Law of Ukraine On Securities and Stock Market
Date of Entry into Force: May 12, 2006
The Law regulates relations which appear during placement, turnover of securities and realization of professional activity in stock market, with the aim of provision of openness and effectiveness of functioning of the stock market.
The Law defines that stock market (equity market) is an aggregate of members of stock market and legal relations between them as to placement, turnover and accounting of securities and their derivatives.
The members of the stock market can include issuers, investors, self-regulating organizations and professional participants of the stock market.
Stock market is divided into: · primary equity market – aggregate of legal relations, connected with placement of securities. · secondary equity market – aggregate of legal relations, connected with turnover of securities.
Securities are documents of the fixed form with corresponding requisites, which certify monetary or other property rights, defining relations of a person, who placed (issued) them and an owner, and envisaging fulfillment of liabilities in accordance with conditions of their placement, and also the possibility of transfer of right, which arise from those documents, to other persons.
In accordance with the procedure for placement (emission), securities are divided into the following: · issuing securities, which are certify equal rights of their owners within the limits of one issue referring a person, who undertakes certain obligations (issuer). Those are shares, bonds of enterprises, bonds of local loans, government bonds of Ukraine; mortgage bonds; certificates of funds of operations with real estate; investment certificates, treasury obligations of Ukraine. · non-issuing securities.
Securities are divided in accordance with: · form of existence – documentary and non-documentary. · form of issue – to bearer, registered and order.
In Ukraine, the following groups of securities can exist in civil turnover: · share securities (shares, investment certificates); · debt securities (bonds of enterprises, state bonds of Ukraine, bonds of local loans, treasury obligations of Ukraine, savings (depository) certificates, bills of exchange); · mortgage securities (mortgage bonds, mortgage certificates, mortgages, certificates of funds of operations with real estate); · privatization securities; · derivative securities; · title securities.
Limits of turnover and/or realization of rights on securities may be settled only in cases and in order envisaged by legislation. Peculiarities of registration and passing of property right for securities is fixed by legislation.
Share. Issuer of shares may be only a joint-stock company. A share has nominal value fixed in the national currency. Minimal nominal value of a share may not be lower than one kopeck. Joint-stock company places only registered shares. Joint-stock company places shares of two kinds – simple and privileged. Simple shares are not subject to be converted into privileged shares or any other securities of a joint-stock company. The part of the privileged shares in the statutory capital of a join-stock company shall not exceed 25%. Registration of issue of shares shall be done by the State Commission for Securities and Stock Market of Ukraine in accordance with its fixed procedure. Peculiarities of issuing, turnover and buying out of shares of corporate investment funds are defined by the legislation.
Bond. Issuer, in accordance with the procedure, established by the State Commission for Securities and Stock Market of Ukraine, may place percentage, special and discount bonds. Bonds shall be placed in documentary or non-documentary form. Issuer may place registered bonds and bonds to bearer. Circulation of bonds is permitted after the State Commission for Securities and Stock Market of Ukraine registered the report on results of placement of bonds and issue of certificate of registration of bonds issue. Bond has nominal value, defined in the national currency, and if it is not envisaged by terms of placement of bonds – in foreign currency. Minimal nominal value of a bond shall not be lower than one kopeck. Bonds may be placed with a fixed maturity, single for the whole issue. Pre-term retirement of bonds on demand of their owners is permitted in case when such possibility is envisaged by the terms of bonds placement. Retirement of bonds may be done in cash or in property in accordance with terms of bonds placement. Sale of bonds shall be done in national currency, and if it is envisaged by the legislation and terms of their placement – in foreign currency.
Bills of exchange Bill of exchange is a security, which certifies an undoubted bill of debt of issuer of a bill of exchange or his order to the third party to pay the defined sum to the owner of the bill of exchange (billholder) after the beginning of the term of payment. Bill of exchanges may be simple bill of exchange or transfer note and exist exclusively in a documentary form. Peculiarities of issue and turnover of bill of exchanges, fulfillment of operations with bills of exchange, payment of bill liabilities and collecting payments on bill of exchanges is defined by the legislation.
The Law gives classification and definitions of notions of such securities as: bonds of enterprises, bonds of local loans, state bonds of Ukraine, treasury obligations of Ukraine, investment certificates and savings (depository) certificates.
It is noted that professional activity on the stock market is an activity of legal entities on rendering financial and other services in the sphere of placement and turnover of securities, registration of rights on securities, management of actives of institutional investors. Professional activity in the stock market is implemented only on the basis of license, issued by the State Commission for Securities and Stock Market of Ukraine. The list of the documents, required for receiving of the license, procedure of its issue and cancellation are defined by the State Commission for Securities and Stock Market of Ukraine.
Securities trader may realize dealer activities, if he has a paid with money statutory capital of not less than UAH 120,000, broker activity and activity on management of securities – not less than UAH 300,000, underwriting – not less than UAH 600,000.
The share of the other securities trader shall not exceed 10% in the statutory capital of the securities trader.
Securities trader is prohibited to resell (exchange) securities of his own issue.
Securities trader has right to conclude agreements on securities management with natural persons and legal entities. The sum of the contract on securities management with one client – natural person, shall amount to the sum not less than equivalent of 100 minimal salaries.
A certain part of provisions of the Law is dedicated to coverage of questions of creation and work of the stock exchange, establishing the rights and liabilities of its participants.
The Law defines the order of actions, authorities and procedure of interested parties and state authority bodies in issuing of securities in case of open (public) and closed (private) placement.
Issuers who made open (public) placement of securities are liable to present timely and complete information as to: · financial and economic state and results of activity of an issuer in terms, defined by the legislation; · any actions, which may influence financial and economic state of an issuer and result in considerable change of price on his securities; · owners of large share packages (10% and more).
State regulation of stock market is realized by the State Commission for Securities and Stock Market of Ukraine, and also by other state bodies within the limits of their authority, defined by the legislation.