The protection of investors’ rights in the Republic of Kazakhstan
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
Author: Dautbayeva Dinara, Ministry of national economy of the Republic of Kazakhstan, Kazakhstan
The
concept of a financial instrument is widely applied now not only in practice of
the international business, it also gains the increasing popularity in the
domestic markets of Kazakhstan. So, according to Kazakhstani periodicals, on
the domestic organized securities market there is a practice of trade by future
contracts on purchase of US dollars and also “exotic (and risky) instruments -
urgent contracts on an US dollar exchange rate to EURO in volume of 1000 EUR”. The
regulatory base concerns also
currency options. All these
contracts are directly called proceeding from the objective nature of the economic
relations formalized by legal rules.
It
appears that legal definition of the concept “financial instrument” should be
adequate to its economic nature. In this regard, in our opinion, legally
significant confirmations of property rights concerning such financial assets
as money and the issue securities providing legal possibility to transfer these
rights can be considered a financial instrument, which not always can be
transferred to the third party in confirmation of transfer of competences according
to it. However, this instrument must not interfere with such transfer. In
this regard the written contracts allowing a concession of the rights,
securities in their traditional understanding as documents, and entries in
property rights registers can be considered the instruments. The higher degree of
the property right transferability, the more the
corresponding instrument “merges” with the right certified by it.
So,
the concession of the
right sunder the usual
contract is acceptable, if participants of the
transfer consider certain expenses in time and
other resources for such
cession acceptable.
The need for in crease
in property rights
transferability was caused
by emergence of
securities when transfer of the right
was “adhered” to transfer of documents certifying
it. Development of technologies, globalization of
economic processes served
as motives for development
and introduction of the instruments allowing to certify property rights with
the electronic records cap able to change their requisites in only a few seconds.
New information technologies allow to make in a
day a large quantity of transactions worth millions when
accessory of a sold
asset proves by
the register of the market
intermediary and the owner
of this as set actually owns no thing.
Complication of economic relations and integration of national financial
markets into the world infrastructure also leads to emergence of new financial
instruments giving opportunities for the so-called “cross-border transactions”
(the transactions connected with transfer of financial resources and other
capital through border) and also exp and s borders and possibilities of
speculative transactions in the markets. In this regard
one of the popular financial instruments in the developed markets
of instruments is the derivative ones (“derivatives”). In the
practice of law and in the legislation the term “derivative securities” is also
used a long
with the concept of
derivative instruments. But generally speaking, just a simple study of
problems of the derivative instruments transfer inevitably leads to a
conclusion that they are of an extremely high risk and their legal nature is
still insufficiently clear for the legislator.
Even professional Kazakhstan traders directly call derivative financial instruments the speculative ones
possessing high speculative
potential with a very high risk
of non-payments. Therefore, the release of such derivative instruments by national issuers is possible only at
a rather high level of the national stock market development.
Due to underdevelopment of legal and economic theories of derivative financial
instruments and national securities markets and due to limitation of the issue
securities circulation, it is necessary to be very careful in the solution of a
question on an admission of the derivative instruments circulation on the
national securities market. For instance, the German researchers specify that
derivative instruments in all their various forms and ways of regulation are a
subject of disputes because of their objective danger connected with their
circulation as quite of ten their trade is carried out on the non-controllable
of f-exchange market. In this connection the international financial
institutions recommend the developing countries to establish certain
restrictions concerning derivative instruments “as even well
operated firms and financial institutions incurred serious losses in connection
with use of such instruments”.
In particular,
they recommend to improve supervision of the derivative
instruments release and circulation and to use procedures on risk management.
Besides, it is important for the derivatives trade to keep the limits of the
organized markets where professionals
have more possibilities to keep
control over various situations of objective and subjective nature. At the same time the
derivative instruments trade in the organized markets should be under especially rigid supervision
of the state and relevant professional organizations.
In
legal literature there is no a uniform concept of a form of right protection.
The form of right protection is meant as “defined by the legislation competent
authorities’ activity for right protection”, in other words, the
activity for establishment of original circumstances, application of law rules,
definition of the way of right protection and pronouncement of the relevant
decision. Apparently, according to this approach the concept of form includes
right self-defense, use of measures of operative influence, i.e. an order of
right protection not assuming appeal to any state or other authorities.
