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គណៈកម្មការមូលបត្រ កម្ពុជា (គ.ម.ក.)

Securities and Exchange Commission of Cambodia (SECC)

Overview of Cambodia Capital Market

Kao Thach, LLB (F.L.E), LLM (Bond)

Deputy Director GeneralSecurities and Exchange Commission of Cambodia

Present Financial System in Cambodia

Present financial system in Cambodia

Players in Financial Sector:

● Banking system: The central bank, that is the National Bank of Cambodia with its 21 provincial

branches;

31 commercial banks (22&9), 7 specialized banks; 31 (MBIs 7) Licensed Microfinance Institutions; 28 Registered MFIs International Reserve: 3.213 Bil Loan to Deposit: 88.3% (2011)

● 6 General Insurance Co., & 1 Re-Insurance

● No inter-bank/money market● 15 securities Firms and 1 Cambodia Securities Exchange ● Active foreign exchange markets due to high degree of dollarisation ( more than

90% of banks transactions in US$, large volume of USD cash in circulation).

Bank-based system VS. Market-based system?

Alan Greenspan’s Pumping Philosophy

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Sequencing to create Securities Market in Cambodia

Law and Regulations Regulator Securities

Firms CSX

Feature of Cambodia Capital Market

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Primary Market

“Supply”“Demand”

“Intermediary”

“Infrastructure”

Secondary Market

Intermediaries

CSXCambodian Securities Exchange

IssuerInvestor

TransferAgent

CashSettlementRegistrar Law

Firm CRAAppraiserFirm

AccountingFirms Others

Clearance and SettlementOperator19

Securities DepositoriesCSD

Intermediaries

Paying Agent

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Capital Requirements

Securities Underwriter

Securities Dealer

Securities Broker

Investment Advisor

Minimum Capital 40 billion riels (~ USD 10 million)

25 billion riels (~ USD 6.25

million)

6 billion riels (~ USD 1.5

million)

400 million riels (~ USD 100,000)

Net Capital 2 billion riels 1.25 billion riels

300 million riels

Non required, but:- Proper location

with equipped office

- Licensed Adviser

Securities Bond 4 billion riels 2.5 billion riels

1 billion riels 80 million riels (~ USD 20,000)

Capital Requirements for intermediary

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Human Resource requirement for intermediary

Human Resource Other Requirements

CEO and director or partner

Head of securities representatives

Head of operations Compliance officer Other qualified staff

Physical facilities A 3-year business plan Comply with requirements

for risk management and internal controls

A risk management plan Satisfy other requirements

stipulated

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• to make a public offering shall fulfill the following requirements: – Shareholders’ equity shall not less than KHR 5,000,000,000 (five

billions) at the date of filing the application; – Issue size shall not be less 20 % of shareholders’ equity at the latest

balance sheet (shareholders’ equity < KHR 20,000,000,000 (twenty billions)) and;

– Issue size shall not less 15 % of shareholder’s equity at the latest balance sheet (shareholders’ equity is > KHR 20,000,000,000 (twenty billions) or more);

– Net profit shall not be less than KHR 500,000,000 (five hundreds millions) for the latest full financial year prior to the date of logging application

– Aggregate net profit shall not be less than KHR 1,000,000,000 (one billion) for the latest 3 financial years prior to the date of filing application;

Public Limited Company or SOEs

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obtain eligible listing from the Stock Exchange approval from the SECC and register the disclosure

documents with the SECC (Law: Art. 12, Anukret: Art. 9, 10, 11 & 13).

fully responsible for accuracy, adequacy and reliability of information containing in the disclosure document (as well as securities firm and any expert).

Have the signature of the Chairman of Board of Directors, Directors, CEO and CFO on disclosure.

Public Limited Company or SOEs

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• The Board shall be composed of at least 05 and not more than 15 members.

• At least 1/5 independent directors (ID). • foreigner as independent directors, those shall

have working experiences in Cambodia at least 06 months before becoming ID

Corporate Governance of PLCs

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• The Board shall constitute committees to assist and ensure good corporate governance:

– Audit committee, – Risk management committee, – Nomination committee and other.

• Risk management committee for public listed company has asset from KHR 200,000,000,000 (two hundred thousand million) and over.

• The public listed company had asset less than KHR 200,000,000,000 (two hundred thousand million) may consider to have Risk management committee if necessary.

• The public listed company has asset less than 200,000,000,000 (two hundred thousand million) Riel, the duties of the risk management committee may be carried out by the Audit Committee.

Corporate Governance of PLCs

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Securities Investors: Individual or Institutional

• We believe that To attract investments, genuine market transparency and efficiency must be

firmly established For individual investors, investor protection and education are critical For institutional investors and foreign investors, legal and regulatory

impediments must be mitigated in phases.

• Individual Investor: Cambodian Savers, foreigners, any investing public

• Institutional Investor: Banks, Social Securities Fund, Insurance Company, Investment fund…

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CSX is a joint stock company : RGC 55%, KRX 45%.The CSX should take on a for-profit organizational form.KRX take part in the management of CSX. For efficiency: to integrate trading, clearing/settlement, and depository

functions in the CSX.Electronic auction mechanism: CSX is equipped with electronic systems

that can cover all functions related to trade flow.Adopt a dematerialized form. Establishment of DvP and T+2

Feature of the Cambodia Securities Exchange

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Feature of the Cambodia Securities Exchange

How many times do investors trade a day? Twice a day, at 9:30 am and 11:30 am Execute orders use a periodic call auction after collecting orders for an hour.

− Later, may adopt the periodic call auction more frequently, then eventually, adopt the continuous call auction.

− When adopting the continuous call auction, the CSX will equip with block trading facility, various order types, etc

Price limit system: Apply very tightly price limit around 5%

The implementation of a tight price limit system and the establishment of a T+2 settlement system are pre-requisite mechanisms to prevent the Cambodian securities market from possible market turmoil arising from the pre-maturity of the securities market in the Introduction Stage

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Operator of Securities Market: A company incorporated and registered in Cambodia Capital is not less than KHR 40, 000 millions Suitable trading system and floor Enough human resource

Operator of clearance and settlement facility A company incorporated and registered in Cambodia Capital is not less than KHR 20, 000 millions Suitable clearance and settlement system Enough human resource

Operator of securities depositories A company incorporated and registered in Cambodia Capital is not less than KHR 20, 000 millions Suitable and secured depositories system and place Enough human resource

Possible 3 in 1: A company incorporated and registered in Cambodia Capital is not less than KHR 80, 000 millions Suitable and compatible system for each operator Clear and Firm Firewall or Chinese wall between 3 operators Enough human resource

Requirements for Operators

Insurance SectorPremium=USD2.3 million in 2000 and 8.8 millions in 2003 to USD24.906 million in 2010. (3 folds from 2003 and 11 folds from 2000)

2003 2004 2005 2006 2007 2008 2009 2010 (u-naudited)

-

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

30,000,000.00

Trend of Gross Premium 2003-2010