System - Block Trading System - Put thought

They hope to encourage the investors come to trade in the market more and easy for investor 10 Malaysia ASCM Malaysian equity market continues to be inflicted by issues of truncated participation from foreign funds

and retail investors. In terms of market demographics, foreign investors remained more or less constant at 22% by value of shareholding and trading participation stood at 27% in 2010. Participation from retail investors dwindled to 27% of total trading value in 2010 as compared to 33% in the previous year.

11 Mongolia MASD • Increase listing requirements of Mongolian stock exchange and clear listed companies or cancel some companies from listing.

• Provide Disclosure of information of Listed companies. • Register and list shares of Infrastructure and mining companies with strategic projects of Mongolia.

12 Philippines PASBDI The lack of liquidity in the market stems from various shortcomings, such as the singular nature of our product offering, which basically just consists of cash equities. Additionally, a large portion of the Philippine capital market remains untapped, both on the investor side and issuer side. The challenge of improving the Exchange’s corporate governance image has been there for quite some time, and remains one of the biggest factors to explain the low-level growth trajectory of the PSE despite being one of the oldest bourses in Asia. This problem also mirrors the situation of the country as a whole, as the Philippines seem to be always waiting for that one breakthrough to take it to new heights.

13 Russia NAUFOR There is currently a strong need to revise legislation and regulations concerning procedure of securities issue and placement to harmonize it with best global practices.

14 Sri Lanka SEC In July 2010 share prices in certain stocks increased unusually not due to fundamentals but on speculation and overheating the market. This price volatility that existed in the market prompted the SEC to impose a 10% (up or down) price band on all listed securities. The SEC also imposed restrictions on broker credit to investors. The SEC faced challenges in implementing these measures since the investing community is used to trade on credit by brokers. These corrective measures were taken to bring about a strong level of confidence as well as add further liquidity to the market.

15 Taiwan CTSA Rapid changes in legislation, technology and operating structures in Taiwan have caused keen competition in the financial services industry to intensify, especially for securities firms. Hence, securities firms need

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to expand business scope, develop new financial products, and enhance customer service in order to raise profit margin. With the impact of globalization, Taiwan securities firms will also face the challenges of worldwide competitors. Mirroring the rise of China’s fast economic growth, securities firms on the mainland has achieved successful results. Taiwanese securities firms have build excellent relationship with many China securities companies, but there is not a lot of time left.

16 Thailand ThaiBMA n/a 17 Turkey TSPAKB To increase the number of listed companies, an IPO campaign protocol was signed in 2008 with related

parties. The aim is to increase the awareness of IPO activities among the companies, and encourage non-listed companies to be listed to ISE. A similar protocol was also signed for SME companies and export companies in 2011. On the other hand, some improvements in regulations were also made by the CMB, as stated in “Section V”. As a result, there has been an increase in the number of listed companies. 2 SMEs, one foreign and 49 local companies were offered to public between January 2010 and December 2011. The total number of listed companies is 375 at the end of the December 2011 including collective products and alternative markets. But it is still too low compared to comparable markets’ stock exchanges.

18 UAE (DIFC) DFSA Due to market conditions equity markets in the UAE have seen very limited IPO activity. No IPO activity took place in the DIFC during 2011.

19 Vietnam VBMA n/a

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V – 3. Specific Challenges in Bond Markets No. Country Name of

Organization Specific Challenges in Bond Markets

1 Cambodia SECC n/a 2 China SAC 1. Bond market is underdeveloped, and the proportion of debt financing is low. By the end of 2010, the

balance of corporate bond of United States is equivalent to 207% of the bank loan balance, South Korea is 54.45%, Japan is 43.29%, and the balance of corporate bond of China is only equivalent to 18.32% of the bank loan balance.

2. China’s bond market has long existed in multiple monitor. In the procedure of bond issuance, Ministry of Finance is in charge of treasury bond and the local government bond; National Association of Financial Market Institutional Investors under the guidance of the PBOC is in charge of financial bond, Medium Term Note, Short Term Financing Bills, Super & Short-term Commercial Paper, The Small and Medium-sized Enterprise Set Bill, as well as other innovative varieties; National Development and Reform Commission is in charge of enterprise bond; CSRC is in charge of corporate bond.

3. Bond trading market is divided into three parts, namely, in Shanghai and Shenzhen stock exchange, Inter-Bank Bond Market, over the counter market of commercial bank. The procedure of unification and interconnection between Exchange Market charged by CSRC and Inter-bank Market charged by PBOC has been difficult to promote.

3 Hong Kong HKSA No specific challenge as Hong Kong is just beginning to build a liquid bond market especially focus on RMB denominated bonds.

