On 23 November 2012 the National Securities and Stock Market Commission (the "Commission") adopted the resolution "On Approval of Regulation on Functioning of Stock Exchanges" (the "Regulation"), which is currently undergoing registration with the Ministry of Justice of Ukraine.
Once the Regulation comes into effect, which is expected upon its registration by the Ministry of Justice and official publication, it will become the main set of rules regulating activities of the securities exchanges in Ukraine. The Regulation, in particular, will significantly alter the rules for securities handling and the key requirements for the stock exchanges.
Among the most important new rules introduced by the Regulation are stricter requirements for securities issuers, which can qualify for the first or second tier listing. In particular, to list the shares, the issuer would be required to meet the following minimum requirements:
- issuers seeking the first tier of listing shall be in existence for at least three years and issuers seeking second tier of listing – for three months;
- issuer's net assets must be at least UAH 100 million or UAH 50 million respectively;
- issuer's annual income derived from the sale of goods, works or services over the last financial year must be at least UAH 100 million or UAH 50 million respectively;
- issuer's market capitalization must be at least UAH 100 million (applicable to the first tier of listing only);
- issuer must have suffered no losses in any reportable period for the two financial years preceding the listing (applicable to the first tier of listing only);
- 15% of the issuer's shares must be free float in the last quarter prior to listing (applicable to the first tier of listing only);
- number and average monthly value of stock exchange contracts concluded and performed in relation to the issuer's securities over the six months preceding listing, must be at least 100 and UAH 10 million respectively – for the first tier of listing; or 10 and UAH 250 thousand respectively – for the second tier of listing.
However, if shares undergo an initial or secondary placement on the stock exchange, the issuer will not be obliged to comply with the relevant above requirements to include its shares in the second tier of listing.
Also, for the first time the Regulation establishes the requirements for the listing of securities by foreign issuers in Ukraine. The Regulation stipulates that in order to get listed in the second tier of a stock exchange, a non-resident issuer shall (i) submit a documentary evidence confirming that its securities have been admitted to trading in Ukraine and (ii) ensure that they are listed on a foreign stock exchange from a list approved by the Commission. In order to get listed in the first tier of a stock exchange, the foreign issuer would have to (i) submit documentary evidence confirming that its securities have been admitted to trading in Ukraine, (ii) ensure that they are included in the main list of a foreign stock exchange and (iii) comply with requirement (7) above in part of its applicability to the first tier of listing.
It is worth mentioning that the increase of the minimum requirements for listing of securities at this moment is questionable from the economic perspective as the toughening of the listing rules does not correspond to the current state of the Ukrainian securities market, which shows the signs of significant liquidity downfall and decline in the volume of trading. Though the Commission does not deny that new requirements may reduce the number of securities on the market (in particular those of the first tier of listing), it argues that tougher requirements will help to protect the rights of investors and will in the long run serve as a stimulus for growth.
In November 2012 the Commission also approved a number of other decisions, which in particular regulate (i) the procedure for compiling administrative data by organizers of securities trading, (ii) the procedure for compiling and submitting administrative data on securities traders, (iii) the requirements for software products used by the securities market participants, (iv) the procedure for consideration of cases and imposition of sanctions for infringements of securities laws.