The regulator will control all M&A transactions

Starting in January, the stock market regulator will begin to approve or deny changes in the shareholder structure of companies under its control. According to the published document, the commission will also have the opportunity, through a proxy, to participate in meetings of shareholders of companies in which a significant stake in the capital was acquired without prior approval.

The State Commission on Securities and Stock Market (SCSM) has published a draft document with the help of which it plans to apply sanctions to investors who have not agreed with the regulator on the purchase of a significant share (over 10%, 25%, 50% or 75%) in the capital of a professional stock market participant . The need for this is due to the fact that on January 8, a law will come into force, according to which the State Securities and Stock Market Committee and the State Financial Services Commission will be charged with the obligation to coordinate the acquisition or increase of a stake to a significant one in the organizations they regulate. The law will also apply to indirect participation in capital.

If the investor refuses to agree on a future purchase, he will be deprived of the right to vote and participate in the management of the company. The restriction will apply only to a block of shares acquired without the consent of the regulator. At the same time, only an authorized representative of the investor will be able to vote at the meeting of shareholders (participants) on behalf of these shares. But the investor himself will not be able to propose his candidacy for approval by the State Securities and Stock Market Committee.

The document states that within two days after identifying a violation, the State Securities and Stock Market Committee will contact the market participant with a request to propose a candidate for a proxy. It will not be possible to nominate an investor and members of his family, as well as individuals and members of their families who own shares or shares in the capital of a company that bought a stock market participant. Also, the trustee cannot be former and current employees of the purchasing company if they have worked for it during the last year, as well as persons to whom the court has imposed a restriction on engaging in certain activities and holding a number of positions. This proposal, already with the written consent of the principal, must be sent to the State Securities and Stock Market Committee within a day.

If the institution does not have time to propose a proxy, the regulator will choose one within two weeks after identifying a violation of the law. Together with other shareholders, this person authorized by the State Securities and Stock Market Committee will take part in the meeting of shareholders of the market participant and vote on behalf of the package acquired illegally, according to the commission’s instructions. “During voting, the proxy is obliged to act in the interests of qualified and balanced management of the professional participant,” the document notes. An authorized representative is appointed for a period until the violations are eliminated.

Unlike the State Securities and Stock Market Committee, another regulator, the State Financial Services Commission, will appoint a trustee based on the proposal of a market participant. The relevant law, which the State Securities and Stock Market Committee will have to rely on, provides a clear list of grounds for refusal to approve the receipt of a significant share. There are only seven of them - for example, the submission of false information, the discrepancy between the investor’s business reputation and his financial condition with the regulator’s criteria, and the investor’s entry into capital pose a threat to investors and other creditors. Regulators will agree that decisions of shareholder meetings with the participation of a person who has violated the law will not have legal force.

Similar requirements have been applied in the banking market since 2001. Considering that a number of banks operate in the stock market (trading securities, custodian services), they will also fall under the requirements of the State Securities and Stock Market Commission, says Oksana Paraskeva, head of the securities department of the Maritime Transport Bank. She notes that it is impossible to fulfill the requirement to nominate a proxy within one day due to the length of the procedure for agreeing on such issues. “Professional participants and the commission do not have parity terms, which in this case is very important, since we are talking about the life of a legal entity,” believes V. And. O. President of the Ukrainian Stock Traders Association Maria Eremeeva. She notes the contradiction in that, on the one hand, the trustee must comply with the interests of the financial institution, and on the other hand, the regulator gives him the task of voting. This may result in a conflict of interest.

Therefore, Vladislav Basisty, an expert in the department of market regulation of the Stock Partnership Association, promises to propose to the regulator to increase the period for a professional participant to submit proxy candidates: “We will also propose to exclude the commission’s authority to independently appoint a proxy. And when drawing up a task for voting, the commission should take into account the proposals of the participant, shares which the proxy will vote."

Nikolay Maksimchuk

The State Securities and Stock Market Committee will trust itself