4 India ANMI The corporate bond market remains underdeveloped. The resultant illiquidity leads to pricing inefficiencies; corporate find it difficult to price their credit instruments reliably and commercial banks are unable to value bond portfolios.

5 Indonesia APEI 1. Increasing the liquidity and improving a pricing standard benchmark available for all participants.

2. Although KPEI has a clearing system for bond trading transaction, many of the participants trade over the counter directly among the securities houses and banks.

6 Japan JSDA Vitalization of Japanese corporate bond markets: In Japan, the vitalization of the corporate bond market

has been a particularly urgent issue. During the financial crisis, money markets dried up everywhere and corporate financing shifted to bank loans—and in some cases it was even difficult to get bank loans.

7 Kazakhstan FSC Major Challenges in a bond market are low liquidity and small number of issuers. 8 Korea KOFIA n/a 9 Laos SECO The ministry of finance and the SECO are setting the regulation in government bond and corporate bond

under supporting by Government of Japan which is NOMURA help in building it. -Government Bond Market and Corporate Bond

10 Malaysia ASCM There is a need to broaden the capability and capacity of the bond market to supply financing to a wider base of industries and projects; particularly in supporting the structural shift towards the services and knowledge-based industries. The ability to widen access to bond financing for more sophisticated ventures is critically dependent on broadening the investor base and appetite for a wider array of debt products and credit risks. Widening the credit spectrum requires strengthening investor confidence, increasing the participation of the public and private investment management industry, expanding the product range and enhancing the market infrastructure.

11 Mongolia MASD • Issue long-term government bonds. Mongolian government firstly issued its bonds with 1-5 years in June, 2011. It has issued very short-term bonds with 1-6 months in the MSE.

• Issue mortgage.

12 Philippines PASBDI 1. Increasing Liquidity by broadening and diversifying investor base 2. Attracting foreign investors into government bond markets to enhance market sophistication 3. Enforcement of the regulatory framework i.e.: disclosure obligation 4. Simplify processes 5. Broaden the database 6. Reduce cost in offering of securities 7. Convergence with International Financial Reporting Standards (IFRS) by 2012 8. Developing of derivative and swap markets by establishing an exchange-based OTC derivative

trading; Philippines closed the Manila Futures Exchange in 1997.

13 Russia NAUFOR No specific challenges in bond market. 14 Sri Lanka SEC The Colombo Stock Exchange (CSE) has facilities for the secondary trading of Corporate and

Government Securities. A separate trading system (DEX) and a separate clearing and settlement mechanism is in place for debt securities. Presently 69 corporate debt securities are listed on the CSE. All Government Debt is tradable through the DEX system. Currently the DEX system is not frequently used by investors to trade in Debt securities and they have found it easier to go to a Primary Dealer to trade in Debt. The Challenge is to attract and encourage investors to trade Debt through the CSE system.

15 Taiwan CTSA The types of bond available in Taiwan market are government bonds, financial debentures, corporate bonds, convertible bonds, foreign financial debentures, corporate bond with equity warrant and beneficiary securities. The gloomy global economic outlook and the debt crisis in Europe weakened Taiwanese investor confidence in the coming year. Dimming prospects in the global financial markets suggested that local investors may away from risky assets, including lower-rated corporate bonds an� bank debentures. The

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down trends of global market would slow the pace of new bond issuance and widen credit spreads. In December of 2011, the yield on Taiwan’s benchmark 10- year bonds was near a three-month low as a deteriorating outlook for the local economy spurs demand for the safest assets. The main reasons of yields have been falling due to the economic conditions.

16 Thailand ThaiBMA 1. Expanding market players to securities companies since banks dominate bond market and securities companies do not have large amount of funding for bond trading.

2. Most mutual funds for investors, especially individual investors, only invest in short-term bond to avoid interest rate risk. Many individual investors lack understanding and perceive bond investment as bank deposit.

3. Not enough supply of long duration bonds for insurance companies. 4. Lack of liquid bond hedging instruments. Bond futures and interest rate futures listed on the

Thailand Futures Exchange are rarely traded. 5. Not easy to short sell bonds. 6. No market for speculative grade / high yield corporate bond.

17 Turkey TSPAKB In terms of bond trading, ISE is ranked 8th among the members of World Federation of Exchanges as of

end 2011. But corporate bond activities are still quite limited, despite the recent revival thanks to low real interest rates and changes in regulations.

18 UAE (DIFC) DFSA The DIFC is home to a large bond and Sukuk (Islamic bonds) market admitted to the Official List maintained by the DFSA. The DIFC provides an environment that gives credibility and high visibility to issuers of Debt products on its platform. Products currently admitted include Euro Medium Term Notes (EMTN) issued by prominent UAE banks and a Medium Term Note (MTN) issued by a prominent corporate entity of the Dubai Government. However, the bond market has also been affected by market conditions and there has been no issuance of new bonds in the DIFC.

