For this purpose, a strategic partnership Master Services Agreement was signed between the State Property Committee, Mongolian Stock Exchange and the London Stock Exchange and within this capital market reform initiative, many milestones have been reached including the market infrastructure reform to align with international standards, introduction of T+3 settlement system, and the revision of existing market rules and regulations.
However, the Securities Markets Law then effective could not reflect the necessary regulations that are needed for capital market operations in accordance with international standards, and posed certain constraints within the reform initiative, which necessitated the revision of the Securities Markets Law. This coincided with the previously started effort to revise Securities Markets Law based on international best practices.
As the main organization that operates within and based on the Securities Markets Law, Mongolian Stock Exchange assumed a key role in the process of drafting the law and provided policy-level advices and comments. Policy level discussions by the Government and Parliament such as improving effectiveness of capital market reform, attracting domestic and foreign investments, establishing modern competitive market environment, funding development projects, and furthermore enabling dual listing of securities on both home and international exchanges, can now be realized. The new opportunities created by the revised Securities Markets Law include the following:
Provision for dual listing of companies that have operations in Mongolia and listed abroad, on the domestic exchange, will enhance local market liquidity and provide an opportunity for the public to hold and gain from the securities of such companies. Detailed provisions for dual listing with international exchanges will encourage local companies to issue securities and depository receipts on international market.
Detailed provisions for issuance of depository receipts based on underlying securities and other derivative products will diversify the current products on the market whilst offering various options to the investors and helping to expand the market and align with international practices. In addition, the provision for custodians with the function to provide custody for underlying securities, enables the establishment of custodian operations in the market.
The revised Law also includes detailed provisions for nominal and beneficial holders, in accordance with the international standards. Nominal holder is a regulated entity, registered as the depositor in the securities ownership rights registry who is not an actual owner of such securities, while Beneficial owner is the actual owner who registered its securities under the nominal holder according to the Law and who is legally entitled to the any proceeds from the securities. The recognition of nominal and beneficial ownership promotes in bringing sophisticated international investors to the local market.
The Law provides for flexible and fast procedure for public and private placements of securities in line with international standards and clearly establishes the responsibilities of listed companies and includes regulations on operational transparency and implementation of good corporate governance practices.
In accordance with shifting to post payment system for securities, the Law provides detailed provisions for such payment system. Within the capital market reform initiative, the shift from prefunded system to post payment system was completed in 2012. Post payment system provides an opportunity for trade participants to fund their trades after certain period of time after the trade is executed, and operates on the main principle of Delivery versus Payment. This system has many benefits such as bringing a favorable environment to attract international and domestic capital and reduces the unnecessary troubles and inefficiencies of participating in trading.
As Mongolian economy and capital markets become more multinational, the Law provides for the cooperation between the local regulator and foreign regulators and the International Organization for Securities Commissioners (IOSCO). Having Securities Markets Law which aligns with international standards is a major milestone in internationally accepting our market regulatory framework. Previously, as our domestic legal and regulatory framework were not internationally accepted, domestic companies could only be listed abroad by establishing a foreign entity abroad, but now the Law opens up the opportunities.
The Law provides for criteria of issue and public offer of securities, information to be included in the prospectus, and includes clauses to reduce the associated risks and improve responsibility. The Law also provides for quality information, fair and equal access to information, and associated disclosure duty of related participant and competent persons, hence creating a transparent environment with open, accurate and equal information for all market participants, which is all crucial for ensuring better trust in the capital market and promoting the market development.
In the revised Securities Markets Law, self regulatory organization is set to provide central policy and standards for market participants and improve their ethics and professionalism, which ensures better regulation for market participants operations.
Mongolian capital market marks 22 years in its history. During this time, we have worked towards the goal of developing the capital market, enabling all nationals possess private assets and protecting the rights and interests of market participants and in the future we will strive towards more developments in the market while maintaining close relations with investors and market participants.
Public Relations Department
MONGOLIAN STOCK EXCHANGE
Source: MONGOLIAN STOCK EXCHANGE
Link to Original Article: http://mse.mn/news/show/id/599
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