Moldovan New Capital Market Law entered into force

The day is finally here: 14 September 2013 − the day that Moldova’s new capital market law comes into effect. The legal act switches the gear from a law inspired from the legislation of other CIS countries to a law harmonized with the EU legislation and aligned to the international practice. Specifically, eleven relevant EU Directives are transposed − including MiFID, the Directive on Takeover Bids, the Investor Compensation Scheme Directive, the Market Abuse Directive, the Capital Adequacy Directive and the UCITS Directive − with secondary regulation to further develop the provisions of the Law.

Please see the table below for a quick comparative view of the two laws. In a nutshell, the new law significantly liberalizes the activity of the investors and of the companies.

The situation is not as straightforward yet, given that the Old Law is to stay effective for another 18 months and the market participants are still waiting on the regulator to provide guidelines on the functioning of the market during this period. Those commencing their activity after 14 September 2013 are yet overall affected.

Securities Market Law of 1998 Law on Capital Market of 2012
Capital market meant to intermediate the mass privatization. General function: Capital market meant to facilitate investments.
Regulating all legal relationships in the market. Regulating public offers, organized markets (i.e stock exchanges and MTF) and investment services and activities.
Full supervision and control of all market participants and market operations. Supervision and control targeted at publicly traded companies, market operators and market abuses, involving a prudential approach.
No regulatory exceptions. Exceptions for qualified investors and professional clients.
All JSCs treated as public companies. Specifically banks, funds, insurers and listed companies treated as public companies.
Complex registration of security issuance for all JSC’s. Simplified registration for security issuances of privately-traded JSCs.
All JSCs required to be listed on a stock exchange. Only JSCs meeting certain requirements allowed to list on a stock exchange.
Most of trading activity to be pre-cleared and authorized by the market regulator. No authorizations required, except in the case of takeover bids of over 50% of the voting shares.
The Concentration Rule, requiring that investors trade securities solely at the stock exchange. Best Execution Rule, allowing intermediaries to trade client securities at an organized markets or an OTC market.
The sell-out provision is effective in the case of takeovers: minority shareholders have the option of asking to be bought out. A first step in direction of the squeeze-out, which is allowed when 90% of the shares are taken over: having acquired 90% of the shares, the bidder is allowed to compulsorily buy out the shares of remaining shareholders, if they do not expressly refuse so.
Only the trading of securities permitted for market participants. All types of financial instruments allowed for trading.
Various limitations as to the type and diversity of investment services allowed to be provided by one investment firm. An investment firm can provide all types of investment services and perform all types of investment activities at the same time.
Certain trading restrictions. Most trading restrictions removed: e.g. margin trading, repos

Authors: Ruxanda Nedelciuc, Alexandru Savva

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