2007 assessment · the oliy majlis 02.07.1992 10.10.2006 the law of the republic of uzbekistan...

SECURITIES MARKETS LEGISLATION ASSESSMENT PROJECT

2007 ASSESSMENT

based on legislation in force on 1 June 2007

UZBEKISTAN

LEGES ADVOKAT LAW FIRM Turab Tula str., 1 Tashkent 700003

Uzbekistan http://www.leges.uz

EBRD – Securities Market Legislation Assessment 2007

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TABLE OF CONTENTS General Information ______________________________________________________________________________________________________ iv

Section I – Basic Information about Securities Market Related Laws and Regulations _________________________________________________ vi

Section II – Identity of the Relevant Market Regulatory Authorities (Statutory and Non-statutory) by Activities Regulated ____________________vii

Section A – Regulator ______________________________________________________________________________________________________ 1 Responsibilities of the Regulator _________________________________________________________________________________________________________________ 1 Independence of the Regulator___________________________________________________________________________________________________________________ 1 Accountability of the Regulator __________________________________________________________________________________________________________________ 2 Regulator’s powers and resources ________________________________________________________________________________________________________________ 4 Clear and Equitable Procedures _________________________________________________________________________________________________________________ 7 Professional Standards ________________________________________________________________________________________________________________________ 8 Cooperation among Regulators __________________________________________________________________________________________________________________ 9

Section B – Self-regulation ("SROs") ________________________________________________________________________________________ 12 Performance and Functions of SROs _____________________________________________________________________________________________________________ 12 Authorisation or delegation subject to oversight ____________________________________________________________________________________________________ 12 Oversight __________________________________________________________________________________________________________________________________ 13 Misuse of Information and Conflict of Interests_____________________________________________________________________________________________________ 14

Section C – Issuers and their Information-Disclosure Obligation __________________________________________________________________15 Content of the Prospectus______________________________________________________________________________________________________________________ 15 Foreign Issuers______________________________________________________________________________________________________________________________ 17 Full Disclosure______________________________________________________________________________________________________________________________ 18 Liability ___________________________________________________________________________________________________________________________________ 18 Derogations ________________________________________________________________________________________________________________________________ 19 Regulator’s Powers __________________________________________________________________________________________________________________________ 19 Other Listing Documents ______________________________________________________________________________________________________________________ 19 Ongoing Disclosure Requirements_______________________________________________________________________________________________________________ 20 Fair and Equitable Treatment of Shareholders _____________________________________________________________________________________________________ 21 Change in Corporate Control __________________________________________________________________________________________________________________ 23

Section D – Collective Investment Schemes (CISs) ______________________________________________________________________________24 Entry and Eligibility Criteria ___________________________________________________________________________________________________________________ 24 Supervision and Ongoing Monitoring ____________________________________________________________________________________________________________ 26 Delegation of Functions _______________________________________________________________________________________________________________________ 28


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Legal Form/Investors Rights ___________________________________________________________________________________________________________________ 29 Separation of Assets __________________________________________________________________________________________________________________________ 29 Disclosure _________________________________________________________________________________________________________________________________ 31 Asset Valuation______________________________________________________________________________________________________________________________ 33 Pricing and Redemption of Interest ______________________________________________________________________________________________________________ 34

Section E – Market Intermediaries ___________________________________________________________________________________________ 35 Authorisation and Licensing ___________________________________________________________________________________________________________________ 35 Ongoing Requirements________________________________________________________________________________________________________________________ 36 Investment Advisers __________________________________________________________________________________________________________________________ 37 Custodians _________________________________________________________________________________________________________________________________ 38 Capital Adequacy Requirements ________________________________________________________________________________________________________________ 38 Management and Supervision __________________________________________________________________________________________________________________ 39 Customer Protection _________________________________________________________________________________________________________________________ 39 Procedures for Dealing with intermediary in Financial Difficulty ______________________________________________________________________________________ 40

Section F – Secondary Market ______________________________________________________________________________________________42 Licensing of Exchanges and Trading Systems ______________________________________________________________________________________________________ 42 Ongoing supervision _________________________________________________________________________________________________________________________ 44 Transparency of Trading ______________________________________________________________________________________________________________________ 45 Detection of Unfair Practices___________________________________________________________________________________________________________________ 46 Monitoring of Large Exposures _________________________________________________________________________________________________________________ 47 Default Procedures __________________________________________________________________________________________________________________________ 48

Section G – Clearing and Settlement _________________________________________________________________________________________ 49 Authorisation and Licensing of Securities Settlement Systems__________________________________________________________________________________________ 49 Trade Confirmation and Delivery Versus Payment __________________________________________________________________________________________________ 50 Transparency _______________________________________________________________________________________________________________________________ 50 Central Depository___________________________________________________________________________________________________________________________ 51 Oversight __________________________________________________________________________________________________________________________________ 52 Derivatives _________________________________________________________________________________________________________________________________ 53 Protection of customers’ securities ______________________________________________________________________________________________________________ 53

Section H – Accounting and Auditing of Financial Reports _______________________________________________________________________54 Disclosure of Financial Results _________________________________________________________________________________________________________________ 54 External Auditor_____________________________________________________________________________________________________________________________ 55 Accounting Standards ________________________________________________________________________________________________________________________ 56 Auditing Standards___________________________________________________________________________________________________________________________ 58


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Section I – Money Laundering ______________________________________________________________________________________________61 Scope of the criminal offence of money laundering __________________________________________________________________________________________________ 61 Customer due diligence and record-keeping _______________________________________________________________________________________________________ 61 Reporting of Suspicious Transactions and Compliance_______________________________________________________________________________________________ 62 International Cooperation _____________________________________________________________________________________________________________________ 63

Section J –Financial Instruments ____________________________________________________________________________________________ 64 Variety of financial instruments traded ___________________________________________________________________________________________________________ 64 Derivatives _________________________________________________________________________________________________________________________________ 65 Cross-Border Issuance________________________________________________________________________________________________________________________ 65 Sponsor/Underwriter _________________________________________________________________________________________________________________________ 66 Concentration Rule __________________________________________________________________________________________________________________________ 66 Private Placement ___________________________________________________________________________________________________________________________ 66


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2007 ASSESSMENT: GENERAL INFORMATION

In Uzbekistan the basic legislation on the securities market is comprised of: • The Law “On securities and stock exchange” (Law No. 918-XII dated 02.09.1993), which introduces the concept of securities, briefly describes each type of

securities, identifies the scope and frames of state control and regulation of securities market and emission of securities and introduces the concept of stock exchange (the last amendment to this Law was made on 23.07.2007);

• The Law “On mechanisms of functioning of the securities market” (Law No. 218-I dated 25.04.1996), which covers such questions as functioning of the securities market, regulation of the securities market, informational provision of the securities market and the responsibility of participants of the securities market (the last amendment was made on 10.10.2006);

• The Law “On activities of depositaries in securities market” (Law No. 672-I dated 29.08.1998), which describes the activities of depositaries, the questions on licensing of their activities, rights, duties and responsibilities of depositaries, and authorities of the Central Depositary (the last amendment to this Law was made on 13.12.2002);

• The Law “On protection of investor’s rights in the securities market” (Law No. 262-II dated 30.08.2001), which covers rights, duties and responsibilities of all participants of the securities market and the procedures for examining complains and applications of investors (the last amendment was made on 10.10.2006);

• Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996. The Provision describes main rights, duties, functions and structure of the Centre. The last amendment to the Provision was made in 10.11.2006.

The securities market legal framework was most recently amended on 23.07.2007 by the Law “On introducing changes and amendments to some legislative acts of the Republic of Uzbekistan in economic sphere” which established that bonds can be issued only by open joint-stock companies under the following conditions: (i) within the limits of its own capital on the date of making a decision to issue bonds confirmed by the conclusion of audit company; (ii) only open joint stock companies (“OJSC”), which have positive indicators of profitability, paying capacity, financial sustainability and liquidity for the last three years confirmed by a conclusion of an audit company and after receiving independent rating assessment under the procedures established by the legislation; (iii) by participation of commercial banks fulfilling the functions of payment agent for paying funds owned to investors by issuers. Moreover, the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property together with the Central Bank of the Republic of Uzbekistan has adopted the Provision “On procedures for circulation of securities in foreign currencies in the territory of the Republic of Uzbekistan, purchasing securities in foreign currencies by residents and also purchasing of securities by non-residents issued by residents of the Republic of Uzbekistan” dated 22.06.2007. This provision regulates the questions of sale and purchase of securities in foreign currencies by residents and non-residents of the Republic of Uzbekistan, particularities of purchasing securities of commercial banks of the Republic of Uzbekistan by foreigners, the questions of payment of profits for securities in foreign currencies, paying off securities in foreign currencies. On 27.09.2006 the President of the Republic of Uzbekistan has adopted the Decree “On means for further development of securities market” in accordance to which there was adopted the Program for further development of securities market for 2006-2007. The Program stipulates introduction of insurance of investment in securities market by creating Investment insurance fund (forth quarter of 2007); elaborate and approve Provision on professional standards of activities of institutional investments in securities market (November 2007); setting normative requirements for the quality and minimal level of investments to the corporative securities by


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institutional investors by adopting a Provision (December 2007); organization of the system for preparation of staff in the sphere of corporate management (third quarter of 2007). The securities market regulator is the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property, which is competent in realization of the state policies in the sphere of forming, development, control and regulating securities market in the Republic of Uzbekistan. The regulator in banking sphere is the Central Bank of the Republic of Uzbekistan. The State inspection on insurance supervision under the Ministry of Finance of the Republic of Uzbekistan acts as the regulator in the sphere of insurance activities. Off-budget Pension Fund is a key organ of state regulation in the sphere of pensioning. It closely works with the State Tax Committee, which is responsible for ensuring timely and correct deductions to the Fund, and the Ministry of Labour and Social Protection of the Republic of Uzbekistan, which is responsible for assignment and payment of pensions, compensations and entitlement payments. As of 1.1.2006 there were 322 investment institutions: one stock exchange - the RFB “Toshkent”, 1 OTC market, 2 clearing houses, 94 intermediaries (brokerage firms), 36 custodians, 25 consultants, 65 asset management companies. The number of joint stock companies is 2,114 (not all of them are listed) .The value of registered stocks was 2.5 bln.USD and 51 mln. USD in bonds. The Annual market turnover was 141 mln. USD1 Market capitalization is USD 1,588 millions2. Clearing and settlement of securities is performed by 2 clearing houses. Information regarding the numbers and names of SROs and CISs in the country and their market value in 2006 is not available.

1 Source: Avesta Investment Group Note: All amounts have been converted at the following FX rate: $1 USD = 1150 UZS 2 As of December 2006 (http://www.feas.org/Member.cfm?MemberID=23#practices) information provided by Federation of Euro-Asian stock exchanges.


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2007 ASSESSMENT CHECKLIST FOR SECURITIES MARKET LEGISLATION Section I – Basic Information about Securities Market Related Laws and Regulations

# Official Title of Law/Regulation (in English) Promulgating Authority Date of Promulgation Dates of Past

Amendments

1. The Law of the Republic of Uzbekistan “On securities and stock exchange” No. 918-XII

The Oliy Majlis (i.e. Uzbek parliament) 02.09.1993 23.07.2007

2. The Law of the Republic of Uzbekistan “On mechanisms of functioning the securities market” No. 218-I The Oliy Majlis 25.04.1996 10.10.2006

3. The Law of the Republic of Uzbekistan “On activities of depositaries in securities market” No. 672-I The Oliy Majlis 29.08.1998 13.12.2002

4. The Law of the Republic of Uzbekistan “On protection of investor’s rights in the securities market” No. 262-II The Oliy Majlis 30.08.2001 10.10.2006

5. The Law of the Republic of Uzbekistan “On stock exchange and stock exchange activities” No.625-ХII The Oliy Majlis 02.07.1992 10.10.2006

6. Provision on the Centre on coordination and control over functioning of the

securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126

The Cabinet of Ministers 30.03.1996 10.11.2006

7. Provision on procedures for registration and issuing into circulation the shares

of open joint-stock companies established as the result of reorganization of state companies.


