(Compiled as of November 8, 2012)

3rdCOMPARATIVE ANALYSIS OF ASIAN SECURITIES REGULAORS & SROs AND MARKET CHARACTERISTICS
(Data and information provided by participating organizations inthe 8th ASF Tokyo Round Table)

CONTENTS

I. Basic Organizational Features

I 1. Organization Type, Statutory Basis I 2. Number of Staff, Funding Source and Number of Member Firms

II. Regulatory Framework of the Securities Markets of Each Country

III. Regulation & Self Regulation

III 1. Major Rule Making Functions of each Organization III 2. Qualification System for Market Professionals III 3. Securities Firms Inspection or Audit III 4. Disciplinary Action and Measures Against Misconducts III 5. Dispute Resolution System between Securities Firms and Customers III 6. Investor Education Activities

IV. Market Structures

IV 1. Breakdown of Financial Assets held by Household Account IV 2. Share of Foreign Investors in the Stock Trading on the Exchange IV 3. Share of Foreign Investors in the Bond Trading on Exchange/OTC Market IV 4. Settlement and Clearing Systems for Securities Transaction IV 5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.) IV 6. Share of On-line Trading

V. Challenges of Securities and Capital Market

V 1. V 2. V 3. V 4. V 5. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a whole Specific Challenges in Equity Market Specific Challenges in Bond Market Specific Measures introduced / Implemented for the Securities Market Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

I. Basic Organizational Features

I 1. Organization Type, Statutory Basis
No. 1 2 3 4 5 6 Country Cambodia China India Indonesia Japan Kazakhstan Name of Organization Securities and Exchange Commission of Cambodia Securities Association of China Association of National Exchanges Members of India Association of Indonesian Securities Companies Japan Securities Dealers Association Committee for the control and supervision of the financial market and financial organizations of the National Bank of the Republic of Kazakhstan Organization Type Government Regulator SRO &Industry Association NPO registered under Indian Companies Act Industry Association SRO &Industry Association A part of the National Bank of the Republic of Kazakhstan Statutory Basis Established by Law on Issuance and Trading of Non-Government Securities Established by Securities Law of the Peoples Republic of China Spontaneously established Spontaneously established Established pursuant to Financial Instruments and Exchange Act Established according to the Act of the President of the Republic of Kazakhstan 61 dd. 18.04.2011. The Regulation on the Committee and its organizational structure has been approved by Board of Directors of the National Bank of the Republic of Kazakhstan, under the Act # 88, dd. April 28, 2011. On May 3, 2011, the Committee was registered as a legal entity by the Department of Justice of Almaty as a state institution. Established by Decree on Securities and Securities Market Established by The Societies Act in Malaysia Established by Law of Non-Government Organization Central Bank of Myanmar Law, 1990 Set up in pursuance of the Securities and Exchange Commission of Pakistan Act, 1997

SECC SAC ANMI APEI JSDA FSC

7 8 9 10 11

Laos Malaysia Mongolia Myanmar Pakistan

Lao Securities and Exchange Commission Office Association of Stockbroking Companies Malaysia Mongolian Association of Securities Dealers Central Bank of Myanmar Securities and Exchange Commission of Pakistan

SECO ASCM MASD CBM SECP

Government Regulator Industry Association Non-Government Organization Government Regulator An autonomous regulatory body established under law which manages and maintains its own fund SRO

12

Philippines

Capital Markets Integrity Corporation

CMIC

13

Romania

Romanian Stock Brokers Association

RSBA

SRO & Association

Industry

14

Sri Lanka

Securities and Exchange Commission of Sri Lanka The Thai Bond Market Association Association of Thai Securities Companies The Association of Capital Market Intermediary Institutions of Turkey

SEC

Government Regulator

15 16 17

Thailand1 Thailand2 Turkey

ThaiBMA ASCO TSPAKB

SRO &Industry Association Industry Association SRO&Industry Association

18 19

UAE (DIFC) Vietnam

Dubai Financial Services Authority Vietnam Bond Market Association

DFSA VBMA

Government Regulator Industry Association

Established by Republic Act 8799, otherwise known as the Securities Regulation Code Established by GEO no.26/ 2000 regarding the associations and the foundations Established by The Securities and Exchange Commission of Sri Lanka ACT No.36 of 1987 as Amended Established by Securities and Exchange Act Established by or in accordance with Securities and Exchange Act B.E. 2535 Established according to the Capital Market Law. The Statute of the Association became operational through a Government Decree, dated January 8, 2001 Established by Dubai Law No.9 of 2004 (as amended by Dubai Law No 7 of 2011) Establishedaccording to Decision No. 830/QD-BNV dated May 22, 2009 issued by Ministry of Home Affair

I 2. Number of Staff, Funding Source and Number of Member Firms

No. 1 Country Cambodia Name of Organization SECC No. of Full Time Staff 80 Funding Source Government Budget Number of Member Firms (by Business Category) (As of September 25, 2012) 1 Cambodia Securities Exchange-CSX (Securities Market Operator, Clearance and Settlement Facility Operator and Securities Depository Operator) 13 Licensed Securities Firms (7 underwriters, 2 Dealers and 4 Brokers) 2Licensed Investment Advisor Firms. 3 Accredited Cash Settlement Agents 3 Registered Securities Transfer Agents 3 Registered Paying Agents 3 Registered Securities Registrars 5 Accredited Professional Accounting Firms 1 Accredited Valuation Company 7 Law Firms (As of June 30,2012) 111 securities companies 84 securities investment consulting institutions 6 credit rating institutions 1 asset management company 41 special members About 880 Members on all India basis comprising of Market Intermediaries Firms / Companies including foreign institutional broking firms/companies.

China

SAC

92

Membership Fee

India

ANMI

Indonesia

APEI

2 (registere d office) + (regional offices) 5

Membership Fee, Special Contributions by Members

Membership Fee, SRO Sponsorship, Training Course Fee

Our members are only Securities Companies, which consist of: Stock Exchange Member: 114 (active brokerage house) with the following breakdown: Securities Houses 30 Underwriter Houses 12 Securities and Underwriting Houses 53 Securities and Fund Management Houses 2 Underwriter and Fund Management Houses 2 Securities, Underwriting and Fund Management Houses 15 (As of Sept.1,2012) 276 Regular Members consisting of securities companies including foreign securities companies 217 Special Members consisting of banks, insurance companies and other financial institutions As of the 1st July, 2012: There are 110 legal entities licensed by the Committee to conduct activity on the securities market, including second tier banks (commercial banks), insurance companies, insurance brokers, pension funds and organizations engaged in certain types of banking operations; There are 135 legal entities carrying out their professional activity as a stock market operators, as follows: - 66 broker/dealers; - 10 registrars; - 32 investment portfolio managers; - 13 pension assets management organizations; - 10 custodians; - 2 transfer-agents; - 1 stock exchange; - 1 depository SECO is a government regulator, does not have member. At the present, there are 2 securities firms (both are member of the Lao Securities Exchange (LSX)), one security exchange LSX, 3 audit companies (approved by SECO to provide audit service related to securities business). (As at 31 Aug 2012) - 15 Securities Firms including 1 with foreign ownership. - 14 Investment Banks. (As of Sep.11,2012)

Japan

JSDA

334

Membership Fee, Fees for Examination and Training Course

Kazakhstan

FSC

275

Financed by the Budget of the National Bank of the Republic of Kazakhstan

Laos

SECO

36

Governments Budget,

Malaysia

ASCM

Membership Fee

Mongolia

MASD

Membership Fee, 3

10 11

Myanmar Pakistan

CBM SECP

1,127 560

12

Philippines

CMIC

20

Governments Budget A Fund has been established under section 23 of the Securities and Exchange Commission of Pakistan Act, 1997 which comprises of (1) grants from the Government of Pakistan, (2) grants of money and sums borrowed or raised by the SECP for the purposes of meeting its obligations or discharging its duties, (3) taxes, fees, penalties or other charges levied under the said Act, and any other laws being administered by the SECP, and (4) all other sums or property which may in any manner become payable to or vested in the SECP in respect of its functions and powers. regulatory fees from the trading participants of the Philippine Stock Exchange, Inc.

There are 53 Members consisting of securities companies which have more than 1000 professionals operating in the securities market, licensed by the Financial Regulatory Commission of Mongolia. 4 State-owned banks and 19 Private-owned banks None

13

Romania

RSBA

Membership fee &Fees for trading courses and thematic seminars

14

Sri Lanka

SEC

76

15

Thailand1

ThaiBMA

45

CESS Levy* (*A part of brokerage which SEC is entitled to receive; In case of equity Transactions up to Rs. 50 mil. total brokerage 1.12% of which SEC receives (as Cess) - 0.072% Transactions over Rs. 50 mil. - minimum brokerage (floor) - 0.200% of which SEC receives 0.0450%), Licensing/Registration/Appli cation Fees, Seminar Income Membership Fee,Fee from Training, Training Course, Information service fee Membership Fee, Training and Examination Fee Membership Fee& Training fee

CMIC functions as the independent audit, surveillance and compliance unit of the Philippine Stock Exchange, Inc., which has one hundred eighty-four (184) trading participants-members (of this number, one hundred fifty-five [155] are local members while twenty-nine [29] are foreign members). (As Of July 2012) 48 regular members - 42 Regular Members securities companies - 6 Regular Members banks 4 honorific members Exponent personalities in the financial market The Colombo Stock Exchange (hereinafter referred to as the CSE) is currently a mutual exchange and has 15 full members and 13 trading members licensed to trade both equity and debt securities, whilst 1 member is licensed to trade in debt securities only. All 29 members are licensed by the SEC to operate as stockbrokers and are corporate entities and some are subsidiaries of large financial institutions.

16

Thailand2

ASCO

25

17

Turkey

TSPAKB

26

18

UAE (DIFC)

DFSA

130

Government Budget

53 Ordinary Members consisted of 21 banks and 32 Securities which have debt trading license (Dealer) - 2 Extraordinary Member which have inter-dealer broker license (IDB) (as of Aug 27, 2012) 38 Regular Members consisting of Securities Companies including Foreign Securities Companies (As of September 2012) - 101 brokerage firms, - 1 derivatives brokerage firm - 41 banks - 2 Authorised Market Institutions (1 securities and derivatives exchange and clearing house NASDAQ Dubai Limited, 1 commodities exchange Dubai Mercantile Exchange Limited) - 284 Authorised Firms - 50 Ancillary Services Provider (including 16 Registered Auditors) - 1355 Authorised Individuals

19

Vietnam

VBMA

Membership Fee,

- 58 Recognised Members - 8 Recognised Bodies VBMA has 55 members in which 33 Regular Members and 22 Associate Members, including - 26 Banks, - 7 Finance Companies, - 14 Securities Companies, - 1 Finance Leasing Companies, - 3 Insurance Companies and - 3 Law Firms.

II. Regulatory Framework of the Securities Markets of Each Country

No. 1 Country Cambodia Name of Organization SECC Major Laws, Rules or Practice in the Securities Markets of Each Country -Law on Government Securities - Law on The Issuance and Trading of Non-Government Securities - Sub-decree on The Implementation of The Law on Issuance and Trading of Non-Government Securities - Regulations and guidelines of the Securities and Exchange Commission of Cambodia (SECCs regulations) - Rule of the Cambodia Securities Exchange Registration Listing Rule Membership Rule Market Operation Rule Clearing and Settlement Rule Depository Rule Laws: Securities Law of the Peoples Republic of China Regulation issued by ministries and commissions and normative documents: 1. In terms of securities issuance, The Administrative Measures for the Initial Public Offering and Listing of Stocks, The Administrative interim Measures for the Initial Public Offering and Listing of Stocks in Growth Enterprise MarketMeasures for the Administration of Securities Issuance and Underwriting, Administrative Regulations of Sponsoring Securities Issuance and Listing, The Measures for the Issuance Examination Committee, Guidelines on Due Diligence Work of Sponsors, etc. 2. In terms of listed companies governance, Measures for the Administration of the Equity Incentives of Listed Companies (Trial Implementation), Administration of the Takeover of Listed Companies Procedures, The Administrative Measure of Noticeable Asset Restructuring of Listing Companies, Guidelines for the Articles of Incorporation of the Listed Companies, Rules for Shareholders Meetings of Listed Companies and Administrative Measures on Information Disclosure by Listed Companies, etc. 3. In terms of securities companies supervisory management, The Regulation on Supervision and Administration of Securities Firms, Regulation on Risk Management of Securities Firms, Risk Control Indices Management Measures on Securities Companies, Supervisory Measures on Qualification of Directors, Supervisions and Senior Management Persons of Securities Companies, The Management Measures on Margin Purchase and Short Sale Business of Securities Companies, and Guidelines for Internal Control on Margin Purchase and Short Sale Business of Securities Companies, etc. 4. In terms of securities investment fund management, The Administrative Measure of Fund Management Companies, Administrative Measures on Domestic Securities Investments of Qualified Foreign Institutional Investors (QFII),Governance Norms on Securities Investment Fund Companies(Trial), Notice on Related Problems of Setting Aside Risk Reserve Fund for Fund Management Companies, Guiding Opinions on Management of Investment Administrators of Fund Management Companies, etc. 5. In terms of securities registration and settlement, Administrative Measures on Securities Registration and Settlement, Administrative Measures on Securities Settlement Risk Fund, etc. 6. 6. In terms of futures trading, Regulation on Trading Management of Futures, Management Measures for Futures Brokerage Companies, Management Measures for Futures Exchange, The Management Trial Measures on the Risk-based Supervision Index of Futures Companies, Trial Measures for the Provision of Intermediary Services by Securities Companies to Futures Companies, Trail Measures on Financial Futures Settlement Operation for Futures Companies, etc. Securities and Contracts (Regulations Act) (1956) (SCRA) Securities and Exchange Board of India (SEBI) Regulations Foreign Exchange Regulations Indirect Tax Income Tax Companies Act Other Other relevant applicable Acts. - Under the Capital Market Law Number 8 Year 1995 (UUPM)-Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) - Indonesia Stock Exchange (IDX) Rules - Indonesian Clearing and Guarantee Corporation (KPEI) Rules - Indonesian Central Securities Depository (KSEI) Rules

China

SAC

India

ANMI

Indonesia

APEI

5 6

Japan Kazakhstan

JSDA FSA

Laos

SECO

Malaysia

ASCM

Financial Instruments and Exchange Act (FIEA) The Law On securities market of the Republic of Kazakhstan; The Law On investment funds of the Republic of Kazakhstan; The Law On pension provision of the Republic of Kazakhstan; and other legal acts established to regulate the activities on the stock market. The governments Decree on Securities and Securities Exchange, No. 255/PM, dated May 24th 2010. - Regulation on Organization and Operation of Securities Company - Regulation on the Issuance of Stock to the Public - Regulation on Exchange Supervision - Regulation on Accounting and Auditing for related Securities Businesses - Regulation on the Management of Foreign Investors in Securities Market in Lao PDR - Regulation on Disclosure of Information - Regulation on Securities Professional Supervision Capital Markets and Services Act 2007 (CMSA) Bursa Malaysia Rules In striving to build a market of quality and integrity, Bursa Malaysia is guided by the following regulatory principles which are aimed at achieving regulatory goals and ensuring a consistent and cohesive approach to its actions and decisions. These principles are also embedded in the rules and regulatory framework of Bursa Malaysia. The regulatory principles will ensure greater parity of regulatory actions across the different segments of parties regulated and overall greater effectiveness in Regulation. The principles are as follows:1. Clear and easily accessible rules and requirements 2. No more regulation than necessary o Balance competing needs of regulation and business efficacy o Ensure costs and burden of regulatory compliance are proportionate to the benefits 3. Principles-based approach where appropriate o Move towards a principles-based approach to regulation, where appropriate but issue guidance where necessary 4. Outcome focused o Target outcomes through our regulatory actions or decisions rather than mere compliance with rules o Use discretion to modify or waive the rules, where the spirit of the rules can still be achieved, where the business can be facilitated without harming other stakeholders or where the burden of complying far outweighs the benefits o Always be guided by our regulatory objectives and the current regulatory concern o Consider the impact of our regulatory actions or decisions before and after taking each action or decision 5. Innovative and competitive o Facilitate innovation, for example, by avoiding unreasonable restrictions on regulatees o Maintain the competitive position of Bursa Malaysia as an integrated exchange 6. Risk-based approach o Emphasise on risk-based supervision rather than "one-size fits all" regulation o Facilitate early detection of problems, issues and trends, enabling prompt pre-emptive actions 7. Values-based approach o Enforce the rules without fear or favour o Act professionally with integrity and fairness 7

o o

Exercise our powers and discretion consistently whilst also considering the particular facts of each case and different points of view Act swiftly, in a proactive manner

8. Transparency o Make our regulatory approaches and processes more transparent o Communicate clearly and effectively about what we do 9. Benchmarked and globally collaborative o Observe and benchmark to international standards and best practices o Create and maintain close co-ordination among both domestic and foreign regulators 10. Consultative approach o Adopt a consultative approach and actively seek feedback from industry participants, other stakeholders and the public o Interact and leverage on relationships with stakeholders 9 10 11 Mongolia Myanmar Pakistan MASD CBM SECP Securities Market Law of Mongolia The major law will be Security Exchange Law and it will be enacted in very soon. Statutes administered by the SECP: Securities and Exchange Ordinance, 1969 Companies (Appointment of Legal Advisors) Act 1974 Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 Companies Ordinance, 1984 Central Depositories Act, 1997 Securities and Exchange Commission of Pakistan Act, 1997 Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002 Insurance Ordinance, 2000 Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012 Anti Money Laundering Act, 2010 Rules administered by the SECP: Securities (Leveraged Markets and Pledging) Rules, 2011 Anti Money Laundering Rules, 2008 Takaful Rules,2005 Clearing Houses (Regulation and Registration) Rules, 2005 Voluntary Pension System Rules, 2005 Commodity Exchange and Futures Contract Rules, 2005 Single Member Private Limited Companies Rules, 2003 The SECP (Appellate Bench Procedure) Rules, 2003 NBFC (Establishment and Regulation) Rules, 2003 Insurance Rules, 2002 SEC (Insurance) Rules, 2002 Balloters Transfer Agents and Underwriters Rules, 2001 Brokers and Agents Registration Rules, 2001 Public Companies (Employees Stock Option Scheme) Rules, 2001 Stock Exchange Members (Inspection of Books and Record) Rules, 2001 Members' Agents and Traders (Eligibility Standards) Rules, 2001 Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000 Companies (Asset-Backed Securitization) Rules, 1999 The Companies (Buy-Back of Shares) Rules, 1999 The Companies (Rehabilitation of Sick Industrial Units) Rules, 1999 The Companies (Audit of Cost Accounts) Rules, 1998 The Companies (Court) Rules, 1997 Central Depository Companies (Establishment and Regulation) Rules, 1996 Companies (Issue of Capital) Rules, 1996 The Employees Provident Fund (Investment in Listed Securities) Rules, 1996 Credit Rating Companies Rules, 1995 Companies (Management by Administrator) Rules, 1993 Companies (Management by Administrator) Rules, 1993 Companies (Invitation and Acceptance of Deposits) Rules, 1987 The Companies (General Provisions And Forms) Rules, 1985 Modaraba Companies and Modaraba Rules, 1981 The Companies (Appointment of Legal Advisers) Rules, 1975 Companies (Appointment of Trustees) Rules, 1973 Companies Profits (Workers Participation) Rules, 1971 Securities and Exchange Rules, 1971 In addition to the above, the SECP also administers a number of Regulations for the corporate sector and capital market. The applicable major laws and rules in the Philippine regulatory securities market are as follows: a. Republic Act 8799, otherwise known as the Securities Regulation Code, and the Amended 8

12

Philippines

CMIC

b. c. d.

Implementing Rules and Regulations of the Securities Regulation Code; Securities and Exchange Commissions Rules of Procedure, Memorandum Circulars, and other issuances; The Capital Markets Integrity Corporation Rules; and Rules of the Philippine Stock Exchange, including, but not limited to: The Revised Trading Rules and its Implementing Guidelines Trading, Clearing and Settlement Rules Revised Listing and Disclosure Rules Rules Governing Trading Rights and Trading Participants The Philippine Stock Exchanges Amended Articles of Incorporation

13 14

Romania Sri Lanka

RSBA SEC

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

- Law No.297/2004 - regarding the capital market SEC Act No. 36 of 1987 as amended, SEC 2001 Rules, Takeovers & Mergers Code, Unit Trust Code, SEC Directives, Draft rules for Market Intermediaries Colombo Stock Exchange Rules, Circulars and Procedures (Stockbroker Rules, Listing Rules, ATS Rules & Regulations, CDS Rules, DEX Rules, procedures for Capital Reorganisations by listed companies) -Securities and Exchange Act B.E. 2535 (the SECs Act) -Regulation and Notifications of the Securities and Exchange Commission (SECs regulation) -Regulation and Notifications of the Thai Bond Market Association (ThaiBMAs regulation) Securities and Exchange Act B.E 2535/ in the process of setting up SRO (expected to implement with in next year) -Capital Market Law (CML) -Capital Markets Boards (CMB) Communiqus -Decree Law on Securities Exchanges -Istanbul Stock Exchange (ISE) and Turkish Derivatives Exchanges (TurkDEX) rulebooks Primary Legislation: Federal Laws, Dubai Law, DIFC Law -Federal Law No 8 of 2004: Regarding The Financial Free Zones in the United Arab Emirates (the Financial Free Zone Law) -Federal Decree No 35 of 2004 specifically established the DIFC as a Financial Free Zone in the Emirate of Dubai -Dubai Law No 9 of 2004, 'The Law Establishing the Dubai International Financial Centre is a Dubai Law that recognises the financial and administrative independence of the DIFC. It establishes the various bodies, including the DFSA, that are necessary for the DIFCs day-to-day operation. -Dubai International Financial Centre (DIFC) laws administered by the DFSA governing Financial Services which are the Regulatory Law 2004, Markets Law 2004, Law Regulating Islamic Financial Business 2004, Trust Law 2005, Collective Investment Law 2006, Investment Trust law 2006. -DIFC laws administered by the DIFC Authority such as the Companies Law, Insolvency Law, Companies Law, Contract Law, Arbitration Law, Insolvency Law, Data Protection Law. DIFC laws are enacted by the Ruler of Dubai and apply only in the DIFC. Secondary Legislation The DFSA Rules are subsidiary legislation made under the laws administered by the DFSA. The Rulebook is made up of topic-area modules which specify their scope and the audience to whom they apply, and there are a total of 18 modules. All DFSA rules are available on the DFSA website www.dfsa.ae -Securities Law issued on 29/06/2006 -Credit Institutions Law issued on 26/06/2010 -Decree No.01/2011/ND-CP dated 05/01/2011 on government bond issuance -Decree No. 90/2011/ND-CP dated 14/10/2011 on corporate bond issuance

19

Vietnam

VBMA

III. Regulation & SelfRegulation

III 1. Major Rule Making Functions of Each Organization
No. 1 Country Cambodia Name of Organization SECC Major Rule Making Functions - Law on Trading and Issuance of Non-Government Securities, the responsibility of Securities and Exchange Commission of Cambodia includes the following : 1. To regulate and supervise securities market in the Kingdom of Cambodia. 2. To enforce policy with respect to securities markets. 3. To formulate conditions for granting approval to the operators of a securities market, clearance and settlement facility, and securities depository 4. To formulate conditions for granting license to securities companies and securities company representatives 5. To promote and encourage compliance with requirements of this law. 6. To act as an appeal body in respect of decisions made by approved entities affect members, participants or investors, 7. To consult with any qualified person for the purpose of formulating policies for the development of a securities market in the Kingdom of Cambodia. 8. To fulfill other duties prescribed by sub-decree. - Anukret (Sub-decree) on the Conduct and Organization of the Securities and Exchange Commission of Cambodia According to the provision of Securities Law of the peoples Republic of China, the responsibilities of the Securities Association of China (SAC) include formulating rules and regulations that SAC members must abide by, supervising and examining members action and the members who break the law, regulation or SAC rules will be subject to discipline action. SAC Regulation stipulates that SAC formulates self-regulatory rules, qualification standards for practitioners and business criteria and provides services and management to SAC members according to administrative regulation and CSRC regulatory documents, etc. Furthermore, the Regulation illustrates that SAC could promote Members establishment of information technology and information security, organize to develop industry technical standards and guidelines coordinating with industry development. Our organizations have rules governing the conduct of members as a trade organization. We offer guidance on regulations issued by regulatory bodies as above. Our rule making functions do not cover the rules and regulations governing the capital market. APEI is not a Self-Regulatory Organization (SRO). APEI functions are a liaison between our members and regulatory authorities. The industry is regulated by the Capital Market Supervisory Agency & Financial Institution(Bapepam-LK) and SRO (IDX, KSEI, KPEI) JSDA makes and enforces a wide range of self-regulatory rules covering the securities business in Japan that control the conduct of its member firms. According to the Law On the state regulation, control and supervision over the financial market and financial organizations the main functions of the Committee are as follows: - to issue and recall permissions to open (establish) financial organizations, arrange reorganization and liquidation, approve new branches opening, as well as set the order of issuance of such permissions and consents; - give or deny consent to elect/appoint candidates for managing positions in financial organizations, as well as set the order of issuance or denial of such consent; - set the order of issuance, suspension and deprivation of licenses to perform professional activity on the financial market, in cases stipulated by the legislation on licensing of the Republic of Kazakhstan; issue, suspend, and deprive of such licenses; - issue regulations mandatory for financial institutions, consumers, financial services, other legal entities and individuals on the territory of the Republic of Kazakhstan; - approve prudential standards and other mandatory standards and limits for financial institutions, including consolidated basis; - to approve the internal procedures of the banks, bank holding companies and banking conglomerates focused on meeting the requirements of the authorized body considering the risks they are taking; - implement the reporting regime (except for the financial statements) of financial institutions and their affiliates; - participate on the general meeting of shareholders of financial institutions, bank and insurance holding companies; - examine and revise the activities of financial institutions and their affiliates in the cases and within legal issues of the Republic of Kazakhstan, including the involvement of the audit firms; - examine and revise the legal entities applying for the license to operate on the financial market, in the cases and within legal issues of the Republic of Kazakhstan; - set the condition of enforcement measures and sanctions for the financial organizations, majorities of financial organizations, banking and insurance holding companies, banking conglomerates and insurance groups within the law of the Republic of Kazakhstan. - in coordination with the Government of the Republic of Kazakhstan able to take decision on mandatory buyout of shares of financial institutions within the law of the Republic of Kazakhstan. - Other functions stipulated by the law of the Republic of Kazakhstan SECO formulates securities-related rules and regulations covering the securities issuance, securities exchange and securities business in the Lao PDR that manage and supervise operations of the issuing 10

China

SAC

India

ANMI

Indonesia

APEI

5 6

Japan Kazakhstan

JSDA FSC

Laos

SECO

8 9

Malaysia Mongolia

ASCM MASD

10 11

Myanmar Pakistan

CBM SECP

companies, securities companies, and the securities exchange in a stable, transparent, fair and efficient manner. ASCM is not a self-regulatory organisation. The industry is regulated by the Securities Commission and Bursa Malaysia which acts as both an exchange and frontline regulator of the Malaysian capital market. -To protect rights and interests of its members and their customers under the Law and relevant regulations of Mongolia; -To provide professional consultancy with relevant law and regulations to the professional participants; -To submit its proposal to develop and implement the securities legislation and policies to the authorized organizations; -To make professional ethical code which its members should be following publicly. -To organize training and seminars for its members professionals and the public, and make journal and news; -To share information, study experience, and develop co-operation with the same organizations or associations; -To organize professional training to get a license in direction with the Financial Regulatory Commission. The Central Bank of Myanmar takes over the monetary stability and financial sector stability of the country. The SECP is mandated with the responsibility to facilitate development of modern and efficient corporate sector and capital market, based on sound regulatory principles that provide impetus for high economic growth. Under Section 20 of the SECP Act, 1997, SECP is responsible for the performance of the following functions: (a) regulating the issue of securities; (b) regulating the business in Stock Exchanges [Commodity Exchange] and any other securities markets; (c) supervising and monitoring the activities of any central depository and Stock Exchange clearing house; (d) registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with the securities markets in any manner; (e) proposing regulations for the registration and regulating the working of collective investment schemes, including unit trust schemes; (f) promoting and regulating self-regulatory organizations including securities industry and related organizations such as Stock Exchanges and associations of mutual funds, leasing companies and other Non Bank Financial Institutions; (g) prohibiting fraudulent and unfair trade practices relating to securities markets; (h) promoting investors education and training of intermediaries of securities markets; (i) hearing and deciding investor complaints against persons involved in brokerage business for violations of securities laws, rules, regulations, directives, codes, etc; (j) regulating substantial acquisition of shares and the merger and take-over of companies; (k) regulating professionals who provide services within the financial services market; (l) considering and suggesting reforms of the law relating to companies and bodies corporate, securities markets, including changes to the constitution, rules and regulations of companies and bodies corporate, Stock Exchanges or clearing houses; (m) encouraging the organized development of the capital market and the corporate sector in Pakistan; (n) ensuring and monitoring compliance by insurers, insurance surveyors and insurance intermediaries of all laws, rules and regulations pertaining to insurance for the time being in force; (o) regulating professional organizations connected with the insurance business; (p) promoting and regulating development of Private Pension Schemes and Funds Sectors under SECPs regulatory ambit include: Corporate Sector Capital Market Insurance Sector Non-Banking Financial Sector (Investment Banks, Leasing, Modarbas, Voluntary Pension Schemes, Mutual Funds) The SECP was given regulation-making powers by Federal Government through Finance Act 2007. Subsequently, various regulations have been developed under various statutes. The SECP has also issued guidelines for areas like; Bancassurance, internet trading, issue of Commercial Paper/TFCs/Prospectus, compliance of AML requirements for market intermediaries, etc. CMIC functions as the independent audit, surveillance and compliance unit of the Philippine Stock Exchange, Inc. It reinforces the confidence of the investing public through the adoption, enforcement, implementation and interpretation of rules, guidelines and the Securities Laws applicable to the operations and dealings of trading participants and other market participants of the Philippine Stock Exchange, and acts as a self-regulatory organization under the laws of the Philippines. CMIC shall have the jurisdiction to investigate and resolve, or shall decide in the first instance all cases involving: (1) all violations of the Securities Laws or the CMIC Rules by trading participants, and; (2) 11