19 Vietnam VBMA Uncertain macro outlook unfavourable for bond market • CPI remained record high since 2008. • Lingering CPI issues come from monetary, fiscal policies, inefficiency in SOE sectors and structure

of the economy. • Upward pressure on USD/VND remains intact • Liquidity remains thin • “Buy and hold” practice • No real benchmark curve that reflects the real market levels • Investor base weak

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V – 4. Specific Measures introduced / Implemented for the Securities Market No. Country Name of

Organization Specific Measures introduced / Implemented for the Securities Market

1 Cambodia SECC 1. Vision and Financial Development Plan for 2001-2010 is divided into three phases: - Phase one (2001-2004) : Create rules and regulations - Phase two (2005-2007): Build the foundation of Securities Market, Securities Market Surveillance, Promote the Bond Market and Strengthen the Public’ Knowledge.

- Phase three ( 2008-2010) : Promote the market participants, Strengthen the supervision and market watch, Enhance the corporate bond market and Build up the capacity building for the securities market participants.

2. Financial Development Strategy for 2006-2015 consists of three phases - Phase one ( 2006-2009) : Focus on the public capacity building, Cooperate with the foreign

securities market, Implement the law on issuance and trading of non-government securities and Eliminate the fraud in securities market.

- Phase two (2009-2012): Give the accreditation to credit rating agency, Establish the Securities Depository operator and Give the approval for Cambodia Securities Market (CSX).

- Phase three ( 2012-2015) : Create the Collective Investment Scheme (CIS) , pension fund, regulatory securities framework and derivative instruments.

2 China SAC Specific Measures introduced by CSRC:

1. Establish inside information insiders registration management system for listed companies. 2. Maintain a continuous high pressure on insider trading behavior, while at the same time devote more

efforts to increasing criminal crackdown. Finally, raise the delinquent costs of inside trading. 3. Inspect and rectify all types of transaction market for guarding against financial risk

4. Take measures to make Margin Purchase and Short Sale Business of Securities Companies transferred from pilot to a formal routine.

5. Carry out Refinancing Margin Purchase and Short Sale business. Allow securities finance company lending fund and securities owned by self or raised legally to security companies. Security companies can use the fund and securities to do business of Margin Purchase and Short Sale.

6. Carry out the system of RMB Qualified Foreign Institutional Investors (RQFII), allow the subsidiaries in Hong Kong of domestic fund management companies, security companies to use RMB raised in Hong Kong to invest in domestic security market.

7. Take measures to encourage all kinds of long-term fund investing in stock market. Coordinate the development of various institutional investors, such as Security Investment fund, Pension Fund, Social Security Fund, Insurance Companies, etc. Actively guide the venture capital and private equity fund into public and standardized operation.

8. Enhance the analytical ability on macroeconomic for securities company. Make securities company playing an active role in the construction of market.

Self-Regulatory management measures by SAC:

1. Actively explore the security dispute mediation mechanism to properly handle the disputes between members, and between the member and the practitioner, as well as between the member and client. At present, it has formed a work scheme for dispute mediation and the draft rules of security dispute mediation.

2. In 2011, SAC newly established Advisory Committee. On the basis of the original 8 Professional Committee, SAC newly established 6 Professional Committees, including Human Resource Professional Committee, Asset Management Professional Committee, Professional Committee for International Cooperation, Professional Committee for Security Dispute Mediation, Professional Committee for Innovation and Strategic Development. The total numbers of professional committees reached 14.

3. Carry out consultative assessment of relevant laws, regulations and policy in security market. It has completed the implementation effect of “Securities Law”.

4. Strengthen the formulation and revision of industry standards. Research and formulate the self-regulatory measures for Direct Investment & Sponsor, The guideline of regions that securities company business department is saturated, The guideline of information isolation wall system for securities company. Release Practicing Rules for security research report, Guideline for evaluating the effectiveness of compliance management in securities company, Guideline for estimating the value of collective financial product, etc.

3 Hong Kong HKSA The daily trading hour of the securities market was extended by one hour in March 2011 from 4 hours to 5 hours. It is schedule that trading hour will be extended for a further 30 minutes by March of 2012. The securities trading platform of the exchange has upgraded by the end of 2011. Trading capacity has significantly increased from 3,000 orders per second to 30,000 orders per second.

4 India ANMI • The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) alliance this year - Traders can now access data feeds from both the BSE and the NSE on a single platform. This means that brokers need just one terminal to access both BSE and NSE prices.

