Dynasty Law & Investment draws attention to the fact that from July 1, 2021 a new version of the Law of Ukraine "On Securities and Stock Market" will come into force. The law, along with a new version, also received a new name - "On capital markets and organized commodity markets."
The new law regulates the relations arising during the issue, circulation, redemption of securities and fulfillment of obligations under them, the conclusion and execution of derivative contracts, replacement of derivative contracts and transactions on financial instruments in capital markets, as well as relations during professional activity in the capital markets and organized commodity markets.
The law defines the capital markets as the stock market, the derivatives market and the money market, and qualifies commodity markets and regulates their operation, establishes a clear classification of securities and provides their definitions, introduces the concept of "derivative" and regulates the derivatives contract market.
Among the innovations of the Law "On Capital Markets and Organized Commodity Markets" is the introduction of the institution of qualified investors.
Qualified investors in financial instruments are investors in financial instruments who have the skills, experience and knowledge in the field of capital markets, sufficient for them to make independent investment decisions and assess the risks of transactions in financial instruments.
According to the Law, qualified investors can be:
1) international financial organizations;
2) foreign states and their central banks;
3) the state of Ukraine in the person of the central body of executive power authorized to implement the state budget policy in the field of public debt management and state-guaranteed debt;
4) the National Bank of Ukraine;
5) professional participants in capital markets, banks and insurance companies;
6) foreign financial institutions that meet the criteria established by the National Commission on Securities and Stock Market
7) legal entities that meet the requirements specified in the Law.
The main advantages of the status of a qualified investor are:
• the ability to enter into transactions between financial instruments without the participation or mediation of investment firms.
• there is no need to draw up and publish a securities prospectus during the public offering of securities only among qualified investors.
The law includes securities as financial instruments, including securities of mutual investment institutions, money market instruments, options, futures, swaps, forwards and other derivative contracts, derivative financial instruments, financial contracts for difference in prices (so-called CFD contracts). etc.
The law stipulates that trading in financial instruments is carried out by investment firms for which transactions in financial instruments are an exclusive type of activity and which have received licenses to conduct relevant activities within the professional activity of trading in financial instruments, namely:
1) sub-brokerage activities;
2) brokerage activities;
3) dealer activity;
4) portfolio management activities of financial instruments;
5) investment consulting;
6) underwriting and / or placement activities with a guarantee;
7) placement activities without providing a guarantee.
Investment firms can also provide their clients with additional services, such as:
• storage of financial instruments and clients' funds;
• providing clients with loans and borrowings for concluding derivative contracts with the participation or mediation of such an investment firm and concluding transactions in financial instruments;
• providing clients with advice on financing their business activities, development strategy, other related issues, providing services and advice on reorganization or purchase of corporate rights of legal entities;
• conducting investment research and financial analysis and others.
The main principle of investment firms is the mandatory execution of client orders on the most favorable terms for clients.
Before concluding a financial instrument agreement with or on behalf of a client, an investment firm must obtain all necessary information about the client's knowledge and experience of the financial instrument in order to analyze the suitability of the financial instrument for an individual client and provide the client with an opinion.
Please note that in case of violation of these obligations by the investment firm, the investment firm is obliged at the request of the client:
1) if the financial instrument is securities - to purchase at its own expense from the client such securities at the price at which they were purchased by the client, and reimburse all costs (except for lost profits) incurred by the client in connection with the contract for such securities;
2) if the financial instrument is a derivative contract - to reimburse the client for all costs incurred by the client in connection with the conclusion and execution of the derivative contract or transactions relating to it.
Thus, the new Law on Capital Markets and Organized Commodity Markets guarantees certain protection of investors during trading in financial instruments and imposes an obligation on professional market participants to act exclusively in the interests of clients.