12

Philippines

CMIC

trading-related irregularities and unusual trading activities involving issuers. Thus, a trading participant shall comply or cause compliance with any order of CMIC for a trading participant to (a) attend, (b) provide information, and/or (c) produce records and other documents under the control of the trading participant at any investigation or other proceedings of CMIC in connection with (a) any matter within CMICs jurisdiction to investigate and resolve under the CMIC Rules or (b) CMICs enforcement of the Securities Laws. 13 Romania RSBA The main purpose of the Stock Brokers` Association is to promote a favourable environment for the development of the capital market and to play a decisive role in the elaboration of economic, financial and fiscal policies likely to have an impact on the capital market. Another purpose is to develop, manage and promote conduct and professional ethics standards among its members. In order to enable the implication of the brokers' community in the process of elaborating macroeconomic policies, the Stock Brokers' Association has become a strong voice in the process, by assuming the role of a consultative organism for the principal law-makers: Romanian National Securities Commission, Ministry of Finance, Government and Parliament. 14 15 Sri Lanka Thailand1 SEC ThaiBMA As Regulator of the capital market of Sri Lanka, the SEC formulates and enforces rules and regulations to maintain a securities market that is fair, efficient, orderly and transparent. ThaiBMA plays major roles as an SRO and information center for Thai bond market. ThaiBMA issues rules and regulations for bond trading which include ethics and code of conduct for our member and traders. Also, we perform market with monitoring and surveillance, where all bond transactions are required to report to ThaiBMA within 30 minutes after execution. By ASCOs BOED and regular member under SEC announcement and Securities and Exchange Act B.E 2535. - Establish professional rules and regulations, - Set safety measures aimed at preventing unfair competition, - Assist in the resolution of disputes arising from off-exchange transactions among its members or between its members and investors, - Determine the principles on commissions and fees charged by its members and propose these to the Capital Market Board, - Evaluate complaints against its members and inform the Board on the results, - Impose disciplinary action against the law and the Statute. The Rules made by the DFSA under the administered laws comprehensively cover the full range of financial and related activities undertaken in or from the DIFC. The regulatory mandate covers asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange. VBMA performs the following function as an association of debt market professional in Vietnam - A high-standard debt market professionals community in Vietnam - A market modernization champion and driver - A collective market information source - A policy dialogue interlocutor for policymakers and regulators - A training center for the market players VBMA has introduced to the market a written code of conduct applicable to VBMA members and their employees with regard to debt market transactions. The written mark convention applicable to debt market transactions among VBMA members and with their transaction counterparts was also produced and will be introduced to the market soon. A model back-office manual for debt market transactions that was designed to be used for reference by VBMA members when they attempt to standardize and improve their back-office operations for debt market transactions. VBMA has selected 4 members for pilot implementation this Back Office Manual at their organizations.

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

12

III 2. Qualification System for Market Professionals

No. 1 Country Cambodia Name of Organization SECC Qualification Systems for Market Professionals According to the Prakas (Regulation) on Licensing of Securities Firms and Securities Representative, the Chef Executive Officer (CEO), Head of Securities Representative, Head of Operation, Compliance Officer and Other Senior Officers of securities firms shall participates in the training program and/or pass an examination set by the SECC to engage in the securities business activities in the Kingdom of Cambodia. The training and examination is mainly focused on legal aspect only (SECCs regulation, CSXs rules, Law on Commercial Enterprise, Law on Investment, etc.) and conducted with paper based and multiple choice questions (MCQ). So far, there are 162 participants attended the training course and took the examination organized by the SECC -Formulated by CSRC, The Measures for Securities Practitioners Qualification Management stipulates that professional persons undertaking securities business in securities companies, fund management companies, fund custodian and sales institutions, securities investment consulting institution and securities credit rating institutions must obtain practice qualifications and practitioners certificates. Furthermore, SAC is responsible for organizing practitioners qualification examination, issuing practitioners certificates, and launching registration, etc. -Formulated by SAC, Implement Detailed Rules for Securities Practitioners Qualification Management (Trial) stipulates that SAC checks up practitioners certificates every two years, examines and investigates practitioners, and the rule violation practitioners will be subject to take disciplinary punishment and will be logged in the integrity web system making for securities practitioners. -Formulated by SAC, Code of Conduct for Securities Practitioners specifies the demand for Securities Practitioners. Securities Practitioners in their practice should maintain legitimate rights of customers and other related parties, be honesty, diligent; provide professional services to customers in accordance with business norms and practice standards; provide education for customers on securities investment, reveal the investment risk to clients; take part in the subsequent vocational training provided by SAC. Under the SEBI and Exchange regulations, India have adopted a registration systems where at least two Designated Director of the Securities Companies, should have a minimum of 2 years experience in an activity related to dealing in securities. E.g. as a portfolio manager, or as investment consultant, or as a merchant banker, or in financial services or Treasury, Broker, Sub Broker, Authorized Agent or as a Authorized Person to a member of a recognized stock exchange, Dealer, Jobber, Market Maker, or in any other manner in dealing in securities or clearing and settlement thereof. The exchange requires members firms officers and dealers to pass suitable examinations certifying their capability to function in the capacity in which they are employed. They require obtaining the National Institute of Securities Market (NISM) and National Certificate for Financial Markets (NCFM). This is a prerequisite to employment in any securities company to ensure that they have adequate skills and knowledge. The NCFM certificate is available in all operational subjects. The National Stock Exchange, Bombay Stock Exchange as well as MCX Stock Exchange conduct their own examinations for the Equities Market, Futures & Options Market and the Currency Market. Here is the link to NSEs site introducing you to NCFM: http://www.nseindia.com/content/ncfm/ncfm_introduction.htm In addition, NSE also offers a host of other examinations (including for those who want to become Insurance Agents). Here is the link giving a list of their modules: http://www.nseindia.com/content/ncfm/ncfm_modules.htm A few years ago SEBI formed an Institute called NISM, with the objective of making it, over time, the sole body conducting examinations for the Capital Markets. It has become compulsory now. Here is the link to the NISM website: http://www.nism.ac.in/ The only outsourcing done by them is for conducting of the examinations, where they get professional entities (largely IT training institutes, since they have the required set-up) to conduct the examinations for them. The test material and all other back end work is handled by the respective entities. 1. Examination for licensing Under the Capital Market Supervisory Agency Rules, we differentiate Securities Company and Individual licenses. There are three different licenses in a Security House may hold, they are: Broker-Dealer, Underwriter and Investment Manager Representative licenses. As of individuals, there are four types of licenses a professional may hold, they are: a Representative of Mutual Fund Sales Agent License, Broker Dealer License, Underwriter License & Fund Manager License. Each of these individual licenses can be obtained by taking and passing the intended test provided by the Capital Market Professional Standard Committee (PSP). The Capital Market Professional Standards Committee (PSP) conducted a test in writing for all licenses that are held three times in a year and open to the public, the examinee must meet the minimum value to obtain a certificate of graduation and then the certificate can be effectively used after registration in the 13

China

SAC

India

ANMI

Indonesia

APEI

Capital Market Supervisory Agency (Bapepam-LK). Broker dealer license shall be held by the employees of securities firms that act as a sales or dealer as well as other license shall be held by employees who handle the related fields, so hopefully the employee will have sufficient knowledge and expertise in handling client assets. 2. Training and workshop The association in cooperation with the regulators and SROs regularly organizes workshops or training related to the implementation of new regulations or to enhance participants' understanding related to its function in the securities company, in general training or workshops related to the compliance and enhancement of back office function. Regulation has required the company directors to follow the continuing education in order to get better understanding about the development and implementation of existing legislation and currently the implementation is coordinated by the association in cooperation with the regulators and the SROs 1. Qualification Examinations Under the FIEA, Japan has adopted a registration system for sales representatives, and unqualified people are excluded from the sales activities of securities companies, etc. For this reason, and being delegated by the FIEA, JSDA requires member firms officers and employees to obtain qualification as a Sales Representative, which is a prerequisite for being engaged in the securities business in Japan. This rule ensures that market professionals have adequate skills and knowledge. For this purpose, JSDA holds the qualification examinations for Class-1 Sales Representative and Class-2 Sales Representative for employees of regular members involved in securities business operations. Class-1 Examination became open to the public starting from January 2012, in addition to Class-2 Sales Representative which has been open to the public since September 2004. It also holds the qualification examinations for Special Members Class-1 Sales Representative, Special Members Class-2 Sales Representative and Special Members Class-4 Sales Representative. In addition, JSDA introduced a Sales Manager and Internal Administration system in April 1992 whereby member firms must appoint a Sales Manager and an Internal Administrator for each sales unit. To become a Sales Manager or an Internal Administrator, candidates must pass the Internal Administrator examination (or Special Members Internal Administrator in case of officers and employees of special members). JSDA has been offering computerized examinations since April 2002, which enable candidates to take those examinations on any business day. The qualification examinations for regular members are conducted in English as well. The number of the examinees and successful applicants for each examination in fiscal 2011 is shown in the following table. Examination Class-1 Sales Representative Class-2 Sales Representative Internal Administrator Special Member's Class-1 Sales Representative Special Member's Class-2 Sales Representative Special Member's Class-4 Sales Representative Special Member's Internal Administrator Examinees 60,076 40,010 21,239 13,384 26,785 600 4,297 Successful Applicants 25,859 22,888 18,275 4,480 10,794 230 3,783

Japan

JSDA

2. Training Courses for Members Based on a training program drawn up annually, JSDA provides training courses for executive officers and employees of member firms. JSDA flexibly conducts training courses other than those included in the program in response to amendments of laws and institutional reform. Total of 5,039 participants attended these courses during the fiscal year 2011. To contribute to strengthen the compliance system and to enhance internal training in member firms, JSDA edited and distributed a collection of rulebooks on laws and regulations to be used as reference material in internal training courses. In addition, JSDA provided summaries and training materials on compliance-related themes from among its training themes for the fiscal year. Moreover, JSDA dispatched or introduced JSDAs executive officers and employees as lecturers at a total of 36 in-house training sessions of member companies during the fiscal year 2011. Training Courses in Fiscal 2011 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Seminar for company representatives Training for executives Training for internal administration supervisors Training for internal administration assistant supervisors Training for internal administrators Training for sales managers Training for qualification renewal of sales representatives Basic Compliance course Compliance practice course Securities business seminar 14

11. 12. 13. 6 Kazakhstan FSC

Compliance seminar for sales staff Risk management seminar Corporate ethics seminar

In order to obtain a licence an applicant must comply with the following qualification requirements: - availability of a business plan, which describes the purpose of organization of the applicant, guidelines of activities and the market segment in which the applicant plan to operate, types of services, marketing plan, risks related to professional activities of the applicant and methods to reduce such, financial perspectives (estimated balance-sheet, income statement for the first three financial (operating) years), a staffing plan; - availability of programmes, computers and other equipment required for activities in the securities market in accordance with the regulatory legal acts of the authorised body; - compliance of the organisational structure with the requirements established byLaw on the security market of the Republic of Kazakhstan and regulatory legal acts of the authorised body;presence of regulations concerning the internal audit of the applicant. [Until 2006, there used to be a requirement for individuals which were employees of brokers-dealers companies. They needed to pass qualification examinations. Instead of these requirements were approved requirements for the top management of the security firms such as: - a university degree, - relevant work experience in financial market, - had a precedent of managing a member-firm that was recalled its license or liquidated - Others] As specified in the Decree on Securities and Securities Exchange, individual wanting to be a securities practitioner shall be employed by a securities company and receive a securities practitioner certificate. SECO grants Securities Practitioner Certificate to individuals who passed a securities-related examination organized by SECO. From 2009-2010, SECO in co-organizing with the Stock Exchange of Thailand held the training courses which has been opening to the public and divided into 2 levels as the Certificate of Modern Investment Professional 1 and 2 (hereinafter referred to as CMIP 1 & 2). However, at the present the Lao Securities Exchange is in charge of organizing the training courses and the examination instead of SECO. An individual will be qualified for being a broker if he/she passed the CMIP 1 and will be qualified for being a financial advisor and analyst if he/she passed the CMIP 2. In Malaysia, the CMSA requires market professionals to hold Capital Markets Services Representatives License (CMSRL) in order to deal in securities and futures trading. In attaining their licenses, the market professionals are required to pass licensing examinations set by the Securities Commission which acts as the regulator and enforcer of the CMSA. Securities Market Law of Mongolia prescribes as follows; 19.1. Professional participants in the securities markets are Stock Exchange, Trading center of securities dealers, Securities settlement and depository organizations, Mutual and Investment funds, Brokers, Dealers, Underwriters, Investment management and Investment Advisors. 20.1. The Commission (as Financial Regulatory Commission or FRC) shall grant special licenses to professional participant in the securities markets specified in provision 19.1 of this Law. 20.2. The Commission can grant special licenses to The Stock Exchange, Clearing and Settlement and Central Depository Systems and to securities dealers centers separately or it can grant a license for combined activities. 20.3. The Commission shall grant a special license to commercial banks in consultation with the Bank of Mongolia and grant a special license to insurance agencies and pension funds in consultation with central government agency in charge of financial and social affairs. 20.4. In order for applying to get a special licenses specified in the provision 20.1 of this Law an applicant shall attach the following documents to its application other than those provided by the Law on special licenses: 20.4 1. Verification of meeting the minimum capital requirements; 20.4.2. Certified copy of the Company Charter; 20.4.3. Business plan that contains an estimation of planned profits for first three years; 20.4.4. Detailed introduction on consistent activities of securities clearing depository organizations with the networks of the Stock exchange or with the networks of center for trading of securities dealers; 20.4.5.Reference which verifies that the applicant is financially solvent and with non-past due loans; 20.4.6.Risk management plan; 20.4.7. Reference notes on professional and experienced personal employed; 20.4.8.Notes that certifies the place of business, equipment necessary for participating in securities trading. After enacting the Security Exchange Law, the Myanmar Security Exchange Commission will be established and it will lead the implementation plan for qualification system for Market professionals.

Lao

SECO

Malaysia

ASCM

Mongolia

FRC

10

Myanmar

CBM

11

Pakistan

SECP

The Institute of Capital Markets (ICM) has been mandated to conduct licensing certification examinations for different segments of the capital market and to develop skilled professionals for this market. Going forward, partnership will be formed between the SECP and the ICM for undertaking education and training requirements for existing and potential market participants, under which the ICM will be involved in various educational activities and will also be engaged in the capacity development of resource persons for the purpose of conducting such activities. 15

Further, all Asset Management Companies and Pension Fund Managers were required to have at least 2 persons or 20% of their employees (whichever is higher) undertaking activities related to sale of collective investment schemes or pension funds, who shall obtain certification for Mutual Funds Sales Agents from ICM latest by June 30, 2011. Any new professional entrants appointed by the ACMs/PFMs are required to have the ICM certification for Mutual Funds Sales Agents within one year of his/her employment with the AMC/PFM. Further, all brokers of the stock and commodity exchanges registered with the SECP are required to nominate a Compliance Officer from amongst their employees who shall be responsible to ensure effective implementation and compliance with relevant regulatory framework. Also, for all personnel undertaking the functions of brokerage, trading, sales agents and professionals providing buying/selling advice to clients, certification from ICM has been made mandatory as follows: At least 2 persons or 20% of the employees (whichever is higher) shall obtain relevant certification by June 30, 2011. (However, existing employees above the age of 35 and having relevant experience of at least five years are exempt from this condition.) Any new professional entrants in the capital market shall be required to have the ICM certification within one year of his/her employment with the broker.

12

Philippines

CMIC

Compliance Officer / Associated Person - the (Philippine) Securities and Exchange Commission administers a certification seminar and exam (Association Person Certification Exam) for those who want to be compliance officers/associated persons. Only licensed compliance officers/associated persons are allowed to occupy a compliance function in a brokerage house. Further, each trading participant/broker is required by the (Philippine) Securities and Exchange Commission to have at least one compliance officers/associated persons. Failure to comply with the preceding requirement would result to cancellation of the broker-dealer license. The Philippine Stock Exchange assists trading participants in their compliance function by conducting seminars to keep them abreast with new rules and regulations. Salesman/ Trader - The (Philippine) Securities and Exchange Commission administers the licensing of salesmen. Accordingly, a candidate must pass the Securities Certification Exam, or SRCE, and the PAM Certification Seminar, which is conducted by the Philippine Stock Exchange, for the salesman to validly trade in the Exchange.

13

Romania

RSBA

14

Sri Lanka

SEC

In Romania, participants to the capital market can only be the investment firms and asset management companies. Therefore, the employees of the above mentioned companies must obtain a qualification recognized by the Romanian National Securities Commission prior to being employed in the company. For that purpose, the Stock Brokers` Association has been organizing training courses which are ending with an examination counting for obtaining the authorisation since 2007. The main courses for obtaining the required authorization are: - brokers - compliance officers - investment consultants. Last year, almost 200 persons have attended these courses, 74% of them applying for the brokers specialization. In 2010, The Stock Brokers` Association began organizing courses mandatory for the continuous professional training compulsory by internal regulation. Last year, the Association started a new program in which well-known lectors delivered 11 types of courses for over 700 persons. These courses covered all the aspects in the financial domain such as: Sales Planning, Identifying And Finding Solutions To customer needs, Negotiation Techniques, Financial Management And Risk Management, Business Plan, Legal And Accounting Issues Encountered when Opening A Business, Human Resources Management, Communication, Leadership, Financial Instruments Used In The United Europe And The Conditions Of Implementing to the Romanian Market, European Legislation. In the first half of this year, more than 900 employees attended the courses. The Stock Brokers` Association has not neglected the globalization process taking place in the last years. There for, in March this year, an agreement was signed with London Stock Academy. The main purpose of this Agreement is offering training sessions in London and Bucharest for the Romanian specialist, but also for representative of the important institutions acting or influencing the welfare of the national capital market. SEC Capital Market Education & Training Division (CMET) has a qualification framework for financial sector professionals and SEC has made this qualification compulsory to work as an Investment Advisor in the stockbroking industry. Courses conducted by CMET Certificate in Capital Market Diploma in Capital Market Continues Professional Development Program Investor Programme Advanced Investor Programme 16

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

Fit and Proper personnel and specific academic qualification and experience will be required for other Market Intermediaries. Under the SECs regulation, bond traders are required to register with ThaiBMA. In order to register, traders have to satisfy the set criteria and pass the registered trader examination administered by ThaiBMA. ThaiBMA will be responsible for ensuring that trading practice of registered traders follows the established Ethics and Code and Conduct for the bond market. Pass the Securities Investment Consultant Examination (device to 10 papers depend on products) and register to SEC. Refresh 15 hrs. every 2 years (Continuing professional Education programs) - Licensing requirements were introduced by the Capital Markets Board (CMB), the main regulatory authority in the capital markets, in August 2001. The licensing system aims to assess the professional qualifications and the knowledge of persons working at capital market related jobs. The first licensing examinations were held in September 2002. - Since 2011, exams are organized by the recently established Capital Market Licensing and Training Agency (CMLTA) with the cooperation of TSPAKB. - Licenses are issued by the CMLTA upon application of successful candidates at the exams. Detailed records of the licensed professionals are kept at the CMLTAs registry, and information on registered professionals is partially available to the public. - The CMB introduced several types of licenses for market professionals. The first seven of the below-listed licenses are required for employment at intermediaries (banks and brokerage firms) and others for employment at other institutions such as rating agencies. 1. Basic Level: Required for branch managers, representative office managers. 2. Basic Level Customer Representative: Required for client advisors. 3. Advanced Level: Required for managers, research and corporate finance analysts. 4. Settlement & Operations: Required for back office employees. 5. Derivatives: Required for derivatives traders, managers and back office employees. 6. Derivatives Customer Representative: Required for derivatives client advisors. 7. Derivatives Accounting & Operation: Required for back office employees. 8. Real Estate Appraisal: Required for mortgage and real estate appraisers. 9. Residential Real Estate Appraisal: Required for mortgage and real estate appraisers. 10. Credit Rating: Required for employees of credit rating agencies. 11. Corporate Governance Rating: Required for employees at corporate governance rating agencies and employees at investor relations departments of listed companies. 12. Independent Auditing: Required for independent auditors of listed companies and intermediaries.

18

UAE (DIFC)

DFSA

In order to conduct financial services in or from the Dubai International Financial Centre, individuals or entities need to seek authorisation from the DFSA. Authorisation is given in the form of a license which is issued by the DFSA, which specifies the type of financial services that can be conducted. The financial services activities which require regulation if they are carried out by way of business are as follows: - Accepting deposits - Providing credit - Providing money services - Dealing in Investments as principle - Dealing in Investments as agent - Arranging Credit or Deals in Investments - Managing Assets - Advising on Financial Products or Credit - Managing a Collective Investment Fund - Providing Custody - Arranging Custody - Effecting Contracts of Insurance - Carrying Out Contracts of Insurance - Operating an Exchange - Operating a Clearing House - Insurance Intermediation - Insurance Management - Managing a Profit Sharing Investment Account - Operating an Alternative Trading System - Providing Trust Services - Providing Fund Administration - Acting as a Trustee of a Fund - Operating a Representative Office Before the DFSA can authorise a firm as an Authorised Firm, the DFSA needs to be satisfied that the firm meets its Fit and Proper test, and is likely to do so on an ongoing basis. Generally, Fit and Proper means the ability to carry out a financial service competently, with honesty and integrity. The areas the DFSA assesses include: - Legal status: A firm must be a body corporate or partnership. It can be formed in the DIFC, or a firm can establish a branch of a legal entity based in another jurisdiction. In the latter instance, the DFSA would expect the outside jurisdiction to have internationally compliant regulatory and legal standards. 17

Location of offices: A firm must carry on its activities from a place of business in the DIFC. Ownership and group structure: The DFSA seeks to establish that it will be able to effectively supervise the firm. Therefore an applicant needs to make the DFSA aware of any Close Links (eg parent, subsidiary, sister company) which could hinder effective ongoing supervision. Adequate resources: A firm must have adequate resources to carry out the proposed financial services including financial resources and adequate systems and controls. A firm must have an internal audit function. Senior management: A firm must appoint a Senior Executive Officer, a Compliance Officer, an Anti-Money Laundering Reporting Officer and a Finance Officer. These individuals need to be Authorised. The first three positions require the individuals responsible to be resident in the UAE. As part of the licensing process, we will evaluate the competence and integrity of the proposed senior management team.

19

Vietnam

VBMA

According to Decision No. 15/2008/Q-BTC dated 27-3-2008 by the Ministry of Finance, there are 2 types of certificates relating to securities business that market professionals must have, namely: Securities Business Practising Certificate and Securities Professional Certificate. - Securities Business Practising Certificate gurantees that the holder is eligible to hold professional positions at securities firms, fund management companies, securities investment companies operating in Vietnam.

- Securities Professional Certificate guarantees that the holder meets necessary qualifications in securities
and stock market. A market professional must hold Securities Professional Certificate before attending the exam for the Securities Business Practising Certificate. There are 3 types of Securities Business Practising Certificates, including: - Securities Brokerage Certificate - Financial Analysis Certificate - Fund Management Certificate 1. To attend the exam for Securities Brokerage Certificate, the Securities Professional Certificate must comprise of qualifications on Basics on securities and stock market; Laws on securities and stock market; Securities Analysis and Investment; Securities Brokerage and Investment Advisory. 2. To attend the exam for Financial Analysis Certificate, the Securities Professional Certificate must comprise of qualifications applied to brokers, together with qualifications on Financial Advisory and Issue Underwriting, and Analysis of Corporate Financial Statement. 3. To attend the exam for Fund Management Certificate, the Securities Professional Certificate must comprise of qualifications needed for the Financial Analysis Certificate and qualification onFund and Asset Management. Exams are held by the Securities Research and Training Center under the SSC. VBMA also provide the training course on the Fixed Income Trading Techniques for dealer in the market. We expect that in the time to come, all dealer must attend this training course.

