Ukraine's securities commission focuses on bolstering marketplace (03/30/97)

Ukraine's securities commission focuses on bolstering marketplace

by Khristina Lew

NEW YORK - As more state property moves into the hands of the Ukrainian population through privatization, efforts to develop Ukraine's nascent stock market will take on greater significance in the coming year.

To date, securities trading in the Ukrainian market has been relatively low. But with government plans to privatize Ukraine's most attractive enterprises, notably utilities, in 1997, interest in corporate securities will grow, said Vladimir Ulyanov, director of the Corporate Finance Department at Ukraine's Securities and Stock Market State Commission.

The Ukrainian commission, created by presidential decree in June 1995, has been working with the U.S. Securities and Exchange Commission since its inception to establish, according to Mr. Ulyanov, "a strong government agency that is capable of protecting the civility of the marketplace, openness, transparency and the rights of the investor."

Mr. Ulyanov was a member of a four-person delegation from the Securities and Stock Market State Commission that held meetings in Washington and New York at the end of February. The delegation's visit was organized by Financial Markets International Inc., a United States Agency for International Development contractor.

The Securities and Stock Market State Commission (SSMSC), like the Securities and Exchange Commission, was created to protect the interests of investors in connection with the public issuance and sale of corporate securities. It regulates licensing and control over securities traders, and registration of share issues of joint-stock companies, including companies created in the privatization process.

In the future the SSMSC will regulate municipal bonds and futures, and has been tasked with developing a system of independent registries and controlling their operation.

The commission has a structure similar to the SEC and is divided into five departments: regulatory, corporate finance, enforcement, registration and information. It has the right to impose fines of up to $100,000 on violators. In December 1996 the SSMSC was expanded from five commissioners to seven; it has offices in 25 Ukrainian oblasts.

There are three stock exchanges in Ukraine: the Ukrainian Stock Exchange, the Kyiv International Stock Exchange and the Donetsk Stock Exchange. Ukraine also has a foreign market exchange created with the assistance of USAID.

The SSMSC has issued over 250 licenses for company registration on the various exchanges and some 600 licenses to brokers and dealers. According to Mykola Volkov, deputy chairman of the SSMSC, there are 200 brokerage firms registered on the Ukrainian Stock Exchange, 50 each on the Kyiv International and Donetsk stock exchanges, and 80 on the foreign market exchange.

Most Ukrainian securities are traded in the over-the-counter market, however, and the Verkhovna Rada has yet to pass laws on the creation of a national depository system and investment funds.

The Ukrainian stock market is slowly evolving, and the SSMSC has been taking pointers from institutions in the United States to improve its function.

During their February visit, Messrs. Volkov and Ulyanov, and Commissioners Serhii Biriuk and Aleksei Romashko, met with SEC and NASDAQ officials in Washington, and participated in a one-day program at the New York Stock Exchange, the world's largest.

The NYSE program, organized for the Ukrainian commissioners in part by Andrew Kyzyk, managing director of International Listings at the New York Stock Exchange, provided instruction in floor operations, market surveillance, settlement and clearance, and listing and trading requirements. The program culminated with a visit to the floor, where the Ukrainian commissioners spoke with traders.

Mr. Kyzyk said the SSMSC needs to focus specifically on developing and implementing an efficient system of settlement and clearance, and cautioned that the achievement of a flourishing marketplace is a timely and lengthy process.

The Ukrainian commissioners also had meetings with Deutschebank, AIG and the Bank of New York, the only depository bank for Russia and Eastern Europe. That meeting resulted in a March 14 seminar in Kyiv on "Accessing Global Equity with Depository Receipts" conducted by Thomas Sanford, Bank of New York vice-president, and Tetiana Golubenko-Sierant, assistant treasurer.

Foreign investors are beginning to take notice of the Ukrainian market. The Ukrainian commissioners said 28 foreign offices operate in Kyiv, and counted among Ukraine's foreign investors Credit Suisse First Boston and Merrill Lynch.

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