8. P Procedures for selling the shares of the privatized enterprises on the stock exchange and OTC markets No. 404.


9. Provision on licensing of the professional activities in the securities market (activities of investment institutions in securities market) No. 308. Cabinet of Ministers 09.07.2003 10.11.2006


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# Official Title of Law/Regulation (in English) Promulgating Authority Date of Promulgation Dates of Past

Amendments

10. Provisions on licensing of the stock exchange activities No.66. Cabinet of Ministers 04.02.2003 10.11.2006

Section II – Identity of the Relevant Market Regulatory Authorities (Statutory and Non-statutory) by Activities Regulated

# Activities Regulated Name of the Relevant Regulator

Date of Establishment Legal Basis

1. Securities issuance and offering3

The Centre on coordination and control over functioning of the securities market under the

State Committee on Management of State Property of the Republic of Uzbekistan

30.03.1996

Provision on the Centre on coordination and control over

functioning of the securities market under the State Committee on

Management of State Property of the Republic of Uzbekistan No. 126

2. Change of control transactions4

The State Committee of the Republic of Uzbekistan on

demonopolization, support of competition and entrepreneurship

30.04.2005

Decree of the President of the Republic of Uzbekistan “On establishing the State Committee of the Republic of Uzbekistan on demonopolization,

support of competition and entrepreneurship” No. UP-3602

3. Securities markets5



30.03.1996




3 Including prospectus and disclosure requirements, share registrations, tender offers, shareholder rights, beneficial ownership reporting, etc. 4 e.g., mergers, take-overs, monopoly positions, and other transactions affecting control in a company. 5 e.g., including establishment of exchanges and trading systems, admission to listing, trading, clearing and settlement, depository, etc.


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4. Brokerage or dealing related activities6



30.03.1996




5. Fund (or portfolio) and asset management (including investment advisers, asset managers, etc.)



30.03.1996




6. Collective investment schemes



30.03.1996




7. Accounting and auditing standards/services The Ministry of Finances of the Republic of Uzbekistan 23.11.1992 Provision “On the Ministry of Finances

of the Republic of Uzbekistan” No. 553

8. Investment services providers



30.03.1996




6 e.g., including licensing, conduct of business requirements, prudential requirements, etc.


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9. Money Laundering (i.e., FIU – Financial Intelligence Unit)

Department on fighting with tax, currency crimes and legalization of criminal

incomes under the General Prosecutor’s office

21.04.2006

Decree of the President of the Republic of Uzbekistan “On Provision on Department on fighting with tax,

currency crimes and legalization of criminal incomes under the General

Prosecutor’s office” No.PP-331


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Section A – Regulator7

# Issue Yes ( )

No ( )

Relevant provision number/citation of law/regulation;

Remarks/Other Comments

IOSCO Relevance

RESPONSIBILITIES OF THE REGULATOR

1. Whether the regulator responsibilities, powers and authority are clearly defined in the law?

Section 2 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996

1

2. Whether the regulator has discretion to interpret its responsibilities based on clear and transparent criteria and process so to prevent abuse of discretion?


1

INDEPENDENCE OF THE REGULATOR

3. Whether the term of office, the procedures for appointment and removal and the criteria for removal of the head and members of the governing body of the regulator are specified under the relevant law?

2

4. Whether the operational independence of the regulator is assured by the law from external political, commercial, or other interest interference when exercising its respective functions and powers?

2

5. Whether the law provides legal protection (for bona fide actions only) to the regulator, the head and members of the governing body and its staff against lawsuits for actions taken in their functions?

2-5

7 Please answer the questions of this section considering the regulator (see Section II, above) in charge for: Securities issuance and offering; Securities markets; Brokerage or dealing related activities and Collective investment schemes


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# Issue Yes ( )

No ( )



IOSCO Relevance

ACCOUNTABILITY OF THE REGULATOR

6. In the exercise of its regulatory powers, whether the regulator is required by the law to consult with or obtain an approval by the government, ministry or other authorities? [Please specify the cases and the authority]

The Centre is established under the State Committee on management of state property of the Republic of Uzbekistan. Thus, it is accountable to this Committee. Moreover, the General Director of the Centre and his/her deputies are appointed by the Cabinet of Ministers and, thus, subordinated to it. However, it is not clearly stated in laws regulating the activities of the Centre.

2

If the answer to the above question is "yes" (if "no" in the above, please tick "no" in the following sub-questions): (1) whether the circumstances in which consultation or approval is required are clearly defined and the relevant process is sufficiently transparent? [If "yes", please briefly describe the process]

7.

(2) whether the circumstances where consultation or approval is required are limited to policy issues and not to day-to-day technical matters?

Under Section 3 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996 the Centre is not required to receive approval from any governmental authority to execute its authorities. However, as it was mentioned in question 6 it is accountable to the Cabinet of Ministers and hence, should follow the general policy set by the Cabinet and stay within its frames.

2

8. Is the regulator accountable to the Parliament or another government body on 2


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# Issue Yes ( )

No ( )



IOSCO Relevance

an ongoing basis? [Please explain]

9.

Are the regulator and the other parties to which the regulator is accountable required by the law to treat as confidential information received as part of the supervisory process and only to disclose information in certain defined circumstances?

There is not specific clause in the relevant laws and regulations, which require the Centre to treat all the information obtained as confidential. However, article 98 of the Civil Code states that information considering official or commercial secret is under the protection of law. Thus, the Centre can be hold liable for such violation.

2

10. Is the regulator’s receipt and use of funds subject to review or audit?

Section 4 of the Provision on the Treasury of the Ministry of Finance of the Republic of Uzbekistan No. 53 dated 20.03.2007; Section 3 of the Provision “On Chief control and revision department of the Ministry of Finance of the Republic of Uzbekistan and its territorial control and revision departments” No. 393 dated 15.11.2002; Decree of the Cabinet of Ministers of the Republic of Uzbekistan “On questions of organization of activities of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 126 dated 30.03.1996 (The Center is subject to tax inspection as any other legal entity in the Republic of Uzbekistan. Moreover, since the Centre is the budgetary organization, i.e. it get financed from the Republican budget it is subject to revision from the side of the Chief

2


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# Issue Yes ( )

No ( )



IOSCO Relevance

control and revision department of the Ministry of Finances and the Treasury.

11. Does the regulator have to provide written reasons for its material decisions?

Point 25 of the Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998

2

12. Are affected persons permitted to make representations prior to a regulator’s decision in appropriate cases?

Point 21 of the Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998

2

13. Are all decisions taken by the regulator subject to a sufficient, independent review process, ultimately including judicial review?

Section 5 of the Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998

2

REGULATOR’S POWERS AND RESOURCES

14. Whether the regulator is empowered by the law to receive routine financial reports from regulated entities8? If "yes", please identify from whom the regulator receives such routine reports.

The Centre receives annual financial reports from the following participants of the securities market: investment funds (Point 66 of the Provision on Investment funds No. 410 dated 25.09.1998), managing

2, 10

8 “Regulated entity” includes authorised or licensed entities or persons


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# Issue Yes ( )

No ( )



IOSCO Relevance

companies (Point 30 of the Provision on managing companies of investment funds No. 410 dated 25.09.1998), issuers (article 12 of the law of the Republic of Uzbekistan “On securities and stock exchange” dated 02.09.1993.

15. Whether the regulator is empowered by the law to inspect a regulated entity business operation without giving prior notice?

Part 4 of point 7 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996

8

16.

Whether the regulator is empowered by the law to have access to books and records and request data or information from regulated entities without judicial actions, even in absence of suspected misconduct, in response to (i) a particular inquiry? (ii) on a routine basis? [please specify]

The legislation states that the Centre has a right to access books and reports of regulated entities in two cases: (i) to check authenticity of published reports and documents; (ii) upon receiving information on misconduct or possible violation of the legislation (Part 4 of point 7 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996)

8

Does the regulator have the investigative and enforcement power to require from any persons involved in relevant conduct of who may have information relevant to a regulatory or enforcement investigation:

(a) data? (b) information? (c) documents?

17.

(d) records?

The Provision on examining cases and use of sanctions for violation the legislation of the Republic of Uzbekistan on securities market No. 1131 dated 23.04.2002

9


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# Issue Yes ( )

No ( )



IOSCO Relevance

(e) statements or testimony?

18.

Whether, under the law or regulation, the regulator has the power to impose administrative sanctions? If "yes", please briefly describe the kinds of sanctions that can be imposed. If "no", please briefly describe what the regulator can do in case of non-compliance with laws.

1) issue orders mandatory for consideration and execution by all participants of securities market; 2) demand from stock exchange exclusion or removal one or several its members in case of their violation of the legislation of the Republic of Uzbekistan on securities; 3) request issuers to stop advertising campaigns on the open sale of securities without registering prospectus of issue of securities under the established procedures; 4) apply economical sanctions in accordance with the legislation; 5) in case of violation of rules of operation of stock exchanges suspend operations on stock exchange for the period of not more than 10 days (the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996)

9

19. Whether, under the law or regulation, the regulator has the power to order suspension of trading in securities?

Section 3 of the Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998. Such suspension cannot be more for than 10 days. In case the Centre wants to prolong the suspension it has to

9


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# Issue Yes ( )

No ( )



IOSCO Relevance

apply a court.

20. Whether, under the law or regulation, the regulator has the power to initiate or refer matters for criminal prosecution?

The Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998. Point 44 of the Provision “On operating companies of investment funds” No. 410 dated 25.09.1998

9

21.

Whether the regulator is assured by the law and/or regulation to have sufficient financial and other resources to properly discharge its functions?9 If "no", please indicate the areas of insufficiency. [Please also specify if the regulator’s budget is taken from the state budget or from the market]

The legislation does not provide for any guarantees of sufficient financial resources to properly discharge the Centre’s functions. We do not possess information regarding the budget of the Centre and, thus, cannot state whether allocated funds are sufficient for the Centre’s activities. The legislation only guarantees the right to hire external experts. (Article 7 Section 3 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996).

2

CLEAR AND EQUITABLE PROCEDURES

22. Whether the regulator has the power to issue legally binding rules and regulations? If yes, is the regulator obliged to make all rules and regulations

Section 2 and 3 of the Provision “On considering appeals of the Centre on coordination and control over functioning of

4

9 The points of consideration in financial aspect should include: competitive salary scales, ability to hire external experts if necessary, training budget and programme, information technology equipment, and travel budget, etc.


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# Issue Yes ( )

No ( )



IOSCO Relevance

available to the public? the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998. The regulator is obliged to make all rules and regulations available to the public.

23. Whether the law or regulation sets forth the general criteria for granting, suspending or revoking licenses?

Provision on licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003; Provision on licensing stock exchange activities No. 66 dated 04.02.2003

4

24.

Whether the regulator is required by the law or regulation to publicly disclose and explain its policies in important operational areas, such as through interpretations of regulatory actions, settings of standards, or issuance of opinions stating the reasons for regulatory actions?

The legislation does not set such requirements to the Centre, but the practice shows that the Centre on permanent bases issues opinions, letters etc. Moreover, one of the tasks of the Centre set by the legislation is to widely inform public and investors on conditions of securities market and its participants

4

PROFESSIONAL STANDARDS

25.

Whether the staff of the regulator is required by law, regulation or other, [please explain] to observe a "Code of Conduct" or other written standards/guidance of the same nature in exercising their regulatory powers and discharging their functions?

There is not such special Code of Conduct that the employees of the Centre should follow. However, in practice all entities have internal codes of labour conduct, which are mandatory for their employees. We believe the Centre also has such rules, but we do not have access to this document.

