December 20, 2021
Overview of the securities market regulation in Uzbekistan
- The Law of the Republic of Uzbekistan of07.2008 No. ZRU-163 “On the securities market” (New edition approved by the Law of the Republic of Uzbekistan dated 03.06.2015 No. ZRU-387);
- Law of the Republic of Uzbekistan of04.1996 No. 223-I “On Joint Stock companies and protection of shareholders’ rights” (New edition approved by the Law of the Republic of Uzbekistan of 06.05.2014 No. ZRU-370);
- The Law of the Republic of Uzbekistan of10.2006 No. ZRU-58 “On mortgage”;
- Decree of the President of the Republic of Uzbekistan of 04.2021 No. UP-6207 “On measures for further development of the capital market”;
- Regulations on the procedure for maintaining the Unified State Register of Issues of Emission Securities (Appendix No. 2 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan of12.2008 No. 284);
- Rules for the Issue of Securities and State Registration of Issues of Emission Securities (registered by the Ministry of Justice of 08.2009 No. 2000);
- Regulation on the procedure of execution and registration of securities transactions in the territory of the Republic of Uzbekistan (Annex No. 2 to the Resolution the Republic of Uzbekistan of 06.1994 No. 285);
- Regulation on the licensing of professional activities on the securities market (Annex No. 1 to the Republic of Uzbekistan of07.2003, No. 308);
- The rules for the provision and publication of information on the securities market (registered by the Ministry of Justice of 07.2012 No. 2383).
Securities under Article 96 of the Civil Code of the Republic of Uzbekistan (hereinafter referred to as the “Civil Code of the Republic of Uzbekistan“) are understood to be documents certifying, in compliance with the established form and mandatory requisites, property rights, the exercise or transfer of which is possible only upon their presentation. And in accordance with Article 3 of the Law of the Republic of Uzbekistan of 22.07.2008 No. ZRU-163 “On the Securities Market” (hereinafter referred to as “ZRU-163“), securities are documents certifying property rights or loan relations between the legal entity that issued these documents and their owner, providing for the payment of income in the form of dividends or interest and the possibility of transferring rights arising from these documents to other persons.
The following types of securities are prescribed in the legislation of the Republic of Uzbekistan:
- promissory note (bill of exchange);
- savings (deposit) certificate;
- depository receipt;
- treasury obligations of the Republic of Uzbekistan;
From 2022, the concept of an exchange bond is introduced into the ZRU-163.
Article 4 of the ZRU-163 establishes that, according to the form of issue, securities can be both documentary (in the form of blanks) and non-documentary (in the form of entries in accounting registers in electronic form). Shares, bonds (corporate and infrastructure) and depositary receipts are issued in a non-documentary form. ZRU-163 also prescribes derivative securities such as options, futures, etc.
ZRU-163 considers the following as the participants of the securities market:
- Issuers of securities;
- Owners of securities;
- Professional participants of securities market;
- Central Securities Depository.
According to Article 3 of the ZRU-163, the Central Securities Depository (hereinafter referred to as the “Central Depository“) is understood to be a state depository that provides a unified system for storing, accounting of the rights and movement of emission securities on deposit accounts. It is created in the form of a state unitary enterprise.
The Unified Rules (Standards) of Depository Accounting and Reporting (reg. by MoJ of 01.12.1999 No. 844) (hereinafter referred to as the “Unified Accounting Standard“) are mandatory for depositories of the Republic of Uzbekistan and apply, including to depository transactions with securities transferred to the depository for storage and/or accounting of rights to them. Securities storage and accounting of rights to securities is carried out on the accounts of the depot – a set of records in the accounting registers of the investment intermediary and (or) the Central Depository. A person who has a depot account is called a depositor.
According to Article 24 of the ZRU-163, professional activity is carried out in the securities market as:
- investment intermediary;
- investment consultant;
- investment fund;
- fiduciary manager of investment assets;
- transfer agent;
- organizer of over-the-counter securities trading.
Professional activity in the securities market is licensed (some types of such activities are carried out on a notification basis). Professional participants in the securities market can only be legal entities with at least two employees (except for the investment fund) with a qualification certificate of a securities market specialist. The qualification certificate of a securities market specialist is issued for a period of five years.
Professional activity in the securities market is carried out by a foreign organization by creating a new or participating in the authorized capital of an existing legal entity – a professional participant in the securities market.
In accordance with the Rules for the issue of securities and the state registration of issues of emission securities (reg. by MoJ of 30.08.2009 No. 2000), the issue of securities), as a rule, includes the following stages:
- adoption and approval of a decision on the issue of securities;
- approval of the prospectus (in case of public placement of securities);
- state registration of securities issue;
- registration of the issue of securities in the Central Securities Depository;
- disclosure of information on the issue of securities in accordance with the procedure established by law and the Rules;
- placement of securities of the issue;
- submission to the registration authority of a notification on the results of the issue of securities.
The issuer carries out the placement of securities after their state registration. The placement of securities must be completed in the following terms:
- in the case of the initial issue of shares — within the period established by the decision on the issue of securities, but no later than 1 year from the date of state registration of the issuer as a legal entity in the form of a joint-stock company;
- in other cases – within the period established by the decision on the issue of securities, but no later than 1 year from the date of state registration of the issue of these securities.
Securities in a non-documentary form are considered to be placed after their full payment and transfer to the accounts of the purchasers’ depots during the period of their placement. Securities which were not placed are subject to cancellation.
