25 Mar 2024 16:16

Ukrainian president signs into law bill key to receiving $1.5 bln from World Bank

MOSCOW. March 25 (Interfax) - Ukrainian President Vladimir Zelensky has signed into law a bill on regulation and oversight at capital markets and organized commodity markets, which bolsters the powers of the National Securities and Stock Market Commission (NSSMC) and is essential to issuing a $1.5 billion development policy loan (DPL) by the World Bank to Ukraine.

The law signed by Zelensky returned to parliament on March 22, Ukrainian media said, citing the Verkhovna Rada website.

The World Bank is due to hold a meeting on a planned $1.5 billion DPL for Ukraine on March 26, deputy head of the Verkhovna Rada's relevant committee Yaroslav Zheleznyak said. The World Bank is expected to adopt a positive decision. National Bank of Ukraine Deputy Governor Sergei Nikolaichuk said earlier that the World Bank would not adopt such a decision if the bill on the National Securities and Stock Market Commission has not been signed into law.

As reported earlier, the bill was passed on February 22, but the NSSMC asked the president to veto certain amendments to its text "[...] in order to be able to fine-tune the bill and introduce the necessary adjustments, which will subsequently make it impossible to undermine the functioning of the regulator as a state institution."

The NSSMC said it was speaking about the possibility to raise salaries through optimizing the size of its staff but keeping the entity's general budget at the 2022 level, wordings related to a conflict of interests and whether relatives of the commission's employees can work on the market.

The Verkhovna Rada reviewed these proposals three times, but to no avail, including during a vote on other bills. It was only at the fourth attempt, during a March 21 vote on a bill on the system of deposit guarantees, that the Rada managed to amend the wordings related to a conflict of interests and whether relatives of NSSMC can work on the market. Meanwhile, the amendment on salaries was backed only by 160 MPs, where as 226 votes are required.

Under the amendment, NSSMC staff pledge to avoid any real or potential conflict of interests while performing their official duties. The commission's ethics code establishes the rules for preventing, notifying, managing and settling conflicts of interests involving commission staff.

The law also paves the way for enhancing the institutional capabilities of NSSMC as the national regulator of the capital markets and the organized commodity markets, as well as expanding its powers and formalizing independence guarantees for the commission, including its financial independence guarantees, in legislation, updating legislative norms regulating the commission's international cooperation, building an efficient system of oversight at the capital markets and the organized commodity markets in line with the IOSCO principle in order to ensure the functioning of an efficient system to prevent abuse on these markets.

The document also envisages introducing efficient mechanisms to prevent manipulation, insider trading, any unlawful use of insider information and other abuses on the capital markets and the organized commodity markets, including a ban on financial pyramids and countering attempts to set them up.

In order to boost the NSSMC's financial independence, the law envisages annual contributions by active professional market players to fund its regulation functions. Thus, financial instrument traders, financial instrument keepers, asset management companies will have to pay a sum equivalent to 15 subsistence minimum amounts (the largest fee will be paid if various activities are combined) and trading organizers and clearing organizations 75 subsistence minimum amounts. However, under the document, this rule will start to apply after the crisis ends. Today's subsistence minimum in Ukraine is 2,589 hryvni.

Emission registration payments may stand at the equivalent of 25 subsistence minimum amounts, permission for a foreign security to access the Ukrainian market 5 subsistence minimum amounts, and approval of candidates for top professional market players 27 subsistence minimum amounts.

The new Extended Fund Facility (EFF) for Ukraine approved by the International Monetary Fund (IMF) in late March 2023 required Ukraine to bring its securities market rules in line with international standards. The initial plan was that the bill would be adopted before late May 2023, but this process took longer than expected.

According to the updated memorandum with the IMF under the EFF, published overnight into Saturday, Ukraine, after adopting the aforementioned legislation, will align its regulations with the IOSCO principles in order to become its full-fledged participant by late December 2024, fully implementing other provisions of the law by the end of 2025.

Other commitments listed in the updated memorandum will see the NSSMC take steps to enhance the operational efficiency of NBU's capital controls in consultation with the NBU, including through regulatory harmonization and aligning capital flow restrictions for securities accounts with those applied to bank accounts by end-July 2024.