5


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# Issue Yes ( )

No ( )



IOSCO Relevance

If the answer to the above question is "yes", whether the relevant "Code of Conduct" addresses issues in the following areas:

(1) conflicts of interest? (2) dealing with information obtained in the course of the exercise of powers and discharge of duties? (3) observance of confidentiality and secrecy provisions and protection of personal data?

(4) ensuring procedural fairness?

26.

(5) restriction on the holding or trading of securities and requirement to disclose financial affairs or interest.

5

27. Whether there are legal or other sanctions against the staff of the regulator who fails to adhere to the above mentioned "Code of Conduct"?

There is not such special Code of Conduct that the employees of the Centre should follow. However, in practice all entities have internal codes of labour conduct, which are mandatory for their employees. We believe the Centre also has such rules, but we do not have access to this document.

5

COOPERATION AMONG REGULATORS

28. If there is more than one regulator listed in Section II above, whether the division of the responsibility among regulators are clearly and objectively set out by law?

The two regulators mentioned in Section II are the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan and The State Committee of the Republic of Uzbekistan on demonopolization, support of competition and entrepreneurship. The Centre exclusively deals with the matters related to the activating in securities market and stock exchange. The Committee deals with antimonopoly issues and matters of control of companies. The duties of each of them are clearly set the following documents: Provision “On considering appeals of the Centre on

1


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# Issue Yes ( )

No ( )



IOSCO Relevance

coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998

29. If there is more than one regulator listed in Section II, whether they are required by the law to co-operate and share information with each other?

One of the tasks of the Centre is to coordinate the activities of ministers and other state organs in securities market. Part 5 Section 2 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996

1

30. Whether the regulator has the authority under the law to share information with regulators in foreign jurisdictions? [please specify with which countries]

The legislation does not set a certain list of countries, to which the Centre has a right to provide information nor does it indicates what information can be given. However, the Cabinet of Ministers adopted the Decree in accordance to which the Centre became a member of International Organization of Securities Commissions IOSCO). This implies that the Centre has an authority to share information with other regulators in foreign countries.

11

31. Whether the regulator is permitted by the law to provide assistance to regulators in foreign jurisdictions? [please specify with which countries]

Under the legislation the Centre has a right to cooperate with the international and foreign regulators of securities markets in the field of coordination of joint activity on control of execution of legislative and statutory acts on securities, unification of

13


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# Issue Yes ( )

No ( )



IOSCO Relevance

conduction of operations with securities on internal and external securities markets, and supervision of activity of their participants (Part 6 Section 2 of the Provision “On the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998).


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Section B – Self-regulation ("SROs")10

# Issue Yes ( )

No ( )



IOSCO Relevance

PERFORMANCE AND FUNCTIONS OF SROS

Are there any organisations in your country, that:

a) establish rules of eligibility that must be satisfied in order for individuals or firms to participate in any significant securities activity?

This organization is the Republican Stock exchange (Article 22 of the Law of the Republic of Uzbekistan “On securities and stock exchange” dated 02.09.1993)

b) establish and enforce binding rules of trading or business conduct for individuals or firms engaging in securities activities?


1.

c) establish disciplinary rules and/or conduct disciplinary proceedings, which have the potential to impose enforceable fines, or other penalties, or to bar or suspend a legal or natural person from participating in securities activities or professional activities related to securities activities?


6

AUTHORISATION OR DELEGATION SUBJECT TO OVERSIGHT

Whether, as a condition of ongoing authorisation, the regulatory framework requires SROs to: (1) have the necessary capacity to enforce compliance by its members and associated persons with laws, regulations and rules? Point 6 of the Provision on licensing stock

exchange activities No. 66 dated 04.02.2003

2.

(2) treat all members of the SRO and applicants for membership in a fair and consistent manner?

7

10 A self-regulatory organisation (SRO) is any organisation that has been given the power or responsibility to regulate any part of the securities market of industry. The term

“self-regulatory organisation” means any national securities exchange , registered securities association, or registered clearing agency, which have been granted the right to regulate themselves and enforce such regulation. This section applies to all SROs in your country – i.e. stock exchange, central depository to the extent that they fit within the SRO definition]


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# Issue Yes ( )

No ( )



IOSCO Relevance

(3) develop rules that (i) are designed to set standards for its members and (ii) to promote investor protection?

Article 20 of the Law of the Republic of Uzbekistan “On securities and stock exchange” dated 02.09.1993

(4) submit to the regulator its rules and any amendments thereto for review and/or approval?


(5) co-operate with the regulator and other SROs in your jurisdiction to investigate and enforce applicable laws, regulations and rules?

Article 17 of the Law of the Republic of Uzbekistan “On securities and stock exchange” dated 02.09.1993; Point 6 of the Provision on licensing stock exchange activities No. 66 dated 04.02.2003

(6) enforce its own rules and impose appropriate sanctions for non-compliance with its own rules?


(7) assure fair representation of members on its board of directors and administration of its affairs?

(8) assure that its rules do not create anti-competitive situations?

OVERSIGHT

3. Whether the regulator is required by the law or regulation to establish a programme/procedure/process to oversee the operations of SROs (including inspections, periodic reviews, reporting requirements, review/revocation of SRO rules, monitoring of continuing compliance with conditions of authorisation)?

The Centre/Regulator has a right to conduct planned and extraordinary inspections of stock exchanges. It is not required by the law to have certain programme to oversee the operations of SROs.

7

4. In matters related to SRO responsibility, whether the regulator retains authority to (i) inquire and (ii) intervene into matters affecting investors or the market? Section 4 of the Provision on licensing stock

exchange activities No. 66 dated 04.02.2003 7


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MISUSE OF INFORMATION AND CONFLICT OF INTERESTS

Does the law or regulation requires SROs to: (1) ensure that potential conflicts of interest at the SRO are avoided and resolved? 5. (2) address prevention of misuse of information and observance of confidentiality of information? Point 6 of the Provision on licensing stock

exchange activities No. 66 dated 04.02.2003

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Section C – Issuers and their Information-Disclosure Obligation

# Issue Yes ( )

No ( )



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CONTENT OF THE PROSPECTUS

In a public offering of securities11, whether issuers are required to:

(i) prepare a prospectus (or an information document of similar nature)

If the volume of emission exceeds 25,000 minimal salary12 (i.e. approximately USD 300,000). In other cases, the issuer fills out application of emission. Application of emission is simplier form of prospectus, which only includes the main significant provisions of a prospectus. The application for emission has a standard form set by the legislation. (The Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

(ii) distribute it, and Point 12 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002

1.

(iii) file the prospectus with the regulator/stock exchange for review/approval [Please specify]

Section 4 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002

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11 The term Public Offering of Securities refers to the issuance and/or sale of the securities to the public. 12 As of 1 August 2007 minimal monthly salaries is 15,525 soum, i.e. approximately USD 12


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Whether the prospectus is required to include information on:

(i) key financial information, including capitalisation and indebtedness of the issuer and reason for the offer and use of proceeds and risk factors [please specify if all or just some of these issues are included]

It shall include information on capitalisation and indebtedness of the issuer. (Annex 2 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

(ii) the company, including history and development of the company, business overview, organisational structure, property, plants and equipment [please specify if all or just some of these issues are included]

Includes: main activities of the company, organizational structure, property, plants and equipment. (Annex 2 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

(iii) operating and financial review and prospects, including operating results, liquidity and capital resources, research and development, patents and licenses. [please specify if all or just some of these issues are included]

All of this information is included. (Annex 2 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

2.

(iv) directors, senior management and employees, including compensation of directors, board practices, number of employees and share ownership [please specify if all or just some of these issues are included]

All of this information is included. (Annex 2 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

IOSCO – International Disclosure

standards for cross-border offerings and

Initial listings by

foreign issuers


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(v) major shareholders and related party transactions

It indicates major shareholders but it is not required to show related party transactions. (Annex 2 of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002).

(vi) the identity and holdings of persons who hold a substantial beneficial ownership interest in the company

FOREIGN ISSUERS

3. Whether a foreign issuer is required to disclose additional information in the prospectus? If "yes", please briefly describe

Under the legislation the procedures for issuing, state registration and annulment of securities are not applied to securities issued by foreigners (Preamble of the Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002). Under the provision “On procedures of circulation in the territory of the Republic of Uzbekistan securities in foreign currencies, purchasing of securities in foreign currencies by residents, and also purchasing by non-residents securities issued by residents” No. 1692 dated 22.06.2007 the procedures for state registration of securities in foreign currency are set by the authorized organ, i.e. the Centre. However, such procedures still have not been adopted.

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4. Whether a foreign issuer is allowed to use a prospectus which has been approved by a foreign regulator? If "yes", please briefly describe

Provision “On procedures of circulation in the territory of the Republic of Uzbekistan securities in foreign currencies, purchasing

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of securities in foreign currencies by residents, and also purchasing by non-residents securities issued by residents” No. 1692 dated 22.06.2007

FULL DISCLOSURE

5. Whether there are different disclosure requirements for different types of securities or according to the different circumstances in which securities are offered? If "yes", please briefly describe

Upon state registration of IPO (issue of bonds) of the state entity being reorganized into a joint-stock company a prospectus will also include information on distribution of shares in charter fund among the state and investors (Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated 10.07.2002)

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6. In addition to public offering of equity, whether prospectus requirements also apply to other types of public offerings (e.g., debt securities, warrants, pre-emptive rights offering to existing shareholders, etc.)? Please specify.

The Procedure for issuing and circulation of derivative securities No. 320 dated 02.04.1997

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7. Whether there are any restrictions on, or disclosure requirements with regard to, the content of information that an issuer discloses outside the prospectus during an offering (e.g., in advertisement, "road-show" materials or on the issuer's web-site)?

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8. If the answer to the above question is "yes", whether any such restrictions or requirements extend to those acting on behalf of the issuer in connection with the offering (e.g., underwriters or advisors)?

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LIABILITY

9. Whether the issuer is liable for the content of the prospectus? If "yes", please describe if there are any exceptions provided for under the law.

There are no exceptions. (Provision “On procedures for issuing, state registration and annulment of securities issuing of joint-stock companies” No. 1159 dated

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10.07.2002)

10. Other than the issuer, whether there are any other persons/entities that may be held liable for the content of the prospectus (e.g., underwriter, auditor)? If "yes", please describe.

If the prospectus was drafted by intermediary institution it may be held liable for the content of the prospectus. (Section 3 of the Provision “On procedures for issuing, state registration and annulment of corporate securities” No. 1158 dated 10.07.2002)

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DEROGATIONS

11. Whether there are circumstances where an issuer is permitted to proceed with a public offering without full disclosure of relevant information? If "yes", please briefly describe.

14

REGULATOR’S POWERS

12.

Whether the regulator has the power to enforce prospectus and/or other listing documents disclosure requirements by delaying or stopping the offering or through other regulatory actions? If "yes", please briefly describe the nature of these actions (e.g., civil, administrative or criminal) and indicate whether these actions if taken are with immediate effect (e.g., trading halt or injunction).

The Centre may start administrative procedures and stop the offering. In case of violations the Centre makes a decision on stopping offering within 3 working days. (Points 42-44 of Section 7 of the Provision“On procedures for issuing, state registration and annulment of corporate securities” No. 1158 dated 10.07.2002)

9, 14

OTHER LISTING DOCUMENTS

13. Apart from the prospectus, are issuers required to prepare or distribute documents for listing purposes? (e.g., listing particulars13 or a document of similar nature)?

14

14. Does the regulator have the power to enforce listing document disclosure 14

13 Listing particulars: details which a company is obliged to publish about itself together with any securities it issues before it obtains a listing on a recognised stock exchange.


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requirements by delaying or refusing a listing?

ONGOING DISCLOSURE REQUIREMENTS

15. Whether open/public/listed/admitted to trading companies [please specify] are required to prepare annual reports and/or periodic reports, under a certain timeframe? Please specify.

