Regulation of the securities market

Securities marker state regulation and control is exercised by the means of special legislative and regulatory legal acts, securities state registration, licensing and certification control and surveillance over market participants’ activities. The Head of the state the House of Representatives of National Assembly of the Republic of Belarus, the Council of Ministers of the Republic of Belarus, the National Bank of Belarus carry out the unified state policy in this field. In compliance with the Decree of the President as of April 28, 2006 N277 distribution of authority in securities market regulation between the Council of Ministers of the Republic of Belarus and the National Bank was formalized in legislation.
 
The main principles of securities market regulation are realization of national economic interests and investment activity security enforcement in Belarus.   
 
Governmental regulation of securities market, control and surveillance over issue, circulation and redemption of securities as well as professional and securities exchange activity is assigned to the Ministry of Finance of the Republic of Belarus as per regulation N 982 of the Council of Ministers of the Republic of Belarus as of June 31, 2006
In accordance with the Presidential Decree N289 as of May 5, 2006 “Regarding the structure of the Government of the Republic of Belarus” a Securities Department was established in the Ministry of Finance by means of reorganization of the Securities Committee.  
 
In accordance with the Regulation regarding Securities Department approved by the resolution of the Council of Ministers N 982 “About separate issues of the Ministry of Finance of the Republic of Belarus and cancellation of some resolutions of the Council of Ministers of the Republic of Belarus” as of June 31, 2006 the Securities Department with the Ministry of Finance of the Republic of Belarus is a governmental body which exercises executive, control and regulating functions in governmental regulation of securities market, control and surveillance over issue, circulation and redemption of securities as well as professional and securities exchange activity as well as  extradepartmental financial control for compliance with the securities law in by the market participants.
 
The activities of the Securities Department are guided by the Constitution of the Republic of Belarus, other legislative acts, Regulation about the Ministry of Finance approved by the Council of Ministers of the Republic of Belarus N1585 “Issues of the Ministry of Finance of the Republic of Belarus” as of October 31, 2001 and Regulation regarding Securities Department with the Ministry of Finance
 
Securities Department’s major tasks are as follows:
 
  • Governmental regulation of securities market, control and surveillance over issue, circulation and redemption of securities as well as professional and securities exchange activity; 
  • Governmental registration of bonds and shares issue with the exception of state and National Bank securities;   
  • Securities Department’s responsibilities are the following:
  • To prepare and introduces in the proper order to the Ministry of Finance draft regulatory legal acts concerning governmental regulation of securities market;
  • To register bonds and shares issue in accordance with established procedure;
  • To keep state bonds and shares registers in compliance with the legislation;
  • To participate within its terms of reference in professional and securities exchange licensing carried out be the Ministry of Finance;
  • To carry out certification securities market experts;
  • To exercise control and surveillance for securities issue and circulation;
  • To carry out control and surveillance for activities of professional securities market and stock exchange participants;
  • To register shares and bonds pledge agreements or delegates its authority to the national unitary enterprise “National depositary trust company” (National Depositary hereinafter) to register such agreements
  • To regulate National Depositary activities, manages the property assigned to the National Depositary  and controls its financial and economic activity in the order stipulated in the legislation;
  • To issue certificates on shares floatation in (outside) Belarus;
  • To carry out stock accounting , rating and conversion of securities seized, forfeited or taken in favor of state in other ways except for securities of state, National Bank and “Property” registered privatization checks;
  • To make offers on inclusion of checks in control coordination plans and to check compliance of securities market participants with the securities legislation and to send the results of such checks to law-enforcement and other state agencies according to their competence if necessary;
  • To form working groups of securities market monitoring;
  • To organize and coordinate the work of the state exchange inspector;
  • To file claims (applications) to ordinary and economic courts in the due order;
  • To impose official penalties for infringement of the securities legislation;
  • To issue instructions to block (unblocking) securities in case of need to protect the interests of Belarus and in other cases defined by the legislation;
  • To gather and store reserve information about stock owners whose depot account are opened in Belarus depositaries and to provide such information in the cases stipulated by the legislation;
  • To take measures on prevention of unfair competition at the circulation of open joint-stock companies’ shares on the stock market and the OTC securities market including introduction of price manipulation prevention regime at securities market;
  • To develop corporate governance norms for joint-stock companies;
  • To make grounded proposals to the Ministry of Finance on introduction of quotas on floating of shares and bonds of the Belarus issuers in foreign states and floating of foreign issuers’ shares and bonds in Belarus;
  • To coordinate manufacturing of securities forms according to the legislation;
  • To manage within its competence the activities of territorial units of the Ministry of Finance related to securities;
  • To exercise other authorities according to the Security Department’s objectives and functions.
  • The Security Department within its competence and in compliance with the legislation is authorized to do the following:
  • To issue orders and instructions within the Security Department;
  • To make proposals to the Ministry of Finance within its terms of reference including draft regulatory legislative acts related to the abovementioned issues;
  •  To make decisions of a non-regulatory nature binding to National Depositary and securities market participants;
  • To involve on a contractual basis research teams and institutions of higher education to work out complex and target development programs of corresponding industries;  
  • To consider applications related to the Securities Department reserved matters and filed by national state administration bodies subordinate to the Government of the Republic of Belarus, local executive and administrative bodies, public associations, mass media, deputies and individuals;
  • To carry out foreign economic activity in the manner prescribed by the laws;
  • To make non-regulatory decisions binding for securities market participants;
  • To represent the Republic of Belarus in international and foreign organizations regarding of governmental regulation of securities market;
  • To turn to national state administration bodies, local executive and administrative bodies and other establishments to receive necessary documents and data as well as to engage experts to perform works and provide services related to the Securities Department’s activities;   
  • To conduct clerical work and provide preservation and use of archive documents.
The head of the Securities Department is a director who is appointed and dismissed by the Council of Ministers of the Republic of Belarus as agreed with the President of the Republic of Belarus.
 
