Unlicensed activities: The Court of Appeal confirmed the legitimacy of NSSMC’s actions against LLC UTESISTEM TRADE

National Securities and Stock Market Commission (NSSMC), within the scope of its powers, controls the activities of professional participants in capital markets and organised commodity markets, which must obtain appropriate licences from the regulator.

Thus, NSSMC imposed a sanction on LLC UTESISTEM TRADE for conducting transactions related to the direct conduct of professional activities in the capital markets and organised commodity markets, which require a licence. The company carried out activities that require licensing, but acted without the necessary permit, which is classified as unlicensed activities.

NSSMC found that UTESISTEM TRADE LLC created conditions for holding an electronic auction for the sale of unprocessed timber and ensured the centralised conclusion of transactions (exchange agreements, exchange contracts) in relation to exchange goods without a licence. The regulator issued a resolution to impose a fine of UAH 153,000 on the company for violations on organised commodity markets.

The company filed a claim with the court to cancel the NSSMC Resolution, but the court dismissed the claim. Disagreeing with the Resolution of the court of first instance, the company filed an appeal. Thus, in October 2024, the Second Administrative Court of Appeal dismissed the appeal and upheld the Resolution of the first instance court.

In its Resolution, the panel of judges agreed with the conclusion of the court of first instance that NSSMC had proved the legitimacy of its decision in relation to LLC UTESISTEM TRADE, as well as that the claims were unfounded and there were no grounds for their satisfaction.

In this case, NSSMC was guided by the provisions of the Law of Ukraine on Commodity Exchanges and the Law of Ukraine on State Regulation of Capital Markets and Organised Commodity Markets, as well as the Regulation on Conducting Activities for Organising Commodity Trading on Commodity Exchanges.

Timeline of events:

On 11.02.2022, NSSMC issued Resolution No. 96-ЮО on imposing a sanction in the form of a fine for violations in the capital markets and organised commodity markets on LLC UTESISTEM TRADE for the legal entity’s performance of operations related to the direct conduct of professional activities in the capital markets and organised commodity markets, which require a licence. Thus, the company acted without a licence to carry out the relevant type of activity within the framework of such professional activity (unlicensed activity).

The company filed a claim with the court to cancel the NSSMC resolution. On 19.07.2024, the Resolution of the Sumy District Administrative Court dismissed the claim of LLC UTESYSTEM TRADE in full.

UTESISTEM TRADE LLC disagreed with the Resolution of the court of first instance and filed an appeal. On 28.10.2024, the Second Administrative Court of Appeal dismissed the appeal and upheld the Resolution of the court of first instance.