The issue of securities may be:
- suspended by the registration authority;
- recognized by the registering authority as failed;
- excluded from the Unified State Register of Issues of equity securities (Unified State Register of issues of equity securities) in cases established by law;
- declared invalid by the court.
The procedure for making exchange-traded and over-the-counter transactions for the purchase and sale of shares of joint-stock companies, bonds issued by joint-stock companies, as well as derivative securities concluded on the territory of Uzbekistan is determined by the Regulation on the Procedure for making and Registering transactions with securities on the territory of the Republic of Uzbekistan, approved by Resolution of the Cabinet of Ministers of the Republic of Uzbekistan of 08.06.1994 No. 285.
Execution and registration of transactions with securities at organized securities auctions are carried out in electronic form, without the need for their paper registration. Other transactions are made in writing and are subject to registration in accordance with the established procedure.
Transactions on the secondary market for the purchase and sale of JSC shares are carried out exclusively on the exchange and organized over-the-counter securities market, with the exception of cases defined in the legislation of the Republic of Uzbekistan.
When making transactions with securities, the parties must come to an agreement on the following conditions:
- type and full name of securities (inclusion of the securities registration number is recommended);
- term and method of transfer of securities and their payment, terms of insurance of commercial risk under the transaction, if any;
- the amount of commission for the execution of the transaction.
Registration of securities transactions is carried out:
- organizers of over-the-counter securities trading, stock exchange and stock departments of currency exchanges – on transactions made on their trading platforms;
- Central Securities Depository and investment intermediaries serving the alienator of securities – for other securities transactions.
Only transactions on the purchase and sale of securities and their derivatives can be made and registered on the trading platforms of the organizers of exchange and over-the-counter securities trading.
The legislation of the Republic of Uzbekistan requires disclosure of information in relation to:
- professional participants of the securities market;
- organizers of securities trading;
- owners of securities;
- authorized state body.
Disclosure of information is carried out by:
- publication of information in the mass media;
- providing reports, information and other information.
Disclosure of information is carried out on the following websites:
- Unified portal of corporate information (http://openinfo.uz/ru /);
- The website of the Republican Stock Exchange “Tashkent” (https://uzse.uz /);
- Website of the State Unitary Enterprise “Central Securities Depository” (http://www.deponet.uz /).
Professional participants of the securities market can disclose confidential information in a special order, as they fall under the requirements of the legislation of the Republic of Uzbekistan on internal control to counteract the legalization of proceeds from criminal activity, the financing of terrorism and the financing of the proliferation of weapons of mass destruction. You can find out more about this here.
Information on the procedure for issuing bonds and disclosing information can be obtained here.
You can find out about the organization of the primary (IPO) and secondary (SPO) public share offerings and related information disclosure here.
State regulation of the securities market is carried out by:
- licensing and (or) establishing mandatory requirements for professional activity in the securities market and exchange activities;
- registration of issues of securities and control over compliance by issuers with the conditions and obligations stipulated in the decisions on the issue;
- ensuring the disclosure of information about securities in accordance with the legislation;
- certification of securities market specialists;
- control over the activities of securities market participants in accordance with the procedure established by law.
The authorized state body for regulating the securities market (hereinafter referred to as the “Authorized Body“) in accordance with Article 55 of the ZRU-163 is determined by the President of the Republic of Uzbekistan. Previously, such a body was the Center for the Coordination and Development of the Securities Market under the State Competition Committee of the Republic of Uzbekistan, then the Agency for the Development of the Capital Market, and in accordance with the Decree of the President of the Republic of Uzbekistan of 13.04.2021 No. PP-5073, from May 1, 2021, this agency was abolished, and its powers were transferred to the Ministry of Finance of the Republic of Uzbekistan.
For more information about the control over the acquisition of shares, see here.
Measures for further development of the capital market are provided for in the relevant Decree of the President of the Republic of Uzbekistan No. UP-6207 dated 13.04.2021. This Decree also approved the Capital Market Development Program in 2021-2023. The main goal of this Program is to radically improve the state policy, which provides for deepening the implementation of reforms aimed at bringing the total volume of free securities in the country’s GDP to 5%. And the priority strategic objectives are:
- increasing competitiveness and bringing the capitalization of the capital market to 45 trillion soums by the end of 2023 by introducing mechanisms attractive to investors, creating an effective alternative mechanism for bank lending;
- increasing the accessibility of the capital market for all categories of investors through active integration with international financial markets, extensive use of modern information and communication technologies and the use of advanced approaches successfully tested abroad;
- bringing up to 5 percent by the end of 2023 of the part of projects financed by issuing securities under the republican and regional investment programs by ensuring the harmonious functioning and development of all segments of the capital market in order to maximize the investment needs of the population, entrepreneurs and the economy;
- creating the necessary conditions for the active financing of investments aimed at the development of the stock market through the introduction of international best practices, the elimination of unnecessary barriers, restrictions and excessive regulation of the sphere;
- development of the necessary legislative framework that ensures the integrity of capital market regulation, prevention of systemic risks with the introduction of appropriate international criteria and experience;
- development of a sustainable system for providing the capital market with personnel that meet modern requirements, creating attractive conditions for attracting promising, including foreign specialists;
- training and retraining of specialists for the capital market, systematic improvement of their qualifications;
- coverage of 40 thousand people by the end of 2023 as part of programs to support the improvement of knowledge, skills and financial literacy of minority investors, other capital market participants and the general population.