The Securities Department Director:
  • Reports directly to the Minister of Finance;
  • Is a Ministry of Finance collegium member;
  • Has deputies the number of which is defined by the Ministry of Finance. Deputy The Securities Department Directors are appointed and dismissed by the Minister of Finance as agreed with Council of Ministers of the Republic of Belarus.
 
The Securities Department Director’s authorities are as follows:
  • To manage The Securities Department and is personally liable for fulfillment of the tasks and functions allotted to the Securities Department;
  • To issue instructions and orders within his/her competence regarding the Securities Department, to approve regulations regarding organization development of the Securities Department;
  • To assign obligations to his/her deputies, managers of the departments and other employees of the Securities Department;
  • To approve structure and personnel arrangements of the Securities Department as agreed with the Ministry of Finance within the budget of the Ministry;
  • To appoint and dismiss the employees (including those working on a contractual basis) of the Securities Department as well as to apply incentive measures or disciplinary penalties as per legislation;
  • To represent the Securities Department’s interests in state bodies and other organizations;
  • To manage in the established order the securities Department’s funds and other property, to act on its behalf without authorization and to open accounts with banks;
  • To approve the National Depositary’s structure, number of employees and personnel arrangements of office and management personnel;
  • To exercise other authority within its competence.
The Securities Department’s address is 220002, 44 Kropotkina Street, Minsk.
 
In pursuance of the Presidential Decree N336 as of June 20, 1998 “Regarding governmental regulation system improvement” an open joined-stock company “Belarusian currency and stock exchange” was established on the basis of a joint operation agreement between the National Bank and the Ministry of State Property Management and Privatization with the view to provide professional securities market participants with the necessary security trading conditions, to define stock market value rate and publication of such rates for examination of all the interested and to regulate the activities of securities market participants in Belarus.
 
Today OJSC “Belarusian currency and stock exchange” is the only integral structure in Belarus on the basis of which a national exchange trading system in all major segments of financial market, i.e. currency, stock and mature.
 
The exclusive right to the organize state short- and long-term bonds and National Bank short-term bonds secondary circulation is granted to OJSC “Belarusian currency and stock exchange”
 
The exchange market of non-state securities is presented by corporate securities (shares and bonds).
 
Information transparency is the main principle of OJSC “Belarusian currency and stock exchange”. In 2000 a Belarusian informational quotation computer-based system was implemented and now it is the only full-fledged source of information about after market condition.
 
To spread information the exchange uses a wide range of modern and traditional technologies: Internet server, e-mail, remote data terminals, which allow receiving summary and current information (in on-line mode) about foreign currency and state securities trading process.
 
Exchange securities market’s strategic objective is to provide a new quality level of service for participants and growth of trade turnover, modernization of the market’s infrastructure and technologies.
 
Depositary system of Belarus is bi-level and includes central depositary and depositaries in correspondent relations to the central depositary.
 
The primary task of depositary system is to provide a centralized storage of securities registered in the order established under the legislation and listed in the territory of Belarus as well as to carry out recording of rights to such securities.   
 
A centralized bi-level depositary system established in Belarus which carries out recording of rights to securities everywhere in territory of Belarus is the most advanced in the CIS countries.
 
The national unitary enterprise «National Central Securities Depositary» functions as the central depositary in terms of corporate securities, as for state securities this function is performed by the National Bank of Belarus.
 