18

III 3. Securities Firms Inspection or Audit

No. 1 2 Country Cambodia China Name of Organization SECC SAC Securities Firms Inspection or Audit The SECC has conducted on-site and off-site inspection to the securities firm. The securities firm shall submit the periodic financial statement to the SECC. "SAC Member Management Measures" stipulates that Association members should submit business and financial information in accordance with the demands of SAC on regular or irregular period, meanwhile, accept evaluation organized by SAC coordinating with self-regulatory management. Related provisions exist in the self-regulatory rules for businesses of securities companies, SAC supervises the practices of securities companies, including self-run, margin purchase and short sale, asset management, risk control, anti-money laundering and investor education, etc. SEBI and the Exchanges inspect members books for adherences to compliance requirements as stipulated by them from time to time. Generally, all inspections are on-site inspections. The authority conducting the inspection may call for additional records. The Capital Market Supervisory Agency & Financial Institution (Bapepam-LK) and the Indonesia Stock Exchange (IDX) perform regular and unregular audits annually on all companies in the industry. An audit or even an investigation may be completed by visiting the head office or branch office of the members of stock exchange when needed. In conducting the audit or investigation, the Capital Market Supervisory Agency and Financial Institution Supervisory Agency (Bapepam-LK) and the Indonesia Stock Exchange (IDX) will conduct an examination of books, licensing, standard operating procedures, systems and other compliance documents. JSDA inspects the observance by member firms, etc. of laws and regulations, the condition of the business and assets of member firms, their books and records and other items. Currently, JSDA conducts four types of inspection, namely General Inspection, Special Inspection, Follow-up Inspection and Moving/ Continuous Inspection. In principle, inspection is conducted by visiting the head office, branch office, sales office, or other facility of the member firm and inspecting its accounting records etc. (i.e., onsite inspection). In some cases, instead of onsite inspection, off-site or document-based inspection may be conducted using accounting records etc. submitted by the member firm subject to the inspection without visiting the said firm. According to the Law On securities market of the Republic of Kazakhstan The Committee has right to carry out inspections of activities of issuers, licensees, central depository, self-regulating organizations, stock market professionals. The reasons to initiate inspections are as follows: - complaints of investors; - complaints of shareholders; - complaints of professional participants of the securities market and self-regulatory organisations; - discrepancy of information in documents or details, provided by issuers for the state registration of shares emission. - discrepancy in reports of licensees activity; -violation of market confidence, including price manipulation, insider trading, etc.; - other facts. The on-site inspections are conducted on regular basis in accordance with a Committees inspections plan. Also the securities market participants are inspected through the off-site supervision by special units. Examiners are monitoring the conduct of business activities by reviewing and analyzing of the financial statements, statutory returns and or any other reports submitted by licensees. The objective of off-site supervision is to quickly identify negative trends and emerging problems and to resolve the issues before they become serious that could dramatically effect organizations financial condition. SECO inspects the securities firms as well as their securities business operations, financial statement, utilization of their registered capital and other items specifying in regulation on securities related business inspection. SECO conducts two types of inspection, namely General inspection and Ad hoc inspection. Bursa Malaysia closely supervises the business conduct of brokers and their representatives with the aim to achieve the following objectives: To ensure secure, fair and orderly trading environment through effective monitoring and supervision To ensure adequate protection of investors who engage the services of the brokers for trading To effectively monitor the activities of brokers to ensure that brokers are providing secure and trusted services to investors

India

ANMI

Indonesia

APEI

Japan

JSDA

Kazakhstan

FSC

Lao

SECO

Malaysia

ASCM

Bursa Malaysia regulate and supervise two groups of brokers: stock brokers (stockbroking companies) i.e. Participating Organisations futures brokers (futures broking companies) i.e. Trading Participants

Supervision of brokers is carried out in the following manner :

Inspection - conduct scheduled and/or ad-hoc inspection visits to the office premises of brokers with the focus to assess their degree of compliance, level of market conduct and adequacy of clients' assets protection Compliance Monitoring ensure timely reporting by brokers, conduct analytical review on their periodic submissions and raise alert when the needs arise 19

Financial Monitoring - monitor the brokers' financial condition and ensure their compliance with minimum financial requirements from various aspects Registration ensure all licensed brokers, their key staff and licensed personnel are duly registered with Bursa Malaysia for monitoring purpose Others - Evaluate and process applications received from brokers that require prior consent of Bursa Malaysia before implementation, which among others, include applications for new business activity and establishment of new office premises

Mongolia

MASD

The Law prescribes as follows; 19.2. Professional participants in the securities markets have the following responsibilities 19.2.1. To submit the information and reports related to securities transactions elaborated in compliance with the relevant methodology and forms; 19.2.2.To determine and follow the fees for registration securities transaction, settlement and depository, membership and seats and fees for other related services; 19.2.3.To issue and allow the regulations and instructions for their own activities by the permission of the Commission in conformity with laws. 19.2.4.To inform to the Commission and the public in case its members, an issuer of the securities and other participants in the securities related to the law; 19.2.5. To submit its audited semi-annual and annual financial statements elaborated on time specified by the Accounting law to the Securities Commission and to the professional participants in the securities markets publish its balance sheets and inform the investors about it; 19.2.6. To have and update the list of insiders and monitor the performance of their duties. 19.2.7. To provide increased persons by fair information on timely basis; 19.2 8.To make transactions related to securities trading and options on fair, transparent and timely manner; 19.2.9.To submit the proposals for improving the activities in the securities markets to the Securities Commission; 19.2 10. To protect the common interests on an issuer and an investors; 19.2 11 To have the Risk funds. The sources of risk funds shall come from shareholders capital and from the company profits. The association should request its members to implement and follow the above general duties and relevant other responsibilities, established by other regulations and provide training into them. The association has not right to inspect them and only FRC inspects their activities. The supervisory body for security market will be the Myanmar Security Exchange Commission in Myanmar. However, that commission has not been established yet and Myanmar has not decided that the commission will be under the Ministry of Finance and Revenue or not. System Audit of the brokers is being carried out on annual basis by the auditors in line with the Regulations of the Stock Exchanges. The said regulations require that all eligible Brokers shall be audited once in each audit cycle of two-year period. The selection is made through biannual balloting. An eligible broker is defined as one who has operational track record of at-least one year preceding the ballot
Compliance Wing of the SECP also carries on site and off site inspection of the brokers. The Audit and Compliance Department of CMIC shall conduct annual regulatory examinations to determine and to verify compliance by trading participants with relevant Exchange rules and Securities Laws. The Audit and Compliance Department of CMIC shall emphasize, but shall not be limited to the examination of the trading participants compliance with the following rules: 1. 2. 3. 4. Books and Records Rule; Risk-based capital adequacy and other financial ratios necessary to determine adequate capital for operation; Customer Protection Rule; and Relevant provisions of the Securities Laws on the business conduct and sales practices of trading participants.

10

Myanmar

CBM

11

Pakistan

SECP

12

Philippines

CMIC

Further, the Audit and Compliance Department of CMIC shall perform a monthly spot audit on the trading participants which shall be prompted by the following parameters: 1. 2. 3. 4. 5. Net liquid capital, or NLC, with 10% variance from previous month to current month; NLC below the required minimum limit (at least P5,000,000 or 5% of the aggregate indebtedness whichever is higher); Risk-based capital adequacy ratio is below 120%; Deficiency on reserve requirement; and Unimpaired paid-up capital.

The parameters may be revised, if necessary. The Audit and Compliance Department of CMIC shall also conduct examination of TPs registered branch 20

13

Romania

RSBA

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

or agency. The securities companies are inspected one every two years by representatives of the Romanian National Securities Commission. During these visits are inspected mainly the account records of the company. In the near future, the security companies, and the other participants to the capital market, will be requested to present audited informatics systems. Staring this September, all the securities companies are compelled to set up financial records according to the International Financial Reporting Standards (IFRS). These reports are subdued to external audit. The CSE Broker Supervision Division and the SEC Supervision Division conduct both risk-based on-site and off-site inspection of Broker Firms and of all market intermediaries respectively. Off-site inspection is conducted by reviewing the monthly and audited financial statements which are submitted by the regulated entities. Off-site inspections are conducted based on the risks identified during on-site inspections and also when a special need arises. ThaiBMA acts as a front line regulator to detect unfair trading practices by using Market Surveillance System which facilitated the task of detecting and evaluating suspicious patterns and potential fraudulent practices such as price or volume manipulation, series trading, excessive markup, and etc. ThaiBMA also conducted 2 types of inspections, namely Regular inspection and Special inspection with 2 approaches (1) onsite inspection by visiting member firms office and facilities related to their bond trading i.e. trading account, electronic data, and etc. (2) off-site inspection by using document-based without visiting member firms. By SEC under Securities and Exchange Act B.E2535 and the Stock Exchange on the trading activities. TSPAKB makes necessary investigations independently on the regulations of the Association, evaluates the complaints against its members and also assists in the resolution of disputes arising from off-exchange transactions among its members or between its members and investors. Investigations are made by site-visits and/or by asking for written defence in case of complaints. On site investigations of the members are not done regularly by the Association, but rather on a case-by-case system initiated by a complaint from a client or another member. In this context, the Compliance and Legal Affairs Department of TSPAKB, with 3 personnel, conducts inspections when necessary. The Supervision Divisions primary responsibility is to assess, monitor and mitigate risk in Authorised Firms (AF), Ancillary Service Providers (ASP) (law/accounting firms), and auditors. Stringent review of proposed new entrants occurs during the licensing process and continuing vigilance is maintained through inspections, supplemented by off-site surveillance. Firms proper conduct of business, financial health and adherence to laws, regulations and prudential standards are assessed by a team of experienced regulators. Timely remedial action is instituted to address weaknesses, objectionable practices or adverse conditions identified by our supervisory activities. Under the Supervision Module, there are various types of on-site visits by the DFSA on Authorised Firms, which differ in their objective and frequency depending on proportionality of the risks that they pose to the DFSAs objectives. The greater the impact and probability of the Authorised Firms perceived risks, the more intensive the on-site visits. The DFSA requires AFs registered external auditor to co-operate with the DFSA in a number of ways, including the submission of specific audit reports and statements. The Markets Division, on its part, is responsible for the licensing and ongoing supervision of exchanges and clearing houses based in the DIFC. It also recognises licensed entities seeking Recognition status, either to operate as exchange or clearing house in the DIFC or to become members of exchanges located in the DIFC.

19

Vietnam

VBMA

Inspectors from the State Securities Commission (SSC) inspects securities firms to assess the compliance to legal documents on securities and stock market Exchanges supervises securities member firms in the compliance to membership obligations, including: Maintenance of eligibilities for membership Securities trading of members Reporting and information disclosure of members Handling violations of trading members The inspection and supervision is applied to activities of securities firms, branches and transaction offices. This activity is planned yearly. Besides, there are unscheduled inspections at the request of the SSCs Chairman and authorities. The SSC inspection is also carried out based on reports from exchanges and other SSC agents on the violation of securities firms. After defining the level of violations, the inspection board announces the inspection to the securities firms and starts collecting evidences by visiting the securities firms and asking the firm to providing original copy of necessary documents. The conclusions are drawn after the analysis and assessment of accounting figures as well as professional activities. The securities firm also has the internal audit system and has the yearly financial statement audited an auditing organization approved by the SSC. VBMA is not empowered by regulator to do these duty

21

III 4. Disciplinary Action and Measures Against Misconducts

No. 1 Country Cambodia Name of Organization SECC Disciplinary Action and Measures Against Misconducts According to Law on Issuance and Trading of Non-Government Securities, There are two kinds of administrative disciplinary action. One is applied to companies such as securities company, issuing company and other market participants while other is applied to individual. According to the Anukret (Sub-decree) on the Implementation of the Law on Issuance and Trading of Non-Government Securities, a person who contravenes any provisions of this Anukret or any requirement prescribed in accordance with this Anukret, shall commit an offence and be liable to punishments in accordance with the existing laws and provisions in the Kingdom of Cambodia. Meanwhile, under the Prakas (Regulation) on the Code of Conduct of Securities Firms and Securities Representative, any person who contravenes any provisions of this Prakas, the Director General of SECC is authorized to apply the following administrative sanction: - A warning - A correction order - A suspension or dismissal of directors and/or senior officers. - Imposing restrictions on the license - A suspension or revoke the license. SAC Member Management Measure stipulates that SAC could take the form of written or verbal reminders or questions to talk to members or practitioners for violation of laws, regulations, administrative rules and regulations of SAC, and disciplinary action is allowable according to the seriousness of the circumstances. Association members can be given disciplinary measures, such as warning, criticism within the industry, public reprimand through the media, suspension of membership rights, suspension or cancellation of membership qualification. The form of disciplinary action can be used alone or in combination. Members and practitioners, who subject to disciplinary action, must participate mandatory training organized by Association. The disciplinary action to members and practitioners should be investigated by SAC self-discipline Commission, and put forward opinions on the results of the investigation. SAC is entitled to make decisions on punishment under its regulations and other self-regulatory rules. Under the SEBI and Exchange regulations, disciplinary action is applied against the securities company for any transgression of the governing laws by either the company or its employees. The disciplinary action may include any of the following: (1) Reprimand (2) imposition of a fine (3) suspension of membership for a defined period (4) Expulsion in case of a serious offence. Separately SEBI may compound the offence by disgorgement of profits with a consent order. Under the Law Number 8 Year 1995 regarding Capital Market (UUPM), disciplinary actions include: 1. Sanctions against the company in the form of: - written warning - penalty - temporary suspension 2. Sanctions against individuals (Director and/or Employee involved in the Securities) - written warning - penalty - temporary suspension individual license - revocation of individual license Before sanctions applied, in general The Capital Market Supervisory Agency and Financial Institution Supervisory Agency (Bapepam-LK) as the regulator will ask for an explanation of the parties to the offense committed and its supporting documents and the Regulator will apply a penalty based on the results of the investigation that have been done and the activities will be automatically suspended if the sanctions connected with the revocation of the license. Under the FIEA, there are two categories of administrative disciplinary action. One is applied to companies such as securities companies, banks, insurance companies and so on. The other is applied to individual sales representatives affiliated with those companies. As the task of taking administrative disciplinary action against sales representative is assigned to JSDA under the FIEA, JSDA also has two categories of disciplinary action. One is applied to the member firm on its own misconduct while the other is applied to the member firm on the misconducts committed by its employees. There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is triggered, namely 1)reprimand, 2) imposition of a negligence fine, 3) limitation of membership, 4) suspension of membership and 5)expulsion. When employees of the member firm are to be disciplined, JSDA may rescind the registration or order suspension of the business of a registered Sales Representative by specifying a period not exceeding two years when he or she violated laws and regulations or was found to have conducted extremely inappropriate acts concerning his or her duties of Sales Representatives. However, when employees have their registration revoked, normally they also lose their sales representative qualification at the same time. So, they have to re-qualify as sales representatives. Of course, even if they do again acquire the qualification, they will have to wait five (5) years after the revocation of their registration to become a registered sales representative again. JSDA introduced a permanent expulsion system for officers or employees committing insider trading violations. If Committee identifies violations of the prudential requirements and other standards and limits 22

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

Kazakhstan

FSC

Lao

SECO

Malaysia

ASCM

obligatory for companies, violations of the legal acts of the Committee has right to apply the enforcement measures both to companies and executives as follows: - to require a letter of commitment; - to compile a written agreement with the security organisation; - to issue a warning; - to issue a written prescription, obligatory for execution - penalty Person or organization who violates the provisions in the Decree on Securities and Securities Exchange shall be subject to the following sanctions and penalties: (1) being warned in writing; (2) being fined; (3) suspending or revoking a securities business license; (4) revoking the Securities Practitioner License; and being subject to legal proceeding upon the character and scope of their violation. Business Rules of Bursa Malaysia Securities Berhad - Market Misconduct The Business Rules of Bursa Malaysia Securities Berhad ("Rules of Bursa Securities") prescribe rules relating to conduct of business, trading, settlement, etc. The key trading rules that Market Surveillance focuses on are summarised below. For the full and latest provision, kindly refer to the relevant provision of Business Rules of Bursa Malaysia Securities Berhad. 1. Rule 401.1(2) Participating Organisations (POs), Heads of Dealing (HD) and Dealer's Representative (DR) shall refrain themselves from engaging in, or be a party to, any unethical practices that may damage the confidence of investors and hamper the sound development of the stock market. 2. Rule 401.1(3)(a) and (b) POs, HD and DR shall avoid, and shall not participate in any operation by others which might have the same result, any act or practice which might lead to a false or misleading appearance of active trading in any securities on the stock market of the Exchange or a false or misleading appearance with respect to the market for, or the price of, any such securities; or directly or indirectly be tantamount to stock market manipulations. 3. Rule 404.1(4) A PO shall not allow any form of irregular and/or unhealthy practice to exist or prevail in its daily and professional business conduct. 4. Rule 404.1(7)(c) Every PO shall at all times maintain a proper supervisory programme and a system of internal controls which must take into account among others, the PO's operations and proper conduct of its business. 5. Rule 404.3(1)(a) and (c) Every PO and every DR shall at all times observe professional standard of integrity and fair dealing and conduct their business in a manner which contributes to the maintenance of a fair and orderly market. Capital Markets and Services Act 2007 ("CMSA") - Market Misconduct The CMSA prescribes the laws among others, to regulate and to provide for matters relating to the activities, markets and intermediaries in the capital markets. Some trading related laws are explained below :1. Section 93 of CMSA - Front running Front running refers to a DR or PO entering into a transaction of purchase or sale of securities in priority to client's order. 2. Section 98 of CMSA - Short Selling Short selling is the action of a person selling shares, which he does not own at the time of selling. Essentially, the law provides that a person shall not sell securities to a purchaser unless, at the time when he sells them:

he has or, where he is selling as agent, his principal has; or he believes on reasonable grounds that he has, or where he is selling as agent, his principal has, a presently exercisable and unconditional right to vest the securities in the purchaser.

23

3. Section 175 of the CMSA - False Trading /Market Rigging This involves matched transactions where the buyer and seller are the same i.e. either involving the same Central Depository System (CDS) account or "passing around" a specific group of CDS accounts. Transactions result in no change in beneficial ownership (NCBO).

Note: Essentially, the law provides that a person shall not create, or cause to be created, or do anything that is calculated to create, a false or misleading appearance of active trading in any securities on a stock market in Malaysia or a false or misleading appearance with respect to the market for, or the price of, any such securities.
4. Section 176 of CMSA- Stock Market Manipulation Stock market manipulation is the act of transacting in the securities of a company that will have or is likely to have the effect of raising or lowering or maintaining the price of the company's securities on a stock market, with the intention of inducing other persons to purchase or subscribe for the company's securities. Such acts are illegal under the CMSA. 5. Section 188 of CMSA - Insider Trading Insider trading or dealing is the purchase or sale of a company's securities effected by or on behalf of a person with knowledge of relevant but non-public material information regarding the company that may affect the price of the company's securities (price sensitive information) if made public. In its commitment to deter and reduce breaches of the industry law, both Securities Commission and Bursa Malaysia play their respective roles in enforcing the CMSA and Bursa Malaysia Rules. In undertaking enforcement action, due process will be accorded where the defaulting parties are given opportunity to provide explanation to Securities Commission and/or Bursa Malaysia. In deciding the appropriate sanction to be imposed, a variety of factors are taken into consideration according to the circumstances of each individual case. The factors taken into consideration include, amongst others, public interest/deterrent element of the proposed penalty, antecedent character and background of the defaulting party, nature of the breach and circumstances and manner under which the breach was committed, mitigating and aggravating factors. As such, depending on the outcome of the assessment of the various factors in relation to the facts and circumstances of each individual case, the actions/ sanctions imposed may also vary even for the same breach by different parties. The type of sanctions that may be imposed for the breach include: reprimand fines remedial actions suspension any other action deemed appropriate 9 Mongolia MASD

FRC has rights to grant licenses the professional institutions that are participating in the securities market to deal with professional activities on the securities market, monitor their activities, temporarily restrict and invalidate thelicense. The Law stipulates as follows; 15.1. A regulations issued by the Commission to implement laws shall be followed by all participants in the securities market. The association has right to suspend membership and to inform the FRC and other related organizations of such member and its professional if necessary. Myanmar has not enacted the Security Exchange Law and the security market has not been established yet. The conduct of brokers in violation of the securities market laws is being directly handled by the stock exchange of which the broker is a TREC (Trading Right Entitlement Certificate) holder. In case of the violation of the Central Depository of Companies Act, action is initiated by the Central Depository Company of Pakistan Limited, in accordance with the applicable legal framework.
The SECP, being the apex regulator monitors compliance of all the applicable securities market laws, rules and regulations and takes such measures to avoid misconducts and takes disciplinary actions, where required in the light of the applicable regulatory framework. Show cause notices are issued to the party which appears to be in violation of securities market laws and orders are passed and penalties are imposed on the party found guilty of any misconduct/violation after being given an opportunity of hearing and analysis of facts and figures. With respect to trading participants, and, in particular cases, issuers, the pertinent rules are found in the CMIC Rules. For violations, the broker or issuer involved is subjected to investigation proceedings and corresponding sanctions, as provided in the CMIC Rules. CMIC shall have the jurisdiction to investigate and resolve: (1) all violations of the Securities Laws or the CMIC Rules by Trading Participants, and (2) Trading-Related Irregularities and Unusual Trading Activities involving Issuers, based on any of the following complaints, findings, reports or determinations: a) written complaints filed directly with CMIC by customers, Trading Participants, or any aggrieved party for alleged violation of the Securities Laws or these Rules; b) examination Findings of CMIC based on 24

10 11

Myanmar Pakistan

CBM SECP

12

Philippines

CMIC

regular annual examinations or for cause examinations of Trading Participants; c) reports of Trading-related Irregularities or Unusual Trading Activities; and d) matters which CMIC has determined should be investigated and resolved to enforce the Securities Laws and these Rules, including matters referred to CMIC by the (Philippine) Securities and Exchange Commission, the clearing agency, and the Disclosure Department of the Philippine Stock Exchange. Any Complaint or referral to CMIC for investigation and/or resolution should be sent in writing to CMIC President and should state the particulars of the Complaint or referral. CMIC may act on anonymous complaints or referrals provided these contain sufficient leads or particulars to enable the taking of further action. After evaluation, if the party involved is found to be in violation, the corresponding penalty, as provided in the Article XII of the CMIC Rules, is then imposed, which penalty is published in the website of CMIC or the Philippine Stock Exchange. 13 Romania RSBA According to the Romanian regulations, failing to observe the law or the regulation leads to administratively, disciplinary or penal sanctions. The disciplinary actions can be applied to either the company securities company, bank, asset management company, etc. or to the individual representative of such a company. The main administrative disciplinary actions undertaken by the Romanian National Securities Commission are: warnings, fines, suspension of authorization, withdrawal of authorization, temporary prohibition from carrying our certain activities and services which are subject to the law. The Stock Brokers` Association applies only the suspension of membership or withdrawal of this quality. Disciplinary matters relating to Broker Firms are referred by the CSE to the Arbitration & Disciplinary Committee of the CSE(hereinafter referred to as the DC). After deliberations, the DC will give its decision regarding the matter, which should be approved by the Board of Directors of the CSE. A Broker Firm found guilty of any violation of rule shall be liable to a public reprimand and/or suspension of membership and/or termination of membership as determined by the CSE Board. The SEC Act empowers the Commission to cancel or suspend the Licence/Registration granted to stockbroker, stock dealer or any other market intermediary. Under ThaiBMAs rule, there are two categories of administrative disciplinary action. One is applied to member firms. The other is applied to individual registered trader affiliated with those member firms. There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is triggered, namely (1) warning (2) probation (3) fine (4) suspension (5) revocation. Under Securities and Exchange Act.2535 A member which acts contrary to professional honour, professional principles and rules, to legislations related to the capital market activities and to resolutions of the TSPAKB can be fined according the measures of the Disciplinary Regulation. The following disciplinary penalties are applied, depending on the nature and importance of the act. Warning: a written notice to the concerned member stating that it has to act more diligently and carefully in performing its activities. Censure: a written notice to a member stating that it is faulty in its profession and behaviour. Fine: the amount is paid by the liable party to the Investors Protection Fund within 30 days following the date of the notice. Temporary exclusion from the Association membership: direct or indirect restriction of professional activities of a member for a temporary period of time to be designated according to the nature and importance of the incorrect act, not exceeding a period of 6 months. Permanent discharge from the Association membership: in that case, the relevant institution cannot operate in the capital markets ever. The actions requiring temporary exclusion are insider trading and market manipulation. The action requiring permanent exclusion is using customers assets (cash or capital market instruments) in favor of the member or third parties by issuing counterfeit documents or forging documents. Laws and rules of the DIFC administered by DFSA are enforced by the Enforcement Division. The Division takes action pursuant to a referral from the Supervision or Markets Division in circumstances of suspicion of any misconduct that may cause damage to the DIFCs reputation or to the financial services industry in the DIFC. A wide range of enforcement powers are available to the Division. The DFSA may accept enforceable undertakings, impose fines or censures, take licensing action or commence proceedings in the Financial Markets Tribunal or the DIFC Courts. The Division also proactively tries to prevent misconduct through education and outreach programs. The Enforcement Division frequently provides assistance to other international regulators, and takes every opportunity to work closely with local regulators. According to Decree No. 85/2010/N-CP dated 02/08/2010 on penalties of administrative violations in the field of securities and securities markets, where Domestic and foreign individuals, agencies and institutions (hereinafter referred to as individuals and institutions) found guilty of administrative violations in the field of securities and securities markets shall be subject to penalties in accordance with this Decree, unless otherwise stipulated in international conventions of which Vietnam is a signatory or participant. Violations the field of securities and securities markets are categorized as follows: a. Violations of rules and regulations of public offering of securities; b. Violations of rules and regulations of public companies; c. Violations of rules and regulations of listing of securities on Stock Exchanges; 25

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

d. Violations of rules and regulations of organizing securities market; e. Violations of rules and regulations of securities business activities and securities business practicing certificate; f. Violations of rules and regulations of securities trading; g. Violations of rules and regulations of securities business, securities registration, securities depository; clearing and settlement of securities transactions; custodian banks; depository banks; h. Violations of the rules and regulations of reporting regime and information disclosure; i. Violations of the rules and regulations of auditing issuers, listing companies and business organizations in the field of securities; j. Violations of rules and regulations of inspection and examination of authorities; Jurisdiction of giving administrative penalties 1. The SSCs Chief Inspector may: a) Give a warning; b) Impose a fine of up to VND 70,000,000; 2. The SSCs Chairman may: a) Give a warning; b) Impose a fine of up to VND 500,000,000; c) Apply forms of additional penalties and other measures for correction as stipulated in the Decree. Transferring the case with signs of crime to criminal prosecution: The procedures of transferring the case with signs of crime to criminal prosecution are complied with as stipulated in Article 62 of the Decree-Law of Treatment of Administrative Violations. Disciplinary Action and Measures against misconducts in the fields of securities and securities market will be announced on the website of SSC. Right now VBMA is not empowered to do this duty.

26

III 5. Dispute Resolution System between Securities Firms and Customers

No. 1 Country Cambodia Name of Organization SECC Dispute Resolution System between Securities Firms and Customers Under the Law on Trading and Issuance of Non-Government Securities, for any dispute arising in relation to the conduct of securities business the disputing parties may bring the case to SECC for mediation before filing a lawsuit to a court, except a criminal case. After receiving a complaint, SECC shall interrogate all parties about subject matters of the dispute and try to mediate them based on laws, rules and regulations. Result of mediation shall be kept in a record made by SECC stating whether or not both parties agree with the mediation. The mediation record must be signed by SECC and all parties concerned each of whom must be provided with a copy of the record. Any agreement reached in the presence of SECC shall be effective for execution. In case the mediation has failed, each party may refer an unsettled mediation record to a competent arbitral tribunal or appeal to a competent court. Valid period of the appeal to the arbitral tribunal

or the court shall be of 90 (ninety) days, otherwise the rights to appeal will lose.
SECC currently is in the process of drafting the Prakas (Regulation) on Dispute Resolution System as well. SAC set up Securities Dispute Mediation Center in charge of the following tasks: . To investigate, handle industrial complaints and provide feedbacks To provide appropriate assistancesfor protecting the rights of investors To deal with complaints and dispute mediation The main principles in the process of dispute mediation . 1. The company level: securities company can freely negotiate with customers, reach a settlement; 2. Association level: SAC Member Management Measure stipulates that disputes between securities companies or disputes between securities company and clients could apply to the Association for mediation. In addition. 3.The judicial level: if mediation cant be reached, involved persons may apply for arbitration or sue. The measures and procedures for mediation of securities disputes are in progress. The SEBI regulations require all exchanges to organize a grievance redress cell for customers. At first, the exchange attempts to conciliate between the disputants. In case conciliation is frustrated, the disputants can refer the dispute to arbitration under the Indian Arbitration Act. The exchanges specify the rules for Arbitration in accordance to the Arbitration Act. The disputants may appeal against the arbitration award. The final award is binding on the disputants. Investors in Indonesia may report a dispute to the Capital Market Supervisory Agency & Financial Institution (Bapepam-LK) and it will conduct an investigation afterward. A settlement mediation can be obtained through the Indonesian Capital Market Arbitration Board (BAPMI) as an intermediary in dispute settlement via negotiation or reconciliation. If this measure is unsuccessful and the case not related with the Capital Market criminal act, the dispute may be brought to the court. In April 2009, FINMAC (Financial Instruments Mediation Assistance Center: NPO) was established as a new financial ADR organization for disputes between customers and financial instruments service providers FINMAC evolved out of the previous Securities Mediation and Consultation Center, which was an internal organ of JSDA. The previous organization accepted complaints and consultations from customers about operations performed by JSDA member firms and conducted mediation between member firms and their customers to solve disputes concerning securities businesses operated by the members. After migrating to FINMAC, the above mentioned services are being offered through contracted based business operators such as members of Financial Futures Trading Association, Investment Trust Association, JSDA, Japan Commodities Investment Sales Association and to the Specific Business Operators (individually registered Type 2 financial instruments business operators, etc.) Financial Institutions Association of Kazakhstan (FIAK) was established in May, 1999. The main FIAK functions are the following: - Participation in development of the regulation of the financial market and tax regulation; -Participation in Kazakhstan financial, budget, tax and currency policies development and implementation; -Participation in further development of financial services market; - Participation in the development and implementation of measures pertinent to the support and protection of local entrepreneurs; - Compiling, analyzing and summarizing proposals of FIAK members on the resolution of financial sector issues and improvement of legislation pertaining to the financial sector subjects interests; - Establishment of the work groups on the priority and problem directions with the FIAK members involvement, development of general proposals and implementation of such with the authorized bodies; - Organization of joint discussions, round tables and Kazakhstan Financiers Congresses, which have become a regular event. SECO is in the process of drafting the securities law and formulating the securities-related regulations. Any dispute will be handled as case per case basis by Bursa Malaysia which acts as the frontline regulator of Malaysia capital market. In cases related to the CMSA, the Securities Commission will lead the investigation task. Both the Securities Commission and Bursa Malaysia have their respective Complaints Bureau department to handle customer reports against the securities firm. The report is then relayed to the investigation units for further actions. Investigation reports will then be used as the basis to resolve the dispute. 27