Among
various forms of right protection the leading role is played by a judicial form
of protection of investors’ rights as universal, historically developed, regulated
in details by norms of civil procedural law. The judicial form is the most
regulated one in comparison with the forms of right protection by other state authorities
and especially by public organizations. It provides reliable guarantees of the
correct law application and establishment of real rights and obligations of the
parties. Judicial protection of civil rights is the most important guarantee of
their implementation. The right for judicial protection is guaranteed by
Article 13 of the Constitution of the Republic of Kazakhstan [1]. Court is a
unique and independent of other branches of state power authorities carrying
out justice. Its characteristics in many respects defined the nature and the
maintenance of a judicial form of protection. Now judicial protection of the
rights of citizens and legal entities on behalf of the state is carried out by
courts of general jurisdiction and specialized courts in which the order of
consideration of civil proceedings is in advance defined by the norms of civil
and administrative law; the persons interested in outcome of the legal
proceeding use the right to participate in trial and to defend their rights and
interests on the principles of equality and competitiveness; the decision
should be factual established in a court session by means of pro of s and
corresponding to the law. The majority of the considered above ways of
protection of investors’ rights find their realization by means of a reference
to the court of general jurisdiction or specialized court according to the
jurisdiction established by a legal procedure. The right to a reference to the
court as the subjective right of the particular physical or legal entity is
realized in various forms. The main form of realization
of the right to judicial protection is the claim and , respectively, a claim
form of protection, claim production. Claim production assumes existence of
dispute on the right between two warring parties which act in protection of own
interests and have an equal legal status. The greatest number of
the conflict saris in gin the sphere of securities market is considered in claim production. At the same time protection of
investors’ rights is possible also in the form of applying on the cases arising from administrative and other public legal relation ship and on special production.
For initiation of a legal
proceeding in court or other body it is required to define the jurisdiction of a dispute.
It is known that jurisdiction is a reference of these ort hose legal proceedings to a certain authority. Protection of investors’ rights can be carried out in courts of general
jurisdiction, in specialized inter – regional courts, in
executive authorities, and also within the self-regulating organizations of the securities market professional
participants. There are two main forms of judicial protection of investors’ rights and interests: in courts of general jurisdiction and in specialized inter – regional courts. Legal proceedings
on protection of investors’ rights can be considered also in the arbitration courts, but, the latter are not the justice-carrying authorities. For this reason they will be studied separately. The examples of the
legal proceedings considered by specialized inter-regional courts can serve the following: recognition of
registration of transactions on alienation of actions void; establishment of
default of the foundation agreement; illegality of shares distribution; recognition
void the distribution and sale of shares, increase in an authorized capital,
release of shares of the second and the subsequent issues; cancellation of
reports on results of release and placement of shares of the second and the
subsequent issues; recognition void the contract of shares purchase and sale;
an illegal exception from the shareholders structure; compulsion to
registration of the property right to shares; recognition of shares ownerless,
etc.
According to No. 158
Decree of the President of the Republic of Kazakhstan dated August 17, 2006 in the city of Al maty there was formed a specialized financial court equated to regional court
and authorized to consider civil-law disputes of participants of regional
financial center of the southern capital. In CIS there are no similar financial
courts yet; in the world there are some similar courts. In this regard the
formation of financial court in Kazakhstan was preceded by preliminary
laborious work on studying of judicial and regulatory systems of foreign
countries and financial centers in Great Britain, Irel and, Singapore, and Malaysia.
Another jurisdictional
form of protection of investors’ rights is the administrative form. The
administrative form of protection assumes established by the legislation order
of protection of rights and legitimate interests of investors without a
reference to the court of general jurisdiction and specialized court. The given
form of protection allows to prevent violations or restrictions of rights and
legitimate interests or to restore the broken rights by interaction with state
executive authorities (administrative authorities). Unlike judicial authorities
the administrative ones protect broken rights and interests along with the
implementation of their other main powers. For these authorities settlement of
disputes about rights is not a unique and main form of their activity.
Protection of civil rights is administratively carried out by means of the
appeal to an authority. The decision accepted administratively can be in any
case appealed in court (Paragraph 2 of Article 9 of the Civil Code) [2].
The
component part of the policy of the Republic of Kazakhstan in the sphere of
regulation and supervision of the national financial market was the priorities
of formation of a new system of state regulation of the financial institutions
activity providing, taking into account positive international practice on this
matter, association of all supervising and regulatory functions within one
specialized authority. The National Bank delegated these functions to the
Committee on Regulation and Supervision of the Financial Market and Financial
Organizations (hereafter referred to as CFS). CFS is a state authority which
carries out regulation and supervision of the financial market and its “players”,
takes measures not to allow violation of rights and legitimate interests of consumers
of financial services, creates equal conditions for financial organizations on
the basis of the diligent competition principle, and watches the “players”
of the financial market in due time and fully carry out their obligations. The direct work with consumers of financial services
is conducted continuously. CFS
registers each complaint to this or that financial organization
and considers each
case separately. On CFS site there
is statistical monthly information on number of complaints to concrete
financial institutions - banks, insurance companies, pension funds, participants
of securities market, summaries about the most actual and widespread problems
connected with financial services, and also data on the measures being taken
for elimination of the allowed facts of infringement of the rights of consumers
of financial services.
The
ways of protection of investor‘s rights applied irrespective of existence or
absence of securities. Legal
status of investor assumes existence of special rights arising till the moment
of securities acquisition. Firstly, it is the right to reliable information
about the issuer and the securities. For adoption of the investment decision
the potential investor is to receive quick and reliable information. So, in
compliance with Article 21 of the Law on the securities market the issuer is
obliged to provide the prospectus about issue of securities to investors [2].
