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Foreign experience and especially of the Kazakhstan system of state regulation of the stocks (securities) market

The securities (stocks) market is one of the most regulated in the market economy. The complexity of the relationships in the market, its scale, his inherent high risks, and the security interests of its participants (subjects) is driving the need for the adoption of detailed standards and rules of work in the market, as well as bringing to the regulation of various state bodies.

The state, through regulatory and law enforcement agencies should develop a sustainable system based on a balance of interests of the state and participants of the securities market and its security, to protect it from external and internal threats [1].

World practice proves that the system of regulation of stock market, regardless of its scale, scope and degree of development should include elements such as regulatory bodies, regulatory functions and procedures (legislation, registration, licensing, and supervision), the legislative base, and the professional ethics of work with securities.

According to I. Mirkin "regulatory infrastructure of the securities market - the system of regulation of the securities market, which includes:

- Regulatory authorities (state authorities and self-regulated organizations, regulatory functions and procedures;

- legal infrastructure of securities market regulations, operating in the securities market, which consist of 90% of the legislation on securities);

- ethics of the stock market (the rules of honest business, approved by the self-regulatory organization), traditions and customs" [2].

The state bodies, the main authority which is supervising the participants of the stock market and the formation of a normative base of their activity, constitute the highest level of regulating the securities market organizations. In addition, certain powers may be delegated to professional participants of the market formed by their collective self-regulation organizations.

In the history accumulated great experience state regulation of the securities market. In the world practice there is the following basic model of its regulation:

- By monitoring with the help of banking and non-banking institutions, or mixed model (Japan, Brazil);

- The model of the single regulation (by means of direct government control) (Great Britain, Ireland, the Netherlands, Portugal);

- By monitoring with the help of financial and banking bodies, the so-called European (banking) model (Germany, Belgium, Denmark);

- Through a specially created institutions, or American (non-banking) model (the USA, France, Italy, Spain, Russia).

For example, in the United States, federal regulation of the securities market is carried out on the basis of the principle of self-regulation. The commission for the Securities and Exchange Commission has transferred its powers to control the trafficking of registered securities of the stock exchanges, having reserved the right to make changes or additions to existing rules and regulations. The right to exercise control over the trade on the over-the-counter market, was handed over to the National association of securities dealers (NASD) [4].

In the scheme 1 demonstrated to the world a model of state regulation of the securities market.

Model of stock market regulation

The model of the single regulating the stock market (Great Britain)

The mixed model (Japan)_

The European model (Germany)

The American model (USA)

The regulatory authority for financial services (The Financial Services Authority, FSA)

The ministry of finance (Department of securities) The commission under the Securities and Exchange Commission (SEC)

The commission for the securities market (Bundesamt fur das Wertpapieren) The German federal bank

The commission under the securities and exchange commission (SEC) The national association of stock exchange dealers (NASD)

Companies act (1985/1989.) The law on the securities Act (the insiders) (1985.) The law on financial services (1986.) The law on banks of England (1998

Securities act (1948.) The law on the reform of the financial system (1993).)

The law on securities trading (1998)

Securities act (1933.) The law on stock exchanges (1934.)

Note - the source of 5

On the world financial markets all the more strengthened the trend towards mega regulators, i.e. the single regulator of financial markets.

The main economic reasons for creating mega regulators are the following:

- universalization of the financial institutions, expressed in the provision of their services, similar to those, which were the organizers of trade on the financial markets;

- The creation of financial conglomerates, in which the holding company owns several financial institutions, which offer a range of financial services to different sectors of the financial market;

- Growth of cross-border proposals diversified financial products of banks, insurance and broker-dealer companies (insurance, stock funds, pension funds, collective investment, etc.) [5].

Therefore, as a consequence, the countries, where there are the above-mentioned reasons, refused to regulation for the functional (sectoral) principle and created a single regulator of financial markets. In turn, the regulatory body is built inside on a sector principle to highlight in its structure the leading regulators, carrying out regulatory functions in respect of credit organizations, activities of professional participants of the securities market, the activity of the organizers of trading activity on the management of collective investments, insurance, etc.