• SEBI gave permission to exchanges early in the year to introduce Liquidity Enhancement Schemes, wherein intermediaries can be incentivised for creating volume in any security.

• SIMPLIFIED ACCOUNT OPENING - This account opening form has now been simplified with the investor needing to sign in just one place — the first sheet of the form. This part of the form also contains all the details pertaining to an investor. This KYC (know your client) form has been made uniform so that it can be used by all SEBI registered intermediaries whether for stocks, mutual funds, portfolio management schemes, venture funds, and so on.

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• SEBI has issued guidelines to simplify application-cum-bidding forms for public offers with modifications with the aim of making them more investor-friendly. The changes are to be implemented by all companies launching public offers.

5 Indonesia APEI 1. Growing the market capitalization through addition of more and more publicly listed companies

2. Increasing transparency through the implementation of separate share and cash accounts for all investors which accessible through internet (AkSES Card)

3. Introduction of new and stricter of Capital Market accounting standard and a more tighter method of calculating Net Adjusted Working Capital (MKBD) to ensure the healthiness of all securities houses

6 Japan JSDA 1. Revision of the Financial Instruments and Exchange Act and Amending Self-Regulatory Rules

(1) Action plan to energize Japan’s financial and capital markets and financial industry In December 2010, the Financial Services Agency (FSA) announced its Action Plan for Invigoration, etc. of Financial/Capital Markets and Financial Industry.

The plan proposes two roles for the financial sector as part of the New Growth Strategy—Blueprint for Revitalizing Japan. Those roles are to support the real economy and to lead the economy as a growing industry itself. The action plan summarizes initiatives for the FSA to take in the future to develop an environment to enable Japan’s financial sector to fully exercise these two roles, providing a path to achieve this goal through the following three pillars. (a) Supply of funds to the companies commensurate with borrowers’ size and stage of development

• Facilitate supply of funds for small- and medium-sized enterprises (SMEs), etc. • Appropriate supply of risk money for emerging companies, etc. • Flexible supply of funds, etc.

(b) Financial sector serving as a bridge between Asian and Japanese economies • Establishing Japan’s status as a main financial market in Asia • Expansion of Japanese financial institutions’ activities in Asia

(c) Provision of asset management capabilities to utilize Japanese national assets safely and effectively

Aiming to achieve the goals of its New Growth Strategy, the FSA is pressing forward with the initiatives in the action plan.

In February 2011, to flesh out the details of these initiatives, Study Group regarding restoring confidence in and stimulating Japan’s startup markets was set up, composed of the FSA, exchanges, JSDA and the Japanese Institute of Certified Public Accountants, etc. Having announced the time table showing implementation schedule of concrete measures in June, 2011, the Study Group continues to deliberate specific actions to be taken to restore the confidence in and activate Japan’s start up markets.

(2) Reviewing Self-Regulations With a few exceptions, uninvited solicitations on OTC derivative transactions where one of the parties is an individual have been banned as of April 2011 based on the content of the FSA’s report on How to Regulate Uninvited Solicitations on Derivative Transactions and on revisions of the Financial Instruments and Exchange Act. In consideration of this change, the JSDA revised its self-regulatory rules from the point of view of further enhancing investor protection regarding sales solicitation for OTC derivatives and for structured bonds, investment trusts, and other financial instruments that are similar in complication to OTC derivatives. ① Among other efforts to enhance investor protection, in December 2010, the JSDA began issuing

investor alerts on its website. In addition, from the perspective of actively taking measures to prevent investors from being victimized by solicitations for sales of unlisted stocks by unregistered sales representatives, the JSDA is working with the FSA, the Securities and Exchange Surveillance Commission (SESC), the National Police Agency, and other self-regulatory bodies, actively sharing information with those involved.

② Dialog with a wide range of market users to resolve market issue

In September 2010, the JSDA established the Study Group on New Progress of Securities Market as a consultative body to the JSDA Chairman.

In December 2010, to enable the efficient discussion of a wide range of themes, the Study Group established three subgroups: the Market Intermediary Subgroup, the Products and Services Subgroup, and the Market Infrastructure Subgroup. Among the issues being discussed are sales activities by securities companies and other market intermediaries, products and services offered through securities companies and other investment agents, the legal framework and rules that form the infrastructure that supports the securities market, and mechanisms for eliminating unfair trading from the market.

Following deliberation of these issues, the Study Group issued a report in June 2011. 2. Revision of Financial and Securities-Related Taxation System

In promoting tax revisions for fiscal 2011, the JSDA made various requests aimed at energizing the economy and enabling Japanese to enjoy more prosperous lives. Those requests included maintaining the current preferential tax on capital gains and financial income from listed stocks and other securities and introducing a simple Japanese version of the individual savings account (ISA).

