Ukraine obliges passing bills on expanding powers of securities commission, splitting functions of financial service markets watchdog
Ukraine has obliged to pass bills expanding the powers of the National Securities and the Stock Market Commission of Ukraine (NSSMC) and on splitting functions of the national commission of financial service markets regulation as part of cooperation with the International Monetary Fund (IMF).
According to a memorandum of the economic and financial policy of Ukraine within the second review under the EFF program of the (IMF), the NSSMC faces significant challenges faced in its role as the regulator of the Ukrainian securities market, including insufficient powers to conduct effective supervision and the issuance and trading of fictitious securities in the market.
They also severely constrain the ability of the NSSMC to cooperate with foreign supervisors.
To this end—and to bring Ukrainian legislation in line with IOSCO Principles and with a view for Ukraine to become a signatory of IOSCO’s Multilateral Memorandum of Understanding—Parliament was adopt legislation by end-September 2016 expanding powers of NSSMC.
The bill would allow the NSSMC to: a. Conduct inspections of regulated entities without the existing undue constraints, including by removing any remaining moratorium on the NSSMC’s ability to conduct certain inspections; b. Conduct audits of any legal or natural person to determine compliance with securities laws; c. Demand and have access to information from any natural or legal person to determine compliance with securities laws, including by introducing appropriate exemptions from the existing secrecy laws (such as banking secrecy and protection of personal data); d. Have the ability to share with foreign authorities information in the possession of the NSSMC or acquire such information on the foreign authorities’ behalf to determine compliance with securities laws; e. Use any of its available powers to provide assistance to foreign authorities regardless of whether the NSSMC has an independent interest in the matter; f. Adopt regulations under Ukrainian securities laws without any external approval/agreement/registration; g. Have access to a larger and more stable source of funding than currently; and h. Provide appropriate legal protections to the NSSMC and its Chairman, Commissioners and staff.
To ensure that NSSMC’s new powers are appropriately exercised, the above legislations should: i. Require the NSSMC to establish proper confidentiality and data protection framework in order to safeguard information from improper disclosure; j. Subject the NSSMC and its Chairman, Commissioners and staff to confidentiality requirements and effective administrative and criminal sanctions for undue disclosure of confidential information, even after they have separated from the NSSMC.
In addition, Ukraine is obliged to pass the bill on consolidation of functions to enhance further the functioning of financial markets by end-December 2016.