All issuers shall provide quarterly report on the process of issuing securities (no later than 30 days after the end of the quarter) and annual report on securities (no later than 25 of July) (the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999)

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16. If the answer to the above question is "yes", whether the annual and the periodic reports are made available to the public? If yes, please explain how they are distributed.

14

17. Whether issuers are required to file the annual and periodic reports with the regulator for review/approval?

The Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999

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18. Whether the regulator has the power to enforce the disclosure requirements of the reports? If yes, please describe the available actions.

1) suspend issuing of securities; 2) nullify state registration of securities issuing; 3) impose economic sanctions (Section 3 of the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999)

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19. Whether the issuer is liable for the content of the reports? If "yes", please describe if there are any exceptions provided for under the law

No exceptions (the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999)

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20. Other than the issuer, whether there are any other persons/entities which may be held liable for the content of the annual/periodic reports (e.g., auditor)? If "yes", please describe.

Under the legislation an auditors are liable for damages caused by the audit report containing incorrect conclusions regarding financial conditions of the audited entity. Since audit report is the part of the prospectus the auditors may be deemed

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liable for the part of information concerning audit. (Article 8 of the Law of the Republic of Uzbekistan “On audit activities” dated 09.12.1992)

21. Whether issuers are subject to a general and continuing obligation to disclose promptly any material information that would significantly affect the price of their securities? If "yes", please describe whether such requirement varies according to types of issuers.

Issuers excluding entities with foreign investments and closed joint-stock companies are required to provide quarterly account reports and report on financial results. Entities with foreign investments and closed joint-stock companies together with the abovementioned documents also provide reports on movement of assets, money flow, own property and also certificate of debit and accounts receivable and payable, certificate on financial and economic conditions (Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999

14

22. Whether there are circumstances where an issuer is permitted to derogate from its disclosure obligations (e.g., confidentiality)? 14

FAIR AND EQUITABLE TREATMENT OF SHAREHOLDERS

23. Whether the relevant law or regulation stipulates the right of fair and equitable treatment of shareholders?

The legislation does not directly indicates that. However, the legislation provides for equal rights to all shareholders regardless of any conditions. (Article 27-29 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” No. 223-I dated 26.04.1996)

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24. Whether issuers are required to disclose information to shareholders in order to help them make voting decisions? If "yes", please briefly describe the types of Article 107 The Law of the Republic of

Uzbekistan “On joint-stock companies and 15


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voting decisions that would trigger such disclosure requirement. protection of rights of shareholders” No. 223-I dated 26.04.1996. The information indicated in article 106 of the Law on joint-stock companies shall be provided to a shareholder at his request.

25. Whether investors have the right to petition the regulator? If "yes", please indicate the grounds based upon which a petition can be made.

The Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998. The grounds for such petitions are illegitimate actions of participants of securities market, which include violations of the legislation on securities

15

26. Whether minority shareholders have the right to appoint an auditor to re-examine the books and accounts of the company? If yes, please specify the minority shareholding percentage requirement and other specific conditions and whether the shareholder or the company must pay for this audit

15

27. Whether shareholders of a company have the right to start derivative suit (i.e., in the name of the company) against the directors of the company? If "yes", please indicate the shareholding percentage requirement, if any, for exercising such right.

Shareholders holding not less than 1% of shares have a right to start a suit against the director in their own name (Article 88 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” No. 223-I dated 26.04.1996)

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28. Whether shareholders of a company have the right to request an extraordinary general meeting of shareholders to be held? If "yes", please indicate the shareholding percentage requirement, if any, for exercising such right.

Shareholders holding not less than 10% of voting shares have a right to call an extraordinary meeting (Article 72 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” No. 223-I dated

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26.04.1996

29. Whether beneficial shareholders are required to publicly disclose their ownership and identity in specific circumstances? If yes, please specify the circumstances and the disclosure procedures

15

30. Whether the shareholders who are required to disclose their identity and ownership position due to their shareholding percentage have an on-going obligation to report changes in their shareholding? If "yes", please indicate how significant the change has to be to trigger such reporting obligation.

All transactions with shares, including changes of shareholding, shall be registered with the holder of register, which then provides this information to the Centre. (Articles 47, 33 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” No. 223-I dated 26.04.1996)

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CHANGE IN CORPORATE CONTROL

31. Does the relevant law or regulation provide for the circumstances in which a mandatory tender offer must be made? If "yes", please describe the circumstances.

15

32. Whether public/open/listed/admitted to trading companies are required to disclose adequate information in connection with a change in corporate control (e.g., take-over etc.) to enable minority shareholders to assess the offer?

15

33. Does the regulatory framework provide minority shareholders with the opportunity to vote eventual manoeuvres (e.g., poison pills) made up by the management to resist the tender offer?

15

34. In connection with a proposed transaction involving the company, whether the directors or other members of senior management of a company are required to disclose compensation or personal benefits that they may receive?

15

35. Does the regulatory framework provide minority shareholders with the concrete opportunity to sell their shares to the bidder at the same conditions as the controlling shareholder?

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Section D – Collective Investment Schemes (CISs)14

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1. Does your country have a specific legislation on collective investment schemes? Please specify is the regulation is specifically on CIS or instead on other investment funds (e.g., privatisation funds)]

Provision “On investment funds” No. 410 dated 25.09.1998; Provision “On privatized investment funds” No. 410 dated 25.09.1998; Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998;

ENTRY AND ELIGIBILITY CRITERIA

Whether there are specific standards or requirements set forth in the relevant law or regulation for eligibility15 to:

(i) promote and sell a CIS?

Point 7 of Section 2 and Points 10, 11 of Section 3 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market)

2.

(ii) operate a CIS? Section V of the Provision “On investment funds” No. 410 dated 25.09.1998

17

Whether the eligibility standards or requirements for licensing or registration of operators of CIS include the following factors: (1) fitness and propriety of operator (including persons who hold a material interest in the operator)?

(2) honesty and integrity?

3.

(3) competence to carry out the functions and duties of a scheme operator (i.e., human and technical resources)?

The Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003; Section II of the Provision “On investment funds” No. 410 dated 25.09.1998

17

14 CIS includes open-end funds that redeem their shares or units (whether on a continuous basis or periodically), closed-end funds whose shares or units are traded in securities markets, unit investment trusts, contractual models and the European UCITS model. For purposes of this assessment checklist, CIS excludes schemes investing in property/real estate, mortgages or venture capital. 15 The term “eligibility” is intended to include authorisation, licensing, registration or other preconditions to operating or marketing a CIS.


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(4) financial capacity? (5) capacity to discharge operator-specific powers and duties? (6) adequacy of internal management procedures?

See comments above

4. Whether, in assessing eligibility to market or operate a CIS, it is required by the law or regulation to assess the qualifications of key individuals employed by the CIS operator or manager?

Point 7 of Section 2 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market); Section 3 of the Provision “On operating companies of investment funds” No. 410 dated 25.09.1998

17

If the answer to the above question is "yes", whether the following factors are considered:

(1) educational requirements?

Higher education in economic, financial or banking spheres (Section 3 of the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998; Section II of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003)

(2) fitness and propriety?

Section 3 of the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998; Section 2 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003

5.

(3) honesty and integrity?

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(4) past experience in marketing or operating of CIS?

Not less than 2 years of experience in managing positions in investment funds (Section 3 of the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998; Section 2 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003)

(5) continual professional training?

6. Whether CIS operators are required to make public disclosure of the information listed in the preceding questions? Please briefly describe what is the disclosure procedure

Upon request on an investor. (Article 6 of the Law of the Republic of Uzbekistan “On protection of rights of investors in securities market” dated 30.08.2001

17

7. Whether there are sanctions against unlicensed operation of a CIS? If "yes", please briefly describe.

Economical sanctions, i.e. fine, imposed by the Centre. In case of repeated violation, use of criminal sanctions (Article 190 of the Criminal Code). All profits received from activities conducted without license will be confiscated (Article 135 of the Tax Code)

17

SUPERVISION AND ONGOING MONITORING

8. Whether CIS operators are subject to a general and continuing obligation to report to the regulator or to investors any information regarding material changes in its management or organisation?

Point 30 of the Provision “On operating companies of investment funds” No. 410 dated 25.09.1998

17

9. If the answer to the above question is "yes", whether the regulator's approval of these changes is required? 17

10. Whether there are provisions to prohibit, restrict or disclose conduct likely to give rise to conflicts of interests between a CIS and its operators or their associates or related parties? If "yes", please briefly describe.

1) to purchase at the expenses of fund’s assets investment objects of its affiliated entities or sell such objects to them;

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2) purchase bonds of companies managed by the operator; 3) purchase securities issued by its affiliated persons or by funds managed by its affiliated persons; 4) directly or through third parties conclude contracts on investing property of a fund to securities used by operator itself or by company controlling operator or controlled by the operator; 5) invest property of a fund without prior written approval of Supervisory board of the fund into securities of companies in which the operator has its interest. (Section 7 of the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998)

11. Whether there are regulatory means16 available to minimise conflict of interest situations to ensure that any conflicts if they arise do not adversely affect the interests of investors? If "yes", please describe.

Besides direct prohibition of the transactions mentioned above, any transaction concluded by the fund with any organization in which there is economic interest of a member of management board of the fund or the operating institution must be approved by the Supervisory board of the fund. Moreover, the operator shall receive written approval of the Supervisory board of the fund to conclude transactions the total cost of which exceed 10% of the fund’ assets. (Point 56 of the Provision “On investment

17

16 Possible means include direct prohibition of particular transactions under the law, use of a code of conduct, review and/or approval of certain transactions and activities by the regulatory authority, disclosure by the operator, prior approval or ratification of certain transactions by the investors, record keeping by the operator, limitation of the activities of the operator and independent review by a third party, etc.


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funds” No. 410 dated 25.09.1998)

12.

Whether there is an ongoing monitoring of the conduct of CIS operators throughout the life of a CIS (including compliance with licensing or registration requirements)? If "yes", please briefly describe the monitoring method(s) adopted.

1) Conduct planned and extraordinary examinations of operators activities by the Centre; 2) operator shall annually provide information on its activities together with all relevant documents to the Centre and CIS (Section 6 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003; the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998)

17

13. Whether the regulator has the power under the law to take actions in the event of suspected or actual breaches or default by CIS operators? If "yes", please briefly describe what actions the regulator can take.

1) initiate extraordinary examination of operator’s activities 2) suspend the license; 3) impose economic sanctions 4) file a lawsuit to the court (Section 3 the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996)

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DELEGATION OF FUNCTIONS

14. Whether CIS operators are permitted to delegate their functions to other persons? 17


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If the delegation by CIS operators of their functions is permissible: (1) whether the regulatory system require the CIS operator to (i) monitor the activity and (ii) evaluate the performance of the delegate?

(2) whether the delegating operator is required to disclose to investors the delegation arrangements and the identity of the delegate?

(3) whether the delegating operator will be held responsible for actions or omissions of the delegate as though they were done as its own?

15.

(4) whether the CIS operator can terminate the delegation and make alternative arrangements for the performance of the delegated function, where available?

17

LEGAL FORM/INVESTORS RIGHTS

16. Whether there are requirements as to the legal form and structure of a CIS? All investment funds can be only in form of open joint-stock companies (Point 6 of the Provision “On investment funds” No. 410 dated 25.09.1998)

18

17. Whether the rights of investors to a CIS, the ways to exercise them and the risks associated with the investment are required to be disclosed to investors?

Point 70 of the Provision “On investment funds” No. 410 dated 25.09.1998; Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” dated 26.04.1996; Article 3 of the law of the Republic of Uzbekistan “On protection of rights on investors in securities market” 30.08.2001

18

18. Does the regulatory framework provide that where changes are made to investor rights that do not require prior approval from investors, notice is given to (i) investors and to (ii) the regulator before the changes take effect?