In the final tax revisions for fiscal 2011, the current preferential tax of 10% on capital gains and financial income from listed stocks and other securities was extended two years and will back to regular 20% from January 2014. The introduction of the so-called Japanese version ISA was postponed until

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January 2014. 3. Securities market business continuity plan (BCP)

In November 2010, the JSDA held a joint training exercise for all members simulating conditions after an early morning major earthquake directly under Tokyo. The purpose of the exercise was to test the BCP Measures Committee and others’ provision of emergency information using BCPWEB, confirm the process of recording damage reports on BCPWEB by JSDA members, and check the operation of the linkups with the in-house BCP systems of individual members tied in with the joint exercise. Along with the joint industry exercise, the money and exchange markets also jointly implemented their BCPs and confirmed the link up between the three different markets. Following the occurrence of the Great East Japan Earthquake in March 2011, the JSDA was able to collect information and appropriately communicate information from the Japanese government to the market.

7 Kazakhstan FSC The Committee's activities concerning the regulation of the securities market in years 2010 and 2011 were directed at the following:

- developing of the securities market infrastructure; - strengthening the mechanisms of the protection of interests of consumers of financial services; - taking action which will contribute to strengthening the financial state of organizations having

the licenses to conduct professional types of activities in the securities market; - strengthening the mechanisms of supervising and control of the activity of organizations having

the licenses to conduct professional types of activities in the securities market; - strengthening requirements of submission the information from securities market

organizations, increasing the transparency of the information - strengthening the mechanism of prevention the possibility of fraud including manipulating the

securities market; - strengthening requirements to the prospectus of bond emission.

8 Korea KOFIA The FSC decided to temporarily ban short selling of all listed stocks in the KOSPI and KOSDAQ markets for three months from August 10 to November 9. This policy was for reducing volatility of market which was significantly increased after shock of downgrade of the U.S. sovereign rating.

9 Laos SECO The SECO is working to review the prime ministry decree in upgrade to be the securities law. Moreover,

the SECO cooperate with other sector to review another law that related to the securities market and

some law has a conflict.

10 Malaysia ASCM There are several initiatives implemented in the Malaysian securities market this year which aim to further stimulate the market growth. These initiatives focus on the sales channel of the market. The Dual Licensing initiative was introduced in April 2011 to allow experienced dealer’s representatives (DRs) of the securities market to trade in derivatives. This initiative would not only help to stimulate the derivative market but also would help the DRs to diversify their source of income. On average, the Proprietary Day Traders (PDT) contribution to the market is not insignificant at about 5% of the market value. Previously, the regulators did only allow 36 PDT to trade in the market but the number has been increased to 100 in June 2011 following several requests from the ASCM to the regulators to increase the number of PDT in order to further stimulate the market. On 5 December 2011, the Securities Commission announced the liberalization of shareholdings of stockbroking companies which are not investment banks. The liberalization allows the affected stockbroking companies to be fully owned by non-Malaysians that full acquisition of local stockbroking companies is now possible. The regulators view the liberalization as a stimulator to attract more foreign funds into the market by having foreign-owned stockbrokers in the local securities market.

11 Mongolia MASD • The Parliament adopted a new company law on Oct 06, 2011.12.31 • We are discussing a draft of new securities market law by Mongolian government. • We are developing new trading, clearing, settlement, brokerage and dealing systems with LSE management

team. • Mongolian association of securities dealers organizes a training to get professional license in starting of

March 2011. • Enter legal requirements and authorized rights for a Self-regulatory organization into a draft of new law. We

are preparing to become a self-regulatory organization.

12 Philippines PASBDI PSE has approved its plan of spinning off its regulatory arm to further enhance the independence of its regulatory functions. MSD has enhanced its market surveillance procedures and is seeking to continually improve its policies and procedures to align it with international/regional best practices. MSD coordinates with SEC in relation to its surveillance reviews and functions. Also the SEC has strengthened its rules relating to corporate governance by requiring at least two (2) independent directors per trading participant (TP). Also the SEC has enhanced its rules towards investor protection by increasing TP’s unimpaired paid up capital to Php20M. Coordination with the central bank on data of loan growth and none performing loans in banks which is correlated to the market peak's.

