Professional activity in the capital markets is the activity of joint-stock companies, limited liability companies or additional liability companies to provide financial and other services in the capital markets in the course of any type of activity.
Part two of Article 41 of the Law of Ukraine On Capital Markets and Organized Commodity Markets (the “Law”) defines the following types of professional activities:
1) trading in financial instruments;
2) activities related to the organization of trading in financial instruments;
3) clearing activities;
4) depository activities;
5) asset management activities of institutional investors;
6) property management activities for financing construction projects and/or real estate transactions;
7) administration of non-state pension funds.
Combining professional activity in the capital markets with other types of activity is allowed only in the following cases:
1) combining banking activities with financial instruments trading, depository activities, property management activities to finance construction and/or real estate transactions, and mortgage coverage management activities;
2) combining the activities of a professional capital markets participant with the provision of information services in the capital markets and organized commodity markets;
3) combining the activities of a professional capital markets participant with the activities of a trade repository;
4) combining clearing activities of a professional capital markets participant to determine obligations with activities related to the organization of trade in products and/or activities related to the organization of derivative contracts on commodity exchanges;
5) combining the activities of an organized capital market operator with the activities of organizing trade in products;
6) combining the activities of the National Bank of Ukraine with professional activities in the capital markets in cases established by law;
7) the Central Securities Depository and depository institutions may combine their professional activities with activities to ensure the functioning of the accounting system for shares in limited liability companies and additional liability companies.
The activities of the Central Securities Depository may be combined with other types of activities in cases provided for by law.
Trading in financial instruments includes the following types of activities:
1) sub-brokerage activities;
2) brokerage activities;
3) dealer activities;
4) portfolio management of financial instruments;
5) investment consulting;
6) underwriting and/or placement activities with the provision of a guarantee;
7) placement activities without providing a guarantee.
Sub-brokerage is an investment firm’s activity of accepting orders from clients to enter into derivative contracts and execute transactions with financial instruments on behalf of clients and providing the corresponding orders for execution to another investment firm that carries out brokerage activities.
Brokerage activities are the activities of an investment firm to enter into derivative contracts and execute transactions with financial instruments for and on behalf of clients or for and on behalf of clients but in its own name.
Dealer activity is the activity of an investment firm in entering into derivative contracts and performing transactions with financial instruments on its own behalf and for its own account.
Portfolio management is the activity of an investment firm in managing portfolios of financial instruments consisting of one or more financial instruments and/or funds for the benefit of clients.
Investment advisory is the activity of an investment firm to provide individual recommendations to a client at the client’s request or at the initiative of the investment firm regarding the conclusion of derivative contracts, agreements on the replacement of a party to a derivative contract, and transactions with financial instruments and currency values.
Underwriting is an activity carried out by an investment firm on its own behalf and/or on behalf of an issuer or offeror for a fee in accordance with the terms of the underwriting agreement.
Underwritten placement activity is an activity carried out by an investment firm on its own behalf in accordance with the terms of an agreement on the organization of underwritten placement.
Non-guaranteed placement activity is an activity carried out by an investment firm on behalf of the issuer or offerer in accordance with the terms of the placement agreement.
Subject to the requirements of the law, an investment firm may provide clients with such additional services if they are specified in the decision of the National Securities and Stock Market Commission to issue a license to conduct the relevant type of activity within the framework of professional activity in financial instruments trading and are included in the register of professional participants in capital markets and organized commodity markets:
1) custody of financial instruments and customer funds (including accounting for rights to securities and rights thereunder on customer securities accounts within the framework of the depository institution’s custodial activities), as well as disposal of financial instruments and customer funds that are the subject of collateral (including the use of rights to securities in the interests of the customer);
2) granting loans and credits to clients for entering into derivative contracts with the participation or intermediation of such an investment firm and performing transactions with financial instruments;
3) advising clients on financing their business activities, development strategy, and other related matters, providing services and advice on reorganization or purchase of corporate rights of legal entities;
4) services involving currency transactions in cases related to the provision of services by an investment firm to its client. The provision of such services shall be subject to the requirements of the Law of Ukraine “On Currency and Currency Transactions”;
5) conducting investment research and financial analysis or providing any other general recommendations related to transactions with financial instruments;
6) services related to underwriting;
7) providing guarantees for the fulfillment of obligations to third parties under contracts concluded on behalf of a client of such an investment firm.
In the course of its activities in the capital markets, an investment firm shall have the right to provide additional services provided for in part two of Article 44 of the Law of Ukraine “On Capital Markets and Organized Commodity Markets” (except for the depositary activities of a depositary institution provided for in paragraph 1 of part two of Article 44 of the Law of Ukraine “On Capital Markets and Organized Commodity Markets”) without obtaining additional licenses or other permits.
Professional activities in the organization of trading in financial instruments include the following activities:
1) activities related to the organization of securities trading on the regulated stock market;
2) organizing the conclusion of derivative contracts in the regulated derivative contract market;
3) organizing trading in money market instruments on the regulated money market;
4) activities related to the organization of securities trading on the stock exchange BTM;
5) organizing the conclusion of derivative contracts on the BTM of derivative contracts;
6) activities related to the organization of bond trading on an OTM for bonds;
7) organizing the conclusion of derivative contracts on an OTM of derivative contracts.