To protect the given right the following ways are applied: award to
discharge of duty in nature which is characterized by that the violator
(the issuer, the professional participant) is obliged to execute really the
actions he is obliged to make by law, i.e. to provide necessary information to
the investor; protection of the right to information assumes suppression of
the actions breaking the right or creating threat of its violation - this
way is applicable in case if officials of the issuer create obstacles to the
investor in acquaintance with documentation or not commission of the positive
actions consisting in granting necessary documentation to the investor; change
or termination of legal relationship by presentation of the converting
claim is possible according to the Law “On Securities Market” in case of
violation the requirements about granting information to the investor by the
professional participant of the securities market - the issuer [2].
According to Articles 401, 403 of the Civil Code of the Republic of Kazakhstan such violation is the basis for change or cancellation of the contract between the
investor and the professional participant - the issuer - in a judicial order
[2].
A
universal way of protection of investors’ rights is indemnification -the protection of the rights to paper, the right
from paper, and at violation of the right of investor’s general ability as
within contractual and extra contractual relations. But there arises a property
interest. The property interest of the investor is satisfied at the expense of
monetary compensation of the property losses and /or other losses of
joint-stock companies. The requirement about indemnification can be declared by
the investor to the issuer (for example, the losses which have arisen in
connection with default by society of a duty on payment of declared dividends
or payment of par value of the bond); or to other shareholders (in case the
legislation established possibility of their calling to subsidiary
responsibility, for example, according to Paragraph 2 of Article 44 of the
Civil Code of the Republic of Kazakhstan) [2].
Compensation
of moral harm is rather new and
actively being applied way of protection of rights. However, the application of
this way of protection of shareholders’ rights is hardly possibly. Compensation
of moral harm is possible at violation of the personal non-property rights
(benefits) in cases called by the law the property ones. As joint-stock legal relationship
are characterized as the property ones the law stipulates no possibility of
moral harm compensation to the participants of these relations (these relations
are not the consumer ones where such compensation is possible).“The use of this
way of protection (compensation of moral harm) is directed on complete or
partial recovery of mental wellbeing of the personality, compensation of
negative emotions by positive ones” [3]. It hardly corresponds to the nature of
relations where the subjects have the purpose of pr of it receiving.
Foreign legislation and the practice of law also do not consider compensation
of moral harm for protection of shareholders’ rights possible.
Recognition
void the act of authority, management or an official should also be referred to universal ways of the
protection applied by investors irrespective of existence or absence of
securities. This way assumes possibility of recognition void fully or partially
standard and substandard acts (actions, decisions, and also inaction) of
executive authorities in the sphere of the securities market, of other state
authorities breaking the rights and freedoms of citizens or legal entities. Depending on the type
of act and the authority status the question
of its appeal or recognition void is competent to the court
of general jurisdiction. According to Article 10 of the Law “On Securities Market»” the decision
of the executive authority on refusal in the state registration
of release can be appealed in a judicial
order [3].
At the present stage the development of foreign policy
activity of the courtiers promotes the formation of a complex system of
international relations. Rates to attract foreign investments in Kazakhstan led to an increase in the number of investment disputes [5]. Bilateral
investment agreements provide investors a direct right to submit the dispute to
arbitration against the State, violating the laws and agreements - even if
investors do not have agreements with the State.
For suppression of
abuses at the exchange and defaults on operations with securities and
derivative instruments it is necessary: first of all, to develop and adopt
accurately and clear normative legal acts excluding possibilities of their
double interpretation; to strengthen regulatory and supervising activity of the
Agency of the Republic of Kazakhstan on Regulation and Supervision of the
Financial Market and the Financial Organizations; to form special authorities
at the exchange (commission or controllers etc.) for revealing suspicious transactions and suppression of wrongful
actions both from investors and professional participants.
REFERENCES
1. Конституция Республики Казахстан от 30
августа 1995 г. // Информационная система «Параграф».| the Constitution
of the republic of Kazakhstan dated August 30, 1995 // Paragraph Information System.
2. Гражданский кодекс Республики Казахстан
(Общая часть) от 1 июля 1999 г. // Информационная система «Параграф».| The Civil Code of the Republic of Kazakhstan dated July 1, 1999 //
Paragraph Information System.
3. Кейнс Дж. М. Общая теория занятости,
процента и денег. / Дж.М. Кейнс. – М.: ЭКОНОВ, 2002. – 195с.|
J. Keynes General Theory of employment, interest and money./ J. Keynes. – Moscow: Econov, 2002. – 195 p.
4. О рынке ценных бумаг:
Закон Республики Казахстан от 2 июля 2003г. // Информационная система «Параграф» | On Securities Market: Law of
the Republic of Kazakhstan dated July 2, 2003 // Paragraph Information System.
5. Басин Ю.Г. Избранные труды по
гражданскому праву. Под ред. Сулейменов М.К. - Алматы: АЮ – ВШП «Эдилет», НИИ
Частного права КазГЮУ, 2003. – 734с. |
Y. Bassin
Selected works on civil law. Edited by M. Suleimenov. – Almaty: Adilet Higher School of Law, KazUHL Private
Law Research Institute, 2003. – 734 p.
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
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