13 Russia NAUFOR 1.Revision of tax regulation. At the end of 2010 was enacted several Tax Code amendments, including an exemption for gains from long-term investments and an exemption for asset transfers. The 0 percent personal income tax or profit tax rate applies to income from operations involving the sale or

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other disposal (including redemption) of shares of Russian organizations (participating interests in the charter capital of Russian organizations) provided that as of the date of disposal they have continuously belonged to the taxpayer on the basis of ownership or another right for more than five years. This regulation is applied to shares and interests acquired on of after January 1, 2011. Also the taxation of the derivatives was improved. 2.Revision of financial market regulation. In 2010 the Law On Counteracting the Misuse of Insider Information and Manipulation of The Market has been adopted. The act specifies the definitions of manipulation and insider information and sets up the requirements for issuers and financial firms to prevent the violations.

3.Reform of settlement system. At the end of 2011 the settlement system of Russia was reformed. In 2012 will be created a central securities depository with a regulator-approved standard electronic workflow, Straight Through Processing (STP) for nominee accounts, 1-day processing for nominee instructions.

14 Sri Lanka SEC The SEC implemented several initiatives recently to accomplish an effective regulatory regime. Some of those initiatives include issuing licenses to new market intermediaries, directing the CSE and the CDS to implement a system of full dematerialization of all listed securities, completing the regulatory framework for exchange traded funds, updating the Code for Unit Trusts and finalizing the rules pertaining to Employee Share Option Plans. Also the SEC directed the CSE, CDS and all licensed stock brokers to remove the two band fee structure which was applicable and to have one band for transactions and also to reduce the transaction cost. Changes were made to the Automated Trading System (ATS) of the CSE with a view to develop the market microstructure. With the aim of enhancing the surveillance function, the SEC procured a state of the art surveillance system in 2010

15 Taiwan CTSA The authorities passed several amendments to the Securities and Exchange Act Dec. 12, of 2011. Covering changes to 26 articles of the act, the amendments include specific regulations governing foreign firms seeking to float their shares in Taiwan as well as penalties to both issuers and their management in cases of violations. New rules have been added requesting that public firms prepare their financial statements in accordance with the International Financial Reporting Standards, as set forth by the International Accounting Standards Board. The due date of quarterly reports has also been extended to 45 days after the end of accounting periods. The rules will take effect in 2013 along with Taiwan’s full IFRS adoption. One of the amendments offers better protection to minority shareholders by giving them the right to ask competent authorities to examine the papers, documents and accounting books of issuers suspected of wrongdoing. To make it easier for companies to keep up with changing market conditions, another amendment states that firms intending to float, delist, stop or resume trading their shares only need to notify authorities of their intentions, without having to obtain prior approval.

16 Thailand ThaiBMA Under the Thai Capital Market Development Plan, government and private sectors including ThaiBMA have agreed to continue promoting the Thai bond market in both the demand and supply sides of the market by 1. Promoting the private repo market in term of increasing the number of players and the trading

volume 2. Encouraging new products in the Thai bond market such as Inflation-linked bond for corporate and

municipal bonds. 3. Promoting electronic trading platform 4. Promoting bond market to individual investors by providing training and developing website called

thaibond.com to assist individual investors. Thaibond.com will provide trading information and issuance news.

5. Encouraging private sector to raise fund through bond issues by easing bond issue regulations, and by providing training and education.

17 Turkey TSPAKB Classification of the Equities In July 2010, CMB classified the listed equities into three groups (A, B and C) by considering some criteria such as free float market capitalization and number of freely floating shares. Additionally, investment trusts are also classified by considering their [Market Price/Net Asset Value] ratio. While Group A represents most of the equities traded, Group B and C correspond to less liquid ones. In accordance with the classification, each group is subject to different trading rules. Group A and B shares are traded through continuous auction, whereas Group C shares are traded by single-price auction method. Within Group C, equities in the Watch List Market are traded twice a day in the afternoon. Other Group C shares are traded at four single-price sessions during the day. Only Group A shares can be used for margin trading and short selling. Additionally, investors, who want to buy equities from groups B and C, have to be informed about the risks by brokerage firms before trading these shares for the first time. On the other hand, while disclosure of price level is 5 for A and B groups shares, only last price is shown for Group C shares, except for investment trusts. Emerging Companies Market (ECM) The Emerging Companies Market was established as a separate market on the ISE in October 2010 for SMEs. A market advisor mechanism is introduced for ECM to assist the company for the application to the ECM. Market advisors have to provide advisory services to the company for compliance with the capital markets regulations.

18 UAE (DIFC) DFSA NASDAQ Dubai has outsourced its trading, clearing and settlement and custody systems to its parent the Dubai Financial Market, which enjoys are large retail investor base. The market model of the DFM

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accommodates individual investor account structure for retail investors and provides a large liquidity pool as well as omnibus accounts held with custodians on behalf of institutional clients. As a result retail participation in the NASDAQ Dubai market has increased by 5.8% the first 11 months of 2011.

