STATE COMMITTEE FOR SECURITIES UNDER THE AUSPICES OF AZERBAIJAN REPUBLIC

  • The history of establishment of Committee
  • Structure of Committee
  • Duties of Committee
  • Rights of Committee
  • Institutions subordinated to Committee
  • International relations of Committee
  • The address of location of the Committee

    The history of establishment of the committee

    The historical review

    Establishment of the securities market in Azerbaijan took place at the beginning of the 20-th century. Yet in 1900 on the pages of the newspaper "Kaspi" there was published interesting information proving the wide use of securities in the articles devoted to the promissory note reforming. At that period there were issued promissory notes and interest-bearing securities by the numerous banks acting in Baku, including Baku Trade Bank. Promissory notes were widely used in the payment process as well as in forming debt relations. The promissory notes market continued developing during the existence of the Azerbaijan Democratic Republic, though after the establishment of the Soviet authority it was restricted. First shares in Azerbaijan were issued by approval of the Regulations of the Baku Trade Bank. The main shareholders of this bank were the well-known entrepreneurs of Azerbaijan, such as the head of the council H.Z.Taghiyev, members M.S.Asadullayev, M.Naghiyev, M.Mukhtarov and others. During first two decades of the XX century there were acting a number of joint-stock companies. Those companies, among which there can be mentioned “Oil Products JSC”, “Bul-Bula Oil and Trade JSC”, “Balakhany-Zabrat Oil Production JSC” mostly dealt with production, refining and sale of oil. During the Soviet period of Azerbaijan history the securities market was limited mainly by the circulation of premium bonds.

    Establishment of the securities market in Azerbaijan Republic after gaining its independence has been amongst the most significant events of the new economic history, since the existence of such markets as one of the main principles of economical development of any country, is one of the most important infrastructures promoting the world economic integration processes.

    With the adoption of Presidential Decree "On Providing the Activity of State Committee for Securities under the auspices of the President of Azerbaijan Republic" dated July 26, 1999 there was put the basis of the organized securities market in Azerbaijan. Throughout the period of its activity there has been done a lot of work on forming and development of the securities market with wide infrastructure, meeting all modern requirements, and appropriate to market relations. One of them is establishment of the state regulation system of the securities market provided with the juridical-normative basis corresponding to world standards. In general, besides providing transparency of processes going on in the market, the purpose of the Committee is to restrict potential risks in the securities market to the minimal level. That's why a special attention has been paid to protection of the rights of investors (especially minor investors) in the scope of the legal basis, disclosure of information concerning the securities market, prohibition of insider dealing, prevention of price manipulation and consolidation of inner and outer investment resources of the securities market in the real sector of economy.

    For this purpose there have been adopted more than 70 legal acts including Law "On the Amendments and Additions to the Civil Code of Azerbaijan Republic". Besides, there has been worked out the new mechanism of the excise marks turnover on tobacco products and alcohol drinks as well as regulation of the debt market and pledge operations. The civilized lottery market has been formed, the work on the protection of the rights of shareholders organized, and the activity of National Depository Center approached to high level. At the same time, the proper registration was made for regulation of the state privatization checks and options turnover.

    On February 15, 2000 Committee encouraged the establishment of Baku Stock Exchange (BSE). The constitutors of BSE are 18 big banks and financial institutions. It’s noteworthy that there is also Istanbul Stock Exchange among them. The first trading operation at BSE was carried out on September 1, 2000.

    One of the main functions of BSE is to organize trading of securities of all sorts, provided by the legislation of Azerbaijan. In addition, BSE possesses a respective license on rendering depository and register keeping services for holders of both corporate and state securities.

    At the present time, along with state short-term bonds and National Bank’s short-term notes there are traded corporate stocks and bonds at BSE. The total turn-over of BSE 2005 was 5,5 times higher than for 2004, and total turn of shares 3,5 times.