18

SEPARATION OF ASSETS

19. Whether the operator of a CIS is required to separate and segregate CIS assets from the assets of managers, its related entities and other schemes? Point 9 of the Provision “On book-keeping

in investment and private funds” No. 1662 18


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dated 13.02.2007

20. Whether there are qualification requirements for the entities holding CIS assets? If "yes", please briefly describe.

As we understand the assets of CIS are the monetary funds. These funds are kept in banking accounts. Thus, the organization opening banking accounts shall have license on banking activities. (article 5 of the law of the Republic of Uzbekistan “On banks and bank activities” dated 25.04.1996

18

21. If CIS assets are required to be held in safekeeping on behalf of the investors by a third party, whether it is required that the third party be independent of the CIS operator? If "yes", please briefly describe such independence requirement.

The legislation only states that operator of investment fund cannot be a depository. (Point 5 of the Provision “On activities of managing company of investment funds” No. 410 dated 25.09.1998)

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22. If the custodian and investment functions may be performed by the same legal entity or related entities, whether there are special legal or regulatory safeguards with respect to the CIS assets? If "yes", please briefly describe.

18

23. Whether CIS operators are required to maintain a register of holders of shares or units in the scheme? 18

24. Whether CIS operators are required to keep all books and records in relation to transactions involving CIS assets and all transactions in CIS shares or units? Point 65 of the Provision “On investment

funds” No. 410 dated 25.09.1998 18

25. Whether there are auditing requirements in relation to CIS assets? Point 66 of the Provision “On investment funds” No. 410 dated 25.09.1998 18

26. If the answer to the above question is "yes", whether the auditors are required to report to the regulator any irregularities or non-compliance?

Audit report together with other relevant financial documents shall be provided to the Centre ( Point 66 of the Provision “On investment funds” No. 410 dated 25.09.1998)

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DISCLOSURE

In making a public offering of a CIS, whether the CIS operator is required to

(i) issue an offering document (e.g., a prospectus)? (ii) deliver it to investors?

27.

(iii) deposit it to the regulator and obtain its prior approval?

The Provision “On issuing, state registration and annulment of issuing of shares by joint-stock companies” No. 1159 dated 10.07.2002

19

Whether CIS offering document is required to include the following information:

(1) the date of the issue of the offering document? (2) information concerning the legal constitution of the CIS? (3) the rights of investors in the CIS? (4) any pending material legal proceedings involving the CIS? (5) procedures for purchase, redemption, and pricing of units? (6) relevant, audited financial information concerning the CIS? (7) information on the custodian? (8) the investment policy of the CIS (i.e., indicating the markets and instruments in which investments are made)?

(9) information on the risks involved in achieving the investment objectives? (10) the appointment of any external administrators or investment managers or advisers who have a significant and independent role in relation to the CIS?

(11) fees and charges in relation to the CIS? (12) the regulatory authority, auditors and other independent third parties and their responsibilities in relation to the CIS?

28.

(13) description of the methodology of asset valuation?

The Provision “On issuing, state registration and annulment of issuing of shares by joint-stock companies” No. 1159 dated 10.07.2002

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29. Whether CIS operators are subject to a general disclosure obligation to allow investors to evaluate the suitability of the CIS for them? Section X of the Provision “On investment

funds” No. 410 dated 25.09.1998 19

30.

Whether the regulator has the power under the law to take actions in the event that the issuing documentation is inaccurate, misleading or false or fails to satisfy the filing/approval requirements? If "yes", please list all regulatory actions available.

1) initiate extraordinary examination of operator’s activities 2) suspend the license; 3) impose economic sanctions; 4) file a lawsuit to the court (Section 3 the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996)

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31. Whether the offering document is required to be kept up-to-date to take account of any material changes affecting the CIS? 19

32. Whether prior notification is required to be given to the regulator regarding changes to information in an offering document? If "yes", please indicate whether the regulator's approval is required.

The changes into prospectus can be made only in two cases: 1) in case of finding inconsistency or minor mistake, which does not have significant effect; 2) changing form of issuing of bonds. These changes shall be approved by the Centre (Provision “On procedures for issuing, state registering and paying – off of corporate bonds” No. 1158 dated 10.07.2002

19

33. Whether CIS operators are required to submit to the regulator a report setting forth the activities in respect of a CIS on a periodic basis (please specify the report’s periodic basis: annual, semi-annual, quarterly)?

CIS shall submit quarterly reports and annual reports on financial activities of CIS, which includes accounting report, report on incomes, costs, profit and expenditures, and dividends, certificate on financial activities and net assets, the amount of salaries of

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managerial staff, information on changes in composition of affiliated persons (Point 58 of the Provision “On accounting and reporting in investment and private investment funds” No. 1662 dated 13.02.2007)

If the answer to the above question is "yes":

(1) whether the law or regulation require a timely distribution of the report?

Quarterly reports shall be submitted no later than 30 days after the end of the quarter; annual reports shall be submitted no later than 60 days after the end of the quarter (Point 58 of the Provision “On accounting and reporting in investment and private investment funds” No. 1662 dated 13.02.2007)

34.

(2) whether the regulatory framework requires that the accounts of a CIS be prepared in accordance with high quality, internationally acceptable accounting standards?

19

ASSET VALUATION

35. Whether CIS operators are required to have the CIS net asset value (NAV)17 calculated on a regular basis? If "yes", please indicate the frequency.

Every three months (point 2.1. of the Provision “On assessment of net asset value of investment funds” No. 840 dated 25.11.1999)

20

36. Whether the valuation of the CIS assets is required to be checked by independent auditors?

Audit of correctness of assessment of net asset value is conducted annually. However, the Centre has a right to conduct its own independent assessment (point 5.5. of the Provision “On assessment of net asset

20

17 The calculation of the net asset value (NAV) of a CIS is extremely important, as the NAV reflects the price which an investor pays when investing in a CIS (subject to any additional up-front charges) and the price an investor will receive (subject to any additional exit charges) should a holding be liquidated.


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No ( )



IOSCO Relevance

value of investment funds” No. 840 dated 25.11.1999)

37. Whether there are specific regulatory requirements in respect of fair valuation of assets where market prices are not available?

Section 5 of the Provision “On assessment of net asset value of investment funds” No. 840 dated 25.11.1999

20

PRICING AND REDEMPTION OF INTEREST

38. Whether the operator of a CIS is required to disclose or publish the price of the CIS unit on a regular basis? 20

39.

Whether CIS operators are subject to an on-going obligation to disclose, in a timely fashion by way of notices or announcements, information which is material to the value of a CIS or otherwise significant to holders of interests in a CIS?

Section 6 of the Provision “On operating companies of investment funds” No. 410 dated 25.09.1998

19

40. Whether there is a maximum time period for making payment of redemption proceeds? Please specify 20

41. Whether there are rules governing the fees or charges payable by investors on the purchase or redemption of shares or units of a CIS? 20

42. Whether there are rules or mechanisms in place to address errors in respect of the price of the CIS units or the value of CIS assets? 20

43. Whether suspension or deferral of routine valuation and pricing and regular redemption of shares or units of a CIS is permissible under certain circumstances? If "yes", please briefly the circumstances.

20

44. Whether the regulator has the power to demand, delay or stop the deferral or suspension of redemption rights? 20


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Section E – Market Intermediaries

# Issue Yes ( )

No ( )



IOSCO Relevance

AUTHORISATION AND LICENSING

Whether licensing is required to conduct business as:

(i) Market intermediaries18? Point 1 of the Provision “On investment intermediaries” No.1108 dated 07.03.2002 1.

(ii) Investment Advisers19? Point 4 of the Provision “On consulting activities in securities market” No.1495 dated 15.07.2005

21

2. Whether the relevant law or regulations establish minimum standards or criteria that all applicants for licensing must meet before a license is granted?

the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003

21

3. Whether the circumstances in which a license application may be refused are clearly set forth in the law or regulation? If "yes", please briefly describe. 21

If the answer to the above question is "yes", whether these requirements include: (1) an assessment of whether the applicant has the appropriate financial resources (e.g., minimum initial capital) to carry on the proposed business? If "yes", please specify

(2) an assessment of whether the applicant has adequate operational systems and controls for the businesses it proposes to carry on, such as proper books and records, internal controls, risk management, and supervisory systems?

4.

(3) an assessment of whether the applicant has senior management and directors with the knowledge, skills and experience necessary to perform their proposed roles?

21

18 “Market intermediaries” include those who are in the business of managing individual portfolios, executing orders and dealing in, or distributing, securities. 19 “Investment advisers” for the purpose of this assessment are those engaged in the business of advising others regarding the value of securities or the advisability of investing in, purchasing or selling securities. They offer only advisory services without offering other investment services.


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IOSCO Relevance

(4) an assessment of whether the applicant has a proven track record/past conduct?

ONGOING REQUIREMENTS

In the event that a market intermediary fails to meet ongoing requirements, whether the regulator has the power to:

(1) suspend the intermediary's license?

(2) revoke the intermediary's license?

Section 7 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003; Articles 22024 of the Law of the Republic of Uzbekistan “On licensing certain types of activities” dated 25.05.2000

(3) impose conditions or restrictions on the intermediary's business operations?

(4) take effective steps to seek the removal of persons employed at the intermediary which have committed securities violations?

The Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998

5.

(5) impose other sanctions? If "yes", please specify.

Impose fines (the Provision “On considering appeals of the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan” No. 395 dated 15.09.1998)

21

Whether intermediaries are required to immediately report to the regulator on the occurrence of the following events:

(1) significant change in the ownership of the firm? 6.

(2) change in the senior management or directors of the firm?

21


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IOSCO Relevance

(3) change in the information delivered during the licensing process or a material change in the intermediary's circumstances?

The Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003

(4) other specific events? If "yes", please specify.

Whether the following information about intermediaries is required to be made publicly available:

(1) the existence of a license, its category and status?

Point 9 of the Provision “On procedures for concluding and registration of transactions with securities in the territory of the Republic of Uzbekistan” No. 285 dated 08.06.1994

7.

(2) the scope of its permitted activities, the names of its senior management and other individuals authorised to act in the name of the intermediary?

Names of senior management and other individuals authorized to act in the name of the intermediary is indicated in annual reports submitted by the intermediary to the Centre; Point 9 of the Provision “On procedures for concluding and registration of transactions with securities in the territory of the Republic of Uzbekistan” No. 285 dated 08.06.1994

21

INVESTMENT ADVISERS20

8.

Does the regulatory framework on investment adviser include detailed requirements setting out the disclosures to be made by the adviser to potential clients, including: (i) descriptions of the adviser’s educational qualifications, (ii) investment strategies, (iii) fee structure and other client charges, (iv) potential conflicts of interest, and (v) past investment performance? [please specify for each of the items]

21

20 See footnote 17, above.


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No ( )



IOSCO Relevance

CUSTODIANS21

9. In case of custodians, does regulation provides for the protection of client assets, including segregation and periodic or risk-based inspections (either by the regulator or an independent third party)?

Article 15 of the Law of the Republic of Uzbekistan “On activities of depositaries in securities market” No. 672-I dated 29.08.1998

21

CAPITAL ADEQUACY REQUIREMENTS

10. Whether intermediaries are required to calculate and maintain a minimum amount of capital on an on-going basis? If "yes", please briefly describe.

Investment intermediary – 1,000 minimal monthly salaries22; investment consultant – 300 monthly salaries ; investment companies – 3,000 minimal monthly salaries; clearing companies – 30,00 minimal monthly salaries. (Provision “On economic normative of investment institutions’ activities” No. 1280 dated 30.09.2003)

22

11. Does the regulatory framework provide for different minimum capital requirement for intermediaries depending on the risks undertaken? 22

12. Whether intermediaries are required to provide audited financial statements or other audited reports to the regulator? 23

13. Whether the regulatory framework require intermediary to have specific liquidity and solvency requirements (e.g., enough capital to run the business for three months)?

