Legislative Update September 00 - December 00

Between September and December 2000 the National Securities Commission of the Republic of Kazakhstan (NSC) adopted several legal acts which regulate activities in the Kazakh securities market. This update provides an outline of the most important acts.

Second-Tier Banks

A joint Resolution of the NSC Directorate (83) and the Board of the National Bank of the Republic of Kazakhstan (415) on the Requirements For Second-Tier Banks Combining Custodian and Broker and Dealer Activities in the Securities Market was adopted on November 3 2000.

The resolution aims to protect the rights and legally protected interests of investors in the securities market. It establishes certain requirements and restrictions for second-tier banks combining custodian and broker and dealer activities in the securities market, including the following:

• the formation and existence within the bank's structure of subdivisions to carry out custodian and broker and dealer activities in the securities market;
  
  
• the prohibition of the performance by one such subdivision of the functions and activities performed by another subdivision;
  
  
• the prohibition of the performance by these subdivisions of any other activities in the financial market;
  
  
• the prohibition of the combination of positions within these subdivisions; and
  
  
• other restrictions regarding employees, premises, safe access, the circulation of documents, and the transfer of information between subdivisions and within the bank in general.

Pension Funds

NSC Directorate Resolution 711 on the Requirements Presented to Custodian Banks Rendering Services Connected with Storage and Registration of Pension Funds of Cumulative Pension Funds, dated November 6 2000, is aimed at ensuring the safety of pension funds of cumulative pension funds, and protecting the rights and interests of depositors (recipients of pension payments).

The resolution provides that a custodian bank has the right to render services connected with the storage and registration of pension funds in the presence of one of the following types of access to the international depository and settlement systems (eg, Euromoney or Clearstream International): (i) direct access, or (ii) by execution of a custodian agreement with a foreign organization that provides custodian services in the securities market and has direct access to the above systems.

Obtaining NSC Consent

NSC Directorate Resolution 644 on the Procedure for the Provision to Organizations Performing Activities on Investment Management of Pension Funds of Consents to Make Investments in Securities of Non-Residents of the Republic of Kazakhstan was made on August 24 2000, and was amended by NSC Directorate Resolution 668 on October 2 2000.

This resolution regulates the procedure for obtaining the NSC's consent to make investments in securities of Kazakh non-residents.

Registrars

NSC Directorate Resolution 678 on Several Measures for the Protection of Rights and Legally Protected Interests of Investors in the Securities Market was adopted on October 12 2000. It provides that a registrar is obliged to control the issue of non-state securities through an independent calculation of the time periods for which the issuer must submit reports to the NSC on the results of the issue and placement of securities. A registrar must send notifications to its issuers requiring that they submit these reports to the NSC.

The resolution also empowers registrars to execute certain actions (eg, the suspension of the operation of an agreement executed between the registrar and an issuer for the maintenance of a register of holders of given securities with respect to the conduct of operations on personal accounts of securities holders, and notification to all of the interested parties, including issuers, securities holders, nominal securities holders and its transfer agents).

Securities Holders Register

NSC Directorate Resolution 679 on Several Measures For the Protection of Rights and Legally Protected Interests of Investors that are Potential Purchasers of Shares of Joint Stock Companies Independently Maintaining the Securities Holders Register was adopted on October 12 2000. This resolution sets out additional requirements for companies that independently maintain the securities holders register. It regulates the procedure for maintaining the register and conducting operations on personal accounts of securities holders.

For further information on this topic please contact Yuriy Maltsev at White & Case by telephone (+7 3272 50 74 91) or by fax (+7 3272 50 74 93) or by e-mail ([email protected]).