    Baku Stock Exchange online: www.bse.az

    Kind of professional activities
    There are 7 kinds of the certified professional activities:

    1. broker activity
    2. dealer activity
    3. activity on securities management
    4. depository activity
    5. security owners’ register keeping activity
    6. clearing activity
    7. activity of stock exchange
    31 juridical persons received the license of professional participants of the securities market, 200 physical persons passed attestations for being able to perform different activity kinds. At the present moment 11 brokers, 10 dealers, 3 depositary, 2 register keepers, 1 exchange, 1 licensed professional participation controlling securities.

    The valuable papers in the circulation: shares, cooperative loans, the State short-term Loans, the short-term notes of the National Bank, privatization checks, options. In future such new notes as hypothec notes, hypothec loans, and apartment certificates may be put into the circulation (turnover).

    Structure of the Committee

    Chairman
    First vice-chairman
    Vice-chairman
    Vice-chairman
    Chief of Apparatus
    Chairman Assistant
    Department of Securities Issue and Registration
    Department of Regulation of the Debt Market and Registration of Pledge Operations
    Department of Regulation of Securities Turnover
    Department of Regulation of Securities Infrastructure
    Department of Development and Monitoring of the Securities Market
    Department of Law
    Personnel and Recruitment, Personnel Training Department
    Common Department
    Department of Information and Public Relations
    Accounts Department
    General Service Department

    Duties of Committee

    Committee is a central executive authority regulating the activity regarding securities: conducting state policy in the sphere of forming and development of the securities market; controlling and coordinating the activity of respective executive bodies; regulating activities of professional participants of the securities market; protecting rights and interests of investors, shareholders and other owners of securities.

    Acts adopted by Committee within the framework of its duties are obligatory for other central executive bodies and participants of the securities market. Committee supervises the execution of those acts by mentioned bodies.

    Main duties of Committee are the following:
    - Conducting state policy in the securities sphere and its realization, providing the state regulation and control;
    - organizing and development of the securities market , creating the favorable investment environment;
    - providing control of the activity of issuers and professional participants of the securities market, including stock exchanges;
    - creating environment of healthy competition in the securities market;
    - protecting rights of participants of the securities market, as well as investors, shareholders and other owners of securities.
    Committee carries out the following functions in accordance with its duties:

    - realization of state governing in the sphere of the securities market, state regulation and control, coordination activity;
    - working out suggestions on main directions of the organization and development of the securities market, analyzing the current situation and development prospects, coordinating activity of the corresponding central executive authorities in the securities market;
    - approval of emission booklets of securities, including emission booklets of foreign emitters issuing securities at the territory of Azerbaijan Republic;
    - approval of registration rules of securities and their emission booklets, and their registration;
    - determination of requirements provided for the unified state register of securities and their keeping;
    - regulation of the securities turnover of all sorts;
    - control of emitters’ observance of securities issuing and turnover rules;
    - determination of obligatory requirements on securities (including those ensured with immovable property), their open placement, turnover, quotation, listing, counting-depository activities on securities;
    - preparation and approval of unified standards on realization of professional activity in the securities market as well as insurance and guarantee standards;
    - laying down and realization of licensing rules of the professional activity in the securities market; such as broker, dealer, depository activities, securities management, clearing, register keeping, organization of securities trading and other kinds of activities provided by law;
    - laying down and realization of rules on licensing the activity of stock exchanges at the territory of Azerbaijan Republic;
    - laying down and realization of rules on licensing activities of investment funds, including specialized check investment funds;
    - determination of standards of investment, non-governmental pension and insurance funds in the securities market as well as activities of their managerial organizations, banks and insurance companies;
    - determination and supervision of rules of activities of self-controlled organizations of professional participants of the securities market;
    - laying down and realization of rules on licensing activities on preparation of the notes of all the kinds of securities; organization of state securities issue;
    - laying down and supervision of rules on ordering state excise marks, their sale, turnover and registration;
    - control of observance by emitters and professional participants of the securities market of the legislation of Azerbaijan Republic on securities, including legal acts adopted by Committee;
    - laying down of rules of participation and permission to the market entrance of foreign legal entities and natural persons, and control of their activity;
    - regulation of securities turnover issued by foreign emitters and their admittance to the internal market of securities, monitoring of their activity;
    - laying down of rules of permission of outside I.P.O. and turnover of the securities of the emitters registered at the territory of Azerbaijan Republic;
    - registration of pledge of all kinds of securities, and debt obligations, officialized by securities;
    - determination of licensing rules of issuing, organization and conducting of all the kinds of lotteries at the territory of Azerbaijan Republic;
    - laying down of rules of attestation of professional participants of the securities market, including stock exchanges;
    - verification of reports on operations with securities made by emitters at the territory of Azerbaijan Republic;
    - creation and monitoring of transparent information system in the securities market;
    - monitoring of the accounting balances of emitters, professional participants of the securities market, including stock exchanges;
    - taking part in determination of the general methodological basis of organization of accounting related to the activities of professional participants of the securities market, including stock exchanges;
    - protection of the rights and interests of investors, shareholders and other owners of securities;
    - creation of equal conditions for getting the necessary information, needed to be disclosed;
    - determination of the rules on advertising in accordance with the legislation concerning the securities market;
    - organization of trainings for professional participants of the securities market;
    - conducting surveys on development of the securities market;
    - international cooperation in accordance with legislation; preparation or taking part in the preparation of projects of international contracts connected with the activity of Committee, conducting and participating in international conferences, seminars and other international events;
    - Carrying out other functions in accordance with legislation.