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India

ANMI

Indonesia

APEI

Japan

JSDA

Kazakhstan

FSC

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Laos Malaysia

SECO ASCM

Mongolia

MASD

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CBM SECP

The Law stipulates as follows; Protection of interests of investors 13.1. It is prohibited to disclose information on number of securities owned by an investor and related to that information which was not disclosed for the public and it is also prohibited to offer of purchases of securities by an interested person without owners permission. 13.2 If the professional participants in the securities markets violate the provision 13.1 of this Law it becomes a justification/reason to suspend or revoke of granted licenses from those professional organizations/participants in the securities markets. Disclosure of information related to securities to investors 14.2. A professional participants in the securities markets shall disclose the following information to investors at their request: 14.2.1. Documents related to special licenses to participate in professional dealings with Securities in the markets and related to certificate of state registration; 14.2.2.Information about the capital, debt, loans and the state of financial situation of professional market participants; 14.2.3. Information related to sanctions was imposed to any of their official in relation to her/his professional activities; 14.2.4.Information on trading and on prices of trading for last 6 months issued by the professional participants; 14.3 The false information disclosed to investors violating the provision 14.2 of this Law shall become a basis for making changes to the Agreement made between the investor and the professional market participant or to cancel the Agreement. 14.4 An investor has right during the process of purchasing and selling of securities to request any information specified in the Law from an issuer or from the professional market participants. Myanmar has not enacted the Security Exchange Law and the security market has not been established yet. The three Stock Exchanges operating in Pakistan have their own dispute resolution mechanisms for handling disputes between the brokers and their clients. The Exchanges also have the mechanism of arbitration in place to address such issues. The SECP, however, being the Apex Regulator also addresses the grievances of the investors of the stock market in accordance to the statutes, laws, rules and regulations in place. Going forward, the arbitration procedure in place will be revamped to ensure greater efficiency, transparency and ease of access to the investors and a Code of Conduct for Arbitrators will be introduced which is expected to result in more independent and transparent decisions and increased investor confidence in the arbitration process. An aggrieved or interested party may file a written complaint with CMIC against any trading participant for trading-related irregularities or other violations of the Securities Laws within six (6) months from knowledge of its commission. If CMIC determines the complaint to be sufficient in form and substance to justify an investigation under the CMIC Rules, CMIC shall proceed with the investigation of the complaint in accordance with the procedure entailed by the Rules, which involves, among other matters, the submission of certain pleadings and other documents. After the issues have been joined, CMIC shall then assess the merit of the complaint based on the submissions of the parties. If the complaint is without merit, CMIC shall immediately dismiss it. If the complaint has merit, CMIC shall meet the parties within five (5) days from the date of filing of the last pleading to discuss a possible amicable settlement, to clarify matters raised in the complaint, and to allow the parties to introduce additional evidence on their behalf. The proceedings before CMIC shall be in the nature of informal administrative hearings and CMIC shall not be bound by technical rules. If the parties agree to amicably settle the complaint, CMIC shall evaluate the amicable settlement to ensure compliance with the Securities Laws. If the settlement is in order, CMIC shall dismiss the complaint, provided that the parties have complied with the terms of the settlement. If the parties do not agree to amicably settle the Complaint, CMIC shall consider the complaint submitted for resolution with notice to the parties. Verily, dispute resolution, or settlement, is only possible in investor complaints. The possible disputes between securities firms and customers are settled in a court of law, (or by direct mediation). Recently the Romanian National Securities Commission has given an Executive Order that obliged the Securities Firms to publish the evolution of the customers` claims. Disputes between Broker Firms and the customers are resolved by the CSE. First the client must make the complaint in writing to the Compliance Officer of the relevant Broker Firm. If he/she is not satisfied with the decision, the client can refer the complaint to the CSE Secretariat. Thereafter, the CSE Secretariat will inquire into the complaint and will give a decision. If a party in not satisfied with the CSE Secretariat's decision, such party may appeal to the Dispute Resolution Committee (hereinafter referred to as the DRC) of the CSE for a review the decision. The decision of the DRC must be ratified by the Board of Directors of the CSE. Failure by a Broker Firm (who has not appealed to the DRC) to comply with the decision of the CSE Secretariat, will result in the matter being referred to the DC of the CSE in order to take disciplinary action against the Broker Firm. In case of bond trading disputes between members or between members and its client, the parties may 28

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

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Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

seek arbitration proceeding or mediation provided by ThaiBMA. Panel of Arbitrators shall be appointed for this matter. Under Securities and Exchange Act.2535 Investors in the Turkish capital markets can always resort to courts for all complaints. However, if the customer prefers alternative dispute resolution methods, the procedure is determined according the nature of the complaint. - If the complaint relates to exchange transactions, the customer can resort to the related exchange (Istanbul Stock Exchange-ISE or Turkish Derivatives Exchange-TurkDEX). The dispute resolution method is similar to arbitration. The customer can decide to go to the court at any stage. The decision taken by the exchange is binding for the parties. Appeals on the ISE and TurkDEX decisions can be made to the Capital Markets Board (CMB). CMB decisions can be appealed to administrative courts. - If the complaint relates to off-exchange disputes, the customer can resort to the TSPAKB. TSPAKB offers two alternative dispute resolution methods; arbitration and mediation. Arbitration: If the related parties agree to do so, arbitrators are chosen from TSPAKBs list of arbitrators. The decision is binding. Appeals against arbitrators decisions can be made to the Court of Appeals. Mediation: TSPAKB helps the parties in solving complaints. TSPAKBs mediation decisions are not binding. - The CMB is not directly involved in customer complaint resolution. However, in case an investor reports a complaint, CMB may initiate an inspection. The DFSA maintains a complaints section on its website which provides information on how complaints are dealt with. Authorised Firms must maintain adequate mechanisms to deal with customer complaints. These mechanisms are designed to help resolve any customer disputes by dealing with the company directly.Authorised Market Institutions (Exchanges) in the DIFC are also required to maintain a complaints mechanism. Before contacting the DFSA the customer should try dealing with the Authorised Firm first. This can often be quicker and more efficient as it is also in the companys interest to resolve the complaint If the customer is unhappy with this response received from the Authorised Firm or the Authorised Market Institution then the customer can contact the DFSA. The Financial Markets Tribunal (FMT) serves as an independent financial services disciplinary tribunal to determine breaches of DFSA administered legislation and related regulatory proceedings. It is broadly empowered with a remit and powers comparable to other international integrated financial services regulatory tribunals. The FMT is operationally independent of the DFSA Board and Executive. Decisions on originating proceedings before the FMT may be appealed to the DIFC Court. Decisions of the FMT on appeals of Exchange decisions may be appealed to the DIFC Court on a point of law.

19

Vietnam

VBMA

In case of bond trading disputes between members or between members and its client, the parties may request VBMA acting as mediation center. The mediation will followed the Mediation rule set by VBMA.

29

III 6. Investor Education Activities

No. 1 Country Cambodia Name of Organization SECC Investor Education Activities So far, the SECC has been trying to promote investor education in the securities sector for potential listed companies, public investors, reporters, public, universities students, as well as other market participants through conference, seminar/workshop, and training course. Also, SECC cooperated with a private institute, Financial Institute of Cambodia (FIC), for providing education in the securities sector including diploma decree and certificate. At the end of 2011, the CSRC instituted Investor Protection Bureau in order to provide overall planning, investor protection guidance supervision the program of comprehensive mechanism for legal system and inspecting Regional Bureaus, Exchanges, Self-Regulatory Associations and main market bodies, which will be benefit for improving the service quality and further the investors relief by-laws. SAC had done a great deal of jobs, including: 1. To formulate and publish relevant member guidance and rules to strengthen the disclosure of risks, for example the Working Guidance of SAC Members on Investor Education, Investor Education Norms of Business Offices of Securities Companies, Essential Clauses of Disclosure Document of Investment Risks of GEM Market, Equity Notice of Investors holding Security Investment Fund, Guidance on Investor suitability Management, etc. 2. For protecting investors, SAC gave plentiful publicities, and introduced investing production to the new investors. Firstly, SAC made series of cartoons, handbooks on investor education. Secondly, SAC cooperated with CSRC Investor Education Bureau to make public-interest advertisement on investor education. Thirdly, SAC carried out advertisement selection activities on website. 3. SAC has been strengthening the education and training towards securities practitioners. Furthermore, SAC had carried out evaluations on special projects of investor education and services. The association regularly conducts investor education and financial literacy programs. Soon we will collaborate with SEBI for a comprehensive move on investor literacy programs aimed at the emerging classes of investors from schools and colleges. A sustainable activity, meant to grow and spread understanding among the public regarding Capital market, including investment function and the Indonesia Stock Exchange (IDX) and other parties such as the Securities Company, the professional associations and others implement In order to increase the number of investors in capital market and increase investor knowledge of the mechanisms associated with transactions in capital market, the Indonesia Stock Exchange(IDX) collaborates with APEI regularly conducts investor education and financial literacy programs in the form of seminars, workshops, training program, gathering, etc. to educate and enhance the capital market knowledge of investors, the activities may include such as : - socialization and education capital markets both for the public and market participants - development of capital market information centers in the region - study the characteristics of investors conducted on an ongoing basis - socialization of reference securities holdings to investors and prospective investors IDX Regular Education Program aims to arouse public interest in learning share investment thoroughly, so that they will become competent investors, and at the same time, attract new investors, either retailed ones or institutionals. IDX regular education program divided into three levels : 1. Basic Education Program is the level for participants with less knowledge of share investment 2. Intermediate Education Program is the level for participants who have completed the Basic level and are interested to learn more on share investment 3. Advance Education Program is the level for participants who have completed the Intermediate level and are interested to learn more on other investment instrument in Capital Market The establishment of IDX Corners is to introduce the Capital Market as early as possible to the academic world. Currently, the establishment of IDX Corners is using the concept of 3 in 1 (co-operation between JSX, University and Security Company) so that the academia can not only learn the Capital Market theoretically, but are also able to practice it. In order to develop Indonesias capital market, Indonesia Stock Exchange also makes several direct approaches to the public. One of them is through the establishment of the Capital Market Information Center (PIPM) in potential regions. Currently, Japan envisages the following issues; 1. Need to change money flow from savings to investment 2. Continued low interest rates in a mature economy and growing difficulty to build wealth through deposits and savings 3. Growing concerns about public pension system in an aging society 4. Complex financial products supplied through various sales channels (unexpected losses, financial fraud, etc.) Under these circumstances, JSDA acknowledges the increasing need for upgrading financial literacy among Japanese citizens and has been conducting investor education activities as mentioned below; Supports school teachers by providing experience-based teaching materials, education programs and information magazines, and holding seminars. Set up websites for teachers and students Supports securities research activities by university students Offers donated courses on securities through the Open University of Japan 30

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

Kazakhstan

FSC

Laos

SECO

Malaysia

ASCM

Holds Investment Day commemorative events Holds Investor Relation (IR) seminars: During fiscal 2011, JSDA held a total of 24 IR seminars in Tokyo, Osaka and Nagoya in response to individual investors strong need for business information disclosure and to support the IR activities of listed companies. Altogether, 8,983 people participated in these seminars. As a member of the International Forum for Investor Education (IFIE), JSDA participated in its annual conference in Seoul in May, 2012 and exchanged views with the members and relevant parties. Within the framework of realization of the Program on development of the regional financial centre of Almaty city till 2010 approved by Order #68 of Chairman of the Agency of the Republic of Kazakhstan on regulation of activities of the regional financial centre of Almaty city from August 8, 2006 was made a decision about creation of educational centre "Academy of the regional financial centre of Almaty city" (Academy of RFCA). Creation of educational centre was aimed to training/retraining of professional staff for financial sector, in particular for the share market and financial organizations which were at the process of forming that moment. The project is also aimed to increasing of financial literacy among population of the Republic of Kazakhstan. Academy of RFCA is intended for education and training of specialists for the regional securities market. The main task of the Academy is creation of the system directed to training and retraining of professional staff of the financial sector jointly with leading international educational centres. Academy of RFCA establishes high requirements and criteria of getting qualification and certificate on graduation from educational courses, that is why the knowledge acquired in our Academy allow you to react swiftly to changes in sector of securities market and finance as a whole. SECO has been conducting investor education activities by organizing seminars under the several topics related to securities and securities market for the ministries, educational institutions and related government agencies. Also, SECO has participated in the training in our counterparts jurisdiction to exchange experiences regarding the financial literacy. The industrys investor education role is spearheaded by Bursa Malaysia which also acts as the promoter of Malaysia capital market. The investor education activities are fully supported by the stockbroking community and public listed companies as industry players. Bursa Malaysia places great emphasis in market education in the form of training, dialogues, conferences and direct engagements with our Listed Issuers and Brokers. Creating awareness and providing continuous education to the listed issuers, directors and advisers is key to ensure that the underlying principles of the Bursa Malaysia Listing Requirements are embraced and adopted. Collaboration with industry institutions and associations to carry out educational and awareness initiatives which include conferences, roadshows and dialogues with listed issuers throughout Malaysia to share our regulatory objectives and concerns to help build relationship of trust and co-operation as well as promote a self-regulation culture. Practice / guidance notes are issued from time to time to the listed issuers to aid them in compliance with the rules. The latest developments relating to regulatory services, policies, framework, etc. will also be updated in Bursa Malaysia website to enhance transparency of our regulatory roles to the public. Direct engagement with directors and advisers of listed issuers to promote higher standard of conduct among listed issuers. This is carried out from time to time when issues need to be immediately addressed and clarified. Annual Conferences and Dialogues Bursa Malaysia has organised annual conferences for compliance officers of both the securities and futures industries and conducted dialogues with the management of brokers in various cities located nationwide to achieve the following objectives :I) To enable brokers to learn new regulatory and compliance matters and tap the wide knowledge of the speakers II) To enable brokers to learn about the various breaches and issues in the industry from Bursa Malaysia so that they can better address these issues III) To provide an opportunity to have a dialogue with representatives of Bursa Malaysia to enable the brokers to better understand the regulators perspective and expectations IV) To provide an opportunity for the regulator to understand and act upon the various concerns faced by brokers V) To enhance channels of communication between Bursa Malaysia and brokers so that they have a point of reference when faced with regulatory and compliance issues Engagement with Brokers Bursa Malaysia carries out various engagements to maintain high standards of business conduct, enhance self-regulation and prevent regulatory transgressions. Bursa Malaysia conducts regular engagements with senior management and Board of Directors of brokers through dialogues and conferences for compliance officers. One-to-one engagements with senior management of brokers are also conducted to discuss our specific trading observations and concerns. These engagements have proven useful as any regulatory concern which requires the 31

immediate attention of brokers will be highlighted during the session and brokers are then able to address the concern instantly to prevent the condition / situation from deteriorating further. Securities Industry Development Corporation Securities Industry Development Corporation (SIDC) is the training and development arm of the Securities Commission Malaysia (SC). It was established in 1994 and incorporated in 2007 It organises training programmes for Malaysian and foreign regulators, company directors and market professionals as well as conduct public investor education seminars on wise investing and investors' rights. In collaboration with the SC, it develops examination questions and modules and conducts licensing examinations as part of the licensing regime for Malaysian capital market intermediaries.

Mongolia

FRC

10

Myanmar

CBM

Market Chat In line with the industrys retail strategy of sustaining and engaging existing investors, the industry continued with the annual nationwide engagement programme called Market Chat. Market Chat remains an integral part of the industrys Retail Investor Engagement Programme and is now in its fifth year with the launch of the 2011/12 series in October 2011. The industry also participated in several retail investor conferences such as Minggu Saham Amanah Malaysia, Minggu Kesedaran Kewangan 2012 and Asia Trader and Investor Convention (Singapore and Kuala Lumpur). The association and its some members organize a primary training for investors together. We have organized Investors education opening days events with the FRC and its members for 4 times or since 2007. It made a book of Financial guidelines for investors in 2010. Our website has a lot of presentations. Implementation for the Development of Capital Market in Myanmar The Capital Market Development Committee was organized on 1st July, 2008, led by the Minister of Ministry of Finance and Revenue. Moreover, six sub-committees were organized on September 17, 2008, so as to provide efficient assistance to main committee. These sub-committees are: Sub-committee for the development of domestic securities market Sub-committee relating to establishment and encouragement of public companies Sub-committee regarding the enactment of the Securities Exchange Law Sub-committee concerning with the establishment of securities companies Sub-committee for training, educating and information concerning with the capital market and Sub-committee for accounting and auditing standards for Securities Market

11

Pakistan

SECP

The SECP had earlier launched a comprehensive educational campaign aimed at creating awareness among investors about securities market. A series of booklets were published for imparting valuable information/knowledge to the general public. All the rules regulations and securities laws have been placed on the official website of the SECP for access of general public. A list of member-brokers and their agents registered with the SECP is also available on the same website. The exchanges have also been advised to place list of their members and agents on their websites. Moreover, during the last few years the SECP in collaboration with other capital market institutions has conducted various road shows both local and abroad. Further, various IPO summits and Investor education seminars have been held and sponsored by the SECP to educate and attract investors. As part of future plans, a separate comprehensive Investor Education Plan has been prepared for implementation jointly by the SECP and the market infrastructure institutions. The Plan includes various educational activities for the investors including road shows aimed at domestic and international investors; educational campaigns and seminars for retail investors, policy/decision makers, and pension and insurance sectors. The Plan also envisages the development of a dedicated website/link, and publishing informative material etc. Further, the key investor guides are in the process of revamping in collaboration with the ICM to educate and attract all walks of life to the capital market and to equip them with basic knowledge of this market. CMIC develops a counseling approach towards trading participants of the Philippine Stock Exchange and devises procedures and systems that will assist them as much as possible in complying with the rules. Moreover, CMIC is in the process of realizing one of its purposes, which is providing training courses on new or technical aspects of the rules to ensure that trading participants know what is required of them and also assist in developing the culture of self-regulation and responsibility in the context of a securities exchange which operates in the public interest. The context of the recent years has proven the need for educated investors, as the sophisticated financial instruments offered and the wide access to the international markets have known a rapid growth. Therefore the Stock Brokers` Association has offered trading on-line courses for those who are not familiarized with the trading mechanisms in the capital market. After attending these courses the participants are obtaining the basic knowledge about the capital market, trading financialinstruments and composing a portfolio according to the investment type of each person. The on-line courses are increasingly growing the difficulty level, starting with an Introduction of the Capital Market, following with the second module: Trading Financial Instruments and finishing with Technical and Fundamental Analysis in making an investment decision. The fourth courses present the advantages and the 32

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

opportunities of financing ones company through the capital market. One other interest of the Stock Brokers` Association is the young generations of specialist. Therefore, the Stock Brokers` Association has developed an agreement with The Academy of Economic Studies in Bucharest according to which, at the end of a contest, 4 students are offered a free trading course. The Stock Brokers` Association also supports internship programs for students. The Stock Brokers` Association also organizes seminars and conferences regarding the most important changes in local and global markets challenges for the local securities companies and investors. The SEC has two Divisions in order to educate stakeholders of the Capital Market. The SEC Capital Market Education & Training Division conducts a qualification framework for financial sector professionals and also conducts certificate courses for investors. The External Relations & Market Development Division is involved in educating investors/students/undergraduates/teachers by organizing workshops, road shows, TV/Radio programmes, publishing articles in papers/magazines and organising other promotional/educational activities. As part of our role in promoting investor education, ThaiBMA has established website to provide information in both the primary market and secondary market for investors through www.thaibma.or.th and www.thaibond.com. Our websites also provide research and articles about the bond market knowledge and investment. ThaiBMA regularly organizes free seminar for both retail and institutional investors. Advanced training courses in the area of bond and financial market are also offered to professionals in the bond market at minimal cost. Capital Market Development Fund (CMDA) is the key function of investor education and operate by the securities firms and the Stock Exchange (Thailand Securities Institute). A joint investor education campaign was launched recently with the cooperation of relevant capital market institutions. TSPAKB financed a broad based financial literacy survey in 2010. A quantitative survey was done with 2010 people, representing the whole population. TSPAKB also published a book about the basics of Turkish capital markets and financial products. Experts from the Istanbul Stock Exchange, the Capital Markets Board and the Association of Capital Market Intermediary Institutions of Turkey visited several universities in order to create and increase the awareness of capital markets among university students. The DFSA participates in investor education forums such as the DIFC Knowledge Series, organizes regular outreach sessions for Authorised Firms to address relevant regulatory topics, issuing of DFSA investor alerts in relation to scams and fraudulent activities. - Quarterly, The Dialogue between Regulators and VBMA members and non members is organized. The Dialogue is a communication channel between regulators and market players. At the Dialogue, The Regulators popularize new policies to the market players and the market players update the market situation to the Regulators. - The Investor Guide is under the preparation and will be published soon - To help the reporters to understand about the whole picture of the bond market and its operation that help them in writing the news for the media, a training seminar was organized for the reporters. - The basic and advance training for member is organized. - The Investors Conference is also organized yearly.

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

33

IV. Market Structures

IV 1. Breakdown of Financial Assets held by Household Account
No. 1 Country Cambodia Name of Organization SECC Breakdown of Financial Assets held by Household Account In Cambodia, a significant part of the financial assets of household are placed in cash deposits, while in stock is very low occupying a smaller portion. But stocks starting to gain recognition from the investing public and it will be considered as a large portion in the near future. As of the end of December 2011, Household Account amounted as follows: Currency and Deposit KHR 19,830 billion ( 4.95 billion USD) As of 25 September 2012 Stock Market Value KHR 548 billion ( 137 million USD) By June 30, 2012, bank deposits reached 90.881trillion RMB, the total stock market valued at21.93 trillion RMB, total amount of bond is 22.8 trillion RMB bonds at par. Composition of (Changes in) Gross Financial Asset
Period Currency Bank Deposits Non Banking Deposit Life Insurance Fund Provident and pension fund 1970s 1980s 1990s 2000s 20002005 20052011 10.7 49.9 1.7 19.9 10.3 3.5 4.3 -0.2 0.4 100 13.9 11.9 10.3 9.6 8.9 45.6 40.3 34.7 44.7 37.8 3.0 4.6 6.8 1.3 2.0 9.0 7.5 10.1 17.4 14.7 19.6 17.5 18.8 12.4 15.1 4.2 11.1 9.5 11.1 19.5 Claims on Government Shares and Debentu res 1.5 3.9 7.0 4.1 2.8 0.5 2.2 3.8 -0.5 -0.9 2.7 0.9 -1.0 0.0 0.0 Units of UTI Trade Debt (Net) Gross Financial Asset 100 100 100 100 100

2 3

China India

SAC ANMI

Projections of Household Savings Rate (in % of GDP)

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 12th Plan Average Household Savings Rate 23.2 23.6 24.0 24.4 24.8 25.2 24.4

4 5

Indonesia Japan

APEI JSDA

n/a At the end of FY2011 (Apr. 2011 to Mar. 2012), the financial assets of households totaled 1,513.3 trillion yen, up11.2 trillion yen from a year earlier. In terms of their composition, the proportions of stocks and other equities and investment trusts declined to 6.5% and 4.0%, respectively, reflecting the drop in stock prices. In contrast, cash and deposits further increased its share of overall household financial assets to 55.2%. This result indicates that households still maintain a strong preference for low risk, secure assets when investing.
FY2011 FY2008 Financial Assets of Household Currency and deposits Bonds Investment trusts Trust beneficiary rights Shares & Other Equities Insurance and pension reserves Overseas Portfolio Investment Ohers (source) Bank of Japan 1,454.6 54.5% 2.7% 3.5% 0.2% 5.4% 29.4% 0.5% 3.7% FY2009 1,490.9. 54.0% 2.6% 4.1% 0.2% 6.5% 28.1% 0.7% 3.7% FY2010 1,502.1. 54.3% 2.4% 4.2% 0.2% 6.6% 28.0% 0.7% 3.5% FY2011 1,513.3 55.2% 2.2% 4.0% 0.1% 6.5% 27.9% 0.8% 3.4% (Amount) ( trillion) 1513.3 835.0 32.8 60.8 2.1 97.7 421.7 12.3 50.6

6 7

Kazakhstan Laos

FSC SECO

n/a Amount: Billion Kip Financial Assets of household Currency in circulation Deposits Stocks 2009 3,579.58 13,354.61 2010 4,504.52 18,598.45 2011 5,661.18 23,532.24 1,027.24

Malaysia

ASCM

Source: Bank of the Lao PDR, Lao Securities Exchange Total financial assets held by household accounts for year 2010 was at RM1,386 billion. Composition of the household financial assets is as below. Financial Asset 34 Percentage of composition (in %)

Deposits with Financial Institutions Savings with Employee Provident Fund Equity holdings Unit trust holdings Endowment policies

31 30 17 16 6

Total
9 Mongolia FRC Stock and bond trade (bln MNT)

100
Government bond: 236.7 bln Corporate bond: 4.4 bln

10 11

Myanmar Pakistan

CBM SECP

12

Philippines

CMIC

On June 3, 2011, Parliament authorized government to issue bonds worth 300 billion with the purpose to support national producers and increase jobs. Parliament resolved issuing loans worth 100 billion in order to increase jobs to producers of value added products, such as cashmere thread and cashmere end-products and 150 billion to small and medium-sized enterprises. Remaining 50 billion bonds were spent on herders who prepared and sold sheep and camel wool to national industries as a bonus. The Securities Market is not established in Myanmar. The financial asset held in the individual investors account maintained with the Central Depository Company of Pakistan Limited is the individuals investments in securities whether or not listed on the stock exchanges. A substantial part of the financial assets of households in the Philippines are placed in cash deposits, with stocks and bonds occupying a smaller portion of the sum total. Nevertheless, recent figures have shown that stocks and bonds are starting to gain recognition from the investing public.

13

Romania

RSBA

14 15

Sri Lanka Thailand1

SEC ThaiBMA

n/a Government Debt Securities Outstanding Classifiedby Group of Holders

35

Source : Bank of Thailand

Long term Corporate Bond Holder

Source : ThaiBMA

16

Thailand2

ASCO

Bank deposit 33% Insurance 15% LTF/RMF funds 29% Equity/Equity fund 5% Debt instrument/bond 2% Government bond 4% Bond fund 5% Gold 4% Others (ETF, derivatives) 1% (source: SET, Nielsen reported by Kasikorn Research Center 2 Aug.2010)
Financial Assets of Households 2010 2011 2012/03 Cash 9% 9% 9% TL Deposits 53% 52% 52% FX Deposits 20% 21% 20% Equities 7% 6% 6% Mutual Funds 6% 5% 5% Pension Funds 3% 3% 3% Bonds/Bills-Eurobonds 2% 2% 2% Precious Metals 0% 2% 3% Repo 0% 0% 0% Total 100% 100% 100% Source: Central Bank of the Republic of Turkey 2012/03 (Bn. $) 27.1 160.5 62.3 20.0 14.3 8.9 5.7 8.2 1.4 308.3

17

Turkey

TSPAKB

Deposits (TL and FX) are the major component of the financial assets representing 72% of households total savings. Total deposit measure US$ 308 billion, as of end of March 2012. During the last three years, while equities share decreased slightly in total, the share of precious metals instruments increased. 18 19 UAE (DIFC) Vietnam DFSA VBMA Information not available as such national statistics are not published in the UAE n/a

36

IV 2. Share of Foreign Investors in the Stock Trading on the Exchange

No. 1 Country Cambodia Name of Organization SECC Share of Foreign Investors in the Stock Trading on the Exchange There is only one listed company, a state-owned enterprise, Phnom Penh Water Supply Authority (PPWSA) in the Cambodia Securities Market (CSX) and started the first trading on 18th April, 2012. From 18th April 2012 to 25th September 2012: Company PPWSA Average per day 2 China SAC Trading volume (share) 5,558,702 52,441 Trading value (Million Riel) 45,039( 11 Mil USD) 425 ( 106,250 USD)

In 2003, China launched the system of Qualified Foreign Institutional Investors (QFII). The system is the only way for foreign investors to carry on the A-share trade. QFII system is a transitional institutional arrangement for limitedly introducing foreign capital and opening capital market in the case of unopened capital account. According to the latest statistics from State Administration of Foreign Exchange and CSRC, there were a total of 172 QFII with the accumulated amount of $ 27.26 billionyuan by June 8, 2012.
FII Activity (Equities) Gross Purchase (Cr) 286,021.40 475,624.90 814,877.90 721,607.00 624,239.70 766,283.20 611,055.60 4,20,141.40 Gross Sale (Cr) 238,840.90 439,084.10 743,392.00 774,594.30 540,814.70 633,017.10 613,770.80 3,57,071.20 Net Investment (Cr) 47,181.90 36,540.20 71,486.30 -52,987.40 83,424.20 133,266.80 -2,714.20 63,070.00 Cumulative Investment ($Mn) 10,706.30 8,107.00 17,655.80 -11,974.30 17,458.14 29,361.83 -357.83 12,298.19

India

ANMI

Year

2005 2006 2007 2008 2009 2010 2011 2012 (January August)

Indonesia

APEI

Indonesia was downgraded below investment grade since the crisis at the end of 1997, hence, foreign investors which accounted for nearly 63% diminished drastically to a level of below 4% by early 1998. Since then, gradually foreign investors came back to Indonesia, as of end of November 2011, it has reached to a level of 59%. By mid-December 2011, Indonesia had been promoted again to an investment grade country which many believe that in 2012, foreign investors may be more and more attracted to invest their fund in Indonesia.