22

14. Whether an intermediary is required to give notice to the regulator if its capital falls below the minimum requirements? 22

15. Whether there are regulatory measures that the regulator can take in the event 22

21 For the purpose of this assessment, custodians are c those professionals who do not deal, but are permitted to have custody of client assets (i.e., to hold securities on behalf of clients). 22 As of 1 August 2007 minimal monthly salaries is 15,525 soum, i.e. approximately USD 12


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# Issue Yes ( )

No ( )



IOSCO Relevance

that a market intermediary's capital falls below a required minimum? If "yes", please list them.

16. Whether capital adequacy requirements take into consideration trading book23 positions? 22

MANAGEMENT AND SUPERVISION

Whether market intermediaries are required to establish and maintain: (1) appropriate standards of conduct to ensure that the firm complies with all applicable laws and regulations? Please describe 17. (2) appropriate systems of risk management and internal controls? Please describe

23

CUSTOMER PROTECTION

18. Whether a market intermediary is required to “know its customer” before providing specific advice to a customer? Section 3 of the Provision “On investment

intermediaries” No.1108 dated 07.03.2002 23

19. Whether market intermediaries are subject to a general duty to put the interests of a client ahead of its own interests? Section 2 of the Provision “On investment


20. Whether market intermediaries are required to disclose to the clients where there is a potential for conflicts of interest? Section 2 of the Provision “On investment


21. Whether market intermediaries are required to treat all clients equally in case where conflicts of interest arise between several of the firm's clients?

The legislation does not set any requirements on this matter. The Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003 requires the applicant to provide an internal code of conduct in relations to the conflict of

23

23 The trading book of an institution shall consist of all positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book (Art.111 of EC Directive 2006/49).


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# Issue Yes ( )

No ( )



IOSCO Relevance

interest. However, it does not provide any conditions, which this code of conduct shall satisfy. Consequently, it is totally up to the Centre to decide whether such code is in compliance with the legislation. Thus, issuing related to conflict of interest between several clients of intermediary are usually specifically indicated in a contract concluded between the firm and a client.

22. Whether market intermediaries are required to enter into written contracts with all clients?

Point 10 of the Provision “On procedures for concluding and registration of transactions with securities in the territory of the Republic of Uzbekistan” No. 285 dated 08.06.1994

23

Whether market intermediaries are required to provide clients with:

(1) transaction reports and/or confirmations? [Please specify the frequency] 23.

(2) account statements? [Please specify the frequency] Point 12 of the Provision “On investment intermediaries” No.1108 dated 07.03.2002

23

PROCEDURES FOR DEALING WITH INTERMEDIARY IN FINANCIAL DIFFICULTY

24.

Whether the regulator has a contingency plan or other measures to deal with the financial difficulty (i.e., a situation which could potentially lead to insolvency) of a market intermediary, including a combination of activities to restrain conduct, to ensure assets are properly managed and to provide information to the market as necessary?

24

25. Whether there is an investor compensation fund/scheme24 in place? 24

26. Does the regulatory framework provide for early warning systems or other

Matters on dealing with intermediary in financial difficulty are regulated by the general legislation on insolvency of subjects of entrepreneurship, i.e. the Law of the Republic of Uzbekistan “On bankruptcy” No. 1054-XII dated 05.05.1994. and these issues are not regulated 24

24 The investor compensation fund (or scheme) is a fund set up usually with contributions of market intermediaries (or the state) aiming to compensate investors in case of an intermediary insolvency. It is not a banking deposit insurance scheme.


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IOSCO Relevance

mechanisms (e.g., a specified threshold below which a market intermediary is considered in financial difficulty and the regulator's action is required) to give the regulator notice of financial difficulty by a market intermediary and time to address the problem and to take corrective actions? In the event of financial difficulty of a market intermediary, whether the regulator has the power to:

(1) restrict activities by the intermediary? (2) require the intermediary to take specific actions (e.g., moving clients accounts to another intermediary)? (3) freeze or seize assets held by the intermediary or by a third party on behalf of the intermediary?

(4) appoint a monitor, receiver, or other administrator?

27.

(5) require that the relevant information is disclosed to the market?

Matters on dealing with intermediary in financial difficulty are regulated by the general legislation on insolvency of subjects of entrepreneurship, i.e. the Law of the Republic of Uzbekistan “On bankruptcy” No. 1054-XII dated 05.05.1994 these issues are not included

24


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Section F – Secondary Market

# Issue Yes ( )

No ( )



IOSCO Relevance

LICENSING OF EXCHANGES AND TRADING SYSTEMS

Whether prior authorisation or licensing [please specify] is required in respect of:

(1) a securities exchange? [please specify is this authorisation/licensing is different from the one of market intermediary]

Point 6 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003 This license is different from that of market intermediaries. 1.

(2) a trading system25? [please specify is this authorisation/licensing is different from the one of market intermediary]

Point 6 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003 This license is different from that of market intermediaries

25

In connection with an application by an exchange or trading system for authorisation or licensing, whether the regulatory framework requires: 2.

(1) evidence of the operational or other competency or fitness of the system operator as a secondary market?

Point 7 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003

25

25 A trading system means essentially any organization, association, person, group of persons, or system that constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange. The main difference between a trading system and the stock exchange is that the former does not set rules governing the conduct of subscribers other than the conduct of such subscribers' trading on such organization, association, person, group of persons, or system; or discipline subscribers other than by exclusion from trading (for a different definition under EU law, see Art. 4, item 14 and 15 of Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments – so-called MiFID).


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IOSCO Relevance

(2) the operator of the system assuming risks26 to comply with prudential and other requirements designed to reduce the risk of non-completion of transactions (e.g., mandatory margin assessment and collection, capital or financial resources, member contributions, compensation scheme, credit or position limits)?

The legislation sets the presence of the system of guarantees for performance of concluded stock exchange transactions as one of the requirements for obtaining a license. It, however, does not specify what this system should include. (Point 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003)

(3) the regulator to be informed of the types of securities to be traded? Section 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003

(4) the regulator to give approval of the rules [and any amendments thereof] governing the admission of securities to be traded?

Section 15 of the Provision “On licensing professional activities in securities market (activities of investment institutions in securities market) No. 308 dated 09.07.2003; Section 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003

(5) all persons with direct access to the system to be authorised or licensed? [please specify if the same rules apply to the trading system and stock exchange]

This rule applies only to stock exchange. (Section 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003)

(6) the same financial capacity, integrity, or performance criteria as those for market intermediary must be met by persons with direct access to the system or exchange?

Section 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003

26 I.e., principal risk, settlement risk, guarantee risk and performance risk.


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No ( )



IOSCO Relevance

(7) clearly disclosed standards or procedures governing trade execution (e.g., requirements with respect to precedence of client orders, prohibitions on front-running27 or trading ahead of customers, etc)? If "yes", please describe.

The legislation set the requirement of disclosing procedures for trade execution without clarifying the specifics of such procedures. (Section 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003)

ONGOING SUPERVISION

3. Whether the regulatory framework requires the regulator to have arrangements in place for continuous monitoring, surveillance and supervision of the trading system and the conduct of its participants?

The legislation does not require the Centre to have certain arrangement for continuous monitoring of the trading system. However, it gives the Centre authorities to conduct such monitoring. (Section 3 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996

26

4.

Whether the regulatory framework provides the system operator, the regulator or others have the power to suspend or halt trading, set margins, set position limits or otherwise intervene in case unusual or potentially improper trading occurs? If "yes", please briefly describe.

The Centre has a right to suspend trading for the period of not more than 10 days or address the court for suspension of trading for more than 10 days in case of violation of stock exchange rules (Section 3 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated

25

27 The illegal practice of taking a position based on information not publicly available regarding an imminent transaction, possibly ahead of a customer order. (e.g., a broker who buys himself 200 shares in a stock just before his or her brokerage plans to buy a large block of 400,000 shares).


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# Issue Yes ( )

No ( )



IOSCO Relevance

30.03.1996)

5. Whether the regulatory framework requires the regulator to have a procedure in place to assess the continuing compliance of the trading system or exchange with the initial authorisation requirements?

26

Is the regulator determines that the exchange or trading system is unable to comply with the conditions of its initial authorisation, does the regulatory framework provide the regulator with the power to:

(i) re-examine the exchange or trading system conditions of authorisations/licensing and impose a range of actions, such as restrictions or conditions on the market operator?

Section 3 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996 6.

(ii) withdraw the exchange or trading system’s authorization?


26

TRANSPARENCY OF TRADING

Whether the regulatory framework includes (i) requirements or arrangements for providing (a) pre-trade (i.e., posting bids and offers) and (b) post-trade (i.e., last sale price and volume of transactions) information to market users? If "yes", please indicate the frequency and timing of reports and what is reported.

7.

(ii) Requirements or arrangements that information on completed transactions be provided on an equitable basis to all participants?

Article 6 of the law of the Republic of Uzbekistan “On mechanism of functioning of the securities market” No. 218-I dated 25.04.1996

27


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# Issue Yes ( )

No ( )



IOSCO Relevance

8. Does the regulatory framework allow the exchange or trading system’s operator to permit derogation from the objective of real-time transparency28? If yes, are conditions clearly defined?

DETECTION OF UNFAIR PRACTICES

Whether there is legislation prohibiting the following conduct in respect of securities admitted to trading on authorised exchanges and regulated trading systems:

(1) market or price manipulation? Article 25 of The Law of the Republic of Uzbekistan “On mechanism of functioning of securities market” No. 218-I dated 25.04.1996

(2) misleading information? Article 6 of the law of the Republic of Uzbekistan “On securities and stock exchange” 02.09.1993

(3) insider trading? Article 25 of The Law of the Republic of Uzbekistan “On mechanism of functioning of securities market” No. 218-I dated 25.04.1996

(4) front-running29?

9.

(5) excessive leverage in the system (e.g., trading on margin30)?

28

28 The degree of transparency of a market can be measured as a deviation from a real-time standard. However, there is no single standard of “timeliness.” Most exchanges and regulatory systems provide for a certain degree of deviation from a real-time standard, such as, permitting some degree of opaqueness of quote information for block transactions, adopting different definitions of “real-time,” adopting a “promptness” standard that varies from several minutes to a longer time, allowing exceptions to real-time based on the size of the trade, type of trade (dealer mediated rather than auction market) or type of dealer. Indeed, each type of market microstructure delivers market fairness, efficiency and transparency in slightly different ways. 29 See footnote 25. 30 This practice is about trading with borrowed money, which can be extremely risky because both gains and losses are amplified. That is, while the potential for greater profit exists, this comes at a hefty price - the potential for greater losses. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money.


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# Issue Yes ( )

No ( )



IOSCO Relevance

(6) other fraudulent or deceptive conduct and market abuses? Article 25 of The Law of the Republic of Uzbekistan “On mechanism of functioning of securities market” No. 218-I dated 25.04.1996

10. Does the regulatory framework provide the regulator with the power to supervise and inspect (i) securities position limits, (ii) quotation display rules, (iii) order handling rules, (iv) settlement price rules or market halts?

The legislation does not indicate specific spheres or aspects, which can be supervised and inspected by the Centre. However, the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996 states the general rule of the Centre to control the activities of all members of security market.

28

In case of detection of trading violations, whether the following actions can be taken by the relevant authority:

(1) liquidation of positions? (2) suspension of trading? (3) fines? (4) revocation or suspension of membership or access authorisation? (5) other sanctions [please explain]?

11.

(6) required arbitration or mediation?

Section 6 of The Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996 (for all of the above actions)

28

MONITORING OF LARGE EXPOSURES

12. Whether the relevant regulatory framework requires the clearing firm, the market, and/or the regulator to monitor trading in order to identify large exposures31? If "yes", please briefly describe (i) how the law defines “large

29

31 The terms “large exposure” refers to open positions or credit exposures that are sufficiently large to expose a risk to the market or to a clearing firm.


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# Issue Yes ( )

No ( )



IOSCO Relevance

exposure” and (ii) the monitoring functions conducted (e.g., reporting requirement, inspections etc.)