The world practice of creation of a single regulatory body allows making a conclusion about the fact that some mega regulators function on a compact financial markets of small countries, and the other - in the countries with highly developed and integrated into the world economy market.

There are several models of the creation of: mega regulators

- As a single regulatory authority is an independent body accountable to the parliament;

- As a single regulatory body is the central bank, combining its main functions with the functions of the regulator;

- as a single regulatory body is a body, accountable to the ministry of economy or the ministry of finance, combined with supervisory functions a number of functions of the central bank and the ministry of finance (monetary policy and crediting of budget deficit) [6]

In particular in the UK the single regulator of financial markets the FSA (The Financial Services Authority, which reports to the financial authorities and the parliament. The activities of the FSA clearly fit into the scope of the UK monetary and financial policy. This fact is an example of the consistency of state regulation, which leads to more effective regulation of financial markets and is one of the key factors of transformation of London, in the principal financial centre of the Euro zone.

In the composition of the FSA consists of 9 regulatory bodies, the previously existing independently and perform the functions of regulation of the securities market, investment management, private investment, the supervision of banks, insurance of trade and industry, regulation of construction activities and charitable societies in [7].

In spite of the all the structural differences, the model of a single regulation has the following advantages:

- replace the system of separated and ineffective regulatory organizations of the financial market, which contributes to improving the coordination and effectiveness;

- help to reduce the effect of duplication of functions of regulatory authorities;

- contribute to overcoming inequality, inconsistency and the fragmentation of the legislative base;

- provides for a clear division of responsibility;

- promotes the establishment of a strong financial infrastructure of the national economy and the general conditions for the functioning of financial institutions on the basis of fair competition;

- provides comprehensive protection of consumers of financial services and operational control over the activities of the objects of regulation.

The specifics of the Kazakhstan stock market lies in the fact that the commercial banks there are simultaneously in three ways: as issuers, investors and professional participants. In Kazakhstan today, the commercial banks are the most powerful in terms of finances and more adapted to work with clients in comparison with the stock structures with lower capital base and financial stability.

World experience of development of the stock market shows that the dominance of banks in the securities market is characteristic of all countries in the initial stage of the development of this market. Gradually with the development of the market share of the banking sector in the redistribution of financial resources is reduced, and the share of the resources redistributed through the stock structure, on the contrary, increased. For example, in the United States in the early 19th century, the share of commercial banks in the financial allocation was up to 95-98% [8].

But at the moment this feature of the Kazakh market distinguishes it from the modern market of the USA on which commercial banks according to the law of the Glass-Steagall act prohibited by the mediation in the purchase and sale of securities, investment in corporate SECURITIES, and implementation of underwriting [9].

Necessity of participation of commercial banks in operations with securities is dictated by the fact, that at the present time they accumulate a large enough financial resources, as well as the need to diversify the activity of banking institutions in order to reduce risks.

Thus, the advantages of the banks in the implementation of operations in the securities market are:

- Reduction of the risks due to the diversification of services;

- Most of the large capitals of banks;

- Complexity of customer service;

- cost savings, accumulated profit;

- Easier access to financial resources.

The peculiarity of the Kazakhstan stock market is the existence of, according to the current legislation of two kinds of professional intermediaries - brokers-dealers, banks and broker-dealers - non-banking organizations (Brokerage Company). The Kazakh market is different from the stock market of Germany, where the non-banking structures do not exist.

Нe peculiarity of stock market of Kazakhstan lies in the weakness of the legal system, in particular, the delay of the adoption of a series of important laws regulating the securities market, as well as in the absence of an independent system of control over the execution of laws on securities, carried out by the judicial authorities (as, for example, in the united states).

Thus, the analysis of specificity of the Russian securities market testifies to the fact that in the country formed its own, the Kazakhstan model of the stock market, with a range of features.