The main task in the further development of depositary systems of Belarus is to create a uniform central depositary for all kinds of issue securities till 01.01.2008 with a view to fulfill subparagraph 1.2 of clause 1 of the Decree of the President of Belarus N277 as of 28.04.2006
 
THE LIST
Of major regulatory legislative acts of the Republic of Belarus regarding securities market regulation in the Republic of Belarus.
 
1. Civil Code of the Republic of Belarus as of December 7, 1998;
2. Investment Code of the Republic of Belarus as of June 22, 2001;
3. Banking Code of the Republic of Belarus as of October 25, 2000;
4. the Law of the Republic of Belarus “Regarding securities and stock exchange market” as of March 12, 1992»;
5. the Law  of the Republic of Belarus “Regarding business entities” as of Decewmber 9, 1992;
6. The Law of the Republic of Belarus “Regarding transfer and promissory notes circulation” as of December 13, 1999;
7. Decree of the President of the Republic of Belarus № 3 “Regarding denationalization and privatization of the state property of the Republic of Belarus” as of March 20, 1998;
8. Decree of the President of the Republic of Belarus N 277 “Regarding some of the issues of securities market regulation” as of 28 апреля 2006 г.;
9. Decree of the President of the Republic of Belarus N 278 «Regarding improvement of regulation in bonds circulation in the Republic of Belarus” as of April 28,  2006;
10. the Resolution of the Council of Ministers of the Republic of Belarus N 982 “ Regarding the Ministery of Finance and cancellation of some of the resolutions of the Council of Ministers of the Republic of Belarus” as of June 31, 2006;
11. the Resolution of the Ministry of Finance of the Republic of Belarus  N 112 “regarding securities market regulation” as of 12 сентября 2006;
12. resolution of the Securities Committee with the Council of Ministers of the Republic of Belarus № 10/P “regarding some issues of reporting and disclosure of information to the securities market participants” as of December 16, 2005;
13. resolution of the Securities Committee with the Council of Ministers of the Republic of Belarus № 09/ P “regarding approval of the Instruction on securities issue and state registration” as of April 11, 2006.
 
The market of the state securities
 
The market of the state securities functions since 1994 and is characterized by stability, duly and unconditional performance of all its obligations to investors. Repayments and service of state loans are protected and top-priority in relation to other expense items in the budget. Investment in state securities of Belarus is beneficial and riskless transaction.
 
On behalf of the Government the Ministry of Finance issues the following kinds of state securities:
 
 For legal entities
          State short-term bonds,
          State long-term bonds,
          State bonds in hard currency,
 
For natural bodies
          Public premium currency bonds of the Republic of Belarus,
          Public savings bonds of the Republic of Belarus.
 
The current state securities legislation of the Republic of Belarus enables residents and non-residents to invest their money into all kinds of securities of the Government of the Republic of Belarus.
 
state securities of the Republic of Belarus can be acquired by legal entities the following ways:
• at the auction held by the National Bank of the Republic of Belarus;
         at the auction held by the Ministry of Finance of the Republic of Belarus by electronic trading system of OJSC “ Belarusian currency and stock exchange”;
         on the basis of a bonds sales contract concluded between the Ministry of Finance of the Republic of Belarus on the conditions approved by the Ministry;
         at a secondary securities market through the participants of state securities trading which are the members of stock market  section of OJSC “ Belarusian currency and stock exchange”.
 
State securities market participants in Belarus are as follows:
 
1.       the Ministry of Finance of the Republic of Belarus is an issuer acting on behalf of the Government of the Republic of Belarus. the Ministry of Finance work out proposals, determines the terms of issue, placement, circulation, meeting and servicing of state liabilities which form both internally and externally held public debt.  
The National Bank of the Republic of Belarus is a fiscal agent of  the Government of the Republic of Belarus in the market of state securities. It take part it their circulation and functions as a central depositary of state securities. 
 
Investors are professions securities market participants, legal and natural entities including foreign entities.
 
A long term repayment or exchange of obligations for the new issues is possible at mutual agreement of the issuer and investor.
 
The most attractive bonds for investors are short-term state bonds with maturity of up to one year and long-term state bonds with maturity starting at one year denominated in national currency of Belarus (Belarusian rubles). The abovementioned securities are issued in book-entry form as a discount or record in the account and can be with discount or interest income.
 
Bond yield of bonds in Belarusian rubles in 2006 made up 10 – 11 percent per annum. An average term of state bonds maturity in 2006 made up 323 days for short-term and 1 950 days for long-term bonds.
 
Bond yield of bonds in foreign currency (USD, EURO) during the period from 2005 to 2006 varied within the rage of 6 to 9 percent per annum. An average term of such securities maturity is 2 years.
 
Information about state securities in the Internet
 
-          http://ncpi.gov.by/minfin/ - The Ministry of Finance of Belarus
-          http://www.bcse.by - OJSC “ Belarusian currency and stock exchange”.
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