19 Vietnam VBMA - Ministry of Vietnam prepare the roadmap to develop Vietnam Bond Market from 2012 util 2020. - Important legal documents was issued in 2011 such as: Decree 01/ND-CP/2011 on Government Bond Issuance and Decree 90/ND-CP/2011 on Cooperate Bond Issuance. - More frequent big lot bond issuance reducing the total outstanding bond numbers: Numbers of outstanding bonds: 477 bond codes (slightly down compared to around 520 codes in 2010) - More frequent dialogs between regulators and market participants

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V – 5. Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.) No. Country Name of

Organization Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

1. Cambodia SECC In Cambodia there is no tax on capital gain, but we have Tax Incentive on Profit Tax for Equity and/or Debt Securities Issuing Companies and on Withholding Tax for Securities Investors. According to Anukret on tax incentives in securities sectors.

- Tax Incentives on Profit Tax for Equity and / or Debt Securities Issuing Companies Equity and/or Debt Securities Issuing companies approved by the SECC and listed on the permitted Securities Market shall fulfill the form and submit to the General Department of Taxation through SECC in order to grant the incentives by reducing 10% of total amount of tax on profit to be paid for three (03) years.

- Tax incentives on Withholding Tax for Securities Investors. Public Investors shall gain fifty (50%) percent deduction of withholding tax on interest and/ or dividend with derives from holding and/ or buying-selling the government securities, equity securities and debt securities for the period of three (03) years counting from the opening of securities market.

2 China SAC 1. Accelerate introducing QFII. Increase its investment quota. 2. Carry out the Administrative Regulation on RMB Qualified Foreign Institutional Investors (RQFII),

allow the subsidiaries in Hong Kong of domestic fund management companies, security companies to use RMB raised in Hong Kong to invest in domestic security market.

3 Hong Kong HKSA Simple and low tax regime is one of the main measures to invite foreign investment. There is no capital gains tax, no estate tax and the corporate tax rate is 16.5%. Hong Kong’s status as the gateway to China also draws in foreign interest. Hong Kong development into China’s offshore RMB centre with issuing of RMB denominated bonds (dim sum bonds), Quota for Qualified Foreign Institutional Investor (QFII) and Qualified Domestic Institutional Investor (QDII) are also key for attracting foreign investments.

4 India ANMI • There has been a direct relationship between buoyancy in capital market and FDI in India. To accelerate its transformation pace further, the Government has constituted FSLRC (Financial Sector Legislative Review Commission), reforms have been initiated in ECB, FII, QFI and Non- Residents Investments.

• FII limit raised on investments in corporate long- term infra bonds from US $ 5 Billion to US $ 25 Billion.

• Qualified Foreign Investors (QFIs) have been allowed to invest a total of US $ 10 Billion in mutual fund equity schemes. QFIs have also been allowed to invest up to US $ 3 Billion in mutual fund debt schemes.

• Government has liberalized External Commercial Borrowings (ECBs). A separate treatment has been given for Infrastructure Debt Fund under ECB.

5 Indonesia APEI 1. The upgraded to become Investment Grade for the Country (FITCH Rating Agency)

2. Promoting the Capital Market Industry through various International Expos and Events 3. Increasing security measures for investors through introductions and improvements of various

rules and regulations of the Capital Market

6 Japan JSDA In March 2011, the JSDA and SIFMA, the US Securities Industry and Financial Markets Association, co-organized the 4th Japan Securities Summit in New York. The conference intended to provide market professionals and investors from around the world with the opportunity to better understand the attractiveness of Japanese securities market. The insights of the distinct guests and fruitful discussions attracted participants mainly from New York and the East coast of the United States.

7 Kazakhstan FSC n/a 8 Korea KOFIA Korea opened stock market to foreign investor in Korean government abolished limitation of foreign

ownership of stocks in 1998 and There is a law named “Foreign Investment promotion Act” which allows several kind of benefit in trading stocks& bond, and taxation for foreign investors.

9 Laos SECO The SECO works to prepare the regulation for custodial bank which is one condition that foreign investors request.

10 Malaysia ASCM The annual Invest Malaysia conference has become a permanent date in the calendars of many institutional investors from home and abroad. The seventh Invest Malaysia conference was held to attract local and foreign institutional investors. As a follow-through of the Invest Malaysia conference, an Invest Malaysia road-show was held in Europe. Meetings were arranged with targeted new investors as well as opinion leaders in Paris, London and Edinburgh. Media roundtables and interviews were also organised as part of the process of moving towards the upgrade of Malaysia by FTSE to Advanced Emerging Market status. More Invest Malaysia road-shows were held in Hong Kong, Beijing and Tokyo. The two over-arching strategic objectives of Invest Malaysia are business development (diversifying and broadening our investor base) and communicating the Malaysia Story, as well as managing external perceptions of our capital market.