Japan

JSDA

Market Share & Trading Balance by Types of Investors - Tokyo, Osaka, Nagoya Year
Citi BK & Member Investment Business Life & Individuals Foreigners Trust BK Financial Account Trusts Cos. Non-life Regional BK Other

Institutions

Market Share
2008 2009 2010 2011

26.7% 26.5% 24.2% 19.0 -3,537 -1,987 -1,299 -3,150

16.7% 21.5% 17.6% 17.7% 982 -866 -2,277 5

46.4% 39.0% 47.2% 53.2 -3,708 1,777 3, 10 1,972

1.9% 2.4% 2.0% 1.8 301 76 17 -138

1.0% 1.2% 1.0% 0.9 1,632 -184 -273 617

0.2% 0.3% 0.4% 0.4 -328 -418 -631 -575

0.1% 0.1% 0.1% 0.1 -36 -277 -245 -81

5.0% 5.7% 5.0% 4.8 -4,502 1,440 962 789

0.1% 0.1% 0.1% 0.1 -193 -184 -34 30

Net Selling (-)/Buying (+) (billion)

2008 2009 2010 2011

(Source) TSE Monthly Statistics Report

6 7

Kazakhstan Lao

FSC SECO

n/a Market Share & Trading Balance by types of investors 37

Year Market Share Government (%) Domestic investors (%) Foreign investors (%) Net Selling (-)/Buying (+) (billion kip) Foreign investors 8 Malaysia ASCM

2011

September 2012

74.19 16.73 9.08

74.30 11.75 13.95

35.73

72.69

The table below indicates the market demography by trading value (in %) for domestic and foreign investor categories since the past five years. Year 2007 2008 2009 2010 2011 Foreign 37 42 26 27 26 Investors (%) Domestic 67 63 74 73 74 Investors (%) There have accounts of approximate 1000 investors to own their shares of Mongolian listed companies. The Securities Market is not established in Myanmar. Trading by the foreign investors in the stock trading on the exchanges during the period from March 1, 2012 to August 31, 2012 was Rs. 47,228.19 million, which is 7.5% of the total traded value of the stock traded on the exchanges during the period. As per records of the Philippine Stock Exchange, the share of foreign investors in the stock trading on the Exchange stands at 43.14% as of 11 September 2012. During the last year, as the world crisis continued, the Romanian capital market continued to be affected by the economic crisis at the level of portfolio investments of the non-resident persons, due to their risk aversion. This was visible in the situation of net capital inflow. The total gross inflow on the capital market in 2011 was 1.69 bl. Lei, compared with 616.43 mil. Lei in 2010. Yet the total gross outflow last year was above 1.63 bl. Lei. Thus the net capital inflow was 60.59 mil lei, compared with the 156.65 mil. Lei in 2010.

9 10 11

Mongolia Myanmar Pakistan

MASD CBM SECP

12 13

Philippines Romania

CMIC RSBA

38

(Source: RNSC) 14 Sri Lanka SEC

Turnover Equity Total (Rs. Mn) Domestic(Rs. Mn) Foreign(Rs. Mn) 77% 23% 2012* 2011 546,255.8 486,959.4 59,296.4 89% 11% 2010 570,326.8 464,733.6 105,593.2 81% 19% 2009 142,462.6 99,010.8 43,451.8 69% 31%

*provisional up to 30-Aug-2012

15 16 17

Thailand1 Thailand2 Turkey

ThaiBMA ASCO TSPAKB

Foreign investors trading value during January to July 2012 captured by 50% of total trading value in Stock market. We calculated this number by gathering information from the Stock Exchange of Thailand. Approximately 25% Investor Breakdown of the Equity Trading Volume 2010 2011 2012/03 Domestic Total 84.4% 84.5% 81.8% Domestic Individual 66.3% 68.0% 63.5% Domestic Corporation 9.6% 8.1% 9.5% Domestic Institutional 8.5% 8.4% 8.8% Foreign Total 15.6% 15.5% 18.2% Foreign Individual 0.2% 0.1% 0.1% Foreign Corporation 10.7% 11.1% 13.7% Foreign Institutional 4.7% 4.3% 4.3% Source: TSPAKB After increasing for five consecutive years from 2004 to 2008, the share of foreign investors exceeded 25% in 2008. Due to the global financial crisis, this trend reversed and foreign investors share decreased to around 15 % between 2009 and 2012/03. Foreign corporations, reflecting mainly financial institutions, are the major investor group among foreigners.

18

UAE (DIFC)

DFSA

The DIFC and DFSA laws and regulation do not impose limits on foreign investor ownership or trading. The international orientation of the NASDAQ Dubai, the DIFC exchange and clearing house, is evidenced by the variety of the country of origin of the entities with listed equity securities, i.e. US, South Africa, Bahrain, Jordan, Cayman Islands and India. Listed companies which operate subsidiaries in the UAE are required to comply with the UAE Companies Laws which stipulates foreign ownership limits. In respect of 2 equity securities listed on NASDAQ Dubai Primary Listed Shares DP World Limited UAE Nationals More than 80% % Foreign ownership Not available

19

Vietnam

VBMA

48.82 % Depa Limited 51.18 % Foreign trading as % of market are 37.3% on HOSE and 7.08% on HNX. These are the statistics over the last 2 weeks.

39

IV 3. Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market

No. 1 2 3 Country Cambodia China India Name of Organization SECC SAC ANMI Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market Bond market is not yet existent in Cambodia. The same as the case of Stock Trading

FII Activity (Debt) Year 2005 2006 2007 2008 2009 2010 2011 2012 (January August) Gross Purchase (Cr) 7,015.50 11,061.40 31,418.90 48,020.10 111,773.40 206,373.30 288,858.70 1,37,508.60 Gross Sale (Cr) 12,553.20 7,012.30 21,991.30 36,248.40 107,210.10 159,965.40 246,793.50 1,10,706.00 Net Investment (Cr) -5,518.40 4,049.00 9,428.50 11,771.90 4,563.40 46,408.00 42,067.00 26,803.60 Cumulative Investment ($Mn) -1,224.50 882.60 2,340.10 2,636.40 1,049.13 10,112.16 8,654.62 5,092.61

Indonesia

APEI

As of end of November 2011 the total of Corporate Bonds and Governments Bonds traded by foreign investors reached US$.9,86 bio which is about 1,32% of the total bonds issued of US$.749,2 bio. Government bond : Since the endof last yearto August 2012 , Banking addingRp25, 58tn, the highest among other investors, bringing its ownershipshare ofRp290,61 tnor36.19%

Japan

JSDA

FY2011

City Banks & LongTerm Credit Banks Regional Banks

28%

25%

Trust Banks

Other Financial Inst.

Life & Non-Life Insurance Companies Investment Trusts

3% 1% 13% 19%

Foreigners Corporation & Individuals Others

7%
2% 2%

*Trading among bond dealers is excluded. 6 7 8 9 Kazakhstan Laos Malaysia Mongolia FSC SECO ASCM MASD n/a Not applicable Exchange Traded Bond (ETB) was launched on 7 September 2012 (this year). Relevant guidelines and regulations are expected to be issued by the Securities Commission (SC) in January 2013. There is not OTC bond market. There have not share of foreign investors. 40

10 11 12

Myanmar Pakistan Philippines

CBM SECP CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

The Securities Market is not established in Myanmar. 0.968 Million Bonds were traded on the Exchange/OTC Market during the period March 1, 2012 to August 31, 2012. However, no trading in bonds by the Foreigners has been observed during the period. According to previous records, [t]he Philippines opened 2012 with a 25-year, US$-denominated benchmark bond to fund the country's economic stimulus projects. The government raised US$1.5 billion from bonds carrying an interest rate of 5.0% and maturity by January 2037. The offer was heavily subscribed attracting orders of $12.5B with the biggest demand coming from the US and locally, followed by the rest of Asia and Europe. Further, in 2012, the government plans to raise another $2.5 billion from overseas bond sales in 2012 and about 75 percent of its debt sales will be in the domestic market to help plug a deficit projected to hit 286 billion pesos ($6.54 billion) as the government steps up infrastructure spending to spur economic growth amid sluggish global demand. Due to the small depth of the Romanian bond market, the foreign investors` interest in this type of instruments was equally small last year. According to the RNSC statistics in 2011 there were no bond transactions performed by foreign investors, as compared to the year before when the spent over 113.55 ml Lei in buying bond, and the soled of only 23,918 Lei. Corporate Debt Securities trading on the CSE (DEX system)
Turnover Corporate Debt Securities Total (Rs. 000) Domestic (Rs. 000) Foreign (Rs. 000) 100% 0% 2012* 2011 2,690,664.4 1,925,668.9 764,995.5 72% 28% 2010 72,288.1 72,288.1 100% 2009 136,765.0 136,765.0 100%

*provisional up to 30-Aug-2012

15

Thailand1

ThaiBMA

From January 2012 to July 2012, foreign investors account for 20% of total outright trading value between Dealers to Client. In term of bond holding as of the end of July 2012, foreign investors accounted for 8% of total outstanding value of Thai bond market or by 626,334 million baht.

Remark: D2C =Dealer to Client

16 17

Thailand2 Turkey

ASCO TSPAKB

Monthly average from Feb-July 2012 approx. 20% In Turkey, banks generated around 94% of bonds and bills transactions totally both in exchange and OTC market in 1Q2012. The table shows only the brokerage firms transactions breakdown.
Investor Breakdown of the Bonds & Bills Trading Volume (Exchange+OTC Market) of Brokerage Firms Domestic Total Domestic Individual Domestic Corporation Domestic Institutional Foreign Total Foreign Individual Foreign Corporation Foreign Institutional 2010 2011 2012/03 94.8% 91.3% 91.5% 5.3% 4.1% 4.3% 37.8% 24.9% 16.9% 51.7% 62.4% 70.3% 5.2% 0.2% 5.0% 0.0% 8.7% 0.2% 8.5% 0.0% 8.5% 0.4% 8.1% 0.0%

41

Source: TSPAKB

18

UAE (DIFC)

DFSA

Foreign investors bond trading through brokerage firms is quite limited with a 9% share in 2012/03. These investors prefer to trade bonds through banks rather than brokerage firms. A large number of Sukuk (Islamic bonds) are admitted to the Official List of the DFSA. A list of such Sukuk is provided below. However the trading of such Islamic bonds takes place OTC and currently does not require reporting to the DFSA.
Issuer Type Date of Admission

DEWA Funding Limited

Sukuk

June 18th, 2008

DP World Sukuk Limited

Sukuk

July 3rd, 2007

EmaarSukuk Limited

Sukuk

July 19th, 2012

GE Capital Sukuk Ltd.

Sukuk

December 10th, 2009

HilalSukuk Company

Sukuk

November 4th, 2009

JAFZ Sukuk (2019) Limited

Sukuk

June 20th, 2012

Paka Capital Limited

Sukuk

May 20th, 2008

RAK Capital

Sukuk

August 21st, 2008

Tamweel Funding Limited

Sukuk

April 2nd, 2008

TamweelSukuk Limited

Sukuk

July 29th, 2008

19

Vietnam

VBMA

Share of Foreign Investors in the Bond Trading on HNX are 25.4% (from 09/24/12 to 09/28/12) and 17.6% (from 10/01/12 to 10/05/12)

42

IV 4. Settlement and Clearing Systems for Securities Transaction (for Stocks, Bond, Derivatives Respectively)
No. 1 Country Cambodia Name of Organization SECC Settlement and Clearing Systems for Securities Transaction n Cambodia, the Securities Clearing and Settlement Facility are provided by Cambodia Securities Exchange (CSX) under the SECC. The securities transactions are settled T+2 through the CSX.

China

SAC

India

ANMI

Indonesia

APEI

Securities Law of the People's Republic of China stipulates that the securities registration and settlement institution is a non-profit institution providing centralized registration for securities transactions, custody and settlement services. Securities registration and settlement takes unified national operation mode and the securities registration and settlement institution shall establish central securities settlement accounts and capital settlement accounts. As offering net amount settlement services to securities transactions, it should require the participants to deliver the securities and funds in full-amount and provide delivery guarantees in accordance with the principle of equivalence on money and goods. The various types of settlement funds and securities collected by the securities registration and settlement institution under business rules must be deposited in special accounts of settlement and delivery, which only be used for settlement of securities transactions in accordance with business rules. Securities Registration and Settlement Management Measures stipulates that the securities companies which participate in the centralizing clearance and settlement of securities must apply for the clearance qualification, sign an agreement with securities registration and settlement institutions and definite the rights and obligations to both sides. Securities registration and settlement institution shall select the qualified commercial banks as settlement banks for funds pay business. The settlement on securities and capital practices settlement classification. If the clearance result is wrong caused by securities registration and settlement institution, settlement participants can ask for collection by the securities registration and settlement institution after performing settlement obligations and undertaking the losses suffered by settlement participants. The Indian settlement system works under the T+2 compulsory rolling-settlement cycle i.e. transaction on the trade day are settled on the second business day after the trade day. India has two Clearing Corporations; the National Securities Clearing Corporation (NSCCL) organized by the National Stock Exchange and the Bank of India Services Limited (BOISL) set up by the Bombay Stock Exchange. In case the settlement is not completed on T + 2 day, the shares are auctioned. The auction is done on T + 3 day and auction payout is done on T + 4 day. The auction standard will be T + 1 day price for NSE and T day price for BSE. Default in auction payout then the closing out price would be 20% higher than the standard auction price. All trades on the exchange platform are in the dematerialized form. There are two Depositories in Indiaviz the National Securities Depository Limited (NSDL) organized by the National Stock Exchange and the Central Depository Services Limited (CDSL) set up by the Bombay Stock Exchange. Final settlement of trades takes place on the depositories in the book entry format. Trade Guarantee Fund: - SEBI requires the exchanges to have a system of guaranteeing settlement of trades or set up a Clearing Corporation to take up counter party risk to ensure that payment default by the members does not disturb the market equilibrium. In Indonesia, settlement, custodian and clearing of securities transactions in the exchange are handled by the Indonesian Central Securities Depository (KSEI) and the Indonesian Clearing and Guarantee Corporation (KPEI). KSEI involvement : As a Central Securities Depository Institution (CSD), in accordance with Law No.8 of the year 1995 on the Capital Market (UUPM), KSEI was established for the purpose of providing orderly, appropriate, and efficient Central Securities Depository and Transaction Settlement services. In order to operate as Central Depository and provide orderly, appropriate, and efficient settlement services, KSEI has prepared a dependable and secure system known as C-BEST (The Central Depository and Book-Entry Settlement System). KPEI differentiate its clearing system based on products transaction, they are: 1. Settlement and Clearing System for Equity: Electronic Clearing and Guarantee System (e-CLEARS). The on-line system which is owned and operated by KPEI to support the clearing and stock exchange settlement guarantee process in appropriate, regulated, efficient. All clearing and equity transaction settlement guarantee activities consist of stock exchange validation, netting, novation, positioning, up to reporting process which is done through e-CLEARS@ system. This web-based system connects KPEI, Clearing Members and the CustodianCenter online. 2. Settlement and Clearing System for Bonds : Electronic Bonds Clearing System (e-BOCS) 43

Japan

JSDA

The system to settle the corporate and retail bonds transaction in Indonesian Stock Exchange that involves the Custodian Bank as one of the proactive party over the confirmation and affirmation process of the bonds transaction data. This clearing mechanism shortens the settlement over bonds obligation and also increases the efficiency 3. Settlement and Clearing System for Derivatives : Risk Monitoring On-line (R-MOL) T The system is developed by KPEI to support clearing and Futures Index (FI) derivative transaction settlement process. This system combines the client-server and web-base technology to manage all clearing process, transactions settlement, administration and reporting up to FI transaction. This system enables the data interfacing between KPEI, Indonesian Stock Exchange, CM, and Payment Bank without manual intervention In Japan, the settlement services for securities transactions are provided mainly by Japan Securities Depository Center, Inc. (JASDEC). Its services consist of the registration of securities, settlement by book-entry transfer of securities, custody and its related operations such as general shareholders notification, conversion agency service (CB), dividend payments and proxy services for foreign stocks. In addition to those services, JASDEC provides settlement matching services, and pre-settlement matching services. On the other hand, Japan Securities Clearing Corporation (JSCC) provides clearing services such as obligation assumption, netting of cash securities positions, settlement instruction to CSDs/Settlement Banks for securities/cash, and settlement guarantees In Japan, the settlement period for stock transactions is T+3. The Bank of Japan settles JGB transactions.

Kazakhstan

FSC

I In Kazakhstan, the settlement services for securities transactions are provided mainly by the Central
depositary. The main functions of Central depositary are as follows: - render to deponents services associated with the nominal holding of financial instruments; - carry out settlements in financial instruments in relation to transactions concluded in the organized securities market and in relation to transactions concluded in the over-the-counter market with the participation of its deponents (between deponents themselves; between a deponent on the one hand and a client of another deponent on the other hand; between clients of two different deponents), as well as other persons carrying out broker and (or) dealer activities without an appropriate license in accordance with legislative acts of the Republic of Kazakhstan; - carry out depository services with regard to state securities in accordance with the Republic of Kazakhstan legislation and its compendium of rules; - render consultative, information services and other types of services not contradicting the Republic of Kazakhstan legislation; - clearing functions. The settlement and clearing services for securities transactions in the Lao PDR is provided by the Lao Securities Exchange. Its services includes registration and depository of securities, transferring securities ownership to the holders, clearing and settlement relating to securities transactions and other services relating to the distribution of dividends and the request of organizing the shareholders meeting upon the request of public companies and issuers. The settlement period for stock transactions in the Lao PDR is T+2. Trading, Clearing and Settlement Flow Chart

Laos

SECO

44

Malaysia

ASCM

9 10 11

Mongolia Myanmar Pakistan

MASD CBM SECP

The settlement services for securities transactions are provided by Bursa Malaysia Depository. Its services consist of the registration of securities, settlement by book-entry transfer of securities, custody and its related operations such as general shareholders notification, electronic dividend payments, electronic share application and provision of depositors records service. In Malaysia, the settlement period for securities transaction is T+3. On the other hand, Bursa Malaysia Securities Clearing and Bursa Malaysia Derivatives Clearing provide clearing services for securities and derivatives transaction respectively. The clearing services include netting of cash/asset positions, settlement instruction to settlement banks for asset/cash, and settlement guarantees. Government and corporate bonds are settled and cleared at the Central Banks Real Time Electronic Transfer of Funds and Securities (RENTAS) settlement system. Settlement and Clearing systems make transactions for stocks and bonds under instruction of cash trading by Mongolian Stock Exchange. There has no derivatives The Securities Market is not established in Myanmar. The clearing and settlement function is centralized at the National Clearing Company (NCCPL) which provides for integrated settlement of trades executed at the stock exchanges in dematerialized shares. All stock, debt and derivative transactions are cleared and settled through NCCPL. Both exchange and non-exchange trades and transactions are settled by the National Clearing and Settlement System (NCSS) under Balance Order Multilateral Netting with T+2 and T+1 settlement cycle. The Company also facilitates cross exchange netting, provides broker-to-broker delivery system to facilitate arbitrage transactions, institutional delivery system facilitating direct settlement of institutional trades, margin financing and margin trading modules and registration of Unique Identification Numbers (UINs). Netting of Future Market (Derivative) Transactions with Regular Market Trades is also carried out at NCCPL. Clearing and settlement of net buy or net sell positions of Clearing Members takes place in each security at the end of the Future Contract Period. Recently a Negotiated Deal Reporting System has been introduced at the stock exchanges whereby reporting of off-market transactions for both debt and equity market segments is being done on real-time basis. To enhance transparency and minimize the potential misuse of the negotiated deal market, all transactions carried out through negotiated deals functionality are also being settled through the NCCPL. The Securities Clearing Corporation of the Philippines or SCCP, a wholly-owned subsidiary of the Philippine Stock Exchange, has been established to ensure the orderly settlement of equity trades executed at the Exchange. SCCP acts as a central counterparty; thus, it guarantees the settlement of all Philippine Stock Exchange trades up to the extent of its Clearing and Trade Guaranty Fund (CTGF). Clearing members are limited to the trading Participants of the Philippine Stock Exchange. The settlement period is T+3; purchases by a customer in a cash account shall be paid in full within three (3) business days after the trade date. In Romania, the settlement services for securities transaction are provided by the Central Depository. The institution also ensures clearing services and keeping records of the issuers registries. Central Depository is a share holding company, member of BSE group. Since February 2008, Central Depositary provided an extended range of settlement and value added services for multi-country securities and multiple asset classes. The new borrowing and lending service, developed under the Global Master Securities Lending Agreement, for both fixed income and equities, minimizes the settlement risk and responds to clients changing business models. Central Depositary is the only Central and Eastern European central securities depository which is leading the first migration wave to TARGET2 Securities. 45

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

Central Depository is the sole Romanian institution authorized to allocate and administrate ISIN (International Securities Identification Number) and CFI (Classification of Financial Instruments) codes according to ISO standards (International Organization of Standardization) The settlement period for the stock transactions is T+3. Central Depository Systems (Pvt.) Limited (hereinafter referred to as the CDS) is the Clearing House in Sri Lanka and is a fully-owned subsidiary of the CSE. The CDS provides depository facilities and clearing services for securities traded on the Colombo Stock Exchange. It also provides a safe keeping facility and an electronic record of all listed securities that are dematerialised.In Sri Lanka settlement period for stock transactions is T+3.There are four banks that act as settlement Banks of the CDS. Stock Clearing and settlement of stock exchange transactions are centralized at Thailand Securities Depository Co. (TSD) and Thailand Clearing House Co.(TCH), subsidiaries of the Stock Exchange of Thailand (SET), and DVP with net settlement are used for stocks. Stock settlement convention is T+3. Bond In Thailand, clearing and settlement of bond transactions are centralized at Thailand Securities Depository Co. (TSD), a subsidiary of the Stock Exchange of Thailand (SET). The Bank of Thailand (BOT) acts as the registrar for government bonds and is responsible for the operation of BAHTNET, a high value transaction clearing network. Clearing and settlement of government transactions are done on DVP and real time gross settlement basis (RTGS). Bond Settlement convention is T+2 but can be varied upon counterparty agreement. Derivatives Exchanged traded derivatives are listed and traded on the Thailand Futures Exchange Co. (TFEX), a subsidiary of the Stock Exchange of Thailand.Clearing and settlement of these derivatives transaction are done through Thailand Clearing House Co., Ltd.( TCH), also a subsidiary of the Stock Exchange of Thailand. The clearinghouse provides a range of services related to the registering, clearing and settling of transactions executed on the exchange, the guaranteeing of contracts and the managing of risks of its members. The most important role of the clearinghouse is to serve as counterparty to every transaction.

16 17

Thailand2 Turkey

ASCO TSPAKB

Stock and Derivative products are settlement and clearing by cash and margin loan via Thailand Clearing House (TCH) In Turkey, while Takasbank is responsible for settlement and clearing services, Central Registry Agency serves as the central depository for the dematerialized capital markets instruments. Takasbank is a specialized bank dedicated to securities services in Turkey. In addition to settlement and clearing services, Takasbank acts as the central counterparty and clearing house for the Turkish Derivatives Exchange and operates the Takasbank Money Market, an OTC market where ISE members can lend and borrow funds. The Central Registry Agency Inc. (CRA) is the only central depository for all dematerialized capital market instruments. It was established in 2001 as a private company. The dematerialization process was completed in 2006 for equities and in 2007 for mutual funds and corporate bonds. The main functions of the CRA are to dematerialize and register capital market instruments and the rights attached in electronic form, with respect to issuers, intermediary institutions and rights holders, and manage the Investors Protection Fund (IPF). The IPF was established in 2001 to cover the obligations to investors of bankrupt brokerage firms and banks, with respect to equity transactions. Equities The settlement of equities and cash is done on T+2 by Takasbank, through delivery-versus-payment (DVP) system. The securities settlement operations are carried out via Takasbank Settlement Pool Account with the Central Registry Agency (CRA). CRA and Takasbank systems are fully interlinked in real time, so securities transfers are reflected in the CRA instantaneously. Settlement is realized along with the details transferred from the CRA. The custody accounts are held with the CRA. Intermediaries have a settlement pool account besides their own portfolio account and client sub-accounts. The cash accounts are held at Takasbank. At the end of each trading day, ISE transmits details of all transactions to Takasbank. Takasbank multilaterally nets the settlement positions, determines the obligations of each broker in each security, and calculates their net cash position. The net settlement position on client basis is transmitted to CRA on the trade day (T). Details of netting are available to brokers electronically on T, showing also settlement amounts due. At the end of the day, the securities of the delivering clients are blocked automatically by the CRA for settlement purposes. On T+1, net settlement records that are checked by the CRA are made available to brokers electronically. On T+2, the securities of the delivering clients are transferred from the blocked settlement account to the settlement pool account of the broker within the CRA system. Securities are transferred to client sub-accounts by the CRA. Bonds & Bills Clearing and settlement is handled by Takasbank. The settlement date for transactions is T+0, unless otherwise agreed between the parties. On the other hand, for the foreign currency denominated securities, settlement date is T+3. The settlement of government debt securities traded in the organized and OTC markets are done through the Electronic Securities Transfer System operated by the Central Bank. Takasbank has a securities account with the CBRT in order to facilitate the settlement of government debt securities. 46

After a trade, the ISE issues confirmations to both parties and to Takasbank. Takasbank multilaterally nets all trades for each ISE member for each security traded and for cash. Netting results are reported to the members electronically on trade day. Only trades done before 14:00 hrs can be settled on the same day. Derivatives The clearing and settlement of transactions are executed mostly on a cash settlement basis. TurkDex introduced physical delivery for currency contracts in 2009 and for live cattle contracts introduced for the Feast of Sacrifice in 2011. Takasbank acts as the central counterparty and guarantees the settlement of transactions. But the guarantee is limited to the collateral taken from the members and the size of the guarantee fund. Trades are executed on a client account basis, which means that margins are also monitored on account basis. However, although the margins are followed on account basis, clearing members are responsible for the margin calls. Everyday, after the announcement of daily settlement prices of contracts by TurkDex, Takasbank starts marking-to-market on account basis. If the collateral falls below the maintenance margin, a margin call is announced by Takasbank. If the collateral is above the maintenance margin in an account, but the cash margin is negative after the losses are deducted from the cash collateral, the relevant member shall be required to compensate for the negative balance by a margin call. While daily losses are deducted from the cash collateral on the same day (T+0), profits are added to the cash collateral on the following day (T+1). The DIFC has 2 exchanges, Dubai Mercantile Exchange (DME) and NASDAQ Dubai. The rest of the United Arab Emirates has 3 exchanges, Abu Dhabi Securities Exchange (ADX), Dubai Financial Market (DFM), and Dubai Gold and Commodities Exchange (DGCX). DFSA regulates DME and NASDAQ Dubai as they are established in the DIFC. The legal and regulatory environment of the DIFC exchanges is aligned to meet international best practice. NASDAQ Dubai was licensed from in Sept 2005 for the financial service of operating and exchange and operating a clearing house in respect of shares, debentures, warrants, certificates, units, rights in those investments, designated investments, options (but not on commodities) and futures (but not on commodities). DME was licensed in April 2007 for the financial services of operating an exchange in respect of commodity derivatives. Following the consolidation with DFM on 11th July, 2010, NASDAQ Dubai has outsourced its trading, clearing, settlement and custody functions for equities to DFM. Trades, for instance, have moved from a T+3 to a T+2 settlement cycle of DFM, whilst settlement timings have also changed in line with DFM. Trading hours of NASDAQ Dubai for the equity market from Sunday to Thursday are now from 10.00 to 14.00 for continuous trading whilst the pre opening auction period is from 9.30 to 9.55. In terms of clearing, NASDAQ Dubai remains the central counterparty (CCP) for the clearing and settlement of trades in NASDAQ Dubai equities to the extent that if there is a payment default, the bank guarantee defaults, CCP will meet the obligations of its member. DME lists the DME Oman Crude Oil Futures Contract, which is an exchange traded contract for crude oil price transparency in the east of Suez crude markets. Additionally, DME lists the DME Oman Crude Oil Financial Contract, which is settled with reference to the benchmark DME Oman Crude Oil Futures contract. All trades executed on the DME are cleared through and guaranteed by the CME Group, which is regulated by the U.S. Commodity Futures Trading Commission (CFTC). DME markets trade electronically, opening at 1800 (EST) and closing 1715 (EST) the next day, Sunday to Friday to mirror the trading hours for NYMEX products on CME Globex. The HNX has the Electronic Bond Trading system or EBT, which is a modernized and advanced alternative in bond trading. EBT allows only members of HNX to enter the trading bonds by EBT system. This system is very convenient and efficient that can facilitate electronic negotiation, payment by BIDV and settlement by VSD. Bond-Trading operation process as in Timely Basis Transaction or dealing date (T-n) Front office negotiates and makes deals with counterparty. Back office verifies deals with internal front office, confirms deal with counterparty, and

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

sends payment to BIDV as for ensuring cash availability or checks with VSD to make sure that bonds are available for selling. Transactions, confirmation could be done within the same day as trading date (T) or up Note that the larger number of n means that there could be more risk in

to a week before trading date (that is n could be a number from zero to 7) or even longer period sometimes. settlement if the bond market is very volatile. Trade date (T) Back office key in dealing details, as put through, into the Electronic bond trading system (EBT). Settlement date (T+ 1) The EBT will automatically notify the BIDV and VSD to make the payment and transfer securities. Processing timing for bond dealing, confirmation, payment, and settlement depends on agreement among the parties and has to be done within office hours of three main organizations, i.e., HNX, BIDV and VSD, which are summarized in the following table, and before entering deals into the EBT system to prevent a failed settlement. 47

Organizations involving in Bond Trading in Exchange

Hanoi Stock Exchange (HNX) Duties: Electronic Bond Trading (EBT)
Trading Date T

BIDV for Cash Payment Duties: Cash settlement or payment

Payment date: T+1

Vietnam Security Depository (VSD)

Duties: Securities Registration and Depository Securities Clearing and Settlement Settlement date: T+1

Trading Time

8:30 am - 11:00 am Working Time

8:30 am - 16:00 pm Morning Working Time

Afternoon Working Time

8:30 am - 11:30 am
13:30 pm - 17:00 pm

48

IV 5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.)

