In the year 2002, the process of reforming of the equity market in the Republic of Belarus continued. Changes of legislation concerned the activity of virtually all participants of the market, including issuers, investors, professional members of the market. Acts adopted with an objective to improve the conditions of the activity in the equity market of the country, were for the most part aimed at unification of the legislation of the Russian Federation and the Republic of Belarus, eliminated existing contradictions and filled gaps in the national legislation.
The rules of the game become clearer
First of all, one should note positive changes regarding asset management introduced in the Civil code of the Republic of Belarus. Specifically, now the manager of the trust may accept money from the trustor for purposes of their further investment in securities. This means a substantial broadening of the manager’s opportunities. Before, only banks could use client’s funds under the contracts of monetary trust.
Novelties introduced in the year 2002 were mainly directed at strengthening of the discipline among the participants of the equity market. Thus, the Code on Administrative Violations has undergone changes that definitely mean increase of the liability in the form of fines for violations committed by the members of the equity market which provide brokerage services or carry out trust management. With similar purpose of increase of the liability while conducting transactions with securities and protection of the citizens from unfair actions of the members of the equity market, changes were introduced in the Law on Securities and Stock Exchanges; in particular, these changes contained a list of mandatory provisions for the contracts concluded by the members of the equity market with citizens.
For its part, the Committee on securities has toughened the financial adequacy requirements for the professional members of the equity market (limit sizes of equity capital, circulating assets and borrowed funds), and has established a rather high qualifying requirements for their employees.
The Committee has worked out a more detailed regulation of the activity of the members of the equity market – new Regulation on Segregation of the Accounts of the Broker and his Clients, as well as the Regulation on the Activity of the Investment Fund, were adopted.
Obviously, the above listed measures have contributed to establishing a more definite and clear rules of the game at the equity market and to protection of its participants from carelessness of their counteragents.
Committee on securities has also paid attention to regulation of corporate capital issue. Thus, new Regulations on emission of shares and bonds, on the circular notes and on reporting of the issuers were adopted. Among substantial improvements, one can note a smaller amount of paperwork necessary for registration of the capital issue, and easier requirements for the issue of corporate bonds.
Privatization
In the Republic of Belarus, the process of the so-called voucher privatization is not completed – i.e. most of “Property” privatization vouchers issued in its time by the Government for the population for buying a part of state property, remain unused. The problem is that no more or less attractive shares of the Belarusian enterprises have been offered for sale yet; and a moratorium on circulation of the stock exchanged for vouchers was imposed by the President in 1998.
The term of circulation of the “Property” vouchers expires on June 30, 2003. At present time, the government is working on the number of measures aimed at completion of the voucher privatization. The solving of this problem along with cancellation of the ban on circulation of the above mentioned stock is expected to result in a substantial revival of the equity market of the republic.
Foreseeable prospects
At present, the parliament of the republic is passing the draft of the Law on Emissive Securities and Participants of the Equity Market.
Introduction of the draft in the parliament is aimed at unification of the legislation of the Republic of Belarus and the Russian Federation in the sphere of securities. Provisions of the draft are pretty much similar to the Russian legislation, specifically, to the Federal Law on the Equity Market dated April 22, 1996.
According to the provisions of the draft, issue of the corporate bonds with security as well as without it, is allowed. Proposed are such security instruments as pledge, bail, and bank guarantee, which may be used independently as well as in aggregate (now bonds are issued only on the security of the issuer’s property). Issue of the bonds without security is allowed only for purposes of financing an investment project that passed an official evaluation, and in other cases.
It is proposed to introduce new types of professional activity in the equity market – such as clearing activity and activity on organization of the security trading in the equity market which have been already known to the Russian legislation for a long time.
In general, the draft has united “under one roof” regulations of a number of legislative acts and by-laws aimed at regulation of activity of all participants of the equity market, matters of issue and circulation of stock and bonds, professional activity in the equity market, and the fundamentals of state regulation of the equity market.
In the year 2002, the Committee on securities and other governmental agencies have conducted a considerable piece of work on improvement of regulation of the equity market. As a positive tendency one can note elaboration and adoption of the acts aimed at establishing common with the Russian Federation (where the current legislation is better developed) conditions for activity in the equity market. However, still remain such obstacles for turning the equity market into an effective mechanism for attraction of domestic and foreign investments as moratorium on circulation of the stock acquired during the period of preferential privatization, and an uncompleted process of transfer of the state property to the private investors. It is obvious that formation of the full-fledged equity market is impossible without solving these issues, and these solutions will be the most expected ones in the near future.
Maksim V. SALAHUB
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