New Categories Of Professional Participants In Securities Markets

Client Alert on Latest Developments in Azerbaijani Securities Regulation summarizing the latest legal developments, including the new Securities Market Law and amendments to the Azerbaijani Civil Code.

Securities Markets Law

New categories of professional participants in securities markets

Professional participants in securities markets are defined to include investment companies, stock exchanges, clearing houses, investment fund depositaries and a central depositary. They are to be created in the form of joint stock companies and will be subject to licensing.

An investment company is defined as a joint stock company having a license to engage in the activities of an investment company and the sole activity of which consists of rendering primary and auxiliary investment services. Investment companies will be issued a single license for a range of activities, including those of a broker, dealer and underwriter, subject to the limitations set forth in the terms of the license.

Certain licenses will be issued for an unlimited period of time

Unlike current requirements, according to which a license is issued for five years, the activities of stock exchanges, clearing houses and depositaries will be licensed for an indefinite period of time.

The review of an application for the issuance of the applicable license is conducted in two stages - initial and final. There will also be a special procedure for the licensing of branches of foreign investment companies in Azerbaijan. Only branches of foreign investment companies that have received the license in question may engage in the following services in the territory of Republic of Azerbaijan:

Primary investment services

The acceptance and execution of clients' orders in relation to transactions with securities or derivative financial instruments The management of individual investment portfolios The provision of investment advice The placement and underwriting of securities (with and without an underwriting commitment) Transacting with securities and derivative financial instruments for their own account in the capacity of a member of a depository and stock exchange Margin trading Auxiliary investment services

The management of clients' securities accounts, including executing transactions related to encumbering securities and derivative financial instruments Lending funds or securities to investors for trading with securities and derivative financial instruments Conducting investment and financial...