No. 1 2 Country Cambodia China Name of Organization SECC SAC Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.) n/a At present, Chinas equity markets with the features and functions of OTC are consisted of Agency Share Transfer System and Regional Markets of Property Right Transaction. CSRC is committed to developing the Agency Share Transfer System into a national and unified OTC market under the supervision of CSRC. At present, The number of regional markets of property right transaction has more than 200. The regional markets were established by the functional departments of local government to meet the demand for the state-owned enterprise reform and the stated-owned assets transformation in the transition process from planned economy to market economy. The regional markets have played a positive role in solving the transfer of stated-owned assets, restructuring and financing, etc. As a large number of state-owned capital exited in competitive fields, the trading volume of state-owned property right has reduced tremendously. Meanwhile, the multi-level capital market system is imperfect, the demands of small business finance and the property rights transfer are unmet, in these case, a lot of regional markets of property right transaction expand there services to small and medium enterprises. The regional markets provide listing platform to meet the demand of equity transaction, and other financing services. Currently, the function definition on the regional markets of property right transaction is unclear. The markets lack of legal basis and a good monitoring mechanism. It is difficult to unite the scattered markets throughout the country. Because of the above reasons, it is difficult to form a unified national OTC market based on the regional markets. In July 2001, approved by CSRC, Agency Share Transfer System (hereinafter referred to as Agency System) was set up to solve the historical issues. Agency System is under self-regulation by SAC. In 2002, Agency System began to provide service of share transfer for delisting companies. To support the development of high-tech enterprises, in January 2006, Agency System began to provide service of share transfer by quotation for the non-listed limited companies registered in Zhongguancun Science Park. By the end of June 2012, Agency System has 176 listing companies totally, including 8 companies from STAQ and NET, 44 delisting companies, and 124 quoted companies from Zhongguancun Science Park. 64 security companies have licences in Agency System. Cumulative trading volume over the previous years is 8.8 billion shares, value of all trading is 19 billion Yuan. Off-Exchange transactions are few in number. Such transactions take place directly between the two parties who give direct instructions to the Depositories to conduct the transactions. These transactions mainly take place in case of an open offer or takeover of a company. Such transactions do not require reporting to the exchange. In case the off-exchange transaction is executed through a registered stockbroker on a principal-to-principal basis, the stockbroker must report such transactions to the Exchanges. Bond trading in Indonesia is mostly on the Over The Counter (OTC) basis. All OTC trading is requiring reporting to Indonesia Stock Exchange (IDX) through Central Trading Platform (CTP) within 30 minutes. Since the 1998 abolishment of the obligation to trade stocks on exchanges in Japan, off-exchange transactions have been gradually increasing. However, in Japan, unlike US and European market, most stock orders are still executed through the stock exchanges and market fragmentation is not so notable. Having said that, the PTS (proprietary trading system) operators are gradually entering the Japanese market as order placement through DMA, algorithm trading, etc. grow. PTS Operating Companies: 2
Company Name SBI Next Securities apan Started PTS
Aug 20, 2007

India

ANMI

4 5

Indonesia Japan

APEI JSDA

Pricing Method
Order Matching Method

Transaction Time
8:2016:00 19:0023:59

Target Customer
Individual investors, Institutional investors

Remarks
Continuous Matching of Limited Orders, in principle, on the basis of closing price on exchange, Price movements are limited by daily price range

Chi-X Japan

July 29, 2010

Or e Matching Method

8:0016:00

Institutional investors, Securities companies

Continuous Matching of Limited Orders, in principle, on the basisof latest trading price on exchange, Price movements are limited by daily pri e range

49

TradingAmount regarding the Off-Exchange Trading

7,951,186
Off-Exchange Trading (A)
(A)

8,000,000
(Trading Amounts: 100 Mil.Yen)

10%

PTS Trading (within (A))(B)

7,256,882 8.86% 7,000,000

On Exchange Trading (C) (A)(B)

9% Share of Off-Exchange against On-Exchange (A/C) (A/C) 8.42% Share of PTS against On-Exchange (B/C) (B/C)
(C)

8%
6,000,000 7.63% 6,054,098

7.03% 5,347,742 6.36% 5,000,000

6.24% 5.92%

7%

5.47%

6.11%

6.03%

6%

4,000,000 3,572,861

5.11%

3,902,246

3,754,677

5%

3,188,598
3,000,000

4%

2,553,421
2,252,387 2,092,294

3.32%

3%

2,000,000
2%

1,000,000 396,858 7,247 0.1% 2006

505,945 0.25% 0.77%

0.84%
226,413 31,356 268,367 105,911

1%

199,649 405
0 0.02% 2001

211,498 159,720 159,389 1,568 1,016 1,160 0.07% 0.04% 0.03%

273,024

425,656 0.35%
21,487 238,438 29,928

2,279 0.04% 2005

19,521 2007

0%

2002

2003

2004

2008

2009

2010

2011
10

(Note) Data on On-Exchange Trading is compiled in reference to TSE Monthly Report.

Kazakhstan

FSC

7 8

Laos Malaysia

SECO ASCM

9 10 11

Mongolia Myanmar Pakistan

MASD CBM SECP

12 13

Philippines Romania

CMIC RSBA

As an emerging markets country, Kazakhstan just on the way to develop market relationships, including stock market operations and Other-The-Counter (OTC) financial instruments. Currently, there are no direct rules or instructions regulating Over-The-Counter (OTC) operations, as well as ATS (Alternative trading system) and MTF (Multilateral Trading Facility). In most cases, professional members of stock market prefer to operate with traditional trading systems in the centralized securities exchange market operated by a stock exchange. Not applicable Equities and derivatives transactions in Malaysia are traded on the Exchange. Unlisted debt securities are however traded over the counter and most of the debt securities available in the market are unlisted. The Electronic Trading Platform (ETP) operated by the Central Bank facilitates over thecounter trading transactions. ETP is a centralized database on Malaysian government and corporate debt securities that is integrated with Fully Automated System for Issuing/Tendering (FAST). ETP provides information on terms of issue, real-time prices, details of trades done, and supplies relevant news on debt securities issued by both the government and the private sector. Currently in Mongolia there is no such type of transaction. The Securities Market is not established in Myanmar. During the period from March 1, 2012 to August 31, 2012, off exchange transaction volume was equivalent to 16.3% of the Ready Market Trading volume of the Karachi Stock Exchange which is the largest (volume wise) stock exchange of Pakistan. In the Philippines, most stock transactions are still executed through the stock exchange due to the lower transaction cost relative to OTC transactions. In 2010, the first company was listed on the ATS market. Last month there were 25 company listed. In Romania there are no financial instrument traded outside the stock exchange.

(Source: Bucharest Stock Exchange) 50

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

In terms of Section 28 (1) of the SEC Act no person holding securities ina public company listed in a licensed stock exchange shall without the prior approval of the Commission buy, sell, gift or otherwise deal in such securities except in compliance with trading procedure adopted by such licensed stock exchange. The transfers outside the trading floor include : gifting of shares, restructuring of entities (share swaps, amalgamations etc.),margin trading and financial facilities, employee share option schemes, Takeovers and Mergers Code transactions (mandatory offers/voluntary offers), correction of data entry errors, change of custodian, qualifying shares, de-listings, and single to joint CDS account/ joint to single CDS account transfers. Bond trading in Thailand is mostly on the over-the-counter (OTC) basis. Although an electronic trading platform is offered by the Stock exchange to be an alternative for trading, it accounts for only less than 5% of total trading. Inter-dealer trading is actively done through voice box from the two main inter-dealer brokers. All trading (no matter where it takes place) is required to report to ThaiBMA within 30 minutes. ThaiBMA then disseminates these executed transactions to the market to provide for intraday market movement information. n/a According to the Article 55 of the Regulations Pertaining to the Foundation of Stock Exchanges and their Principles of Operation, the buying and selling of listed stocks and/or securities on the exchange is the main rule. However, upon the proposal of the relevant exchange and the necessary arrangements by the CMB, authorization may be granted for off-exchange trading. Unless an exception has been made to such trading, exchange members cannot trade securities of their customers off-exchange. Currently; intermediaries must trade equities, rights coupons and exchange-traded funds, and the derivatives based on equities or the equity indices on the exchanges. However, they can trade bonds & bills and derivatives based on assets other than equities or equity indices off-exchange, with the obligation to register off-exchange transactions to the ISE. Registration fee for off-exchange transaction is higher compared to the exchange traded ones. Securities listed on NASDAQ Dubai can also be traded over the counter, (OTC). The activity of operating an alternative trading system (ATS)is considered a financial services activity that could only be carried on by an Authorised Firm in the DIFC. As an Authorised Firm an ATS provider will have to comply with the regulation such as standards for applicants, requirements on conduct of business, systems and controls, monitoring, etc. However, there is no ATS which is operating at the moment in the DIFC. n/a

51

IV 6. Share of On-line Trading

No. 1 2 Country Cambodia China Name of Organization SECC SAC Share of On-line Trading n/a In March 2000, CSRC promulgated Interim Measures for Online Securities Commission to regulate and promote the development of online transactions. Subsequently, the development of online trading system is very fast. By 2006, the volume of transactions conducted via the Internet reached more than 40%. The proportion has already been averagely more than 70% at present, much higher securities companies reached more than 90%. On-line trading becomes the main trade way now. All transactions in India take place online through the exchanges. There is no floor trading in India. The exchanges offer connectivity to its trading members through V-SAT connectivity or through leased lines. The members in turn extend connectivity to trading terminals across India through computer-to-computer links (CTCL) again through V-SAT connectivity or through leased lines. The broker using his computer link directly executes transactions on the exchange. Besides Brokers are permitted to offer internet based trading to their clients. Securities and Exchange Board of India (SEBI) in August granted the brokers registered with SEBI to provide Internet-based trading are eligible to provide securities trading using wireless technology (Mobile based trading). This is the next push forward to encourage increased retail participation and has started in India. Currently, around 61 brokerage houses (around 53% of all the 114 brokerage houses in Indonesia) offer On-Line Trading System for their investors. Japan has witnessed a rapid increase in the number of Internet users and the PC market penetration rate since the latter half of the 1990s. In addition, in October 1999, the Japanese stock market entered a new era of complete liberalization of commissions and fees in the stock brokerage business. And these two factors have led to the birth of online brokers in Japan. Since then, competition among online brokers has been severe. Most of them cut commissions and fees in stock trading significantly to increase their customer base. In October 1999, there were around 300,000 internet brokerage accounts in Japan, but by March 2012, this number had reached 17.5 million accounts. Sept.2010 52 16,078,857 61,352,320 Mar.2011 52 16,468,789 66,997,116 Sept.2011 51 16,959,034 56,640,256 Mar.2012 60 17,569,423 55,877,996

India

ANMI

4 5

Indonesia Japan

APEI JSDA

Number of member firms engaged in Internet trading Number of Accounts Stock Trading Amounts (million Yen) 6 Kazakhstan FSC

7 8

Laos Malaysia

SECO ASCM

9 10 11 12 13

Mongolia Myanmar Pakistan Philippines Romani

MASD CBM SECP CMIC RSBA

14 15

Sri Lanka Thailand1

SEC ThaiBMA

16 17

Thailand2 Turkey

ASCO TSPAKB

In Kazakhstan stock exchange transactions can be made by using electronic trading platforms, also through written orders or telephone calls. Unfortunately, there is no official statistics of online-trading. Moreover, the share of individual investors which able to trade via internet, is very tiny, against institutional investors (banks, pension funds, investment companies etc.). Also, there is no floor trading in Kazakhstan, considering the fact that professional members of Kazakhstan Stock Exchange (KASE) operates through the electronic trading platform. Currently, the LSX is in the process of developing a system for on-line trading, namely Home Trading System (HTS). The HTS is expected to be launching by 2013. Since the advent of online trading in Malaysia, the growth has been steadily increasing. Currently, online trading contributes to about 17% of the total trades executed through Bursa Malaysia. It was also reported that 18% to 21% of total retail transactions were performed through online broking. Currently in Mongolia there are no online broker and dealer trading. The Securities Market is not established in Myanmar. Figure not available As provided by the Philippine Stock Exchange, the share of on-line trading, as per available records, is 6.86% of total value turnover. In Romania, the entire trading system is on-line but is performed mostly by the employees of the securities companies. In the last years, though, almost half of the Romanian securities companies have developed on-line trading systems for their clients. At present 27 broker firms provide internet trading facilities for investors. Internet trading is still not very popular among investors. Electronic trading platform for bond market which offered by the Stock Exchange of Thailand, it accounts for less than 5% of total trading. Some traders use messaging likes Reuters, Bloomberg but they still have to confirm just like OTC. Approximately 25% of total trading value.
Internet Transactions of Brokerage Firms 2010 Equities No. of Active Internet Investors No. of Trades Internet Trading Volume (US$ 1.000) Bonds and Bills 297,486 39,954,028 169,732,386 2011 383,732 54,984,643 228,764,939 2012/03 213,165 12,492,438 53,109,924

52

No. of Active Internet Investors No. of Trades Internet Trading Volume (US$ 1.000) Futures No. of Active Internet Investors No. of Trades Internet Trading Volume (US$ 1.000) Warrants No. of Active Internet Investors No. of Trades Internet Trading Volume (US$ 1.000) Leveraged FX Trading No. of Active Internet Investors No. of Trades Internet Trading Volume (US$ 1.000)
Source: TSPAKB

240 1,540 16,671 4,236 4,917,918 177,853,806 457 31,435 64,772 -

173 1,095 9,508 7,453 8,373,941 189,230,836 7,775 1,050,479 1,388,935 1,663 544,170 47,041,176

67 279 1,055 4,816 1,672,745 51,166,354 3,968 290,621 518,779 4,621 380,538 85,004,021

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

In Turkey, brokerage firms are allowed to trade in each type of markets. On the other hand, while derivatives brokerage firm can trade only in futures market, banks are allowed to trade both in futures and bonds & bills markets. The table shows the only the brokerage firms (including derivatives brokerage firms) transactions. Leveraged FX trading can be done by brokerage firms only. nternet transactions in the market have an increasing share in total. While the share of the internet transactions in equities was 0.2% in 1999, it reached to 24% at the end of the 2012/03, indicating a historic high level. Internet tradings share in the derivatives exchange rose from 5% in 2006, to 40% at the end of the 2012/03, and online trading became the major channel for futures transactions. Leveraged FX trading has been regulated by the CMB since 31 August 2011. Internets share in Leveraged FX trading have reached US$ 85 billion, recording the highest volume among other instruments. Members of the exchanges are connected electronically to the trading platforms of the exchanges. Orders to the members can be made either electronically, through voice devices or written instructions. Some members provide their customers with online trading access. HNX introduced the new electronic system for the auction of government bonds in July 2012. HNX also introduced an electronic trading system for T-bills in September 2012. HNX is trying to build the yield curve for Vietnam but this project is still in its early phase Vietnam Securities Depository now allows T+3 mechanism in stock trading on exchange

53

V. Challenges for Securities and Capital Market

V 1. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a Whole
No. 1 Country Cambodia Name of Organization SECC Major Recent Incidents and/or Challenges in Securities and Capital Market as a whole Most Recent Incidents: - On 18th April 2012, first trading day at the Cambodia Securities Exchange (CSX) Challenges in the Securities Market: - Only one listed company (only one type of share traded on the CSX) - Low liquidity of the market - Trading volume is low - Small amount of local investors - New market for the country - Investor Awareness about the complex financial products - Market risk - Encouraging other companies come to borrow the fund in market Major Recent Incidents On July 12, 2012, National Development and Reform Committee and Ministry of Finance jointly released the Notification on Reduce the Supervision Expense Standard of both Securities and Future Markets, which stipulated that CSRC brings the standard of annual transaction fee from 0.04 per thousand down to 0.02 per thousand, and exempts supervision fee of securities transaction on securities investing fund and bond. In December 2011, CSRC, PBOC, SAFE jointly released Trial Measure for Fund Management Companies, Securities Companies RMB Qualified Foreign Institutional Investors in Domestic Security Investment. Challenges: For a long time, China has formed a financing structure that the indirect financing is predominated, which leads to enterprise financing excessively dependent on bank credit. It results in the risk of macro-economic volatility highly concentrated in the banking system. During 9 years from 2002 to 2010, the fund raised from exchange market of China for Chinese enterprises is 3.28 trillion Yuan totally, only 8.5% of the increment of bank loan for the same period. The Indian Capital/Financial markets have remained subdued during the past few years. The recent events that have impacted the global financial/stock markets have also impacted the sentiments in India. The sluggish global economy has also impacted the growth of Indian Economy. The Government of India is exploring all avenues to provide the required thrust to the economy. A global turnaround for which concerted efforts are being made by various Countries will accelerate the growth process. The main challenge in security market are: Improvement of the security market, such as: Investor Protection Fund Misperception of investing in stock market is like a gamble & only for the rich people Improvement the implementation of continuous settlement, Single Investor ID (SID) Implementations of separate securities and cash account for each investor Monitoring system of securities transaction to conform with the Capital Market Rules Monitoring the compliance of market participants to the prevailing regulations Development of Straight Through Processing (STP) is one of the projects within the scope of capital market infrastructure aimed at improving the efficiency of the overall market. 1. A series of scandals uncovered about Japanese listed companies (i.e. Olympus, Daio Paper, etc.) having caused severe damage to investor confidence in Japanese capital markets and corporate governance. 2. Fraud in the solicitation of unlisted stocks and bonds 3. Exposure of a big Ponzi scheme scandal by the Japanese Investment Management Company causing a huge loss of entrusted pension money Historically, In Kazakhstan companies of the real sector in financing activities often use banking credit products against capital market instruments. In that way, one of the biggest problems is a low rate of listed issuers. Also, the main stock market participants are institutional investors (banks, insurance companies, pension funds), and the share of retail investors is negligible. Other challenges in securities market is a low liquidity and a small number of financial instruments (CDS, IRS etc.). 1. Limited choices of products 2. Market is in the early stage of development and still not on the radar screen of international investors 3. Limited investor base from local, institutional and foreign investors
increasing cost of doing business declining brokerage rate higher commission sharing with commission-based dealers following liberalization in 2010 low liquidity and dwindling trend of the market volume Low retail participation the industry is regulated by the Securities Commission and Bursa Malaysia which acts as the frontline regulator. The Central Bank has also been actively involved on the regulations of the industry, particularly to the stockbrokers that are licensed as investment banks. Inevitably, the additional regulatory structures and the embedded bureaucracies have in some or other ways affected the smoothness of the stockbrokers

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

Kazakhstan

FSC

Laos

SECO

Malaysia

ASCM

54

business operations.

9 Mongolia MASD

In tackling these challenges, the ASCM has been engaging the regulators as well as the Government with appropriate proposals to resolve the issues facing the industry and Malaysian capital market as a whole

10 11

Myanmar Pakistan

CBM SECP

To improve Securities legal environment. Now we are discussing about the draft of new Securities Market Law including new services and standards such as clearing, custody, investment trust and advisors, and self-regulatory organizations To establish new systems for securities trading, clearing, settlement and depository, and online brokerage and dealing. Management team of London Stock Exchange is helping to develop those systems since April 2011. To develop standards and requirements of new services such as clearing and custodian services, trust services, asset management and advisors. To disclose information for securities issuers and professional participants and develop information receiving and delivery infrastructure based on Mongolian Stock Exchange or Financial Regulatory Commission. To develop standards of governance of the listed companies and implement them. The Securities Market is not established in Myanmar. At present the Pakistani capital market is experiencing a difficult phases of its history owing to a number of domestic factors and impact of global financial meltdown. Turnover and market capitalization are low and new listings from good quality corporate houses are finding it difficult to get fully subscribed. Moreover, lack of investor education is coupled with limited market outreach- investors in the capital market are mainly concentrated in only two or three major sectors. The total number of registered investors in capital market is less than 200,000 while number of active investors is even lower.
In recent past, international and domestic volatility in the macro-economy led to a severe liquidity crunch, along with an exodus of foreign institutional investors leading to sharp decline in the key indices and erosion of market capitalization. The overall situation dampened the market activity and gave rise to lack of investor confidence. To cater to the situation, various market stabilization measures were taken but despite the same, investor confidence and liquidity levels could not be restored fully. A comparison of the key economic, financial and capital market indicators reveals that the Pakistani capital market has not fared very well as compared to other regional and international market. Currently, the major challenges being faced by the Pakistani capital market are summarized below: Regulatory and Structural Reforms at the Capital Market Institutions and Intermediaries Across the globe, broad movement towards consolidation and mergers is witnessed. Majority of the stock exchanges internationally stand demutualized and corporatized with healthy capitalized intermediaries. The pace of adapting to such global trends has been slow in the Pakistan. Demutualization has been achieved only recently and the market is now set to cope with post-demutualization challenges. Also, the regulatory framework of the market infrastructure institutions and capital market needs to be aligned with internationally acclaimed principles of market regulation. Increased Investor Education and Market Outreach Greater efforts are required for educating existing and potential investors about their rights, roles and responsibilities in the changing marketplace. Targeted awareness campaigns are required for retail investors, policy/decision makers, and pension and insurance sectors. Expanding market outreach is also a major challenge which can be dealt with by expanding branch network of market intermediaries, capital market infrastructure institutions and by making use of technological innovations for targeting geographically remote investor base. Restoration of Investors Confidence Major initiatives are required to reinforce investor confidence by improving risk management, governance and transparency and investor protection. Enforcement mechanisms and compliance processes (surveillance, inspection activities) need to be strengthened. Review of existing regulatory framework is needed for ensuring good corporate governance and transparency in the operations and reporting procedures of listed companies. Image Building of the Capital Market and Institutions To attract foreign investment and to acquaint international community on the capital market developments and investment prospects in Pakistan, roundtables and conferences need to be held globally and liaison with foreign counterparts and greater participation in international forums like IOSCO should be ensured. Commodity/Currency Market DevelopmentWorld over, commodities markets constitute an important part of the capital markets. Futures market in the commodity and currency are relatively new in Pakistan and major initiatives are required to diversify to promote activity ad interest in this market. Developments In early 2012, the (Philippine) Securities and Exchange Commission, having allowed CMIC to be spun off into an independent entity, approved the latters application for registration as self-regulatory organization after it complied with the requirements. On 12 March 2012, the Capital Markets Integrity Corporation Rules took effect. Under the CMIC Rules, CMIC, among other matters, enforces compliance by trading participants and, in the proper case, by issuers with the Securities Laws. On 27 July 2012, the Philippine Stock Exchange kicked off the celebrations commemorating the Exchange's 20th anniversary through a traditional bell ringing ceremony. The celebrations will culminate in December highlighted by the Exchange's first Bell Awards for corporate governance which will recognize trading participants and listed firms subscribing to high standards of corporate governance. 55

12

Philippines

CMIC

Major Challenges Investigation of, and penalizing, market manipulators; Expansion of local and foreign investors; Expansion of listed companies; High friction (transaction) costs relative to the neighboring exchanges; Public perception as regards the capital markets; and Necessity for more products relative to the market and more experienced and qualified personnel from the securities industry. 13 Romania RSBA The developments in the last few years in the European and international capital markets have put a real pressure on the Romanian capital market as well as on all the participants. As a consequence, the most important challenge is convincing the Romanian Government to list the state own companies. One other challenge is creating a modern Central Counterpart according to the regulations applicable in the European Union. Also, being a part of the European Union, Romania has to apply all the European regulations.

14

Sri Lanka

SEC

15 Thailand1 ThaiBMA 1.

2.

3. 4. 5. 6. 7.

Broadening/diversifying the (sound) product range available to investors The capacity of regulators and market participants need strengthening to meet the challenges and sophistication that comes with capital market development Limited menu of enforcement options in relation to insider dealing and share price manipulation; however the SECs enforcement capacity is being strengthened with the technical assistance of the World Bank through FIRST Initiative (the Financial Sector Reform and Strengthening Arm of the World Bank) Reducing transaction costs and expanding the use of internet trading Liberalization of securities business by the year 2012. This will create stronger competition in the business and allow for newcomers. We have started to see some of the non-bank securities companies either been acquired by bank or been merged among themselves. Many securities companies look for diversified business income apart from stock trading commission. The issuance of new debt products by government and big corporation, e.g. 50-year government bond, 10-yr government Inflation linked bond, saving bonds distributed by ATM, and 100-yr puttable corporate bond. Demutualization of Thailands Stock Exchange has been delayed due to change of government. Volatile capital inflow/outflow from foreign investors. Deposit Protection Agency (DPA) postpones its project to reduce Bank deposit coverage to 1 Million Baht per account per bank due to global financial crisis. Introduction of Gold / Silver futures by the Thailand Futures Exchange SMEs Bond project has introduced to promote bond market as another fund raising channel for SME businesses. Privileges for SMEs Bond project participants such as lower rating fee, discount on registration and annual fee are offered until the end of 2012. Opportunities to develop new financial products to respond to expanding demand of investors, e.g. infrastructure fund Environmental problems and limited energy supply create needs for alternative energy, which is advantageous to those companies in energy sector. Insecurity in global food supply creates cross-border investment between capital-rich countries and resource-rich countries, as well as needs to develop risk management tools to manage risks from food price volatility. Integration of worldwide financial markets increases needs for regulators to have policies that facilitates private sector as well as maintains reliability and prudence of regulatory bodies. As the number of senior citizen is increasing, capital market should be a source of long-term investment and introduce investment products suitable for senior citizen, e.g. investment products with capital protection, etc. Capital market should also help create financial literacy in the country.