    Rights of Committee

    Committee has got the following rights for carrying out its duties and functions:
    - to accept acts which execution is obligatory for ministries and other central executive organs, banks and credit organizations , local executive authorities, municipal representatives, legal entities and natural persons in the scope of Committee’s proxy; carry out control over the activity of the central executive organs for the points concerning its proxy;
    - to conduct classification of securities and determine types of securities in accordance with the legislation of Azerbaijan Republic;
    - to accept legal acts connected with securities and regulating activity in the securities market;
    - to suspend or abolish legal acts contradicting to the legislation of Azerbaijan Republic and the rules coordinated with Committee on the financial market of Azerbaijan Republic and its state regulation;
    - in the scope of its proxy to inquire and get the necessary information from the ministries of Azerbaijan Republic or other central executive organs, National Bank of Azerbaijan Republic, state and commercial banks, state companies and concerns, local executive bodies, municipalities, legal entities and natural persons engaged in private business about their activities in the securities market;
    - to keep registration of issue and emission prospects of all the types of securities;
    - to lay down the rules of registration, issue and turnover of securities at the territory of Azerbaijan Republic;
    - to fix conditions of issue of securities and municipal papers, their arrangement and turnover;
    - to regulate the turnover of the foreign emitters’ securities in Azerbaijan Republic;
    - to lay down the rules on return of financial funds of investors in case emission fails;
    - to set the date of IPO’s;
    - to confirm reports about IPO of securities;
    - to get a report from emitters about the results of issue of emission securities during the period set by legislation after finishing IPO of securities and to register in case the measures laid down by legislation;
    - to cancel further IPO issued in the result of false emission and to take measures for this purpose; to allow further IPO in accordance with legislation after all the infringements connected with false emission of securities being solved by issuer;
    - to grant licenses to the professional activity kinds in the securities market such as brokers, dealers, securities management, clearing, depository, register-keeping, organization of trade in the securities market and other professional activities determined by law;
    - to carry out control of the activity of professional participants in the securities market and to suspend or cancel licenses given in case their activity breaks the law on securities of Azerbaijan;
    - to lay down the rules on realization of professional activity in the securities market;
    - to give instructions that are obligatory for issuers and professional participants of the securities market, including self-controlled organizations of the professional participants of the securities market;
    - to control protection of the rights of investors and other owners of securities, and compliance of their rights by issuers and professional participants of the securities market;
    - to appeal to the appropriate juridical-order organs in case the legislation on securities is infringed and to lodge a claim in the court;
    - to allow placement of the securities issued by foreign issuers at the territory of Azerbaijan Republic out of the boundaries of Azerbaijan Republic taking into consideration intergovernmental contracts;
    - to give license on issuance and organization of all the kinds of lotteries at the territory of Azerbaijan Republic and to carry out its control;
    - to keep registration of pledges with all the types of securities, including pledges of debt obligations officialized by securities in accordance with legislation;
    - to fix amount of state tax and its payment procedures while emission prospect is being registered (excluding registration of emission prospects in privatization process);
    - to work out suggestions and rules of payment of state tax for giving license to professional participants in the securities market;
    - to involve foreign and local consultants and experts, consulting organizations under the treaty for working out the problems connected with authorities of Committee, including working out projects of organization and development of the securities market, and legal acts;
    - to set up special accounts for support and development of the securities market in Azerbaijan Republic with non-substitutive financial and technical help;
    - to carry out international relations in the securities market in the way provided by legislation , as well as to participate in the work of international organizations and other institutions, to conduct negotiations with foreign and international organizations on topics charged to Committee; to accede to respective contracts, to represent Azerbaijan Republic in the questions concerning the authorities of Committee;
    - to form appropriate legal entities for solving problems connected with the authorities of Committee according to legislation;
    - to call to official account the persons who break the legislation on securities, and to apply administrative measures to those persons.