11 Mongolia MASD We should together do the following measures as: • Develop trust services and investment funds to attract foreign investors. • Decrease tax rate. Now tax rate for foreign investors is 20%. • Provide standards and requirements for public disclosure of information.

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12 Philippines PASBDI 1. Promoting and participating in regional initiatives.

2. Simplify Direct Foreign Investment Procedures/Processes

3. Upgrade private and public Infrastructure and be at par with international standards

4. Reduce cost in doing business (i.e. electricity rates, taxes, etc.)

5. Utilize our advantage/strength in ENGLISH as our second language

6. Broadened our data base

7. Liberalization of exchange controls

8. Improve connectivity with our foreign counterparties

13 Russia NAUFOR 1. Revision of financial market and tax regulation and reform of settlement system.

New settlement procedure will remove a significant legal barrier for foreign investments into the Russian securities market, in particular long-term investments of foreign pension and mutual funds. Foreign investors will be allowed to open omnibus accounts in Russian settlement institutions.

2. A huge number of promotional events intended to explain the attractiveness of Russian securities market to investors from around the world:

- Russia Calling Investment Forum,

- Annual Troika Dialog Russia Forum, etc. 14 Sri Lanka SEC Foreign investment in the CSE has reduced during last two years due to several reasons such as the

momentous growth in the market (The CSE recorded a growth of 126% in 2009 and 96% in 2010 becoming the 2nd best performing market in the world and foreign investors found it too expensive to invest), global economic/market issues and market microstructure issues of the CSE. The SEC and the CSE along with the stockbrokers have taken steps to attract more foreign investors to the market. Those include relaxing foreign restriction in investing in the Debt Market, conducting foreign road shows and improving market microstructure and improving risk management (CCP). The SEC organized a Sri Lankan Day in London in association with LSE this year and the CSE organized two road shows in Singapore and Malaysia in November 2011. Stockbrokers organized roadshows in Dubai and in Japan this year in order to attract foreign investors.

15 Taiwan CTSA In 2008, as part of its capital market liberalization policy, the Taiwan government amended the stock exchange rules to actively encourage foreign businesses to list in Taiwan. It also relaxed restrictions on the qualifications of foreign issuers and the use of raised funds. Now, as long as foreign issuers and Taiwanese businesses established abroad meet the relevant requirements, they can readily apply to list on the Taiwan Stock Exchange (TWSE) or the over-the-counter GreTai Securities Market (GTSM). Taiwan’s capital market can now truthfully boast unsurpassed advantages for foreign investment firms: stable political and economic environment, big savings, outstanding share price performance on listing costs and access to the China market. Because of Taiwan’s cultural links with mainland China, Taiwan constitutes an ideal test market and a base to penetrate the mainland China market. Taiwanese people are good business partners for foreign companies in this regard, as they have extensive knowledge about doing business with mainland China.

16 Thailand ThaiBMA - Double Tax Treaty to exempt withholding tax on capital gain/interest for foreign investors who buy Thai government bonds.

- Not subject to capital control measures if go for direct investment. - ASEAN Economic Community (AEC)

17 Turkey TSPAKB With collaboration of CMB, ISE, TurkDEX and other capital market institutions, international events were organised to introduce the Turkish capital markets to foreign investors and institutions. In 2010 and 2011, two activities were organized respectively in South Korea and Taiwan.

18 UAE (DIFC) DFSA The DFSA has worked closely with NASDAQ Dubai as well as the local securities regulator, the Emirates Securities and Commodities Authority (SCA) to implement enhancements to the clearing and settlement model used on NASDAQ Dubai and its parent the Dubai Financial Market. The DFSA is working closely with the SCA, NASDAQ Dubai and the UAE exchanges to meet the qualifying criteria for an upgrade to ‘emerging market’ status by MSCI. Work on this issue is ongoing. An upgrade to emerging market status of UAE is expected to encourage the participation of foreign investment (funds) in the UAE Markets. Whilst there are no restrictions on foreign ownership in the DIFC, the existing UAE Companies Law stipulates a UAE ownership of at least 51% of all companies. However a revised UAE Companies Law has recently been signed into effect by the President of the UAE which proposes a revision of foreign ownership limits for certain businesses. The revised Companies Law is yet to be released to the public.

19 Vietnam VBMA - Continue to implement the Resolution 11 in a stable and effective way to reset three macroeconomic indices of inflation, forex rate and foreign reserve.so that foreign investor will come back to buy the bond.

- MOF should consider to exempt withholding tax on capital gain/interest for foreign investors for those one invest in G Bond.

- Investor Conference to communicate with Foreign Investor.