Kazakhstan's securities market until July 2001, was formed in the framework of the initially adopted the concept of non-banking (USA) models of organization and regulation. Among the regulators of the stock market in the Republic of Kazakhstan the central place occupied by the National commission of the Republic of Kazakhstan on securities (NSC), which was responsible for the state policy in the securities market. The Powers of the National commission were fixed by the Law of the Republic of Kazakhstan "On securities market" dated March 5, 1997. [10], the Decree of the President of the Republic of Kazakhstan "On approval of the Regulations of the National commission of the Republic of Kazakhstan on securities" from November 13 1997. № 3755[11].

The question of admissibility a unified system of regulation financial markets to markets of Kazakhstan discussed for a long time.

First, the analysis of the experts has shown that the successful functioning of the brokerage company are divisions of large banks. Thus, in practice it turns out that the Kazakh stock market has a banking model with some signs of a universal model.

Secondly, cited the following main arguments in favor of the merger of financial regulatory bodies:

- The emergence of financial conglomerates, representing a wide range of financial services (banking, insurance, and pension services, asset management, underwriting and market-making on the market of corporate securities);

- Presence of the actions of the financial departments, as a result there is a duplication of functions, the contradictions in the implementation of regulatory and prudential supervision.

Given these trends, in the Republic of Kazakhstan creating a single system of regulation of activities organizations, providing various kinds of services, on the financial market: banking, insurance, services on the securities market and collective investment.

The Decree the President of the Republic of Kazakhstan of July 11, 2001"ON measures on organization of a unified system of state regulation of the financial market National commission of the Republic of Kazakhstan on securities was abolished with the temporary transfer of its functions to the National Bank of the Republic of Kazakhstan.

At the present time in Kazakhstan is forming a unified system of state regulation of the activities of financial institutions, providing for unification of all supervisory and control functions within the framework of a specialized agency - the Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations (the Agency for regulation and supervision of), directly subordinate and accountable to the President of the Republic of Kazakhstan.

His organizational structure of the Agency for regulation and supervision consists of seven Departments and two Directorates:

- Department of strategy and analysis, the objectives of which include the implementation of the consolidated supervision of financial market and market analysis;

- The Legal Department carries out legal support of regulation and supervision of financial market and financial organizations, as well as legal support of the activities of the agency;

- The department of supervision over banks, the task of which is the prudential regulation and inspection of activity of commercial banks;

- Department for supervision of the insurance market and other financial organizations, exercising the prudential regulation of these entities;

- Department of liquidation of financial institutions, providing control over the liquidation of the financial organizations and the activities of the temporary administration and liquidation commissions;

- Department for maintenance of activity of the Agency, which includes the management of information technology and the department of documentary maintenance;

Control of licensing;

- Management of the protection of the rights of consumers of financial services.

Thus, in Kazakhstan carried out the transition to non-banking (American) model of regulation of the securities market on the model of uniform regulation of the financial market and financial organizations, where as a single regulatory authority is an independent body accountable to the President of the republic. The creation of a single regulator of the financial market will allow coordinating the sectors of this market and to implement the integrated management taking into account the interests of all its participants.

The basic legal infrastructure of the securities market in Kazakhstan was almost completely created in March 1997, when they were taken 3 of the law N securities market", "ON registration of securities transactions in the Republic of Kazakhstan", "On investment funds in the Republic of Kazakhstan".

The Law "On registration of securities transactions in the Republic of Kazakhstan" defined such organizations authorized for registration of transactions with securities, and confirmation of the property rights or other rights to the central bank as broker-dealers, registrars, custodians and Central depository, the foundations of relations between them, as well as the basic conditions of their activity. The law determines the activities of the above-mentioned professional participants of the organizational - legal form of their actions, tasks and functions, the conditions and the procedure for licensing their activity, as well as the procedure for registration of transactions with securities.