    Institutions subordinated to Committee

    1.National Depository Center
    National Depository Center, being the professional participant of the securities market in Azerbaijan, was established after approval of the Regulations “On National Depository System” and “Keeping of Registers of Shareholders of Joint-Stock Companies and Specialized Check Investment Funds Established During Privatization of State Institutions" by the Decree of the President of Azerbaijan Republic dated May 14, 1997. In accordance with the execution of the above-mentioned Decree, National Depository Center started its activity as a closed joint-stock company on September 18, 1997.

    In accordance with the execution of the Presidential Decree "On Providing Activity of State Committee for Securities under the auspices of the President of Azerbaijan Republic" dated July 26, 1999 National Depository Center was re-established on September 8, 1999 and the entire share holding had been obtained by Committee.

    In 2004 National Depository Center (NDC) participated in the establishment of "Eurasian Central Depositories Association" and became its member.

    There have been opened deposit accounts for more than 100 000 natural persons and legal entities in NDC, and more than 1000 contracts were concluded with joint-stock companies on rendering respective services in the securities market.

    National Depository Center online: www.mdm.az

    2. In accordance with the Presidential Decree "On Organizing the activity of State Committee for Securities under the auspices of the President of Azerbaijan Republic in Nakhchivan Autonomous Republic" there were taken necessary measures for establishing department of Committee and corresponding structural subdivisions of National Depository Center.

    International relations of Committee

    During recent years there has been a great role of the technical aid supplied by international organizations to the development of the securities market. Realization of the project "Development of the securities market of Azerbaijan Republic" included in the TACIS program of 2000 charged by European Union was successfully carried out from March 2003 up to November 2004 by "Securities Research Associates", Great Britain.

    There were held training courses by international experts, 30 representatives of local banks, broker associations and Baku Stock Exchange got international certificates. Besides, the legal documents of State Committee for Securities were analyzed, translated and edited; their conformity to international standards was specially mentioned.

    A great role had the project on development of the new tools of securities in Azerbaijan Republic. International experts took an active part in the first issue of corporate bonds emitted by "UNIBANK". State Committee for Securities was supplied with new computer equipment with the support of TASIC Program of European Union and established internal network system.

    Such events in general are directed at the integration of the local securities market into international financial space. Currently Committee has the agreement on realization of FIRST multi-donor program “Aid on establishment of the non-bank corporate bonds”. A Grant Agreement on the realization of 12-month technical aid project was concluded between Committee and the British “Emerging Market Economics Limited” Company on July 14 2005.

    The address of location of the Committee

    AZ 1000 Baku city, Bul-Bul's avenue, 19.
    Tel: 4935058
    Fax: (994 12) 4982559
    E-mail: info@scs.gov.az
    Web site: www.scs.gov.az
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