13. Whether the regulator or the market has the power to compel customers or market members carrying or controlling large positions to reduce their exposures or to post increased margin?

29

In case a market member does not make relevant required information needed to evaluate an exposure available to the market authority, whether the following action can be taken by the relevant market authority:

(1) impose limitations on future trading?

(2) require liquidation of positions?

(3) increase margin requirements?

(4) revoke trading privileges?

(5) suspend from trading?

14.

(6) require to increase capital of the market member?

29

DEFAULT PROCEDURES

15. Whether the market is required to have contingency plans or emergency procedures in dealing with a market disruption or system failure? 29

16.

Whether the regulatory framework requires markets and/or the clearing and settlement system(s) promptly to isolate the problem of a firm in financial difficulty by addressing its open positions or otherwise protect customer funds and assets from an intermediary’s default under national law?

29

17. Whether the regulatory framework requires intermediaries to separate and segregate customers’ assets from other funds and assets? Point 12 of the Provision “On investment

intermediaries” No. 1108 dated 07.03.2002 29

18. If yes, in the event of intermediary’s insolvency, does the framework enable customer’s positions to be moved by a receiver to a solvent intermediary? Point 12 of the Provision “On investment

intermediaries” No. 1108 dated 07.03.2002 29


-- 49 --

Section G – Clearing and Settlement

# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance

AUTHORISATION AND LICENSING OF SECURITIES SETTLEMENT SYSTEMS

1. Whether the clearing and settlement systems are subject to direct supervision either by the regulator or the relevant market authority?

Point 26 of the Provision “On settlement and clearing chambers in securities market” No. 196 dated 29.04.2003

18

If the regulator has oversight responsibility regarding the clearing and settlement system, whether the regulator has the power to:

(1) license clearing and settlement systems? Point 6 of the Provision “On licensing stock exchange activities” No. 66 dated 04.02.2003

(2) issue rules mandating specific standards for clearing and settlement systems?


(3) approve changes to a clearing and settlement system’s rules and procedures?


(4) conduct surveillance of the operations of clearing and settlement systems? (5) inspect, audit or require a third party inspection or audit of clearing and settlement systems?

(6) require the clearing organization to file reports?

2.

(7) bring regulatory actions against a clearing and settlement systems for violations of the securities laws and regulations or for failure to enforce its own rules?

The legislation does not specify that the Centre has a right to conduct these actions in relations to settlement and clearing organizations. However, section 6 of The Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996 states that the Centre has a right to conduct all of the above actions in relations to all participants of equity market.

30


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# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance

TRADE CONFIRMATION AND DELIVERY VERSUS PAYMENT

3. Whether the regulatory framework requires that confirmation of trades between direct market participants occur no later than trade date (T+0)? 2

4. Whether the regulatory framework requires that trades be settled within three days from the trade date (T+3)?

The terms for trade confirmation and settlement are set in internal rule for settlement and clearing approved by the Centre. However, the legislation does not establish the requirement that such confirmation and settlement be conducted within the time limits set in the questions. (the Provision “On settlement and clearing chambers in securities market” No. 196 dated 29.04.2003; The Law of the Republic of Uzbekistan “On securities and stock exchange” No. 918-XII)

3

5. Does the technical, legal and contractual framework ensure that delivery of securities takes place if, and only if, payment is received? (i.e., DVP - delivery versus payment)?

Section 3 of the Provision “On settlement and clearing chambers in securities market” No. 196 dated 29.04.2003

3

TRANSPARENCY

6.

Do entities that provide the clearing, settlement and custodial infrastructure of securities markets make clear disclosures to market participants about their rules, regulations, relevant laws, governance procedures, risks, steps taken to mitigate risks, and the rights and obligations of participants?

Settlement and clearing chambers interact with their members in accordance with a contract on settlement and clearing services and Rules on conducting settlement and clearing services, which include all the information indicated in the question. (Point 8 of the Provision “On settlement and clearing chambers in securities market” No. 196 dated 29.04.2003)

17


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# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance

CENTRAL DEPOSITORY32

7. Are securities issued on a dematerialised basis (i.e., electronic issue opposed to the issuance as a physical certificate)?

Securities can be issued both in material (paper) and electronic forms. Electronic form of securities is more frequent.

6

8. Does the transfer of securities require any form of physical delivery?

Transfer of securities requires physical delivery in case securities have materialized form (paper form). The Provision “On settlement and clearing chambers in securities market” No. 196 dated 29.04.2003; Law of the Republic of Uzbekistan “On activities of depository in securities market” No.672-I dated 29.08.1998)

6

9. Does a central securities depository (CSD) exist? If NO, please briefly describe the settlement system.

Law of the Republic of Uzbekistan “On activities of depository in securities market” No.672-I dated 29.08.1998

6

10.

If the answer to the above question is “yes”, does an entry in the CSD result automatically in the transfer of the legal title to the securities in the official register of the issuer? If NO, please specify which rights are given by the entry

The new owner of the securities after the registration of the transaction shall him/herself inform the issuer about the transaction and his/her rights to the securities. The issuer is not responsible for non-payment of dividends to the new owner in case he/she does not promptly inform the issuer about his/her rights to the securities. (Point 21 of the Provision “On procedures for concluding and registering transactions

6

32 There are several different ways for owners to hold securities. In some jurisdictions, physical securities circulate and beneficial owners may keep securities in their possession, although owners typically employ a custodian to hold them to reduce risks and safekeeping costs. The costs and risks associated with owning and trading securities may be reduced considerably through immobilisation of physical securities, which involves concentrating the location of physical securities in a depository. The immobilisation or dematerialisation of securities and their transfer by book entry within a CSD significantly reduces the total costs associated with securities settlements and custody.


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# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance with securities in the territory of the Republic of Uzbekistan” No. 285 dated 08.06.1994) The owner of securities upon entry in the CSD gets the right to keep his/her securities in depo account of the CSD, receive confirmation of his/her rights to securities by receiving relevant certificate, give instructions to CSD regarding the use of securities.(Article 12 of the Law of the Republic of Uzbekistan “On depositaries activities in the equity market” dated 29.08.1998

11. Are securities immobilised or dematerialised and transferred by book entry in a CSD?

As it was mentioned above some securities have a paper form. Thus, they should be physically transferred into accounts of a buyer after being registered by the depository

6

OVERSIGHT

Is the clearing and settlement systems required to: 12. a) file periodic reports to the regulator?

30


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# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance

b) submit to periodic and/or special audits and inspections?

Since the clearing and settlement organizations are being licensed by the Centre, the Centre has a right to conduct planned and extraordinary inspections of the clearing and settlement organizations’ activities on the compliances of license requirements. (Section 3 of the Provision “On procedures for concluding and registering transactions with securities in the territory of the Republic of Uzbekistan” No. 285 dated 08.06.1994 The legislation does not provide for mandatory audit of clearing and settlement organizations unless these organizations are in form of JSC.

DERIVATIVES

13. Whether derivative securities clear and settle on a different system through a specialised trading and/or clearing system? 30

14. If the answer to the above question is "yes", whether the legislative framework addresses the treatment of derivatives risks? 30

PROTECTION OF CUSTOMERS’ SECURITIES

15.

Dies the legal or regulatory framework provide any arrangements to protect customers’ securities from theft, loss or misuse and to ensure that they will not become subject to claims of the custodian’s creditors (e.g., segregation of assets insurance, compensation schemes)?

Section 3 of the Provision “On requirements to conduct depository activities” No. 809 dated 31.08.1999 establishes rules for keeping securities to protect them from theft, loss and misuse. However, the legislation does not provide any requirements for segregation of assets insurance and compensation schemes.

12

16. Are the entities holding securities in custody subject to mandatory internal or external audit, or both, to determine if there are sufficient securities to satisfy Article 11 Law of the Republic of

Uzbekistan “On activities of depository in 12


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# Issue Yes ( )

No ( )



CPSS / IOSCO

Relevance customer claims? securities market” No.672-I dated

29.08.1998 Section H – Accounting and Auditing of Financial Reports

# Issue Yes ( )

No ( )



IOSCO Relevance

DISCLOSURE OF FINANCIAL RESULTS

1. Whether issuers are required to publish financial and other information at regular intervals (i.e. annual and periodic financial reports, please specify)?

Issuer shall publish annual report on the last financial year (annually no later than May 1 of the following year); information on issuing of securities including information on state registration (no later than 2 weeks before the emission), information on conducting of general meeting of shareholders, information on affiliated persons (Point 8 of the Provision “On revealing information to participant of equity market” No.1127 dated 18.02.2002

14

If the answer to the above question is "yes", 2.

(1) Whether the issuer or other persons (depending on the circumstances, they might be the underwriter, sponsor, advisor, etc.) is legally responsible for the contents of these reports?

Point 2.16 of the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999 Officials of the issuer are responsible for reports they sign under the legislation of the Republic of Uzbekistan. The persons who can sign reports are director of the issuer and chief accountant.

14


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# Issue Yes ( )

No ( )



IOSCO Relevance

(2) Whether companies are required to file these reports with the regulator for review/approval?

Section 3 of the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999, Point 7 of the Provision on the Centre on coordination and control over functioning of the securities market under the State Committee on Management of State Property of the Republic of Uzbekistan No. 126 dated 30.03.1996

(3) Whether the regulator has the power to take action for incomplete or misleading information in these reports?

Section 3 of the Provision “On drafting and filing reports on securities” No. 710 dated 27.04.1999

EXTERNAL AUDITOR

3. Whether the relevant law or regulation requires that annual financial statements published by issuers should be audited by external auditors?

Point 12 of the Provision “On revealing information to participant of equity market” No.1127 dated 18.02.2002

16

4.

Does the regulatory framework require that an issuer’s governance body independent in both fact and appearance of the management of the company (e.g., shareholders or a statutory or corporate audit oversight body) oversee the process of selection and appointment of the external auditor?

The General Meeting of shareholders makes decision on conducting audit and choosing audit organization and maximum amount of fees paid to the audit organization for the services (Article 64 and article 105 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” dated 26.04.1996)

16

5. Whether the regulatory framework requires issuer to change the external auditor after a certain number of years (i.e., rotation)? If yes, please specify the rotation period

16

6. Whether issuers are required to provide audited financial statements in public offering prospectuses?

Point 23 Provision “On issuing, state registration of issuing and clearing off corporate securities” No. 1158 dated 10.11.2002

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

Whether the required audited financial statements include the elements listed below:

(1) a balance sheet or statement of financial position? (2) a statement of the results of operations? (3) a statement of cash flow?

7.

(4) a statement of changes in ownership equity or comparable information included elsewhere in the audited financial statement or footnotes?

National Standard of audit activities No. 70 dated 10.03.2001

16

ACCOUNTING STANDARDS

8. Are financial statements required in public offering and publicly available annual reports required to be prepared and presented in accordance with a comprehensive body of accounting standards?

Law of the Republic of Uzbekistan “On accounting” No. 279-I dated 20.08.1996 16

9. If the answer to question above is “yes”, are these accounting standards of a high and internationally acceptable quality?

The work on comparing the Uzbek accounting standards and international standards has not been done. However, the Uzbek accounting system is considered to be very detailed and comprehensive.

16

10. Whether an organisation responsible for the establishment and timely interpretation of accounting standards is set out by the relevant law or regulation? If "yes", please state the name of the body and its composition

Ministry of Finances of the Republic of Uzbekistan (Article 5 of the Law of the Republic of Uzbekistan “On accounting” No. 279-I dated 20.08.1996)

16

11. If the answer to the above question is "yes", whether the standard setting body is subject to regulatory oversight? If "yes", please indicate who the supervisory authority is.