On the basis of the above-mentioned laws in 1997, the government approved the package of normative-legal acts regulating licensing and implementation of professional activities on the securities market: "the Regulation of broker-dealer activity", "Provision of custodian activities", "Regulations on the Central depository", "and Regulations on keeping the register of securities holders".

The most important event that precipitated the development of securities market of Kazakhstan for the following years was the adoption of the law "ON pension provision in the Republic of Kazakhstan", in accordance with which since 1998 in the country be put into effect funded pension system. This law defines the legal and social framework for pension provisions, which provide for the establishment in Kazakhstan accumulative pension system, provided by accumulative pension funds, companies on management of pension assets and custody.

In 1998, after a long preparation was adopted the law "On joint stock companies", thoroughly regulating the processes of creation and activity of the JSC, standards of corporate governance and protection of the rights of the shareholders’ interests. One of the most important consequences of the adoption of this law was the streamlining of the structure of shareholders.

In spite of the fact that the legal infrastructure of the Kazakhstan stock market was considered to be formed, it, nevertheless, was characterized by incompleteness of the process of formation of normative base, which consisted in the fact that many of the legal acts do not keep pace with the development of the market and even sometimes contradict his tendencies. In the legislation, regulating the securities market, many were the shortcomings of a legal nature, when the solution of practical situations they are either not regulated by law, or was it a dual interpretation.

Therefore, in 2003, have been developed and adopted new laws "On joint-stock companies" and "ON securities market", which take into account the changes in the functioning of the securities market, since the adoption of the initial versions of the laws mentioned above, and are aimed at achieving new results in the sphere of corporate management and state regulation of the securities market.

However, some of the domestic legal experts note the following shortcomings of the new law on joint-stock companies:

- It does not reflect many of the "Recommendations on the application of the principles of corporate governance by Kazakhstan joint-stock companies", which were approved on September 24, 2002. The expert council for securities market matters under the National Bank;

- there is no clear legal regulation is very topical and fairly complicated issues of interaction of bodies of the joint-stock company (the general meeting of shareholders, the board of management, board of directors) with rehabilitation competitive manager in the carrying out of procedures of bankruptcy of the company;

- there are no regulations limiting the number (proportion) of shares that have the right to acquire non-resident - physical and legal persons, which may lead to the transfer of rights of ownership to the property of bigger enterprises, functioning in the strategically important industries (energy, transport, metallurgy and etc.), to foreign investors.

The Law "On securities market" , dated 2003, developed taking into account the law-enforcement practice of previously existing laws "ON securities market" and" ON registration of securities transactions in the Republic of Kazakhstan" from 1997., as well as with account of the international practice of operation of the securities market.

As to the law "On investment funds in the Republic of Kazakhstan", as it has been already noted earlier, its practical implementation, unfortunately, has not brought positive results.

The New Law "On investment funds", adopted in mid-2004, developed taking into account the errors of the former and provides for mitigation of existing today, and preventing the emergence of investment funds regulations.

The main innovation of the law is the creation of mutual funds - funds without formation of the legal person. According to the developers of unit organization fund in granting tax privileges should be efficient enough, as in this form of the organization of the work of the fund the cost of the process control system should be minimal.

One of the basic elements of the system of state regulation of the stock market is overseeing the activities on the securities market, which is carried out in a variety of forms.

Methods of regulation and supervision relationships at the Kazakh stock market are classified according to the following features:

(a) On the subjects of the stock market, having licenses for realization of activity on the securities market;

b) On the individual components and procedures, subject to permanent control;

c) The sources of information, obtained in the process of licensing of the business entity; in the course of the implementation of the current control of the activities of a securities market, by means of regular reports, additional requested information about them; in the course of inspections of the activities of the subjects of the securities market.

The peculiarity of the Kazakhstan model of regulation of the stock market is the presence of rigid centralization of regulatory functions in the hands of the state and the establishment of strict rules and norms of activity of stock market participants.