Clearing activities include the following types of activities:
1) clearing activities to determine liabilities;
2) clearing activities of the central counterparty.
Clearing activities for determination of obligations are clearing, as well as settlements in the clearing accounting system and/or organization of settlements, including by preparing documents (information) for settlements and sending them to the relevant settlement institutions.
Clearing activity of a central counterparty is the activity of a clearing institution to carry out clearing, settle in the clearing accounting system and/or organize settlements, including by preparing documents (information) for settlements and sending them to the relevant settlement institutions, as well as the acquisition of mutual rights and obligations of the parties during or after the conclusion (execution) of the transaction:
1) derivative contracts;
2) transactions with financial instruments;
3) transactions with assets, other than those specified in paragraphs 1 and 2 of part one of Article 60 of the Law, admitted to trading on organized markets (including products).
Depository activities. Article 3 of the Law of Ukraine “On the Depository System of Ukraine” defines the types of depository activities and their combination. The following types of depository activities may be carried out in Ukraine:
1) depository activities of the Central Securities Depository;
2) depository activities of the National Bank of Ukraine;
3) depository activities of a depository institution;
4) custody of assets of collective investment institutions;
5) custody of pension fund assets.
The depositary activities of a depositary institution may be combined with activities related to the custody of assets of collective investment institutions and the custody of assets of pension funds.
The activities provided for in clauses 3-5 of part one of this Article may not be carried out by the Central Depository.
Activities provided for in clauses 3-5 of part one of this Article may be carried out by the National Bank of Ukraine in cases established by law.
The depositary activities of a depositary institution may be combined with activities in trading in financial instruments and/or banking activities, provided that such types of activities are carried out by separate structural units of the depositary institution in accordance with the procedure established by the Commission.
The depositary activities of the Central Depository may be combined with clearing activities in cases established by the Commission.
The NBU’s custodial activities may be combined with clearing activities.
Combining custodial activities (except for custodial activities of the National Bank of Ukraine) with other types of activities other than those established by law is prohibited.
Depositary activity – activities of professional participants of the depository system of Ukraine and the National Bank of Ukraine in providing services for the storage and accounting of securities, accounting and servicing of the acquisition, termination and transfer of rights to securities and rights to securities and restrictions on rights to securities on securities accounts of depository institutions, issuers, correspondent depositories, persons engaged in clearing activities, depositors, nominee holders, accounting of shares of limited liability companies
A business entity shall carry out professional trading activities in organized markets subject to obtaining a license to carry out the relevant type of activity within the framework of professional trading activities provided for by the Law of Ukraine “On Capital Markets and Organized Commodity Markets” and/or the Law of Ukraine “On Commodity Exchanges”.
In organized commodity markets, it is carried out:
organizing trade in products on commodity exchanges;
professional activity in organizing the conclusion of derivative contracts on commodity exchanges.
Professional activity in organized commodity markets is the activity of joint-stock companies, limited liability companies or additional liability companies to provide services for the organization of trade in products and/or the organization of derivative contracts on commodity exchanges.
A commodity exchange, in addition to a license to carry out activities related to organization of commodity trading on a commodity exchange, a license to carry out activities related to organization of conclusion of derivative contracts on commodity exchanges, shall have the right, in accordance with the procedure established by the Law of Ukraine “On Capital Markets and Organized Commodity Markets”, to obtain a license (licenses) to carry out the following types of activities in the capital markets:
1) clearing activities to determine liabilities;
2) organizing the conclusion of derivative contracts on the regulated derivative contract market;
3) organizing the conclusion of derivative contracts on the BTM of derivative contracts;
4) organizing the conclusion of derivative financial instruments on an OTM of derivative contracts.
Asset management activities of institutional investors (asset management activities) – activities carried out by an asset management company for remuneration on its own behalf or on the basis of a relevant asset management agreement that belong to institutional investors on the basis of ownership.
Asset management activities of institutional investors (mortgage servicing activities) – activities carried out by a mortgage servicer on its own behalf and for a fee for a specified period of time on the basis of a mortgage servicing agreement.
Non-state pension fund administration is a professional activity of a capital markets participant – administrator of a non-state pension fund, which is carried out by him for remuneration on his own behalf and on the basis of a relevant agreement with a non-state pension fund.
Property management activities for financing construction and/or real estate transactions – activities related to attracting funds from individuals and legal entities for management by the manager in order to finance housing construction, as well as issuing, placing and accounting for certificates of real estate funds.
Professional activities are licensed by the National Securities and Stock Market Commission in accordance with the laws of Ukraine regulating professional activities in the capital markets and organized commodity markets, regulations adopted in accordance with the Law of Ukraine “On Capital Markets and Organized Commodity Markets”.
The requirements for the form of submission of documents (paper or electronic) for obtaining a license are established by the regulatory legal acts of the National Securities and Stock Market Commission on licensing.