The Cabinet of Ministers of the Republic of Uzbekistan (Provision “On the Ministry of Finances of the Republic of Uzbekistan” No. 553 dated 23.11.1992

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

Whether the accounting standards used in preparing financial statements and financial reporting address the general topics listed below:

(1) presentation of financial information? (2) consolidation of financial information? (3) business combinations? (4) tangible and intangible assets (including impairment of assets)? (5) leases? (6) income taxes? (7) employee benefits (e.g., pension, stock compensation, etc.) (8) provisions and contingencies? (9) financial instruments (including derivative financial instruments)?

12.

(10) securitisation?

The Republic of Uzbekistan has unified accounting standards for all legal entities and entrepreneurs. The Ministry of Finances adopted national accounting standards for all spheres of accounting, which sets rules and requirements for book-keeping There are over 20 of such national accounting standards, which cover all of the issues mentioned in question 12.

16

Whether the accounting standards used in preparing financial statements and financial reporting address the following areas of particular interest to investors:

(1) earnings per share? (2) interim financial reporting?

13.

(3) information about business segments?

National standards of accounting of the Republic of Uzbekistan No. 1 “On accounting policy and financial accounting” No. 474 dated 14.08.1998; National standards of accounting of the Republic of Uzbekistan No. 2 “Incomes from the main business activities” No. 41 dated 26.08.1998; National standards of accounting of the Republic of Uzbekistan No. 3 “Report on financial results” No. 43 dated 27.08.1998

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

(4) related party transactions? However, such questions are addressed in audit inspection. (National standards of audit activities of the Republic of Uzbekistan No. 55 dated 03.03.2003

(5) leases? National standards of accounting of the Republic of Uzbekistan No. 6 “On accounting of leasing” No. 1374 dated 22.06.2004

AUDITING STANDARDS

14. Are audited financial statements included in public offering and publicly available annual reports, required to be audited in accordance with a comprehensive body of auditing standards?

The Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition)

16

15. Are these auditing standards of a high and internationally acceptable quality?

The work on comparing the Uzbek auditing standards and international standards has not been done. However, the Uzbek auditing standards are considered to be very detailed and comprehensive.

16

16. Does the regulatory framework provide for an organization responsible for the establishment and timely interpretation of auditing standards?

Decree of the Cabinet of Ministers “On improving audit activities and increasing the role of audit” No. 365 dated 22.09.2000

16

Do auditing standards expressly require the auditor to: 17.

(1) use due professional care in the performance of the audit?

The Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition); Section 6 of the Provision “On the procedures for issuing licenses to audit companies for conducting audit activities” No. 365 dated 22.09.2000

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

(2) adequately plan and supervise the audit? Article 6 of the Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition)

(3) obtain an understanding of the internal control system of the entity? (4) obtain sufficient evidence to determine whether the financial statements are free of material misstatements?

Article 6 of the Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition)

Whether an auditor report is required to disclose:

(1) any exceptions to the application of accounting principles used? There cannot be any exceptions to the accounting principles

(2) any material uncertainties in the financial statements? 18.

(3) any going-concern issues?

Paragraphs 3-6 of the National standards of audit activities of the Republic of Uzbekistan No.70 dated 10.03.2001

16

19. Whether the regulatory framework requires auditors to be independent from the issuer? If "yes", please define “independence”

Article 105 of the Law of the Republic of Uzbekistan “On joint-stock companies and protection of rights of shareholders” 26.04.1996 Independent means an audit companies, which is not connected by material interests with an issuer.

16

20. Whether auditors are required to be licensed or approved and to satisfy specific education criteria and other qualifications in order to practice?

Article 21 of the Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition)

16

21. Whether auditors are subject to continuing professional education requirements after they are licensed or approved to practice?

However, the head of an audit company is obliged to pass through attestation once in three years in the Ministry of Finances (Section 6 of the Provision “On the procedures for issuing licenses to audit companies for conducting audit activities” No. 365 dated 22.09.2000)

16


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# Issue Yes ( )

No ( )



IOSCO Relevance

22. Does the regulatory framework provide for a mechanism for enforcing compliance with accounting standards such as requiring restatements of financial statements that deviate from accepted standards?

Article 12 of the Law of the Republic of Uzbekistan “On audit activities” No. 734-XII dated 09.12.1992 (new edition) states that entity violating accounting standards shall make correction of mistakes. In case the audit determines mistakes or non-compliance with the legislation it shall indicate such questions in its conclusion. This conclusion is presented then to local tax organs. Tax organs will initiate an inspection of financial activities of an entity based on such report. Thus, entities are interested in correcting mistakes to avoid tax inspections.

16


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Section I – Money Laundering

# Issue Yes ( )

No ( )



FATF Relevance

SCOPE OF THE CRIMINAL OFFENCE OF MONEY LAUNDERING

1.

Whether there is legislation in place to address the issues of money laundering (ML)? If "yes", please identify the name of such legislation and when it was adopted [if a special law exists, please include details of the law in Section I, above]

Law of the Republic of Uzbekistan “On resistance to legalization of incomes received from criminal activities and financing terrorism” No. 660-II dated 26.08.2004

1

Whether the following conventions have been signed and ratified (please specify in your comments):

(i) 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention)?

Uzbekistan ratified the Convention in accordance with the Decree of the Oliy Majlis dated 24.02.1995

(ii) 2000 UN Convention against Transnational Organized Crime (the Palermo Convention)?

Uzbekistan ratified the Convention in accordance with the Decree of the Oliy Majlis dated 30.08.2003

2.

(iii) 2003 UN Convention against Corruption?

1 and 35

3.

Does the law provide for the confiscation of property (including funds and securities) that has been laundered or which constitutes (i) proceeds from; (ii) instrumentalities used in; and (iii) instrumentalities intended for use in the commission of any ML, financing of terrorism (FT) or other predicate offences, and property of corresponding value.

3

CUSTOMER DUE DILIGENCE AND RECORD-KEEPING

4. Does the regulatory framework require that financial institutions obtain senior management approval before establishing business relationships with politically exposed persons?

6

5. Does the regulatory framework require financial institutions to maintain all necessary records on transactions, both domestic and international, for at least 10


-- 62 --

five years following completion of the transaction regardless of whether the account or business relationship is ongoing or has been terminated?

6. Are financial institutions required to undertake customer due diligence measures including identifying and verifying the identity of their customers?

In order to open a bank account a legal entity shall provide information regarding its tax status (tax identification number) and names of director and chief accountant, with the notarized samples of their signatures. Individuals willing to open a bank account shall provide their passports or other documents substituting passport. (Points 9-14 of Section 2 of the Instruction on bank accounts opened in banks of the Republic of Uzbekistan No. 1080 dated 10.11.2001)

5

7. Does the regulatory framework prohibit from opening/maintaining (i) anonymous accounts, (ii) accounts in fictitious names, (iii) numbered accounts and (iv) non registered (i.e., bearer) securities?

Based on the comments to question 6 individuals/legal entities cannot open anonymous account, accounts in fictitious names and numbered accounts. Moreover, when business entities open bank accounts, the bank shall within one day inform in written form relevant tax inspection about that. (Points 9-14 of Section 2 of the Instruction on bank accounts opened in banks of the Republic of Uzbekistan No. 1080 dated 10.11.2001). Individual residents and non-residents have a right to open bank accounts in foreign currency on deposits to bearer without indicating their names and signatures. Payment of such deposit is made upon presentation of deposit book. (Point 17 of the Instruction on bank accounts opened in banks of the Republic of Uzbekistan No. 1080 dated 10.11.2001)

5

REPORTING OF SUSPICIOUS TRANSACTIONS AND COMPLIANCE

8. Does the regulatory framework require financial institutions to report to the 13


-- 63 --

relevant authority suspicious transactions (i.e., when it suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity or terrorism financing), regardless of the amount of the transaction?

9. Does the regulatory framework require market intermediaries to have in place policies and procedures designed to minimise the risk of using an intermediary's business as a vehicle for money laundering?

8

INTERNATIONAL COOPERATION

10.

Does the regulatory framework allow the relevant authority to cooperate with foreign authorities for AML purposes (e.g., search and seizure of information, taking of evidence or statements from persons, providing originals or copies of relevant documents and records)?

All cooperation of the Department is conducted under the procedures and frames indicated in the international treaties signed by the Republic of Uzbekistan

36-38


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Section J –Financial Instruments

# Issue Yes ( )

No ( )



IOSCO Relevance

VARIETY OF FINANCIAL INSTRUMENTS TRADED

1. Does the regulatory framework provide for a definition of financial instruments/securities or similar? [Please provide the definition in your answer]

The Law of the Republic of Uzbekistan “On securities and stock exchange” No. 918-XII dated 02.09.1993 gives definition of securities. “Securities are monetary instrument certifying property rights and loan relations between an issuer and a holder of a security, which entitles payment of incomes in form of dividends or percents and opportunity to transfer the rights arising from these documents to third parties.”

Does the regulatory framework provide comprehensive regulation for listing and trading of:

(i) commercial bonds Provision “On issuing, state registering and terminating issuing of bonds of joint-stock companies” No. 1159 dated 10.07.2002

(ii) government bonds

Provision “On servicing and circulation of the state short-term bonds” No. 552 dated 30.11.1998; Provision “On procedures for distribution, circulation and paying off of the state medium-term treasury obligations of the Republic of Uzbekistan” No. 1327 dated 16.03.2004

(iii) municipal bonds

2.

(iv) derivatives Procedures for issuing and distribution of derivatives No. 320 dated 02.04.1997

25

3. Whether there is a specific regulation applicable to the issuance of financial instruments to the benefit of employees as an employee share purchase plan? 14, 25


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# Issue Yes ( )

No ( )



IOSCO Relevance

DERIVATIVES

4. Does the regulatory framework clearly provide that derivative contracts are enforceable without exceptions?33 14, 25

5. If a market for derivatives exists, does the regulatory framework require disclosure of the terms of the contracts traded, the mechanisms of trading and the risks?

14

CROSS-BORDER ISSUANCE

6. Does the regulatory framework provide for any limits/restrictions to the issuance and the selling of financial instruments by a foreign issuer in your market? Please describe

Securities in foreign currencies can be issued only in cashless form. Transactions with securities in foreign currencies in secondary market can be conducted only through stock-exchange or organized over the counter markets. Foreign entity can purchase securities of banks-residents of the Republic of Uzbekistan only after approval of the Central Bank. Legal entities registered in off-shore zones cannot purchase securities of banks of the Republic of Uzbekistan.(Provision “On procedures for circulation in the territory of the Republic of Uzbekistan securities in foreign currency, purchasing securities in foreign currencies by residents, and also purchasing securities issued by residents of the Republic of Uzbekistan by non-residents” No. 1692 dated 22.06.2007)

14-16

33 In some jurisdictions, the enforceability of derivatives is limited due to a concurring provision addressing unenforceability of gaming bets. In some other countries enforceability of derivatives is limited only to licensed financial institutions.


-- 66 --

# Issue Yes ( )

No ( )



IOSCO Relevance

7. Does the regulatory framework provide for any limits/restrictions to the issuance and the selling of financial instruments by a national issuer in a foreign market? Please describe

The legislation does not cover the questions of issuance and the selling of financial instruments by a national issuer in a foreign market

14-16

SPONSOR/UNDERWRITER

8. In the case of Initial Public Offering, whether the issuer is required to have a sponsor or an underwriter? 14

CONCENTRATION RULE

9. Does your regulatory framework require that all relevant transactions be conducted on a stock exchange? 14

PRIVATE PLACEMENT

10. Whether there is a specific regulation for private placement of financial instruments? Please define private placement.

Private placement – placement made among limited number of investors known beforehand (Provision “On the procedures for issuing, state registering and paying off corporate bonds” No. 1158 dated 10.07.2002)

14


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This Assessment does not constitute legal advice. Readers are advised to seek appropriate legal advice before entering into any transaction, making any determination or taking any action related to matters discussed herein. The contents of this Assessment are copyrighted. For further information or eventual comments please contact Gian Piero Cigna at [email protected]

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