The analysis of foreign experience of state regulation of the securities market has allowed identifying a number of problems and contradictions, in particular:

- The domestic stock market characterized by the imbalance, which is expressed in a dominant position of the government securities market the corporate. The specifics of the Kazakhstan market are similar to the German and eastern European stock markets, on which there is the same situation;

- negativity of the structure of the Kazakhstan enterprises, lies in the fact that in most companies is dominated by large owners, prevailing in the board of directors and often are the managers of companies. This factor speaks of a lack of effective control of the board of directors of Russian companies over the management and accountability of managers to shareholders, because of the insufficiently developed legislative base often leads to numerous violations of the rights of shareholders;

- there is a low quality of the issuers, not contributing the expansion of the issue and the market of securities circulation, which is manifested in the high debt of many Kazakhstan companies, the absence of effective investment projects, in the conduct of the issuers of accounting does not reflect their real positions (the system of double-entry bookkeeping);

- stock market of Kazakhstan is characterized by the weakness of the legal system, in particular, the delay of the adoption of a series of important laws regulating the securities market, as well as in the absence of an independent monitoring system the implementation of the laws on the securities market, carried out by the judicial authorities (as, for example, in the USA);

- the law "On joint Stock companies" does not reflect many of the "Recommendations on the application of the principles of corporate governance by Kazakhstan joint-stock companies", which were approved on September 24, 2002 the Expert council for securities market matters under the NBK;

- the law "On joint Stock companies" there is no clear legal regulation is very topical and fairly complicated issues of interaction of bodies of the joint-stock companies (general meeting of shareholders, the board of management, board of directors) with the rehabilitation of the bankruptcy manager in carrying out the procedures of bankruptcy of the company;

- the law "On joint Stock companies" there are no regulations limiting the number (proportion) of shares that have the right to acquire non-resident - physical and legal persons, which may lead to the transfer of rights of ownership to the property of large joint-stock companies operating in strategically important industries (energy, transport, metallurgy and etc.), for foreign investors;

- the peculiarity of the Kazakhstan model of regulation of the stock market is the presence of rigid centralization of regulatory functions in the hands of the state and the establishment of strict rules and norms the activities of the participants, which is fraught with the departure of participants of the market on other capital markets, or in the"shadow"activities.

Accordingly, the analysis of problems of the state regulation of the securities market to a number of conclusions, recommendations and proposals:

- The study found that the world's financial markets all the more strengthened the trend towards mega regulatory, i.e. the single regulator of financial markets;

- The main economic causes for the creation of the FSA are: universalization of financial institutions; the creation of financial conglomerates; growth in cross-border proposals diversified financial products of banks, insurance and broker-dealer companies (insurance, stock, pension, collective investments, etc.);

- in the republic of KAZAKHSTAN carried out the transition to non-banking (American) model of regulation of the securities market on the model of uniform regulation of the financial market and financial organizations. The creation of a single regulator of the financial market will allow coordinating the sectors of this market and to implement the integrated management taking into account the interests of all its participants;

- it is necessary to interaction and cooperation between government and market regulators in this area, providing an opportunity to the state not only to maintain the market, but also to improve its performance at minimum cost of budgetary funds.

- in order to ensure more effective control over the illegal actions of the subjects of the securities market infrastructure, and the state regulator is more expedient in the process of licensing of professional participants of the draw and self-regulatory organizations, but rather to carry out the issuance of licenses on the basis of the application of the latter;

- For more effective control in the structure of self-regulating organizations need to create a specialized internal division of monitoring and control over the activity of its members and the disciplinary committee;

- with the purpose of minimization of various infrastructure risks inherent in professional activities on the securities market, there is a need to create a special guarantee and insurance funds, and participation in the fund shall be compulsory in obtaining the license on realization of professional activity in the stock market.

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11. The President of the Republic Of Kazakhstan. On approval of the regulation on the National commission of the Republic of Kazakhstan on securities: the Decree of 13 November 1997. № 3755 // Kazakhstanskaya pravda. - 1997. - On November 20.