16

Thailand2

ASCO

Market liberalization and AEC puts pressure on securities companies to adapt and prepare for new competitors. Regulations The Capital Markets Board conducted a twinning project with the German BaFIN in 2006-2007. In that study, Turkish regulations were reviewed and their conformity to European Union regulations was analyzed. It has been concluded that Turkish regulatory structure is in line with the EU standards to a large extent. Yet, there are still some amendments to be implemented. In April 2010, the communiqu regarding public offerings has been amended in view of harmonising with the EU acquis, and facilitating the IPO process. Within the context of this revision, the main amendment was the removal of the minimum free float requirement. In addition, the underwriting obligation for intermediary institutions was lifted. Offerings to qualified investors and equities to be registered for listing on the Emerging Companies Market, established for SMEs, was also regulated by this new communiqu. In July 2010, a series of new regulations, aiming largely at hindering market manipulation were announced by CMB. CMB classified equities into three groups according to liquidity and free float criteria and differentiated the trading rules. These measures became effective in October 2010. 56

In October 2010, a new regulation regarding the sale of foreign securities was released. This regulation allowed the IPO of foreign equities and eased existing regulations regarding foreign securities. In October 2010, the Banking Regulation and Supervision Agency allowed banks to issue TL-denominated bonds and bills. On the other hand, in 2011 leveraged forex transactions were defined for the first time in the Capital Market Law. Accordingly, this market is regulated by Capital Markets Board starting from end-August. In July 2011, asset management companies were given the opportunity to apply for brokerage licenses, limited to mutual fund transactions. As the global turmoil affected the markets, buy-backs have been introduced for the first time in August 2011. Concurrently, the regulation regarding short-selling was tightened. In October 2011, CMB released a new communiqu related with corporate governance. Accordingly, each listed company in the ISE-30 Index is required to have independent board members. The number of the independent board members has to be at least one-third of the total board. Banks are exempt from this regulation. In addition, a draft for a new Capital Market Law has been submitted to the Parliament in June 2012. Market Reforms The Emerging Companies Market (ECM), established as a separate market on the ISE, became operational in October 2010. This market with looser requirements than the main market is designed for SMEs. A market advisor mechanism is introduced for the ECM. On the bonds and bills market of the ISE, several new sub-markets were established lately. In May 2010, ISE introduced a new borrowing market for companies whose stocks are traded on ISE. Those companies will be able to issue debt instruments on the Offerings Market for Qualified Investors without issuing a prospectus and a circular. Repo Market for Specified Securities and Interbank Repo-Reverse Repo Market were established in December 2010 and January 2011. Istanbul Regional Financial Centre Project The government has undertaken a project in order to make Istanbul a regional financial center. Studies have started under the coordination of the government and working groups have been formed in early 2009, with the contribution of 81 public and private institutions, non-governmental organisations (including TSPAKB) and universities. The resulting Strategy Document was made public in October 2009. The studies are continuing in a wide range of areas including the justice system, regulatory and supervisory framework, diversification of financial services, taxation policies, human resources and infrastructure via working committees. Our Association is involved in every step of the project. IPO Campaign The Istanbul Stock Exchange, the Capital Markets Board, the Union of Chambers and Commodity Exchanges of Turkey, and the Association of Capital Market Intermediary Institutions of Turkey signed a protocol to encourage public offerings in 2008. Within the context of the protocol, a series of seminars, conferences and private meetings are organised across the country in order to increase the awareness among the companies about public offerings, inform them about the benefits and procedures of an IPO. A similar protocol was signed in February 2011 by the Istanbul Stock Exchange, the Capital Markets Board, the Small and Medium Industry Development Organization, and the Association of Capital Market Intermediary Institutions of Turkey in view of encouraging the IPO of small and medium size enterprises. Within the context of the protocol, the Small and Medium Industry Development Organization will subsidise the IPO costs of SMEs to be traded on the newly established Emerging Companies Market. Investor Education As stated in Section III under the Investor Education Activities, in order to increase the awareness about the capital markets, investor education activities were initiated jointly with capital markets institutions. The UAE and Dubai have not been immune to the fallout of the global financial crisis. As a result trading volumes have decreased dramatically. To further support the capital markets in the DIFC, the DFSA has completed a review of the offering and securities rules to recognise regulatory developments in peer jurisdictions and enhance the regulatory framework applicable to the issue of securities and the continuing obligations of Reporting Entities (listed companies). Effective from October 1, 2011 the DFSA operates the Official List for Securities and is the single responsible authority for admitting companies to the list and monitoring continuing obligations and disclosures. The DFSA has also amended its Recognition regime which now includes Alternative Trading Systems and enables such platforms to remotely connect firms authorised in the DIFC.

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

- The Government issued Circular 21 which is effective on September 01, 2012 to govern the interbank
57

lending. - The State Bank of Vietnam (SBV) is trying to regulate the gold market to restrict the short-selling of gold by commercial banks in Vietnam.

58

V 2. Specific Challenges in Equity Markets

No. 1. Country Cambodia Name of Organization SECC Specific Challenges in Equity Markets - Short-time investor - Promoting more listed companies to raise fund through securities market - Financial literacy and securities awareness of the public 1. It is necessary to improve multi-level capital market. At present, China has not yet formed a national OTC market under unified supervision. 2. To strengthen investor education, improve investor suitability system. At present, the management on the investor suitability is still weak. It should take measures to strengthen risk revealing and classification of various products in multi-level market, carry out investor appropriate system matching with different product. Ensure the right product sold to the right investors. 3. Product structure of capital markets is far from perfect. Capital markets need to expand the breadth and depth in serving the national economy. 4. The intrinsic restraint mechanism is not perfect,some market participant lack of honesty and law-abiding sense. 5. To continuously push on the works on securities companies creation and development. Reviving the overall market sentiment Enhancing investors confidence in the Capital Market Enhancement of participation by Retail Investors Investor education process in non-metro area including developed rural areas Enhancing levels of governance in the Capital Market Enhancing the overall image of the market intermediaries Finding pragmatic solutions to current issues facing the capital/stock market. The specific challenges in Indonesia Equity Market are: Globally economic recession, the crisis in europe along with recovery efforts in the US is very likely to continue to affect the global situation Continues efforts to increase participation from market players, particularly domestic ones, in term of go public companies, availibility of attractive investment products as well as the increasing number of of investors in the Capital Market The equality of comprehension of knowledge about investing in equity securities Introducing the capital market activities to attract much more investors Promotes infrastructure development of Indonesia Capital Markets to meet the needs of Capital market Community Overseethe market participants to be comply with the provisions of regulations 1. Japans stock exchanges having been facing fierce competition from electronic trading systems of foreign exchanges and proprietary trading systems (PTSs). 2. Insider stock trading has been successively exposed recently, involving major securities houses in Japan. Most of these cases show that their officials leaked information about large new equity issues to fund manager and other clients. Kazakhstan's stock market, including emerging companies, remains sluggish. Joint stock companies don't release shares in a free trade. The number of stock listed in the exchange is still very limited and the legislation is not sufficient and not yet complies with the related existing laws. Malaysian equity market continues to be inflicted by issues of truncated participation from foreign funds and retail investors. In terms of market demographics, foreign investors remained moreor less constant at 22% by value of shareholding and trading participation stood at 26% in 2011. Participation from retail investors dwindled to 26% of total trading value in 2011 as compared to 27% in the previous year. To increase listing requirements of Mongolian Stock Exchange and clear listed companies or cancel some companies from listing. To provide disclosure of information of listed companies. To register and list shares of Infrastructure and mining companies with strategic projects of Mongolia.

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

6 7 8

Kazakhstan Laos Malaysia

FSC SECO ASCM

Mongolia

MASD

10 11

Myanmar Pakistan

CBM SECP

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

The Securities Market is not established in Myanmar. The equity segment has seen substantial growth in the past. Among other reforms, the market witnessed the introduction of derivative products, separate automated systems for trading of equity instruments, various leverage mechanisms, book-building mechanism for initial public offerings, market making etc. However, continuous efforts need to be made to expand and broaden the product portfolio in line with international trends to enhance investment opportunities. While the cash market in Pakistan is relatively mature, the derivatives segment has not performed to its fullest. The range of derivative products offered at the stock exchanges is relatively limited. Diversified derivative instruments need to be launched to enable investors to better manage their portfolios and risks. There is a purported lack of liquidity in the market, which is founded on certain grounds, such as the singular nature of the Philippine markets product offering, which basically consists of cash equities. Furthermore, a substantial fraction of the Philippine capital markets is deemed untapped, both on the investor side and issuer side. The main challenge in the Romanian equity market remains the permanent struggle to change its status from frontier market to emerging market. One of the most important issues is represented by the reduced number of listed companies, and therefore the lack of foreign investors to trade in Romania. Increasing the trading frequency of listed equity Attracting regular research coverage of Sri Lankan stocks by international brokerage houses and fund 59


15 16 Thailand1 Thailand2 ThaiBMA ASCO n/a

managers Expanding the institutional investor base Enabling the growth of the domestic mutual fund/investment trust industry Minimising transaction costs and expanding the use of internet trading Simplifying IPO application Attracting large, high quality issuers such as state banks to expand the issuer base Increasing the free float of listed stocks Uncertainty of government policy on demutualization of SET Because of AEC, the introduction of new equity instruments is needed in order to attract investors.

17

Turkey

TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

Number of investors is a bit low compare to total number of outstanding accounts, that is, approximately 25%. To increase the number of listed companies, an IPO campaign protocol was signed in 2008 with related parties. The aim is to increase the awareness of IPO activities among the companies, and encourage non-listed companies to be listed to ISE. A similar protocol was also signed for SME companies and export companies in 2011. On the other hand, some improvements in regulations were also made by the CMB, as stated in Section V. As a result, there has been an increase in the number of listed companies. 10 SMEs, one foreign and 67 local companies were offered to public between January 2010 and July 2012. The total number of listed companies is 404 at the end of the July 2012 including collective products and alternative markets. But it is still too low compared to comparable markets stock exchanges Due to market conditions equity markets in the UAE have seen very limited IPO activity. No IPO activity took place in the DIFC during 2011 although some preliminary discussions have been taking place over the last few months. n/a

60

V 3. Specific Challenges in Bond Markets

No. 1 2 Country Cambodia China Name of Organization SECC SAC Specific Challenges in Bond Markets The SECC and the Ministry of Economic and Finance are in the process of drafting the rules and regulation of the government bond and corporate bond. Set up a normative and uniform bond market. The bond market needs to improve its creation, e.g. developing high-earned bond for making up for the system blank of bond market and satisfying diversified financing demands. The Bond Market as compared to the Equity market is smaller in portion with identified participants like Government, Corporate, Financial Institutions, Mutual Funds etc. The following will provide the overall current scenario. Increasing the liquidity and improving a pricing standard benchmark available for all participants. Enhancement of the bond transactionby reporting (Trough CTP system), although KPEI has a clearing system for bond trading transaction, many of the participants trade over the counter directly among the securities houses and banks. Enhance the role of therelated authorities in their efforts to create a more reliable price reference Overseethe market participants to be comply with the provisions of regulations 1. Vitalization of Japanese corporate bond markets: Japans corporate bond market is still small compared with the markets in the United States and Europe. Moreover, the issuance of corporate bonds in Japan is still limited to fairly high-rated companies in specific sectors. It is difficult for companies with lower credit ratings to issue corporate bonds. Moreover, the liquidity of the secondary market is low, and compared with measures taken in overseas markets to improve investor confidence in recent years, the price information structure in Japan have not really been adequate. In addition to this background, corporate bond issuance suffered dramatic declines after the occurrence of the major earthquake disaster. 2. Realization of T+2 for JGB settlement In order to reduce the settlement risk of the JGB transaction, the reduction of settlement period for the JGB transactions has been discussed, and the settlement period for the JGB outright transactions has shortened from T+3 to T+2 (the delivery and the settlement occur, in principle, on the 3rd business day starting from the contract date) since April 23, 2012. After this, the deliberation on the T+1 settlement for the outright transactions is expected to start from the autumn 2012. Major Challenges in a bond market are low liquidity and small number of issuers. The Lao domestic bond market is still in its early stage. There are only two types of bonds available in Laos include treasury bills (T-bills) issued by Ministry of Finance and BOL bonds issued by Bank of the Lao PDR. No business company, such as a public limited company, besides a bank has so farissued and sold corporate bonds at least through public offering. There is a need to broaden the capability and capacity of the bond market to supply financing to a wider base of industries and projects; particularly in supporting the structural shift towards the services and knowledge-based industries. The ability to widen access to bond financing for more sophisticated ventures is critically dependent on broadening the investor base and appetite for a wider array of debt products and credit risks. Widening the credit spectrum requires strengthening investor confidence, increasing the participation of the public and private investment management industry, expanding the product range and enhancing the market infrastructure. To issue long-term government bonds. Mongolian government firstly issued its bonds with 1-5 years in June, 2011. It has issued very short-term bonds with 1-6 months in the MSE. To issue mortgage. State-owned Banks and Private Banks are major Investors for Government Treasury Bonds in Myanmar. Therefore, over 99% of the outstanding bonds are subscribed by the institutional investors to be treated in Liquidity positions and reserve requirement. Individual investors pay less interest in investing of government bonds due to lower coupon rates compared to the bank deposit rates. Pakistans debt market remains significantly underdeveloped. While equity markets typically tend to develop earlier than debt markets in most developing countries, Pakistans economy and financial sector is at a stage where it can support and benefit from a vibrant and efficient debt market. One of the main issues in the development of the bond market remains integration of the National Savings Scheme instruments into the mainstream capital markets as the subsidized nature of its saving products makes comparable market instruments unattractive and non-competitive. Also, potential investors need to be incentivized through tax rebates and existing product range needs to be diversified by introduction of government securities. 1. Increase of liquidity through the broadening and the diversification of investor base; 2. Invitation of foreign investors into government bond markets to enhance market sophistication; 3. Enforcement of the regulatory framework (i.e., disclosure obligation); 4. Simplification of significant processes; 5. Broadening of the database; 6. Reduction of cost in offering of securities; 7. Convergence with International Financial Reporting Standards (IFRS) by 2012; and 8. Development of derivative and swap markets by establishing an exchange-based OTC derivative trading; Philippines closed the Manila Futures Exchange in 1997. 61

India

ANMI

Indonesia

APEI

Japan

JSDA

6 7

Kazakhstan Laos

FSC SECO

Malaysia

ASCM

Mongolia

MASD

10

Myanmar

CBM

11

Pakistan

SECP

12

Philippines

CMIC

13

Romania

RSBA

The bond market in Romania consists mainly in municipal bonds (39) and government bonds (28). The main challenge is increasing the confidence of the corporate sector to seek financing through the capital market.

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

1. 2.

3. 4. 5.

16 17

Thailand2 Turkey

ASCO TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

6. 7. n/a In terms of bond trading, ISE is ranked 8th among the members of World Federation of Exchanges as of end 2012/06. But corporate bond activities are still quite limited, despite the recent revival thanks to low real interest rates and changes in regulations. The DIFC is home to a large bond and Sukuk (Islamic bonds) market admitted to the Official List maintained by the DFSA. The DIFC provides an environment that gives credibility and high visibility to issuers of Debt products on its platform. Products currently admitted include Euro Medium Term Notes (EMTN) issued by prominent UAE banks and a Medium Term Note (MTN) issued by a prominent corporate entity of the Dubai Government. This year the DFSA has approved the admission of U.S. $650,000,000 Trust Certificates of JAFZ Sukuk (2019) Limited and U.S.$500,000,000 Trust Certificate under the U.S.$2,000,000,000 Emaar Sukuk Limited Trust Certificate Issuance Programme. The securities, which are based on Islamic principles of Wakala and Ijara respectively, were allowed to be admitted to the Official List of Securities of the DFSA in June 2012 and July 2012 year. The securities are also admitted to NASDAQ Dubai for trading on its market and are not due for redemption until 2019. Uncertain macro outlook unfavourable for bond market CPI is contained to around 7-8% this year 2012 but the inflationary expectation is building up. The government is trying to restructure the SOEs, banking, and financial sectors but all efforts now seem to be negatively affected by the uncertain political environment Gold prices are both increasing internally and externally but the gap between the domestic price and international price remains high, about VND2.5 million on average Upward pressure on USD/VND remains intact Liquidity remains thin Buy and hold practice No real benchmark curve that reflects the real market levels Investor base weak

Establishing a data reporting and information dissemination mechanism for unlisted corporate bonds that is publicly available to enhance transparency in bond markets and encourage greater participation Building the capacity and technical skills of financial market intermediaries and the public on debt products/trading Creating a market-making mechanism for corporate bonds Increasing the trading frequency of corporate bonds Expanding the investor base Attracting large, high quality issuers to expand the issuer base Expanding market players to securities companies since banks dominate bond market and securities companies do not have large amount of funding for bond trading. Most mutual funds for investors, especially individual investors, only invest in short-term bond to avoid interest rate risk. Many individual investors lack understanding and perceive bond investment as bank deposit. Lack of tax incentive for individual investors in bond market as they have to pay for capital gain tax while it is exemption in stock market Not enough supply of long duration bonds for insurance companies. Lack of liquid bond hedging instruments. Bond futures and interest rate futures listed on the Thailand Futures Exchange are rarely traded. Not easy to short sell bonds. No market for speculative grade / high yield corporate bond.

62

V 4. Specific Measures introduced / Implemented for the Securities Market

No. 1 Country Cambodia Name of Organization SECC Specific Measures introduced / Implemented for the Securities Market 1. Vision and Financial Development Plan 2001-2010. 2. Financial Sector Development Strategy (FSDS) 2006-2015 (Updated from Vision and Financial Development Plan for 2001-2010 in 2007) 3. Financial Sector Development Strategy (FSDS) 2011-2020 (Updated fromFSDS 2006-2015 in 2011) Specific Measures introduced by CSRC: 1. Establish inside information insiders registration management system for listed companies. 2. Maintain a continuous high pressure on insider trading behavior, while at the same time devote more efforts to increasing criminal crackdown. Finally, raise the delinquent costs of insider trading. 3. Inspect and rectify all types of transaction market for guarding against financial risk 4. Take measures to make Margin Purchase and Short Sale Business of Securities Companies transferred from pilot to a formal routine. 5. Carry out Refinancing Margin Purchase and Short Sale business. Allow securities finance company lending fund and securities owned by self or raised legally to security companies. Security companies can use the fund and securities to do business of Margin Purchase and Short Sale. 6. Carry out the system of RMB Qualified Foreign Institutional Investors (RQFII), allow the subsidiaries in Hong Kong of domestic fund management companies, security companies to use RMB raised in Hong Kong to invest in domestic security market. 7. Take measures to encourage all kinds of long-term fund investing in stock market. Coordinate the development of various institutional investors, such as Security Investment fund, Pension Fund, Social Security Fund, Insurance Companies, etc. Actively guide the venture capital and private equity fund into public and standardized operation. 8. Enhance the analytical ability on macroeconomic for securities company. Make securities company playing an active role in the construction of market. Self-Regulatory management measures by SAC: 1. SAC set up 15 special committees, including Direct Investment Committee, Advisory Committee, Securities Brokerage Committee, Investment Banking Committee, Asset Management Committee, Securities Analysts and Investment Advisers Committee, Securities Companies Compliance Committee, Finance, Accounting and Risk Control Committee, Innovation and Development Strategy Committee, International Cooperation Committee, Securities Credit Rating Committee, Human Resources Management Committee, Information Technology Committee, Securities Dispute Mediation Committee, Self-regulation Oversight Committee, Self-regulation Coordination Committee As the branch institutions of SAC, The special committees are aimed at ensuring and carrying out the rights of SAC members, improving members active participation on SAC works. The committee members cover more than 150 member units. The special committees fully reflect the opinions of SAC members on the issues of sales network policy, issuance system reform, capital management development, the construction of information separation wall systems of the securities companies, revenue policies of capital market. Moreover, it will improve innovation development risk indicator system of securities companies. 2. Impelling business innovation SAC has been actively organizing and putting forward the business creation on relatively professional fields. For the important issues involved in special committees, SAC designed programs and supervised its implement. On May 7 and 8, 2012, SAC hosted the Conference on Innovation and Development of Securities Companies, where SAC raised political suggestions to the difficult and urgently-needed to be resolved issues. 3. Strengthen formulation and revision on industry standards. SAC researched and formulated self-regulatory measures on Direct Investment Business & Sponsor, Guideline of Regions that Securities Company Business Department is Saturated, and Guideline of Information Wall System for Securities Company. SAC released Practicing Rules for Security Research Report, Guideline for Evaluating the Effectiveness of Compliance Management of Securities Company, Guideline for Estimating The Value of Collective Financial Product, etc. 4. Carrying out consultative assessment on relevant laws, regulations and policies of security market. SAC had completed the implementation effect of Securities Law. Periodic Changes/modifications aimed towards development and investors protection Simplifications in procedural areas like: Collections of Investors details called as KYCprocess which is Know your customer Modifications to the process of raising funds from the Capital market like Initial Public Issue (IPO); follow up IPO; other modes of raising Funds Emphasis on enhancing governance in the Capital/Stock Market Focus on investors education Focus on Investors protection Focus of speedy grievance redressal process for investors Growing the market capitalization through addition of more and more publicly listed companies Increasing transparency through the implementation of separate share and cash accounts for all investors which accessible through internet (AkSES Card) Introduction of new and stricker of Capital Market accounting standard and a more tighter 63

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

method of calculating Net Adjusted Working Capital (MKBD) to ensure the healthiness of all securities houses Oversightthe improvement of the securities company internal control, system and professionalism of its employees 1. Merger of Stock Exchanges In November 2011, the Tokyo Stock Exchange (TSE) and the Osaka Securities Exchange (OSE) announced a merger of their operations with a target date in January 2013. The merger of the TSE with its large share of the stock market and the OSE with its strengths in the Nikkei 225 futures and the derivatives markets would give birth to an exchange group with a good balance of strengths in both cash and derivatives transaction markets. 2. Partial revision of the Financial Instruments and Exchange Act In September 2012, the Japanese Diet passed a bill for amendment of the Financial Instruments and Exchange Act to enhance the international competitiveness of Japans markets as well as the convenience of those markets for users. The amendment is also intended to improve the financial system in the light of the turmoil in global financial and capital markets and to develop appropriate regulations assuring users of secure transactions. The following are the major amendments being introduced. Legal and regulatory frameworks to facilitate the establishment of a comprehensive exchange Currently, the operators and regulators of securities and financial products and commodity products are separated. To facilitate the establishment of a comprehensive exchange that trades all of these products, the amended act has prepared the way for new systems, including 1) enabling Financial Instruments Exchanges to trade commodity derivatives, 2) integrating the regulatory and oversight functions for a comprehensive exchange under the Prime Minister (Financial Services Agency acts on behalf of), and 3) developing a framework enabling intermediaries and central counterparty (CCP)to comprehensively handle securities and financial products and commodity products. Improving the fairness and transparency of OTC derivatives and related transactions In accordance with the international consensus for OTC derivative market reforms, the amended act 1) requires the obligatory use of electronic trading platforms for certain OTC derivatives transactions, 2) requires public announcement by the operators of electronic trading platforms of trading and other information, such as price and quantity, and 3) develops an approval framework to enable foreign electronic trading platform operators to offer their services in Japan (Systems for mandatory use of CCPs for clearing and for data storage and reporting of trading information have already been established through the 2010 amendment to the FIEA.). Ensuring appropriate regulations to prevent market misconduct To enhance deterrents to market misconduct, the amendment expanded the scope of the administrative monetary penalty and the authority for necessary investigations. On the other hand, to facilitate the smooth management of company groups, the amendment exempted certain transactions related to reorganization of companies from the scope of insider trading regulations. 3. Implementing Measures to Prevent Insider Trading and Responding to Unfair Trading Practices with Public Offering Capital Increases; In collaboration with stock exchanges, JSDA promoted the registration of listed companies on the Japan-Insider Registration and Identification Support System (J-IRISS). To persuade listed companies to register, the JSDA sent registration request letters to listed companies not yet registered on J-IRISS and visited individual companies. As a result, the number of J-IRISS registered companies at March 31, 2012 increased to 2,193 companies, or 61.48% of all listed companies. This figure compares with 1,827 companies, or 50.55% of all listed companies at June 30, 2011. The JSDA will continue to implement measures to promote registration on J-IRISS to achieve registration by all listed companies. In August 2011, the JSDA notified member firms about establishing a thorough management system for corporate-related information before making a capital increase through a public offering. In addition, in November 2011, the JSDA took measures to comply with partial revisions of the FIEA Enforcement Order, requesting issuers of prospectuses to include content on short sale regulations. In a related action, it also partially revised JSDAs Regulations Concerning Underwriting, etc. of Securities. The revised section encourages issuers to try and explain the content on short sale regulation to customers receiving the prospectus. The partial revisions were enforced in December 2011. 4. Preventions of fraud using unlisted stocks, corporate bonds, and other securities; As a measure to prevent investors from becoming victims of investment scams using unlisted stocks, corporate bonds, and other securities, the JSDA carried out activities to enlightened and warn investors about such investment scams. The JSDA included this topic in its events held on Investment Day and its various lectures and seminars for consumers and its training courses for consumer affairs consultants. Through its call center dedicated to unlisted stock investment scam complaints, the JSDA also provided information related to unlisted stocks, corporate bonds, and other securities investment scams and on cases of such investment scams reported to the authorities. In February 2012, the JSDA established an Initiatives Plan to Prevent Unlisted Stock and Other Investment Scams and proceeded with measures to prevent scams. Through its Study Group on Advertising Methods for Developing and Promoting Markets, etc., the JSDA also considered effective public relations (PR) and promotional activities to prevent unlisted stock scams. 64

5. Measures to Vitalize the Corporate Bond Market The JSDA set up a Study Group to Vitalize the Corporate Bond Market in July 2009. The study group used sub-committees to focus its deliberations on the four key issues of 1) a review of underwriting examination by securities companies, 2) granting of covenants and information disclosure, 3) corporate bond management, and 4) development of infrastructure for disseminating corporate bond price information. The study group made public its report Work Toward Vitalization of the Corporate Bond Market on July 30, 2012. The Study Group is continuing its deliberations, focusing now on measures to realize a more efficient, transparent, and highly liquid corporate bond market. 6. Revision of Financial and Securities-Related Taxation System Guided by the slogan, From Savings to Investment, Japan introduced a preferential tax rate of 10% on dividends and capital gains from publicly listed stock and some other securities in 2003. Under the difficult economic and financial conditions in ensuing years, this preferential tax treatment has been extended, but is scheduled to end in 2013, resulting in the tax rising to 20% in the following year. Despite this situation, basically Japans government is proceeding with establishing a securities taxation system that will promote securities investment. Specifically, plans call for the 2014 introduction of a tax exemption measure (Japan version ISA) for small amounts of dividends and capital gains from listed stocks and some other securities up to a maximum of 3 million over three years. In addition, the government plans to consider expanding the scope of the allowable netting of income and losses on public and corporate bonds, etc., in the tax revisions for fiscal 2013. Furthermore, the JSDA is requesting the Japanese government to provide a tax treatment measure that supports the formation of education savings for children. The measure would make income on funds invested in an account that can only be used for paying higher education expenses tax free. 6 Kazakhstan FSC The Committee's activities concerning the regulation of the securities market inrecent years were directed at the following: developing of the securities market infrastructure; strengthening the mechanisms of the protection of interests of consumers of financial services; taking action which will contribute to strengthening the financial state of organizations having the licenses to conduct professional types of activities in the securities market; strengthening the mechanisms of supervising and control of the activity of organizations having the licenses to conduct professional types of activities in the securities market; strengthening requirements of submission the information from securities market organizations, increasing the transparency of the information strengthening the mechanism of prevention the possibility of fraud including manipulating the securities market; strengthening requirements to the prospectus of bond emission. 1. Capital Market Development Strategy: SECO as a regulator will facilitate the development of the capital market as a crucial source of long-term capital raising to support economic expansion as well as developing framework of regulations, laws, taxes, accounting and IT in order to increase efficiency of the capital market. Foster clear, complete, and accurate information disclosure is also one of the strategies. Moreover, the other important strategies in developing our capital market is to promote linkage and standards of Lao capital market to comply with international requirements, to create conditions to improve the enterprise to strengthens, transparent financial and quality goods and services, and to create conditions of purchase - sale of securities, and the tack to take those skills can provide high flexibility and force to present to investors invest in the stock market is collaboration. 2. Action Plan for Capital Market Development Strategy: To upgrade existing Decree on Securities and Securities Market into Law on Securities by end of 2012; To complete drafting National Strategy on Securities Market Development for 2011-2020 by 2013; To introduce new regulations such as: - Regulation on home trading system, - Regulation on net capital ratio of securities firms, - Regulation on corporate bond, - Others 1) Capital Market Task Force 5 working groups established to assist the Capital Market Task Force (CMTF) to make recommendations to improve the efficiency and competitiveness of Malaysias capital market. Representatives from Regulatory Agencies, market players, commercial banks, financial institutions, remisiers association, fund managers, analysts, government linked investment companies and legal firms. 2) Tiered Licensing i) Full fledged dealers representatives ii) Marketing officers iii) Trade executioners 3) Retail Bonds The Securities Commission (SC) launched the retail bonds and sukuk framework in september 2012 65

