*99641*
UTEYEV BAKYTNUR ZHUMASHEVICH
Citizenship: Kazakhstan
“Kainar” University - teacher of finance
Tel.: +7 705 205 18 88, +7 702 121
10 07
Mail. ru: uteev2011@mail.ru
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.
Íe 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. ¹ 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.
THE
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