Laos

SECO

Malaysia

ASCM

which allows retail investors to invest directly in bonds and sukuk. It said the launch is also in line with the initiative set out under the Capital Market Master Plan 2 to facilitate greater retail participation in the bond and sukuk market. The framework enables retail bonds and sukuk to be issued and traded either on the exchange (Bursa Malaysia) or over-the-counter (OTC) via appointed banks. By 2013, this access will be expanded to include issuances by public-listed companies and banks. Relevant guidelines and regulations are expected to be issued in January 2013. 4) ASEAN Exchange Link ASEAN Exchanges is a collaboration of seven exchanges from Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The collaboration aims to promote the growth of the ASEAN capital market by driving cross-border collaboration, streamlining access to ASEAN, creating ASEAN centric products and implementing targeted promotional initiatives. The ASEAN Trading Link marks the first key milestone for ASEAN Exchanges towards breaking down the barriers to cross-border trade in ASEAN. The ASEAN Trading Link is an excellent conduit to tap the regions growth opportunities as it allows investors an easy access to a wider investment selection across the connected markets. Malaysia and Singapore are the first two connected markets in ASEAN on 18 September 2012, while Thailand will be next when The Stock Exchange of Thailand connects on the ASEAN Trading Link in October 2012. The three markets, Malaysia, Singapore and Thailand, serve as the foundation of the ASEAN Trading Link providing a single entry-point access to three of the largest stock markets of the ASEAN Exchanges collaboration. Jointly these three markets offer nearly 3,000 listed companies with a market capitalisation of USD1.4 trillion. Together they account for some 70% of the total market capitalisation of ASEAN. 5) Referral Agents: Securities and futures brokers are now able to refer their respective clients to one another following amendments made to the Securities Commissions Licensing Handbook allowing for Referral Agent activities. The amendments, initiated by Bursa Malaysia, will create a more facilitative trading environment and boost the number of participants in both the securities and derivatives market and allow a Participating Organisation (PO), as a holder of the Capital Markets Services License (CMSL), to refer clients to a Trading Participant (TP) of Bursa Malaysia Derivatives, and vice versa. Furthermore, Dealers Representatives (DR) who hold the Capital Markets Services Representatives License (CMSRL) for dealing in securities may now refer their clients to a TP via their POs, and likewise, Registered Representatives (RR) holding the CMSRL for dealing in derivatives may refer their clients to a PO via their TPs. Referral agents must only undertake the regulated activities they are licensed for and not any other regulated activities. The Parliament adopted a new company law on Oct 06, 2011. We are discussing a draft of new Securities Market Law by Mongolian government. We are developing new trading, clearing, settlement, brokerage and dealing systems with LSE management team. Mongolian association of securities dealers organizes a training to get professional license in starting of March 2011. To enter legal requirements and authorized rights for a Self-regulatory organization into a draft of new law. We are preparing to become a self-regulatory organization Not yet Performance Functions of Self-Regulatory Organizations in Pakistan: All SROs (the stock and commodity exchanges, the Central Depository (CDC) and the National Clearing Company (NCCPL)) have the authority to make, amend or rescind their regulations with prior approval of the SECP. In accordance with the same, the SROs have various regulations in place that outline the rules and procedures for conducting trading activities and/ or business at these SROs. All individuals and firms engaged in the trading of securities and/ or commodities are bound by the respective regulations of the SRO they are related to. For the enforceability of such regulations, each SRO is equipped with the relevant automated electronic system that assists in ensuring compliance of the regulations pertaining to the trading activities of market participants by enabling the SROs to continually monitor the markets. Further, enforceability is ensured through the provisions for penalty developed by each SRO to penalize market participants for any 66

Mongolia

MASD

10 11

Myanmar Pakistan

CBM SECP

violation of such regulations. Such penalties have been specified in the relevant regulations of all SROs. The establishment of disciplinary proceedings to cater for any violations of the existing rules and regulations is vital to ensure compliance of the regulatory frameworks of the SROs. In order to deal with various contraventions of the regulations of the stock exchanges, Section 4 of their General Regulations specifies the procedures for conducting disciplinary proceedings against members of the stock exchanges who have violated any of the respective regulations. Apart from the procedures for conducting disciplinary proceedings, specific penalties have also been prescribed for the same, wherein upon failure of a member to pay the specified fine to the exchange, the Board of Directors of the exchange may suspend or expel such member. Under Section 5 of the said Regulations, the Board may suspend or expel any member of the exchange who is found guilty of fraudulent conduct. The commodity exchange has prescribed its disciplinary procedures for various violations under Sections 3.38-3.44 of the General Regulations which also includes the relevant penalties that may be imposed by the Exchange on a case to case basis. Disciplinary proceedings may also be initiated by CDC against its CDS Elements and by NCCPL against its NCC Participants under Section 14 of the CDC Regulations and Section 14 of the NCCPL Regulations respectively. Penalty provisions for the same have also been specified the relevant regulations of CDC and NCCPL. Further, the companies desirous of being listed at the stock exchanges have to fulfill the requisite conditions outlined in the Listing Regulations of the stock exchanges and after listing need to comply with the regulations established by such exchanges. Furthermore, all members/ brokers of the exchanges and the companies listed at these exchanges, in case of stock exchanges, have to abide by the regulations of their respective exchanges at all times. Major reforms undertaken in the recent years are as follows: The stock exchanges in Pakistan were recently converted into demutualized entities. The Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012 was promulgated on May 7, 2012. The Act provides a framework for the corporatization, demutualization and integration of the stock exchanges in a time bound manner. This was a much awaited development in the capital market and has now brought the Pakistani exchanges on par with various other international counterparts. Demutualization is expected to lessen the conflicts visible in a mutualised set-up where the brokers enjoyed rights of ownership, decision-making and trading. It will support enhanced governance and transparency at the stock exchanges and bring greater balance between interests of various stakeholders by clear segregation of commercial and regulatory functions and separation of trading rights and ownership rights. Post-demutualization, the Pakistani stock exchanges will be in a better position to attract international strategic partners and good quality issuers. To provide transparent and efficient price discovery through an automated trading platform for debt market securities at the stock exchanges, a Bonds Automated Trading System was introduced. Also, to introduce a separatecounter for listing and trading of privately placed debt securities, a regulatory framework was devised whereby companies are allowed to listtheir debt securities issued through private placementson the stock exchanges under their Regulations governing Over-the-Counter Market. To provide the investors with a platform for investing in the commodities market and to fulfill the hedging requirements of various market segments related to the commodities market, Pakistans first commodity exchange- PMEX was established which commenced operations in 2007. PMEX provides a regulated platform for trading of futures contract in commodities and currencies. Since then the product portfolio of PMEX has been broadened continuously to cater for the hedging and speculative needs of various stakeholders/investor groups. To provide investors with basic hedging instruments, financing options and increased investment alternatives, deliverable futures contracts and cash-settled futures contracts are available for trading at the three stock exchanges. Additionally Stock Index Futures Contract based on the KSE 30 Index and Sectoral Indices for oil and gas sector and banking sector are available at the Karachi Stock Exchange (KSE). To add depth and diverse investment alternatives to the market, Exchange Traded Funds and index based Options have been introduced in line with international best practices. To cater to the increasing liquidity and financing needs of the Pakistani capital market, the Securities (Leveraged Markets and Pledging) Rules, 2011, covering the products of Margin Financing, Margin Trading and Securities Lending and Borrowing, were formulated and promulgated. In line with the Governments objective of documenting all incomes and sectors of the economy, to address practical issues and to encourage activity in the securities market, the SECP had proposed revamping of Capital Gains Tax (CGT). Accordingly, Finance (Amendment) Ordinance, 2012 has been promulgated on April 24, 2012 and the Income Tax Rules are also in promulgation stage. Under the revised CGT regime, the National Clearing Company shall act as a withholding agent to deduct and deposit CGT from investors transactions while providing an automated and efficient mechanism for the calculation, deduction and deposit of tax. 67

 To improve standards of listings at the stock exchanges and to enhance transparency and investor protection in the capital market operations, a comprehensive policy was formulated for dealing with companies in continuous default of securities market laws. The said policy forms part of the Listing Regulations of the stock exchanges and is greatly assists in dealing with such listed defunct/non-compliant companies. A new mechanism for issuing/offering shares to High-Net Worth clients and Institutional Investors known as Book Building was launched. To ensure transparency and improve efficiency in the capital market operations, Automation of Securities Settlement project at the CDC was launched in collaboration with the Central Depository, National Clearing Company and the stock exchanges, whereby securities will be automatically transferred from the respective sellers account to the respective buyers account instead of being routed through the members main account. With the objective of fostering good governance principles and practices in the corporate sector, a new Code of Corporate Governance applicable on the listed companies was introduced incorporating international best practices. To implementrobust Anti-Money Laundering/Combating the Financing of Terrorism regime in the Pakistani capital market in light of the FATF recommendations and international best practices, effective Know-Your-Customer and Customer-Due-Diligence policies and procedures were introduced for the capital market and its intermediaries. To ensure improved monitoring of internet trading activities offered by the brokers, Internet Trading Regulations were approved for the stock exchanges which comprehensively cover various aspects while effectively addressing issues unique to this segment including risk management and privacy of investors' accounts. To strengthen monitoring and compliance by market intermediaries with the applicable regulatory provisions and to improve enforcement power of the regulators, Regulations governing System Audit (Regulatory Compliance) of the Brokers of the stock exchanges were revamped with major changes in the brokers audit process and scope. Following measures are in the pipeline and are expected to be completed soon: Laws/statutes such as the SECP Act, Futures Trading act and Securities Act have been drafted by the SECP and are in different stages of approval/promulgation. These Laws are essential for improving the regulatory framework in light of both local and international developments in the capital markets and enhancing SECPs role as the apex regulator to ensure better regulation and supervision of the market and its participants. In line with international best practices, efforts will be undertaken for the National Clearing Company (NCCPL) to function as Central Counter Party with the establishment of a settlement guarantee fund; and consolidation of risk management at NCCPL. To ensure clear segregation of roles and responsibilities between the apex and the frontline regulators to strengthen the SRO status of the market institutions, the SECP and the stock exchanges are in the process of jointly identifying such roles and responsibilities and enter into a Memorandum of Understanding. A phased approach would be adopted whereby exchanges would be gradually assigned the responsibilities with sufficient oversight and guidance to ensure a smooth transition towards the SRO status while protecting the public interest in general and investor confidence in particular. With the intention of strengthening the market intermediaries through appropriate risk management, a Revised Brokers Regime for intermediaries of stock and commodity exchanges is in the development stages. The said regime aligns with the IOSCO Principles for market intermediaries and is based on the recommendations of the Consultative Group on Capital Markets. The said regime inter alia provides for enhanced capital adequacy requirements and a code of conduct for the market intermediaries. For developing the commodities market, the SECP may explore the possibility of allowing new commodity exchanges to function in the country, as presently the potential offered by this market segment is not being utilized to the maximum. For developing an Islamic capital market in line with global best practices, the SECP is contemplating the establishment of a Shariah Board comprising of eminent Islamic scholars and market professionals to ensure that all products/services offered under this umbrella are in conformity with the Shariah principles. Regarding new product/system development, the future SECP agenda cross-listings of derivatives based on foreign indices at Pakistani stock exchanges to boost activity in index futures market. To accelerate growth in the debt market in coordination with relevant stakeholders, the possibility of listing of government debt instruments at the stock exchanges will be explored and integration of National 68

Savings Scheme instruments into the mainstream capital market. To promote transparency and price discovery of debt securities and to minimize pricing issues of debt securities, establishment of an independent Bond Pricing Agency (BPA) conforming to international standards, is in the pipeline. The BPA is expected to contribute towards stimulating activity in the primary and secondary debt markets, increasing market depth, reducing information asymmetry, increasing credibility of financial statements through accurate asset-liability valuation, product development etc. CMIC was established for the primary purpose of reinforcing the confidence of the investing public in capital market institutions and to promote a more active and vibrant market participation. In early 2012, the (Philippine) Securities and Exchange Commission, having allowed CMIC to be spun off into an independent entity, approved the latters application for registration as self-regulatory organization after it complied with the requirements, particularly the signing of a memorandum of agreement with the Philippine Stock Exchange to address the following matters: a) to set out the protocol among the officials and employees of the two entities in the handling of data and information necessary for the effective surveillance and detection of trading-related irregularities and unusual trading activities; b) to delineate jurisdiction on enforcement of listing, disclosure and trading rules; and c) to address concerns over records of PSE-market regulation department and market integrity board and the cases and other matters pending with these units. As a self-regulatory organization, CMICs primary mandate is to adopt and enforce rules, guidelines and provisions of the Securities Regulation Code (SRC) applicable to the operations and dealings of the trading participants of Philippine Stock Exchange. CMIC is committed to carry out its role as an independent regulatory body in the capital market with unquestioned integrity and the highest ethical standards. On 12 March 2012, the Capital Markets Integrity Corporation Rules took effect. Under the CMIC Rules, CMIC, among other matters, enforces compliance by trading participants and, in the proper case, by issuers with the Securities Laws. Thereafter, CMIC concluded the procurement of the surveillance system with Korea Exchange. The Philippine Stock Exchange is proposing Direct Market Access to investors in a strong bid to boost participation in the Philippine stock market. Direct Market Access is an arrangement whereby a Trading Participant's client is permitted to enter orders to buy or sell securities directly into the Philippine Stock Exchange trading system or PSEtrade for queuing and matching without any manual intervention by the trading participant. . The Romanian National Securities Commission is continuously adapting the internal regulations in order to insure a more transparent market, a better protection for the operators and the investors, against unfair, abusive and fraudulent practices. One of its main roles is to promote trust in regulated markets and in financial instruments investments and also fair and transparent operations of the regulated markets. Another concern refers to preventing market manipulation and fraud and to ensure the integrity of regulated markets and establishing standards of financial soundness and honest practice in the regulated markets. RNSC is also permanently adjusting the national regulatory framework according to the regulations mandatory at the European Union level. At the beginning of September, for example, RNSC has published a Regulation that transposes the disposals of the Regulation (EU) no 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps. Another issue is implementing the Directive of the Euroepan Parliament and of the Council, ammending Directive 2009/65/ec on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UNCTIS) as regards depositary functions, remuneration policies and sanctions. In July this year, in the Official Journal og the European Union was published Regulationa No648 (EU)/2012 On OTC Derivatives, central Counterparts and Trade Repositories, whose disposition ought to be intergrated in the national legislation of each member state. RNSC has also published internal regulation for adapting the dispositions of the prospectus Directive.

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

15

Thailand1

ThaiBMA

Through the amendments to the SEC Act, the SEC envisages changes including wide powers for the SEC to regulate demutualised stock exchanges, derivative exchanges, clearing corporations, futures brokers, futures dealers, futures fund managers, corporate investment advisers, financial planners and the unlisted bond market, in addition to the other market participants already under regulation. The SEC will also be empowered to institute civil actions against capital market offenders in order to disgorge investors who have incurred losses due to their actions. The Unit Trust Code was amended and gazetted to enable the SEC to regulate exchange traded funds. Developing a framework for the Investor Association of Sri Lanka to protect the minority shareholder rights; the main feature of this Association is that it will be a body corporate having a legal personality which can sue on behalf of investors. The introduction of a preferential share allocation mechanism for retail investors to broad base share ownership in Sri Lanka and to encourage increase participation of retail investors in mutual funds licensed by the SEC Under the Thai Capital Market Development Plan, government and private sectors including ThaiBMA 69

have agreed to continue promotion of the Thai bond market in both the demand and supply sides of the market by 1. Encouraging new products in the Thai bond market such as Inflation-linked bond for corporate, Sukuk bonds and municipal bonds. 2. Promoting electronic trading platform 3. Promoting bond market to individual investors by providing training and developing website called thaibond.com to assist individual investors. Thaibond.com will provide trading information and issuance news. 4. Encouraging private sector, especially SME to raise fund through bond issues by easing bond issue regulations, providing training and education and some privileges 5. Encouraging securities firms to participate more in bond market 6. Promoting government bond into Global index 7. Revising Tax rules for bond trading such as capital gain tax for individual - Liberalization of trading fee and brokerage license by SET. - SEC issued a regulation recently to ensure the availability and quality of securities companies analyst reports for investors. - SEC encourages ASCO to become SRO. Classification of the Equities In July 2010, CMB classified the listed equities into three groups (A, B and C) by considering some criteria such as free float market capitalization and number of freely floating shares. Additionally, investment trusts are also classified by considering their [Market Price/Net Asset Value] ratio. While Group A represents most of the equities traded, Group B and C correspond to less liquid ones. In accordance with the classification, each group is subject to different trading rules. Group A and B shares are traded through continuous auction, whereas Group C shares are traded by single-price auction method. Within Group C, equities in the Watch List Market are traded twice a day in the afternoon. Other Group C shares are traded at four single-price sessions during the day. Only Group A shares can be used for margin trading and short selling. Additionally, investors, who want to buy equities from groups B and C, have to be informed about the risks by brokerage firms before trading these shares for the first time. On the other hand, while disclosure of price level is 5 for A and B groups shares, only last price is shown for Group C shares, except for investment trusts. Emerging Companies Market (ECM) The Emerging Companies Market was established as a separate market on the ISE in October 2010 for SMEs. A market advisor mechanism is introduced for ECM to assist the company for the application to the ECM. Market advisors have to provide advisory services to the company for compliance with the capital markets regulations. NASDAQ Dubai has outsourced its trading, clearing and settlement and custody systems to its parent the Dubai Financial Market, which enjoys are large retail investor base. The market model of the DFM accommodates individual investor account structure for retail investors and provides a large liquidity pool as well as omnibus accounts held with custodians on behalf of institutional clients.

16

Thailand2

ASCO

17

Turkey

TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

- Ministry of Vietnam prepare the roadmap to develop Vietnam Bond Market from 2012 util 2020. - Important legal documents was issued in 2011 such as: Decree 01/ND-CP/2011 on Government Bond Issuance and Decree 90/ND-CP/2011 on Cooperate Bond Issuance. - More frequent big lot bond issuance reducing the total outstanding bond numbers: Numbers of outstanding bonds: 477 bond codes (slightly down compared to around 520 codes in 2010) - More frequent dialogs between regulators and market participants

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V 5. Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

No. 1. Country Cambodia Name of Organization SECC Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.) According to the Sub-decree on Tax Incentive in the Securities Sector, issuing company/listed company and securities investors can receive the tax incentive as follow: - Tax Incentives on Profit Tax for Equity and / or Debt Securities Issuing Companies Equity and/or Debt Securities Issuing companies approved by the SECC and listed on the permitted Securities Market shall fulfill the form and submit to the General Department of Taxation through SECC in order to grant the incentives by reducing 10% of total amount of tax on profit to be paid for three (03) years which shall be calculated from: 1. The beginning of the taxable year of securities issuance within the first six (6) months of the taxable year. 2. The beginning of the taxable year after the taxable year by which securities are issuedwithin the last six (6) months of the taxable year. - Tax incentives on Withholding Tax for Securities Investors. Public Investors shall gain fifty (50%) percent deduction of withholding tax on interest and/ or dividend with derives from holding and/ or buying-selling the government securities, equity securities and debt securities for the period of three (03) years counting from the opening of securities market. 1. On December 16, 2011, CSRC, the Peoples Bank of China and State Ministration of Foreign Exchange jointly released Trial Measure for Fund Management Companies, Securities Companies RMB Qualified Foreign Institutional Investors in Domestic Security Investment. RQFII trial business set out formally. The State Council of the people's Republic of China firstly approved the investment amount of 20 billion. 2.China speeds up its QFII qualification approvals and suitably lowers its QFII qualification standards to overseas institutions. Steps to accelerate the process of further Economic growth and development Provide a conducive environment for investment Clarity in various laws governing the investment Speed in according various approvals Ensure required infra-structure to support the development process The upgraded to become Investment Grade for the Country (FITCH Rating Agency) Promoting the Capital Market Industry through various International Expos and Events Increasing security measures for investors through introductions and improvements of various rules and regulations of the Capital Market Enhancement of the infrastructure system to be more efficient and effective Enhancement of cooperation withthe regional exchanges that will provide quality of procedure and rules of the game The JSDA has produced a short video titled "Japan: Touch Point for Global Growth", which is intended to introduce the possibilities and attractions of Japan and its capital market targeting foreign investors and overseas market related parties as audience. The video presents advantages and future potentials of Japan and its capital market, featuring interviews with leading pioneers and experts in seven key areas. n/a SEC has formulated a regulation on the Management of Foreign Investors in Securities Market in Lao PDR and currently studying the establishment of custodian bank in order to facilitate the investment of foreign investors. Now in its 8th year, Invest Malaysia organised annually by Bursa Malaysia was held in May 2012, with the theme for 2012 being the continuation of Malaysias transformation journey, introduced in Invest Malaysia 2010, culminating in the Economic Transformation Programme unveiled in October 2010 and which is now into its second year of implementation. Invest Malaysia 2012 will focus on the progression of Malaysias transformation showcasing the detailed deliverables that have and will positively impact the Malaysian economy and capital market. Apart from the countrys transformation, Invest Malaysia 2012 will also introduce ASEAN as a sub-theme as the region moves closer towards economic integration by 2015, as targeted under the ASEAN Economic Community (AEC) blueprint. The AEC envisages a single market and production base, a highly competitive economic region which is fully integrated into the global economy. The IM 2012 will showcase over 30 Malaysian corporates over a period of 2 days. IM 2012 invites you to explore, discover, update, expand and broaden investment opportunities in Malaysia, the heart of ASEAN. Invest Malaysia : Key Objectives for Investors - Be the first to hear groundbreaking key developments in the Malaysian capital markets that will be announced - Unrivalled access to regulators and policy makers - Unparalled access to CEOs, CIOs and Senior Management of leading Malaysian PLCs - Network with policy makers and industry leaders to gain insights for informed investment decisions 71

China

SAC

India

ANMI

Indonesia

APEI

Japan

JSDA

6 7

Kazakhstan Laos

FSC SECO

Malaysia

ASCM

Invest Malaysia 2012 Event Highlights - Plenary sessions with Keynote Address by the Prime Minister of Malaysia and guest speakers as well as thought provoking panel discussions - Profile leading companies across key sectors in corporate presentations across three conference tracks 9 Mongolia MASD - Profile leading companies across key sectors in one-on-one and small group meetings We should together do the following measures as: Develop trust services and investment funds to attract foreign investors. Decrease tax rate. Now tax rate for foreign investors is 20%. Provide standards and requirements for public disclosure of information. Not yet Market Accessibility Criteria Openness to foreign ownership No distinction is made between local and foreign investors in Pakistan and they are treated at par with local investors across all sectors without any special registration and/or licensing requirement. There are no foreign ownership limits in Pakistan and foreign investors may purchase upto 100% shareholding in a listed security through the secondary market. However, prior approval of the relevant regulator will be required for purchase of securities of companies in the financial sector, beyond a certain threshold. In case holding exceeds 10% of the outstanding securities of a listed company, only reporting is required for all investors irrespective of their categories in accordance with relevant regulatory requirements. Foreign investors are given equal treatment in respect of economic and voting rights. As per the market norms, all information including corporate actions is generally disseminated in English language. Ease of capital inflows / outflows Non-residents are allowed to trade freely in the securities including debt instruments and other derivatives products available for trading on the Stock Exchanges of Pakistan. Foreign investors are free to invest and move out capital, capital gain on investments and dividends easily at their discretion without bearing additional cost in the form of tax on foreign outflows or expropriation of funds by the government. For portfolio investment, the non-residents are required to open Special Convertible Rupee Account (SCRA) with any Authorised Dealer in Pakistan. The fund available in such special accounts can be transferred outside Pakistan or credited to a foreign currency account maintained in Pakistan at any time without prior approval of the State Bank. These accounts can also be credited with dividend income. Transfers from one such account to another may also be made in case of transfer of shares between the two account-holders. 1. Promoting and participating in regional initiatives; 2. Simplifying direct foreign investment procedures/processes; 3. Upgrading private and public infrastructure and being at par with international standards; 4. Reducing cost in doing business; 5. Utilizing Filipinos advantage/strength in English as second language; 6. Broadening the database; 7. Liberalizing of exchange controls; and 8. Improving connectivity with foreign counterparties. Permanent contact with members of the Parliament, the Government and those of other institutions in a position to create lobby for investing in the local stock exchange. Recently, the Stock Brokers` Association has organized for its members working trips to three European Security Exchanges, during which our members had the opportunity to discuss not only with their colleagues, but also with representative of potential investor companies, investment funds, financial institutions. Another important method of attracting foreign investors is adapting the national legislation to the European and international ones, giving more facile access for those who want to extend their portfolios to the financial instrument available on the Romanian capital market.

10 11

Myanmar Pakistan

CBM SECP

12

Philippines

CMIC

13

Romania

RSBA

14

Sri Lanka

SEC

Capital Gains are tax free Foreign investment process streamlined through opening a single account called the SIA Account (for Sri Lanka Government securities, equity, corporate bonds and unit trusts) Dividends and capital invested freely repatriable no exchange controls Foreign investment allowed in Sri Lanka Government securities, up to a maximum of 12.5% of the outstanding stock Foreign investment allowed in listed corporate bonds, up to a maximum of 50% of the issue size 100% foreign equity ownership is allowed in most areas of the economy Foreign investment now allowed in all unit trusts/investment trusts/mutual funds Showcasing the investment opportunities in the Sri Lankan capital market through international 72

15

Thailand1

ThaiBMA

investor forums : Investor forums were held in London (in partnership with the London Stock Exchange and Bloomberg UK), Malaysia (in association with the CIMB Group) and Singapore in 2011 and in Tokyo in 2012 Launch of the S&P Sri Lanka 20 Index for local and foreign investors to gauge the performance of Sri Lankan equity market and for creating a Sri Lankan equity benchmark capable of supporting index linked financial products Facilitating the fast tracking of the implementation of a margin based Risk Management System for both the CSE and Broker Firms (phase I), establishing a suitable Delivery-versus-Payment (DvP) mechanism for stock market transactions (phase II), and a Clearing Corporation for central counter party guarantee (phase III) together with the CSE Enabling the necessary requirements for an elevation to the MSCI Emerging Markets Index which remains the best option to attract foreign portfolio investments into Sri Lanka Facilitating the demutualisation of the CSE : the Cabinet of Ministers in Sri Lanka approved the demutualisation of the CSE which will be by way of a special Act Facilitating the establishment of a full-fledged multi-asset class commodities and derivatives exchange in Sri Lanka -Double Tax Treaty to exempt withholding tax on capital gain/interest for foreign investors who buy Thai government bonds. -Not subject to capital control measures if go for direct investment. -ASEAN Economic Community (AEC) Reduction of corporate income tax from 30% to 23% and finally to 20% in 2013. Create Thailand branding to promote 5 major industries consisting of healthcare, tourism, food & agriculture, energy, and telecommunications.

16

Thailand2

ASCO

17

Turkey

TSPAKB

18

UAE (DIFC)

DFSA

19

Vietnam

VBMA

Improve measures of foreign investment promotion, e.g. provide tax incentives to those who set up regional offices in Thailand, etc. With collaboration of CMB, ISE, TurkDEX and other capital market institutions, international events were organised to introduce the Turkish capital markets to foreign investors and institutions. In 2010 and 2011, two activities were organized respectively in South Korea and Taiwan. The DFSA has worked closely with NASDAQ Dubai as well as the local securities regulator, the Emirates Securities and Commodities Authority (SCA) to implement enhancements to the clearing and settlement model used on NASDAQ Dubai and its parent the Dubai Financial Market. The DFSA his working closely with the SCA, NASDAQ Dubai and the UAE exchanges to meet the qualifying criteria for an upgrade to emerging market status by MSCI. Work on this issue is ongoing. An upgrade to emerging market status of UAE is expected to encourage the participation of foreign investment (funds) in the UAE Markets. Whilst there are no restrictions on foreign ownership in the DIFC, the existing UAE Companies Law stipulates a UAE ownership of at least 51% of all companies. However a revised UAE Companies Law has recently been signed into effect by the President of the UAE which proposes a revision of foreign ownership limits for certain businesses. The revised Companies Law is yet to be released to the public. - Continue to implement the Resolution 11 in a stable and effective way to reset three macroeconomic indices of inflation, forex rate and foreign reserve.so that foreign investor will come back to buy the bond. - MOF should consider to exempt withholding tax on capital gain/interest for foreign investors for those one invest in G Bond. - Investor Conference to communicate with Foreign Investor.

73